T-Mobile, Crown Castle Sign Deal on 7,200 Towers
T-Mobile and tower operator Crown Castle International reached a deal for CCI to operate 7,200 T-Mobile towers. CCI will pay $2.4 billion for control of the 7,200 towers for the next 28 years and will have the option to buy the towers for an additional $2.4 billion at the end of that period. The accord is expected to close in Q4, T-Mobile said. The carrier sought a deal on the towers to help fund its plan to upgrade to 4G LTE, T-Mobile CEO John Legere said in a joint news release with CCI (http://xrl.us/bnrtmp). “T-Mobile USA is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort,” he said.
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T-Mobile’s plan was a reasonable way of raising incremental money without causing a dramatic change in the carrier’s business model, said Evercore Partners analyst Jonathan Schildkraut. “I think they got a really good price for” the towers, he told us. “They also got amendment rights as it applies to the modernization project and the towers that they sold. So net-net, it appears to be a very attractive transaction for T-Mobile."
CCI had recently been the clear favorite to win the deal, though American Tower and Global Tower Partners, a subsidiary of Australia-based Macquarie Group, had also reportedly been interested, Schildkraut said. American appeared to be more price-disciplined during the process, he said. “At the end of the day, the competition was between CCI and Global Towers,” he said. “Based on our conversations, we think that those two were involved. CCI came down to the best offer.” The elements that ultimately mattered were the amount bidders were willing to pay and what rights on the towers they were willing to grant to T-Mobile, Schildkraut said.
Ultimately, the deal was more strategically important for CCI than it was for other bidders, Schildkraut said. “CCI has a relatively slower organic growth story than the other players in the space,” he said. “They are focused on domestic operations and they have a little bit of international operations in Australia, but they really only like developed markets. We see American Tower and SBA Communications [have been making] investments into some faster-growing international markets.” CCI’s growth dynamics were lower than those of its competitors, but the deal with T-Mobile may change that, Schildkraut said. “By making an acquisition like this, CCI has altered their growth story on a forward basis."
The T-Mobile-CCI deal is likely to be the last major deal of its kind in the U.S. for the near future, and it’s unlikely to change the dynamics of the U.S. tower industry, Schildkraut said. “I think it enhances CCI’s longer-term growth profile, but we think they overpaid,” he said. “We downgraded the company maybe a month and a half ago because we felt there was a chance they were going to overpay for this asset, and here they have.”