Analysts have run the numbers on Vodafone’s (VOD) European mobile masts business and believe that investors should not anticipate significant share price upside from the mobile network being spun-out.

Vantage Towers, as the masts business has been named, owns around 68,000 towers around Europe, generating an estimated €1.24 billion of revenue and €680 million of earnings before interest, tax, depreciation and amortisation (EBITDA). That implies an EBITDA margin of 55%.

Vodafone hopes to merge its UK towers unit, CTIL, into the Vantage business. This depends on striking a deal with joint venture partner 02, having agreed to a network sharing deal to save on operating costs in 2012. CTIL would add between €50 million and €70 million of EBITDA to the Vantage business.

The FTSE 100 telecoms giant has been chewing over the idea of demerging its mobile masts arm for several years as a route to unlocking value it perceived was buried in the operation.

A dedicated towers business with shares traded on a stock market would be more transparent to investors and could potentially attract a higher valuation.

The towers operation will join the stock market in Frankfurt rather than the London Stock Exchange. The news didn’t go down well with UK investors who have already had to contend with Vodafone’s share price being stubbornly in decline for the past five or six years.

The company is believed to have been encouraged by foreign mobile tower business valuations in recent months. This was highlighted by Spanish-listed towers company Cellnex, which recently raised €4 billion of extra cash from investors to pursue acquisitions.

That cash call implied that Cellnex was trading on an EBITDA multiple of 21-times, according to analysis by Megabuyte analyst Philip Carse, versus Vodafone’s 6.9-times valuation. But Carse believes that any share price upside for Vodafone spinning off the asset is already priced in.

‘A similar multiple to Cellnex for Vantage (circa €14.3 billion) would imply around 5.5 times EBITDA for the rest of Vodafone. That’s in line with European peers, such as Deutsche Telekom, Orange and Telefonica, and well above the 4.0 times EBITDA of BT (BT.A),’ he says.

Any tower value upside may have to be earned by sweating its mobile masts estate to greater effect. This would include initiatives such as driving up third-party tenancies, says Carse, or the average number of third-party mobile service providers renting space on towers for their own network equipment. ‘Vodafone’s current 1.5-times tenancy ratio compares with Cellnex’s 1.6,’ according to Carse.

Ultimately, Vodafone needs to demonstrate real value from its large 5G investment to reignite its share price.