Canadian pension fund swoops on 2degrees’ cell towers with $1b acquisition

Connexa and Ontario Teachers’ Pension Plan are buying cell towers from 2degrees in NZ. Photo / Bevan Conley.

Telco 2degrees is selling its cell tower assets to Connexa and Ontario Teachers’ Pension Plan for $1.076 billion.

Connexa was formed following the sale of a 70 per cent stake in Spark New Zealand’s mobile tower infrastructure assets to Ontario Teachers’ earlier this year.

Spark held a 30 per cent stake in Connexa following that transaction but this will now be diluted to 17 per cent as Spark said today it will not contribute any equity to the 2degrees tower transaction.

Ontario Teachers’ will contribute all the additional equity capital required for the acquisition with its shareholding in Connexa increasing to approximately 83 per cent.

2degrees currently owns and operates approximately 1124 mobile towers in New Zealand.

Under the deal announced this morning, 2degrees has entered into a 20 year-agreement with Connexa (plus rights of renewal) to secure access to existing and new towers, with an additional tower build and co-location commitment of 450 sites over the next 10 years.

Connexa CEO Rob Berrill said: “Connexa is Aotearoa’s first independent mobile towers business with a focus on investing in our country’s digital infrastructure to enable a more connected future. We currently operate over 1200 mobile sites and have been commissioned by Spark to deliver New Zealand’s largest forward-committed new site build programme of over 670 sites over the next 10 years.

“With the addition of 2degrees’ mobile towers and the committed build to suit programme, we will be able to achieve greater operational efficiencies through increased infrastructure sharing, which means fewer unnecessary mobile tower builds in local communities and faster deployment of towers to improve network coverage and capacity across Aotearoa.

“Our model is to focus on serving our customers through a long-term approach to asset management, and increasing asset utilisation and performance, and we’re excited to bring that same approach to 2degrees’ mobile towers.”

2degrees CEO Mark Callander said the move will enable further investment in 5G build and increase focus on its core business.

Callander emphasised only passive assets - the towers themselves and land or land rights - were sold. 2degrees will continue to own the active elements of its network, including the radio access equipment, spectrum assets, transmission and backhaul, “ensuring a world-class network and customer experience.”

“What we do with the active network layer is key and will continue to be the focus of future investment – this is where we will differentiate and grow,’ he said.

Spark chief executive Jolie Hodson said the deal will deliver operational efficiencies and support more infrastructure sharing, better network economics, and faster deployment of new digital infrastructure across Aotearoa.

“We are pleased to continue to be a shareholder in a larger, and even more efficient business, and we look forward to working in partnership with Connexa as it delivers our new site build programme of 670 sites over the next 10 years. "

Spark has appointed Jarden as a financial advisor on the deal.

The transaction is subject to approvals from the Overseas Investment Office (OIO) and Commerce Commission and is anticipated to occur mid-2023.

Ontario Teachers has been an active investor in New Zealand. Previous investments include Asia Pacific Healthcare Group, New Zealand’s leading pathology business, Lumino the Dentists (through Abano Healthcare), the country’s leader in dental care, and OTPPNZ, which operates 35,000ha of timberland in the Central North Island region.

Bruce Crane, head of Asia Pacific Infrastructure & Natural Resources at Ontario Teachers’ said: “We are excited to further grow our infrastructure portfolio in Asia-Pacific and specifically New Zealand which remains a key market for Ontario Teachers’ across multiple asset classes.”