Verizon Tower Transaction: Completed at the End of 1Q15
Verizon's 1Q15 Results: What Were Its Key Transactions? (Part 2 of 4)
Verizon tower transaction
In the last part of this series, we looked at the status of the proposed transaction between Frontier Communications (FTR) and Verizon (VZ). The proposed sale transaction was for wireline assets in three states. Verizon will sell the assets to Frontier Communications. Now, we’ll look at another important transaction that Verizon entered into during 1Q15 with American Tower (AMT). The tower transaction was completed at the end of the quarter.
Verizon entered into an agreement for a wireless tower transaction with American Tower on February 5, 2015. The transaction was completed on March 27, 2015. It gave American Tower the authority to operate and lease 11,285 of Verizon’s wireless towers. Basically, American Tower is either subleasing or leasing these wireless tower sites from Verizon. When the tenure of these leases and subleases ends, American Tower might buy these towers. According to the same agreement, American Tower also bought 163 towers from Verizon. The tower transaction was worth ~$5.053 billion. It was paid in cash.
Verizon will use space in these towers
Initially, Verizon will have space in these towers for ten years. The telecom company will have to make monthly rent payments of $1,900 to American Tower. These payments will increase by 2% YoY (year-over-year). After ten years, this arrangement could be extended for five-year periods up to eight times.
Instead of investing directly in the stock, you can get diversified exposure to Verizon by investing in the Technology Select Sector SPDR Fund (XLK). XLK held ~5% in the telecom company on March 31, 2015.
Alternatively, you can get more diversified exposure to Verizon by investing in the iShares Core S&P 500 ETF (IVV). IVV held ~1.1% in the company on March 31.
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