SBA Communications to acquire more towers from Oi

SBA Communications (SBAC) said today that it is acquiring 1,641 more wireless sites in Brazil from Oi. Oi will lease space on the towers from SBA after the transaction closes, but SBA will have the right to lease space to other carriers as well. Currently, the average tenancy rate for these towers is 1.4, meaning that SBA has a significant opportunity for new co-locations.
SBA is paying roughly $527 million for these towers, based on current exchange rates. Earlier this year, SBA paid about $645 million for 2,007 Oi towers in Brazil and in 2013 it purchased 2,113 Oi towers there for roughly $302 million. The company says that tower cash flow, tenant count and tower condition can all impact the purchase prices.
Analyst Jennifer Fritzsche of Wells Fargo says that in this transaction, SBA is paying about 15.8 times tower cash flow. She also notes that in addition to the company’s three acquisitions in Brazil, SBA is likely to build towers there.
“In addition to acquisitions, SBAC is also focused on building towers in Brazil as it notes subscriber density per tower is 4x what it is in the U.S.,” said Fritzsche in a research note.
Of the three largest U.S. tower companies (Crown Castle, American Tower and SBAC), SBA and American Tower have been aggressive in Latin America, while Crown Castle has repeatedly said that the U.S. market offers the highest risk-adjusted returns. American Tower just added 4,600 towers in Brazil, bringing its total holdings there to almost 12,000.
When the latest transaction closes, SBA will own or have use rights for about 7,000 sites in Brazil. SBA estimates that the new sites will contribute approximately $60 million in leasing revenue during 2015.
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