Industry sources predicted that American Tower Corp. (AMT) is likely to purchase 4,000 mobile phone towers from Essar Telecom Infrastructure for $350 million – $400 million. Essar Telecom Infrastructure is a small-sized wireless tower operator of India. The deal is expected to be announced in Jan 2010. The wireless tower sector in this country is undergoing a wave of consolidation. Smaller players are looking at mergers or complete sell-out to large global tower operators since these companies lack the wherewithal to take on their larger rivals.

Last May, American Tower acquired more than 1,700 towers of XCEL Telecom Pvt Ltd in India. Prior to this acquisition, American Tower had entered a build-to-suit agreement with a Tier1 wireless carrier in India to construct 200 tower sites. The acquisition increases the total number of American Tower controlled wireless tower sights to over 26,000 throughout the world.

India offers some of the cheapest mobile call tariff in the world. These low prices have put pressure on wireless service provider’s margins and their capital expenditure plans for network upgrade. As a result mobile operators in the country are tending towards more towers sharing and leasing to save costs. This makes India a lucrative market for wireless tower operators.

Apart from Essar, American Tower is also eyeing 12,000 towers of Aircel Cellular. Currently, the company owns about 2,500 towers in India and management sets a target to nearly triple this revenue in the next 18 months. Revenue wise, 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.

In addition to India, American Tower is also trying hard to expand in China, the largest emerging market in the world. The explosive growth of 3G wireless technology in China necessitated more tower spaces in that country. The company controls more than 2,700 wireless towers in Mexico and 1,230 wireless towers in Brazil. Recently, American Tower has decided to acquire 196 wireless towers from Cincinnati Bell (CBB) for $100 million in cash. This deal is expected to be closed by end 2009.

Zacks Investment Research

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