AT&T has agreed a $4.85 billion deal with infrastructure company Crown Castle in a deal aimed at improving its financial flexibility and value to shareholders.
The US operator is to lease rights to approximately 9,100 of its towers to Crown Castle (Houston, TX, USA) –which will also buy another 600 towers outright – and then sublease capacity on those towers as and when required.
The average term of Crown Castle’s lease rights is 28 years and as the lease expires, notes AT&T’s (Dallas, TX, USA) statement, the infrastructure company will have fixed-price purchase options for those towers, totaling approximately $4.2 billion.
AT&T says it will sublease capacity for a minimum of ten years, paying a fee of $1,900 per month per site, with annual rent increases of 2%.
It has the option of renewing up to a total of 50 years.
Other operators, including number-four player T-Mobile US (Bellevue, WA, USA), have concluded similar deals aimed at improving their balance-sheet position and financial flexibility.
The partnership with Crown Castle should allow AT&T to ramp up capacity as and when required by rising customer adoption of bandwidth-hungry mobile internet services.
Essentially, it means the operator can avoid making certain expensive upfront investments in network capacity and simply make incremental adjustments to operating expenditure as usage grows.
In that respect, it bears comparison to the use of software-as-a-service or cloud-computing technologies.
“This deal is good for AT&T and our shareholders,” said Bill Hogg, AT&T’s senior vice president of network planning and engineering. “This deal will let us monetize our towers while giving us the ability to add capacity as we need it. And we’ll get additional financial flexibility to continue to invest in our business, maintain a strong balance sheet and return value to our shareholders.”
In its own statement on the deal, Crown Castle said the transaction would reinforce its position as the largest provider of wireless infrastructure in the US, with approximately 40,000 towers.
“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,” said Ben Moreland, Crown Castle’s chief executive.
The company says it will fund the transaction with cash on hand as well as equity and debt financing, including borrowings under its revolving credit facility.
News of the deal coincided with publication of Crown Castle’s results for the three months ending September.
The company flagged a 21% increase in revenues, to $749 million, compared with the same period of 2012, while net income rose to $46 million from $42 million in the third quarter of 2012.