Crown Castle Buys $115m Distributed Antenna System Network

New York-based Charterhouse Group, Inc. on July 30, 2010 announced a definitive agreement to sell NewPath Networks, Inc., a leading developer and operator of distributed antenna system ("DAS") networks, to a subsidiary of Crown Castle International Corp. (NYSE:CCI), in a transaction valued at $115m.

Charterhouse Entrepreneur Bill Marraccini commented, "The strategic and financial support of the Charterhouse team and Meritage, which invested alongside Charterhouse, put NewPath in a great position to take advantage of the explosive growth in DAS networks as a preferred solution to meeting the phenomenal growth in wireless applications and demand. would like to thank Mike Kavanagh, NewPath's ceo, and his team for all the hard work and dedication they exhibited in taking NewPath from an early stage business to a recognized leader. We have confidence that the NewPath team, combined with Crown's own experience in the DAS field, positions Crown to be the premier owner and provider of DAS solutions." 

NewPath is a provider of DAS networks in the United States. company designs, develops, owns and operates DAS networks that deliver enhanced network coverage, capacity and performance to wireless service providers in areas where traditional network build-out is difficult due to zoning, space, aesthetic, physical obstruction or cost constraints.  DAS networks are used in urban areas, residential neighborhoods, large corporate, retail, or university campuses, sports arenas and stadiums.  The transaction is expected to close in approximately 60 days, subject to customary closing conditions. 

JSICA Observations:  According to Wikipedia, DAS networks are “a network of spatially separated antenna nodes connected to a common source via a transport medium that provides wireless service within a geographic area or structure.  DAS antenna elevations are generally at or below the clutter level and node installations are compact.”   NewPath has 35 DAS networks in operation or under construction, implying a deal value of more than $3m each.  Investment firm Charterhouse has been active in several high-growth infrastructure arenas; the company has also partnered with St. Louis-based Cequel III, which announced a data center buy last month (see below).

Tower Values Strong Despite Recession

Few industries—communications related or otherwise—have weathered the recession as well as the communications tower business.  Thanks to a combination of continued wireless infrastructure deployment as network demand expands and historically low interest rates, multiples for tower portfolios—both public and private—remain strong.

The three largest public tower companies—American Tower (NYSE:AMT), Crown Castle International (NYSE:CCI) and SBA Communications (Nasdaq:SBAC)—have been expanding internationally in recent years, but a handful of domestic buys by SBAC and AMT, along with healthy public trading values for all three, point to average per tower values well in excess of $500,000, and cash flow multiples that are in the mid-teens.

AMT revealed in its March 31 10-Q that it acquired 164 domestic towers in the quarter from various sellers for an aggregate of $88.5m, or nearly $540,000 apiece.  And in the fourth quarter, AMT purchased 196 towers from Cincinnati Bell (NYSE:CBB) for $99.9m, or $510,000 each.  Meanwhile, SBAC acquired 36 structures in the first quarter for a total of $23.5m, or $653,000 per tower.

The public tower companies now generate in excess of $17,000 per tower per month, and about $10,000 of that falls through to the cash flow line.  Investors like the stable revenue and cash flow, and in fact, the three public companies are presently trading well above the value range seen in recent private transactions, on a per tower basis anyway.  Trading values range from about $700,000 to $760,000 per tower, and revenue multiples fall between 9x and 11.3x.

American Tower Completes Purchase of 196 Cincinnati Bell Towers

Boston, Mass.-based American Tower Corporation (NYSE:AMT) completed its acquisition of 196 wireless communications towers and related equipment from Cincinnati Bell, Inc. (NYSE:CBB) for $99.9m in cash on December 23, 2009.  The deal was first announced on November 18, 2009 (The Deal Advisor, 12/09, p.15). The towers are primarily located in Ohio and Kentucky and average 2.1 tenants per tower. CBB will remain a tenant on all 196 towers under a long term lease agreement. 

CBB is an incumbent local exchange carrier and wireless provider serving residential and business customers in Ohio, Kentucky, and Indiana. 

American Tower is an independent owner and operator of 28,000 wireless and broadcast communication sites around the world.  In addition to leasing space on towers, the company also provides customized collocation solutions through its Distributed Antenna Systems that support in-building and outdoor wireless coverage. 

JSICA Observations:  Done within less than two months since its announcement, the deal offered CBB a solid valuation at more than $500k per tower and what we figured to be about 10x revenue.  AMT is clearly betting it can push that 2.1 tenant stat to 3 or 4…or higher.