Cell towers are ugly. So are the stocks.


Chart: CNNMoney

Even when companies go out of their way to make cell towers look less like eyesores and have them blend into the landscape naturally, they are still pretty darn ugly. Now their stocks are ugly too.

Shares of American Tower, Crown Castle International and SBA Communications got shellacked Monday following Sunday’s news of AT&T buying the U.S. assets of T-Mobile. But is it an overreaction?

Clayton Moran, an analyst with The Benchmark Company, says investors might be overdoing it a bit. He argues that even if the FCC approves the marriage of Ma Bell (aka The House of Orange) and the wireless company that Miami Heat star D-Wade loves so much, it will take years for this deal to have a financial impact. Even then, it may be minimal.

Moran argued that the reason for the big sell-off was that investors just simply didn’t expect the news. They had gotten spoiled into thinking that a deal for T-Mobile may never happen and that the tower companies would continue growing like weeds (speaking of ugly) as the four major wireless firms (Sprint Nextel being the other) tried to one-up each other with newer, faster services.

The tower company stocks had been on a tear for the past few years. As 3G begat 4G, that meant more business for American Tower, Crown Castle and SBA from Verizon, AT&T, Sprint and T-Mobile.

"This is a sector that had little operating risk and had been growing for years while rarely facing any challenges," Moran said.

Still, the knee-jerk dumping of the tower stocks may not be completely illogical. After all, fewer competitors means more bargaining power on price for the wireless carriers. Oppenheimer telco analyst Timothy Horan said in a note Monday that AT&T will be adding 7,000 towers owned by T-Mobile.

That, he said, could give AT&T more leverage in negotiating new deals with the tower companies. And that could very well hurt their revenue and profits down the road.

It usually is never good news for consumers when an industry already dominated by a few giants gets smaller as one colossus decides to eat another. And in this case, it looks like consumers across the board, cell phone tower owners as well as individual wireless subscribers, could wind up as losers. — Paul

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