Japan's SoftBank is setting up a towers infrastructure company in the US in partnership with a property company called Lendlease while it plots a merger of its Sprint telecom business with rival operator T-Mobile US.
The towers company will be called Lendlease Towers and will compete against existing US players such as American Tower Corp. (NYSE: AMT) and Crown Castle International Corp. (NYSE: CCI) in the market for infrastructure-based services.
Crown Castle leases towers to mobile operators including AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) and has reported strong growth in revenues amid soaring demand for mobile data services.
SoftBank Corp. and Lendlease, which is headquartered in Australia, say they will each commit $200 million in equity to the business and look to introduce other capital partners in future.
Their initial investment of $400 million will be used to fund the acquisition and restructuring of about 8,000 existing telecom sites, including rooftops and other structures, they have indicated.
According to press reports that cite Lendlease representatives, some of Sprint's assets will be included in the asset portfolio.
Lendlease says it is targeting about $5 billion in telecom infrastructure assets in the medium term.
"I am pleased to announce the establishment of an infrastructure vehicle focused on the US telco sector, which continues to experience unprecedented growth in data usage as the world moves to becoming more connected," said Denis Hickey, the CEO of Lendlease's Americas business, in a company statement. "Consistent with our strategy of focusing on growing demand for infrastructure, we've identified the telco infrastructure sector as an opportunity to deploy our integrated business model."
The news comes amid growing speculation that Sprint Corp. (NYSE: S) and T-Mobile US Inc. are close to finalizing a deal that would combine the two operators and present a stronger challenge to market leaders AT&T and Verizon, pending regulatory approval. (See T-Mobile, Sprint in Merger Talks, Again – Report.)
According to a report in today's Financial Times newspaper, SoftBank is still awaiting regulatory approval of at least three deals in the US market, including a $3.3 billion takeover of an investment group called Fortress and the acquisition of Boston Dynamics, a robotics company whose current owner is Google parent Alphabet.
Its transfer of a 25% stake in UK chip designer ARM to a new technology investment fund has also been held up by US authorities, according to that report. (See SoftBank Muscles In on ARM in $32B Deal.)
US operators have transferred tower assets to the likes of American Tower and Crown Castle and then leased capacity on those towers as they look to free up capital for investment in more critical business activities.
While such infrastructure-sharing models have not taken off in the European market, a senior executive at Germany's Deutsche Telekom AG (NYSE: DT), the parent company of T-Mobile US, believes they could make headway as operators start to make costly investments in the rollout of next-generation 5G networks. (See Europe's Backhaul Black Hole Looms Above 5G.)
"If you look at the US, where tower companies are buying fiber to connect sites, that is a trend I see happening [in Europe] in future," said Bruno Jacobfeuerborn, Deutsche Telekom's chief technology officer, during a previous conversation with Light Reading. (See The Growing Pains of 5G and DT CTO: Costs Must Fall or 5G 'Won't Work'.)
Crown Castle, in particular, has made heavy investments in "backhaul" fiber and small-cell capabilities as it looks to capitalize on the arrival of 5G technology in the next couple of years. (See Crown Castle Sticks to Fiber Diet With $7.1B Lightower Deal.)
— Iain Morris, News Editor, Light Reading