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  • Why NIHD Towers Make Sense For American Tower: SCALE 2 comments
    May 30, 2013 6:23 AM | about stocks: AMT, NIHD

    Yesterday at 3:30 PM in a fireside chat setting at the Cowen Technology, Media & Telecom Conference, in a live webcast, American Tower Corporation's (AMT) Leah Stearns, Vice President, Investor Relations & Capital Markets, gave a candid view of where AMT is looking for growth. A transcript of the discussion is available here on SA.

    Here is a brief description of AMT's operation:

    American Tower is a leading independent owner, operator and developer of wireless and broadcast communications real estate. American Tower currently owns and operates approximately 56,000 communications sites in the United States, Brazil, Chile, Colombia, Germany, Ghana, India, Mexico, Peru, South Africa and Uganda. For more information about American Tower, please visitwww.americantower.com.

    This is important because it highlights the markets where AMT's growth will come from in the future. Quoting from the transcript, Leah says,:

    "Leah Stearns

    Well, I think we've demonstrated that in the U.S. particular scale has helped and so we're very interested in adding scale in our existing markets, and so we continue to look for additional opportunities to deploy capital, add or above our risk adjusted trial rates to make sure that we're adding to that asset base becoming more relevant to our customers. I think that we've great portfolio that where we've stand today in our market, but I think that there is the opportunity to maximize the value of those portfolios by adding more towers because is not lot of additional SG&A that needs to come along with new sites."

    We think this is why AMT has stated their interest in NII Holdings (NIHD) tower assets. And we think that the deal is in the works and could be announced shortly. It may happen on a country by country basis or maybe an entire portfolio. NIHD has said it was looking at selling roughly half of its 9000 towers in a tower transaction. Maybe AMT wants them all in order to do another financing in this continuing interest friendly environment. We also think that a rumor that AMT was interested in expanding in India was what caused a sell-off in NIHD over the last two days. That rumor has no effect , in our opinion, on AMT's keen interest in NIHD's towers. We think NIHD was unfairly caught in a downdraft of the telecom sector association with high yield financing markets, and therefore is a buying opportunity for investors anywhere below $13 per share.

    Disclosure: I am long NIHD.

    Themes: Technology, long ideas Stocks: AMT, NIHD
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  • NIHD's towers certainly have a core value, however, the majority require significant upgrades to be useful for advanced 3G/4G service deployment. Comp's to other tower asset sales would be misleading. The core business suffers from a seemingly fatal combination of challenges - insufficient spectrum to deploy advanced services, diminished use (and loss) of 800 MHz spectrum across most of it's market area, sinking ARPU, lack of device diversity and unabated churn. CPGA is dropping slightly only due to lack of advanced devices/service to sell. It's not a great situation.
    3 Aug 2013, 03:39 AM Reply Like
  • Author’s reply » Thanks Bill, your first point on the towers is the most important because it highlights the advantage of having them in a pure play entity that has access to the capital markets on its own.All towers need upgrades over time. If you maintain and upgrade them, they continue to increase cash flow. The industry movement is to separate the businesses into two distinct operations. In this particular case, we are advocating that NIHD spin their entire 8300 towers off to, you may be referring to use it or lose it share holders where it becomes a pure play and not a cash drain on NIHD. http://seekingalpha.co.... In effect, it would become a mini Lat Am AMT overnight. This would leave NIHD with a nice cash infusion, a friendlier tower supplier and more resources to focus on the everyday challenges of running a carrier that are not inconsequential for any of them globally. Loss of 800mhz may be misleading, maybe you are referring to "use it or lose it" which I don't think is in the cards here. The rest of your point is being addressed by management which I think is clear from their earnings call, which you should listen to. Thanks
    3 Aug 2013, 05:11 AM Reply Like
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