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Crown Castle Expands Asset Portfolio

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Crown Castle International Inc. (CCI - Free Report) plans to take possession of 2,300 ground lease-related assets from Wireless Capital Partners LLC for $180 million in cash. The proposed acquisition may increase the company’s debt position by $320 million. The deal is expected to be completed by the end of March, 2012.

The lands to be purchased by Crown Castle includes carrier-owned towers. Therefore, with the completion of the deal, the carriers will automatically become tenants of Crown Castle and is anticipated to generate an annual cash flow of $42 million.

At the end of the third quarter of 2011, Crown Castle possessed $76 million of cash in its balance sheet. Therefore, the company will utilize the available $450 million of revolving credit facility in order to finance the recent deal with Wireless Capital.

In December, 2011, Crown Castle also entered into a definitive agreement to acquire privately held NextG Networks Inc. for approximately $1 billion. NextG is the largest provider of outdoor Distributed Antenna Systems (DAS). The deal is expected to be completed by the second quarter of 2012. Hence, the acquisition of NextG Networks will facilitate the company to expand its reach into remote areas.

Moreover, growing popularity of smart-phone and tablet devices is expected to propel demand for wireless data and video services. Therefore, in order to meet this huge demand for data consumption, tower companies are expanding their tower portfolio.

In December, 2011, one of Crown Castle’s closest peers, American American Tower Corp. (AMT - Free Report) , has purchased 2,500 towers from Pegaso PCS, the Mexican arm of Telefónica, for $500 million.

We believe that strong financial outlook and continuous share repurchase plan will act as tailwinds for the company going forward. However, huge debt and stiff competition from other tower companies will act as negative catalysts for the stock in the near future. We thus maintain our long-term Neutral recommendation on Crown Castle.

Currently, Crown Castle holds a Zacks #2 Rank, implying a short-term Buy rating.

Houston-based Crown Castle International Corp. is a leading independent operator of wireless communication towers in the U.S. and Australia.

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