Following AMT’s recent $9bn purchase of Telxius Towers, Europe is becoming a greater focus for US TowerCos. We deep-dive into the European market and the transaction and conclude the region could drive incremental equity upside to TowerCos on both sides of the Atlantic: 

State of the European Market: Europe shares many of the same big picture drivers of US towers (strong data traffic growth, increasingly high band spectrum for 5G, rising mobile capex). However, European tower assets remain fragmented and owned by economically challenged telcos. From a tower opportunity standpoint, our base case is +50% more European tenancies in 2020-30, but this could be faster given large-scale densifications recently announced (e.g., France) and new carriers in some markets (e.g., Germany). Europe also has lower tenancies and longer term contracts than the US, offsetting some of the historical challenges of the region (low operator returns, slower rent escalators). These industry and market characteristics, fragmented tower ownership, increasing spectrum/tenancy, and economically challenged telco incumbents that are tasked to upgrade telecom networks (from 4G to 5G), generally leads to industry transformation, and in this case, broad-based tower asset consolidation.