In spite of the Covid-19 pandemic, 2020 will still be a good year for towers, according to Marc Ganzi, co-founder and CEO of Digital Bridge, managing partner and an investment committee member at Digital Colony, who is set to become CEO of Colony Capital on July 1. Not to say that there won’t be challenges pulling permits and having leases signed.
Even as parts of the economy have ground to a halt, Ganzi is working seven days a week, meeting with his portfolio companies and customers over the phone from his home.
“We are all working hard. Business doesn’t stop. We are all very cognizant that we have an incredibly important job to do as it relates to our economy. We take that responsibility very seriously,” he said in an interview with Jennifer Fritzsche, senior analyst, Wells Fargo Securities, in a conference call, “Current State for Broadband Infrastructure in Covid-19 Environment.”
Digital Colony owns four tower companies in North America, including Vertical Bridge, and two towercos in Europe. Ganzi said the cell tower business continues to move forward and that his tower companies are doing well.
“People are still signing leases and amendments,” Ganzi said. “All of those businesses will report positive organic top-line growth this year. That is the key. The worst will be 2-3 percent growth and the best will be 16-22 percent growth.”
“The demand was very strong in January, strong in February and it has fallen off in March, but that is because people are struggling to figure out how to execute the lease process,” Ganzi said. With so many states operating under orders to stay at home, towercos will need to learn how to prepare and put together a complete lease package with the due diligence concerning the National Environmental Policy Act State Historic Preservation Office, as well how to the pull the building permits.
“What can hurt the tower sector in Q2 is delays in zoning at local municipalities and pulling building permits. That will be the biggest drag on new lease executions and installs,” he said. “Also, many of carriers’ employees are working from home. Administrators from both the carriers and the towercos need to work together to get their due diligence. The lease or amendment must be drafted, go through legal, and include the right engineering exhibits. In a work from home environment, that is a little tougher.”
Further complicating the lease-signing processing, some carriers accept a digital signature, known as DocuSign, but others haven’t.
“With air travel all but out of the question, doing site walks has become a challenge if the site is too far away to be reached by car,” Ganzi said. “Use of drones with high definition cameras are well suited to serve this purpose.”
“We try to do things virtually and make it as fast and seamless as possible,” Ganzi said. “We have everything automated on our collocation system at most of our portfolio companies in the tower space, so you can go online and get your due diligence very quickly.”
While Ganzi did express some concerns about delays in the supply chain for base stations, he did not think it would impact the integration of T-Mobile and Sprint networks. A merger that is set to close sometime between April 1 and May 1.
“I think they are incredibly organized,” he said. “That is a management team that has a very clear mission. A lot of the integration work was done previously. They have an incredibly strong supply chain. My suspicion is they are going to hit the ground running post-closing. The FCC has them on a short shot clock as pertains to coverage in certain areas.”