November 15, 2016 —
American Tower sent out a a press release that said the carriers accounted for 10 percent and 8 percent, respectively, of the towerco’s consolidated property revenues at the end of the third quarter.
“Tower investors become concerned when they hear merger rumor and they worry about T-Mobile and Sprint overlap,” Clayton Funk, managing director, MVP Capital. “It’s all totally speculative. Who knows if they will even try to merge again.”
American Tower currently has separate leases for antenna space with Sprint and T-Mobile US on the same site at 5,500 communications sites it owns or operates. The revenue generated from each of on these sites represented 4 percent of American Tower’s consolidated property revenues for the third quarter. The average remaining non-cancellable current lease term on these sites with Sprint and T-Mobile USA is approximately 5 years.
SBA Communications also released its exposure to a T-Mobile/Sprint hookup, which represents 16 percent of total site leasing revenue. However, overlapping sites represent only 5 percent of total site leasing revenue, and those leases will be in place for three to five years.
“The Democrats blocked a Sprint/T-Mobile US merger once before. Who knows if the Republican administration will even allow it, even though they are usually for less regulation,” Funk said. President-elect Trump has already voiced his opposition to the AT&T/Time Warner merger.
Wall Street, at least on Monday, was not impressed. All three public tower stocks dropped. As of 11 am, they were down from 2.28 percent to 3.82 percent.
Carrier stocks, on the other hand, have been up, perhaps spurred by the merger rumors or by the election, but Jennifer Fritzsche, senior analyst, Wells Fargo, believes that it may be too early to speculate on merger, especially since FCC Commissioners have not been confirmed or even nominated yet.
“With Sprint up 13 percent the day after the election (vs. a +1% move in the S&P) clearly people are thinking rules of the past may have to be revisited in DC,” wrote Fritzsche. “While we continue to believe the sector will see more M&A –– it seems very early to speculate. Republicans are likely to hold more offices on that 8th floor of the FCC building.”
Trefis, a research and analysis firm, wrote in Forbes, that while the market may be betting the new administration will be more amenable to consolidation in the telecom industry, that does not mean it makes business sense for Sprint to buy T-Mobile US.
The firm noted that T-Mobile US’ stock is up by more than 70 percent since 2014, when Sprint last tried to buy it. Its market cap has grown to $44 billion, which might be a tough lift for Softbank, which just spent $32 billion for British chip designer ARM Holding.
Many in the industry say that Deutsche Telecom has been looking to sell T-Mobile US to any of a number of companies –– from Sprint to AT&T and DISH to Comcast –– for some time now. Nothing will happen immediately as Deutsche Telekom has put the sale of T-Mobile US on hold during the broadcast incentive auction, sources told Reuters.