Brookfield and Infratil acquire Vodafone New Zealand in NZ$3.4bn deal

Brookfield Asset Management will hold its stake in its fourth infrastructure fund while Infratil will undertake an equity raising to help finance its investment.

Brookfield Asset Management and listed vehicle Infratil are to buy 100 percent of Vodafone New Zealand from Vodafone Group.

The two investors will acquire Vodafone NZ for an enterprise value of NZ$3.4 billion ($2.4 billion; €2.1 billion), with each providing NZ$1.029 billion in equity to take equal stakes in the business. The remainder of the purchase will be funded by existing Vodafone NZ debt with a portion of equity reserved for the company’s executive team.

Infrastructure Investor understands that BAM is making the investment through its Brookfield Infrastructure Fund IV, which is due to hold a $14 billion first close later this month. However, BAM declined to comment on how it would be funding its portion of the investment.

Infratil is listed on the New Zealand stock exchange and is managed by Morrison & Co. It said it would undertake an equity raising of up to NZ$400 million to fund its portion of the deal. The firm added that the remainder would be funded through a combination of NZ$400 million of debt from a committed acquisition debt facility and the use of headroom in an existing debt facility.

According to an Infratil announcement to the New Zealand stock exchange Vodafone NZ is the number one player in the country’s mobile market and the second largest player in fixed-line broadband. The company generated revenues of NZ$2.0 billion and underlying EBITDA of NZ$463 million for the 12 months to 31 March.

The business owns more than 1,500 mobile cell sites, more than 10,000km of cabling, local fibre networks in major city centres, and a hybrid fibre coaxial gigabit network in Wellington and Christchurch. It also has access to the Tasman Global Access cable that connects New Zealand to Australia, and owns significant spectrum rights and a rural satellite network.

Is it data infrastructure?

Stewart Upson, managing partner and chief executive, Asia-Pacific at BAM, told Infrastructure Investor that his firm had classified Vodafone NZ as “data infrastructure”.

“Customer-facing activities represent a small fraction of the margin generated in the overall business,” he said. “In some cases, we believe that managing and retaining the customer relationship is important, as it provides increased flexibility to tailor the network to meet customers’ requirements and increases customer stickiness by bundling multiple services.”

Upson said BAM views data infrastructure as a growth area: “Data has been one of the fastest growing commodities in the world. We expect this rapid growth to persist for the foreseeable future, driven by greater smartphone penetration, increasing video consumption, the advent of 5G networks, and new and evolving uses.”

His remarks are in line with previous statements by Sam Pollock, head of BAM’s Infrastructure Group and chief executive of its listed subsidiary, Brookfield Infrastructure Partners. During an earnings call this month, Pollock said BIP saw “significant opportunity” for investments in digital infrastructure in the short term.

BAM owns 41 data centres globally, including two in Australia. It also owns TDF, the largest telecoms tower operator in France with more than 7,000 towers and active rooftop sites.

Infratil referred to its chief executive’s telecoms background when asked how Vodafone NZ fits within the definition of infrastructure. A spokesman for the firm told Infrastructure Investor: “Infratil chief executive Marko Bogoievski is the former chief financial officer of Telecom New Zealand [now Spark] and brings substantial knowledge and understanding of the telecommunications industry.

“Couple this with the substantial due diligence undertaken, including supporting trends surrounding data and the infrastructure required to deliver future communication models – and [we] are comfortable here.”

The Vodafone NZ deal is conditional on approvals from New Zealand’s Overseas Investment Office and clearance from the country’s Commerce Commission. Infratil said it anticipated that these conditions would be satisfied by August and that the deal would be completed by the end of that month.

Infratil’s spokesman said the firm expects to provide more detail on its equity raise when it announces its annual results on 17 May.

Morrison & Co did not respond to a request for comment.