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KPN Negligibly Upgrades Guidance On TowerCo Deal; Not A Spread Mover

COMMUNICATIONS

Rating: Baa3[P]/BBB/BBB


  • Not a spread mover given impact is so small and given the long length of transition contracts signed but an interesting development. This is the second (albeit both essentially negligible) marginal upgrade to FY24 guidance so far this year.
  • KPN and Dutch pension fund ABP have signed an agreement to create TowerCo which will manage ~3800 towers and rooftops, including assets from NOVEC and OTC, with a 10-year built-to-suit commitment from KPN and a 20yr service/tenancy agreement.
  • KPN retains a 51% stake, ABP holds 49%, with KPN making an upfront cash payment of EUR ~120mn to NOVEC/OTC shareholders subject to closing adjustments.
  • Pro-forma 2024 financial impact: EUR ~30mn increase in adj-EBITDA AL, EUR ~20mn in OFCF (most recent FY guidance was for EUR 2.5bn and EUR >890mn respectively).
  • Transaction pending regulatory approval.
  • Spreads muted both this morning and since the Moody’s outlook upgrade on 31 May.
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