Was 2015 the Peak of the Tower Industry?

As we look back at 2015, we at Steel in the Air believe we may have observed the high point for tower company industry activity. In the first half of 2015, valuations for towers and related leases approached all-time highs. Companies interested in acquiring communication towers and leases were bidding at a frenzied pace for any asset made available on the market. However, in the second half of 2015 and continuing through the beginning of 2016, market activity began to return to a more typical pace.

3RD PARTY AGGREGATOR LEASE BUYOUTS

The pace of lease acquisition slowed as some lease buyout companies either shut down entirely (such as Wireless Capital Partners) or turned their focus overseas to leases in South America and Europe (as with APWIP). The companies that remained focused on US leases escalated their marketing efforts, but there was a slight reduction in the amount of offers made as they sensed the decrease in competition.

TOWER COMPANY LEASE BUYOUTS AND LEASE EXTENSIONS

In 2015, tower companies continued to work their way through their portfolios of newly acquired towers, targeting these leases for extensions or buyouts. American Tower started work on buying or extending its recently acquired Verizon portfolio, while Crown Castle continued its efforts to secure the ground rights under its T-Mobile and AT&T tower portfolios. SBA continued to focus on acquiring leases via buyout or extension. These three companies have approximately 70% of their leases tied up under long term lease extensions or have purchased the ground rights under the towers, leaving the remaining 30% of leases to be addressed. Fortunately, in late 2015, we saw some new, well-financed tower companies enter the picture who began to acquire ground leases under the public tower companies’ towers. As a result, the market for buying or extending leases hasn’t dropped significantly as it pertains to tower company-owned towers.

TOWER COMPANY TOWER ACQUISITIONS

The ”Big 3” public tower companies (American Tower, Crown Castle, and SBA) were active in acquiring large and mid-size portfolio towers, but we noticed a reduction in interest from Crown Castle and American Tower in their desire for smaller portfolios of towers. Fortunately, a number of private tower companies were still very much interested in acquiring towers to round out their portfolios, and continued to bid aggressively for tower assets. However, in early 2016, we did see public tower companies attempt to re-trade some of our clients’ deals involving the sale/purchase of towers by lowering their purchase amounts by 10-20%. The timing of these reductions correlates with a 10-20% drop in equity value that many of these public tower companies have experienced lately, which may explain some of the change in the tower companies’ behavior. We anticipate that the market will adjust back upwards, although we doubt that it will return to 2015 levels in the near future.

In 2015 we also observed an increased aggressiveness from tower companies regarding the extension or buyout of their ground leases, with tower company agents being much more willing to threaten the relocation of a tower than ever before. We anticipate that this aggressiveness will continue, as the tower companies have a dwindling number of leases eligible for extension or buyout and will consequently accelerate their efforts. Fortunately for landowners, the viability of moving a tower is no different than it was before. So while tower companies continue to increase their threats of removal, the number of towers actually being relocated is not growing at comparable levels.

What does this mean to landowners who lease property to tower companies or wireless service providers?

First and foremost, it means that the landscape is changing. No longer can you assume that the lease buyout offers you have seen will continue their upward climb as in years past. If you were waiting to see how high they could go, you have likely observed the highest point in 2015. For those of you who used our services regarding buyout offers in the last two years – you already know this, as we have been prophesizing the peaking or plateauing over that time frame. For those of you who haven’t used our services, previously received offers for lease buyouts may no longer be valid or representative of today’s market. If you need help ascertaining what the value of your lease is and whether now is a good time to sell, please contact us. We will gladly review your situation on a complimentary basis and let you know whether we believe that we can assist you with understanding whether or not to sell or extend, and if so, what you should expect in today’s market for your lease. If we see additional value for you, we will provide a quote for services for a complete assessment.

Secondly, it means that now more than ever, a cautious review of the true value of your tower is necessary. If you have had an assessment completed by Steel in the Air within the last two years, an update is not necessary. For those of you who haven’t updated your older assessment or who have never had an assessment done, it may be time to consider doing so. In either case, please contact us and we will be happy to either review your old assessment or reevaluate your situation, and let you know whether an updated assessment is advisable.

Third, we are advising clients who we previously counseled to just “wait and see” to become more aggressive themselves about tying up their lease, especially in denser urban or suburban areas. This can take the form of a lease buyout or a lease extension with a guaranteed term. Now more than ever, the wireless service providers have more tools in their tool chest to reduce their need for sites with high rents ‒ and given the increasingly competitive wireless industry, they are more incentivized to use them. As those of you who have worked with us in the past know, we have been bullish on the wireless industry and more specifically on macrocell towers and leases. We continue to be bullish and believe strongly that macrocell towers and sites will continue to be viable and necessary for the foreseeable future. However, we also believe that there will be efforts by the wireless service providers to reduce costs that will impact a small percentage of our clients in the form of lease terminations or lease reductions. If you need reassurance of whether your lease(s) is/are safe or you need to reconsider other alternatives including the sale of the lease or modification of terms, please reach out to us.

 

Remember When Tristar Took AMT to Court?

The outcome of the TriStar/ American Tower [AMT] litigation might be of interest to some of our clients who unluckily witnessed first-hand the bickering between the parties. Tristar accused AMT of deceiving its landowners with scare tactics and AMT countered that Tristar was tortuously interfering with its contracts. To see more details in a well written story by Wireless Estimator, read more here… .  Read more

Why Do Most Cell Phone Subscribers Change their Plans?

Cost is a big factor, but is it more important than coverage? Then again, why is true nationwide coverage important, as long as you have good coverage where you live, work and play? In the FCC’s recent 2014 report on the state of the wireless industry, we see that as of January 2014, the Big Four: Verizon, AT&T, Sprint and T-Mobile served the following percentages of the U.S. rural population: 89.1%, 91.2%, 57.8% and 65.9%, respectively, so we can see that ubiquitous coverage isn’t the only driving force when choosing a WSP.  We encourage everyone interested in the industry to take a look at the report: State of the Wireless Industry: 2014

 

tower-collocation

Sprint and T-Mobile Still Considering Partnering

Even though Sprint and T-Mobile were officially discouraged to merge into one unified entity, the #3 and #4 (which is which is hard to say) telecoms are not adverse to partnering.  Both companies are in negotiations with Google to lease their network airwaves for Google’s Project Nova.  And Sprint and T-Mobile are pushing the FCC to allow them to bid together in the 600 MHz incentive auction next year.  They argue that if they aren’t allowed to bid together, Verizon and AT&T will eat up all the spectrum, since their resources (money bag) is much heftier.  Should Sprint and T-Mobile be allowed to team up – even though they are classified as “Tier 1 Carriers”? Read More

2016 TV Whitespace Incentive Auction Update

While the dust settles from the recent record setting AWS-3 auction ($44 billion spent), the FCC is preparing to complete an innovative auction of unused or underused TV spectrum.   In this auction, the broadcasters offer up spectrum and are paid partially by the auction winners.   This Auction will be closely watched and could yield fierce competition. Once completed, it will be a few years until the wireless carriers start modifying their existing and proposed cell sites with new equipment to accommodate this spectrum.   Read More