How TowerCos can drive sustained value creation in telecoms

What is a TowerCo? “Towers” is the term used for the physical structures – both masts and rooftop installations – housing mobile network antennas, and the corresponding containers housing mobile base stations, power supply, etc. A Tower Company or “TowerCo” is a business set up to manage the “passive” (or non-electronic) infrastructure assets in a mobile network. TowerCos now control a significant and growing share of passive mobile infrastructure assets globally, leasing capacity space on their masts and rooftop equipment to operators, and increasingly acting as neutral, scaled platforms underpinning national digital connectivity. They also build new infrastructure when needed.

From niche to industry-wide default

As a concept, TowerCos are not new: their origins date back to the mid-1990s, when players like American Tower, SBA Communications and Crown Castle pioneered the sharing of mobile tower infrastructure. In the decades since then, TowerCos have become a default setup for telcos worldwide. In the process, they’ve attracted growing and well-justified interest from financial investors of various kinds.

TowerCos are rarely established from scratch; rather, they are typically carved out from Mobile Network Operators (MNOs) as part of broader strategic and financial optimization programs. Spinning off their tower infrastructure in this way enables telcos to embrace a “puretone” approach to their products, services, go-to-market strategy and organisational structure. While the strategic logic of separation is broadly consistent, the underlying motivations vary. For some operators, carve-outs primarily serve deleveraging and balance sheet optimization objectives. For others, they are vehicles for unlocking hidden asset value, attracting long-term infrastructure capital, or facilitating regulatory-supported consolidation. Increasingly, TowerCo separation also reflects a recognition that infrastructure ownership is no longer a source of competitive differentiation – execution, scale, and capital efficiency are.

Looking back over the history of competition and collaboration in mobile telecoms sector, the sharing of towers between mobile network service providers in a country has generally taken place when towers – or other cell sites – are no longer considered to be a strategic differentiator in the marketplace. So long as coverage is seen as differentiating one mobile operator against another, sharing of towers will usually remain limited. Experience shows that TowerCo carve-outs and in-country consolidation are often related to, or build upon, each other. Existing and potential TowerCo investors are well aware of this linkage and often explore the history of mobile network consolidation to help them understand its implications for the future of TowerCo investments and what has worked in various scenarios.

Against this background, the proliferation of TowerCo carve-outs in recent years has been a clear indication that mobile operators’ network coverage is no longer seen as a focus for competition and differentiation. Building more towers than necessary in a market is inefficient from a macroeconomic perspective and can reduce the availability of capital for other important investments. So, as Figure 1 shows, the trend for mobile network service providers spin off their infrastructure is increasing – with some of these transactions involving estates comprised of hundreds of thousands of towers.

Simultaneously, capital markets have begun to differentiate sharply between business models. Pure-play macro tower landlords are increasingly valued on predictability and yield, while scaled consolidation platforms and hybrid InfraCos that integrate fiber, IBS, power, and edge capabilities may command differentiated valuation profiles – albeit with higher complexity and capital intensity. This emerging ‘valuation regime shift’ is reshaping strategic decision-making across the sector.

Value creation from TowerCos: benchmarks and levers for each deal stage

Over many years, PwC Strategy& has developed extensive global experience of working and advising on TowerCo carve-out, value creation and growth strategies. We have drawn on this wealth of knowledge to consolidate best practices from recent TowerCo carve-outs and M&A deals, while also synthesising the lessons learned from earlier projects involving infrastructure sharing and in-country consolidation. Based on all of this insight, we have compiled this paper as a guide to best practice both for financial investors interested in tower infrastructure and mobile service providers considering tower spin-offs, looking across the three deal stages of pre-deal and carve-out, post-deal value creation, and future growth.

In the pre-deal and carve-out phase, the benchmarks providing the foundation for determining the TowerCo’s pre-deal valuation include metrics such as per-tower financial KPIs and EBITDA multiples. Before engaging in any carve-out, it’s vital to establish clarity on the strategic motivation and build an initial business case for the deal. Our playbook for Tower carve-out supports a systematic approach to defining the carve-out perimeter, setting out the strategic motivation and designing the target operating model. To support all of this, we carefully analyse the fundamental trade-offs between the level of sustained control retained by the mobile telco and the value generated by the TowerCo's independence, assessing the implications for operational efficiency, growth optionality, regulatory exposure, and capital market positioning.

For post-deal value creation, we look across the board at the full range of value creation levers – from strategic drivers such as consolidation of national infrastructure, to more operational ones like increased tenant ratio and site upgrades to support more antennas – either for more tenants or new frequencies, to more tactical levers including finance and tax optimisation. A look back at previous TowerCo deals in past years indicates that, all too often, material value is frequently left unrealized due to insufficient integration discipline, commercial inertia, and limited data transparency. The way to avoid this pitfall is through a sustained focus on value creation. Having selected the right operating model, this approach involves revisiting the KPI already during carve-out against the latest developments to bring the target operating model to life, and addressing specific performance management issues to drive granular improvements across all functions, including commercial optimization, tenancy uplift, energy management, procurement leverage, digital operations, and capital allocation.

The core of future growth of TowerCos will come from two sources. First, from increased tenant ratios – essentially selling space on existing sites to more customers. Second, from building new sites either for network densification or for new type of sites, e.g. small sites (micro/nano/femto sites). Tapping into both sources of growth means examining not only the established core business, but also adjacencies that could contribute to growth, such as mobile communication for railroads and industrial private mobile networks, including site readiness for edge cloud computing. Furthermore, strategic growth avenues for shareholders may be opened by in-country consolidation of towers – and other cell site assets – and international expansion.

Beyond core growth, Leading TowerCos are increasingly transitioning from passive landlords toward hybrid InfraCos – integrating fiber backhaul, small cells, edge data centers, and energy solutions. Those able to orchestrate multiple infrastructure layers may structurally outperform pure-play models, provided capital discipline is maintained.

Setting out the strategic context

As we noted above, before engaging in any carve-out it’s vital to clarify the strategic motivation and build an initial business case, and examine the value trade-offs between continued control of the towers and an independent TowerCo. This analysis paves the way for a clear, systematic approach to structuring the TowerCo, preparing it for operational efficiency and growth, and defining the target operating model.

All of this begins with asking the right questions. These include:

The answer here is determined by the expected future level of infrastructure competition and may differ from country to country. In large parts of Europe, for example, competition on the grounds of national coverage is perceived to have eased, given a mobile network coverage footprint of more than 99%. But the situation differs markedly in other regions of the world.

To answer this question, we need to be candid about the TowerCo’s growth options. How far will it be able to increase its tenant ratio, build additional towers for 5G/6G, and enter into adjacent market areas?

There need to be solid reasons to believe that an independent TowerCo will be more effective and efficient than the status quo. These may include national infrastructure consolidation, more focus on the TowerCo’s cost of operations, or the scope to increase scale through international operations.

Ultimately, towers remain a strategic asset for the mobile telecoms service provider (OpCo), while the TowerCo investor will be unlikely to achieve maximum value without a sufficient degree of operational control.

The answers to such questions need to be defined in three distinct dimensions, each with various sub-dimensions, as shown in Figure 2. These are:

Market context
TowerCo Perimeter
Corporate Structure

Figure 2 provides the option space of prospective answers to this question.

Having mapped out the dimensions and sub-dimensions described above, we can then apply a structured, step-by-step approach to define the actual carve-out scenario, as shown in Figure 3.

The decision-making follows a step by step approach starting with market context confirmation, then builds applicable senaries while deducting the actual scenarios for further detailing.

Strategic considerations

Market context
Confirm the attractiveness of the market context, including timing, for potential carveout.
Scenario analysis
Analyse a range of scenarios to identify the optimal value/control balance for the potential carveout.
Target scenario detailing
Define high-level MSA/SLAs required for smooth realisation of the carve-out’s full potential.

At the end of this process, we will have a clear definition of the perimeter for the carve-out, with each element of the future TowerCo business clearly allocated. This will include – for example – clarifying whether security operations or energy service provisioning will be within the carve-out perimeter (see Figure 4).

In recent years, the global telecoms market has experienced a “perfect storm” of disruptive events that have triggered a flurry of tower carve-outs by mobile network operators (MNOs). This trend has reshaped the telecommunications landscape, ushering in new operational and strategic models for managing these critical assets. Substantial additional investment has been made available for the industry, however thereby changing the ownership structure of the industries value chain elements substantially in favor of new private equity style investors.

Now, the pre-deal rationales for tower carve-outs by MNO have contributed to common post-deal challenges that have hampered medium- to longer-term returns on investment in tower assets. The elements that have created these issues include:

Tower planning, construction, and operation are non-core capabilities for traditional vertically-integrated MNOs. As a result, the development of tower portfolios was typically carried out in an ad-hoc and siloed manner by both incumbent and challenger MNOs. This lack of a cohesive strategy often led to operating model inefficiencies and missed opportunities.

The passive cell-site infrastructure developed by MNOs was deemed “good enough” to serve their purpose in housing active equipment to provide a radio network. This minimalistic approach sufficed for basic operational requirements – but fell short in terms of optimising the full potential of these assets.

The business model required for tower operations is fundamentally different from the MNO’s core business of acquiring and servicing mobile subscribers. Towers represent large balance sheet assets that MNOs struggled to use effectively. This discrepancy is evident in the valuation delta in EBITDA multiples across the two business models.

Together, these factors mean assessments of tower assets between MNOs and infrastructure specialists – often through sale and lease-back arrangements – provide a sufficiently strong commercial rationale for both parties to pursue a deal. Crucially, the benefits of these arrangements flow both ways: they allow MNOs to unlock capital and refocus on their core business activities, while also enabling infrastructure specialists to leverage their expertise to realise their valuation of tower assets.

We have now detailed our view on the pre-deal and carve-out phase of TowerCos. Going forward we need to dive deeper into the post deail value creation.

One of the biggest challenges in these deals – arguably the biggest in many cases – is the availability of high-quality and near-real-time data, which serves as a foundational prerequisite to driving profitable growth. Data plays a pivotal role in enabling sustainable cost reduction, insight for continuous improvement and the capability to grow revenue. However, the history of underinvestment in tower operations has resulted in an operating model that is not designed for value creation. Yet creating value from these assets is becoming increasingly important, especially given the growing focus on profitability over growth in the number of towers. Enabling value creation involves asking a number of fundamental transparency questions, such as:

How many towers do we have, where are they, and what are their characteristics?
Which customers and what kit do I have on my towers?
How much spare bracket space is on the towers and how much headroom wind load is there?
Who makes up my supply chain? Which engineers does it include, with which certificates, and how do they get on site?
Who are my lease contracts with? What are the terms and renegotiation positions?

How to tackle these questions in the era of AI will be part of our next release on our three part series about TowerCo value creation.

In the last part of our three part series we will look into future growth of TowerCos by first exploring two sources of core growth increased tenant ratios and building as well as selling new sites. We will also touch briefly on growth beyond the core looking what data center, fibre and also energy service provisioning holds as growth opportunity for TowerCos.