Adding to its extensive portfolio of cellular towers, independent wireless infrastructure operator Crown Castle (NYSE:CCI) has agreed to lease approximately 9,100 towers from AT&T (NYSE:T), as well as purchase an estimated 600 more in a $4.85 billion all-cash deal announced yesterday.
After the lease terms of the towers expire, averaging about 28 years, Crown Castle will have the option to purchase the towers for an estimated $4.2 billion, AT&T said. However, the purchase value may fluctuate based on market conditions when the leases expire.
In the interim, AT&T intends to sublet the towers from Crown Castle for $1,900 a month, "for a minimum of 10 years," according to AT&T's statement, subject to a 2%-a-year price hike. AT&T has the option to re-up its lease agreements with Crown Castle for as many as 50 years, as well as utilize excess capacity, as needed. The deal is not expected to impact AT&T's wireless customers, the company said.
Prior to yesterday's sale and lease agreement with Crown Castle, AT&T owned and operated an estimated 10,000 cellular towers, generating approximately $326 million in annual revenue. The deal with Crown Castle is expected to help AT&T finance its previously announced plans for European expansion and a $14 billion wireless network overhaul.
Senior vice president of Network Planning and Engineering for AT&T Services Bill Hogg commented in a statement, "This deal will let us monetize our towers while giving us the ability to add capacity as we need it. And we'll get additional financial flexibility to continue to invest in our business, maintain a strong balance sheet and return value to our shareholders."
Following the contemplated transaction, Crown Castle says it will remain the largest wireless infrastructure operator in the U.S. with approximately 40,000 towers. In October 2012, the company sold $1.65 billion in debt to help fund a $2.4 billion purchase of about 7,200 towers from T-Mobile USA Inc.
The transaction announced yesterday is expected to close by year's end. Crown Castle said Monday that it plans to offer 36 million common shares and 7.5 million of its series A convertible preferred shares to finance its deal to lease and buy wireless towers from AT&T.
-- Material from The Associated Press was used in this report.
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