APG forms new tower company with KPN on behalf of ABP

Published on: 10 June 2024

APG, on behalf of its pension fund clients ABP and PPF, is partnering with KPN to establish a new joint tower company temporarily named “TowerCo”. The new company aims to meet the growing demand in the Netherlands for a robust and stable network of antenna sites, such as towers and rooftop locations. Viktor Filipan and Tom Theunisse (both part of APG’s Infrastructure team) discuss the benefits and challenges associated with setting up the new TowerCo.

In a nutshell
• APG, on behalf of ABP and PPF, is collaborating with KPN to establish the largest tower company in the Netherlands with a total of 3,800 towers and rooftop locations.
• OTC, the predecessor of the new TowerCo, was predominantly represented in rural areas, while KPN has a significant number of rooftop locations in more urban areas.
• Through this company APG creates additional long-term value for its clients and provides high-end infrastructure for all telecom providers in the Netherlands.

In 2017, APG, on behalf of ABP, acquired a majority stake in Open Tower Company (OTC), an operator of telecom towers with Tennet as co-shareholder. “The spaces in those towers are rented to telecom operators and other major clients such as the Dutch railways,” says Filipan. “It’s a fairly straightforward business model that fits well with APG's infrastructure mandate. These are passive assets with long-term contracts that generate stable cash flows.” Meanwhile, KPN was looking to increase its stewardship of the strategically important infrastructure assets to ensure good coverage of their network throughout the country.

Filipan: “As part of this transaction, the new TowerCo will enter into a new 20-year contract with KPN. The telecom company is replacing Tennet as co-shareholder and contributes its own assets in the new TowerCo. ABP will own 49 percent of the company, while KPN holds the remaining 51 percent. The new TowerCo will be responsible for building all new KPN mobile sites. For APG, it’s a great opportunity because we are seeking long-term investments that offer security for our pension fund clients.”

From Mid-Size to Market Leader

Theunisse: “While OTC was a smaller investment within APG’s infrastructure portfolio, our collaboration with KPN now allows the company to grow alongside the largest telecom operator in the Netherlands. The new TowerCo will operate 3,800 towers and rooftop locations across the Netherlands from day one, amongst others due to KPN contributing its portfolio of urban rooftops, a segment that was not yet included in OTC’s business. An essential part of the business model is that it’s an open access service: the objective is to be the leading provider of high-end infrastructure for all telecom providers in the Netherlands, both for towers and rooftop locations.”

Ideally, the three major telecom companies in the Netherlands (KPN, Vodafone, and Odido) will lease space on every mobile site. Filipan: “And if there’s space, also a smaller fourth or fifth party. Naturally, we aim for the highest tenancy rate per tower, and this scenario is also preferred by municipalities as it means that less newly constructed towers are required on municipal land.”

With the exponential increase in data usage, more equipment is needed to support the 5G network. “For this, a denser network of mobile sites is required, often placed on rooftops in urban areas”, says Filipan. “In rural areas, one telecom provider may have better coverage than another, making it more popular among residents. Companies are therefore keen to lease space on a public tower to improve their coverage. However, space is not always available, forcing them to build their own tower, with the associated time-consuming and sometimes complex permitting process. Similar to OTC, the new TowerCo will be a neutral host which will serve all telecom companies that want to become a client.”

Close Ties

What facilitated the transaction was that APG, ABP, and KPN were already collaborating on the rollout of fiber infrastructure, continues Theunisse. “We therefore have close ties with KPN, allowing us to quickly address any challenges. Furthermore, APG already has several similar assets worldwide. We ensure that the right people with the right knowledge are part of TowerCo’s management. And we contribute to making it a profitable long-term investment for ABP. An example is the launch of BinnenBereik, a separate entity within OTC. That company ensures that there is always a mobile connection within well-insulated modern buildings, such as offices and distribution centers, with the three major telecom providers in the Netherlands.”

More importantly, according to Theunisse, is that KPN, OTC’s largest client, is now on board as a co-shareholder. “This brings us closer to the action because, ultimately, we depend on the telecom providers who want to place their antennas in our towers and on our rooftops. It’s always better to hear  about the latest developments from the horse’s mouth. Currently, 5G is important, but new technologies may emerge in the future.”

The advantage for KPN is the commercial perspective that APG brings to TowerCo, concludes Theunisse. “For KPN, the passive mobile infrastructure assets are a prerequisite for offering their mobile services. As a co-shareholder in this company, it benefits from the initiatives we launch, such as BinnenBereik, and the focus we bring. We can present them with new business lines in which TowerCo can grow. The support of a major telecom provider like KPN combined with the way we view investments creates a true powerhouse.”

APG was advised by law firm Baker McKenzie and M&A advisor Jefferies throughout the process.

The transaction is still subject to approval by the regulator.