American Tower to Acquire Tower Business From Telcos in India

American Tower Corp AMT recently announced the acquisition of tower businesses from Vodafone India Limited and Idea Cellular Limited for INR78.5 billion or $1.2 billion.

Notably, this leading international wireless tower operator’s majority owned subsidiary in India — ATC Telecom Infrastructure Private Limited (ATC TIPL, formerly Viom) — plans to add 20,000 communications sites.

American Tower currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vodafone India is the subsidiary of U.K.-based Vodafone Group plc VOD. Idea Cellular is a mobile network operator and the fourth-largest Internet service provider in India. Accordingly, Idea Cellular and Vodafone India are seeking to merge their operations to create the country's largest telecom operator. The merged entity will carry a value of more than $23 billion with 35% market share. The sale of assets is an initiative by the companies to sell their holdings, before the proposed merger.

Deal Prospects

As part of the deal, Vodafone India and Idea Cellular will receive service level and process efficiency benefits. ATC TIPL will secure certain preferential rights of new businesses on existing portfolio and sites acquired in certain Indian markets.

American Tower is hopeful that the addition of these two high-quality portfolios will contribute to long-term leasing growth in India. The country’s leading mobile operators are presently focused on accelerating their 4G network deployments.

American Tower is optimistic about the expansion of mobile broadband services in India, with participation in the Digital India initiative.

Accordingly, the company generates more than 50% of the organic core revenue growth from its Indian, EMEA and Latin American markets. In third-quarter 2017, within the Property segment, revenues from the United States totaled $904 million, up 8% year over year. Meanwhile, total international revenues amounted $751 million, up 13.6% year over year. Within this, revenues from Asia (India) totaled $298 million, up 10.4% year over year. EMEA revenues grossed $155 million, up 18.3% year over year. Latin America revenues totaled $298 million, up 14.6% year over year.

The transactions are expected to generate approximately $320 million in property revenues and $120 million in gross margin within a year for American Tower. The deal is expected to close in the first half of 2018, subject to customary closing conditions and regulatory approvals from respective authorities.

Price Performance

American Tower displays an impressive price performance. In the past three months, the stock has returned 7.5% compared with the industry’s rally of 3.5%.

 

 

In the U.S. market, American Tower competes with the likes of Crown Castle International Corp. CCI and SBA Communications Corp. SBAC. We believe that geographic diversification will help the company reduce dependence on the highly-saturated wireless market.

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