American Tower said it sold its fiber business in Mexico to Flō Networks for $253 million. And the company said it's currently looking to sell other underperforming assets in the future, including its operations in India.

Broadly, American Tower CEO Tom Bartlett said the company is working to improve its financial footing – including by paying down debt – and is doing so by selling some of its struggling operations.

American Tower bought its Mexican fiber network from KIO Networks in 2017 for $500 million. The transaction included concrete poles and fiber in urban areas, primarily Mexico City – a possible indication of American Tower's hopes to support small cells and backhaul.

Figure 1: (Source: Phil Harvey/Alamy Stock Photo)

"That thesis didn't play out and management found the retail enterprise fiber aspect challenging with a sub-scale platform," wrote the financial analysts at MoffettNathanson in a note to investors this week. They noted that the $247 million difference between the company's purchase price and its sale price is due in part to the fact that American Tower is retaining some rights to the network for its cell towers in the area. Nonetheless, the financial analysts at KeyBanc Capital Markets calculated American Tower lost $80 million on the deal.

"The piece of that particular business [in Mexico] was just a business that we couldn't generate the kinds of returns on that we had expected," explained American Tower CEO Tom Bartlett during his company's recent quarterly earnings conference call, according to a Seeking Alpha transcript. "And we felt that it would be a better – could be in better hands with somebody who had broader scale in the marketplace. And so, as a result of our kind of ongoing review, it was a business that we've actively marketed over the last several months."

A bigger play

"American Tower seems to be shifting to divesting non-core or underperforming assets," wrote the financial analysts at KeyBanc Capital Markets in a note to investors this week. They speculated that the company could also pursue divestments of its Brazil and Argentina fiber operations.

In February, American Tower officials confirmed the company was looking to sell its cell tower business in India, mainly due to the ongoing troubles dragging at Vodafone Idea, India's third-largest service provider.

"While we believe selling non-core assets is likely positive toward American Tower's goal of deleveraging, the valuation multiples are likely to look low, and we believe it begs the question of why the company underwrote the investments in the first place, and how its process is changing going forward," noted the KeyBanc analysts.

American Tower officials confirmed the company doesn't expect any further major mergers or acquisitions following its $10.1 billion purchase of data center operator CoreSite in 2021.

"In our evaluation, there's nothing in there that we see that's compelling at the moment," said CFO Rod Smith in response to a question about the M&A landscape. "Nothing in there that we see that would require us or prompt us to make any kind of a move."

But he suggested the company remains interested in buying telecom operations in some parts of the world.

"When you think about Europe and Asia, we would want to be larger in there," he said. "We think that market is very constructive for us. We do think there are some interesting portfolios there, but nothing that we've seen yet in terms of terms and conditions and pricing and all the different pieces lining up where it would need to be. And we don't expect that to happen any time soon."

Broadly, American Tower posted relatively solid quarterly financial results, even with the sale of its fiber business in Mexico. The company also reported stable and ongoing demand in its cell towers from US network operators, including Dish Network.

"We believe American Tower will accelerate growth metrics into 2024 as near-term headwinds moderate to generate low-double-digit shareholder returns in 2024 and beyond," wrote the financial analysts at Wells Fargo, in their broad assessment of American Tower's financial position. "We also view the 2023 [financial] guide as very achievable, even with a potential India stake sale."

Related posts:

— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano