Telus started seeking buyers for its towers in February, according to documents reviewed by The Globe and Mail.Justin Tang/The Canadian Press
Telus Corp. T-T has entered a definitive agreement with the Caisse de dépôt et placement du Québec to sell a minority stake in its nationwide cellphone tower network for $1.26-billion, after a months-long search for buyers.
It’s the latest major infrastructure deal in the telecom sector as Canada’s largest carriers aim to sell assets to pay down debt.
The Caisse, Canada’s second-largest pension fund, will acquire a 49.9-per-cent stake in the infrastructure asset, which is being spun out as a new company called Terrion. The business is worth $2.5-billion, including Telus’s 50.1-per-cent equity interest.
Terrion will hold roughly 3,000 towers across British Columbia, Alberta, Ontario and Quebec, making it the country’s largest dedicated wireless tower operator. As part of the agreement, Telus will lease capacity on the towers for an initial period of eight years, with undisclosed renewal options thereafter.
Telus narrows field to three Canadian funds in $1.2-billion bidding war for cell towers
The sale is part of an industrywide push to sell assets to pay down debt and fund growth plans. Telus had $25-billion in long-term debt as of March, and intends to use all proceeds from the sale to pay some of it down. The company will consolidate Terrion’s results in its financial statements.
Telus first started seeking buyers for its towers in February, when TD Securities launched an auction under the codename Project Air, according to documents reviewed by The Globe and Mail.
The telecom pitched potential buyers on the prospect of growth in cell tower usage, and a corresponding increase in fees, as competitors Quebecor Inc. QBR-B-T and Cogeco Inc. CGO-T expand their cellphone businesses.
Several U.S. companies decided not to bid because Telus refused to cede control of the division, but three other institutional investors – Ontario Municipal Employees Retirement System (OMERS), Brookfield Corp. BN-T, and British Columbia Investment Management Corp. – made it to the shortlist, The Globe previously reported.
One bidder finally came out in the lead. In mid-July, Telus entered into exclusive talks with the Caisse, according to Telus chief financial officer Doug French. He told The Globe that the Caisse was ultimately chosen because it could execute the deal in a “fast timeframe.”
When asked if Telus had given up a higher potential bid in order to retain control, Mr. French said he doesn’t think the company “left any value on the table.”
Emmanual Jaclot, executive vice-president and head of infrastructure at the Caisse, said in an interview the pension fund had been involved in the “competitive” deal process for four or five months.
The Caisse already has similarly structured holdings in the U.S., Europe and New Zealand. He said it is “not the intention today” of the Caisse to bring in partner investors for the deal.
Mr. Jaclot said the Caisse was attracted by the long-term lease with Telus, tailwinds around cellular data usage and potential benefits from artificial intelligence.
The process has been closely watched by rivals Rogers Communications Inc., Bell Canada parent BCE Inc. and Quebecor, as they are also considering spinning off parts of their own networks, The Globe has reported. Rogers owns 7,700 towers, Bell parent BCE has 4,900 and Quebecor has 3,800, according to regulatory filings.
Mr. Jaclot said that if any other tower assets were to come up for sale by a Canadian carrier, the Caisse would consider acquiring them, too.
The transaction is subject to regulatory approvals, which Telus expects will be completed before the end of September. When the deal is closed, Eros Spadotto, a former Telus executive vice-president of technology strategy and business transformation, will become Terrion’s chief executive officer.
Mr. French declined to say whether whether the deal would allow Telus to buy back the stake owned by the Caisse, though Mr. Jaclot said the intention is for the partnership to “last for decades.”
In June, Rogers RCI-B-T closed a $7-billion sale of a minority stake in its wireless infrastructure, which included terms allowing it to buy back the portion it sold to New York-based Blackstone Inc. and a consortium of pension funds.
Rogers sells minority stake in wireless infrastructure for $7-billion
The sales bring Rogers and Telus in line with global peers, which have been selling their towers and other network infrastructure for decades.
Telus has outlined a strategy to pay down debt, including recently raising US$1.5-billion through long-term junior subordinated notes. But it also recently proposed spending more than US$400-million to take back control of affiliate Telus Digital, whose share price has plummeted since it went public. The move would lock in major losses as the company considers future spinout plans for other divisions.
For the Terrion deal, Telus retained TD Securities Inc. as financial adviser and Osler, Hoskin & Harcourt LLP and Allen Overy Shearman Sterling LLP as legal advisers. The Caisse retained Stikeman Elliott as its legal adviser.
With reports from Andrew Willis and James Bradshaw