Leading international wireless tower operator American Tower Corporation AMT announced yesterday that it has closed the deal of acquiring leasing rights to approximately 11,324 wireless towers and purchasing 165 additional towers from Verizon Communications Inc. VZ.
Contract Details
The deal, valued at $5.06 billion, was announced in Feb 2015. Notably, American Tower funded the transaction with proceeds from public offerings of 25.85 million shares of its common stock and 13.75 million depositary shares, in addition to revolving credit and cash on hand. Interestingly, at the end of 2014, the company had $313.5 million in cash and cash equivalents.
Moreover, this deal will provide American Tower with the exclusive right to operate the leased towers for an average term of around 28 years with an option to buy them as well.
Other Deals in Consideration
Per the latest market buzz, American Tower is mulling over the acquisition of nearly 9,000 towers of Africa’s largest wireless carrier, MTN Group Ltd. The value of the deal may be anything between $1.5 billion and $2 billion. However, the deal is not expected to close before the end of 2015.
In Nov 2014, American Tower announced its decision to acquire the towers of two major companies. The company has decided to take over 6,480 telecom towers from TIM Celular S.A., a subsidiary of Telecom Italia S.p.A. for about $1.2 billion. The new towers are expected to generate roughly $171 million in annual revenues, including ground rent pass-through and existing collocation revenues, and nearly $75 million of annual gross margin. TIM Celular will be the anchor tenant on each portfolio under lease starting with a term of 20 years.
American Tower also plans to acquire over 4,800 mobile phone towers from India’s largest telecommunications company – Bharti Airtel Ltd. The latter’s Netherlands-based unit has signed an agreement to sell its telecommunications towers in Nigeria to American Tower for approximately $1.05 billion.
Our Take
However, continuous acquisition of towers, mainly outside the U.S., may lead to integration risks. Also, foreign currency exchange rate risks, stiff competition, rising operating expenses and a highly leveraged balance sheet may mar the company’s profitability, going forward. Moreover, the ongoing consolidation trend among telecom and cable TV operators may generate significant financial fluctuations for the company.
Meanwhile, at the end of the fourth quarter of 2014, American Tower managed 75,164 communication towers. Geographically, the company operates 28,566 wireless towers in the U.S. and 46,598 wireless towers outside the U.S.
American Tower currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Better-ranked stocks in the same industry include Anworth Mortgage Asset Corporation ANH and Ellington Residential Mortgage REIT EARN. Both the stocks carry a Zacks Rank #2 (Buy).
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