Sprint/Nextel & T-Mobile Merger in the Works?
Analysts from
Merrill Lynch suggested earlier this month that T-Mobile may be in a position to acquire Sprint Nextel. Here is our breakdown of reasons why we could see this happening and reasons why we can't:
REASONS WHY SUCH A MERGER COULD OCCUR
1.
The declining dollar: T-Mobile is owned by
Deutche Telekom. With the
euro's increase in value relative to the dollar, the cost of acquiring Sprint/
Nextel would be lessened.
2.
4th Generation Wireless: Sprint/
Nextel's WiMAX spectrum and development. It is no secret that T-Mobile is fourth in the race to 3rd generation wireless. While Sprint, AT&T, and Verizon have already implemented next generation technology on a majority of their urban sites, T-Mobile is in the midst of their
UMTS overlay project. With less spectrum than the other carriers, T-Mobile had to bid heavily in the Advanced Wireless Services Auction before they could start this deployment. With Sprint/
Nextel- T-Mobile gets to jump to 4
th generation wireless services without acquiring more spectrum.
3.
Spectrum Auction Participation: T-Mobile did not win any spectrum in the recent 700
mhz auction. Perhaps because they won a good deal of spectrum in the
AWS auction- but it is conceivable that they gained additional comfort knowing that they would have access to the 2.5GHz spectrum used by Sprint/
Nextel for
WiMAX.
4.
Sprint Stock Price: Sprint's stock valuation is pitiful. At $6/share, Sprint's market cap is $19.3 billion. However, Sprint/
Nextel's assets are valued at over $60 billion. We believe Sprint's stock has taken a beating that may be worse than deserved. Perhaps T-Mobile understands this as well.
5.
Number One: A Sprint/
Nextel/T-Mobile merger would yield 83 million subscribers- making it the largest carrier in the US. AT&T has 70 million with Verizon at 64 million.
6.
Sprint Inactivity: Based upon our anecdotal evidence from clients who approach Steel in the Air, Inc to assist them on new lease negotiations for rooftop cell sites or tower sites, Sprint is not doing any new site development as yet this year. This could be an indication that a merger is in the works and Sprint/Nextel doesn't want to expend capital on building new cell sites that will be duplicative to a T-Mobile site.
REASONS WHY SUCH A MERGER MIGHT NOT OCCUR
1.
Foreign ownership: In 2000, when
Deutche Telekom acquired
Voicestream and
re-badged it T-Mobile, there was regulatory and Congressional concern regarding a foreign company having ownership of a cellular network. This concern can only be greater if
Deutche Telekom acquired Sprint/
Nextel.
2.
Antitrust: The FCC and
DOJ might have anti-trust concerns regarding the merger of the 3rd and 4
th largest carriers into the number one carrier. However, if the mergers of AT&T/
Cingular and Sprint/
Nextel and the FCC/
DOJ's failure to force significant divestitures in either merger are an indication, this merger could fly through. Steel in the Air has polled a few other experts- who seem to mostly believe that a merger between Sprint/
Nextel/T-Mobile would be approved.
3.
Technology Soup: T-Mobile operates a
GSM network, Sprint a
CDMA network, and
Nextel an
iDEN network. It is believed by some of us that Sprint/
Nextel's failure to smoothly integrate the two divergent networks is responsible for a large part of their current stock woes. The migration of all three networks would be a significantly difficult hurdle.
4.
Sprint's Pride: Regardless of where there stock is- Sprint most likely believes like I do that their issues are temporary. The market has been particularly unkind to Sprint's missteps and failed to value Sprint/Nextel's considerable spectrum holdings and the prospect of WiMAX.
In the end, perhaps the merger of Sprint/Nextel and T-Mobile is just intriguing supposition. However, if this merger was to occur, it would have dramatic impact on the tower industry and on cell site landowners.
Labels: Deutche Telekom, Sprint PCS, Sprint/Nextel, T-Mobile, WIMAX
Are Crown Castle and WCP Working Together?
In a tale of "strange bedfellows", we are starting to wonder whether Crown Castle and Wireless Capital Partners are working together. A letter that Crown Castle is sending out to its landowners warns of the pitfalls of dealing with various lease buyout companies. However, the letter has one noticeable buyout company not included in the list- Wireless Capital Partners. We assume that this is because Crown Castle and Wireless Capital Partners have come to an agreement whereby they have coordinated their efforts to negotiate lease buyouts.
We could see where this might make sense for Crown Castle. Because of the rigidity of their proposals for buying out their lease agreements, they typically must buy a perpetual easement. However, some landowners are rightfully scared of selling anything in perpetuity. That's where we assume Wireless Capital Partners come in- they offer their "non-recourse loan" for a shorter term purchase. The offer is less than Crown's offer, but the landowner doesn't have a perpetual easement on their property either to Crown.
So why should the landowner care? Because Crown Castle would not be working with Wireless Capital Partners unless they had something to gain from Wireless Capital. This gain might come at the disadvantage of the landowner. We surmise (but don't know) that Wireless Capital Partners has committed to Crown Castle that they won't increase the lease rates at the expiration of the purchased Crown Castle lease agreement. How does this negatively impact the landowner? Because as part of the
WCP agreement, the landowner gives
WCP the right to negotiate an extension to lease even if the extension is for a period greater than the amount of time granted in the non recourse loan. So
WCP could bind the landowner to an extension of the lease that benefits
WCP and Crown Castle, but is significantly undervalued as compared to what the landowner could get if he/she were aware of the value of his/her property to Crown at the expiration of the
WCP non-recourse loan.
In our opinion, this "partnership" is not improper provided that
WCP discloses any such relationship with Crown Castle to the landowner prior to any purchase of a lease agreement. If Wireless Capital doesn't disclose, than the landowner might end up selling to
WCP without knowledge of what they are giving up.
If you have been approached by Wireless Capital Partners regarding purchasing a Crown Castle lease agreement, speak with your attorney to fully understand what rights you are giving up. Ask them what
WCP's intentions are at the expiration of the current lease agreement. If you need help understanding the actual value of the lease buyout or what the lease should be worth after the purchased term,
contact Steel in the Air.
If you have found this post while searching for Crown Castle's or Wireless Capital Partner's websites- please note that Steel in the Air is not affiliated with either entity. You can find more information about Crown Castle at
http://www.crowncastle.com/ or for Wireless Capital Partners at www .
wirelesscapital.com.
Labels: cell phone tower lease, crown castle, lease buyouts, lease purchase, wireless capital partners
Sprint's Sublease of Sites- Part 2- Lightower
Recently, a few of our clients have been contacted by agents of
Lightower.
Lightower was previously known as National Grid Wireless. These agents are requesting access to upgrade Sprint's "telecommunications capabilities from traditional "copper" based services, to those of 'fiber-optic' service."
In some Sprint/Nextel cell site and rooftop leases, this may be permitted, especially if the fiber is being accessed through the current utility/access easement already granted to Sprint/Nextel. Additionally, some Sprint/Nextel leases specifically require that the landowner grant additional easements if necessary to bring in telecommunication services.
However, Sprint/Nextel's blanket letter implies that all of Sprint's leases permit installation without additional compensation to the landowner. "As indicated in our Lease, License, or Site Agreement with you for access, please extend to Lightower (or their agents, bearing a copy of this letter) the same courtesies that you have previously shown to the Sprint/Nextel employees and/or technicians." The letters do not state whether a lease amendment is necessary and once you consent to the access and installation, you might be deemed to have waived any rights to compensation.
Lightower stands to make a decent amount of revenue by bringing fiber-optic service to the property, especially if there are multiple wireless users using the property. Whether
Lightower's installation of fiber to the cell site constitutes an sublease of the property or not depends upon your existing lease agreement. You should contact your attorney to confirm whether they have the right to install fiber to the cell sites on the property or just Sprint's. If they don't have the right and you are discussing compensation and wish to know what to ask for, please contact
Steel in the Air. Labels: Lightower, Sprint PCS, Sprint/Nextel
Sprint's Attempt to Sublease their Sites
Sprint has been contacting landowners recently with existing Sprint sites and asking to modify the current antenna installation. They propose adding 2 parabolic antennas to the site. When asked, they suggest that the additional equipment is used in "support of" their 4th generation WiMAX technology. Yet a careful review of the proposed lease amendment shows that they want to modify the current lease agreements so that Sprint "OR ANY OF ITS AFFILIATED ENTITIES, SUBLESSEES, ASSIGNS OR CUSTOMERS" can use the Site for installing equipment, antennas and microwave dishes, air conditioned shelters, ect.
Basically, Sprint wants unsuspecting landlords to sign these agreements not realizing that they have now authorized Sprint to sublease to virtually anyone. (I am a Sprint customer- perhaps I can get a sublease on one of their sites).
Personally, I find this type of negotiation misleading. Why represent that Sprint wants to add equipment if in fact, they simply intend to sublease to a third party? The answer is relatively easy- otherwise landowners would ask for more money.
Before you agree to an amendment like this or a proposal to add more antennas to your cell site, make sure you consult an attorney who understands wireless leases to counsel you on what rights you are giving up. If you need help evaluating the value of a Sprint lease amendment for additional antennas, contact Steel in the Air.
Labels: cell phone tower lease, Sprint PCS, Sprint/Nextel, WIMAX
WiMAX vs LTE
Just read an interesting article on the Looming Battle for Broadband that discusses the state of
WiMAX vs LTE.
Labels: LTE, WIMAX
