Tower companies — Crown Castle International, American Tower and SBA Communications — are going to feel the pressure after T-Mobile’s decision to buy rival Sprint for $26 billion.
Well ahead of the merger news, which was announced on Sunday, shares of the U.S.-based telecom tower companies fell 4 percent on Friday, Reuters reported.
Shares of Crown Castle International and SBA Communications fell about 4 percent, while American Tower dipped 1.3 percent.
T-Mobile, which will have 127 million wireless subscribers, is expected to cancel telecom tower contracts for overlapping towers to save costs, which could eat into revenue.
“One of the major synergies that T-Mobile and Sprint would try to reap from the deal is decommissioning cell sites,” Nicholas Del Deo analyst at MoffettNathanson, said.
T-Mobile announced its plans to invest $40 billion towards Capex making 5G mobile the top services for mobile phone users in the U.S.
“There’s about 5 percent of revenue at the tower companies today that comes from sites where Sprint and T-Mobile are on the same tower and in a merger scenario these would absolutely go away,” New Street Research analyst Spencer Kurn said.
Crown Castle International and SBA Communications are most exposed to the deal as they count Sprint and T-Mobile as their top customers, while larger rival American Tower would be affected less.
Last year, T-Mobile and Sprint accounted for more than 31 percent of SBA’s total revenue, around 38 percent of Crown Castle’s and about 18 percent of American Tower’s revenue.
The combined company known as T-Mobile will also gain from spectrum holdings, network scale, and expected run rate cost synergies of $6+ billion, representing a net present value (NPV) of $43+ billion.
T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.
The combined company will have lower costs, greater economies of scale, and the resources to provide U.S. consumers and businesses with lower prices, better quality, unmatched value, and greater competition. The New T-Mobile will employ more people than both companies separately and create thousands of new American jobs.