Verizon’s Transaction with American Tower: What You Need to Know

Verizon’s tower transaction

Verizon (VZ) signed an agreement with American Tower (AMT) for a wireless tower portfolio transaction on February 5, 2015. According to the agreement, American Tower will have sole rights to lease and operate ~11,324 wireless towers—owned by Verizon—for an initial payment of ~$5 billion. American Tower will also buy 165 Verizon towers for $0.1 billion. Verizon’s tower transaction is expected complete by the end of 1H15. American Tower will make an initial payment of ~$5.1 billion for this transaction.

Verizon’s Transaction with American Tower: What You Need to Know

Verizon has been interested in rationalizing its asset base and tower sales for some time now. The company was looking for favorable terms and pricing to monetize its tower base. AT&T (T) had beaten Verizon in tower monetization in 2013. AT&T entered into a similar tower transaction agreement with Crown Castle (CCI) for ~9,700 wireless towers in October 2013.

American Tower takes over the majority of Verizon’s towers

This tower transaction covers the majority of Verizon’s towers in the 50 united states. According to American Tower’s press release, it can lease and operate these towers for an average tenure of ~28 years. At the end of the tenure, it can also buy these towers from Verizon for ~$5 billion. The company will have to make payments during the 2034–47 period.

According to American Tower, Verizon will sublease capacity on these towers from American Tower for a monthly cost of $1,900 per tower for at least ten years. However, the tenure can be extended. Nonetheless, there is a 2% per annum escalator clause on the monthly rent.

If you want to take on diversified exposure to Verizon, you can invest in the Technology Select Sector SPDR Fund (XLK). The ETF held ~5% in the company on March 19, 2015.