A merged Sprint/T-Mobile will shutter 25,000 towers, and Crown Castle will suffer most

In the companies’ merger announcement, management from Sprint and T-Mobile laid out their network merger plan. That plan includes a number of moving parts that analysts believe will affect most of the nation’s major tower companies, mostly Crown Castle.

“Judging simply by revenue exposure, American Tower appears best positioned and Crown Castle worst positioned,” wrote the analysts at MoffettNathanson in a report.

However, the analysts offered a number of caveats.

Importantly, Sprint and T-Mobile’s management said that T-Mobile’s network will stand as the foundation of the New T-Mobile network that will arise from the merger. That means, of the 35,000 total towers that the companies plan to decommission, most of them will likely be Sprint towers. Thus, wrote the analysts, it’s difficult to ascertain exactly which tower company will be affected the most by the merger of Sprint and T-Mobile.

Overall, T-Mobile and Sprint today operate a total of 110,000 towers. If the merger is approved, the companies plan to shutter 35,000 towers and build 10,000 new towers, resulting in the end ownership of a total of 85,000 towers. Concurrently, the companies said they would increase the number of small cells they operate from a combined 10,000 today to a combined 50,000 over the coming years if the transaction is approved.

Although most analysts agreed that the overall merger of Sprint and T-Mobile would represent a drag on the nation’s tower companies—it essentially removes one of their four major customers—they argued it wasn’t necessarily a disaster for the space.

“Most importantly, the two cos together plan to invest $40B in capital investment over 3 years alone ($13.3B / yr on a straight-line basis),” wrote the analysts at Wells Fargo in a note to investors. “While some of this will likely be spent to help with the attainment of synergies, we note this annual amount it plans to spend is slightly higher than the two cos plan to spend separately in 2018.”

Concluded the analysts at New Street Research: “The towers will likely face pressure tomorrow; however, we think most of the downside has been largely priced in already.”

After all, the deal has been attempted three times before.