Narrow-Moat European Tower Firms Present Attractive Unit Economics

We are initiating on European wireless tower firms Inwit, Cellnex, and Vantage Towers with narrow moat and stable moat trend ratings and fair value estimates of EUR 10.70, EUR 52, and EUR 29, respectively, which represent a 12%, 29%, and 0% upside based on the Monday, Jan 31 closing price. Our narrow moat ratings are supported by switching costs, as many European mobile operators (MNOs) rely on tower firms to operate their businesses, having almost no network alternatives. Switching tower networks is usually not an option for carriers as this could cause coverage disruptions, resulting in reputational damage. Switching costs are strengthened by the all-or-nothing clauses included tower firms’ contracts, which means MNOs cannot cherry pick towers when contract renewal is due, having to choose the entire tower portfolio or none. Inwit is the only company that also enjoys efficient scale characteristics on top of switching costs, as it is solely focused in Italy, an efficient tower market with high tenancy ratios (number of tenants per tower).