Tuesday, March 22, 2011

Tower Companies Seen as Losers if AT&T Acquires T-Mobile USA

With the caveat that momentary, short-term swings in equity prices are common, investors seem to be concluding, at least for the moment, that AT&T's bid to buy T-Mobile USA will be a negative for companies that rent tower space to mobile providers. The logic is that, if the deal is approved by regulators, there will be reduced demand for tower space.

"This is bad news for tower companies as it would likely lead to cell site decommissioning and possibly lowerfuture demand, with three major wireless carriers rather than four," equity analysts at Benchmark said.

American Tower, which draws over a fourth of its consolidated operating revenue from the two operators, said about four percent of its revenue came T-Mobile contracts at 3,100 sites, which were also being used by AT&T.

Crown Castle International, which has 4,000 towers in the United States used by both carriers, said about six percent of its consolidated revenue in 2010 came from rental payments by T-mobile at overlapping sites.

One might also conclude that a successful acquisition also would be a negative for companies that sell backhaul capacity to mobile providers, as AT&T will shift as much traffic as possible onto its owned network, where T-Mobile USA leased virtually all, if not all, of its backhaul capacity.

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