On Sunday 20th Oct 2013, AT&T announced the plan to raise $4.85 Billion = £2.99 Billion by leasing the rights of its wireless (base stations) to Crown Castle
AT&T will lease its 9,708 towers.
Reading the financials from Crown Castle gives an insight to the business:
Crown Castle pays $4.85 Billion, to operate the towers for an average of 28 years, and AT&T commits an initial lease term for 10 years.
AT&T will pay $1,900 per site.
This means each month Crown Castle will earn from AT&T £1900 x 9708 = $18,445,200 ($18.445 million) which is $221,342,400 per year ($221 million = £136 million), and get this for 10 years.
And in this each year Crown castle will increase the charge by 2%.
A nice monthly revenue from AT&T, for Crown Castle running and maintaining the radio towers, and AT&T gets a cash injection of $4.85 Billion.
Crown Castle who own the 7,100 T-Mobile USA tower network could have the option to manage the overlap, and optimise the 2 networks, and bring cost savings, and after 10 years, has the option from AT&T to buy the network too.
Crown Castle is clearly an infrastructure company, that is getting stable returns each month.
The share price is about $75 a share
They are proposing an annual dividend of $1.4 a share which equate to a yield of 1.86%.
So in these low interest rate times, the US Federal Reserve Base Rate is 0.25%, so by investors investing in Crown Castle, they are able to obtain a return of 1.86%.
The ability to fund this dividend comes from the stable and safe monthly rent obtained from the leases from AT&T and USA T-Mobile, and other carriers whose radio towers it runs.
Also what will be interesting to see, is what AT&T does with the $4.85 Billion. It could use the money for a share buy back, pay down some debt, or perhaps use it buy strategic assets, like more spectrum, or perhaps buy another carrier in Europe.