Overall the wireless tower industry continues to be a frothy deal market in terms of multiples paid by buyers and the number of people trying to buy towers. For the last several years, it has remained a very seller-friendly merger-and-acquisition market. The amount of transactions has been a bit slower this past year, because there hasn’t been a lot new tower inventory in the marketplace scattered amongst dozens of tower developers as there was three or four years ago.
This is the result of carriers either not building a significant number of new sites or consolidating tower development among a handful of companies. AT&T has largely been inactive; Sprint remains inactive; Verizon, however, is consistent and has several tower developer partners across the country; and T-Mobile, which is very active, has development deals with a couple major vendors. After that there are a handful of other companies that it relies on for tower development. When AT&T was active four or five years ago, it would have 25 or 30 different companies building towers across the country depending on regional relationships. Now, similar to T-Mobile, AT&T is focusing on a small number of companies to build their new towers.
Additionally, the carriers themselves may not be spending as much money on new towers because they are spending money on small cells and fiber optics.
Besides tower developers, there is a subset of tower owners that MVP Capital remains very active in representing. For example, we have done several broadcaster sale/leaseback deals this year, ranging from a single site to nearly 20 towers. On a multiple of EBITDA basis, their towers could be worth twice as much as their stations. Utilities own towers, government entities own towers, rural wireless carrier own towers. There are still a large number of tower owners that are not your typical cell tower developers with a business plan to build and sell towers in a five to seven-year period.
MVP Capital has invested a significant amount of resources and time into the fiber, small cell and DAS space, other areas of shared wireless infrastructure that have attractive investment characteristics similar to towers. We have completed several transactions for fiber providers for selling their companies and raising capital. We raised capital for a neutral-host DAS developer/owner/operator this year and we see a significant amount of activity in that space over the next couple of years.
While the number of tower transactions in 2017 was similar to the year before, going forward I think we will see fewer, but larger transactions. From five to 10 towers up to 50 to a couple hundred. Every deal is different, but towers are regularly selling at multiples of 20 times cash flow or higher. Valuations are at peak highs and it is hard to see how they could go any higher. If you have towers, MVP Capital can work to maximize your options and take advantage of these historically high valuations.
Clayton is a Managing Director in MVP Capital’s Towers Group and has been with the company since 2004. With client relationships dating back to 1997, Clayton has personally closed over 150 deals including mergers and acquisitions, sale-leasebacks and private debt and equity capital placements totaling in excess of $2.0 billion of value.