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T-Mobile's towers may be too tall an order as a single unit

by Chris Nolter  |  Published April 27, 2012 at 3:51 PM
As T-Mobile USA Inc. markets its wireless towers, people familiar with the industry said the telecom might benefit by shopping the assets in bundles rather than a single portfolio.

The group of 7,300 towers would be a big bite for one company to digest. Evercore Partners Inc. has estimated the value at $2.8 billion to $3 billion. New York boutique TAP Advisors LLC and Deutsche Bank AG are handling the T-Mobile sale, sources said. Staple financing is available at 12 times tower cash flow, the people added.

Some of the large tower operators are already committed to significant acquisitions.

SBA Communications Corp. is buying towers and other assets from Oaktree Capital Management LP-backed Mobilitie LLC for $1.1 billion. Crown Castle International Corp. is acquiring Madison Dearborn Partners LLC portfolio company NextG Networks Inc. for $1 billion.

American Tower Corp. has made international acquisitions in the past year.

By offering the assets in parcels, a number of tower operators might buy assets. With the aggressive staple financing, private equity firms could be drawn to the process.

One concern could be that the anchor tenant would be T-Mobile USA, the weakest of the national U.S. carriers.

The U.S. arm of Deutsche Telekom AG has been rewriting its plans since the termination of its $39 billion sale to AT&T Inc. last year.

Earlier in the week, the Federal Communications Commission approved a transfer of spectrum licenses from AT&T to T-Mobile USA.

The licenses, which cover 12 of the largest 20 U.S. cities, are part of the compensation that AT&T had promised if the deal could not win regulatory approval. AT&T will also pay its former merger partner $3 billion in cash and enter a roaming agreement with its erstwhile merger partner.

T-Mobile USA plans to spend $4 billion to upgrade its network and to launch long term evolution, or LTE, wireless broadband service next year.

Jonathan Schildkraut of Evercore Partners noted in a recent report that T-Mobile could stir interest by splitting up the assets. "And, with the market currently rewarding public tower operators for acquisition driven growth," he wrote, "this could give all of the largest market operators the opportunity to participate in this divestiture."

Towers are typically worth more in the hands of third-party owners, who can rent space to a number of carriers. Sprint Nextel Corp. arranged a $670 million sale-leaseback of 3,300 cell towers in 2008 with TowerCo LLC, which has funding from George Soros' Soros Strategic Partners LP.

Breaking up tower assets into bundles for auctions has not been common in the U.S., but it is not an exotic concept. It is a common tactic in the cable industry, where operators often shop markets or groups of markets.






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Tags: Evercore | M&A | PE | T-Mobile USA Inc.

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