Crown Castle International’s purchase of T-Mobile USA ’s 7,200 towers for $2.4 billion in cash late in September not only helps fund the carrier’s LTE build out, but it also reinforces its position as the largest U.S. tower company with 30,000 towers and small cell operations in over 50 markets. Both of which are good news for the tower industry.
“T-Mobile is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort,” said John Legere, T-Mobile’s recently hired CEO, in a prepared release.
The urban locations of T-Mobile’s towers – 83 percent of them are in the top 100 markets and 72 percent are located in the top 50 markets – were a good fit for Crown Castle.
“Consistent with our focus on the top 100 U.S. markets, the T-Mobile assets are expected to provide significant growth driven by the continued demand for wireless data services, particularly in the most densely populated areas in the United States,” Ben Moreland, Crown Castle’s president and CEO, said in a prepared release.
According to RBC Capital Markets Analyst Jonathan Atkin, T-Mobile’s financial stability was the key result from the tower sale. “In our view, the tower deal will have little operational impact on Deutsche Telekom or Crown Castle, and serves mainly to provide Deutsche Telekom with financial flexibility for pursuing its U.S. LTE build,” Atkin writes.
Crown Castle estimates that the T-Mobile towers will produce $125 million to $130 million in adjusted funds from operations before financing costs in 2013, and have sufficient capacity to accommodate at least one additional tenant per tower without significant incremental capital. T-Mobile has committed to maintain its communications facilities on the towers for a minimum of 10 years with annual rent escalation provisions tied to the consumer price index. Further, T-Mobile’s rent includes the rights, subject to certain limitations, to complete its current network modernization on these sites.
Crown Castle announced on Wednesday that it is offering $1.65 billion in senior debt to finance the T-Mobile tower transaction. It will also use cash on hand and funds from its revolving credit facility.