AT&T Mobility has signed a contract worth $167.5 million to engage Commnet Wireless to engineer, construct, commission and maintain FirstNet sites in the Southwest. Additionally, AT&T will lease space on existing Commnet sites, with an initial term of eight years and an option to renew for seven additional five-year terms, according to Securities and Exchange Commission filing.
Raymond James & Associates, an investment bank and financial services company with sell-side analysts who track and project the performance of various companies, said that the contract covers nearly $80 million in network construction costs over two years and about $88 million in maintenance over the next eight years, according to Light Reading.
Responding to the news, Wells Fargo Senior Analyst Jennifer Fritzsche, said, “Interesting! Could we see more of these to come? Makes sense if you are [AT&T] because it pushes a lot of the heavy capital spend on other balance sheets.”
Commnet provides wholesale voice and data services to the wireless telecommunications industry, retail wireless service to consumers and vertical market solutions to enterprises. The service provider has wireless networks in 14 states with concentrations in Colorado, New Mexico, Utah, Nevada, Nebraska and Arizona, plus several Native American reservations.
In an effort to lower its cell site costs, AT&T sometimes uses alternative vendors instead of the mainstream tower companies. For example, late last year, AT&T reported that Tillman Infrastructure had built hundreds of new macro cell towers for AT&T to lease as part of its rollout of FirstNet and its plan to deploy mobile 5G at a lower price point.
To win orders to build towers for AT&T’s FirstNet, cell tower developers are reportedly required to sign an agreement that bars them from selling the towers to a public tower company. Charges for lease amendments on the alternative towers are said to be lower than what is traditional in the tower business. Also, lease clauses that escalate the rent are also said increase the rent a lower annual percentage rate than has been common.
While Commnet will build the RAN, AT&T will provide the necessary equipment and materials and maintain ownership. Additionally, Commnet will assign to AT&T any third-party tower leases applicable the sites.
For the sites it builds for AT&T, Commnet will maintain the antenna and radio systems, power plant, transmission networks, backup generator and battery systems. The company will respond to service requirements generated by AT&T to perform repairs or resolve customer-related issues. Commnet will perform other cell site physical plant maintenance and repair. The maintenance services contract will last an initial term of 10 years, with five successive three-year renewal terms.
Commnet has also agreed to provide AT&T with high-capacity transport to and from the cell sites. AT&T will continue to use Commnet’s wholesale domestic wireless network for roaming services at a fixed rate per site during the build period until such time as the cell site is transferred to AT&T.