The push to monetise infrastructure has reduced operators' vertical integration and fuelled the growth of towercos. Given their increased scale and importance, we consider the concerns of competition authorities and the potential impact of regulation.
The independent infrastructure market has expanded, with some firms growing significantly and using multi-tenancy to drive revenue. Asset sales have underpinned this growth, with operators signing sale and leaseback agreements to access the towers they once owned, reducing the extent of vertical integration in the market.
Regulation of towercos has historically been light-touch, particularly when considered relative to obligations imposed on operators through market reviews. In Norway, Nkom is conscious of the potential for spin-offs to impact retail competition and is monitoring market developments to ensure any future tower sales do not impact co-location.
Competition authorities in some countries have also been wary of the effects of mobile asset spin-offs or divestments, including the potential to hinder the emergence of a rival, drive up prices for operators or reduce service quality for end users. In France, Italy and the UK, deals have all required commitments for approval to be given.
New regulation intended to boost gigabit-capable deployments could risk the prospect of legal action between towercos and landowners. The EU’s Gigabit Infrastructure Act will require landowners and aggregators to negotiate with towercos “in good faith” – a broad term that may see Member States provide guidance on access prices.
Further consolidation in an already concentrated tower market will lead to attention from competition bodies. Approval for some in-market deals may require structural commitments, while in any mega-merger between scaled players, authorities may need to balance the impacts on competition and consumers with the broader policy direction.
The independent infrastructure market has expanded, with some firms growing significantly
Tower sales and spin-offs in the telecoms sector have accelerated as operators have sought to monetise their (often underutilised) physical assets – see Figure 1. Some operators have created new standalone towercos, while some have established independent units in partnership with private equity (PE) groups, pension funds or on occasion with their competitors. Others have sold part or all of their infrastructure, subsequently agreeing sale and leaseback deals. This has enabled specialist tower firms – such as Cellnex and Phoenix Tower International (PTI) – to expand across Europe where unlike the US and parts of Asia and Latin America, operators have tended historically to own all or the majority of their own sites. This trend looks set to continue, with Telenor reportedly hoping to offload a stake in its 20,000-strong tower unit that spans Finland, Norway and Sweden, while OTE in Greece has stated an interest in separating its assets into a 100%-owned subsidiary.
For operators, there are real potential upsides, for example freeing up financial resources for more productive uses (such as paying down debt, reducing capex levels or investing in new products or businesses) and also wholesaling access to rival operators. Similarly, infrastructure firms and financial institutions have seen value in investing in operators’ tower assets, often using multi-tenancy themselves as a key driver of revenue. While making sense commercially, this has opened up an otherwise captive network to third parties, reducing the vertical integration that has long-characterised the mobile operator model. Acquisitions have expanded the overall size of the independent infrastructure market, although in some cases increased the concentration of sites within a small number of hands.
Regulatory oversight of towercos has so far tended to be relatively light-touch
Towercos have generally been subject to less stringent regulation than other players within the telecoms sector – they are typically not the focus of market reviews and designations of significant market power (SMP) unlike their operator counterparts. Access to infrastructure is often bespoke and negotiated based on specific terms, e.g. the length of the lease, rather than determined in line with a regulatory decision. It is not impossible that towers could be found in scope of the physical infrastructure access (PIA) market, although this would need to be defined by the regulator and found to meet the three criteria test. PIA has tended to be limited to operators’ ducts and poles, with mobile markets usually deemed competitive at the retail and wholesale levels.
However, Norway provides an exception to the rule, with Nkom continuing to regulate the wholesale mobile market, imposing access obligations on former incumbent Telenor. In its April 2024 decision, Nkom acknowledged the industry was undergoing a restructuring as infrastructure is separated into standalone tower units and stated it is following developments as it wants to ensure co-location on mobile masts works effectively. It highlighted the potential for towercos affiliated to a mobile operator to have the incentive to reject access requests from other operators or to raise or discriminate on price, which would harm competition at the retail level. Nkom stated that companies that build towers should do so in a way that there is room for several tenants. The regulator also suggested that Telenor would still be required to offer access to its infrastructure should the operator sell off its Nordic tower business.
Competition authorities in some countries have been wary of the effects of mobile asset spin-offs or divestments
As mobile network ownership has shifted away from traditional vertical integration, competition authorities have also been mindful of the effects greater shared access, new tower units or infrastructure divestments may have on market dynamics. Across Europe, Cellnex has been a major acquirer of operators’ sites, for example with its purchase of CK Hutchison’s tower portfolio in a transaction valued at €10bn (£8.6bn). This deal included the acquisition of assets in Austria, Denmark, Ireland, Sweden, Italy and the UK. Competition authorities in the first four countries listed gave the purchase the green light in January 2021, which was followed by approval by the AGCM in Italy in June of that year (subject to some relatively minor access commitments). However, in the UK, the CMA set a higher bar for approval. Having previously cleared Cellnex’s acquisition of Arqiva’s telecoms infrastructure in April 2020 in Phase 1, the CMA decided to conduct an in-depth Phase 2 investigation into Cellnex/CK Hutchison.
The CMA found the transaction would raise significant competition concerns by forming a duopoly in the supply of passive infrastructure, in which Cellnex and CTIL would represent more than 90% of the market. The CMA also considered that the acquisition would prevent the emergence of an important alternative (and possibly third national) competitor, which would leave mobile networks facing higher prices and more onerous contracts in future negotiations. This, in turn, could result in higher prices or lower quality services for users of mobile networks across the UK over a period of time. To offset these concerns, Cellnex proposed the sale of over 1,000 sites that geographically overlap with the CK Hutchison assets it agreed to buy (see Table 1). In May 2022, the CMA accepted these final undertakings as addressing the issues it identified, thereby enabling the parties to close the deal.
Such considerations and concerns are not unique to Europe, with Airtel Africa and American Tower Corporation (ATC) currently undergoing scrutiny over the strategic partnership the companies signed in 2022. The Common Market for Eastern and Southern Africa (COMESA) Competition Commission (CCC) received a complaint that the agreement allowed Airtel to take over a set number of ATC sites each year in exchange for a cash rebate from ATC. The CCC has launched an investigation into the existence of anti-competitive behaviour, citing COMESA regulation that prohibits agreements that may affect trade between member states and aims to prevent, restrict or distort competition in the Common Market.
The EU's Gigabit Infrastructure Act could lead to a clash between towercos and landowners
Amid increased regulatory attention, owners of mobile infrastructure in the EU will be preparing for the implementation of a new regulation that has implications for their assets. The Gigabit Infrastructure Act (GIA) was first unveiled by the EC in February 2023 as part of a package of measures to boost the rollout of gigabit-capable connectivity across the region. In overhauling the Broadband Cost Reduction Directive (BCRD, 2014), the GIA recognises the “increasingly significant role” played by providers of access to physical infrastructure suitable for deploying elements of mobile networks, including 5G. The act broadens the definition of “network operator” to include towercos, subjecting them to certain obligations and rights for the first time.
While EU policymakers consider the GIA will enable faster and more cost-efficient rollouts of gigabit-capable networks, its proposed text was met with opposition from some players in the tower industry. Vantage Towers – the unit co-owned by Vodafone – argued the EC’s analysis failed to identify a dysfunctional market in need of regulation and also raised concerns that the act could stifle towerco investment. Vantage Towers’s reservations seem to have softened partially and it has since welcomed the work of the co-legislators, particularly on the issue of land aggregation. Wireless Infrastructure Group (WIG) also welcomed the GIA’s protections for towercos, including the requirement for them to receive fair returns on investments and recognition of their business model when determining access prices for shared neutral host networks.
Nevertheless, there are worries that the GIA has put towercos on a potential collision course with landowners (as well as regulators) that could lead to the emergence of the same outcomes that materialised in the UK. In 2017, the Digital Economy Act made revisions to UK telecoms regulation, which landowners argue has significantly reduced the value of rents paid to them during the renewal of telecoms leases and shifted the balance of power disproportionately in the favour of towercos (that may not necessarily pass on savings downstream). Landowners were especially concerned by the proposed requirement in the draft GIA to negotiate the renewal of leases for towers with network operators under “fair and reasonable” terms, stating this would likely discourage landowners from opening up their lands to new towers.
The final GIA instead requires landowners (or those that manage lease contracts on their behalf – i.e. aggregators) to negotiate access “in good faith” and inform national regulatory authorities about concluded agreements, including the negotiated price – which should “reflect market conditions”. While this is arguably a better outcome for landowners than the original proposal, this terminology is also wider and more open to interpretation by Member States. To facilitate negotiations, regulators could provide guidance on terms and conditions, including on the price for access to land, which could end up differing between countries. Rather than providing certainty for stakeholders and safeguarding against speculative pricing practices, there are concerns about the potential for a spate of legal disputes over access charges, with Vodafone’s legal battle with landlord Hanover Capital in the UK a case in point. Extensive litigation could, in turn, frustrate access to and use of land, and impede the upgrade and expansion of networks.
The prospect of consolidation in an already crowded field will mean greater scrutiny
Against this backdrop, regulatory scrutiny is only likely to intensify with the prospect of further M&A activity. In Ireland, for instance, Cellnex has agreed to sell its business – comprising around 1,900 sites – to PTI for €971m (£834.8m). While Cellnex considers the sale will support its efforts to simplify its corporate structure, the transaction will be subject to competition authority approval. The in-market deal would leave the majority of towers in the hands of just two infrastructure companies, PTI and Towercom. If, like the CMA, the Competition and Consumer Protection Commission (CCPC) in Ireland considers Cellnex could have sold its assets to an alternative buyer other than PTI, it may seek structural commitments from the parties.
The potential for group level mergers between towercos would also raise acute competition issues given the resultant concentration of assets and their importance to mobile operators. While it is argued towercos can speed up network rollouts, improve asset utilisation and encourage market entry, authorities may need to balance the competition effects of consolidation with the impact on the delivery of broader public policy goals, such as universal 5G coverage under the EU’s Digital Decade programme. ATC’s rumoured interest in acquiring Cellnex would bring together the only two large-scale independent suppliers in Europe, likely raising concerns from landowners that the enlarged entity could leverage its negotiating power to drive down access prices.
Should consolidation involve operator-controlled tower firms (such as TOTEM and Vantage Towers, as well as GD Towers, in which Deutsche Telekom retains a 49% stake), the risk of harm to competition will be influenced by whether there is a sufficient number of other network owners willing to host third parties and the scope for price discrimination. In reviewing Cellnex/CK Hutchison in Italy, the AGCM noted the limited openness of INWIT – a joint venture between TIM and Vodafone – to provide wholesale access to rival operators. In considering the possible impact on competition of a future towerco mega-merger, authorities will be keenly focused on preventing potential refusals of access and negative knock-on effects of higher costs and lower quality services for operators, which could then be passed on to end users.
