October 16, 2014 — The M&A market picked up in the third quarter with the two major announcements of tower sales by carriers. But while the press likes to hype the blockbuster billion-dollar deals, the market for smaller portfolios will remain robust, Jason Nicolay, vice president, Media Venture Partners told AGL Link.
Verizon Wireless, has hired TAP Advisors to explore the sale of its towers, estimated at 12,000 in number, and U.S. Cellular is selling 595 non-strategic cell towers outside of its core markets.
Potential buyers are now evaluating Verizon’s towers on an individual and portfolio basis and the carrier hopes to have a deal done by the end of the year, according to Nicolay.
“If Verizon is the only tenant on a particular site, buyers will be looking at whether the sites are good collocation prospects for the other carriers to increase the cash flow on a per-site basis,” he said.
Verizon’s tower sale will not adversely impact the sale of smaller portfolios, according to Nicolay, because not that many tower companies will be capable of buying such a large portfolio.
“A lot of tower buyers will still be interested in buying one to 10 sites or more from middle market developers,” he said. “There is very little inventory of cell towers and a lot of demand right now.”
With two major tower portfolios on the market, the large tower aggregators will be busy doing their due diligence, perhaps opening up opportunities for smaller buyers.
“Verizon’s proposed transaction will take a lot of time from the bigger, likely buyers to analyze how it might affect them operationally and financially. That gives an opportunity for some smaller tower buyers to acquire assets in cases where it might have not have been possible,” Nicolay said. “That said, the market is so hungry for assets that smaller buyers are still paying prices that are attractive to sellers.”
While Verizon is the last major carrier to sell its tower assets, there are plenty of other smaller carriers with tower portfolios.
“Every deal doesn’t have to be 12,000 towers or even 1,000,” Nicolay said. “The tower market is still highly fragmented, and there are still a lot dollars chasing space. There are going to be buyers out there in the market.”