Jim Armitage: O2 and Vodafone line up a future deal for shareholders

While BT’s top brass were gladhanding in Davos, O2 and Vodafone were putting the finishing touches on a deal that should speed the roll-out of the next generation of mobile coverage across the UK.

The pair have long shared phone masts as a natural way of saving on the costs of rolling out network coverage. Their masts’ joint venture, known as CTIL, hastened the spread of 3G and 4G to millions of people.

So today they agreed to extend the network sharing partnership to 5G, in a move that makes total sense.

However, for shareholders, there’s a bigger prize in the pipeline. The pair also signalled that they will increase the independence of the CTIL operation with a view to selling it.

With 16,000 masts and a heap of engineering expertise, CTIL should fetch well over a billion quid. Who’d buy it?

Several global mast businesses might be interested. CTIL could offer out its services building masts for other companies, signalling a lucrative new revenue stream. Perhaps it could rent space to other networks on its existing towers, too. In the US, where most masts are owned by independent companies, the average mast carries three networks.

Vodafone and O2 are likely to start off by selling a minority stake in CTIL to a private equity-style investor before an outright disposal. Vodafone’s new boss Nick Read talks of wanting to maintain strategic control of the operation while raising money from it.

But overseas mast owners such as Cellnex, American Tower and Arqiva will be interested. At the right price, Voda and O2 would doubtless sell the whole thing.

That could put pressure on BT’s incoming boss Philip Jansen to follow suit. BT took on EE’s masts when his predecessor Gavin Patterson bought it from Deutsche Telekom and Orange. Last year, there was speculation BT might sell its 7000 masts for £1.5 billion. Patterson preferred to keep them for 5G, but Jansen may take a different view.

Preparing the nation for 5G will require massive financial firepower. Phone companies will seek to raise cash wherever they can to fund it.

METRO

So, the shorts were right. Metro Bank has long been a target for hedge funders such as Crispin Odey who have bet big that its share price was ripe for a fall.

They figured a small, UK-focused lender was bound to come under pressure at a time of rising stress on household debt and Brexit around the corner.

They hadn’t bet on accounting mess-ups too. Metro’s failure to evaluate the risk on buy-to-let loans reeks of utter incompetence. Now a cashcall looms. As a relatively new bank with a short track record, it sends a terrible signal to investors: what else have they got wrong?

For fans of challenger banks, it’s also a blow. The Big Five oligopoly will sneer about how upstarts can’t be trusted to get it right.

Extremely disappointing.