**As published in RCR Wireless News** Many talk about cellular towers as if each of them were equivalent to a claim for gold or oil. But in reality, towers are even better than gold (the black and gooey kind or shiny and gold kind). For all intents and purposes, the ability for wireless towers to multiply from sea to shining sea isn’t at all hindered by the same resource requirements. In other words, a natural resource like gold isn’t finite in the same way space and the need for wireless towers flourishes – indeed their growth is only kept in check by man-made forces. For the past 10 to 15 years, the tower industry has gone through waves of consolidation, periods of rampant growth and buildouts that were followed by equally rapid down turns. Generally, the cycle repeats.
Working behind the scenes tirelessly and with much less fanfare are the small tower owners that may own a single tower or a portfolio of 15. Marc Ganzi, CEO of Global Tower Partners and chairman of PCIA, calls small-tower owners the “heart and soul of the industry.” The small mom-and-pop operations that build these towers keep the industry going, he added. Collectively, small tower companies comprise around 28% of the entire tower landscape, but pinning down anything resembling solid data on tower counts is almost impossible. It’s generally believed there are more than 260,000 base stations throughout the country, but towers and sites are not one and the same. PCIA only deals with the tower portion of that, which is nearly half or about 125,000 towers. “There’s no way for anyone to accurately track who owns what and how many small tower owners are out there,” Tim House, director of marketing at sales for PCIA, told RCR Wireless News. Regardless, small tower owners as a collective unit are “easily the size of one of the tower companies and may in fact be the size of two of them,” he added. Voice for the small While it’s practically impossible to poll every small tower owner in America, Ganzi and PCIA are working on giving them a louder voice among their publicly traded peers and often would-be suitors. “They’re an important part of the fabric of the industry,” Ganzi said. “It’s part of the ecosystem. If that group of owners, if that 28% of the pie doesn’t have a voice and doesn’t feel like they have a chance at continued success, then we’ve crippled what has gotten the industry to where it is today.” PCIA is creating an advisory board of smaller tower owners to give them a stronger foundation and also connect with local developers and real estate veterans that can help. Advocacy will be the board’s first priority. With a few nominations already in place, Ganzi said he hopes to have the advisory board in place by early December. Operations and revenues The majority of small tower owners only have one or two towers and many find themselves scrambling to achieve success quickly to stay above water. Most of the developers building towers today have been building for 10 to 15 years and carry a significant background in construction. “These are folks that are literally living tower to tower,” Ganzi said. “If they can’t build, they’re not going to be successful and they bear that responsibility at the end of the day.” Small tower owners are considered a close-knit group of individuals even though their backgrounds are as varied as their reasons for venturing into the tower business in the first place. There’s no typical owner, but you’ll generally find commercial real estate veterans who see this as a natural extension of their existing business, people with backgrounds in technology or the wireless industry who want to get in on the action, and finally the investment community. Bundle and sell While some may prefer to hold onto a tower or two as a steady revenue generator, there’s also a massive cottage industry of investors trying to build up a portfolio of 10 to 15 towers in strategic locations with the goal of packaging them together and selling to a large tower company. Steven Bitner, managing director at Media Capital Advisors, laid out the typical development cycle. An investor will scratch together $300,000 to $500,000 to build a few towers, get as many tenants as possible on those towers, then sell. Once they flip their initial investment after a couple years if all goes to plan, they’ll often reinvest – build another four or five towers and slowly build up a portfolio approaching the double digits, Bitner explained. Patience is definitely a valuable virtue when it comes to the tower space. “Even if the large tower companies buy up their assets, they get right back into it and build up their portfolio again,” Bitner said. “That need to flip towers to build the next one – the crux of that problem from the developer standpoint is being able to get that tower to mature enough and not flip when you have a single tenant.” Not including land acquisition costs, a single tower could cost $150,000 to build in a rural area and as much as $250,000 in a more complex, urban environment. The payoff from that investment will skew just as heavily, depending on supply and demand. On average, each tenant will pay $2,000 per month, but that could be pushed as low as $1,300 or as high as $3,000. Challenging cycles and the future Despite the draw toward wireless tower investment, access to capital is still particularly challenging in today’s business environment. Most tower companies don’t have institutional backing or financiers to start with, and many local developers are putting their name and million-dollar-plus-debt loads on the line, but also lowering the cost of capital in the process. “Obviously with the financial crisis, financing has been very much a challenge for them, but the opportunities have not abated at all. How they’re going to fund those opportunities is their number one concern,” Bitner told RCR. Smaller community banks are getting involved and probably saving developers a couple points on their balance sheets too. While capital has dried up to a larger degree and the most recent tower-building bonanza of 2004-2005 fades further into memory, most agree that pent-up demand for more coverage at faster speeds is growing. Indeed, with the wireless industry turning the corner toward fourth-generation networks the opportunity seems just as rich as ever – small tower owners stand to grow in ranks tremendously and many of them will thrive for years to come.