Tower executives: fundamentals still good

NEW ORLEANS--The tower industry did its best to put on a happy face during its annual Tower Summit here today. Despite, the heavy balance sheets crippling the majority of public tower companies, most company executives said the tower management business is still a fundamentally strong business.

Wireless growth is still strong, but it’s a matter of convincing financiers not to lump the tower business with the sagging telecom market as a whole. Wireless growth is increasing, and carriers must continue adding towers to bolster their coverage.

“People forget that this is and always will be a long-term business,” said Steven Dodge, chairman and CEO of American Tower. “The negative outlook for carriers hurts the tower industry. Carriers need to get the financial world to buy into the business. The fundamentals have been trashed way too much.”

Jeffrey Hirschfield, president of Hirschfield Communications, lamented that financiers continue to lump the tower industry with the plight of the telecommunications industry as a whole. “All investors hear is telecom,” he said. “The big picture is that wireless penetration is far below other countries. Subscribers and minutes of use will continue to go up.”

Hirschfield and other private tower firms are discovering that they have an advantage when it comes to acquiring new tower assets since the public companies’ hands are tied in taking on any new business.

“It’s as good as it has ever been for us,” said Hirschfield. “Private companies have an advantage because they can be selective with their agreements.”

Meanwhile, companies like American Tower are swimming in debt because they diversified in too many directions, attempting to managing towers while performing other services like site building and tower maintenance. Dodge said American Tower is striving to become just a tower owner.

“There are big differences in margins,” he said. “We are in the process of turning [our other assets] into cash.”

SBA Communications, on the other hand, sees the services business as an integral part of the company.

“We couldn’t have built the portfolio we have today without services,” said Jeffrey Stoops, president and CEO of SBA. “They are strategically important and make us better tower owners, but we have migrated toward making sure they are solid financial performers.”

As such, there is great debate within the tower industry as to whether companies should pursue new lines of business, such as neutral hosting for in-building wireless sites.

“The restraining capital market says stay with what we have,” said Dodge. “You could end up with an arrow in your back.”

Neutral hosting for in-building sites also brings a host of complex issues that must be flushed out, said Marc Ganzi, CEO of Global Tower Partners, a newly formed tower management company. The capital expenditures associated with building these sites are enormous, while carriers aren’t yet chomping at the bit to get the work done. In addition, tower companies will have to deal with the different landlord philosophies surrounding public areas such as airports, port authorities and convention centers.