AT&T (NYSE:T) agreed to sell and lease 9,700 of its cell towers to Crown Castle in a $4.85 billion deal, capping months of speculation about such a transaction and coming amid a flurry of tower-related deals.
Under the terms of the agreement, Crown Castle will have the exclusive right to lease about 9,100 AT&T towers for an average of about 28 years and will purchase 600 other towers. Crown can buy the leased towers for $4.2 billion beginning in 2032. AT&T will sublease capacity on the towers from Crown Castle for a minimum of 10 years for $1,900 per month per site, with annual rent increases of 2 percent. AT&T said it can add "additional reserve capacity," most likely new antennas, on the towers for future use.
Crown said that the towers are mostly in urban areas, with nearly 50 percent of sites in the top 50 U.S. markets. "Consistent with our focus on the top 100 U.S. markets, nearly half of the AT&T towers are located in the top 50 markets, where we expect the majority of network densification and upgrade activity to occur," Crown Castle CEO Ben Moreland said in a statement. "With an average of only 1.7 existing tenants per site, we expect the AT&T tower assets to provide significant growth opportunities driven by the continued consumer demand for wireless data services."
"This deal is good for AT&T and our shareholders," Bill Hogg, AT&T's senior vice president of network planning and engineering, added in a statement. "This deal will let us monetize our towers while giving us the ability to add capacity as we need it. And we'll get additional financial flexibility to continue to invest in our business, maintain a strong balance sheet and return value to our shareholders."
The arrangement was expected. AT&T confirmed on Sept. 20 that it was "exploring opportunities to monetize some or all of its remaining wireless tower assets." Earlier this month Crown emerged in reports as the most likely bidder.
In September 2012, T-Mobile US (NYSE:TMUS) agreed to sell the rights to 7,200 of its towers to Crown Castle for $2.4 billion. In the T-Mobile deal, Crown noted that 83 percent of the towers were located in the top 100 U.S. markets and 72 percent were located in the top 50 markets
The AT&T transaction comes less than two months after American Tower agreed to acquire privately held rival Global Tower Partners in a deal valued at $4.8 billion. Tower executives have said AT&T's towers were a top remaining prize on the market. (U.S. Cellular (NYSE:USM) has said it is considering selling its towers in markets it has divested, but not in its core markets).
"CCI is paying roughly the same multiple for AT&T's towers as they did for T-Mobile's; however, AT&T's sites are located in worse markets (50% in the top 50 markets versus 72% for T-Mobile's sites) and have more tenants and reserve capacity requirements which limit future growth (1.7 tenants per tower versus 1.6 for T-Mobile's sites)," New Street Research analyst Jonathan Chaplin wrote in a research note.
Credit Suisse analyst Joseph Mastrogiovanni wrote in a research note that the deal with Crown is unlikely to change any of AT&T's long-term strategic plans. "AT&T has been quite vocal about opportunities in Europe, but we believe the company needs to see more regulatory change in the region, especially on spectrum ownership rules, before it would make a large investment," he wrote. "The company could keep the incremental capital on hand should the regulatory environment begin to move in a more favorable direction. However, $5B would be a small part of the funding needed for a deal that could cost over $100B. Finally, the company could keep some powder dry for spectrum opportunities, like the planned broadcast spectrum auction."
For more:
- see this AT&T release
- see this Crown Castle release
- see this NYT article
- see this Bloomberg article
- see this Reuters article
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