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National Grid, the UK energy group, has sold its mobile phone masts and broadcast business to Arqiva, a subsidiary of Macquarie Bank for £2.5bn, more than originally expected.

National Grid said that, following the completion of the deal, it would return £1.8bn to shareholders by extending its existing share buy-back programme.

The company said last November that it would sell its National Grid Wireless division in order to concentrate on its core US and UK gas and electricity transmission and distribution businesses. National Grid was originally looking at a demerger of the wireless business, but after strong interest from private equity funds and infrastructure investors the company opted for a sale.

National Grid Wireless is the UK’s biggest independent provider of mobile communications, and also provides transmission networks for analogue and digital television and radio broadcasters. National Grid is also in the process of selling its much smaller US wireless division.

Morgan Stanley was running the auction process for National Grid Wireless, and it is understood that all six of the bidders who advanced to the second round were infrastructure funds, whose lower cost of capital made them more likely to pay the best price.

The agreed price of £2.5bn is far above any paid for any asset in the sector so far, at 19.3 times 2006 earnings. Texas Pacific Group bought France’s TDF (Tele Diffusion de France), a business similar to National Grid Wireless for about 11 times earnings.

Arqiva is owned by a consortium of investors led by Macquarie Communications Infrastructure Group, Macquarie Bank’s listed media fund. Arqiva is already one of the biggest players in the UK mobile communications sector, and recently bought BT Group satellite broadcast division, as well as transmitter assets previously belonging to NTL.

National Grid chief executive Steve Holliday said of the deal with Arqiva: ”We are confident that it delivers greater shareholder value than a demerger.”

National Grid bought the wireless assets from Crown Castle International in June 2004 for £1.1bn at a multiple of 10.7 times earnings. In the six months to September 2006, National Grid Wireless made profits of £42m, up 17 per cent from the first half of 2005. National Grid said in November that the wireless division was set for ”double-digit growth”.

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