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Crown Castle Seals AT&T Tower Deal

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Leading wireless tower operator, Crown Castle International Corp. (CCI) has recently closed the ongoing wireless tower transaction with AT&T, Inc. (T). The deal has placed Crown Castle as the largest wireless tower operator in the U.S., thereby outpacing its closest rival American Tower Corp. (AMT).

Two months back, Crown Castle entered into an agreement with AT&T to acquire its wireless towers. Per the deal, the tower giant will buy 600 wireless towers of AT&T and receive the exclusive right to lease and operate about 9,100 others for an average of 28 years. Additionally, Crown Castle will have the option to purchase the remaining 9,100 for approximately $4.2 billion between 2032 and 2048.

AT&T will lease network capacity from those towers for at least 10 years for $1,900 per month per site with 2% annual rent increase. AT&T has the option to extend this lease period for another 50 years.

Crown Castle has decided to finance this deal through cash on hand, equity and debt financing, which will include borrowing from its existing revolving credit facility. AT&T operates in the top 50 U.S. markets which will not only boost Crown Castle’s business but will also help the company to add at least one additional tenet per tower, thereby increasing profitability.

In Oct 2012, the company acquired 7,200 wireless towers from T-Mobile USA Inc. (TMUS) for approximately $2.4 billion. Hence, we believe that two large acquisitions within a year will continue to expand its leverage in the upcoming quarters.

Crown Castle carries a Zacks Rank #3 (Hold).

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