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Indian newspaper The Economic Times reported that American Tower Corp. (AMT - Analyst Report) is aggressively pursuing its Indian ambitions. The company is on the verge of acquiring 8,000 wireless towers of Tower Vision, a privately held Indian wireless tower operator. American Tower will pay approximately $572 million for this acquisition.

India offers some of the cheapest mobile call rates in the world. These low level of prices have put pressure on the margins of wireless service providers and also their capital expenditure plans for network upgrade. As a result, mobile operators in the country are tending toward more tower sharing and leasing to save costs. This makes India a lucrative market for wireless tower operators.

Furthermore, after a gap of three years due to the 2G license scam, the Indian wireless industry is expected to grow appreciably with the deployment of 3G and 4G LTE networks. Wireless broadband service for high-speed Internet will be a key growth area. American Tower is currently operating more than 10,000 operational wireless towers in India. The acquisition of Tower Vision will further boost its foothold.

We believe that these geographic diversifications will help American Tower to reduce its dependence on the U.S., for which wireless market is highly saturated. The U.S. is still extremely lucrative owing to the continuous evolution of high-speed mobile technologies.

However, we remain slightly concerned that innovation of alternative techniques like satellite-delivered radio and video services may reduce the need for tower-based broadcast transmission. At present, India generates approximately 1%–2% of American Tower’s total revenue. Management has also fixed a target to increase this level to 5%–10% within the next five years.

Other Stocks to Consider

American tower currently has a Zacks Rank #3 (Hold). Other stocks in the wireless tower industry, which we can consider include Crown Castle International Corp. (CCI - Analyst Report), SBA Communications Corp. (SBAC - Snapshot Report) and Calix Inc. (CALX - Snapshot Report). All these stocks currently have a Zacks Rank #2 (Buy).

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