Telefonica deal brings American Tower to Europe

American Tower Corp is buying telecommunication towers in Europe and Latin America from Telefonica SA for €7.7 billion ($9.4 billion), signaling a new competitive threat in Europe’s fast-growing tower industry.

“American Tower is paying cash for about 30,700 tower sites from Telefonica unit Telxius Telecom,’’ Telefonica said in a statement.

US private equity firm KKR & Co owns 40% of Telxius and Spanish billionaire Amancio Ortega owns close to 10% through his investment vehicle.

The sale is the biggest ever by Telefonica, which expects to book a capital gain of around €3.5 billion and cut its net debt of €37 billion by about €4.6 billion.

The deal is also a shift in strategy for American Tower, which along with rival US operator Crown Castle International Corp had largely stayed away from Europe, where phone companies are trying to raise money from their infrastructure to cut debt and pay for costly 5G rollouts.

Telxius has towers in Spain, Germany, Brazil, Peru, Chile and Argentina.

The absence of US competitors has made it easier for Cellnex Telecom SA, Europe’s largest independent tower operator, to snap up assets across the region.

The Telxius deal puts pressure on Cellnex partly because it gives American Tower a foothold in Germany, the one big European market where Cellnex is still absent.

The US company has focused mostly on building towers in Africa, Latin America and India to sustain its international growth.

In 2019 it bought Eaton Towers Ltd for about $1.85 billion including debt to expand in Africa.

American Tower and Telefonica already have partnerships in Brazil in optic fibre networks.

Until recently, there were few opportunities in Europe for independent tower companies like American Tower, which seek full ownership of mast infrastructure so they can maximise revenue by leasing mast space to as many network operators as possible.

Phone companies in the region have been reluctant to lose control of the assets, seeing them as strategically important.

The deal shows how some are willing to rethink that approach in an effort to reduce costs and raise cash.

Europe’s biggest wireless carrier, Vodafone Group Plc, is working on an IPO of its tower unit in the first half of the year.