Canaccord Genuity on Telecom: Potential Sale of T-Mobile Tower Assets Could Create Attractive Buying Opportunity

April 10, 2012 10:04 AM EDT
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Canaccord Genuity on Telecom: Potential sale of T-Mobile tower assets could create attractive buying opportunity

Analyst, Greg Miller, said, "We believe the sale of T-Mobile’s 7,000+ tower portfolio, the fifth largest in the US, could create another attractive buying opportunity for the three tower stocks. With an unofficial mandate for T-Mobile USA to fund the US wireless build-out without the support of the parent Deutsche Telekom (NYSE: DT), we view the asset sale as highly likely – unlike its prior attempts. Should an acquisition that could be as large as $2.5- 3.0bn be announced, we would be buyers of the stocks on any weakness. As was the case with SBA Communication's (Nasdaq: SBAC) recent acquisition of Mobilitie or Crown Castle's (NYSE: CCI) acquisition of Global Signal, such an acquisition would be expected to require additional equity to fund the acquisition."

Miller thinks that since American Tower's (NYSE: AMT) successful REIT conversion, AMT has the best chance to win. He feels CCI and SBAC could bid to 17x and 18x, respectively, but AMT could go as high as 19x. Separately, other large U.S. wireless M&A is still sitting as a wildcard not too far in the background.

Miller said, "Even though it is likely the DOJ has already effectively blocked a potential merger between Sprint (NYSE: S) and T-Mobile USA, we note that should it be revived and succeed, it could very likely result in a net reduction of cell sites for the combined carrier, as the company integrates the three disparate technologies. However, it is our view that this will take place only over an extended period of time, especially given the significant uptake in data demand." (He noted AT&T (NYSE: T) / Cingular duplicate cell sites were decommissioned when their merger was originally announced)

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