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CREDIT SUISSE FIRST BOSTON CORPORATION.
Reinstating coverage of American Tower with a Buy Rating and a Price Target of $34
* American Tower is the industry leader in all four of its business segments: wireless
towers, broadcast towers, tower services, and teleports.
* American Tower has the first-mover advantage and is positioned to take advantage of
the explosive wireless industry.
* Management is deep and has a track record replete with past successes.
* We are reinstating coverage with a Buy rating and a 12-month price target of $34.
We estimate that by 2004 there will be roughly three broadband tenants on each wireless
tower, and the segment will produce a total of $600 million in EBITDA. The teleport
business should cash flow $100, and the broadcast towers should contribute $100
million, while services and international should pitch in $50 million and $150 million,
respectively. If we do the math, the company should produce roughly $1 billion in total
EBITDA in 2003.
The Wireless Tower Business
American Tower is currently the largest wireless tower company in the U.S. with roughly
9,200 pro forma towers that should grow to 10,000 by year-end with new builds. In the
past the company has outlined its plan to reach 15,000 towers by 2004. It could build
new towers, merge with selected consolidators, and acquire carrier towers, or
cherry-pick from mom and pop companies. Thus far, the company has shown it ability to
excel in all area and has been so successful that it no longer has to look for acquisitions
and can just coast to its goal, focusing solely on new builds.
The drivers of growth in the wireless tower business are an overall increased demand
for wireless services, augmentation of coverage, and colocation. Currently the industry
is trending toward decreased rates, increased usage, and improved features, with
emerging trends of data and Internet transmission. America's wireless networks are less
than complete and we estimate that 100,000 towers are needed to provide ubiquitous
coverage; currently there are only 60,000.
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