NTelos to sell off 103 of its remaining cell towers for $41M to Grain Management

Sprint (NYSE: S) wholesale partner nTelos Wireless struck a deal to sell up to 103 of its cell towers for $41 million to an affiliate of Grain Management, a private equity firm focused on investments in the media and communications sectors. The deal represents most of the towers that nTelos still owned and comes less than two months after nTelos announced plans to sell off its spectrum and its retail business in markets in eastern Virginia.

As part of the new tower deal, nTelos will enter into long-term lease agreements on the towers it sold that are located in its Western Markets. NTelos plans to focus its future efforts on its business in western Virginia and West Virginia, following the sale of its business in eastern Virginia. The tower transaction is expected to close in multiple installments during calendar year 2015, the first of which is expected to occur in the first quarter.

Meanwhile, nTelos provided preliminary fourth-quarter results. For its Western Markets, the company added a total of 5,000 net wireless customers in the period, down from 7,300 in the year-ago period. The net additions were made up of 4,700 postpaid customers and 300 prepaid customers. The carrier had a total of 282,100 subscribers in the Western Markets at the end of 2014, compared to 273,600 at the end of 2013.

For all of 2014, the company expects to be at or above the mid-point of its previous full-year 2014 adjusted EBITDA guidance of between $128 million and $132 million, reflecting consolidated operations in the Eastern and Western Markets.

Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote in a research note that the tower sale is a positive development, though the net proceeds are likely going to be lower than the announced $41 million in gross proceeds. The company's subscriber metrics were lower than Jefferies had expected and imply higher churn than the analysts had forecasted. However, the company's implied fourth-quarter EBITDA is higher than expected, they wrote.

Wells Fargo analyst Jennifer Fritzsche wrote in a research note that the tower sale does not come as a surprise, as nTelos had signaled it was seeking to monetize its towers when it announced the divestiture of the Eastern Markets in early December. "The price per tower of $400K, however, is higher than we expected, as we previously had assumed $100K per site when estimating NTLS's core asset value," she wrote. "The positive postpay and prepaid net adds show signs of improvement in its retail business, although we believe the competitive environment in its Western Markets will continue to be challenging." Release