What happened
Sections of Telefonica (NYSE: TEF) it jumped 10% on Wednesday after Spanish telecom company agreed to sell the European and South American towers and related assets Tower of America (NYSE: AMT). The agreement makes sense for both parties, and as of this writing sections of the Tower of America are up a bit as well.
so what
On Wednesday Telefonica said its Telxius Telecom unit has agreed to sell towers in Spain, Germany, Brazil, Peru, Chile, and Argentina for 7.7 billion euros, or about $ 9.41 billion in cash. Tower of America is purchasing 30,722 tower sites, with Telefonica cell operators maintaining standard lease agreements to continue moving away from the towers.
Image source: Getty Images.
Tower of America is also expected to cost about $ 500 million to build designed towers at 3,300 new sites in Germany and Brazil by 2025. The buyer said it expects the fund to generate about $ 775 million each year in property income.
For Tower America, the agreement is “transformative for our European business,” according to CEO Tom Bartlett. At the same time, Telefonica will have the opportunity to pay down some of its 37 billion euro debt balance, and avoid adding to that total amount to invest in tower extensions.
Now what
Telefonica has been a difficult stock to love, down more than 28% over the past year even after Wednesday’s jump. It is reported that the company has been considering several options to pay down their debts, with reports appearing in December that they could sell activity in Colombia and Ecuador to raise money. .
The company is following a well-traveled path in turning its towers into a pure gaming operator and focusing on the core cellular communications industry, but the industry still faces a lot of competition. sin. This agreement is a step in the right direction, but investors should be wary of buying-in.