Many opportunities remain for those interested in acquiring telecommunications towers, according to Doug Barnett, a senior partner with Atlantic-ACM, a strategic advisory firm focused on telecom and infrastructure. Barnett spoke at the Connectivity Expo conducted by the Wireless Infrastructure Association on May 22 in a session on the investment outlook for towers and infrastructure. He said the top five tower companies control more than 100,000 towers. The next 120 owners down the list control fewer than 20,000. This means many opportunities remain for consolidation, he said.
“We still receive phone calls from all types of investors trying to get into the business,” Barnett said. “The supply of capital and interest is going nowhere. The financial complexity or approach to getting these deals done is becoming much more complicated. It’s not just simple equity deals as they were a couple of years ago. The tower business is healthy from the supply side and healthy from a number of opportunities, but how buyers and sellers are getting the deals to close is becoming increasingly opaque.”
5G Wireless Communications
Asked to choose three words to describe what will constitute 5G wireless communications, Barnett said: “Network, intelligent and edge.”
In the network area, Barnett said it is important to acknowledge that 5G is a new technology, a new generation, but, at least in the early years, it will consist of more of the same wireless communications capability already being offered, just faster and better. He said the network operators continue to conduct business in the same way for infrastructure deployment. “If they are only going to solve for dumb connectivity, how much money can they actually make?” he asked.
In the intelligent realm, Barnett said 5G would enable sensors to step up from performing dumb tasks to performing more intelligent tasks, actually doing something with data comes from observations or diagnostics they collect.
“The edge is the hottest one of all,” Barnett said. “With edge computing, the networks enable real-time communications devices much more at the end-user eyeball level. Some talk about the autonomous vehicle as a leading change to look for. But I am much more excited about the question of whether edge computing finally creates the opportunity we’ve all been waiting for: Can there be some form of a data center at the towers? I would say yes.”
Future for Towers, Small Cells, Fiber
As for what the roll-out of 5G wireless technology will mean for macro towers, small cells and fiber, Barnett said he expected to see the role of the macro tower change. He referred to a split strategy that he said Verizon Wireless pursued five or six years ago, sometimes placing a cabinet at the base of the tower and sometimes not. He said he has heard that Verizon now wishes it had placed cabinets at all of the towers because macro towers will serve as hub sites for cloud radio access network deployment.
Despite all the talk about super-sophisticated wireless applications, Barnett said network operators still need fiber-optic cable in the ground. Wireless networks still need a whole lot of wire to operate, he said.
Some businesses that he expects will benefit the most from mobile operator construction of 5G networks are the deployment partners, Barnett said. He said people who can cost-effectively solve for deployments above the present internal rates of return will be among the winners. The best internal rate of return Barnett said he sees with a typical small cell deployment is 5 to 6 percent.
“We’ve heard in private conversations that people just lose money on small cell deployments in hopes of selling later on down the road,” Barnett said. “The person who comes out on top is the person who can solve the problem the most cost-effectively.”
Turning to the subject of the proposed merger between Sprint and T-Mobile US, Barnett said what argues in favor of government approval for this one, compared with the previously proposed AT&T and T-Mobile merger, is that capital spending for densifying the mobile wireless networks is much further along. He also said the consumer and end-user plans among carriers are converging to the point where three versus four competitors does not make much difference.
Previous talks between Sprint and T-Mobile fell apart because of failure to agree on financial terms, Barnett said.
“Looking under the hood even more carefully and talking explicitly about how capital can be spent over the next couple of years, the two carriers have different network densification strategies,” Barnett said. “Sprint is doubling down on some of their macros and reusing some of that spectrum. For T-Mobile, it is a little bit different.”
Barnett said that anything that shows AT&T or Verizon’s pricing moves are in response to two lowering competitors rather than just a collective bucket would be considered to be beneficial to the consumer.
Uneven Merger Effect on Towers
If and when the merger happens, Barnett said to expect ashort-term delay in changes and modifications at the tower. The delay may slightly reduce tower company top line revenue as Sprint and T-Mobile decide where and how they’re going to modify at the tower. He said there may be less delay for urban locations and more at suburban and rural tower locations. The easy synergies will involve things coming off term where the carriers are collocated, he said.
“One last point,” Barnett said. “When we think back all those years to when AT&T had an exclusive contract on the iPhone and the pressure it placed on their network infrastructure, remember that Verizon saw it as an opportunity to invest in its network way ahead of time. Then, they were ready when the iPhone came off exclusive in 2011 or 2012. With that delay in strategy on the modifications, all the delays in time and attention that gets paid to where Sprint and T-Mobile will be shutting down towers, you may see Verizon step up its One Fiber initiative and really run a lot harder at it.”
Executive Editor and Associate Publisher
Don Bishop joined AGL Media Group in 2004. He helped to launch and was the founding editor of AGL Magazine, the AGL Bulletinemail newsletter (now AGL eDigest) and DAS and Small Cells magazine (now AGL Small Cell Magazine). He served as host for AGL Conferences from 2010 to 2012, appearing at 12 conferences. Bishop writes and otherwise obtains editorial content published in AGL Magazine, AGL eDigest and the AGL Media Group website. Bishop also photographs and films conferences and conventions. Many of his photographs have appeared on the cover, in articles and in the “AGL Tower of the Month” center spread photo feature in AGL Magazine. During his time with Wiesner Publishing, Primedia Business Information and AGL Media Group, he helped to launch several magazines and edited or managed editorial departments for a dozen magazines and their associated websites, newsletters and live event coverage. He is a former property manager, radio station owner and CEO of a broadcast engineering consulting firm. He was elected a Fellow of the Radio Club of America in 1988, received its Presidents Award in 1993, and served on its board of directors for nine years. Don Bishop may be contacted at: firstname.lastname@example.org.
The next Connectivity Expo is set for May 20–23 in Orlando, Florida.