Tower companies fall on telecom consolidation

Bangalore (Reuters) - Shares of American Tower Corp (AMT.N) and other U.S. telecom tower companies fell on Monday, after AT&T Inc's (T.N) $39 billion deal for T-Mobile USA stoked fears that consolidation will reduce demand for telecom infrastructure.

"This is bad news for tower companies as it would likely lead to cell site decommissioning and possibly lowerfuture demand, with three major wireless carriers rather than four," Benchmark said in a note.

American Tower, which draws over a fourth of its consolidated operating revenue from the two operators, said about 4 percent of its revenue came T-Mobile contracts at 3,100 sites, which were also being used by AT&T.

Crown Castle International (CCI.N), which has 4,000 towers in the United States used by both carriers, said about 6 percent of its consolidated revenue in 2010 came from rental payments by T-mobile at overlapping sites.

American Tower shares closed down 9 percent at $46.61 on the New York Stock Exchange on Monday amid five-times daily trading volumes. Crown Castle's stock fell as much as 8 percent during the day, before closing down 5 percent at $37.37.

Shares of SBA Communications (SBAC.O), which received $40.1 million in leasing revenue from T-Mobile in 2010 at sites which were also being rented out by AT&T, closed down 9 percent at $37.03 on Nasdaq.

Tower companies have been seeing solid leasing in the United States, as carriers race to strengthen 3G coverage to support a number of new, data-hungry devices.

Raymond James analyst Ric Prentiss, who downgraded the three tower companies, said the deal can prove to be a drag on future growth rates also, effectively eliminating an additional 4G network from being built, with T-Mobile USA sharing the network AT&T has started building out.

Some analysts, however, said the deal is unlikely to have an immediate impact on cell site rentals as any possible decommissioning will come at a slow pace due to the long-term nature of tower contracts.

Piper Jaffray said the deal could allow AT&T to accelerate its 4G buildout which could mitigate some of the lost opportunity for towers, thereby making the real risk limited.

(Reporting by Jennifer Robin Raj and Himank Sharma; Editing by Sriraj Kalluvila and Joyjeet Das)