American Tower, DZS offload international operations

In separate announcements, American Tower and DZS said they would sell parts of their businesses outside the US in a bid to raise cash. The moves come amid an overall slowdown in demand for telecom networking equipment.

American Tower and DZS play in different parts of the telecom market. American Tower owns and operates cell towers across the globe, while DZS sells access and optical networking infrastructure and cloud software to network operators globally. But both are affected by the slowdown in spending as network operators globally adjust to weaker demand for products and services after several years of spikes due to the pandemic.

The two companies said their latest transactions will allow them to focus more carefully on growing their remaining businesses.

"The $30 million of incremental working capital and the divestiture of our Asia business is expected to enable us to focus on our momentum with fiber-forward service providers across the Americas, EMEA [Europe, Middle East, and Africa] and ANZ [Australia/New Zealand]," said Charlie Vogt, DZS CEO, in a release.

American Tower noted in its own release that proceeds from its sale "are expected to be used to repay American Tower's existing indebtedness."

It's unclear when telecom operators will resume higher levels of purchasing. Some financial analysts have speculated that demand might return in the second half of 2024.

The details

The moves this week by American Tower and DZS do not come as a surprise.

American Tower had been discussing a sale of its operations in India for the better part of 2023. That stems directly from the trouble that its customer in India, Vodafone Idea, is facing. There has been speculation that the operator could be forced to declare bankruptcy in 2024.

On Friday, American Tower announced that Brookfield Asset Management would purchase its business in India for around $2.5 billion, or slightly above the $2.2 billion ascribed to the business in October when American Tower wrote off $322 million in goodwill attributable to India.

Brookfield, for its part, has made several telecom-related investments in recent years. And American Tower isn't the only US-based tower company looking to make a deal. Its peer Crown Castle recently announced that its US fiber business is up for sale.

As for DZS, the company said it would sell its Asia operations to Korea-based Dasan Networks for $48 million, of which $5 million would be cash and the remainder eliminated debt. The company also scored $25 million in debt and equity funding.

DZS has struggled in recent months following a cut to its revenue outlook and financial restatements during 2023. But company officials continue to argue that DZS will be able to profit from US government investments into fiber infrastructure as well as international movement away from Chinese vendors like Huawei.

"Although 2023 was a reset across our industry as service providers worked through post-pandemic supply and inventory challenges, DZS will enter 2024 right-sized, recapitalized and better positioned for long-term sustainable growth focusing on higher margin software-defined solutions and markets," argued CEO Vogt.