American Tower has inked a new multi-year master lease agreement (MLA) with AT&T, and separately bolstered its U.S. portfolio, closing an acquisition of 400 towers.
Details on terms of the deal with AT&T were light, though the carrier said it involves a simplified leasing process and expanded site development services. AT&T’s VP of Tower Strategy and Roaming JR Wilson in a statement called the deal “essential” for executing on the carrier’s 5G and dedicated first responder FirstNet network builds.
An AT&T spokesperson said that terms, while confidential, generally simplify the overall structure and administration of the lease management process, and promote a long-term strategic relationship between AT&T and American Tower.
“This comprehensive agreement is expected to drive mutual value and growth through a simplified leasing process designed to drive efficiency and flexibility improvements directly benefiting our speed in deploying the latest technologies,” Wilson said.
AT&T also noted that the new deal aligns with the carrier’s focus on keeping pace with growing mobile data usage while enhancing capacity and coverage, particularly in underserved rural areas.
AT&T has been following a “one touch” strategy as it builds out the FirstNet public safety network, adding capacity and simultaneously upgrading sites with 4G LTE-A technology and 5G-capable equipment. Wells Fargo Senior Analyst Jennifer Fritzsche noted that while recent tower activity from Verizon and T-Mobile has been fairly weak, AT&T’s wireless activity “seems quite robust.”
“We believe this morning's announcement offers further evidence that AT&T is looking to streamline the process to make it easier to move forward with its "one touch" initiative (centered around its 700MHz FirstNet push),” wrote Fritzsche in Tuesday note to investors.
An AT&T spokesperson told FierceWireless that the new agreement supports both existing and ongoing network plans and “will help improve efficiency as we deploy Band 14 on American Tower network infrastructure as part of our FirstNet build.”
In an SEC filing American Tower indicated it now expects an additional $135 million in straight-line revenue for the 2019, based on the MLA with AT&T. It also revised its 2019 guidance for property revenue of $7.34 to $7.47 billion, and net income of $1.72 to $1.79 billion. Organic tenant billings growth and consolidated AFFO remain unchanged from its July 31 outlook for 2019.
“We look forward to this new phase of our long-standing relationship with AT&T,” said Steve Vondran, president - U.S. Tower Division at American Tower, in a prepared statement. “This agreement provides for an extended mutually rewarding strategic relationship, and we’re excited to help AT&T deliver the next generation of wireless technology to consumers, businesses and first responders quickly and efficiently.”
Fritzsche called out the raised guidance, saying it was important to note that Crown Castle signed a similar deal with AT&T in April 2018, but unlike American Tower, did not raise its 2018 outlook for any straight-line impact.
The Wall Street firm also found it interesting that AT&T made the deal after previously expressing frustration with tower company terms.
“While financial terms were not fully disclosed, it is curious to us that T struck this deal after being fairly vocal as to their aggravation with the tower companies (especially public ones) and felt the economics needed to be change,” wrote Fritzsche.
AT&T has publicly spoken about its intention to sell about 1,300 towers in the U.S., and Wells Fargo analysts indicated private tower developers that the carrier has been vocal about working with “are likely best in line” to scoop up those assets.
Separately on Tuesday, private equity firm Grain Management announced it completed the sale of its nationwide wireless communications assets to American Tower, including approximately 400 towers and other related property interests.
Financial terms of the deal were not disclosed, but executives speaking on American Tower’s second-quarter earnings call in late July, said it expected to close a deal in Q3 for around 400 U.S. sites for about $500 million. Grain Management said the tower assets are in tier-two and tier-three markets that are now benefiting from increased carrier activity and network densification.
American Tower has about 40,000 macro sites in the U.S., and at the mid-point for the year the company increased its new build expectations to 3,500 sites, a 250-site increase.
American Tower in July expected to add about 10,000 towers in total to its portfolio in 2019. This includes 363 other sites already acquired in the first six months of the year, primarily in Latin America, for a total of $150 million. Other international acquisitions include a $1.85 billion deal to purchase Eaton Towers, which includes approximately 5,500 sites across five African Markets. That deal is expected to close by year-end.