Verizon Communications Inc. (VZ) is planning to divest its cell towers in the wake of the potential benefits that rival AT&T Inc. (T) has received from a similar transaction. If successful, Verizon will become the third traditional carrier in the U.S. to offload its cell towers in the last couple of years.
Reportedly, around 12,000 towers can be put up on the block, and going by AT&T’s per tower valuation, the transaction could fetch Verizon around $6 billion. The premier wireless carrier has hired investment bank Tap Advisor LLC to plan the sale of its towers and leasing agreements.
Of late, the sale of cell towers has become a popular trend among wireless carriers looking to raise cash for their operations. Of them, AT&T and T-Mobile U.S. Inc.’s (TMUS) tower sale to Crown Castle Corporation (CCI) have garnered the most attention.
AT&T sold 600 towers and also gave exclusive rights to lease and operate 9,100 towers to Crown Castle for 28 years. Likewise, T-Mobile’s 7,200 tower leasing agreement also spans over 28 years. Notably, instead of selling, leasing towers allows wireless carriers to get additional site space to meet unprecedented demand for capacity.
On the other hand, tower players like Crown Castle, American Tower and SBA Communication will benefit by leasing the acquired towers to multiple players and thus, enhance profitability.
However, Verizon’s decision to sell its tower assets does not come as a surprise as the carrier is expected to bid for spectrum in the upcoming sale of airwaves by Federal Communication Commission in November. Further, Verizon is currently poised on a high leveraged balance sheet after paying $130 billion to Vodafone to gain full control of its wireless unit.
The possible tower sale will provide Verizon with ready cash to participate in the spectrum bid. However, it will stand to increase the company’s operating expenses as Verizon will have to lease the site space from tower operators.
Verizon currently carries a Zacks Rank #3 (Hold).
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