U.S. cell tower owners rallied today, possibly in response to the MetroPCS/T-Mobile deal. SBAC +2%. AMT +1.4%. CCI +2.8%. While the reverse merger will result in some duplicate cell sites being eliminated - American Tower just announced MetroPCS and T-Mobile share space on ~1,000 of its sites - it also puts T-Mobile's 4G LTE ambitions on better footing, both by increasing its spectrum assets and allowing the carrier to tap U.S. capital markets.
Crown Castle (CCI) announces that it will acquire the rights to 7.2K T-Mobile towers for $2.4B in cash. Under the terms of the deal, Crown Castle can lease and operate the towers until the end of their lease with an option to buy. Of the towers involved in the agreement, 83% are situated in top 100 US markets.
SBA Communications (SBAC +0.8%) discloses it has extended leases for 2,800 cell towers used by T-Mobile USA (DTEGY.PK) by an average of 7 years. Wells Fargo sees the deal as evidence struggling T-Mobile is being aggressive with its network upgrades, a positive for tower owners in general. The firm notes Crown Castle (CCI) extended leases with T-Mobile for 7,300 towers in July, and that a similar deal with American Tower (AMT) is likely.
SBA Communications (SBAC -2.2%) slips following a downgrade to Neutral from Citi. Peers Crown Castle (CCI -1.3%) and American Tower (AMT -0.7%) are also underperforming. AMT has seen a couple of downgrades recently on valuation concerns. All three cell tower owners have performed well in 2012.
American Tower (AMT -2.3%) slides after getting downgraded to Neutral by Credit Suisse: the firm is worried about the cell tower owner's high valuation. Rivals are also underperforming: SBAC -1.3%. CCI -1.5%. Citi downgraded AMT for the same reason on July 18.
American Tower (AMT -4.5%) is diving on a downgrade to Neutral from Citi. The firm cites a high valuation following a strong run-up over the last 12 months, and a lack of "meaningful upside" to Street estimates. Other wireless tower owners are lower in sympathy. SBAC -2%. CCI -2.7%.
American Tower (AMT), Crown Castle (CCI) and P-E firms have made second-round bids for T-Mobile USA's (DTEGF.PK) cellular towers, Bloomberg reports. "I expect they will announce a winner in July and probably close the deal by September," says Macquarie analyst Kevin Smithen, who estimates that the assets could fetch $2B.
Canaccord says a potential T-Mobile tower asset sale could be as large as $2.5B - $3B, and that M&A synergies and additional leases could drive up future estimates. This could create another attractive buying opportunity for tower stocks: SBA Communications (SBAC +0.2%), Crown Castle (CCI +0.1%) and American Tower (AMT +0.3%).