T-Mobile to sell 5000 towers?

[chuikov]

From RCR:

http://www.rcrnews.com/apps/pbcs.dll...2007/1014/FREE

Big 3, private tower firms all likely keen on T-Mobile USA tower sale

By Matt Kapko

Story posted: March 2, 2007 - 1:58 pm EDT

T-Mobile USA Inc. indicated that it is interested in selling anywhere from 3,500 to 5,000 of its towers in the United States—a sale that could bring upwards of $1 billion to the No. 4 carrier as it continues its plans to deploy 3G services on recently acquired spectrum.

In a conference call for its annual financial report yesterday, the carrier’s German-based parent company, Deutsche Telekom, indicated that it has numerous cost-cutting plans in place to help it reach its goal of saving $2 billion this year and up to $5 billion in costs by the end of the decade. Along with numerous other assets the company is considering selling, it said its towers in the United States do not fit its current strategy.

“We’ve been saying all along that T-Mobile should consider selling its towers,” said Mark DeRussy, an analyst at Raymond James & Associates. “Considering T-Mobile wrote a pretty big check for the last auction, this could help pay for that.”

T-Mobile was the top bidder in the Federal Communications Commission’s spectrum auction that concluded last summer. The carrier is planning to use the spectrum in its upgrade path to 3G, but it could still be a year or so before the network comes online.

“This is the first time T-Mobile has said their towers aren’t strategically located and that they’re willing to sell them,” DeRussy said. “I think all three of the public guys are going to want a front seat at those negotiations,” he added, referring to the big three tower companies: Crown Castle International Corp., American Tower Corp. and SBA Communications Corp., which together own roughly 50,000 of the 80,000 towers in the United States.

“The more provocative possibility is you’ve got a small private tower company (Global Tower L.L.C.) backed by a very large private-equity firm that has roughly 2,000 towers. If they were able to do this deal, they would have tremendous scale. It could provide a platform for that company to think about going public,” DeRussy said.

“I wouldn’t be surprised if there isn’t already a book circulating out there,” he said, adding that T-Mobile USA has been putting other carriers on its towers recently, which would make it more valuable to a potential buyer.

“The opportunity to purchase a portfolio of this magnitude doesn’t come along every day or every year,” he said. “I think it’s got the potential to have a significant impact on the tower sector in the next six to 12 months. It further shows that carriers are willing to outsource more and more of their infrastructure.”

[Matt]

There's no need for carriers to own their towers. It's a good financial decision.

[jones]

How many of these Cell Sites have
space for CoLocation for Equipment
and Panels cuz some Towers are Flagpole?

[chuikov]

Originally Posted by Matt

There's no need for carriers to own their towers. It's a good financial decision.

It probably is, but it's unfortunate because they do a great job managing their towers.

[WumpusVA]

interesting. a firm like american tower would buy them up... not another carrier... right?

[tower master]

I can't see another carrier wanting to buy them. The tower comapnies have interest in this, but for other carriers, it would be too much cost. And the number of flagpole sites they have is so minimal, it wouldn't even play into the equation. Co-location on a flagpole has got to be difficult (I haven't seen it yet), so they may decide to keep those.

[Fire14]

Originally Posted by chuikov

“This is the first time T-Mobile has said their towers aren’t strategically located and that they’re willing to sell them,” DeRussy said. “I think all three of the public guys are going to want a front seat at those negotiations,” he added, referring to the big three tower companies: Crown Castle International Corp., American Tower Corp. and SBA Communications Corp., which together own roughly 50,000 of the 80,000 towers in the United States.

I think this is a good move by them as well, I did find the section above interesting that there towers aren't stratigically located & sounds odd that they would do that.

I also wonder, does this mean where they have antenna's on a building, would they go along with this sale? or just towers & other locations that other antenna's can be added to these towers?

[jones]

BTW T-Mobile Towers in Germany
will also be Sold, as T-Mobile gets
Ready to Buy another Cell Carrier
in the U.S.A. possibly Alltel.
http://investing.reuters.co.uk/news/...EGY-URGENT.XML

[chuikov]

Originally Posted by Fire14

I think this is a good move by them as well, I did find the section above interesting that there towers aren't stratigically located & sounds odd that they would do that.

I also wonder, does this mean where they have antenna's on a building, would they go along with this sale? or just towers & other locations that other antenna's can be added to these towers?

I don't know what the article meant about "strategic locations". I'm sure T-Mobile has built where they wanted to be. That is a bit confusing to me too.

The building sites won't be included. It's just the towers, poles, flagpoles etc. T-Mobile will sell the structures and continue to operate at the sites as a lessee.

[Fire14]

Originally Posted by chuikov

I don't know what the article meant about "strategic locations". I'm sure T-Mobile has built where they wanted to be. That is a bit confusing to me too.

The building sites won't be included. It's just the towers, poles, flagpoles etc. T-Mobile will sell the structures and continue to operate at the sites as a lessee.

Thanks chuikov, I wasn't sure & didn't know if a company would acutally want to buy the building sites, since you can't use it to add more antenna's for other carriers, just revenue from T-Mobile.

[chuikov]

Originally Posted by jones

How many of these Cell Sites have
space for CoLocation for Equipment
and Panels cuz some Towers are Flagpole?

The flagpoles can usually hold between 2 and 5 carriers. The options are limited for each carrier as far as antennas go. Here's a five carrier pole:


http://gallery.wirelessadvisor.com/s...hp?i=1271&c=42

[larry]

Originally Posted by chuikov

The flagpoles can usually hold between 2 and 5 carriers. The options are limited for each carrier as far as antennas go. Here's a five carrier pole:


http://gallery.wirelessadvisor.com/s...hp?i=1271&c=42

Although I have seen some co-located flagpoles before it is pretty rare to see more than one carrier on a typical flagpole site here in So. Cal simply because the height limits on those things are so low here.

This deal sounds a lot like the deal Sprint made a few years ago to sell a bunch of their towers to raise some cash.

[wirles]

Originally Posted by Fire14

Thanks chuikov, I wasn't sure & didn't know if a company would acutally want to buy the building sites, since you can't use it to add more antenna's for other carriers, just revenue from T-Mobile.

There is nothing to buy/sell in regards to a rooftop site for a carrier. Now some of the tower companies have management/sublease rights to the roof of a building and that has value like a tower based on cash flow and projected growth.

I would venture a guess that the 'strategic location' comment was related to 4G network design, but that doesn't make a lot of sense either.

Here is how the financial model works for selling a tower (These numbers are averages for a 5 carrier monopole with 2 paying tenants in addition to the owner):

Tower steel/construction value: $50k
Revenue from tenants: $4k/month

Ground Lease cost: $2500/month
Utlities/Taxes: $500/month

Cash Flow: $12k/year
Projected Cash Flow including a 5 year growth model to add 2 more paying tenants accounting for increased utlities and taxes but not accounting for annual increases at CPI or 3% whichever is greater: $54k

Paying a multiple of 10x cash flow (conservative in today's market) =

$54k x 14 = $540k
Add in tower value = $50k
Total price paid/tower = $590k

Granted, this is not accounting for a lot of costs and such. Usually a tower like this would actually go for around $275k-$350k depending on a lot of variables. At 5000 towers they are looking to cash in with $1B at $200k/tower averages.

I miss being on the M&A side of tower sites. It was a lot of fun working for the owner of a large tower site portfolio that was aggressively buying more in the good times (late 90's to early 2001).

[T Sizzles]

Originally Posted by jones

BTW T-Mobile Towers in Germany
will also be Sold, as T-Mobile gets
Ready to Buy another Cell Carrier
in the U.S.A. possibly Alltel.
http://investing.reuters.co.uk/news/...EGY-URGENT.XML

Wouldn't it be cheaper for T-Mobile if they bought Alltel to sell all of the Alltel towers that overlap in T-Mobile's coverage area? Because upgrading to HSDPA and UMTS on a GSM tower is cheaper then upgrading a CDMA tower to HSDPA and UMTS.

[Fire14]

Originally Posted by wirles

There is nothing to buy/sell in regards to a rooftop site for a carrier. Now some of the tower companies have management/sublease rights to the roof of a building and that has value like a tower based on cash flow and projected growth.

I would venture a guess that the 'strategic location' comment was related to 4G network design, but that doesn't make a lot of sense either.

Here is how the financial model works for selling a tower (These numbers are averages for a 5 carrier monopole with 2 paying tenants in addition to the owner):

Tower steel/construction value: $50k
Revenue from tenants: $4k/month

Ground Lease cost: $2500/month
Utlities/Taxes: $500/month

Cash Flow: $12k/year
Projected Cash Flow including a 5 year growth model to add 2 more paying tenants accounting for increased utlities and taxes but not accounting for annual increases at CPI or 3% whichever is greater: $54k

Paying a multiple of 10x cash flow (conservative in today's market) =

$54k x 14 = $540k
Add in tower value = $50k
Total price paid/tower = $590k

Granted, this is not accounting for a lot of costs and such. Usually a tower like this would actually go for around $275k-$350k depending on a lot of variables. At 5000 towers they are looking to cash in with $1B at $200k/tower averages.

I miss being on the M&A side of tower sites. It was a lot of fun working for the owner of a large tower site portfolio that was aggressively buying more in the good times (late 90's to early 2001).

Nice breakdown of how they will figure this out, thanks wirles.

[RadioFoneGuy]

We sold off our towers to GTP, Global Tower Partners. It has its up and downs. If we want to add a feedline or ant now we have to modify the lease, where before did what we wanted.

I used to have to go to all my towers once a year and use a FAA approved color chart to check the paint color on my painted towers. Used to have to work on the lighting beacons and stobe controllers.

GTP has been slow in moving the light controllers so we have to keep monitoring the lights and call in to the FCC when a light goes out.

Its better for the carrier not to own their towers, it gives Engineering group a higher CAPEX/OPEX to focus more towards upgrades and site build over tower maintanence.

I am surprised Alltel hasnt followed suit.

[wirles]

Originally Posted by Cellonetech

...I am surprised Alltel hasnt followed suit.

That's a good point of discussion. It is very likely that a deal with VZW would entail a 3rd party taking the towers while VZW takes the rest.

[EdwardP]

Originally Posted by Matt

There's no need for carriers to own their towers. It's a good financial decision.

Within one mile of my home, there are two T-Mobile cell sites. One is on top of an apartment building, the other is on a tower owned by AT&T. The AT&T-owned tower also has Cingular on it.

I was not even aware that T-Mobile USA owned their own towers.

[clock3687]

Originally Posted by EdwardP

Within one mile of my home, there are two T-Mobile cell sites. One is on top of an apartment building, the other is on a tower owned by AT&T. The AT&T-owned tower also has Cingular on it.

I was not even aware that T-Mobile USA owned their own towers.

Ed T-mobile has a website where they list all their towers available for colocation. Theres only a few in the Boston area though.

http://www.t-mobiletowers.com/coLoca...tesSearch.aspx