NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: NYSE:VZ) and Vertical Bridge have reached a definitive agreement in which Vertical Bridge will acquire the exclusive rights to lease, operate, and manage 6,339 wireless communication towers owned by Verizon's subsidiaries. The deal, valued at approximately $3.3 billion, spans all 50 states and Washington, D.C.
The transaction is designed as a prepaid lease with an upfront cash payment of about $2.8 billion. Verizon will lease back capacity on the towers from Vertical Bridge for a 10-year term, with the potential to extend up to 50 years. Verizon also retains access to additional space on the towers for future use, subject to certain terms.
This strategic move is expected to help Verizon reduce tower-related costs and foster greater vendor diversity in the industry. Hans Vestberg, Verizon's Chairman and CEO, stated that this agreement would enhance financial flexibility, allowing the company to invest further in its business and improve its network for customers.
Vertical Bridge's President and CEO, Ron Bizick, expressed enthusiasm for the partnership, noting it as a significant step for the company and the largest U.S. tower transaction in nearly a decade. Marc Ganzi, CEO of DigitalBridge and Vice Chairman of Vertical Bridge, highlighted the deal's alignment with the industry's growing wireless infrastructure demand, particularly with the advancement of AI-driven technologies and 5G.
DigitalBridge, a global digital infrastructure investment firm and majority owner of Vertical Bridge, along with CDPQ, an important shareholder since 2019, have committed capital to support the transaction. The closure of the deal is anticipated by the end of 2024, pending customary closing conditions.
Advisory roles were filled by J.P. Morgan and Jones Day for Verizon, while Centerview Partners LLC and Greenberg Traurig advised Vertical Bridge. Legal counsel for DigitalBridge was provided by Simpson Thacher & Bartlett, and CDPQ was represented by Mayer Brown LLP.
The information for this article is based on a press release statement.
In other recent news, Verizon Communications is reportedly finalizing a deal to sell approximately 6,339 mobile phone towers to Vertical Bridge, a private digital infrastructure company, for around $3.3 billion. The company plans to maintain its access to the tower capacity through a decade-long leaseback agreement with Vertical Bridge, with an option to extend this lease for up to 50 years.
In analyst news, Wolfe Research downgraded Frontier Communications (OTC:FTRCQ) from Outperform to Peer Perform, foreseeing minimal risk of regulatory pushback in the upcoming acquisition by Verizon. Meanwhile, Citi has upgraded its price target for Verizon shares to $49.00, holding a Buy rating based on strong third-quarter financial projections. RBC Capital also raised its price target for Verizon, citing anticipated cost savings from the company's employee separation program and a decrease in handset upgrades as key drivers behind the improved EBITDA outlook.
Verizon's Q2 2024 financial report showed a 3.5% year-over-year increase in wireless service revenue, contributing to a total consolidated revenue of $32.8 billion. The adjusted EBITDA for the same quarter rose to $12.3 billion, marking a 2.8% increase from the previous year. Lastly, Verizon will take a severance charge of between $1.7 billion and $1.9 billion due to a voluntary separation program, as part of its strategy to streamline operations and focus on core business areas. These are the recent developments in Verizon's operations and financial performance.
InvestingPro Insights
Verizon's strategic move to sell the rights to its wireless communication towers aligns with the company's financial objectives, as reflected in recent InvestingPro data. The deal's $3.3 billion value is significant when compared to Verizon's market capitalization of $188.97 billion. This transaction could potentially improve Verizon's financial flexibility, as mentioned by CEO Hans Vestberg.
According to InvestingPro Tips, Verizon "pays a significant dividend to shareholders" and "has raised its dividend for 20 consecutive years." This commitment to shareholder returns is evident in the company's impressive dividend yield of 6.04%. The tower deal could further support Verizon's ability to maintain its dividend policy while investing in network improvements.
The company's focus on financial efficiency is also apparent in its operating income margin of 22.54% for the last twelve months as of Q2 2024. This solid profitability metric suggests that Verizon is well-positioned to leverage the proceeds from the tower deal for strategic investments and debt management.
It's worth noting that Verizon's stock has shown strong performance recently, with a 48.57% price total return over the past year. This positive momentum, combined with the fact that the stock is "trading near 52-week high," indicates investor confidence in the company's strategic decisions, including this tower deal.
For readers interested in a more comprehensive analysis, InvestingPro offers 15 additional tips for Verizon, providing deeper insights into the company's financial health and market position.
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