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Wireless Success Breeds More Tower Companies

By J. Sharpe Smith —

The success of the tower industry is leading to an increase in the number of companies owning towers. Outside of the big three public tower companies, Peppertree Capital Management estimates that the tower ownership industry has grown to include around a dozen mid-sized firms, a couple of dozen additional companies that build 10 to 15 towers a year and more than 60 companies that build to own less than 10 towers annually.

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Mandel

Even though more towers are being built by more companies, it appears that the great majority of the structures end up, eventually, being owned by the big three public companies. But although tower portfolios are bundled and sold, tower companies do not necessarily have to consolidate. In fact, in the case of Global Tower Partners, numerous wireless infrastructure startups have resulted from the sale of the company’s assets.

One of those companies is Blue Sky Towers, which gained debt and equity funding from Peppertree Capital Management to accumulate 700 to 800 cellular sites in the next five years, focusing on the top 20 metros for rooftops and the peripheral markets for tower deployment. It is headed by former GTP vice president of development Jim Rech and Tom Remillard, (formerly Wireless Realty Advisors).

Mandel believes the current business atmosphere can support the new entrants into the tower industry.

“The carriers are competing very vigorously against each other, and, obviously, there are more towers needed,” he said. “We don’t see any shortage of opportunity.”

Increased Interest in Investing Offshore

Domestic success has not kept U.S. companies from looking abroad for more opportunities. An increasing number of groups are seeking funding for tower projects outside the country, according to Mandel.

“As for geography, many U.S. investors will look at opportunities in the more Western-leaning countries of Europe. A subset of those investors is willing to consider Mexico, followed by an even smaller subset willing to go further into Latin America than Mexico,” he said. “As for the remainder of Europe, Africa and Asia, it’s a country-by-country analysis. It’s easy for an entrepreneur to say that ‘the wireless market feels like the U.S. in the 1990s,’ but it’s another thing for an investor to get comfortable with writing a check.”

Kasavana Forms Tower Co. Targeting Latin America

Proving there is life after GTP, Dagan Kasavana, who ran the mergers and acquisitions department for Global Tower Partners, has started his own venture, focusing on acquiring, developing, owning, leasing and operating cell towers in Latin America. The company, known as Phoenix Tower International, was formed to focus on middle market transactions.

 

Kasavana

Kasavana

Of the major markets in Latin America, Phoenix Tower will be looking for opportunities in stable countries that already have public and private tower companies.

“There are key markets in Central and South America that are good for tower ownership,” Kasavana said. “Brazil is an interesting market,where wireless growth and penetration are projected to be fueled over the next three to five years, but so are Columbia, Panama and Costa Rica.

“Growth is projected throughout the region, and we have the ability to capture some of the upside, which is similar to what we have seen in the United States in the last three to five years,” he added.

Since Global Tower Partners sold its portfolio, Kasavana has considered opportunities running M&A programs for various tower companies as well as going it on his own. “I talked with investors who supported this concept for a new tower company that is focused on select opportunities [in Latin America] that others are not,” he said.

In forming Phoenix, Kasavana has brought in several colleagues from his days at GTP. Former GTP Senior Legal Advisor Tim Culver has joined Phoenix in a similar position. Natalya Kashirina, who worked with Kasavana in GTP’s M&A department, is now Phoenix vice president, mergers and acquisitions. Additionally, Orlando Porras, formerly of Ernst and Young, who did many projects for GTP, is now chief financial officer for Phoenix.

Kasavana plans to deal with the cultural challenges of Latin America by using a personal touch. Phoenix will remain based in Boca Raton, Fla., but will build offices in a region as it gains significant market share there. “We are well suited to address these challenges because we don’t see these as satellite offices leveraging off of the U.S. presence. We are going to build them from the ground up, leveraging the local people, the local customers and local operations. And I will be on a plane regularly to meet with them personally,” he said.

A variety of equity investors are involved in Phoenix, which will be formally announced in the near future. The company has a number of transactions in the works and is working to close them.

“At GTP, we had a great run, and it is really fun to see [the former GTP partners] all blossom into new business lines to do new things after the sale,” Kasavana said. “Obviously, we learned a lot of that from Marc Ganzi [former CEO of GTP]. I owe him a lot of credit for instilling the entrepreneurial spirit within me. It is something I take with me going forward.”

American Tower Acquires GTP for $4.8B

After several years of buying towers overseas, American Tower has validated its continuing interest in the domestic wireless market, by purchasing Global Tower Partners for $4.8 billon. The deal is expected to close in the fourth quarter of this year.

The acquisition, which increases American’s tower count by 25 percent, comprises 5,400 domestic towers, 800 property interests under third party communications sites, more than 9,000 domestic managed sites and 500 towers in Costa Rica.

“Using our disciplined approach, we have passed on a number of portfolios over the years, only investing in the most compelling tower assets,” said James Taiclet, American Tower president and CEO. “The acquisition of the GTP portfolio will give us significant expansion of scale in our core market, the United States.  We believe this portfolio is an excellent strategic fit with our existing operations.”

The acquisition gives American Tower an increased presence in several top urban markets, including New York, San Francisco and Washington, D.C.  Plus, it doubles ATC’s rooftop portfolio with an additional 9,000 sites atop buildings. Overall, GTP’s towers are in the top two-thirds in the top 100 BTAs.

“We are increasing our presence in urban areas across the United States,” Taiclet said. “There is a lot of upside in both the [American and GTP rooftop] portfolios as the urbanization of the network proceeds.”

GTP’s towers have room to grow in terms of additional tenants. They average two tenants each, compared with American’s 2.6 tenants, and have the capacity for four tenants.

“The structural integrity off the assets is solid. The locations are very favorable. The management in the past has been top notch, positioning them well for additional collocations,” Taiclet said.

The GTP acquisition could be seen as a vote of confidence to the future growth of macrocellular sites.

“We are still in the early stages of the 4G deployment cycle,” Taiclet said. “Data use continues to rise and the vast majority of that incremental traffic will be carried over macro tower sites. By adding 5,400 towers our future collocation capability becomes even more compelling.”

GTP’s portfolio is expected to generate $345 million in revenue for American Tower in 2014.  AT&T is GTP’s largest customer at 25 percent, followed by Sprint at 17 percent, T-Mobile at 16 percent and Verizon at 14 percent.

American Tower Corporation Announces Agreement to Acquire Global Tower Partners

BOSTON–(BUSINESS WIRE)–Sep. 6, 2013– American Tower Corporation (NYSE: AMT) today announced that it has entered into a definitive agreement to acquire 100% of the outstanding common membership interests of MIP Tower Holdings LLC, a private real estate investment trust, which is the parent company ofGlobal Tower Partners (“GTP”), and related companies, for a total purchase price of approximately $4.8 billion, subject to customary adjustments. GTP is majority owned by Macquarie Infrastructure Partners together with minority partners including Dutch pension fund manager PGGM and management. GTP owns and operates approximately 5,400 domestic towers, 800 domestic property interests under third-party communications sites, and has management rights to over 9,000 domestic sites, which are primarily rooftop assets. In addition, GTP owns 500 communications sites in Costa Rica.

The purchase price is expected to be satisfied with approximately $3.3 billion in cash and the assumption of approximately $1.5 billion of existing indebtedness. American Tower expects to use cash on hand and borrowing capacity under its existing revolving credit facilities, as supplemented by additional anticipated sources of debt financing, to satisfy the cash consideration for this acquisition and other previously announced acquisitions. American Tower intends to maintain its financial and capital structure policies, consistent with investment grade credit metrics, and expects to use the quality cash flow and margin characteristics of the GTP portfolio to de-lever over time back to its stated target leverage range.

American Tower expects that in aggregate, in 2014, the portfolio will generate approximately $345 million in revenues and approximately $270 million of gross margin, and is anticipated to be immediately accretive to Adjusted Funds From Operations (“AFFO”) upon closing.

Jim Taiclet, Chairman, President and Chief Executive Officer of American Tower, said: “GTP has constructed and acquired an outstanding U.S. portfolio of tower, rooftop and land assets, which is highly complementary to that of American Tower. Moreover, GTP’s management of these assets has been excellent, as confirmed through our rigorous due diligence process. GTP’s towers boast a high quality customer base, a strong position with respect to ground ownership and lease terms, and additional structural capacity available to facilitate future leasing activity.

With all four major domestic wireless carriers engaged in aggressive multi-year 4G LTE deployments, we believe our acquisition of GTP solidifies our path to achieving our strategic goals related to growing our AFFO over the next five years.”

The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2013.

American Tower was advised by Goldman, Sachs & Co.and EA Markets Securities LLC, as financial advisors, andClifford Chance US LLP and Sullivan & Worcester LLP, as legal advisors. GTP was advised by Deutsche Bank Securities Inc. as exclusive financial advisor.

American Tower will host a conference call today at8:45 a.m. ET to discuss its transaction. Supplemental materials for the call will be available on the Company’s website, www.americantower.com. The conference call dial-in numbers are as follows:

U.S./Canada dial-in: (866) 740-9153
International dial-in: (706) 645-9644
Passcode: 53968532

When available, a replay of the call can be accessed until 11:59 p.m. ET on October 6, 2013. The replay dial-in numbers are as follows:

U.S./Canada dial-in: (855) 859-2056
International dial-in: (404) 537-3406
Passcode: 53968532

American Tower will also sponsor a live simulcast and replay of the call on its website,www.americantower.com.

About American Tower

American Tower is a leading independent owner, operator and developer of wireless and broadcast communications real estate. American Tower currently owns and operates over 56,000 communications sites inthe United States, Brazil, Chile, Colombia, Germany,Ghana, India, Mexico, Peru, South Africa and Uganda. For more information about American Tower, please visit www.americantower.com.

Cautionary Language Regarding Forward-Looking Statements

This press release contains statements about future events and expectations, or “forward-looking statements,” all of which are inherently uncertain. We have based those forward looking statements on management’s current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, statements regarding the proposed closing of the transaction described above, expected financial projections for the acquired portfolios and the impact on our consolidated results, the anticipated closing date, the expected cash consideration, and the expected sources of funds to pay for the acquisition described above and other previously announced acquisitions. These forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include market conditions for corporate debt generally, for the securities of telecommunications companies and for our indebtedness in particular. For other important factors that may cause actual results to differ materially from those indicated in our forward-looking statements, we refer you to the information contained in Item 1A of our Form 10-Q for the quarter ended June 30, 2013 under the caption “Risk Factors” and in other filings we make with the Securities and Exchange Commission. We undertake no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances.

AFFO is a non-GAAP financial measure. For more information, see our Form 10-Q for the quarter endedJune 30, 2013 under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” and “– Results of Operations.”

Global Tower Partners on the Block – WSJ Report

Macquarie Infrastructure Partners is looking to sell Global Tower Partners to one of the publicly traded tower companies, according to a story in the Wall Street Journal.

GTP, the fourth largest cell tower company in the nation, owns, manages or master leases more than 16,000 wireless sites throughout the United States, Mexico and Costa Rica.

GTP was founded in 2002 by Marc Ganzi, who also founded and was president of Apex Site Management, a company that leased rooftop space. In 2005, Blackstone Group purchased GTP for $225 million. Australian investment bank Macquarie purchased the tower company, which had 2,500 towers and 6,000 roof tops, in 2007 for $1.425 billion and structured it as a REIT. GTP is now rumored to be worth between $3.5 billion to $4 billion.