Towers: To Sell or Not To Sell?

The financially driven atmosphere of the tower-acquisition arena is causing some carriers to question the wisdom of selling.

"Things have gone in waves," said Jim Fryer, Fryer's Site Guide president & publisher. "First, carriers were looking to market their own tower sites. Then, some of them made deals with site-acquisition companies, and that seemed like the way everyone was going to go. Then the next wave hit, and a few carriers who might have intended to sell pulled back."

Selling-shy carriers include AirTouch Communications, AT&T Wireless, Sprint PCS and Western Wireless. Although all of these carriers either have been approached by site-acquisition companies or have investigated the possibilities on their own, they have yet to sell a tower.

"The pros for carriers who sell their towers are three-fold," Fryer said. "They acquire cash from the sales, they no longer have to manage the towers, and they no longer have to deal with allowing co-location for competitors on their towers -- which really sticks in some carriers' craws."

Kenneth Woo, AT&T spokesperson, cited the problems associated with co-location as the main reason why AT&T has adopted a "keep to our own" attitude about its towers.

"The times we've had to co-locate with other carriers have not been good experiences," Woo said. "We've co-located out of necessity in some parts of the country, but it's not a significant number."

What is significant is the number of site-acquisition companies actively vying for carrier towers and the impression they've left.

"From our experience out in the field with some of these vendors, we'd just as soon not go down that route," Woo said.

Woo advised that access and quality should be the two key issues in any carrier's tower-management approach.

Like AT&T, AirTouch has so far rebuffed the advances of at least one site-acquisition company. But unlike AT&T, AirTouch hasn't ruled out the possibility. According to Jonathan Marshall, AirTouch spokesperson, AirTouch is in the process of investigating the tower market, much as Bell Atlantic Mobile (BAM) recently has done.

"We researched all the angles early on," said Tony Melone, BAM vice president of network planning. "We contemplated selling our assets outright, looked at lots of alternatives and finally decided to adopt a joint venture."

BAM engaged in an extensive 6- to 9-month review process before deciding to do business with Crown Castle International, then took another four months to close the joint venture, which resulted in the birth of a new company -- Crown Castle Atlantic.

"The paramount issue for us was that we wanted to do business with someone who had ample experience with site management -- not some financial investor who was trying to piece together a bunch of small tower companies or consolidate tower assets," Melone said. "We wanted the industry experience, and that significantly narrowed the field."

Which is the main reason BAM chose Crown Castle.

"Crown convinced us that they are first and foremost operators -- they're in the business for the long term," Melone said.

Fryer believes companies such as Crown represent what carriers are looking for in tower companies.

"There's no longer the level of service there was before when the industry was populated by independent, local operators who knew the territory, the local players and the zoning," Fryer said. "They climbed up and down the towers themselves -- and when you lose someone like that, you're losing a lot."

BAM felt this change in the industry climate while researching its deal with Crown Castle.

"Quite frankly, in some of the companies we looked at, we had the sense that they were only in this for the short-term financial gain," Melone said. "But with Crown, we were confident that here was a business built from the ground up -- with people building towers, climbing towersand maintaining the sites."

BAM's deal with Crown involved 1,500 towers and a build-to-suit agreement for more than 500 in the next five years. The sheer size of the deal was a cushion for BAM.

Melone said smaller deals do not merit as much high-quality assurance from site-acquisition companies as large deals do.

To simulate the kind of "cushion" a larger deal affords, Melone recommends that carriers establish a transitional services agreement with the acquisition company. This way, the carrier maintains operations until the acquirer has "settled in." Fees should be agreed upon in advance.