We conducted commercial due diligence of PLDT Smart’s tower assets in the Philippines on behalf of Unity Digital Infrastructure, resulting in a successful bid

The problem

• Our client, Unity Digital Infrastructure, was considering acquiring 650 telecoms towers and related passive telecoms infrastructure from PLDT Smart in the Philippines
• Analysys Mason was engaged to conduct pre-bid due diligence and, subsequently, detailed commercial due diligence on a tower portfolio for a potential sale-and-leaseback (SLB) transaction, which also came with corresponding build-to-suit (BTS) tower commitments

The solution

• We conducted pre-bid due diligence, which included:
  • a review of the SLB and BTS portfolios’ lease-up rate (LUR), upgrade capex for co-location and site analysis of land leases, permits, power availability, etc.
• This was followed by detailed commercial due diligence, which involved:
  • review of the macroeconomic, mobile and tower landscape
  • more detailed analysis of the site portfolio including fulfilment of wind load requirements and quality of back-up power, with comparison to similar portfolios from past SLB deals
  • review of the draft master service agreement (MSA)
  • review of the business plan, including potential revenue, opex and capex, by updating tenancy ratio expectations, likely land lease escalationspost-transaction and power equipment capex, respectively

Figure: Sample output of 10-year LUR projection, SLB sites

The result

• Based on our advice on the market environment and LUR expectations, our client submitted an initial bid that was accepted by the seller to move on to the next phase. This led to the commissioning of the full due diligence report, which enabled our client to develop a better understanding of the assets and market, and successfully bid for the tower portfolio for PHP9.2 billion (USD169 million)