Tower circles are buzzing with speculation as to who will walk off with AAT Communications Corp. and its 1,900 or so towers, in effect pushing aside fourth-quarter results from Crown Castle International Corp. and American Tower Corp. that provided few surprises in the tower industry.
Though the company has not announced that it’s for sale, privately held AAT’s asking price is likely around $1 billion, according to estimates from Raymond James analysts Ric Prentiss and Mark DeRussy.
Prospective buyers include the usual suspects: American Tower, Crown Castle, Global Signal Inc. and SBA Communications Corp., among others. “All of these public companies are stable in terms of their capital structure and they can raise a decent amount of debt if they choose to” explained DeRussy. “But don’t forget, maybe another non-public tower entity is looking to substantially increase the size of its portfolio. We really just don’t know who it will be at this point.”
AAT declined to comment about a possible buyout, but company spokesman Elliot Sloane said the company’s assets are attractive for a number of reasons, namely because the towers are mostly newer and can provide a national footprint.
St. Louis-based AAT built its tower portfolio by acquiring many of its structures. In 2003, AAT bought 784 towers from SBA, essentially picking up all of SBA’s towers in western states. The same year, the company also bought 78 towers in Alabama, Arkansas, Florida, Louisiana, Mississippi and Texas from U.S. Unwired Inc., and in 2004, the company bought all of Signal One L.L.C.’s 226 towers located in Alabama, Georgia, Mississippi and Tennessee. Raymond James puts the company’s leasing revenue at about $85 million.
DeRussy said an AAT buyer is likely to be announced during the second quarter and noted that he doubts it would be a carrier. In fact, he said that the trend amongst post-consolidation carriers is the opposite.
Indeed, as Sprint Nextel carries on the work of operational integration, the company said it has been migrating iDEN network traffic from other carriers to its own towers. Sprint Nextel indicated last month that it expects to renegotiate about 1,000 cellular tower leases by the end of 2006 to reduce its lease costs.
“We could see carrier towers come on to the market as they continue integrating and consolidating their networks,” DeRussy explained.
However, DeRussy stressed that there are about 200,000 cell sites in the country, and comparatively speaking, when carriers renegotiate leases, decommission, or sell 1,000 towers here and there, the impact to the industry as a whole is somewhat minimal. In addition, the towers identified by carriers for decommissioning are usually pretty dispersed around the country, lessening the impact to the industry even more.
Nonetheless, deciding which towers they don’t need is not a simple task, DeRussy said.
“It may seem like it’s taking Sprint Nextel a long time to figure out exactly what they are going to be doing with these sites they’ve identified for decommissioning. But they have to think long and hard about the future. Will they want to get back on the tower? Do they want to lose their place and run the risk of spending money to take equipment off and then have to put it back on? Will the changes disrupt service for their subscribers? They have to consider many factors when making these decisions,” DeRussy noted.
The coming of mobile TV and other data-intensive applications makes planning tricky for carriers, since nobody knows definitively how quickly and to what degree data applications will take up space on carrier networks. Carriers don’t want to spend a lot of capital until they know they will see a return on their investment, but they also don’t want to risk letting their bread-and-butter voice services suffer. It’s a walk on a tight-rope for carriers, but likely a good thing for the tower industry.
