Crown Castle Sells Australia Business for $1.6B

Proceeds will support Crown Castle's $1 billion takeover of Sunesys and help to pay off debts.

Iain Morris, International Editor

May 14, 2015

3 Min Read
Crown Castle Sells Australia Business for $1.6B

Crown Castle has agreed to sell its Australian business to a group of investors led by Macquarie Infrastructure and Real Assets for A$2 billion ($1.6 billion) in cash.

The infrastructure player, which generates most of its revenues from selling network capacity to US operators, said the sale would support its recently announced $1 billion cash takeover of Sunesys. That company's fiber assets are expected to strengthen Crown Castle's position in North America's fast-growing small-cells market. (See Crown Castle Bids $1B for Sunesys Fiber Assets.)

The sale will also help Crown Castle to pay off some debts, which had mushroomed to about 5.3 times annualized EBITDA in the January-to-March quarter following a spate of previous acquisitions.

Crown Castle had expressed interest in selling its 77.6% stake in Australia's CCAL in February after receiving "unsolicited" offers for the business and deciding it holds little strategic value. (See Crown Castle Weighs Sale of Australian Unit.)

During an earnings call in January, president and CEO Ben Moreland also complained that CCAL would "start to lose its tax shelter inherent in the depreciation over time," according to a Seeking Alpha transcript.

"So we will start paying more and more taxes over time, which causes us to think about it," said Moreland at the time.

Crown Castle said it would receive about $1.3 billion from the sale after taking into account its ownership stake, the repayment of intercompany debts it is owed by CCAL and various transaction fees. It expects the deal to close in the second quarter of 2015.

"The sale of CCAL allows us to redeploy capital towards our growing small cells networks," said Moreland in a company statement.

Crown Castle had expected CCAL to contribute about $100 million to EBITDA of roughly $2.15 billion this year.

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By comparison, the Sunesys transaction, which Crown Castle hopes to finalize by the end of the year, is expected to contribute between $80 million and $85 million to the company's gross margin in the first year of ownership.

Reporting a 7% increase in revenues and 23% growth in net profit for the first three months of the year, Crown Castle is aiming for a gross margin of about $2.1 billion on site rental revenues of around $3.1 billion in 2015.

While small cells currently account for just 7% of Crown Castle's site rental revenues, executives are guiding for rapid growth in this particular market.

Shares in Crown Castle were trading up 0.5% on the New York Stock Exchange at midday.

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

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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