Shares of leading wireless communication tower operator, American Tower Corporation (AMT), touched a new 52-week high of $104.46. However, the company ended the day’s trading session a trifle lower at $104.17, reflecting a solid 33.5% return over the past 12 months.
The recent upside was propelled by the decision to acquire towers of two major companies. Last week, the company decided to acquire 6,480 telecom towers from TIM Celular S.A., a subsidiary of Telecom Italia S.p.A. (TI), for about $1.2 billion. The new towers are expected to add roughly $171 million in annual revenues including ground rent pass-through and existing collocation revenues, and nearly $75 million in annual gross margin. TIM Celular will be the anchor tenant on each portfolio under leases with an initial term of 20 years.
American Tower followed it up this week with its plans to acquire over 4,800 mobile phone towers from India’s biggest telecommunications company – Bharti Airtel Ltd. The latter’s Netherlands-based unit has agreed to sell its telecommunications towers in Nigeria to American Tower for approximately $1.05 billion. In June, the company had decided to purchase Brazilian mobile-phone infrastructure firm BR Towers SA.
The back-to-back acquisitions will also support the company’s plan of owning more than 70,000 towers by the end of 2014, through organic or inorganic growth. Moreover, the company intends to exceed 2,000 domestic leases this year in addition to spending $110 million in land acquisitions. American Tower is confident such strength in its tower portfolio will help it double its AFFO per share by 2017.
Higher adoption of smartphones/tablets coupled with increased deployment of 3G/4G networks by carriers across the world continues to drive demand for tower space and in turn, drive the company’s revenues higher.
Currently, American Tower has a Zacks Rank #3 (Hold).
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Some better-ranked stocks in this sector are Ashford Hospitality Trust, Inc. (AHT), Corrections Corporation of America (CXW) and Arbor Realty Trust Inc. (ABR). Ashford Hospitality Trust and Corrections Corporation of America sport a Zacks Rank #1 (Strong Buy) while Arbor Realty Trust holds a Zacks Rank #2 (Buy).
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