Crown Castle International Corp. plans to acquire about 2,300 towers through a joint venture with GTE Corp.
Crown Castle has a similar joint venture agreement with Bell Atlantic Corp., which is in the process of acquiring GTE. Including the GTE towers, Crown Castle controls about 8,000 towers in the United States and about 2,000 towers in the United Kingdom.
In addition, Crown Castle and GTE agreed to a five-year build-to-suit agreement for 500 towers.
The joint venture with GTE could result in additional towers being added to Crown’s portfolio. The companies agreed that towers GTE will acquire with certain Ameritech Cellular properties it has agreed to purchase could be transferred to the joint venture at terms similar to the companies’ original agreement. GTE also has the option of contributing up to 150 additional towers to the joint venture over 18 months from the final closing.
The transaction is expected to close in tranches beginning in the first quarter.
GTE will contribute 2,300 towers, valued at about $900 million, to the joint venture. Crown Castle will contribute $525 million in cash and up to $100 million in common stock to the venture.
The structure of the arrangement calls for Crown Castle to own 75 percent of the new joint venture, with GTE owning the remaining 25 percent.
Ted Miller, chairman and chief executive officer of Crown Castle, said the deal with GTE gives the company significant coverage in 34 of the top 50 markets and 68 of the top 100 markets.
“The result is a footprint that we believe is unmatched in the industry, and more importantly, as we’ve said over and over again, a footprint that cannot be replicated,” said Miller. “This provides us with an unrivaled ability to generate leases, which is the real driver of near-term growth in the industry.”
Crown Castle said it expects to have an average of three broadband equivalent tenants on each tower within five years. The company said it believes it can generate 5,000 new leases on the towers during that period.
Today, about 550 third-party tenants reside on the towers, generating revenues of about $6.1 million per year. The company said it expects to add 1.8 broadband equivalent tenants per tower in the next five years at an average rental rate of $1,500 per month.
GTE will pay $1,400 per month to lease space on the towers, escalating at 4 percent per year.
The company noted the transaction gives Crown a presence in several top Western markets-including San Francisco, San Diego, Seattle and Honolulu-where it previously had no significant presence. Crown said it has allocated $40 million in capital expenditures during the next three years to improve the towers so they can meet the company’s lease assumptions from a structural standpoint.
In other news, Crown Castle reported its revenues more than tripled during the third quarter to $98.9 million, from $28.9 million during last year’s third quarter. For the first three quarters, revenues increased to $231.6 million from $52.3 million during the same period last year.
Tower cash flow for the quarter totaled $38.8 million, compared with $10.8 million during the third quarter last year. For the first nine months, tower cash flow increased to $96.4 million from $18 million during the same period last year.
