* 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
* SBA says has $900 mln financing commitment from J.P.
By Supantha Mukherjee
June 26 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
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
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.