The carve-out of radio tower companies has mainly been completed.

Tower companies, also known as TowerCos, are a vital element of today’s telecommunications infrastructure. These mostly independent companies, including prominent players such as Vantage Towers AG, Deutsche Funkturm GmbH (DFMG), Cellnex, and American Tower Corporation (ATC), focus on the construction of so-called “passive” infrastructure, which generally includes ground-based towers but also rooftop towers and radio sites attached to walls. The rollout of transmission and reception technology, or antennas,  the “active” network infrastructure, has usually remained the responsibility of the mobile network operators (MNOs).

The market for independent tower companies has been highly dynamic in recent years due to the strategic decision of some MNOs to carve out their passive infrastructure business to strengthen their financial position. By selling shares in their own TowerCos, MNOs such as Vodafone, Deutsche Telekom, and Telefónica can boost liquidity and monetize assets in the short term. Following the partial disposal of shares in the TowerCo, telecommunication providers maintain some control over the passive infrastructure used.

The trend of carving out TowerCos and allocating passive infrastructure to these independent companies has been observed in the DACH region for some time and in other geographical areas. Companies like ATC, SBA Communications, and Cellnex have driven similar developments in various countries. The trend shows that outsourcing mobile communications infrastructure to specialized companies is a globally recognized practice and is visible in the steadily growing proportion of outsourced radio towers.

Split of towers: outsourced vs. self-hosted

Are TowerCos at a turning point?

Despite the trend in the establishment of TowerCos, a significant proportion of market incumbents have recently experienced negative performance, which is reflected in declining share prices. As a result, many tower companies are now focusing on countering this trend by following measures to increase their profitability.

TowerCo Share Price Index

Julius Hafer, Partner at BearingPoint

The latest developments show that TowerCos are no longer in the founding phase. The focus is now on the operational excellence of tower companies. This concerns both exploiting potential for revenue growth — such as creating new revenue streams or increasing tenancy rates — and minimizing costs through effective cost management and optimization of cost structures.

Julius Hafer, Partner at BearingPoint

TowerCos are under pressure to increase profitability

Several factors influence this trend. Identifying these factors helps uncover potential opportunities to address these challenges.

Interest rates and inflation

TowerCos offer a solid and low-risk investment opportunity due to their stable business model and long-term contracts with MNOs. They regularly pay dividends to shareholders, and in times of low interest rates, TowerCos represent an attractive investment option as they offer a higher return than conservative forms of investment but have a lower risk profile than most industries, making them particularly attractive for institutional investors looking for long-term, stable returns.

However, the spike in global interest rates over the past years has impacted the appeal of TowerCo shares compared to other investment options and contributed to the observed decline in their share prices. The high inflation rate, responsible for rising interest rates, has also significantly impacted TowerCo share prices because TowerCo securities cannot outperform in a high inflation-rate environment due to their stable revenue streams based on lease agreements – investors tend to shun low-yielding securities in such an environment and instead seek out higher-yielding securities with growth potential.


Institutional investors, including pension funds, insurance companies, and sovereign wealth funds, represent a significant proportion of TowerCo investors. Their objective is to achieve long-term, stable returns. In some cases, they take an active role by acquiring a considerable stake in TowerCos, enabling them to influence the operating business to ensure that the expected return on their investment is realized. Consequently, these investors are not only interested in the generation of income but also in the ability of tower companies to reduce their costs sustainably, enhance their efficiency, and improve their competitiveness, helping TowerCos improve their long-term profitability. Due to the market trends mentioned above, strategic investors must closely monitor their investments, which may, in turn, result in a greater involvement in day-to-day business operations and an even more KPI-based management style. Private equity investors, in particular, are interested in increasing the enterprise value in the medium term. Accordingly, not only key financial figures are used, but also KPIs for operational performance (e.g. tenancy rate, number of new construction projects, scaling of operations).

Market consolidation

In recent years, the market for telecommunications infrastructure has been undergoing a period of intense consolidation. For example, the American Tower Corporation, a leading player, has further strengthened its market presence through strategic acquisitions, especially considering the takeover of Telxius sites in Europe. Similarly, Cellnex has acquired towers in the UK. While inorganic growth is a fast-paced growth strategy and entering new markets (compared to building new sites), it also Acquisitions underlines the need for TowerCos to undertake comprehensive integration activities for profit optimization, and the market as a whole is at a stage where such adjustments are essential for TowerCos to maintain their competitive edge. Inorganic growth is not only a strategy for expanding existing markets but also allows companies to quickly enter new markets (compared to building a portfolio on new sites). This growth strategy also underlines the need for TowerCos to engage in comprehensive integration activities to create post-merger integration synergies and optimize overall profitability. The market as a whole is currently at a stage where such cost-driven initiatives are essential for TowerCos to remain competitive.

Construction costs

TowerCos are significantly affected by the price of raw materials, especially concrete and steel, which are essential components for the construction and maintenance of the facilities. The recent rise in raw material prices has led to a significant increase in the cost of materials for the rollout of passive infrastructure.

Operating costs

In addition to increased construction costs, TowerCos must also cope with the increase in nominal wages in recent years. The continuous operation of infrastructure such as antennas and base stations also makes TowerCos heavily dependent on electricity costs. Consequently, the rise in electricity prices has led to a significant increase in the operating costs of these companies.

TowerCos need to expand their core business to grow revenues

Potential strategies that TowerCos can consider to increase their revenues include the following:

  1. Building new sites
  2. Upgrading existing radio towers
  3. Increasing tenancy ratio
  4. Optimizing the use of spare space on land/buildings (advertisement, solar panels, wind turbines, etc.)
  5. Provisioning for edge computing infrastructure

TowerCos must adopt measures to reduce their operating costs

Short to medium-term cost savings are critical to performance improvement. The following opportunities represent some of the available options:

  1. Increase energy efficiency
  2. Perform preventive maintenance
  3. Co-operate with external companies and local/city telecommunications infrastructure providers
  4. Automate processes
  5. Negotiate supplier contracts
  6. Optimize radio tower locations
  7. Reduce idle times


Carving out the passive infrastructure of radio networks and founding TowerCos allowed MNOs to generate liquidity and increase their financial flexibility. Despite a generally positive industry trend, many TowerCos have recently seen their share prices decline, indicating the need for a greater focus on increasing profitability and pointing toward a potential market consolidation.

The attractiveness of TowerCo shares is influenced by external economic factors, such as the development of interest and inflation rates, which collide with the stable lease contracts agreed with MNOs. Institutional investors seeking long-term and stable returns are intensifying the pressure on TowerCos to enhance their efficiency and competitiveness.

Consequently, TowerCos must devise strategies to maintain their competitive edge in a challenging market.

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