American Tower Corp. (AMT), the largest independent operator of wireless communications towers in the world, is aggressively pursuing its global ambitions. The company recently started operations in Colombia. American Tower has entered into an agreement with Spanish wireless carrier Telefonica S.A. (TEF) Colombian subsidiary to purchase the use right of 458 wireless tower. Out of this, 225 towers are already purchased and the rest will be acquired by the end of 2010.
During 2010, American Tower is expanding in several Latin American countries by means of acquiring wireless towers from different subsidiaries of Telefonica. American Tower has entered into an agreement with Telefonica Chile S.A. to acquire up to 287 wireless tower sites from the latter.
On July 6, the company started operation in Chile. On August 9, American Tower started operation in Peru after entering an agreement with Telefónica del Peru S.A.A. to acquire up to 468 wireless tower sites from the latter. In Colombia, the company may also purchase an additional 514 wireless towers from Telefonica by end 2011.
We believe these geographic diversifications will help American Tower to reduce its dependence on the U.S., for which wireless market is highly saturated. Although continuous evolution of high-speed wireless technologies still positioned the U.S. as extremely lucrative, we remain slightly concerned that innovation of alternative techniques like satellite-delivered radio and video services may reduce the need for tower-based broadcast transmission. Moreover, customer concentration is very high for American Tower. Top two customers accounted for nearly 61% of its total revenue.
Outside Latin America, India has become a major growth driver for American Tower. On August 6, the company completed the acquisition of Essar Telecom Infrastructure of India, which operates more than 4,600 wireless towers including a number of sites that are currently under construction.
American Tower’s wireless tower portfolio in India has now more than 7,000 sites. After China, India is the second largest growth market for wireless services where the expected subscriber base would be 737 million by 2012. Furthermore, this country is on the verge of 3G networks deployment. At present India generates approximately 1% of American Tower’s total revenue. Management has also fixed a target to increase this level to 5%-10% in the next few years.
We maintain our long-term Neutral recommendation for American Tower. Currently it is a Zacks #3 Rank (Hold) stock.
AMER TOWER CORP (AMT): Free Stock Analysis Report
TELEFONICA S.A. (TEF): Free Stock Analysis Report
Zacks Investment Research
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