As it Increases CAPEX, AT&T Ponders Asset Sale – RBC

March 25, 2013

AT&T continues to move forward with the massive modernization of its wireless network. To pay for the upgrades and additions to its network, the carrier may monetize its 14,500 tower sites, according to RBC Capital Markets.

The move could bring in more than $5 billion, based on recent tower-industry transactions and assuming roughly $400,000 per site. RBC estimates tenancy levels of less than 1.5 on the AT&T towers and related assets, which could generate cash flow in the low- to mid-$200 million range.

“We think American Tower is best positioned to act on this opportunity based on its low balance-sheet leverage and Crown Castle’s and SBA Communications’ focus on the integration of their recent acquisitions,” RBC Senior Analyst Jonathan Atkin wrote. “Should a transaction take place, we would view it as an attractive source of cash for AT&T. We see few strategic or operational implications for the tower sector, other than the potential for a revisiting of existing master-lease terms.”

AT&T is planning 3G capacity upgrades at more than 15,000 existing cell sites, LTE deployment at another 20,000 sites, Ethernet backhaul at 7,000 sites and UMTS at 4,000 sites, in addition to building 2,500 new sites, according to a report by RBC.

“Of these projects, the LTE overlays and new cell-site deployments are the most relevant from a tower leasing perspective, and ahead of the respective 2012 totals for these activities,” Atkin wrote.