American Tower (AMT) to Wrap Up ATC India Operations for $2.5B
American Tower Corporation AMT recently entered into an agreement with Data Infrastructure Trust (“DIT”), an affiliate of Brookfield Asset Management BAM, to divest 100% of its equity interests in its India-based operations — ATC India. DIT presently houses Brookfield’s telecom tower businesses in India via Summit Digitel and Crest Digitel.
The company’s latest move marks the completion of its earlier announced strategic review of its operations in India.
Based on the exchange rates as of Jan 4, 2024, the total cash proceeds that American Tower will receive at closing aggregate around INR 210 billion or $2.5 billion. The cash proceeds are inclusive of a $2 billion enterprise value on the ATC India operations and a ticking fee that accrues from Oct 1, 2023, to the date of closing. The transaction is expected to materialize in the second half of 2024, subject to customary closing conditions, including government and regulatory approvals.
The proceeds from the deal are expected to be utilized by American Tower to repay its existing debt. In addition, the sum related to the enterprise value assumes the repayment of existing intercompany debt and the repayment, or assumption, of the existing India term loan by DIT.
Pursuantly, the real estate investment trust (REIT) will hold back the full economic benefit associated with the optionally converted debentures issued by Vodafone Idea Limited (“VIL”) and will be entitled to receive future payments related to existing ATC India receivables.
American Tower’s decision to wrap up its ATC India operations comes after VIL, in early 2023, said that it would not be able to resume full payments of the contractual obligations that it owed the company and would instead continue to make partial payments. VIL is American Tower’s largest customer in India and accounted for around 3.2% of its total revenues for the year ended Dec 31, 2022. Finally, in the third quarter of 2023, VIL made full payments of its contractual obligations that were due to American Tower.
With respect to this development, AMT recorded goodwill impairments of $322 million during the nine months ended Sept 30, 2023.
American Tower’s move to reduce its exposure to a challenging business environment in India is likely to be beneficial to its top-line growth in the long run. With a portfolio of roughly 225,000 communications sites worldwide as of Sep 30, 2023, and unmatched geographic diversification of its sites, American Tower remains strategically positioned to capture the incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. The recent estimate revision trend for 2024 funds from operations (FFO) per share indicates a favorable outlook for the company, with estimates moving marginally northward over the past month.
The company’s shares have appreciated 35% in the past three months compared with its industry’s growth of 19.8%.
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Stocks to Consider
A couple of better-ranked stocks from the REIT sector are Rexford Industrial Realty REXR and Stag Industrial STAG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Rexford Industrial Realty’s 2023 FFO per share is pegged at $2.18, indicating a year-over-year increase of 11.2%.
The Zacks Consensus Estimate for Stag Industrial’s 2023 FFO per share stands at $2.28, suggesting year-over-year growth of 3.2%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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