August 13, 2014 — BlueStream Professional Services, which provides planning, implementation and maintenance services for wireless, wireline and data center networks, has purchased assets of Tempest Telecom Solutions’ DAS and Small Cell Division, further enhancing the scale and capabilities of its wireless services. Terms of the transaction were not released.
“This acquisition provides us with the opportunity to increase our scale, while further diversifying and extending our market coverage for DAS and small cell services,” said Trevor Putrah, president of KGP Companies, parent of BlueStream.
The deal is a part of the ongoing consolidation of the DAS ecosystem of smaller regional companies, which is a sign of the maturation of the marketplace, according to Joe Madden, Mobile Experts.
“There’s a long list of small companies with expertise in DAS deployment … that are recognizing the new emphasis on in-building mobile infrastructure by the major operators, which requires a nationwide footprint and a deeper bench when it comes to the talent pool you have to put out into the field,” Madden said.
BlueStream Professional Services provides cell site solutions, including installation and upgrade of technology and equipment, structural capacity analysis and antenna repositioning. It also provides data center planning and deployment, as well as customized outsourced services.
“Before buying Tempest, Bluestream was involved in DAS, but they were not as prominent. This allows them to expand beyond their focus on data centers and other areas [such as cell site services and muli-switching centers],” Madden said.
DAS integration companies are growing in market coverage through acquisitions. Goodman Networks acquired Cellular Specialties last year. Black Box bought InnerWireless in 2012. H&M NetWorks picked up a DAS design and engineering firm, In-Building Wireless, in 2011. Crown Castle purchased Next G Networks in 2011 and NewPath Networks in 2011.
Others are growing more organically. American Tower began developing DAS networks in 2001 and claims to have the most neutral-host indoor DAS networks in the industry. InSite Wireless built and launched its first DAS at the Moscone Center in San Francisco in 2001, which was the first independently owned, neutral-host DAS in the United States.
Mobilitie, after selling off its assets to SBA Communications, is building out neutral-host DAS, small cell and Wi-Fi networks. Boingo Wireless is building out DAS and Wi-Fi networks across sporting venues, airports, convention centers and office buildings. ExteNet Systems is growing steadily through high profile deployments in high-rise office buildings, such as the Willis Tower in Chicago and the Empire State Building; sporting venues, including the University of Michigan football stadium, Brooklyn’s Barclay’s Center and Miami’s Marlins Park; hotels, such as the Omni Severin; and healthcare facilities, such as Banner Health.
“It’s an ongoing process. Companies have been scaling up in the last five years,” Madden said. “Eventually we will reach the point where we have companies that are sophisticated with RF planning models and have people in every major market in the United States. That is an important part of developing a mature ecosystem that is capable of deploying small cells and DAS in the millions. The operators don’t have the manpower to put a million small cells into the field.”
Another firm developing a nationwide footprint is Connectivity Wireless Solutions, which has implemented more than 2,500 DAS networks in 49 states. It has offices in Atlanta; Dallas; Houston; Chicago; San Francisco; Orlando, Florida; Frederick, Maryland; Charlotte, North Carolina; and Anaheim, California. Other key players in the DAS integration space include RF Connect and DAS Simplified.
Tempest Telecom grew in 2011 when it purchased Leaf Communications Services, a West Coast DAS integrator. A year later, it hired Darlene Braunschweig from Corning MobileAccess as president of its DAS and Small Cell Division. She will become the general manager for the BlueStream DAS and small cell business unit.
With a little help from AT&T’s towers, Crown Castle International beat analysts’ estimates at Wells Fargo and Wall Street in the fourth quarter. Site rental revenue was $651 million, adjusted EBITDA was $468.4 million and adjusted funds from operations were $358.7 million, beating Wells Fargos estimates of $626.5 million, $442.6 million and $317.9 million.
In December, Crown Castle closed on the deal in which AT&T leased the rights to 9,000 of its wireless towers and sold 600 more to the tower company for $4.8 billion.
“We note the AT&T towers reportedly contributed $18 million in site rental revenue and $9 million in site rental gross margin in Q4, which were excluded from prior company guides as well as our Q4 estimates,” Jennifer Fritzsche, senior analyst, Wells Fargo, wrote in an Equity Research Flash Comment.
Site rental revenue was up 14 percent year over year, 3 percent of which could be attributed to AT&T towers, and was reduced 1 percent by churn and 1 percent by currency headwinds, according to Jay Brown, Crown CFO.
“We saw a significant increase in U.S. new leasing activity in the fourth quarter 2013, representing more than a two-fold increase compared with the same period in 2012,” Brown said during the earnings call.
The two-fold increase in new leasing activity includes both new licenses and amendment activity, with new licenses representing 65 percent of new leasing activity.
“We believe this activity reflects the carriers’ focus on deploying their equipment on additional sites to help ease capacity-related issues, commonly referred to as site densification,” Brown said.
Ben Moreland, Crown president and CEO, said carriers’ ability to make profitable network infrastructure investments is leading to unprecedented LTE rollout activity.
“The U.S. market is unique because network quality continues to be a differentiator between carriers,” he said. “The strong correlation between network investment and low consumer churn necessitates the carriers to continue investment in their networks to improve quality, increase capacity and add functionality to remain competitive and grow.”
Only 19 percent of installations were covered by pre-sold leasing agreements in the fourth quarter, compared with more than 70 percent of the installations in the prior year.
Crown Castle spent $182.3 million on capex in the fourth quarter, which exceeded estimates of $123 million. “The company spent $137.8 million on construction and improvements (vs. our $62.5 million estimate), though sustaining capex of $20.5 million was more in line with our $23 million estimate,” Fritzsche wrote.
By the end of the year, Crown Castle owned 41,322 sites, including 39,568 domestic and 1,754 in Australia, as well as 11,000 small cell nodes.
The Wall Street Journal’s report of a possible Crown Castle International purchase of T-Mobile USA’s towers is “entirely plausible,” because of the tower company’s recent activity consolidating carrier portfolios, according to an investing note by Jonathan Atkin, analyst, RBC Capital Markets.
“We think Crown Castle is a logical buyer given its greater focus on the U.S. market and relatively recent experience in integrating a large carrier portfolio (Sprint sites) following its acquisition of Global Signal in 2006,” he wrote.
The total number of towers in the deal is reported to be more than 7,300, although Deutsche Telecom has said it owns more than 8,700 towers in the states. The current bid for the towers is likely to be $2 billion or more, according to published reports.
“We believe that a successful acquisition will strengthen Crown Castle’s leading position in the tower industry,” Zacks Equity Research wrote. “If the company manages to acquire T-mobile’s tower arm, it will … help it achieve better operational efficiency.”
The Wall Street Journal reported on July 31 that American Tower and Global Tower Partners were still being considered, according to its source, but Crown Castle had a leg up after final bids were submitted in July.
American Tower focused on global acquisitions during the first half of 2012, which is where it sees the most opportunity. It purchased 1,920 international towers versus 80 domestic sites.
“More than 95 percent of our new communication sites are located in our international markets where we expect to see continued demand as new technologies are deployed, new spectrum is issued and wireless carriers support the growing demand for wireless data on their networks,” said Tom Bartlett, chief financial officer, American Tower.
SBA Communications might not be bidding on T-Mobile’s towers because it has been pretty busy buying everything else on the market. Its purchase of 3,252 towers from TowerCo for $1.45 billion dominated the most recent quarter, and it bought 2,300 towers and DAS assets from Mobilitie for $1.1 billion in the first quarter.
“SBA has been busy issuing debt to both clean up bridge financing from the Mobilitie acquisition and to prepare for the TowerCo acquisition. The company ended the quarter with $4 billion of net debt and has issued over $1.4 billion of new debt since the end of the quarter. SBA’s guidance includes a $14 million increase in net cash interest expense,” according to Piper Jaffray.
It seemed only a matter of time before NextG Networks was purchased by a tower company. The only questions were when and by whom.
Crown Castle International answered those questions on Dec. 16 buying NextG for $1 billion, one of the largest investments into DAS ever. The deal was vindication that DAS and small-cell technology would continue to be an increasing segment of the wireless coverage equation.
“Increasingly, we believe that small-cell architecture, such as DAS, will be an important complement to traditional macro tower installations,” said Ben Moreland, Crown Castle’s president and CEO, said in a prepared release.
Zacks Investment Research praised the synergies of the NextG acquisition, which brings Crown Casetle 7,000 nodes-on-air, 1,500 nodes under construction and rights to more than 4,600 miles of fiber.
Crown Castle’s DAS network will reach more than 10,000 nodes spread across 26 U.S. metropolitan areas, with 80 percent located in the top 10 U.S. metropolitan areas.
“Considering rapid mobile data growth and wireless coverage requirements in urban areas increasingly focused on narrow areas, DAS networks will continue to be an important role in accommodating this demand. Outdoor DAS is more of a competitor to rooftops than to towers, so this should not affect tower leasing demand at CCI (or its peers),” said Jonathan Atkin, analyst, RBC Capital Markets.
Additionally, there is a lot of room to grow through additional collocation on NextG’s infrastructure and will allow Crown Castle to better compete with the other tower companies, according to Zacks.
“NextG has huge underutilized capacity. Currently, the company has only 1.25 tenants per network on an average. This will provide significant scope for Crown Castle to add more customers without incurring additional capital expenditure,” the investment research firm wrote.
Not everyone was enamored with the NextG acquisition. Craig Stanziano, president and founder, Distributed Wireless Group, thinkgs it should be a concern to the DAS community.
“Consolidation has its benefits but from the guys who actually provide the ‘real’ services to ‘make it happen’ it is further restriction on available clients to market services too. Hence, bids on jobs will get more competitive. This will result further consolidation of those ‘real’ service providers as well! We are seeing the start of commoditization to the DAS sector!” Stanziano said in email to DAS Bulletin
The most recent tower company investment in DAS came in September 2010, when Crown Castle acquired Newpath Networks for $114 million. Before that, SBA Communications made a $128.4 million investment in ExteNet Systems in January of 2010. Before that, you have to look back to 2005 when American Tower gained entrance into DAS through its multibillion dollar merger with tower company and DAS provider SpectraSite.