AT&T today announced a new, long-term agreement with cell tower owner American Tower. The companies didn't disclose the details about the agreement, but both walked away from the deal claiming victory.
At the very least, AT&T's new agreement with American Tower appears to signal some progress by AT&T in relation to its tower strategy. AT&T has made no secret of its efforts to reduce the amount of money that it pays to rent space on cell towers owned by the likes of SBA Communications, Crown Castle and American Tower -- the nation's three big, public tower companies. A new, long-term deal between AT&T and American Tower at least implies some forward momentum in this area.
Further, AT&T's announcement comes amid the company's efforts to sell 1,300 of its own towers in the US. That's part of a broader effort by AT&T to pay down its historic levels of debt stemming from its acquisition of Time Warner.
One thing that is clear though about AT&T's new agreement with American Tower -- it's a big win for American Tower. The tower company said it expects to gain $135 million in additional revenue this year from the deal, and as a result will raise its "property revenue" expectations for the year to between $7.34 billion and $7.47 billion.
But AT&T too sought to cast its American Tower agreement in a positive light. JR Wilson, AT&T's VP of tower strategy and roaming, said in a statement that the operator's deal with American Tower would "drive mutual value and growth through a simplified leasing process designed to drive efficiency and flexibility improvements directly benefiting our speed in deploying the latest technologies."
AT&T for years has been working to reduce the rental fees it pays to third-party tower owners like American Tower. In order to gain leverage in those discussions, AT&T has worked with the likes of Tillman, CitySwitch and Uniti Towers to construct new towers with cheaper rates next to existing towers whose owners charged what AT&T believed were excessive rental rates.
Since it embarked on this "build to relocate" strategy, AT&T has inked agreements with Crown Castle and, now, with American Tower. However, it's difficult to determine whether AT&T is gaining the upper hand in these new agreements considering the terms of the deals remain private. While American Tower announced $135 million in additional revenue, AT&T may have managed to obtain concessions such as a reduction of the fees the company pays to add new equipment to its towers.
Interestingly, when Crown Castle inked its new agreement with AT&T last year, the company did not raise its revenue expectations.
AT&T's deal with American Tower also comes amid AT&T's efforts to sell its own tower holdings. "It's public knowledge that we're out there selling our collection of about 1,300 U.S. cell towers that we still have, we still own," AT&T CFO John Stephens said during the operator's recent quarterly conference call, according to a Seeking Alpha transcript of the event.
In comparison, American Tower owns around 40,000 towers in the US.
However, some analysts don't believe a big, public tower company like American Tower will acquire AT&T's towers.
"AT&T has made no secret of the fact that it has embraced working with many of the private new tower developers," wrote the analysts at Wells Fargo in a note to investors today. The Wells Fargo analysts wrote that private tower companies -- not big public ones like American Tower -- are much more likely to acquire the towers that AT&T is selling.
— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano
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