Verizon Strikes Cell Tower Deal With AMT - Announces $5 billion Share Buyback

Verizon

has been on a spending spree investing in its wireless business while simultaneously converting non-core assets to cash to help fund recent purchases. Verizon recently announced that it had sold wireline assets located in California, Florida and Texas to Frontier for ~$10.5 billion; approximately the same figure Verizon recently spent on new U.S. wireless spectrum at the most recent FCC auction. On February 5, Verizon also announced that it had reached an agreement with wireless tower REIT American Tower Corp.

, in a lease and purchase deal valued initially $5 billion. In the same announcement, Verizon shared that it intends to use the $5 billion in cell tower proceeds to buy back shares of its own common stock. Details of the Verizon - American Tower Transaction In the wireless tower transaction, American Tower will have exclusive rights to lease and operate over 11,300 Verizon cell towers, a significant majority of the towers the company currently owns. In addition, Verizon will sell approximately 165 towers outright. The average term of the lease rights is about 28 years. As the leases expire, American Tower will have fixed-price purchase options to acquire these towers based on their anticipated fair market values at the end of the lease terms. Verizon will sublease capacity on the towers from American Tower for a minimum of 10 years for $1,900 per month per site, with annual rent increases of 2 percent. Verizon will have customary renewal options that could potentially extend the full term of the sublease to 50 years. During the terms of the leases, American Tower will have full operating rights to and responsibilities for the towers. American Tower's rights will include the ability to sublease other available space to other companies. Verizon expects the transaction to close by mid-2015, subject to standard closing conditions.