X

Connect (X)

Tag Archives: ROI

How American Tower Seeks Improved Return on Investment

By Don Bishop

The fundamental component to the return on investment (ROI) in the tower business is the tower itself, according to Ed Knapp, chief technology officer at American Tower. Operational excellence plays a role in supporting ROI, Knapp explained, as does the use of drones, providing power to antenna sites, fiber-optic cable connectivity and edge data centers. Knapp spoke during an AGL Virtual Summit in June at the session, “Increasing ROI at the Tower,” moderated by Spencer Kurn, an analyst who leads coverage of U.S. towers for New Street Research.

Ed Knapp (left), chief technology officer at American Tower, and Spencer Kurn, an analyst at New Street Research.

American Tower improves ROI by questioning how it could be a better provider of the tower asset to its customers, Knapp explained, and part of the answer is achieving operational excellence, which in turn leads to using drones. The company uses drones to examine tower integrity, inventory assets around the tower and reveal what antenna space could be available, he said.

“The main goal is to cut down the time from an application to lease-up,” Knapp said. “That’s beneficial for our customers in getting service. It’s beneficial for us to get additional revenue streams sooner.

American Tower has trained 170 drone pilots in a program it initiated with PrecisionHawk, Knapp said. The tower company has conducted tens of thousands of flights, he said, and it is making progress with inventorying a dataset for future applications and uses of the towers. He described the project as a primary business opportunity for the company.

Because American Tower has 210,000 towers in 23 countries, other initiatives to increase ROI take place abroad. Power as a service is one such initiative Knapp cited, explaining that the company provides power in some markets in Africa and India with no electrical grid power.

“We started out dealing with diesel generators running 24/7,” Knapp said. “We realized that, logistically, both from a cost and operations standpoint and from a sustainability and environmental component, diesel was not the best way forward. Thus, in the last few years, we invested several hundred million dollars in renewables. We’ve added solar facilities to those sites. We’ve added battery storage to those sites. We have artificial intelligence and machine learning techniques where we can sit on top of this mini power plant that we built and combine the AC sources from the grid and the generator, combined with some of these DC components. and optimize reliability and service-level agreements for the uptime for those customers.”

American Tower is taking the same concept and is considering it for use in developed markets such as the United States where the electrical grid is reliable, and Knapp said it raises questions about the optimal way to deliver energy storage systems and how to obtain combined economics when removing old lead-acid batteries from some of the base station equipment.

“Moving that together and looking at large energy storage systems that scale,” Knapp said, “are part of a whole bunch of things you can get into behind the meter, in front of the meter, in different ways in which industry at wholesale might create virtual power plants.”

With respect to fiber-optic cable connectivity, Knapp said American Tower has fiber in a number of markets in Latin America. He said fiber is a key component for the transition to 5G wireless communications in the United States.

“We believe fiber is pervasive and widely available,” he said. “Most of the customers deliver it themselves. However, ROI improves when you bring fiber not already present in markets that are just developing and maturing 4G.”

The final piece involving improving ROI is data centers, Knapp said.

“We’ve spent a lot of time in the last few years, investing in edge data centers,” he said. “We have a whole concept around micro edge and metro edge data centers and where those reside from an overall timing perspective. Most of that is in the path toward how operators are going to deliver 5G and low-latency use cases.”

Knapp said that drones, power as a service, fiber and data centers are the areas in which American Tower is investing to improve ROI.

“Those are the areas that we’re investing in that we believe that putting capital to work can deliver tower-like returns,” Knapp said. “Our goal is to say, ‘Can we achieve tower-like returns? Can we create neutral-host, multitenant facilities with digital infrastructure that folks would benefit from economically by essentially sharing those assets as opposed to doing it themselves?’”

For the June 8 AGL Virtual Summit, Total Tech sponsors included Raycap, Valmont Site Pro 1, Vertical Bridge and B+T Group. Tech sponsors included Alden Systems and Aurora Insight. Viavi Solutions sponsored the keynote address. Additional sponsors included Gap Wireless, NATE, VoltServer and WIA.

J. Sharpe Smith programmed the Summit, and Kari Willis hosted. AGL Media Group has scheduled the next AGL Virtual Summit for Sept. 8. To register, click here.

Don Bishop is executive editor and associate publisher of AGL Magazine.

Capex, Opex, Lease-up Deliver Boost to ROI for Vertical Bridge

By Don Bishop

The largest private owner and operator of communications infrastructure in the United States, by its own account, Vertical Bridge manages more than 300,000 properties. The company’s vice president of tower development, Ariel Rubin, said that Vertical Bridge builds towers with a focus on increasing its return on investment (ROI). Rubin spoke during an AGL Virtual Summit in June at the session, “Increasing ROI at the Tower,” moderated by Spencer Kurn, an analyst who leads coverage of U.S. towers for New Street Research.

Ariel Rubin (left), vice president of tower development at Vertical Bridge, and Spencer Kurn, an analyst at New Street Research.

Tower construction affects Vertical Bridge’s capital expense (capex), as reflected in the cost to build the sites, and affects the company’s operating expense (opex), Rubin said. Controlling those expenses helps to raise the company’s ROI.

“On the capex side, we have a great network nationwide of partners that help us not only with the services side, which include everything from site acquisition to engineering services and environmental services, but also one of our largest costs, steel and the towers we procure,” Rubin said. “The network of vendors that provide us with steel and being able to have ready access to sites anywhere in the country have been helpful at keeping some of those costs down.”

Construction is another large capex component, Rubin explained. He said Vertical Bridge has networks of regional contractors and nationwide contractors that help the company when it needs more volume in certain regions or when it needs more specialized contractors in some other markets.

When it comes to capex, Rubin said, “the less you spend, the better your returns will be. More importantly, as we look at ROI and how it’s tied to tower cash flow, the more we can keep of the rent we collect on a site is directly reflected on the return on that particular site. Thus, the operating expenses that each site incurs are one place where we looked and made sure to focus on as we build new sites.”

Rubin identified six items of opex that primarily affect tower cash flow: ground rent, maintenance, utilities, monitoring, insurance and taxes.

“The largest is ground rent,” Rubin said. “We always look to have long-term rights, or purchase the land, or have long-term easements on a property. That helps us control some of the ground rent costs that we incur.”

Vertical Bridge must maintain its sites properly, and it acquires sites with maintenance in mind. Although sites with long access roads or otherwise designing sites that would be expensive to maintain, although perhaps not costing significantly more initially, affect the company’s cash flow because those sites would need to be maintained for years and years, Rubin said. As a result, Vertical Bridge takes maintenance into consideration when designing and building the sites.

As for utilities, Rubin said Vertical Bridge typically does not have high utility costs, but it pays for tower lighting and some power accounts.

“We’ve worked with federal agencies on eliminating nonflashing lights,” Rubin said. “As an example, we were going to LED lights that not only help us reduce some of our opex costs and bring down our utility bills, we’re also helping reduce bird collisions and reducing some of the effects that our towers have in the environment. We’ve seen cost savings from $500 to $1200 to $1300 a year in power bills. We make sure that as sites are being put up, utility costs are minimized for years to come.”

Rubin said that monitoring and insurance costs are somewhat more difficult to control on a site-by-site basis. He said Vertical Bridge’s size helps the company to negotiate, because of the volume of sites.

“If somebody could figure out how to pay less taxes . . .” Rubin mused. “That’s something that we’re subject to. That’s another expense that affects our tax control framework and our return on a particular site.”

Session moderator Kurn said that controlling expenses is one side of the ROI equation — the other, improving tower lease-up.

Rubin then spoke about Vertical Bridge’s large portfolio of  broadcast towers and tall towers, aside from what would be called the traditional towers for carriers. He said Vertical Bridge has been able to make the broadcast towers available for use by wireless carriers.

Meanwhile, Rubin said, the broadcast towers typically have a significant amount of land beneath them, and that is where edge data centers come in as additional lease-up.

“We have enough ground space to not only offer for edge computing, but also solar and some other applications,” Rubin said. “We to work with government entities and wireless internet service providers (WISPs). WISP rollouts are more regional, and we see groups of activity here and there. It’s a mix that continues to grow, but nothing significant at least on the new tower development side. Once the towers are up, this is where a lot of these new opportunities are coming into play.”

Vertical Bridge capitalizes on the edge computing opportunity with existing infrastructure and with what Rubin called edge-to-suit.

“We work not only with the direct carrier contacts that we have at Vertical Bridge, but also we have partnered with our sister companies. DataBank and EdgePresence, and are able to use our existing infrastructure and leverage that from some of the contacts that they bring where we can find some synergies in optimizing the use of our assets,” Rubin said.

“The second part is what we like to call edge-to-suit, which is leveraging our site acquisition teams and development teams to identify, lease, permit and build out to your power and fiber-ready location. It’s kind of like a build-to-suit, but just for edge services. We have the team in place. We think about longer term, making sure we have the ability to put up a tower if needed, but providing that service to our carrier, contacts, just for the edge solution that they need. We have the knowledge.We don’t necessarily have to go put up a tower on day one, but it’s a lot of the same skill set that we already have that we’re using on a daily basis. Using our existing infrastructure and our existing knowledge —that’s where the opportunity for us is key.”

For the June 8 AGL Virtual Summit, Total Tech sponsors included Raycap, Valmont Site Pro 1, Vertical Bridge and B+T Group. Tech sponsors included Alden Systems and Aurora Insight. Viavi Solutions sponsored the keynote address. Additional sponsors included Gap Wireless, NATE, VoltServer and WIA.

J. Sharpe Smith programmed the Summit, and Kari Willis hosted. AGL Media Group has scheduled the next AGL Virtual Summit for Sept. 8. To register, click here.

Don Bishop is executive editor and associate publisher of AGL Magazine.