SBAC to Acquire 2,300 Towers; Tower M&A on the Rise, Analysts Say
Tower operator SBA Communications will acquire 2,300 tower sites in the U.S. and Central America and some distributed antenna systems from Mobilitie for $1 billion, the companies said. Rivals American Tower and Crown Castle recently snapped up tower sites and small antenna assets. More tower deals, especially carrier deals and small antenna system transactions, are expected, analysts said.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
SBA plans to pay $850 million in cash and 5.25 million shares of SBA stock, meaning a total transaction value of $1.093 billion based on SBA’s closing price of $46.27 on Feb. 17. The deal is expected to close in Q2. The Mobilitie towers, which could generate $75 million in tower cash flow for 2012, are all located in existing SBA markets, CEO Jeffrey Stoops said. SBA doesn’t expect to need regulatory approval. Meanwhile, under an agreement, SBA will sell the distributed antenna system (DAS) assets to infrastructure company ExteNet. SBA recently signed an equity investment deal with Chicago-based ExteNet and sold its DAS business to the company. Under the deal, SBA will sell whatever DAS assets it comes to own to ExteNet.
The deal is positive for SBA, said Jonathan Schildkraut, analyst of Evercore, noting Mobilitie’s assets would complement and expand SBA’s markets. But Mobilitie’s model is different than the traditional tower business, said Clayton Moran with Benchmark Research. The company completes tower build-to-suits for carriers like T-Mobile, then shares revenue from additional tenants on the towers with the anchor tenant, he said. This limits revenue and margin growth and is “significantly less appealing” than the rest of SBA’s portfolio, he said. He’s surprised by SBA’s move because SBA’s towers typically have as much, if not more, operational and financial flexibility than other towers, he said.
The acquisition follows a recent uptick in large domestic tower deals, suggesting growing momentum in tower M&A, several analysts said. It’s likely that small tower operators will sell to the large companies which has been the case for many years, said Moran. T-Mobile may consider selling its U.S. towers, and American Tower, Crown Castle and a few other major tower companies are likely bidders, he said. T-Mobile couldn’t be reached immediately for comment. T-Mobile USA is estimated to have up to 7,000 towers, said Jennifer Fritzsche with Wells Fargo. She expects more carrier tower deals and DAS transactions with the rapid growth of data transmission.
Meanwhile, the spectrum bill could drive more tower M&A, Schildkraut said. Scale and breadth of tower portfolio could be a factor in negotiating with the first responder network authority, he said. Additionally, the bill includes a provision to accelerate the ability to add new equipment to existing sites, he noted. This could make existing sites more attractive (vs. building new sites) and make acquisitions more appealing relative to new site development, he said. The spectrum bill wouldn’t “meaningfully” impact the pace of tower transactions, Moran said. “Towers are scarce, valuable assets either way,” he said. He noted large U.S. tower operators are increasingly looking outside North America to buy towers. This is due to a competitive market in the U.S. with a limited number of deals, he said. Large tower operators are generating sizable cash flow that they typically prefer to reinvest in the business, he said. Many of the opportunities are in foreign countries including in South and Central America, he said.