American Tower Acquires Telxius in $9.4B Deal

As of late, scores of companies are investing billions of dollars in the next wave of fifth-generation coverage. This 5G standard promises to speed data flow to mobile and other wireless devices such as personal computers, cars and industrial machinery.

The latest deal underscores that frenzy as American Tower Corp. entered into definitive agreements this week with Telefónica SA, under which it will acquire Telxius Towers for $9.4 billion. This comprises approximately 31,000 existing communications sites in Germany, Spain, Brazil, Chile, Peru and Argentina. In addition, American Tower expects to spend approximately $500 million to construct a committed pipeline of approximately 3,300 new sites in Germany and Brazil through 2025.

It is an understatement to say that investment dollars are flowing into the wireless sector. The Federal Communications Commission’s recent sale of wireless licenses fetched more than $69.8 billion after three weeks of bidding, a record sum that could alter cellphone carriers’ prospects for the next decade. The auction proceeds topped the $44.9 billion raised in 2015 by an earlier sale of mid-range cellular licenses which at the time, US cellphone carriers used to enhance 4G service.

The recent bids have blown past even the highest forecasts, suggesting that several companies are fighting over the most valuable wireless rights.

American Tower expects its latest assets will generate approximately $775 million in property revenue, approximately $410 million in gross margin and approximately $390 million in Adjusted EBITDA at current foreign exchange rates in the first full year in its portfolio, pro forma for contributions from the committed future build-to-suits. This implies an Enterprise Value/Adjusted EBITDA multiple of less than 26x.

“This transaction is transformational for our European business and will establish American Tower as one of the largest independent communications infrastructure providers in Europe,” says Tom Bartlett, American Tower’s chief executive officer. “It is also complementary for our Latin American portfolio and positions us to drive strong long-term organic growth across both regions while augmenting our new build programs and enhancing our relationships with key tenants.”

For commercial real estate owners, this bidding war for 5G rights is also a commercial real estate opportunity. One company positioning itself for growth in such transactions is NAI Global Wireless, launched by NAI Global president and CEO Jay Olshonsky to represent property owners and landlords to market land to cell tower operators and mobile device carriers. NAI Global Wireless provides services including new lease agreements, cell site buyout, site valuation, distributed antenna systems and implementing 5G technology.

Tower companies often recognize the value of putting infrastructure in commercial locations and may offer significant compensation to owners whose properties can support it.