Cellnex Unexpectedly Withdraws From Deutsche Telekom Towers Auction; Story Unchanged; 24% Upside

In a statement to the Spanish stock regulator Comision Nacional del Mercado de Valores, Best Idea Cellnex announced on July 13 it has officially withdrawn from the auction to acquire Deutsche Telekom’s 40,500 towers in Germany and Austria. We are surprised by the announcement, as we believe Cellnex was in a good position to secure the deal. Cellnex offered no antitrust regulatory hurdles (it has no presence in Germany), it had an ongoing relationship with Deutsche Telekom (it had bought towers from DT in the Netherlands during 2021) and is purely focused on Europe in the long term. According to reports by Bloomberg and Reuters, the bid from a consortium of private equity firms (including KKR) seems to be the favored one, and we expect Deutsche Telekom to sell only a minority stake to these players. Although Deutsche Telekom's towers unit was probably the last sizable tower portfolio for sale in Europe, the Cellnex story remains unchanged. We maintain our narrow moat rating and EUR 52 fair value estimate, which represents 24% upside at July 13 prices. Our fair value estimate for Cellnex is mainly organic, meaning it considers little upside from future mergers and acquisitions.