Verizon's reported tower sale might drive a bargain

　　Verizon Communications is exploring a sale of between 5,000 and 6,000 mobile network towers that could pull in more than $3 billion, Bloomberg reported this week. However, one analyst believes that the purported purchase price is "too cheap" based on the value of recent tower sales.

　　Bloomberg noted that Verizon has hired advisers to gauge interest from prospective buyers, speculating that it could draw interest from infrastructure firms and strategic buyers. But the report acknowledged that the exploration is preliminary and might not result in a sale.

　　The report did not cite a specific reason why Verizon is looking in that direction, but noted that Verizon's 2015 deal to sell the rights to lease and operate about 11,000 towers to American Towner for $5 billion up front was used to help Verizon raise cash to fund spectrum acquisitions and to pare down debt.

　　Bargain price?

　　Verizon has not commented on the report, but New Street Research suspects that the purported price of $500,000 to $600,000 per tower – when based on past AT&T and Verizon tower sales that drove an average of $530,000 per tower – is far too low.

　　In a post about the report, New Street analyst Philip Burnett points out that Shentel's sale of 219 towers last year and PG&E's sale of 700 towers in 2021 realized an average value of $1.4 million per tower. "We would assume this is a floor for a sale of Verizon towers today," Burnett noted.

　　"Based on recent transactions and market comps, we estimate that the assets could sell for close to three times the rumored deal value" – perhaps in the range of $7.7 billion to $9.1 billion,  Burnett explained.

　　But the caveat, he acknowledged, is that the tenancy on those Verizon towers is unknown, noting that two to three tenants typically occupy a tower. If Verizon is the sole tenant on each tower, a scenario that's "extremely unlikely," then the value of the rumored sale exploration is fair, the analyst added.

　　Verizon's rumored tower sale exploration surfaces amid some struggles in the tower market due to network operator spending slowdowns. However, some analysts are banking on a rebound for tower operators such as SBA Communications, Crown castle, American Tower and DigitalBridge. Those assets remain valuable as they are increasingly used to underpin broader deployments of digital infrastructure and artificial intelligence applications.