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American Tower Expands Its Arsenal

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If you liked American Tower's (NYSE: AMT  ) dominant position in wireless communication real estate before, you're going to love the company even more now.

On Friday, American Tower announced it has reached an agreement with Virginia-based NII Holdings (NASDAQOTH: NIHDQ  ) to acquire up to 2,790 towers in Brazil, and 1,666 towers in Mexico, for $413 million and $398 million, respectively -- based on today's foreign currency exchange rates, anyway.

In addition, American Tower stated it will also invest around $50 million in start-up capital expenditures associated with the two new portfolios.

This is bigger than you think
To put the significance of this news into perspective, note that this deal alone will cost half a billion dollars more than the $311.2 million that American Tower spent in the entire first half of 2013 to acquire 36 domestic towers and 1,017 international towers.

For those of you keeping track, this increases American Tower's already-enormous portfolio by around 8%, pushing it to over 60,000 communications sites worldwide.

If you're worried about how much they're spending, the company should have no problem financing the purchase. To be sure, at the midpoint of this year, American tower boasted roughly $2.6 billion in liquidity, including $448.4 million in cash and equivalents, plus the ability to borrow around $2.2 billion under two revolving credit facilities.

The folks at NII Holdings, for their part, have already agreed to lease back the towers from American Tower for a minimum of 12 years through their Nextel Brazil and Nextel Mexico subsidiaries. Why? According to NII CEO Steve Shindler in his own company's press release on the agreement, they're happy to have additional liquidity to enable them to continue investing in Nextel's next-gen network deployments in the two countries.

So what does American Tower get out of it? According to their own press release, they expect the towers to collectively generate around $149 million in annual run rate revenue, and roughly $55 million in annual gross margin.

Better yet, American Tower also expects the acquisition to be immediately accretive to adjusted funds from operations when the deal closes sometime in the fourth quarter of 2013.

What's an investor to do?
Even though shares of American Tower are trading near 52-week-lows on the heels of both so-so earnings results, which fell just short of expectations, as well as a startlingly bearish report last month from noted short-selling research firm Muddy Waters, I'm still not convinced American Tower will fall from grace anytime soon.

And I'm certainly not alone. Just last week, fellow Fool Sean Williams astutely pointed out American Tower's rare status as a profitable wireless tower provider, combined with its strategic decision to become a real estate investment trust in early 2012 -- meaning it's now legally required to distribute at least 90% of its earnings to shareholders as dividends. This makes it a truly compelling long-term investment option for patient shareholders who buy at today's levels.

That said, if you're looking for yet another way to play the rise of mobile technology, you're in luck! The mobile revolution is still in its infancy, but with so many different companies it can be daunting to know how to profit in the space. Fortunately, The Motley Fool has released a free report on mobile named "The Next Trillion-Dollar Revolution" that tells you how. The report describes why this seismic shift will dwarf any other technology revolution seen before it and also names the company at the forefront of the trend. You can access this report today by clicking here -- it's free.

Read/Post Comments (1) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 13, 2013, at 3:09 PM, Jon0617 wrote:

    How can you not love this? A trumped up attack scares traders away and kicks the legs out from under the stock price, then AMT flexes its considerable financial muscle to make a huge acquisition it can easily afford, and improve its regional diversity.

    I typically ease into positions with dollar cost averaging, AMT included for the last several months, but I couldn't resist this. I tripled my position while it's on sale, and I expect to be very glad I did.

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Related Tickers

9/30/2016 4:02 PM
AMT $113.33 Down -0.15 -0.13%
American Tower CAPS Rating: ****
NIHDQ $0.00 Down +0.00 +0.00%
NII Holdings, Inc. CAPS Rating: **