AT&T Inc. (NYSE:T) is considering selling its data carrying towers, according to a report that appeared in Businessweek today. The report, which was authored by Businessweek journalists Serena Saitto and Scott Moritz, said the wireless carrier was seeking to rid itself of some un-performing assets in order to boost profitability.
The sale could, according to people familiar with the matter, raise as much as $5 billion. The most likely terms of the deal would see AT&T Inc. (NYSE:T) sell the towers to a third party and then take a long-term lease on the assets. This turns the towers from an asset into a current expense, something that might be advantageous to the company, and to shareholders.
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AT&T tower sale
According to the Businessweek report, there are several companies who could be interested in buying the towers from AT&T Inc. (NYSE:T). These include Crown Castle International, American Tower and SBA Communications. Those companies all operate networks of towers and lease them to the carriers that need their service.
AT&T Inc. (NYSE:T) will use the money generated from the sale of assets to fuel its network upgrade and its capital return program. AT&T Inc. (NYSE:T) announced a buyback deal that could be valued at as much at $11 billion. The company is cash rich, but it needs to spend a lot of cash in order to keep operating at the level of competition required in the industry.
The biggest carrier in the United States may also use some of its cash to purchase networks in countries outside the United States in order to diversify its holdings. In the wake of recent changes in the market, there may be certain parts of Europe with networks that AT&T Inc. (NYSE:T) may be interested in. Emerging market networks are another possibility for the carrier.
Wireless carrier evolution
The rumored AT&T Inc. (NYSE:T) sale is the latest move in a series of mergers, acquisitions and divestments in the wireless data industry in the last year or two. The industry has changed completely and irreparably with the rise of mobile devices, and that has necessitated a change in the structure of their business.
In recent weeks Verizon Communications Inc. (NYSE:VZ) announced that it was going to buy the remaining half of U.S. carrier Verizon Wireless from the British company, Vodafone, which it had started the joint venture with. Earlier this year, most of Sprint Corporation (NYSE:S) was sold to Softbank, a Japanese firm, and smaller U.S. carriers T-Mobile merged with MetroPCS Communications.
The AT&T Inc. (NYSE:T) divestment of wireless towers may not fall in the exact same narrative as those deals, but it is a part of the major structural changes taking place in the wireless industry. The firm is changing the way it operates financially. So far the market seems optimistic, but that may change on the announcement of an actual deal.