January 20, 2015 — NTELOS Holdings has sold the last of its cell towers to private equity firm Grain Management, which invests in the media and communications sectors.
Michael Huber, chairman of the board of NTELOS Holdings, called the transaction an “opportunistic sale of non-strategic assets,” which will allow the company to focus on its West Virginia and western Virginia markets.
The agreement calls for the sale of 103 cell towers for $41 million or about $400,000 per tower. The transaction is expected to close in multiple installments during 2015, with the first installment expected to close in the first quarter. NTLS will enter into a lease agreement for the towers that provides it with access to reserve capacity.
In December 2014, NTELOS Holdings sold its 1900 MHz PCS wireless spectrum licenses covering eastern Virginia to T-Mobile for $56 million as part of a change in its strategic focus that expands LTE network build outs. At that time, the carrier announced it was exploring the sale of cell towers and undeployed spectrum in the eastern region.
“The tower sale does not come as a surprise, as NTLS signaled it was seeking to monetize its towers when it announced the divestiture of its eastern markets [in December 2014],” wrote Jennifer Fritzsche, Wells Fargo senior analyst. “The price per tower of $400,000, however, is higher than we expected, as we previously had assumed $100,000 per site when estimating NTLS’s core asset value.
Media Venture Partners served as exclusive financial advisor to NTELOS on the transaction.
Cincinnati Bell has sold its wireless spectrum licenses and some tower leases to Verizon Wireless for $210 million. The total value of the deal is estimated to be 4.5 and 6 times 2014 and 2015 adjusted EBITDA, respectively. The deal is expected to close in the second half of 2014.
But you won’t see the spectrum on Verizon’s books, however. The carrier turned around and assigned its rights to acquire the spectrum licenses being sold by Cincinnati Bell to Grain Management, a small private equity firm. Verizon Wireless will then lease spectrum from Grain Management.
This spectrum two-step has happened before. Last September, Verizon Wireless sold lower 700-MHz B Block licenses covering the Charlotte, Greensboro and Raleigh-Durham markets in North Carolina to Grain Management for $189 million. Grain then leased the spectrum to AT&T. In addition, Verizon Wireless began leasing an AWS license covering Dallas from Grain Management, which Grain had acquired from AT&T.
Why is Grain Management buying spectrum and then leasing it out? From a business model standpoint, it could be compared with its other business buying towers and leasing space. As everyone knows, spectrum is money. Grain Spectrum Funding raised more than $330 million backed by payments due from AT&T and Verizon Wireless pursuant to two leases of wireless spectrum.
From the perspectives of AT&T and Verizon Wireless, having a small private equity firm own the spectrum may help from a regulatory standpoint with getting nods from the FCC and the Department of Justice. Especially with Sprint’s Son Masayoshi calling on the industry to fight the “wireless duopoly,” AT&T and Verizon Wireless have more incentive than ever to avoid the appearance that their spectrum caches continue to grow.