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American Tower adds new assets in Mexico

by Chris Nolter | Published December 12, 2011 at 4:28 PM

Wireless infrastructure company American Tower Corp. continued its international expansion with the purchase of up to $500 million in assets from Telefónica SA's unit in Mexico announced Monday, Dec. 12.

American Tower would add about 2,500 towers in Mexico from Telefónica's Pegaso PCS SA de CV, which would nearly double American Tower's holdings in the country.

The purchase follows the creation of a joint venture in Uganda to acquire cell sites and reflects the company's aggressive growth outside the U.S.

"American Tower has been pursuing a global growth strategy for a number of years in Brazil and India, and now Mexico looks like is an important market as well," said Clayton Moran of Benchmark Co. LLC.

American Tower owned nearly 40,000 communications sites at the close of the third quarter. More than 21,000 are in the United States, but a growing number are in countries such as India, Mexico and Brazil.

In the first nine months of 2011, American Tower spent more than $1.2 billion in cash on acquisitions, buying 135 communications sites in the U.S. and more than 3,600 in other countries.

American Tower said Thursday that it would form a joint venture in Uganda with South African telecom MTN Group Ltd. American Tower will seed the venture with $89 million. The JV will buy towers from MTN for $175 million. It will also construct new sites for MTN's Uganda unit and other clients.

"This is how they went about pushing through Latin America," said Jonathan Schildkraut of Evercore Partners. American Tower develops customer relationships with carriers and takes on the telecoms as anchor tenants as it purchases towers throughout a region.

The thrust of the recent acquisition strategy does not reflect the company's name. There have been some domestic acquisitions, but they have been smaller than the purchases in other countries.

"That's probably in part due to the limited opportunities here in the U.S. to buy a sizable portfolio," Moran said.

Schildkraut suggested American Tower would be more likely to purchase land in the U.S. than cquire large companies or entire portfolios of towers.

AT&T Inc.'s teetering acquisition of Deutsche Telekom AG's T-Mobile USA could create an interesting opportunity for American Tower and its peers.

T-Mobile has the nation's fourth largest portfolio of wireless towers, the company's website says, with more than 7,000 sites. The company marketed the towers in recent years.

Citing an average a price of about $510,000 per tower in the U.S., Evercore's Schildkraut said a valuation of $3 billion to $4 billion for T-Mobile's portfolio would be reasonable.

The analyst suggested that American Tower would look at T-Mobile USA's towers. Given its focus on international assets, however, he said he doubts the company would buy them. Crown Castle International Corp. of Houston would likely be more aggressive.

"AMT would definitely take a hard look at the T-Mobile towers," said Benchmark's Moran, estimating the value of the portfolio at $1.5 billion to $2 billion.

The Boston tower company is converting into a real estate investment trust, and expects to complete the transition in January.

Moran suggested that the new corporate structure would not prevent the company from buying more tower portfolios.

"Even with the REIT conversion and cash considerations going forward, having to pay a dividend and such, they are still going to have plenty of cash flow that they can use to further this strategy," the analyst said.

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