The Deal: Crown Castle's Lead on Tower Deal May Rest on REIT
NEW YORK (The Deal) -- With AT&T's
Becoming a REIT would place requirements on the wireless tower operator's cash deployments. However, it could also increase Crown Castle's access to the equity markets, which would help it bid for AT&T's assets without adding excessive leverage.
AT&T had hired bankers and made progress in marketing the towers, sources said. Though Bloomberg reported that the Dallas telecom is seeking $5 billion for the towers, one person said the first round of bids had occurred and that the price would be lower.
The portfolio includes about 11,000 towers that produce about $200 million in cash flow and represent one of the last major targets in the industry.
"I think Crown Castle is still in the driver's seat on the AT&T towers," Jonathan Schildkraut of Evercore Partners said.
"A contributing factor to the timing of this announcement may have been the likely need to raise equity to acquire
Schildkraut suggested that the final sale price may not represent the "true cost" of the towers. AT&T would like to keep the right to upgrade the towers, and would likely fold an agreement into the sale.
"Eighteen to 20 times cash flow will be the headline number," he said. "The true cost will include whatever upgrade rights AT&T is able to negotiate."
That would put the valuation at $3.6 billion to $4 billion.
Kevin Smithen of Macquarie Capital estimated that AT&T's towers could raise $4.5 billion to $5 billion, based on a multiple of $400,000 to $450,00 per tower.
There are other acquisitive tower operators. Earlier this month, rival American Tower agreed to pay $4.8 billion for Global Tower Partners, backed by Macquarie Infrastructure Partners Inc., Dutch pension fund manager PGGM BV and company management.