While many of their counterparts in the high-flying build-to-suit industry are prospering, tower manufacturers are finding the road ahead may be a difficult one. Likewise, recent siting decisions do not bode well for carriers trying to build their networks.
Late last month, Rohn Industries Inc. and PiRod Holdings Inc. called off a planned merger of the two companies citing adverse industry conditions. Other tower manufacturers also are describing adverse conditions, particularly slower-than-expected wireless buildout, as a reason for a variety of ailments ranging from poor results to company restructurings.
Valmont Industries Inc., which provides equipment for the communications, agriculture and utility industries, called 1998 a difficult year in part because of weakness in the wireless communications industry. Andrew Corp. said it expects its second quarter results to fall short of analyst expectations due to slow spending in the wireless infrastructure market, and the company plans to reduce its work force by between 10 and 12 percent.
The future of these companies is unclear.
FWT Inc., which provides monopoles, shelters, cell-sites-on-wheels and tower stealthing, recently filed a statement with the Securities and Exchange Commission that suggested it is experiencing problems that could lead to its demise.
“Industry demand for communications towers and monopoles continues to be extremely weak,” said the company. FWT “is currently experiencing severe liquidity and administrative difficulties, which the company believes raise immediate and critical issues regarding its ability to continue as a going concern.”
FWT representatives did not return phone calls by RCR press time.
In its filing, FWT said the company is not generating sufficient funds from its operations to satisfy working capital requirements and is in default of certain covenants of its revolving credit facility with BT Commercial Corp. and Bankers Trust Co. The company said it is seeking and engaged in discussions regarding alternative sources of financing and other strategic alternatives.
The company earlier this year implemented a restructuring program that included terminating Chief Executive Officer Douglas A. Standley and other executives and appointing an operating committee to handle day-to-day operations.
The company’s recent difficulties are compounded by the resignation of its vice president of finance, who was the company’s last officer, and the company’s controller, as well as the delay in performing certain essential corporate functions, such as the timely preparation of financial statements, the company said in its SEC filing.
Bradley Williams, an analyst at Legg Mason Wood Walker Inc., said tower manufacturers are experiencing a period of slower-than-expected wireless buildout as well as increased pressure on their margins as a result of the emergence of independent tower operators.
“A large amount of purchasing power is concentrated among a smaller number of players,” said Williams. The tower manufacturers “are much more price sensitive than they used to be.”
Williams said when wireless carriers built their networks, tower equipment was a smaller percentage of the cost, and carriers would instead look to the infrastructure vendors for price breaks. But independent tower operators, which are building increasing numbers of sites for carriers, look to the tower manufacturers for price breaks because their equipment represents a larger cost.
Williams said demand for wireless towers will continue, but tower manufacturers may be compelled to consolidate or branch into other products and services in order to survive.
Siting decisions
In other tower news, two wireless carriers on the east coast were dealt blows in their attempts to site towers.
In one case, a federal appeals court in Richmond, Va., said that a zoning board in Winston-Salem, N.C., was within its authority to deny a request by AT&T Wireless Services Inc. to site a 148-foot tower on private property being considered for a historical designation.
The appeals court ruling overturned a decision at the district court level. The district court had said Winston-Salem must give a written opinion if it wanted to deny the special-use permit AT&T Wireless was seeking. The appeals court, agreeing with an earlier decision it had made regarding similar circumstances in Virginia Beach, Va., said stamping the request denied and attaching the minutes was sufficient.
The decision is seen as pro-community by those who argue that communities should be able to block towers for aesthetic reasons.
In the second case, the Cellular Telecommunications Industry Association was “very surprised and disappointed” when the National Capital Parks and Planning Commission turned down a staff request to support an application from the National Park Service for Bell Atlantic Mobile to site two towers in Rock Creek Park.
BAM has been trying for more than two years to gain approval for the towers and had finally convinced the Park Service to allow the sites to be built. That was all thrown into doubt Thursday night when the NCPPC, which is made up of representatives of the District of Columbia government, NPS, the General Services Administration and other federal agencies, turned down the application. The process required the NPS to file the application rather than BAM.
Rock Creek Park is an urban national park in the center of Washington, D.C. CTIA has long used NPS’s reluctance to site the towers as an example of NPS policy against tower sitings within national parks. “It seems outrageous that if [NPS] found no impact what possible reason could [NCPPC] have [to deny the application],” said Randall S. Coleman, CTIA vice president for regulatory policy and law.
