Tower Clearance

Selling off your towers and leasing space on a shared site run by a company that now holds many of your former sites may be the trend, but according to industry analysts consolidation hasn't closed the deal on the still-growing tower industry just yet.

Although consolidation has given many carriers a reason to cheer, Herschel Shosteck, Herschel Shosteck Associates president & CEO, said it's only half of the solution that will change the face of the tower industry in the future.

Consolidation, or the selling of built-to-suit towers to tower companies, has allowed more carriers to leave the business of tower management to someone else and save money in the process. But the advent of 3G with data being pushed through wireless applications will require more than consolidation and co-location to keep supply and demand balanced. In order to keep up with the projected subscriber numbers, new towers must be built.

According to Raymond James & Associates (RJA), there are an estimated 60,000 towers suitable for wireless service providers. RJA also predicts that at least 25,000 new towers will be added this year.

One tower-company engineer said tower construction will rise this year, but not drastically. He said co-location will stunt the industry's growth a little. RJA market analyst Eric Prentices disagreed. He said co-location will continue to be a valuable tool in site management, but building will escalate.

"Even with four or five carriers on a tower, there will still be a need for new towers," he said. "We believe PCS service is spreading and will continue to spread like wildfire. There's going to have to be more towers."

STRONGER TOWERS Ed Gazzola, Morrison Hershfield president, insists the future of tower consolidation is in new towers. However, not just any towers will do. The new towers need to be stronger.

Currently, 40% of all wireless-industry towers are monopoles. Gazzola said many monopole towers have had to be reinforced or even replaced because they could no longer withstand the wind loads needed for the additional carriers. Even guyed and freestanding towers need upgrades to fit co-location's load requirements.

"Nowadays you hardly ever see a tower with only one carrier on it," he said. "Towers have to be equipped to carry that many more antennas, and in some cases they are not. I think with this burst of new construction, we should see better-built towers available to carriers."

TOWER ALTERNATIVES Some tower companies fear that the move to micro and pico sites may be a new roadblock in tower growth. Carriers are using the small base stations to get more capacity and pinpoint coverage. But industry-watcher Shosteck said although smaller sites will be used with greater frequency, they will not do away with the growing need for traditional towers.

Micro sites usually are not used to serve rural areas, and as the wireless population spreads out, suburban and rural areas will need more coverage. Towers are the best way to bring that coverage.

According to engineers, rooftop sites also won't prove to be a great threat to tower consolidation. Although rooftops are best suited for in-building and metropolitan coverage, they are only a small part of overall network design. Master lease agreements with large tower companies will continue to be the trend and offer the best use of your capital.

Compared with towers, rooftops are a bit harder to outfit with RF equipment while maintaining RF exposure limits being advocated by groups such as OSHA and the FCC; towers once again win out in ease, access and cost.

PROFITS Born out of the need to divest property and increase income, tower consolidation is a great way to help your bottom line. Nextel, Omnipoint and Powertel sold their entire tower inventories to benefit their budgets. But in the name of competition, some carriers opted to hang on to a small number of key sites.

Shosteck said the high cost of 3G may force carriers again to take stock of their towers. He said carriers still owning their own towers will start to sell them in order to better afford 3G's steep price tag.

Gazzola said because the majority of telecom towers are owned and managed by five tower companies, carriers are able to make good deals and save money. The five companies are American Tower, Crown Castle, Pinnacle Tower, SBA Communications and SpectraSite. He said in the future there would be even more consolidation, and some of these companies will merge.

RJA expects a significantly larger number of towers and a much smaller number of players by the close of this year. RJA and Gazzola both predict one or two of the top five tower companies will merge this year, which could allow for more access and better rates.

"When a big merge happens, it means carriers benefit," he said. "Carriers can pay a set price and have all their tower needs handled by one company."

Having a hard time finding the perfect site? Can't quite figure out how to sell your towers? Don't fret; use the Internet.

Now there is a place made for buyer, seller and lessee. The Web site for Telecom Site Source (www.telecomsitesource.com) is both a site locator and a tower-industry bulletin board.

This site is set up to offer free help to wireless companies trying to locate potential cell sites quickly and effectively. Run by CDS Business Mapping, the site offers desktop mapping of thousands of sites nationwide.

Say you are looking for a site in Tampa, FL. Just type in the location name and you will see a map with a number of viable sites in the general area. Zoom in and you can take a closer look at the property. Double click on the site and you will get the height, elevation and a contact to discuss your lease options.

For a fee, you may put your own towers up for sale. As an added bonus, there also is a link to other telecom Web sites.