American Tower To Buy BR Towers To Fortify Brazilian Presence - Analyst Blog

In a bid to expand its presence in Brazil, leading global wireless communications tower operator American Tower Corporation AMT has decided to purchase Brazilian mobile-phone infrastructure firm BR Towers SA.

The transaction is valued at nearly 2.18 billion Brazilian Reais, or approximately $978 million at present exchange rate, and will be settled in cash along with the assumption of certain existing debts.

To acquire full equity interests of BR Towers SA, American Tower has signed a pact with private equity firms like GPCP V and FIP Multisetorial Plus and other shareholders. The deal is expected to be sealed in the fourth quarter of 2014, subject to customary closing conditions.

Post-closure of the deal, American Tower will own nearly 2,530 towers in Brazil and exclusive use rights for almost 2,110 towers in the country. The company expects that the acquisition of BR Towers SA's towers will generate nearly $131 million (around 292 million Brazilian Reais) revenues annually. American Tower also estimates annual gross margin of nearly $81 million (roughly 181 million Brazilian Reais) from this operation.

We believe the acquisition of BR Towers SA will drive American Tower's top line further. The acquisition will also support the company's plan of owning more than 70,000 towers by the end of 2014, through organic or inorganic growth. Moreover, the company intends to exceed 2,000 domestic leases this year in addition to spending $110 million in land acquisitions. American Tower is confident such strength in its tower portfolio will help it to double its AFFO (give the full name) per share by 2017.

Notably, American Tower touched a fresh 52-week high of $90.73 on June 9, 2014 on the back of robust financial numbers for the first quarter of 2014 and an impressive dividend increase. Higher adoption of smartphones/tablets coupled with increased deployment of 3G/4G networks by carriers across the world continues to drive demand for tower space. American Tower is thus rapidly expanding its business operations in various emerging markets.

The company also recently announced its plans to bid for Viom Networks – an Indian tower company with nearly 42,000 towers and more than 95,000 tenancies. This buyout will fortify American Tower's foothold in India as it already holds 10,000 towers in this nation. Given that India is undergoing a network upgrading phase, this takeover should serve as an added advantage for American Tower.

American Tower currently has a Zacks Rank #3 (Hold).

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