By Laharee Chatterjee and Pushkala Aripaka
(Reuters) - Shares of the U.S.-based telecom tower companies fell as much as 4 percent on Friday after Reuters exclusively reported that T-Mobile US Inc and Sprint Corp could announce a deal as early as next week.
Shares of Crown Castle International Corp and SBA Communications Corp fell about 4 percent, while American Tower Corp fell 1.3 percent in afternoon trade.
Tower companies earn money by leasing out space for cellular antennas and when two telecom companies merge they look at cancelling contracts for overlapping towers to save costs, which could eat into revenue.
"One of the major synergies that T-Mobile and Sprint would try to reap from the deal is decommissioning cell sites," Nicholas Del Deo analyst at MoffettNathanson LLC, said.
A deal between Sprint and T-Mobile would create a combined company with more than 127 million customers, just behind market leaders Verizon Communications Inc and AT&T Inc.
"There's about 5 percent of revenue at the tower companies today that comes from sites where Sprint and T-Mobile are on the same tower and in a merger scenario these would absolutely go away," New Street Research analyst Spencer Kurn said.
Crown Castle International and SBA Communications are most exposed to the deal as they count Sprint and T-Mobile as their top customers, while larger rival American Tower Corp would be affected less.
All companies were not immediately available for a comment.
"When you think about the portfolio mix, American Tower has a larger international business, so the impact on their stock price would be a bit less than it would be for Crown Castle or SBA," Deo said.
Last year, T-Mobile and Sprint accounted for more than 31 percent of SBA's total revenue, around 38 percent of Crown Castle's and about 18 percent of American Tower Corp's revenue.
The deal between Sprint and T-Mobile is not yet certain. They had tried to combine twice before, but failed over control of the merged company and regulatory hurdles.
"Investors love tower companies because they have incredible operating leverage... The problem is that leverage cuts both ways," Kurn said.
(Reporting by Laharee Chatterjee and Pushkala Aripaka in Bengaluru; Editing by Bernard Orr)