T-Mobile USA eyes potential tower sale

NEW YORK Thu Jan 20, 2011 4:46pm EST

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NEW YORK (Reuters) - T-Mobile USA aims to fetch up to $2 billion for the sale of its broadcast cellular towers around the start of the second quarter, according to a person familiar with the process.

Funds are expected to be used for investments such as buying additional wireless airwaves. The head of T-Mobile USA's parent company Deutsche Telekom AG (DTEGn.DE) said on Thursday the company may sell its 7,000 towers.

DT Chief Executive Rene Obermann told reporters on Thursday that a tower sale could generate "significant" funding to improve the financial self-sufficiency of the No. 4 U.S. mobile service, which has been a drag on DT results.

The most likely buyers are American Tower (AMT.N) or Crown Castle. (CCI.N), according to Benchmark Co analyst Clayton Moran. Representatives of those companies were not available for comment.

However, Obermann said T-Mobile USA would sell the assets only if they fetch a good price. Proceeds would be used for investment requirements beyond its typical capital needs.

"We're definitely not in a rush," he told reporters ahead of the company's financial analyst meeting in New York, adding that a sale would depend on whether "the financials work out."

The trend in recent years has been for big U.S. operators to sell their wireless towers and rent back space in them from dedicated tower operators. Sprint Nextel (S.N) sold about 3,000 towers for $670 million in 2008.

T-Mobile USA explored a tower sale in 2007 but decided against it, saying the timing and returns were wrong.

Benchmark's Moran estimated a price range of $1.5 billion to $2 billion for the towers but said valuation would depend on such factors as whether T-Mobile USA commits to renting more tower space for a future high-speed upgrade to its service.

If it instead opts to upgrade its service via a partnership with another operator that uses different towers, it would mean less growth for a prospective buyer of the T-Mobile towers.

"It's more valuable to a tower company if T-Mobile USA is going to build out its own (high-speed) network as opposed to network sharing," Moran said.

T-Mobile USA has said it is considering expanding its access to wireless airwaves through a partnership with companies such as Clearwire CLWR.O or Harbinger-backed start-up LightSquared.

It is also the main bidder left in a spectrum auction Clearwire is holding.

SETS TARGETS TO RESUME GROWTH

Shares of Deutsche Telekom closed up 1.22 percent at 9.72 euros on the Frankfurt Stock Exchange after the news. Deutsche Telekom investors have complained for years about weakness at the company's U.S. unit.

But at the New York event, T-Mobile USA CEO Philipp Humm committed to return his company to growth in 2011 with the help of competitive service pricing and wireless data services.

T-Mobile USA has lost customers to bigger rivals like AT&T Inc (T.N) and Sprint and to smaller rivals like Leap Wireless LEAP.O and MetroPCS Communications. PCS.N

Customer losses hurt T-Mobile USA's revenue in the last two years. The last time service revenue grew was in the first quarter of 2009, when it rose 4.5 percent. Humm promised revenue growth of $3 billion by 2014.

In the third quarter T-Mobile USA posted total revenue of $5.36 billion, down from $5.38 billion in the year ago quarter. It reports fourth-quarter results in February.

The company also committed to cutting costs and promised gross savings of $1 billion by 2013 from such efforts, with savings expected to reach $800 million by the end of 2012.

T-Mobile USA is keeping its target for 35 percent operating profit margins, compared with its third-quarter 28 percent operating profit margin. But Obermann said it would take longer than its original three year target to reach this margin.

"The most important priority for is for us returning to growth," Obermann told reporters.

The operator, which had a contract customer cancellation rate of 2.4 percent in the third quarter aimed to bring this closer to 2 percent in 2011 and below 1.8 percent in 2012.

While T-Mobile USA says it has enough airwaves to support its services in the next few years it is seeking access to new spectrum beyond that, whether through buying licenses in a government auction or deals with companies like Clearwire.

The company did not provide details about its talks with specific companies on Thursday. It did say, however, that it would look at different options for network sharing to help save money, particularly in rural areas where it would be less economical to build out its own network.

(Additional reporting by Nadia Damouni; editing by Gerald E.

McCormick and Matthew Lewis)

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