More buyers than sellers in telecom towers space – analysis08 March 2007

The telecom tower sector is garnering interest, but mainly from interested buyers, suggested sector bankers and executives. Although Cingular is rumored to be selling about 600 of its 7,000 or so wireless tower properties, all potential sellers interviewed by this news service said they are more interested in remaining independent or finding acquisitions than agreeing to a takeout. But all noted that buyers, ranging from large tower concerns to private equity firms, make frequent advances.
In recent intelligence provided by this news service, executives within Optasite in Massachusetts, TowerCo in North Carolina, Subcarrier Communications in New Jersey, and Antenna Sites in Arizona all said they receive consistent approaches from potential buyers but prefer to gain scale themselves rather than sell the company for the foreseeable future.
Published reports have named Global Tower Partners in Florida as having retained Morgan Stanley for a possible sale. According to a source within the company, however, Global Tower spoke to the bank about debt issues, and is not at auction. Meanwhile SBA Communications, often called by pundits an attractive takeout candidate, is increasing its own value at such a rapid pace that it does not need to consider a takeout for at least another year, industry executives and analysts said.
Kevin Brynestad, a managing director at telecom M&A consultants Daniels & Associates, said sellers are holding onto their businesses because, in the case of independent companies, investors want to see higher lease-up on new towers to maximize the return on their investments. They also want to improve value by gaining scale, Brynestad added. Regarding carriers with non-core tower operations, Brynestad speculated that the wireless incumbents need no additional capital at this time and might also retain towers operations for technology control reasons. For instance, a T-Mobile source told this news service that the wireless operator, a division of Germany’s Deutsche Telekom, wants to integrate spectrum gained in Federal Communications Commission auctions before embarking upon a tower divestment.
But sellers, said Brynestad, are interested in buying telecom towers because cash flow and margins are good.
Telecom towers are a service to wireless carriers akin to real estate ownership. Wireless carriers lease space on the towers to hang antennas and extend their networks. The large tower operators and serial acquirers in the space are American Tower in Massachusetts, Crown Castle in Texas, SBA and Global Tower. Some of the private equity concerns said by a banker to have interest in acquiring tower assets include Kohlberg Kravis Roberts and Goldman Sachs in New York, the Telecommunications Development Fund in Washington, DC and Cinven in the UK. Blackstone Group in New York already owns the lion’s share of Global Tower Partners.
Brynestad thinks although few sellers appear willing to part with assets, a deal could shake loose this year. “The market could be flooded in a couple of months,” he commented. “Sellers can sell pretty quickly. At the right price, everybody’s a buyer and seller.”
American Tower, the largest tower operator in the US, has a market capitalization of USD 16bn. Crown Castle, the second largest tower operator, has a market capitalization of USD 9bn.

by Sarah Cohen

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