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Brookfield said Thursday its Brookfield Infrastructure Partners LP is partnering 50/50 with DigitalBridge, a U.S.-based investor, to buy a 51-per-cent interest in Deutsche Telekom’s cellphone-tower assets in Germany and Austria.Fred Lum/The Globe and Mail

Brookfield Asset Management BAM-A-T, much like Canadian pension funds, is betting heavily on telecom infrastructure by co-investing in one of the largest ever purchases of cellphone towers, lured by the steady revenue streams from these assets.

Brookfield said Thursday its Brookfield Infrastructure Partners LP is partnering 50/50 with DigitalBridge, a U.S.-based investor, to buy a 51-per-cent interest in Deutsche Telekom’s cellphone-tower assets in Germany and Austria. The two companies will pay €10.7-billion for the stake.

Deutsche Telekom will keep 49 per cent of the business, known as GD Towers. Unloading its majority stake allows the company to move €6.5-billion of borrowings off its books. Like many telecom companies, Deutsche is also hungry for cash to help fund its 5G investments and pay down some debt.

Brookfield spokesperson Sebastien Bouchard said Brookfield Infrastructure’s flagship investment fund, which has numerous outside investors, will contribute US$2.5-billion of equity in the transaction. Brookfield Infrastructure itself has a 25-per-cent interest in its fund, meaning it will commit just more than US$600-million of its own money for the deal, he said. Funding for its stake will be “through an active capital recycling program,” meaning proceeds from the sale of existing assets.

For Brookfield, the acquisition offers a chance to buy in to a stable stream of cash flow with “strong upside potential,” Sam Pollock, CEO of Brookfield Infrastructure Group LP, said in a statement. With cell towers, owners lease space to telecommunications companies, which place their equipment on the structure under contracts that often run 10 years or more.

The transaction will add to Brookfield’s portfolio of 200,000 telecom tower and rooftop sites worldwide.

Plenty of big Canadian pension funds have been buying into this asset class.

On Monday, Spark New Zealand Ltd. said Ontario Teachers’ Pension Plan agreed to pay $725-million for a 70 per cent interest in Spark’s mobile-phone tower business, TowerCo. It has 1,263 sites, with plans to build 670 more over the next 10 years.

On June 22, the infrastructure division of Ontario Municipal Employees Retirement System said it would acquire Stilmark, an independent Australian developer, owner and operator of mobile towers, for undisclosed terms. The transaction was OMERS’s second announced tower investment in Australia in as many months, after it said in May it would acquire TPG Telecom Ltd.’s portfolio of mobile towers and rooftop sites in a deal valued at 950 million Australian dollars.

In May, 2021, Caisse de dépot et placement du Québec bought a 30-per-cent stake in American Tower Corp.’s European operations for more than €1.6-billion, and in August, 2020, British Columbia Investment Management Corp. partnered with Brookfield to buy a telecom tower company in India, committing US$3.4-billion in equity.

Canada Pension Plan Investment Board also recently invested $2.1-billion in BAI Communications to help it acquire Mobilitie, one of the largest privately held wireless telecommunications infrastructure companies in the U.S., and put €362-million more into Cellnex Telecom S.A., a leading mobile-tower owner and operator based in Spain, bringing its total investment to €1.1-billion, or a 5.2-per-cent stake.

This week’s deals from Brookfield and Teachers suggest cell-tower assets are not coming cheaply. Spark said the transaction with Teachers values the tower business at 33.8 times its 2023 EBITDA, or earnings before interest, taxes, depreciation and amortization.

Deutsche Telekom said the price of its deal with Brookfield and DigitalBridge represents about 27 times a 2021 estimate of the tower business’s adjusted EBITDA. (Only 23 of the 238 companies in the S&P/TSX Composite Index currently have an EBITDA multiple of more than 20, according to S&P Global Market Intelligence.)

Broadly speaking, digital infrastructure investments by pension funds and other institutions can also include data-hosting centres and broadband/fibre networks. In July, 2021, Brookfield announced a joint venture to develop and operate data centres in India.

Across all classes of infrastructure, such as power plants and toll roads, Brookfield says it has $140-billion in assets that employ 44,000 people.

The Deutsche Telekom towers sale kicked off in March. Reuters said Brookfield’s offer was a “surprise” bid in the auction’s final stages. Brookfield’s original offer included Cellnex, but Cellnex withdrew Wednesday, Reuters said.

Reuters said a competing offer came from a consortium led by KKR, backed by U.S. investors Global Infrastructure Partners and Stonepeak. Vodafone’s Frankfurt-listed towers business, Vantage Towers, and U.S. public company, American Tower, had reportedly considered making bids earlier in the auction process.

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