Never mind the World Cup dominating the stage in Brazil, American Tower has claimed more turf in the largest country in South America, purchasing BR Towers, a Brazilian company with 2,530 towers and the rights to 2,110 additional towers for $978 million.
American Tower anticipates that the towers will generate $131 million in annual run rate revenues and $81 million in annual gross margin. The deal is expected to close in the fourth quarter of 2014.
Wells Fargo values the deal 12x tower cash flow and $210,000 per tower, and it increases American’s Brazil exposure by 69 percent. The buy adds to the 6,753 towers American already owns in the country. While some question the stability of the Brazilian economy and American’s expansion there, Wells Fargo takes a favorable view of the country.
What is most interesting to Wells Fargo analysts is that a large percentage, 60 percent, of the wireless infrastructure in Brazil is still 2G. There is also the promise of telecom expansion to handle the coming Olympics.
“With the coming of the Olympics in 2016 (and the not so smooth experience with the World Cup) we believe there will be a great sense of urgency by players to update the wireless infrastructure before this event,” Jennifer Fritsche, senior analyst wrote. “Clearly, towers would play a major role in this process. In our view, those tower companies that have a large foothold in the area are best positioned to capture much of this future spending.”
More Brazilian Action Coming?
The American Tower deal may not be all that is cooking. Bloomberg reported a rumor last week that as many as $4 billion in wireless assets are being sold in three different auction processes. In addition to BR Towers SA, Grupo TorreSur, owned by Providence Equity Partners LLC, and Tim Participacoes, the mobile-phone provider owned by Telecom Italia, may also be selling their towers.