Orange forms tower company TOTEM with 25,500 sites

Orange, which has 257 million customers worldwide, announced the creation of tower company called TOTEM.
Telecom tower testingTOTEM will be run by an independent and dedicated management team that will be appointed in the first half of this year with a view to launching operations by the end of the year.

TOTEM will have around 25,500 sites in France and Spain, the two largest countries where Orange is present. Beyond France and Spain, the Group will explore the possibility of integrating other passive mobile infrastructure assets from within Orange’s European footprint that could create value for the TowerCo.

In France, TOTEM will operate around 17,000 macro sites with an attractive mix of approximately 55 percent towers and 45 percent rooftops. Given the strong co-location demand, which has been constant for several years, and the high proportion of towers in the portfolio, there is clear potential to increase co-location rates.

In Spain, TOTEM will operate around 8,000 macro sites, split equally between towers and rooftops. The Spanish operations will benefit from the network-sharing agreement between Orange and Vodafone, guaranteeing the future stability of the hosting activity.

Based on the scope of sites and the terms of the Master Service Agreement (MSA), in 2020 the TowerCo’s revenues would have exceeded 500 million euros with EBITDAaL of close to 300 million euros, approximately two thirds of which would have been generated in France. This represents a margin of about 57 percent, including maintenance costs of about 5 percent of the TowerCo’s revenues.

The framework agreement provides for an initial 15-year contract with Orange with a tacit renewal of 2 x 10 years providing long-term revenue visibility for TOTEM with its main customer, Orange. The renewal would cover the entire portfolio of sites. Rent applicable to Orange would conform to market practice, indexed to inflation with no cap and a floor of 0 percent. The number of strategic sites will be limited and will be less than 5 percent of the existing French portfolio of sites.

TOTEM will benefit from opportunities to develop its hosting activity across its entire portfolio. Thus, the co-location rate for the combined assets in France and Spain should increase from 1.3x in 2020 to 1.5x by 2026 and up to 3,000 sites should be constructed over an eight-year period based on demand from Orange.

TOTEM will host and deploy new sites for Orange as well as for other operators.

TOTEM also intends to seize inorganic growth opportunities in Europe. Orange will be able to use the flexibility of the new entity’s entire capital structure, whether for issuing new shares or debt financing. Orange wishes to retain control of TOTEM to benefit from the important source of sustainable value creation it provides for the Group.

Stephane Richard, chairman and CEO of Orange Group, said: “Passive mobile infrastructure is a core asset for Orange, benefitting from exceptional operational expertise in the areas of deployment, hosting and maintenance. We are determined to keep these strategic assets within the scope of the Group.”