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SBA Tower Deal Twists Wireless M&A in 2012

NEW YORK( TheStreet) -- Cell tower operators have quietly reignited a grab for assets with the announcement Tuesday that SBA Communications (SBAC - Get Report) would 2,300 cell tower sites in the U.S. and Central America from Mobilitie for $1.09 billion.

Wireless airwaves were rattled when a proposed $39 billion merger between AT&T (T - Get Report) and T-Mobile USA was scuttled by antitrust regulators last year, but Tuesday's announcement coupled with a Dec. 16 deal by Crown Castle (CCI - Get Report) to buy antenna systems from NextG Networks for $1 billion signal that tower operators are on the move as wireless carriers look at M&A as a way to gear for increasing smartphone data loads.

Tuesday, SBA Communications said it will buy tower assets, in addition to indoor and outdoor distributed antenna system assets in cities like Chicago, New York and Las Vegas from Mobilitie for over $1 billion.

Now industry titans like Crown Castle and American Tower may set their gaze on over $2 billion of tower assets that T-Mobile may look to sell as a way to fund its wireless network, while considering a range of deal options, according to industry analysts.

After AT&T's merger with T-Mobile to pick up wireless spectrum was scuttled in December, the knock-on effects are taking shape in a tower land grab between Crown Castle International (CCI - Get Report), American Tower (AMT - Get Report) and SBA Communications (SBAC - Get Report). Watch for ripple effects in the M&A fight to now have a big significance on the next move for T-Mobile USA's parent Deutsche Telekom, as it looks to raise capital for its U.S. operations, which are the fourth largest overall to Verizon (VZ), AT&T and Sprint (S).

T-Mobile picked up $3 billion in spectrum assets from AT&T as breakup fee in its proposed merger. Those assets, along with funds that can be raised from a sale of its over 7,000 tower sites could net billions more for T-Mobile USA as it weighs a host of deal options. "I think that we are definitely going to see a more aggressive T-Mobile in 2012. They have to prepare to be a standalone company," says Jonathan Schildkraut of Evercore Partners.

A tower asset sale would help the company re-invest in its network and service, even if the company were eventually to decide on a joint venture with DISH Network (DISH) or sign networking agreements with Sprint (S) or Clearwire (CLWR). "I wouldn't put any arrangement off the table," adds Schildkraut of T-Mobile's strategic alternatives

Before its proposed $39 billion merger with AT&T in March, T-Mobile was reported to be interested in selling its cell towers for as much as $2 billion. Without AT&T as an acquirer, T-Mobile may revert back to its previous plans, even if SBA Communications drops out as an interested party.

"T-Mobile is likely to sell its US towers," says Clayton Moran an analyst with brokerage The Benchmark Company. Such a move would continue an M&A trend that was revived in 2011. "The likely buyers are the same companies that have been buying most of the tower assets over the past few years, including American Tower, Crown Castle, Global Tower Partners and TowerCo," says Moran.

But the bigger impact may be on the carrier universe, where an tower sale could transform T-Mobile into a more viable competitor or attractive M&A play.

"With the AT&T break-up fee plus proceeds from a tower sale, T-Mobile could make meaningful progress towards deploying a nationwide 4G network," says Moran, who notes that such a move would make it both more competitive and attractive for its industry peers.

SBA Communications shares rose nearly 2% to $47.17 in afternoon trading on news of its acquisition. Its shares have gained nearly 10% year-to-date, outpaced by the gains Crown Castle, which has posted an over 14% 2012 gain.

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For more on telecom and tower investments, see our portfolio of 5 Telecom picks for 2012.
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