UPDATE 3-SBA Communications to buy tower sites for $1.45 bln

Tue Jun 26, 2012 8:51pm IST

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* Purchase of 3,252 cellphone towers will boost total to more than 15,000

* Seller TowerCo will get $1.2 bln in cash and 4.6 mln SBA shares

* SBA says has $900 mln financing commitment from J.P. Morgan

By Supantha Mukherjee

June 26 (Reuters) - Cellphone tower operator SBA Communications Corp will buy 3,252 tower sites in the United States and Puerto Rico from privately held TowerCo for about $1.45 billion to take advantage of explosive growth in data traffic from users of mobile devices such as Apple Inc's iPhone and iPad.

SBA, which has a market value of $6.64 billion, is the smallest of the three major U.S. tower companies but it is growing quickly as competition among existing participants is limited and entry barriers are high.

The purchase, for $1.2 billion in cash and 4.6 million SBA shares, will boost SBA's tower count to more than 15,000.

SBA said the deal would immediately add to adjusted funds from operations after it closes in the fourth quarter.

"We expect the TowerCo assets will produce about $155 million to $160 million in leasing revenue and $93 million to $95 million tower cash flow for the calendar year 2013," Chief Financial Officer Brendan Cavanagh said in a conference call.

A tower can host antennas for multiple operators, resulting in lower costs for clients and more profit for the tower owner.

"We believe the TowerCo assets are high quality, well located and have ample capacity for additional tenants," SBA Chief Executive Jeffrey Stoops said in a statement.

Stoops noted that "a fair amount" of TowerCo's revenue comes from Sprint Nextel's Integrated Digital Enhanced Network (iDen), which the No. 3 U.S. mobile provider is in the process of decommissioning but that this was not a major concern.

Sprint said in May that it plans to cease service on the iDEN as early as June 30, 2013 as part of a series of network updates designed to offer next generation network capabilities.

While Sprint's iDen leases expire between 2015 and 2018, Stoops said there would be no decommissioning until 2015.

After the deal, Sprint's contribution to SBA's revenue will increase to 27 percent from 23 percent, he said.

Both the companies count AT&T Inc, T-Mobile USA and Verizon Wireless among their customers.

None of the 21 analysts covering SBA has a "sell" rating on the stock. Nineteen rate it a "buy" or a "strong buy," according to Thomson Reuters StarMine data.

The TowerCo deal is SBA's second billion-dollar acquisition after it agreed to buy more than 2,300 towers from Mobilitie LLC for about $1.09 billion in February.

"We will not be pursuing any other major U.S. transaction this year," Stoops said, indicating that SBA may not bid for the 37,000 towers that T-Mobile USA, the No. 4 U.S. mobile provider, is looking to sell this year.

SBA and rivals American Tower Corp and Crown Castle International Corp are scrambling to increase capacity to meet the growing demand for data.

Industry leader American Tower, which has 28,000 towers, spent $500 million to buy 2,500 towers from Telefónica's Mexican unit in December. Crown Castle swiftly followed by snapping up NextG Networks Inc to expand its small antenna business.

SBA, which is based in Boca Raton, Florida, said it would fund the deal with cash on hand, existing credit facilities and up to $900 million in financing commitments from J.P. Morgan .

J.P. Morgan was the financial adviser to SBA while Wells Fargo Securities LLC advised TowerCo, which was founded in 2004 by current CEO Richard Byrne along with Scot Lloyd and Tailwind Capital.

SBA shares were up 0.3 percent at $55.80 in late morning trade on the Nasdaq after matching its a year-high of $56.00. The stock traded as low as $32.36 in October.

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