McDonald’s has signed an agreement with KGI to market its restaurants as sites for cell towers. The agreement covers 11,500 locations nationwide that are owned by the iconic fast food franchise.
“McDonald’s places its restaurants in strategic areas where people live, work and shop,” Mike Kampen, principal, KGI Wireless, told AGL Bulletin. “Those are pretty good criteria for siting cell towers, as well.”
As a result of the agreement, KGI Wireless has established KGI Towers, which will serve as McDonald’s only source for construction and development. McDonald’s had previously promoted itself to carriers as a cell site location, but without too much success.
“The difference here is we are marketing to all the carriers, not just a few. We will build the towers with enough capacity for three or four carriers, which means more revenue for McDonald’s,” Kampen said. “We are simplifying the model. We are probably easier to do business with because they are in the burger business and we are in the cellular business. We know who to call.”
KGI had previously focused on marketing existing towers for companies such as Charter Communications, Verizon Wireless, Mediacom and Time Warner Cable. Although KGI does manage wireless sites for Kum & Go convenience stores.
“This is a divergence from our norm,” Kampen said. “This is the first time KGI has gotten into the ownership side. Previously, we were on the real estate services side. This is an attempt to diversify our organization and provide another revenue opportunity for growth.
KGI currently has agreements to build at six McDonald’s sites. It will build two to three sites in 2011.
“We think it will grow in time as we get deals done with major carriers. We will develop a healthy pipeline and hopefully do a lot of deals over time,” Kampen said. “We recognize there is a need out there. When we got into this business 10 years ago, the search rings were 4 to 5 miles in radius, now a search ring might have a radius of a quarter mile down to a few city blocks. As carriers try to strengthen their networks to provide throughput to handle 4G, their real estate options are limited. This is another viable option.”
American Tower had strong growth in the third quarter, and it projects continued growth well into the future, based on several trends.
American Tower saw increases in adjusted EBITDA of 15.1 percent to $350 million in the third quarter, with an increase in operating income of 19.2 percent to $213.4 million. Cash provided by operating activities also increased 7.6 percent to $258.2 million
American extended customer contracts during 2010, and negotiated a master lease agreement with one of its large U.S. customers during the third quarter, which resulted in an increase in rental and management segment revenue of 16.1 percent to $499.8 million. The average lease term was extended to 10 years with a multi-year minimum commitment for additional leasing and amendments.
CEO Jim Taiclet said the company’s future plans are based on optimistic assumptions for both domestic and international markets. American expects advanced data deployments to continue to drive demand for infrastructure at levels commensurate with previous years. Wireless demand in the international market will also drive expansion of the infrastructure.
“Consumers love [data]. Just as nearly everyone subscribed to voice service in the last decade, over the course of the current decade we believe everyone will subscribe to high-speed mobile data service, too,” Taiclet said. “As a result of this adoption curve, increasing data use per user and higher transmission speeds, mobile data consumption will double every year for at least the next four years.”
The surge in data demand and increasing revenue and operating profits are leading U.S. carriers to launch robust 3G and 4G voice and data services, according to Taiclet. For example, AT&T announced service revenue growth in the third quarter of 10 percent, three-fourths of which was driven by data. The carrier’s year-to-date capex is up 55 percent, and it is on a pace to invest $8 billion in wireless capital expenditures.
“This will further justify ongoing investments [in wireless infrastructure] by the carriers. AT&T has shifted its investment meaningfully toward wireless,” Taiclet said.
The scenario is similar at Verizon Wireless, whose wireless service revenues in Q3 were up 8 percent, all of which was attributable to data. The carrier has also shifted its investments toward wireless with year-to-date capex up 20 percent and $8 billion projected in full-year capital expenditures.
“Our other hypothesis is that the U.S. market is so large and competitive that all major service providers must offer their customers a robust data product to be successful,” Taiclet said.
Tower site regulation is a two-edged sword. Too much and the industry slows to a crawl. Too little and the public can be endangered. Chennai, a coastal city in southwest India, felt the latter when a cell tower came crashing down on an apartment complex, according to The Times of India.
While no one was killed, the collapse sent residents and activists calling for carriers to do more to ensure their towers are safe and for the government to do more to make sure that it happens.
Residential welfare associations have facilitated the installation of towers on apartments to generate revenue for maintenance. Carriers pay from $225US to $338US to the apartment owners to rent space on their terraces.
At least 2,000 cell towers are installed in Chennai on apartments, as well commercial buildings and other high-rise structures. The city has identified 1,775 towers that its engineers plan to verify for structural stability.
The debate over regulation highlights one of the challenges that confronts American Tower, which has a significant presence in India, owning or operating more than 7,400 tower sites throughout the country.