Crown Castle Announces $4.85 Billion AT&T Tower Transaction

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Sunday, October 20th, Crown Castle International announced that they had entered into a definitive agreement with AT&T towers to acquire the rights to approximately 9,700 towers. Crown Castle will pay $4.85 billion in cash at closing and they will have the exclusive right to lease and operate the AT&T towers for a weighted average term of approximately 28 years. In addition, Crown Castle will have the option to purchase the towers at the end of the respective lease terms for aggregate option payments of approximately $4.2 billion, which payments, if exercised, would be primarily between 2032 and 2048.

“We are very pleased with our agreement with AT&T, which strengthens our position as the largest provider of shared wireless infrastructure in the US, which we believe is the largest, fastest growing and most profitable wireless market in the world,” stated Ben Moreland, Crown Castle’s President and Chief Executive Officer. “Consistent with our focus on the top 100 US markets, nearly half of the AT&T towers are located in the top 50 markets, where we expect the majority of network densification and upgrade activity to occur. With an average of only 1.7 existing tenants per site, we expect the AT&T tower assets to provide significant growth opportunities driven by the continued consumer demand for wireless data services. While this transaction increases our tower count by approximately 33%, the transaction consideration represents only approximately 15% of our enterprise value. Additionally, we believe this transaction strengthens the credit quality of our revenue, with pro forma 84% of our consolidated site rental revenue coming from the Big 4 US wireless carriers. Further, we expect the impact from the contemplated transaction and related financings to be slightly accretive to our 2014 adjusted funds from operations per share and 5% accretive to our long-term adjusted funds from operations per share.”

It was rumored in early September that AT&T was looking to sell their towers to increase cash flow to be able to better allocate it to more important strategic ventures such as expanding their 4G LTE network deployment. AT&T has contracted to maintain its communications facilities on the towers for a minimum of 10 years with monthly rent of $1,900 per site and fixed annual rent escalators of 2%. AT&Twill also have access to additional space on the towers for its future use, subject to certain restrictions. Crown Castle will have the right to sublease other available capacity on the towers to additional tenants and believes the AT&T towers have sufficient capacity to accommodate at least one additional tenant per tower.

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