AT&T Selling Control of 9,700 Tower Sites to Crown Castle International
AT&T agreed to sell Crown Castle International ownership or leasing rights to about 9,700 of its approximately 10,000 cell tower sites for $4.85 billion. The deal, announced Saturday, gives Crown Castle full ownership of 600 AT&T tower sites and full leasing control of 9,100 sites for an average of 28 years. Crown Castle has the option to buy the leased towers for $4.2 billion at the end of the lease period. AT&T said it will lease back space on the towers for at least the next 10 years at a starting price of $1,900 a month per site; leasing prices will rise by 2 percent a year. AT&T has the option to re-up its leases for a total of 50 years (http://soc.att.com/17Zl624). The deal is one of the latest in a string of sales of wireless carriers’ tower sites to tower companies -- and it may be one of the last major ones for the foreseeable future, industry experts told us Monday.
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The number of tower sites that will get transferred in the AT&T deal will shift Crown Castle’s domestic tower portfolio balance “in a pretty substantial manner,” said Clayton Funk, a managing director at broker Media Venture Partners. Wells Fargo analyst Jennifer Fritzsche said in an email to investors Monday that the AT&T deal by itself increases Crown Castle’s U.S. tower site assets by about 33 percent. As of June 30, Crown Castle owned or operated 29,866 tower sites in the U.S. and American Tower held 22,720, according to filings with the SEC. Crown Castle, American Tower and No. 3 tower company SBA Communications have long driven a “very competitive M&A environment, and you see all three pretty aggressively pursuing most of the major portfolios that go up for sale,” said Brian Clark, a partner at M/C Partners, an investment firm that focuses on the communications, media and technology sectors. “I don’t expect that to stop. The question is, where is the next big portfolio?"
The AT&T deal is “certainly one of the largest tower deals in the market within the last year,” Funk said. Crown Castle agreed last year to operate 7,200 of T-Mobile US’s tower sites for $2.4 billion, with an option to buy the sites for an additional $2.4 billion at the end of the 28-year lease period (CD Oct 1/12 p16). American Tower, Crown Castle’s top competitor, agreed last month to buy out Global Tower Partners owner MIP Holdings for $4.8 billion (CD Sept 9 p12). American Tower also inked an $811 million deal in August to buy nearly 4,500 tower sites from NII Holdings in Brazil and Mexico (CD Aug 12 p12).
AT&T’s towers may end up being one of the last large carrier tower portfolios to come on the market in the near future, Clark and Funk said. Both Verizon Wireless and U.S. Cellular still own a substantial number of towers, but neither has expressed interest in putting them up for sale, Funk said. Clark said international tower sites could become a big focus in the future: “You'll still see a very active market in Latin America and increasingly in Europe.” The AT&T-Crown Castle deal shows that there’s a “strong appetite” for tower assets among public companies, indicating they're continuing to take a “very bullish view on wireless lease-up potential as the LTE buildout continues,” Funk said. That view stems from an expectation that the wireless carriers will start to look for tower sites where they can lease space to fill in capacity gaps, Funk said. “It’s a really robust market,” he said. “While deals like this one get the headlines, there’s still a substantial amount of activity in this space that goes unreported. It speaks to the health of the industry."
The deal will have to clear an FTC-Department of Justice review to ensure it doesn’t violate antitrust provisions of the Hart-Scott-Rodino Act -- but that review isn’t likely to find problems, Funk said. Clark would be “very surprised” if the deal encountered regulatory concerns, he said. “Really you tend to see those kind of regulatory issues when you have acquisition of spectrum and if there’s market share issues with the carriers in terms of subscribers.”