By Sayantani Ghosh and Monika Shinghal
(Reuters) - Wireless tower operator SBA Communications Corp will buy more than 2,300 tower sites and some antenna assets from Mobilitie LLC for about $1.09 billion, as it looks to benefit from an explosion in data traffic and arm itself better against larger competitors.
The deal comes as rivals American Tower Corp and Crown Castle International Corp are scrambling to beef up their tower and antenna assets to meet the blazing demand for data from mobile devices such as Apple Inc's iPhone and iPad.
In December, American Tower spent $500 million to buy 2,500 towers from Telefónica's Mexican unit. Crown Castle swiftly followed suit by snapping up NextG Networks Inc to expand its small antenna business.
"We are particularly excited about the prospects for these towers to serve the future cell-splitting needs of US wireless carriers, which needs we anticipate will flow from the continued growth in consumer demand for wireless data services," Chief Executive Jeffrey Stoops said in a statement.
Wireless carriers use cell-splitting, which divides the coverage of a cell site into several new cell sites, to add more bandwidth in the region.
SBA said it would pay $850 million in cash and about 5.3 million in Class A shares for the tower sites in the United States and Central America, and some small antenna system assets in Chicago, Las Vegas, New York and Alabama.
Stifel Nicolaus analyst Ben Lowe said the deal was reasonably valued and would add attractively to SBA's revenue.
However, Macquarie Research analyst Kevin Smithen said the price that SBAC paid to Mobilitie was slightly steep.
"Ideally, each tower should have been valued between $300,000 and $400,000, but SBAC paid $500,000," he said.
Smithen, who has a "neutral" rating on SBA's stock, said the high price limits the company's ability to buy back shares.
SBA expects the Mobilitie assets to produce about $75 million in tower cash flow for 2012 of which about $16 million is attributable to the small antenna assets.
The company said it would will sell the small-antenna assets to Chicago-based telecom infrastructure company ExteNet.
In January 2012, SBA made an equity investment in Extenet and also sold its distributed-antenna-systems business to the company.
Under that agreement, whenever SBA comes to own small-antenna assets it will sell those to ExteNet at a mutually agreed on price.
"SBAC has decided to focus on their tower portfolio and hive off their antenna assets," Stifel's Lowe said.
The cash amount of the deal will be paid with cash on hand and existing credit facilities, and a $500 million financing from Barclays Bank PLC and J.P. Morgan.
The transaction, which is expected to close in the second quarter, will be immediately accretive to free cash flow.
Barclays Capital and J.P. Morgan advised SBA, while Moelis & Company LLC and BofA Merrill Lynch served as financial advisers for Mobilitie.
Shares of the company rose 2 percent to $47.13 -- their highest in more than a decade.
(Reporting by Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty)