NEW YORK-The U.S. wireless tower industry is at least 18 to 24 months away from recovery, according to a recent report from Standard & Poor’s Rating Services.
In its report, S&P cites financial challenges faced in 2002 by the five publicly traded U.S. tower companies, including bankruptcy filings by Pinnacle Holdings Inc. and SpectraSite Holdings Inc., amendments to bank covenants by American Tower Corp. and SBA Communications Corp., and reductions in overhead by Crown Castle International Corp.
S&P predicts wireless carriers will continue to cut tower-related spending for the next two years, resulting in negative impacts on cash flow for tower operators. Reasons for cuts in spending by carriers include: upgrades to existing networks, sharing existing networks, financial challenges faced by carriers and a flattening of demand for U.S. wireless services. According to S&P, for tower companies, “significant deleveraging may be difficult to achieve without debt restructuring or new equity capital.”
S&P further warns that slowed tower cash-flow growth and “the fact that many towers are not owned but rather leased by tower operators from carriers under long-term lease agreements,” makes the value of existing towers questionable.
At press time, Crown Castle was trading at $4.02 per share, American Tower at $3.75 per share and SBA at 60 cents per share. Pinnacle emerged from bankruptcy in late 2002 as a private company and SpectraSite is expected to emerge early this year.
