(Valor) Gávea Investimentos, the asset-management firm founded by former central banker Arminio Fraga, joined Goldman Sachs to invest in the market of mobile-phone towers. Named Cell Site Solutions (CSS), the company is expected to get up to $300 million in investments, half from each partner, Valor has learned.
The new company will be led by Raymond Ward, executive who was CEO of American Tower, one of the largest companies in this market operating in Brazil. Gávea and Goldman declined to comment.
Rendering services to phone carriers has become a big market for private-equity firms. With the necessary investments to fulfill coverage goals for 3G and 4G technologies, phone companies have been opting to sell part of their tower assets and lease them back.
Brazil now has approximately 60,000 cellphone towers. It is estimated that this number will triple with the arrival of 4G technology. Only 15% of wireless sites (towers and antennas) in Brazil are owned by third-parties, compared to about 40% in the US. Looking to that potential, several funds created companies to acquire this infrastructure.
TorreSur, owned by Providence, an American company, was one of the first to get into the market and has already invested R$1.4 billion in the purchase of 2,600 towers. Last year, GP Investments, together with bank Bradesco, invested R$503 million in BR Towers, whose first deal was the acquisition of nearly 2,000 towers from Vivo, the largest cellphone carrier in Brazil, owned by Telefónica. At the end of 2012, P2 Brasil, an infrastructure fund managed by asset manager Pátria and engineering group Promon announced the creation of Highline, with a R$300 million investment.
Along with the purchase of existing structures, these companies intend to invest in the construction of new towers, whose individual cost varies between R$150,000 and R$250,000, plus the rent of the place where the antennas are installed.
Cell Site Solutions’ investment marks the return of Goldman Sachs to the Brazilian private-equity market. The American bank’s latest forays in Brazil were in 2007, with the purchase of sugar and ethanol company Santelisa Vale, sold two years later to France’s Louis Dreyfus Commodities, and in BRA Linhas Aéreas, airline that filed for bankruptcy protection.
Gávea is likely to invest in CSS money from the latest fund it created, in 2011, a $1.9 billion portfolio that is the largest-ever focused on acquisitions in the country.