Credit: Shutterstock photoLeading international wireless tower operator American Tower CorporationAMT has forayed into Tanzania through its latest tower deal with India's largest telecommunications company - Bharti Airtel Ltd.
Bharti Airtel's Tanzania-based unit has agreed to sell nearly 1,350 of its communication towers in Tanzania to American Tower. Moreover, under the agreement, American Tower may acquire roughly 100 additional sites which are presently being developed, for an added consideration.
Interestingly, Bharti Airtel will be the anchor tenant on the portfolio under lease with an initial term of 10 years. Moreover, both the companies expect the deal to be sealed in the first half of 2016, subject to customary closing conditions and regulatory consent.
Rationale Behind
We note, after deciding to exit the tower business in Africa, Bharti Airtel has been insistently selling its tower assets in various African countries to different companies. The company aims to emphasize on its core business and customers, deleverage through debt cutback and also trim down the escalating capital expenditure on passive infrastructure, via its tower sale agreements.
Meanwhile, American Tower has been aggressively expanding its portfolio through acquisitions in India, EMEA and Latin America, which together contribute nearly 50% of its organic core revenue growth.
Moreover, American Tower has been focusing on India lately. The company recently entered into a definitive agreement with Tata Group, finance group Srei and the remaining minority holders to acquire a majority stake (51%) in Indian wireless tower operator, Viom Networks. This transaction will not only increase the tower count to 57,000, but will also help build stronger ties with mobile network operators, such as Bharti Airtel, Vodafone, Idea, Tata, Reliance and Aircel.
Also, we note that this is not American Tower's first such deal with Bharti Airtel. Last July, American Tower announced the acquisition of nearly 4,700 mobile phone towers from Bharti Airtel. Notably, in Nov 2014, Bharti Airtel's Netherlands-based unit had signed a deal to sell its telecommunications towers in Nigeria to American Tower for about $1.05 billion.
Bottom Line
Given its juvenile population, incredible growth potential and a complementary location in relation to its prevailing African operations, American Tower views Tanzania as an extremely attractive adjoining market prospect. Thus, we believe the latest deal should extend the company's portfolio reach and aid top-line growth.
However, customer concentration and consolidation woes coupled with integration and foreign currency exchange rate risks, stiff competition and a highly leveraged balance sheet are potent headwinds for the company.
Zacks Rank & Stocks to Consider
Currently, American Tower has a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the same industry include CorEnergy Infrastructure Trust, Inc. CORR , Communications Sales & Leasing, Inc. CSAL and Digital Realty Trust Inc. DLR . All the three companies carry a Zacks Rank #2 (Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
