American Tower Corp. last week bolstered its leading position among independent tower companies when it announced plans to acquire TeleCom Towers L.L.C. and OmniAmerica Inc., the latter considered a major player in the tower industry.
When completed, the mergers will add about 1,036 towers to American Tower’s portfolio and bring the company closer to its objective of owning 10,000 towers by 2005. The combined company has 3,044 towers-2,475 of which are owned and 569 managed-and 843 in development or construction.
Steve Dodge, chairman and chief executive officer of American Tower, said he expects the company could reach the 5,000-tower mark as early as 2000, without any significant acquisitions or transactions.
The deal with OmniAmerica nearly doubles American Tower’s tower construction capacity, and Dodge said it is likely the company will build between 1,600 and 2,000 towers next year.
Specialty Teleconstructors is the tower construction arm of OmniAmerica.
American Tower previously had dismissed the idea of owning a construction firm, but Dodge said the company may have been too quick to express its doubts.
“We felt strategically our first step needed to be site acquisition, and we still think that’s the most difficult part,” said Dodge. “As we got into the (negotiating) process and got to know the people and the organizational strengths of OmniAmerica/Specialty, it became increasingly apparent to us that there was more there than we realized.
“Sometimes you have got to admit that you missed something,” said Dodge, who noted the value in owning a construction company is the ability to provide a complete range of solutions to customers.
James McIlree, an analyst at Loewenbaum & Co. Inc., said the deal could signal American Tower’s intent to be more internal-growth driven.
The deals also aid American Tower in filling out a national footprint that the company said will help it secure relationships with nationwide wireless carriers. TeleCom Towers gives the company a stronger presence in the Midwest as well as clusters in Texas, Virginia, Maryland and Southern California.
Mark Ein, a principal at the Carlyle Group, a private equity firm based in Washington, D.C., said the transactions could increase American Tower’s ability to attract large purchase/leaseback and build-to-suit deals with carriers because of its increased resources, geography and an elevated leadership position in the industry.
TeleCom Towers, which is owned partially by Cox Communications Inc., owns or co-owns 367 towers; manages 130 revenue-generating sites; and has rights to about 1,700 managed sites that do not currently generate revenue, many of which are rooftop sites. American Tower previously had resisted owning rooftop sites.
TeleCom Towers’ subsidiary, RCC Consultants, which provides radio-frequency design and engineering consulting mainly to government agencies, will be spun off prior to the close of the merger.
OmniAmerica has 246 sites with 470 sites under development, primarily in the West and Southwest.
The OmniAmerica agreement calls for OmniAmerica shareholders to receive 1.1 shares of American Tower class A common stock for each OmniAmerica share. Including debt, the deal is valued at about $397 million.
The purchase price for TeleCom Towers will be approximately $155 million plus $30 million of debt and will be paid 60 percent in American Tower class A common stock and 40 percent in cash, said the company.
Both deals are expected to close during the first quarter.
“I think this shows that there are going to be a lot of surprises,” said Ein. “I don’t think anyone expected OmniAmerica to be bought. OmniAmerica was positioning itself to be one of the consolidators.”
Ein said OmniAmerica may have decided to cash out because it saw a brighter future for itself as part of American Tower.
“They (OmniAmerica) are very good at what they do, but when an industry is consolidating as fast as the tower industry is consolidating, you can’t necessarily wait until all the pieces are in place,” said Ein. “Sometimes it’s better to consolidate, even if you’re not going to be the one in control.”
In other news, American Tower announced the launch of its new division, ATC Teleports.
ATC Teleports integrates the former MicroNet in New York, Southwest MicroNet in Texas and Washington International Teleport in Washington, D.C., to include more than 70 satellite antennas and terrestrial connections to major cities. American Tower announced the MicroNet acquisitions in November 1997.
The company also said it named Jeffrey A. Ebihara vice president of the Southeast region. Prior to his current position, he was responsible for site development for the Network Services Division in Atlanta.
