Crown Castle Weighs Sale of Australian Unit

Towers company Crown Castle says it is exploring a potential sale of its Australian subsidiary after receiving "unsolicited" offers.

The company has built a network of towers on which it rents capacity to mobile operators such as AT&T Inc. (NYSE: T) and Verizon Wireless . Although its main business is in the US, it also owns 77.6% of Australia's CCAL, which operates 1,800 towers.

That business is expected to generate 4-5% of Crown Castle International Corp. (NYSE: CCI)'s adjusted EBITDA in 2015 but is not deemed to be strategically important. A sale could help to fund acquisition activities in the US market and reduce debt.

"We have determined that fully exploring the options available to us will ensure the best long-term results for our shareholders," stated Ben Moreland, Crown Castle's president and CEO, in a company statement.

Crown Castle has grown rapidly through acquisitions and by leasing infrastructure from big mobile operators. Its ratio of net debt to annualized adjusted EBITDA had swelled to as much as 5.4 by the October-to-December quarter, prompting concern among investors about the degree of leverage.

Executives had indicated they were not particularly attached to the Australian business during the earnings call with analysts last month.

"To the extent there was someone who frankly wanted to own it for a value that compelled us to sell it, we would take a look at it," said Moreland, according to a Seeking Alpha transcript of that call.

As Moreland pointed out, another consideration for Crown Castle is the prospect of higher taxes for CCAL in future.

"That business will actually start to lose its tax shelter inherent in the depreciation over time," he said. "So we will start paying more and more taxes over time which causes us to think about it."

Even so, CCAL now claims to be the largest independent tower operator in Australia and has evidently attracted interest from other players pursuing, or keen to pursue, the same approach as Crown Castle.

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Thanks largely to growing usage of mobile data services, Crown Castle reported a 22% year-on-year increase in site rental revenues last year, to nearly $3.7 billion, and a 19% rise in adjusted EBITDA, to $2.14 billion.

It expects adjusted EBITDA to rise slightly to $2.15 billion this year.

Two of Crown Castle's most important infrastructure deals in recent years have been with large US service providers AT&T and T-Mobile US Inc. .

In September 2012, the company agreed to lease 7,200 wireless towers from T-Mobile for a 28-year period for the sum of $2.4 billion. It followed up that move a year later when it paid $4.83 billion to buy 600 towers and lease another 9,100 towers from AT&T. (See T-Mobile USA in $2.4B Towers Deal, AT&T to Sell, Lease Cell Towers for $4.85B and AT&T Closes Crown Castle Deal.)

Under both agreements, Crown Castle has the right to purchase the towers outright at the end of the leases.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

iainmorris 2/16/2015 | 11:58:20 AM
Balance sheet There's also been investor concern the asset base has doubled in value over the last few years (from $10 billion in 2011 to more than $20 billion in 2014) while profit growth has not been anywhere near as impressive. Still, Crown Castle seems comfortable running a net-debt-to-EBITDA multiple of between 4 and 6 and it's still reporting top-line growth. 
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