MD7 and the Value of a “Guarantee”
June 12th, 2010 by sita Posted in Lease Renegotiations, T-Mobile | No Comments »In the last 6 months, Md7 has been offering landowners a guarantee on their T-Mobile ground and rooftop leases equivalent to 10 years. What may not be clear when they offer this guarantee is that T-Mobile is not the company making the guarantee- instead a subsidiary of Md7 named Md7 Capital Three is making the guarantee. Some of our clients have started negotiations with Md7 believing that T-Mobile is the one who is actually guaranteeing the lease and did not know until retaining our services that Md7 Capital Three is actually the guarantor.
The obvious problem with this is that the value of the “guarantee” is only as good as the long term viability of Md7 Capital Three. Suppose that Md7 Capital Three is undercapitalized and T-Mobile terminates a significant number of leases held by Md7 Capital Three after 4-5 years. Then Md7 Capital Three could simply file for bankruptcy and the landowners who agreed to accept less rent in exchange for the guarantee won’t even receive the guaranteed rent. Please note we aren’t saying that Md7 Capital Three is or is not well capitalized nor are we implying that Md7 set up Md7 Capital Three to avoid its liability under the guarantee. We really don’t know. However, if you are considering a guarantee from any company that they will pay rent for 10 years, we believe it is prudent for you to do your due diligence and review the assets and liabilities (short and long term) of the company that is offering the guarantee. If Md7 is unwilling to provide this information, then that signifies a warning sign to us that you might want to really consider your options.
If you need help assessing the value of your lease and whether the implications from Md7 that T-Mobile might consider terminating your site if you don’t accept their “guarantee”, please see our page on T-Mobile Lease Renegotiations. We are not and will never be affiliated with Md7 in any way.
T-Mobile Cell Tower Construction On Hold.
June 1st, 2009 by admin Posted in T-Mobile, tower construction | No Comments »This afternoon, one of our clients who had negotiated an agreement with T-Mobile for lease of their land received the following response from T-Mobile as to why their lease was not signed:
“As I mentioned during our conversation, due to the Economic Situation, T-Mobile is not moving forward at this time, with any leases, since no towers are going to be built. We would like to keep this site as a possibility for future reference, since it is a future interest for T-Mobile.”
Our client was understandably angry because this particular lease reimbursed him for legal fees that he had already expended. So T-Mobile’s failure to sign the lease meant that he wasn’t going to be reimbursed even though he had done everything they had asked of him and had signed the lease.
It appears from this message that T-Mobile tower construction nationwide is on hold. We have heard a rumor that capital expenditures from T-Mobile in some markets have been dropped 90%. We suspect that they are still continuing with construction on some towers but that a budget hold has been placed in effect and a good number of towers are not being constructed at this time. In our experience, these setbacks are typically an indicator of one of the following:
1. Poor financial performance: T-Mobile has not been having a banner year.
2. Possible merger: Carriers typically stop construction prior to announcing a merger.
3. Need to reallocate budget for 3G.
I believe this is probably indicative of the 1st scenario. If you are in a similar situation, there isn’t much you can do other than wait. Whatever you do, there is no cause to get angry towards T-Mobile.
Sprint/Nextel & T-Mobile Merger in the Works?
March 22nd, 2008 by admin Posted in Deutche Telekom, Sprint PCS, Sprint/Nextel, T-Mobile, WIMAX | No Comments »Analysts from Merrill Lynch suggested earlier this month that T-Mobile may be in a position to acquire Sprint Nextel. Here is our breakdown of reasons why we could see this happening and reasons why we can’t:
REASONS WHY SUCH A MERGER COULD OCCUR
1. The declining dollar: T-Mobile is owned by Deutche Telekom. With the euro’s increase in value relative to the dollar, the cost of acquiring Sprint/Nextel would be lessened.
2. 4th Generation Wireless: Sprint/Nextel’s WiMAX spectrum and development. It is no secret that T-Mobile is fourth in the race to 3rd generation wireless. While Sprint, AT&T, and Verizon have already implemented next generation technology on a majority of their urban sites, T-Mobile is in the midst of their UMTS overlay project. With less spectrum than the other carriers, T-Mobile had to bid heavily in the Advanced Wireless Services Auction before they could start this deployment. With Sprint/Nextel- T-Mobile gets to jump to 4th generation wireless services without acquiring more spectrum.
3. Spectrum Auction Participation: T-Mobile did not win any spectrum in the recent 700mhz auction. Perhaps because they won a good deal of spectrum in the AWS auction- but it is conceivable that they gained additional comfort knowing that they would have access to the 2.5GHz spectrum used by Sprint/Nextel for WiMAX.
4. Sprint Stock Price: Sprint’s stock valuation is pitiful. At $6/share, Sprint’s market cap is $19.3 billion. However, Sprint/Nextel’s assets are valued at over $60 billion. We believe Sprint’s stock has taken a beating that may be worse than deserved. Perhaps T-Mobile understands this as well.
5. Number One: A Sprint/Nextel/T-Mobile merger would yield 83 million subscribers- making it the largest carrier in the US. AT&T has 70 million with Verizon at 64 million.
6. Sprint Inactivity: Based upon our anecdotal evidence from clients who approach Steel in the Air, Inc to assist them on new lease negotiations for rooftop cell sites or tower sites, Sprint is not doing any new site development as yet this year. This could be an indication that a merger is in the works and Sprint/Nextel doesn’t want to expend capital on building new cell sites that will be duplicative to a T-Mobile site.
REASONS WHY SUCH A MERGER MIGHT NOT OCCUR
1. Foreign ownership: In 2000, when Deutche Telekom acquired Voicestream and re-badged it T-Mobile, there was regulatory and Congressional concern regarding a foreign company having ownership of a cellular network. This concern can only be greater if Deutche Telekom acquired Sprint/Nextel.
2. Antitrust: The FCC and DOJ might have anti-trust concerns regarding the merger of the 3rd and 4th largest carriers into the number one carrier. However, if the mergers of AT&T/Cingular and Sprint/Nextel and the FCC/DOJ’s failure to force significant divestitures in either merger are an indication, this merger could fly through. Steel in the Air has polled a few other experts- who seem to mostly believe that a merger between Sprint/Nextel/T-Mobile would be approved.
3. Technology Soup: T-Mobile operates a GSM network, Sprint a CDMA network, and Nextel an iDEN network. It is believed by some of us that Sprint/Nextel’s failure to smoothly integrate the two divergent networks is responsible for a large part of their current stock woes. The migration of all three networks would be a significantly difficult hurdle.
4. Sprint’s Pride: Regardless of where there stock is- Sprint most likely believes like I do that their issues are temporary. The market has been particularly unkind to Sprint’s missteps and failed to value Sprint/Nextel’s considerable spectrum holdings and the prospect of WiMAX.
In the end, perhaps the merger of Sprint/Nextel and T-Mobile is just intriguing supposition. However, if this merger was to occur, it would have dramatic impact on the tower industry and on cell site landowners.
T-Mobile offers WIFI/Cellular dual mode phone
July 7th, 2007 by admin Posted in T-Mobile, WIFI Cellular Phone | No Comments »According to a New York Times article on WIFI enabled cell phones (and many other articles of similar nature), T-Mobile is gearing up to offer a dual mode phone that lets the user “seamlessly” switch between a WIFI network in the home or office (read: anywhere that the phone has been previously configured to use that network with proper security).
A number of articles suggest that T-Mobile is doing this simply to save money developing new cell sites- which is definitely true. However, looking at the number of cell sites owned by each of the big four wireless providers (see our previous post on number of cell sites owned by each carrier), and if you look at the number of subscribers for each wireless carrier, it might seem more clear why T-Mobile finds it necessary to do so.
T-Mobile has a smaller coverage area than the other big three in the US. Furthermore, much of their spectrum is in the PCS 1900mHz range- which is not as effective as the cellular frequencies. T-Mobile is playing catchup- and rather than lose clients who find inferior coverage in their homes and offices where T-Mobile’s coverage is weaker, they are displacing the cell traffic to the free WIFI networks. Given that much of the heavier data intensive use will come when the user is stationary (home/office) this also frees their network of high bandwidth traffic.
To T-Mobile’s credit, the user has greater control over the quality of service (QOS) and can simply add coverage at their home even if the phone does not work well there.
The article points out that there are some issues. First, and most importantly, WIFI is unlicensed spectrum so the possibility of interference and poor signal coverage is high, especially in urban areas. Secondly, T-Mobile will in essence now be taking on the tech support role for setting up wireless networks correctly. Lastly, the article does not mention whether a call made on an open WIFI network will be protected from being overheard.
We believe this is a good move for T-Mobile- and that the other carriers will follow eventually. Giving the end user a higher level of service will reduce churn- especially for users who were on the edge of acceptable coverage in the past. Furthermore, it might allow T-Mobile to increase the number of users who purchase unlimited data plans.