Cox Communications to Enter the Wireless Market
In one of the first signs of good news that I have seen recently surrounding our market (other than self serving statements from public tower company executives at the
PCIA conference), Cox Communications recently announced that it will build its own
Cox Communications cellular network. Cox Communications spent $550 million to purchase spectrum in Atlanta, New Orleans, San Diego, Omaha, and
Las Vegas along with a good part of Kansas and southern New Mexico.
Cox intends to build out those markets and connect to Cox fiber in those areas for
backhaul. In other areas, Cox consumers will roam on the Sprint/
Nextel network. (Cox must have decided that network quality wasn't important for roaming).
While the full impact of Cox's development plan is yet to be known, at a bare minimum, this should equate to at least 2000 new cell sites over the next few years. If recent deployments by
MetroPCS and Leap are any indications, the majority of these sites will be on rooftops and existing towers. One interesting note- in an article in the
USA Today- Cox alleges that they are looking towards
LTE as their future 4G technology platform. However, with Sprint/Nextel using WiMAX, I have to wonder how Cox intends for its users to roam on the Sprint/Nextel network and still have their phones function for advanced services unless Cox intends to use Sprint/Nextel's network in the beginning entirely.
Labels: cox communications
How will cell tower leases be impacted by the current market conditions?
The last month has been a
tumultuous time in the cell tower lease industry, primarily on the side of lease buyouts. With the plummet of the stock market, rising concerns about the availability of credit, and consumer confidence very low, the industry is starting to see the impact. Through our consultations, we have already started to see tangible evidence of a declining market especially in the lease buyout side.
From our vantage, there is a distinct shrinking of the lease buyout market. Of the numerous players who purchase long term easements under cell towers and rooftop sites in exchange for a lump sum, there has
definitely been a slide in the purchase prices and an increase in the due diligence requirements for purchases. Companies that buy the leases are looking to pay less and to be more selective in their choice of leases - preferring to purchase only "investment grade" leases. (i.e. those that are from AT&T, T-Mobile, Verizon). While they still purchase non-investment grade leases, the multiples paid for all leases has
definitely gone down.
One primary reason for this is that Wireless Capital Partners shut its doors about a month ago. With one major competitor out of the way, the remaining firms recognized the advantage they now have and have started to lower their prices and increase their due diligence requirements. Prices are lower than they were just two months ago. There are rumors that a new entity may be formed to fill
WCP's shoes, but
SITA has not seen any evidence of such yet.
Even the tower companies have started to pull back from previous offers. Crown Castle's agents have been representing to landowners that today (Oct 16, 2008) is the last day that they will be honoring most if not all of the lump sum buyouts they previously made. Unlike virtually every other time that lease buyout firms give "hard deadlines",
SITA believes that this one is for real. Crown's stock price has plummeted from a 52 week high of $43 to their current price of $19. One specific reason for this is that Crown may have to
pay back a $160MM credit facility. SITA does not believe that Crown or their landowners are in any jeaopardy- but this does put Crown in a situation where they need to retain their capital for more immediate needs than purchasing long term easements under their leases. Crown's representatives have stated that they will still continue to push the extensions of the leases but won't be making lease buyout offers until they can resolve their credit facility issues. This could take quite a while.
WHERE DOES THIS LEAVE ME AS A LANDOWNER?
Recognize that the value of your tower or rooftop lease is still the same. Nothing has changed that would reduce the value to the owner of the tower. What has changed is availability of capital to those companies that purchase tower and rooftop leases. Unfortunately for many landowners, the recent turmoil comes during a time when many landowners are going to need capital to keep their houses or run their businesses. So as the average landowner's need for the capital increases, the number of competing companies that want to buy the lease decreases and the rates that the remaining companies are willing to pay decreases as well. We are getting an increased number of inquiries from landowners who need to sell their tower lease(s).
Our advice: if you don't need to sell at this time- DON'T. We started in this industry in 1997, weathered the downturn in 2001-2002 and have seen the cycles. As with previous downturns, this too shall pass. The vacumn filled by WCP and by the reduction of offers from towers companies will either be filled again by the tower companies or opportunistic companies that see value in the lease buyout market.
If you do need to sell, recognize that you don't have the same negotiating position that you had just one month ago. However, don't believe that you have to accept the offer that you are given. Even now, we rarely see situations where the first offer is the best. At SITA, we can assist you in making sure that you get the best offer available. We know the players and we have assembled substantial comparable data to assist us in recognizing trends in pricing- both short term and long term. Please see our
cell tower lease buyout page for more information.
If you don't know whether you should sell, please
contact us. We can help you determine whether there is any probility that your lease might be terminated. We can also help guide you on what the pros/cons of selling now are and discuss what the future holds for this industry and lease buyout firms.
Labels: cell phone tower lease, cell tower ground lease, crown castle, lease buyouts, wireless capital partners
Cincinnati Bell Wireless and Lazy Site Acquisition
A potential client received a letter from Cincinnati Bell Wireless stating that they have reviewed the client's property and were potentially interested in leasing a portion of the property for their cell tower site. The letter includes a template lease from Cincinnati Bell Wireless and a request for the landowner to review the lease with his/her attorney first to confirm which clauses that the landowner might find objectionable. While this is understandable, Cincinnati Bell also states in the letter that legal review is a prerequisite to negotiating terms like rent or escalation. Meaning that the landowner either has two choices. First, they can assume that the lease rate will be favorable, call their attorney to review the lease and pay $1500 or more in attorney's fees before ever actually knowing whether Cincinnati Bell intends to pay them $100/mo or $1000/mo. Second, the average landowner might decide not to review the lease in order to save the money and indicate to Cincinnati Bell that they are interested. In this case, they might give up the right to thoroughly review the contract.
We object to this specific type of site acquisition as predatory. Cincinnati Bell Wireless is forcing the landowner to either spend money on an attorney before even negotiating the lease terms or putting them in a situation where more ignorant landowners will simply choose not to get legal representation at all. To us this is lazy and predatory.
Why not simply state in the letter what Cincinnati Bell Wireless is prepared to offer? Then the landowner can make an informed decision of whether the money spent on an attorney will be well spent.
From a landowner perspective, what is to prevent the landowner from simply lying about whether they have objections to the agreement so that they can get to the discussion of the rent and other financial terms? I can't think of anything.
Labels: cell tower ground lease, cincinnati bell wireless, site acquisition
