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T-Mobile leases 7,200 mobile towers to Crown Castle in a 28-year, $2.4 billion deal

daniel cooper
Senior Editor
Updated ·6 min read

T-Mobile's just received a hefty cash boost thanks to a tower-leasing agreement it's entered into with Crown Castle. The deal leases 7,200 wireless towers to the infrastructure firm for a term of 28 years in exchange for $2.4 billion -- that T-Mobile's parent Deutsche Telekom will use to pay off debt. As part of the contract, Crown Castle can buy the towers outright when the deal ends in 2040 for a further $2.4 billion -- and is planning to make money by adding another tenant to T-Mobile's system, so depending on your carrier, you might find your coverage suddenly getting a lot better.

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CROWN CASTLE AND T-MOBILE USA ANNOUNCE $2.4 BILLION TOWER TRANSACTION

Houston, Texas and Bellevue, Wash. - Sep. 28, 2012 -
Reinforces Crown Castle's position as largest provider of wireless infrastructure in the US

Urban-centric portfolio with 83% of the towers in top 100 US markets and 72% in top 50 US markets

Strengthens T-Mobile's position within the US market by helping to support funding of previously announced growth initiatives

T-Mobile to continue focus on network modernization, LTE launch in 2013 and other previously announced initiatives

Crown Castle International Corp. (NYSE: CCI) and T-Mobile USA, Inc. ("T-Mobile"), a subsidiary of Deutsche Telekom, AG ("DT"), announced today that they have entered into definitive agreements pursuant to which Crown Castle will acquire rights to approximately 7,200 T-Mobile towers for $2.4 billion in cash at closing (subject to certain adjustments).

Under the definitive agreements, Crown Castle will have the exclusive right to lease and operate the T-Mobile towers for a weighted average term of approximately 28 years. In addition, Crown Castle will have the option to purchase such towers at the end of the respective lease terms for aggregate option payments of approximately $2.4 billion, which payments, if exercised would be primarily between 2025 and 2048. The transaction is expected to close in fourth quarter 2012.

"We are pleased to reach this mutually beneficial agreement with Crown Castle and take another step closer to realizing the bold vision outlined in our Challenger strategy to solidify our competitiveness in the industry by investing in areas where we anticipate the strongest return for our customers," said John Legere, Chief Executive Officer of T-Mobile USA. "T-Mobile USA is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort as we work tirelessly to continue to deliver our amazing 4G services nationwide."

"We are very pleased with our agreement with T-Mobile, which strengthens our position as the largest provider of shared wireless infrastructure in the US, which we believe is the largest, fastest growing and most profitable wireless market in the world," stated Ben Moreland, Crown Castle's President and Chief Executive Officer. "Consistent with our focus on the top 100 US markets, the T-Mobile towers are similarly well-located, with 83% of the towers in the top 100 markets and 72% located in the top 50 markets. The T-Mobile assets are expected to provide significant growth driven by the continued demand for wireless data services, particularly in the most densely populated areas in the US. While this transaction increases our tower count by approximately 33%, the transaction consideration represents only approximately 9% of our enterprise value. Further, we expect the impact from the contemplated transaction and related expected debt financing to be accretive to our 2013 adjusted funds from operations per share and approximately 5% accretive to our long-term adjusted funds from operations per share."

Crown Castle expects to fund the transaction with cash on hand and debt financing. DT will use the proceeds from the transaction to retire corporate debt and strengthen its financial position to provide for funding of growth investments, including T-Mobile's Challenger strategy.

Following the contemplated transaction, Crown Castle will continue to be the largest wireless infrastructure operator in the US with approximately 30,000 towers and extensive small cell operations in over 50 markets. T-Mobile's nationwide network remains unchanged today, consisting of approximately 51,000 cell sites, the vast majority of which are leased from third parties, as is common in the industry across the US.

Crown Castle estimates the T-Mobile towers will produce approximately $125 million to $130 million in adjusted funds from operations ("AFFO") before financing costs in 2013, and have sufficient capacity to accommodate at least one additional tenant per tower without significant incremental capital. T-Mobile has committed to maintain its communications facilities on the towers from Crown Castle for a minimum of 10 years with annual rent escalation provisions tied to the consumer price index. Further, T-Mobile's rent includes the rights, subject to certain limitations, to complete its current network modernization on these sites.

It is expected that the net effect of this transaction, as reported under US GAAP, will not have a material impact to adjusted OIBDA or annual operating income in 2012 for T-Mobile USA. DT reports results under IFRS. The transaction is expected to result in a material gain impacting Net Income and EBITDA under IFRS for 2012.

A fact sheet outlining Crown Castle's tower portfolio, is available on the Crown Castle website at http://investor.crowncastle.com.

Crown Castle has scheduled a conference call for Friday, September 28, 2012 at 10:30 a.m. Eastern Time to discuss the transaction. The conference call may be accessed by dialing 480-629-9645 and asking for the Crown Castle call at least 30 minutes prior to the start time. The conference call may also be accessed live over the Internet at http://investor.crowncastle.com. Any supplemental materials for the call will be posted on the Crown Castle website at http://investor.crowncastle.com.

A telephonic replay of the conference call will be available from 12:30 p.m. Eastern Time on September 28, 2012 through 11:59 p.m. Eastern Time on October 5, 2012, and may be accessed by dialing 303-590-3030 using access code 4567732. An audio archive will also be available on the company's website at http://investor.crowncastle.com shortly after the call and will be accessible for approximately 90 days.

T-Mobile is being advised by TAP Advisors and Deutsche Bank Securities Inc. as financial advisors, as well as Jones Day and Lape Mansfield & Nakasian, LLC as legal advisors. Crown Castle is being advised by Cravath, Swaine & Moore LLP as legal advisor.