Are cell tower companies finally starting to get squeezed?Posted November 5, 2014 by admin
Cell Towers and Rooftop cell sites are the lifeblood of our connected world. The Big 3 tower companies control tens of thousands of cell site locations. Their growth rates have been off the charts. Here are some of the reasons why Cell Site Capital consultants think the squeeze my finally be on for the big tower companies.
The cell tower companies have recently seen their stock take drop this week. If you dig a little deeper you will see some of the reasons.
1. After the possible sale of Verizon Towers, there will be almost no larger tower transactions for sale. American Tower, SBA Communications and Crown Castle International will have a much more difficult time producing the growth rates that they have historically have produced over the past 5 years. This means the cost per new acquisition of cell towers and rooftop space will be higher than ever before. It will also be much slower than recently which will hurt growth and stock price.
2. In 2015 the tower companies will start to see the effects of consolidation of the wireless carriers. T-Mobile & MetroPCS, Sprint and Clearwire and lastly AT&T and LEAP. The overlapping cell tower leases and rooftop wireless leases will not be renewed. These means tens of millions of income dollars will be lost by the tower companies. Most of this will be offset with the growth of additional equipment and the densification of the current cell towers and rooftops but it will slow the growth of the tower companies.
3. The reason these smaller wireless carriers have been purchased by the Big 4 wireless carriers is due to the cost of continuing to build out the networks. These same cost are now starting to have a adverse effect on the big wireless carriers as well. Sprint has recently stated they will reduce spending. This includes the spending on upgrading cell towers and cell tower leasing at its current rate. Others will be quick to follow suit due to reason #4.
4. Wireless price wars. You are seeing the wireless carriers try to stop the negative churn rates. They are lowing the cost of having a smart phone and increasing data plans. These means more usage but at a lower cost per user.
5. Increase of cell phone and tablets. See chart. More connected devices puts more stress on the current wireless networks and cell tower locations. The trend may slow new subscribers, what will continue to grow is the usage per connected devise. This will also cap some of the added revenue of the current carriers.
Recently, Cell Site Capital has seen more amendment offers from the tower companies rather than buyout offers. Part of this is the tower companies would rather extent your current cell tower lease especially if they have your cell tower site below market value. They would rather not deploy more capital on an asset they already control.
Combining all of the above you may finally start to see some of the stock prices come back down to earth along with the values of some of the cell tower leases. Each cell site location is unique and require a review of the value. At Cell Site Capital we look at the market rents for cell site locations, wireless carries on the site, network layouts and how each cell site fits within that network. If you have any questions about a new or existing cell site lease feel free to give us a call. It’s what we do!