March 21, 2011 / 4:46 PM / 9 years ago

UPDATE 1-Telecoms tower companies fall on AT&T-T-Mobile deal

* Raymond James downgrades American Tower, Crown Castle, SBAC

* Analysts say likely drag on future revenue from deal

* Analysts see no immediate impact on cell site rentals

(Adds analyst comments, details)

By Jennifer Robin Raj

BANGALORE, March 21 (Reuters) - Shares of American Tower (AMT.N) and other U.S. telecoms tower companies fell on Monday, after AT&T’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 lower future demand, with three major wireless carriers rather than four,” Benchmark said in a note.

Shares of American Tower fell as much as 9 percent to $45.86, while smaller rivals Crown Castle International (CCI.N) and SBA Communications (SBAC.O) were also down as much as 9 percent at $37.02 and 7 percent at $36.42, respectively.

Telecommunications 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.

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Investors cheer AT&T-T-Mobile USA deal [ID:nL3E7EL0X8]

For TAKE A LOOK on the deal [ID:nN21291495]

For an INVESTOR VIEW on the deal [ID:nLDE72K1L4]

FACTBOX-How the market values the deal [ID:nN21287266]

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T-Mobile generated about 11 percent of revenue for both SBA and Crown Castle in 2010. [ID:nWNAB9577] [ID:nWNAB9581]

American Tower was not immediately available for comment.

Raymond James downgraded the three tower companies, and said the proposed major wireless carrier consolidation announced on Sunday, and the potential for more M&As, could reduce long-term valuation free cash flow per share growth rates. [ID:nLDE72K0B4]

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.

Raymond James said, this transaction, may, however, prove to be a drag on future growth rates, post 2012, as it would effectively eliminate an additional 4G network from being built, with T-Mobile USA sharing the network AT&T has started building out.

However, Piper Jaffray disagreed, and said the deal with Deutsche Telekom (DTEGn.DE) should allow AT&T to accelerate its 4G build and its aggressive network plans could mitigate some of the lost opportunity for towers, thereby making the real risk limited.

Piper Jaffray said the pressure on tower companies present an opportunity for investors, and noted that previous consolidation among telecom carriers like the Cingular and AT&T Wireless deal had little impact on tower companies.

Shares of American Tower had gained 15 percent over the past one year, while Crown Castle and SBA had gained about 2 percent and 13 percent, respectively.

Wells Fargo said the AT&T deal is likely to impact organic annual revenue growth in the 8-9 percent range, but said American Tower will be least exposed due to its international segment.

(Reporting by Jennifer Robin Raj; Editing by Sriraj Kalluvila)

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