Change has been afoot in the wireless tower industry. In the past 18 months, two of the industry’s five public players have gone through bankruptcy and returned, businesses have been divested and restructured, and stock valuations have fallen and risen like the tides. Meanwhile, at least two private players have grown into real contenders and PCIA emerged as a cheerleader for the industry. Most recently, one of the few wireless carriers with a widely recognized tower business said it was ready to unload it.
Recall some recent tower-centric headlines from RCR Wireless News: Sprint confirms it may sell towers; Crown sheds U.K. assets; SBA completes exit of western U.S. business; Global Signal returns to public market with IPO; Global Tower Partners-first of second generation of tower firms; SBA sells bulk of western tower assets to AAT Corp.; SpectraSite emerges with strong balance sheet.
Indeed, each of the major U.S. tower firms can be considered streamlined, having divested non-core businesses like services and construction, and restructured balance sheets by paying down debt and rebuilding stock values.
“Two years ago these companies looked like they could be going bankrupt,” said Seth Potter, an analyst at Punk Ziegel & Co.
True, two years ago, each of the major public tower companies was struggling to trade above $1 per share. Now, SpectraSite Inc. is on top, trading at $40.72 per share; Global Signal Inc. follows at $20.95 per share; American Tower Corp. is at $13.60 per share; Crown Castle International Corp. is trading at $13.08 per share; and SBA Communications Corp., the smallest of the bunch, is at $5.08 per share.
SpectraSite’s stock has been padded nicely since the company’s emergence from three months of Chapter 11-bankruptcy protection in February 2003. In another effort to streamline, SpectraSite sold its network services division-once considered a complementary product offering-almost two years ago to focus on its core tower-leasing business. SpectraSite currently owns 7,604 towers and in-building systems.
Global Signal, formerly known as Pinnacle Holdings, also emerged from bankruptcy with a strengthened balance sheet. The company was forced into bankruptcy in early 2002 after it lost most of its customers with the downturn in the paging and specialized mobile radio industries. Global Signal emerged from Chapter 11 in late 2002 to operate privately and became public again when its initial public offering closed this June. The company now counts more than 3,300 tower and rooftop communications sites throughout the United States and Canada in its portfolio.
American Tower and Crown Castle, the biggest of the tower companies, have both shown consistent improvement during the past two years. Crown Castle recently sold its successful U.K. tower portfolio for $2 billion, which it plans to use mainly to eliminate debt. The company’s portfolio now stands at 11,900 structures in the U.S. and Australia.
American Tower last week surprised some by lowering its new-build estimates for the remainder of 2004, but the company’s explanation that it is simply employing stricter selectivity in new builds calmed concerns. American Tower currently counts 13,900 towers in its portfolio.
SBA earlier this year sold 801 towers, representing its western U.S. portfolio, for $203 million in cash, to private tower player AAT Communications Corp. Shortly after the company divested its services business there, marking its complete exist of the western U.S. region. SBA planned to use the proceeds to reduce its hefty $957 million debt load. The company now owns 3,045 towers.
That sale, which doubled AAT’s tower ownership portfolio, brought the company into the spotlight. Further acquisitions, including 78 towers from Lake Charles, La.-based US Unwired Inc. and all assets, including 226 towers and 170 managed sites, from Chattanooga, Tenn.-based Signal One L.L.C., has brought AAT’s total number of owned towers to 1,800. The company also manages more than 6,000 rooftop and tower sites. The company said it may use a recently closed $325 million senior credit facility to fund new acquisitions.
Global Tower Partners, another private tower player that attracted attention through a string of acquisitions, could be poised for more. In the five months from November 2003 to April 2004, GTP went from owning zero towers to 507 through several acquisitions. It hoped to double that number by the end of this year. The company also master leases approximately 2,800 rooftops.
Sprint Corp. reported during its second-quarter conference call that it was exploring strategic initiatives for its approximately 6,300 cellular towers, a move that is likely to bring another big change to the tower segment. Analysts estimate the towers could be worth around $1 billion on the open market.
A number of industry analysts have noted that Sprint has recently begun offering its tower “book” to potential suitors, possibly including AAT, Global Signal, American Tower and Crown Castle, though the potential $1 billion price tag could be tough for most to swallow.
These companies “won’t overpay for anything,” said Potter, adding that each player will likely seek assets in which returns on investment are more beneficial to the company than paying down debt would be. Because of the strict attention the public companies are paying to their balance sheets, analysts have suggested private companies like AAT may see more value in the Sprint portfolio.
“Anything we would look at would have to compare very favorably to our own share buyback proposal,” said Ben Moreland, chief financial officer of Crown Castle, at an RBC Capital Markets analyst meeting last week.
Consolidation among tower players, which was a hot topic toward the end of 2003, seems to have cooled. American Tower said in its quarterly earnings call last week that while tower company consolidation would afford the industry certain benefits, it was confident it could maintain success without such a transaction occurring.
