Vodafone launches e15 billion IPO of its masts business Vantage Towers with pledge of bumper dividends

Vodafone today fired the starting gun on the stock market flotation of its European mobile phone towers operation at a reported value of e15 billion.

The mobile phones giant today issued its formal intention to float on the Frankfurt stock exchange, saying it was set to complete by the end of March.

The IPO of the business known as Vantage Towers is intended to raise funds to pay down some of Vodafone’s large debt and will also give an accurate market value of Vodafone’s remaining stake in the business.

It is felt this has not been accurately reflected in Vodafone’s share price before.

The valuation remains unclear but reports yesterday put it at e15 billion - considerably lower than previous speculation of more than e20 billion, although the latter figure includes e2.5-3 billion of Vantage Towers’ debt.

Much will depend on appetites for IPOs in the coming weeks, which look set to be fairly rocky for markets.

Today’s document fleshes out how investors wanting to take up shares in Vantage will be set for potentially chunky dividends.

The newly independent operator will pay out e280 million in divis for this financial year, to be paid in July, and has pledged to pay 60% of recurring free cashflow a year thereafter.

An indication of the future direction of those dividends is that Vantage is targeting free cashflow growth of “mid-to-high single digit” percentage annual compound growth.

While the pricing will be decided after consulting with potential investors in the coming weeks, the float could raise about e4 billion in new money to build out the network.

Vantage’s business model is to rent space on its existing towers to other operators who will increasingly need to build out their networks to support demand for new generation 5G.

Vantage has 82,000 towers across 10 countries, with sites on towers, masts and rooftops across UK and the continent.