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(B)(N) AMT American Tower Corporation (REIT)

September 8, 2013

Deal Book. American Tower Corporation has agreed to buy the parent of telecom tower operator Global Tower Partners for $3.3 billion as it seeks a bigger share of the billions of dollars that U.S. telecom carriers are spending to upgrade their networks (Reuters, September 6, 2013, American Tower extends network reach with $3.3 billion deal).

American Tower Global Reach Courtesy: American Tower Corporation

American Tower Global Reach
Courtesy: American Tower Corporation

The deal will nearly double its tower count in the US and Costa Rica and cement its position as the largest provider in the US, and reduce its near-term exposure to India where the firm currently operates over 10,000 towers which is nearly 15% of its inventory.

Nor is the deal minor because it’s equivalent to more than its current net worth of about the same amount ($3.5 billion) and increases its debt by $1.5 billion (+15%) and investors are expecting further significant shake-outs as the Verizon Vodaphone acquisition works it way through the global telecommunications market (Reuters, September 7, 2013, Sawiris eyes Telecom Italia, but concerned about Rome).

American Tower Global Tenants Courtesy: American Tower Corporation

American Tower Global Tenants
Courtesy: American Tower Corporation

Moreover, this technology barely existed twenty years ago and enables global bandwidth without which we would still be communicating by telegraph (or landlines, satellite, or a few national mega-towers) instead of the Internet and smart phones, and there are many who would like to own it, or control it, and they would, absent the commercial tenancy model which has been developed and enabled by American Tower and its few competitors (Crown Castle International Corporation and SBA Communications Corporation, and some of the telecoms that maintain their own towers (Reuters, September 9, 2013, BCE goes to court to fight Canada’s wireless rules)).

The company has been in the Perpetual Bond™ since much lower prices of $30 to $35 in 2009 (please see Exhibit 1 below) and trading in that magical symbiosis in which the stock price and the price of risk, Risk Price (SF), more or less track one another.

It’s currently trading at $72 and just below our estimate of the current price of risk, Risk Price (SF) at $72 and flat, pending a new balance sheet. Our estimate of the downside volatility in the stock price is minus (-$5) per share and we would, therefore, not be surprised at any price between the current $72 and $67 to $77.

The company expects to pay a current dividend of $430 million to its shareholders this year for a current yield of 1.5%. Moreover, the company is taxed as a REIT and, therefore, not taxed on distributions that it makes to its shareholders.

Exhibit 1: (B)(N) AMT American Tower Corporation – Risk Price Chart

(B)(N) AMT American Tower Corporation

(B)(N) AMT American Tower Corporation

American Tower Corporporation is a wireless and broadcast communications infrastructure company that owns, operates and develops communications sites. The Company’s main business is leasing antenna space on multi-tenant communications sites to different providers.

(Please Click on the Chart to make it larger if required.)

From the Company: American Tower Corporation, a real estate investment trust, operates as a wireless and broadcast communications infrastructure company. It develops, owns, and operates communications sites. The company’s rental and management operations include leasing antenna space on multi-tenant communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities, and tenants in various other industries; managing rooftop and tower sites for property owners; operating in-building and outdoor distributed antenna system (DAS) networks; and managing lease property interests under carrier or other third-party communications sites. It also provides network development services, such as tower-related services comprising site acquisition, zoning and permitting services, and structural analysis services. As of December 31, 2011, the company owned and operated approximately 21,320 towers in the United States and approximately 23,900 towers in Brazil, Chile, Colombia, Ghana, India, Mexico, Peru, and South Africa; approximately 260 DAS networks; and approximately 1,810 communications sites. It has elected to be taxed as a real estate investment trust. As a result, the company would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. American Tower Corporation was founded in 1995, has 2,500 employees, and is headquartered in Boston, Massachusetts.

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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