American Tower’s Purchase of Global Tower Partners Owner Seen Unlikely to Face Major Regulatory Trouble

American Tower’s buy of MIP Tower Holdings will give it ownership of Global Tower Partners’ communications infrastructure assets -- about 5,400 tower sites in the U.S. and 500 sites in Costa Rica, 800 “domestic property interests” at third-party sites and management rights at more than 9,000 U.S. sites, it said. The U.S. tower sites are located in all 50 states and Puerto Rico; about 33 percent of the sites are in the top 50 basic reading areas and about 66 percent are in the top 100 BTAs, American Tower said. The GTP deal is expected to bring American Tower $270 million in net profit on $345 million in revenue during 2014. The deal is American Tower’s second major purchase announcement in less than a month -- the company agreed in August to buy 4,456 tower sites from NII Holdings, including 2,790 sites in Brazil and 1,666 in Mexico (CD Aug 12 p12). The MIP-GTP deal is not the “end of the road” for American Tower, which is already examining other potential acquisitions, CEO Jim Taiclet said during a conference call. The company believes there’s the potential for substantial growth because “we continue to believe that we are in the early stages of the 4G development cycle,” Taiclet said. American Tower’s site portfolio included 56,506 communication sites as of June 30, including 22,720 tower sites in the U.S., 33,473 sites internationally and 313 distributed antenna system networks, according to a filing with the Securities and Exchange Commission (http://bit.ly/17FHRrm).

The deal should “sail through” government regulatory reviews, Evercore Partners analyst Jonathan Schildkraut told us. The transaction faces an antitrust review at the Department of Justice, along with some state reviews. Although the GTP deal will result in American Tower having control over 25 percent of all U.S. towers, “from a tower perspective, that’s just not how competition works,” Schildkraut said. “Competition works at the tower level, which is to say that you need a site and specific geography, and municipal restrictions already prevent one tower from being in close physical proximity to another. So towers actually operate as mini-monopolies anyway.”

There may be some regulatory pushback, but the deal does not appear to be a “non-starter,” said Tom Burnett, Wall Street Access’s research director. An antitrust review is likely to concentrate on the geographic concentration of towers, with any conditions possibly focusing on required divestiture of some towers within a specific geographic region, he said. “You have to imagine that there’s going to be some overlap here,” Burnett said. “The normal practice in something like this, where you have discrete locations, is to divest in the locations where a concentration makes it difficult for the telcos to negotiate because they don’t have anyone else to go to."

The deal substantially expands American Tower’s site portfolio in the U.S., but Schildkraut said he doesn’t believe it will cause any fundamental changes to the U.S. tower market. The deal itself is immediately financially attractive for American Tower because GTP is “one of the best assets out there,” he said. “The GTP portfolio includes really well-selected towers with really strong real estate underneath. They also have good exposure to rooftops, which could be a way of participating in the deployment of small cells down the line.” American Tower’s expanded U.S. portfolio means it “can now approach carriers on a more holistic basis where they can say ‘here are all the different pieces of communication infrastructure that we can provide to you. And rather than responding to you needing capacity at this particular location, let’s come up with an approach to deliver you an optimal network configuration.'” American Tower was already a “powerhouse,” and there has always been a contest between the tower owners and wireless carriers “over who has the most leverage,” Burnett said.

The U.S. tower sector has “somewhat underperformed” this year compared to past strength, in part because tower company mergers and acquisitions have “been really muted,” Schildkraut said. 2014 should be far more robust for the tower sector, he said. The closing of both of American Tower’s major acquisitions should set the sector up for a strong start to next year, while new cell site activity is beginning to grow, Schildkraut said.