Orange takes a major step forward with the creation of TOTEM, its
European TowerCo
Press releaseParis, 18 February 2021
Orange takes a major step forward with the creation
of TOTEM, its European TowerCo
In the context of its Engage 2025 plan, Orange is reinventing
its operator model and is creating a European TowerCo destined to
become a value-creating entity by:
- capitalizing on its industry-leading passive mobile
infrastructure assets, focusing on revenue growth and optimising
operational efficiency; and
- delivering both organic and inorganic growth.
The TowerCo, which has been named TOTEM, will be
run by a fully independent and dedicated management team that will
be appointed in the first half of this year with a view to
launching operations by the end of the year.
First-class assetsTOTEM will bring together assets
with proven operational excellence. It will be equipped with all
the skills and functions necessary to create sustainable value,
positioning the TowerCo as a leader in the growing European
telecommunications tower market.
At the outset the portfolio of premium towers will
consist of around 25.5 thousand sites in France and Spain, the two
largest countries where Orange is present. Beyond France and Spain,
the Group will explore the possibility of integrating other passive
mobile infrastructure assets from within Orange’s European
footprint that could create value for the TowerCo.
In France, TOTEM will operate around 17 thousand
macro sites with an attractive mix of approximately 55% towers and
45% rooftops. Given the strong co-location demand, which has been
constant for several years, and the high proportion of towers in
the portfolio, there is clear potential to increase co-location
rates.
In Spain, the TowerCo will operate around 8
thousand macro sites, split equally between towers and rooftops.
The Spanish operations will benefit from the network-sharing
agreement between Orange and Vodafone, guaranteeing the future
stability of the hosting activity.
Based on the scope of sites and the terms of the
Master Service Agreement (MSA), in 2020 the TowerCo’s revenues
would have exceeded 500 million euros with EBITDAaL of close to 300
million euros, approximately two thirds of which would have been
generated in France. This represents a margin of about 57%,
including maintenance costs of about 5% of the TowerCo’s
revenues.
The framework agreement provides for an initial
15-year contract with Orange with a tacit renewal of 2 x 10 years
providing long-term revenue visibility for TOTEM with its main
customer, Orange. The renewal would necessarily cover the entire
portfolio of sites. Rent applicable to Orange would conform to
market practice, indexed to inflation with no cap and a floor of
0%. Finally, the number of strategic sites will be limited and will
be less than 5% of the existing French portfolio of sites.
Independent governanceTOTEM’s independence is
underpinned by a separate legal structure owned directly by the
Orange Group (Orange SA). Management will be completely independent
from the retail operations and no Board member will be drawn from
the retail operations; two independent Board members will be
appointed to drive operational excellence.
Full operational autonomy is enabled by
transferring all key passive mobile infrastructure assets (sites,
land, leases and third-party tenancy contracts) to the TowerCo.
TOTEM will also have the necessary in-house capabilities to run
operations for anchor and third-party tenants. These include
deployment activities (build-to-suit construction programs, turnkey
roll outs) and maintenance.
Strong growth potentialOrganic growth will be the
core focus of the TowerCo’s management. TOTEM will benefit from
significant opportunities to develop its hosting activity across
its entire portfolio. Thus, the co-location rate for the combined
assets in France and Spain should increase from 1.3x in 2020 to
1.5x by 2026 and up to 3,000 sites should be constructed over an
eight-year period based on demand from Orange.
TOTEM will host and deploy new sites for Orange as
well as for other network operators. With digitalisation
accelerating across industry eco-systems, particularly in areas
such as 5G, Industrial IoT and smart cities, TOTEM should benefit
from additional demand. Given this trend, the TowerCo will be well
positioned to commercialize new services.
TOTEM also intends to seize inorganic growth
opportunities in Europe. To support this growth ambition, Orange
will be able to use the flexibility of the new entity’s entire
capital structure, whether for issuing new shares or debt
financing. Orange wishes to retain control of TOTEM to benefit from
the important source of sustainable value creation it provides for
the Group.
Following this announcement, Stéphane Richard, Chairman and CEO
of the Orange Group, said:“Passive mobile infrastructure is a core
asset for Orange, benefitting from exceptional operational
expertise in the areas of deployment, hosting and maintenance. We
are determined to keep these strategic assets within the scope of
the Group. They represent a long-term industrial view and are an
essential asset in guaranteeing Orange’s independence as well as
its ability to foster sustainable economic performance. Orange is
committed to supporting its TowerCo, which will be named TOTEM,
both strategically and financially in order to make it a clear
leader in the European market.”
About Orange
Orange is one of the world’s leading
telecommunications operators with sales of 42 billion euros in 2019
and 143,000 employees worldwide at 30 September 2020, including
83,000 employees in France. The Group has a total customer base of
257 million customers worldwide at 30 September 2020, including 212
million mobile customers and 21million fixed broadband customers.
The Group is present in 26 countries. Orange is also a leading
provider of global IT and telecommunication services to
multinational companies, under the brand Orange Business Services.
In December 2019, the Group presented its new "Engage 2025"
strategic plan, which, guided by social and environmental
accountability, aims to reinvent its operator model. While
accelerating in growth areas and placing data and AI at the heart
of its innovation model, the Group will be an attractive and
responsible employer, adapted to emerging professions.
Orange is listed on Euronext Paris (symbol ORA) and
on the New York Stock Exchange (symbol ORAN).For more information
on the internet and on your mobile: www.orange.com,
www.orange-business.com or to follow us on Twitter:
@orangegrouppr.Orange and any other Orange product or service names
included in this material are trademarks of Orange or Orange Brand
Services Limited.
Press contacts: +33 1 44 44 93 93Sylvain
Bruno ; sylvain.bruno@orange.comTom Wright ;
tom.wright@orange.com ; +33 6 78 91 35 11Olivier
Emberger ; olivier.emberger@orange.com
- PR_Orange_TowerCo_EN_180221
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