AT&T to Sell, Lease Cell Towers for $4.85B

AT&T has agreed to sell 600 of its cell towers and lease another 9,100 to Crown Castle for $4.85 billion, the companies announced Sunday evening.

Under the terms of the deal AT&T Inc. (NYSE: T) will get $4.5 billion up front and rights to sublease capacity on the towers from Crown Castle International Corp. (NYSE: CCI) for a minimum of 10 years for $1,900 per month per site, with annual rent increases of 2 percent. The carrier gets the option to renew up to a total of 50 years and will also have access to additional capacity on the towers for future use.

Crown Castle gets exclusive rights to lease and operate 9,100 of its wireless towers, which are located in AT&T's top markets, for the duration of a 28-year lease. When the lease expires, the tower company will have the option to purchase the towers for near what it paid, around $4.2 billion, based on the fair market value at the end of the lease.

In discussing the deal on the company's third-quarter earnings call Monday morning, Ben Moreland, Crown Castle president and CEO, noted that there was a significant increase in new leasing activity in the third quarter as the carriers focused on improving network quality.

Indeed, the need for network upgrades is one reason AT&T has entered into the agreement as it has promised to spend around $12 billion upgrading its network this year. Some extra cash to buy back stock and fund its Leap Wireless International Inc. (Nasdaq: LEAP) acquisition are two other reasons. It's a win-win for the carrier as it gets more money and the ability to add capacity as it needs it.

Crown Castle is the largest independent provider of wireless tower infrastructure in the US. Its deal with AT&T won't hold it back from maintaining similar deals with other operators either. Last year it took over 7,200 of T-Mobile US Inc. 's cell towers for $2.4 billion. Sprint Corp. (NYSE: S) and Clearwire also make up a significant chunk of its tower revenue. (See Sprint & Clearwire Make Up 26 Percent of its Tower Revenue and T-Mobile USA in $2.4B Towers Deal.)

AT&T isn't expecting this deal to have a significant impact on its financial results, which it reports on Wednesday for the third quarter, and anticipates the transaction closing by the end of the year.

— Sarah Reedy, Senior Editor, Light Reading