ASX 200 Telco advances on $820 million asset sale

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S&P/ASX 200 Index (ASX: XJO) listed telecommunications company Spark New Zealand Ltd (ASX:SPK) is advancing in early trade.

Spark shares closed yesterday at $4.45 apiece and are currently at $4.54 a share, sending the company’s stock up 2.02% for the day so far.

It comes after the New Zealand-based telecommunications service provider announced a NZ$900 million (A$820 million) divestment.

What asset does the telecommunications operator ASX 200 sell?

Spark’s stock price is up after the company announced that the Ontario Teachers’ Pension Plan Board will acquire a 70% stake in its business TowerCo.

The transaction values ​​the company – with some 1,263 locations in New Zealand – at NZ$1.18 billion. According to Spark, this represents a pro forma multiple of earnings before interest, taxes, depreciation and amortization (EBITDA) for FY23 of 33.8 times.

The acquisition, subject to Overseas Investment Office approval, is expected to take place in the first half of fiscal 2023. Upon approval, telephone company ASX 200 expects net cash proceeds of NZ$900 million.

Spark said the deal includes a 15-year agreement with TowerCo for access to existing and new towers, as well as a commitment to build 670 new sites over the next decade.

What did management say?

Management of the ASX 200 telco believes the deal will maximize shareholder value.

According to Spark President Justine Smyth:

The creation of TowerCo will accelerate Spark’s strategic goal of delivering an intelligent and automated grid, while maximizing shareholder value.

The transaction will bring in proceeds of $900 million, enabling direct returns to shareholders and investment in future growth opportunities that will accelerate Spark’s transition from traditional telecommunications to higher-growth digital services.

Bruce Crane, Senior Managing Director of Ontario Teachers’, added: “This investment builds on our long track record of investing in high quality businesses in New Zealand and will build on our extensive experience investment in digital infrastructure companies globally.

Spark CEO Jolie Hodson noted that telecom operator ASX 200 “will continue to own all of our network ‘intelligence’ – such as radio equipment and spectrum – which drives our competitive advantage and differentiation. on the market”.

How did the ASX 200 telecommunications share perform?

Spark has performed very well in difficult market conditions this year.

Since the January 4 opening bell, Spark’s stock price has gained 6%. That compares to a 13% year-to-date loss posted by the ASX 200.

At the current share price, Spark shares pay a rolling dividend yield of 5.8%, with no deductible.

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