NEW YORK( TheStreet) -- After AT&T's ( T) $39 billion merger with T-Mobile to pick up wireless spectrum was scuttled on Monday, the knock-on effects may be felt first in a cell tower land grab among operators like Crown Castle International ( CCI), American Tower ( AMT) and SBA Communications ( SBAC). The merger breakup will compel tower operators to fight for towers to connect the mobile-phone calls of wireless carriers such as Verizon ( VZ), Sprint ( S), AT&T and T-Mobile for two reasons, according to industry watchers.
First, it puts in play $2 billion worth of cell tower assets that T-Mobile may return to the selling block. Secondly, the blocked consolidation among the second and fourth largest U.S. wireless carriers removes concerns that the companies would find tower usage efficiencies. Now, they may need to expand networks, increasing use of tower services. Before its proposed $39 billion merger with AT&T in March, T-Mobile was reported to be interested in selling its 7,000 cellular towers for as much as $2 billion as part of an effort by its parent Deutsche Telekom to raise capital and exit the U.S. Without AT&T as an acquirer, T-Mobile may revert back to its previous tower sale plans. "T-Mobile will likely try to sell its US towers... This would be a sizable tower deal at around $2 billion. Crown Castle and American Tower as well as private companies Global Tower Partners and TowerCo are possible buyers," says Clayton Moran of The Benchmark Company, who also notes SBA Communications could show interest. Cell towers have become the domain of specialist operators like American Tower and Crown Castle, who rent the mobile phone connection services to national carriers. Their specialty comes from previous tower divestitures of carriers like Sprint and a wave of tower acquisitions in the mid-2000s to build up capacity ahead of a smartphone-based surge in wireless data usage. For more on telecom and tower investments, see our portfolio of 5 Telecom picks for 2012. In 2005, American Tower spent $3.7 billion to buy the cell towers of Spectrasite, adding to its lead as the nation's largest tower operator. Not to be outdone, in 2006, Crown Castle spent $4 billion to buy Global Signal in a competitive push to challenge American Tower's industry lead. After AT&T's failed merger, similar competition may emerge for T-Mobile's 7,000 towers. As AT&T fought to build spectrum to handle increasing smartphone data loads with its T-Mobile merger proposal, national tower operators watched for a knock-on impact to their bottom line. With tower revenue contingent on the ability for national carriers to service ever-increasing wireless traffic, the deal breakup signals that telecommunications giants may not be able to wrench out tower usage synergies through consolidation. "Carrier consolidation has always been a fear for tower investors. AT&T and T-Mobile run the same network technology so network consolidation is feasible... The percentage of rental revenue at risk due to possible site decommissioning for American Tower, Crown Castle and SBA is 4%, 6% and 7%," writes Clayton Moran of the primary risks that AT&T's merger posed to tower operators like Crown Castle in a research note. With the merger dead, fear may turn to greed as carriers may be forced to build out their wireless networks, adding to tower usage.