Cell Tower Info Blog

Wireless Capital Partners tells Landowners of Sprint/Nextel Credit Problems.

So today, two seperate clients who are considering cell site lease buyouts from Wireless Capital Partners received emails from their WCP reps that has a cryptic message regarding Sprint/Nextel's credit rating being downgraded to junk bond status.

The messages include an attachment of a news story about the downgrade. One goes on to say that there have been some amazing changes for WCP since they approached my clients first and that pricing leases is a "moving target". The other doesn't suggest or tell why the story was sent. Neither really states why they were sent at this time.

I surmise that WCP is using the article to scare landowners into selling with the implication that if it happens to the mighty Sprint/Nextel it can happen to the other carriers. Secondly, I assume that WCP will either reprice their cell tower lease purchase offers for Sprint/Nextel leases or discontinue offers altogether. (EDITOR'S NOTE- 6-1-08- Since writing this post, it has come to our attention that WCP has simply stopped purchasing Sprint/Nextel leases. Contrary to what was written above- WCP's financing group simply felt that there was too much risk in owning more Sprint/Nextel leases in the WCP portfolio. WCP's business model is based around spreading risk on their leases and the Sprint/Nextel leases increased that risk too much. WCP is working on acquiring alternative financing for Sprint Nextel leases.)

If you are a landowner that has an offer from WCP for a Sprint Nextel lease- don't dispair. Contact Steel in the Air- because their are other companies that are still buying Sprint/Nextel leases. If you are concerned about your Sprint/Nextel lease as a result of this- remember that Sprint and Nextel has no value without its cell sites. So while there may be a risk of termination due to the merger and duplication of Sprint/Nextel cell sites- these sites still form the basis by which Sprint/Nextel service their subscribers. Without them, Sprint/Nextel will really be in trouble.

Steel in the Air, Inc. and the author are not affiliated with Wireless Capital Partners or Sprint/Nextel. If you reached this post while looking for Wireless Capital Partners- go to www. wireless capital. com (without spaces) or http://www.sprint.com/.

Labels: lease buyouts, Sprint PCS, Sprint/Nextel, wireless capital partners

posted by Steel in the Air @ 6:40 PM 0 comments

Sprint/Nextel & T-Mobile Merger in the Works?

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.

Labels: Deutche Telekom, Sprint PCS, Sprint/Nextel, T-Mobile, WIMAX

posted by Steel in the Air @ 6:34 PM 0 comments

Sprint's Sublease of Sites- Part 2- Lightower

Labels: Lightower, Sprint PCS, Sprint/Nextel

posted by Steel in the Air @ 7:56 AM 0 comments

Sprint's Attempt to Sublease their Sites

Sprint has been contacting landowners recently with existing Sprint sites and asking to modify the current antenna installation. They propose adding 2 parabolic antennas to the site. When asked, they suggest that the additional equipment is used in "support of" their 4th generation WiMAX technology. Yet a careful review of the proposed lease amendment shows that they want to modify the current lease agreements so that Sprint "OR ANY OF ITS AFFILIATED ENTITIES, SUBLESSEES, ASSIGNS OR CUSTOMERS" can use the Site for installing equipment, antennas and microwave dishes, air conditioned shelters, ect.

Basically, Sprint wants unsuspecting landlords to sign these agreements not realizing that they have now authorized Sprint to sublease to virtually anyone. (I am a Sprint customer- perhaps I can get a sublease on one of their sites).

Personally, I find this type of negotiation misleading. Why represent that Sprint wants to add equipment if in fact, they simply intend to sublease to a third party? The answer is relatively easy- otherwise landowners would ask for more money.

Before you agree to an amendment like this or a proposal to add more antennas to your cell site, make sure you consult an attorney who understands wireless leases to counsel you on what rights you are giving up. If you need help evaluating the value of a Sprint lease amendment for additional antennas, contact Steel in the Air.

Labels: cell phone tower lease, Sprint PCS, Sprint/Nextel, WIMAX

posted by Steel in the Air @ 3:34 PM 0 comments

The Next Frontier: Consumer Electronic Devices with Cellular Connections

In a seeming nod to the potential of an open access network for consumer devices, Verizon has announced that it will start to focus more on connectivity of consumer electronic devices similar to what Sprint announced with its XOHM plans.

Verizon will allow any device that meets minimum technical standards to access Verizon's CDMA network. If you recall from an earlier post on WiMAX with Sprint, this is what Sprint proposed to do. Both companies are excited about the prospect of high speed wireless connections to all type of devices and the prospect of the minutes of use that would come with those connections.

Recently, Amazon announced its Kindle e-book reader which uses the Sprint EVDO network (CDMA initially) to download books to the reader. In this situation, Amazon has worked out an arrangement with Sprint to pay for the network usage rather than the end user. It is easy to foresee future devices where the minutes of use cost is absorbed by the device provider.

Labels: CDMA, Sprint PCS, WIMAX, XOHM

posted by Steel in the Air @ 2:05 PM 0 comments

With XOHM, Sprint's WIMAX Plans Are Optimistic

On August 16th, Sprint/Nextel spoke about their WiMAX plans during an investor call entitled "Sprint Ahead: The Technology Summit Call". The Sprint/Nextel WiMAX plans which they have named XOHM (pronounced zoam) are optimistic at best.

In reviewing the presentation- we were struck both positively and negatively with a number of the concepts and statements presented. First- from a general standpoint, the ambition of the project is impressive. Sprint/Nextel (along with the Clearwire WiMAX joint venture) envisions seriously competing with Verizon FIOS (fiber to the last mile) and the large cable companies to provide entertainment, voice, and data services to the end user. Sprint/Nextel believes that if XOHM is successful, electronics manufacturers will include WiMAX chips within common household products like TVs, DVD players, laptops/PCs and even household appliances.

There is dissension among experts in the industry whether a high speed mobile connection is actually necessary or desirable. Personally, I believe that a persistent mobile high speed connection will open new industries dedicated to servicing niche business and consumer needs that are not well served by landline connections like cable and fiber. This is different from Clearwire’s current service model which is referred to as nomadic. Nomadic means that the user must be sitting still to effectively use the service. This is not truly mobile and wireless. Sprint alleges that high speed IP connectivity will foster new applications and devices. I concur but I doubt that a privately controlled network will foster innovation. That is why I personally am excited about the 700MHz auction and the FCC requirements that some of the spectrum allow open access to unlocked devices to all programmers and users.

No doubt XOHM is ambitious- the better question is whether it is possible within the time frame Sprint envisions and before Sprint’s competitors develop their own alternatives. Sprint/Nextel and Clearwire both believe that it is possible and are betting over $5 billion in network investments. Their reasoning is clear- the cost to cover the last mile (the physical connection to the home from the main fiber or cable switches and lines) is significantly less expensive wirelessly than via cable or fiber- because there is no digging required. By leveraging their existing infrastructure of towers/switches ect., Sprint is in a great position to develop the network at a lower cost per end user than FIOS/Cable. Presumably the network will take far less time to build as well.

However there are some practical limitations that Sprint will need to overcome to succeed. We address some of the “optimistic” assumptions made by in the Sprint presentation:

1. Slide 46- Up to 10MB/s speed across the network- It is well known that data speed on WiMAX and other wireless data services diminish the farther the user is from the cell site. We have heard that WiMAX is only effective at distances of 1.5 miles or less from a WiMAX site. We see no justification by Sprint/Nextel that up to 10MB/s is possible from their existing infrastructure of cell sites which in rural areas are sometimes 7-10 miles apart. Does Sprint/Nextel envision building towers every 1.5 miles or less or do they simply plan on only covering the urbanized areas that can support the site development necessary to provide this service. We surmise it is the latter.

2. Slide 22- "2.5GHz provides a balance across coverage and capacity" Sprint is suggesting that the 2.5GHz spectrum meets the two hallmark goals of wireless system design, coverage and capacity. Users expect that they will have ubiquitous coverage so that the user can access the network anywhere they go. Users also expect that the network will have the capacity to be able to handle their call along with those of every other user on the network when they want it. Industry experts suggest that 700 MHz provides better coverage at a cheaper cost than 2.5GHz spectrum. Sprint/Nextel’s assertion that 2.5GHz is more effective than the 700MHz spectrum for capacity issues is intended to quash the naysayers who point to the upcoming 700MHz auction as potential competition to Sprint/Nextel's 2.5GHz WiMAX plan. While Sprint/Nextel confirms on slide 22 that 700MHz requires 1/3 fewer sites to provide coverage, they allege that 700MHz requires 10-15 times more sites to handle the same number of users as a 2.5GHz system. We assume Sprint bases this statement on the current capacity standards for PCS/cellular base stations which are equipped to handle the significantly lower bandwidth required by voice and data today. If Verizon or Google or another carrier were to win a large chunk of 700MHz spectrum, you can be assured that equipment and antenna vendors would develop equipment with capacity that would meet or exceed Sprint/Nextel's current WiMAX equipment standards.

3. Slide 23- End user equipment cost will not be subsidized by Sprint. Sprint envisions that the equipment manufacturers will manufacture devices with cheap WiMAX chips inserted. Unlike cellular phones, which are heavily subsidized by the wireless carrier, Sprint can simply design specifications for the chip that the manufacturer inserts into these new devices. The end user will bear the cost of the chip when purchasing the device from the local retailer. For this to occur there has to be a significant adoption of the service- which means that the experience must meet the technical expectations of the early adopters which include consistent connectivity and data throughput speeds. These early adopters must rave about it publicly-and see the upside in having devices with internal WiMAX chips. Furthermore, Sprint must be prepared with better customer service if and when the expectations are not met.

4. Slide 47- Over 80% of the expected $2.5 billion in revenue expected by Sprint from WiMAX will come through new lines of business. For WiMAX to succeed this will have to be true. Sprint’s current PCS business consists virtually entirely on servicing cellular users who rarely use the advanced network functions on their current phones. Data adoption has come slower than expected but is finally ramping up. Current 3G cellular networks are sufficient for most users to access email and limited internet browsing. So for Sprint/Nextel to succeed they must find new market niches that aren't being filled by existing services. This is entirely possible. I frequently think that I would be willing to use my phone for browsing if the speed were faster. I also believe that a constant always-on connection to our cell tower databases and maps and our customer manager system would be worthwhile. Neither of these is really feasible on existing cellular networks.

5. Backhaul Issues- Slide 36. Sprint fails to address any specifics about the technical needs for backhaul from the individual WiMAX sites to the network. An individual cell site needs between 5 and 8 T1- equivalent phone lines to transfer a few hundred simultaneous voice calls and data use between the cell site and the switch to the landline system. Each T1 line handles approximately 1.54MB/s of data and cost hundreds of dollars per month. Yet somehow Sprint expects to handle up to 10MB/s for EACH user with numerous users per cell site. We can't even fathom the number of T1 lines necessary for WiMAX type services to a few million end users. Currently, it is not a problem for Clearwire who has around 299,000 subscribers and promises nowhere near 10MB/s. If any reader can tell us what the number of T1 line equivalents is necessary to provide this type of service, we will be happy to credit your contribution. To be fair to Sprint, this is not a problem that is unique to them- any competitor has the same issue. A number of companies have been trying to address these issues wirelessly like FiberTower and TowerStream.

Provision of WiMAX services are a tall order- and Sprint is betting that being first to the table (with Clearwire) will give them edge over competing services. If they can meet the technical hurdles listed above and establish a large enough market share prior to their competitors entering the market- then perhaps WiMAX will meet Sprint and their investor’s expectations. Sprint seems to be going it alone at this time as the other carriers take a wait and see approach. I applaud their ambition- and as an early technical adopter- will anxiously keep an eye on their progress to see whether XOHM is a service worth adopting.

Labels: 700MHz, Clearwire, FiberTower, Google, Nextel, Sprint PCS, TowerStream, WIMAX, XOHM

posted by Steel in the Air @ 7:30 AM 0 comments

Global Signal Sprint sublease questioned in IL Court

In late 2005, Global Signal announced the lease of 6600 Sprint towers and the sublease back of the towers by Sprint. One of the questions that we pondered during that time was how this lease would be interpreted if the underlying ground lease between the ground owner and Sprint prohibited subleasing. In a number of cases, Global Signal's response was to simply craft a site management agreement and not sublease the tower.

Fortunately, it appears that we will soon find out. Oak Forest, IL has sued Sprint PCS over the alleged improper sublease of the tower to Global Signal, claiming that the sublease violated their underlying lease agreement. One of the other questions we pondered was whether there was any damage to the landowner by allowing Global Signal to sublease the tower. In effect, all Global Signal was doing was taking the place of Sprint in managing the tower. If the underlying cell tower ground lease prohibited subleasing, Global Signal could not sublease space on the tower without Oak Forest's consent.

Oak Forest could argue that by subleasing to Global Signal, that now there were two companies that need access to the cell tower. But really is the burden any greater?

Either way, it really does not appear that this suit was motivated by the "damage" from the unauthorized sublease. Oak Forest is developing a mixed use development where the cell tower sits- and negotiations on the voluntary removal of the tower weren't moving fast enough. Rather than use eminent domain to "take" the cell tower and compensate Global Signal, the city simply sued for breach of the lease. Having assisted a number of municipal clients navigate through the issue of eminent domain and cell towers, Steel in the Air has found that many municipalities are poorly informed about the cost of relocation of a cell tower.

The legal question here is whether or not the City was actually damaged, and if so, if removal and forfeiture of the tower is an equitable solution to the issue. That will be for the court to decide, if this actually isn't settled prior to the court hearing arguments.

Labels: cell phone tower lease, cell tower ground lease, eminent domain, Global Signal, Oak Forest, Sprint PCS, sublease

posted by Steel in the Air @ 8:18 AM 0 comments