Steel in the Air’s 2022 Predictions for Cell Tower Leasing and Valuation.
While 2021 certainly impacted many industries negatively, the wireless industry wasn’t one of them. This past year was a particularly strong year for tower companies and landowners. Looking forward into 2022, we see more of the same.
Wireless Service Provider Predictions.
- Wireless service providers will aggressively continue to deploy new spectrum on existing sites. AT&T and Verizon will accelerate their C-Band plans despite the most recent dust-up with the FAA and the airline industry. T-Mobile will complete most of their 2.5GHz overlays for existing T-Mobile sites and their conversions of Sprint “keep” sites. Just this week, AT&T and DISH won nearly 2/3rds (by $ amount) of the spectrum in the 3.45GHz action. This spectrum all needs to be deployed to work. Accordingly, there will be more modifications to existing sites in 2022 than in previous years.
- The Big-Three carriers will continue to build (or start to build) infill sites to fill in gaps in 5G between existing sites. While all Big-Three carriers have 5G on low-band spectrum, it is nominally better than 4G. Thus, users will start to observe noticeable speed differences when they leave “mid-band” 5G and move into low band 5G. Because many cell sites were designed originally for 1.9GHz, more will be needed to cover the same area in 2.5GHz or C-Band. We have already heard of elevated “greenfield” build plans for AT&T and Verizon in 2022. Private build-to-suit tower companies will likely be the biggest beneficiary of these infill sites.
- DISH will launch its first market around the middle of the year. We will finally get to see the new network in action. However, some anticipated DISH markets are currently forecast for 2022 will slide into 2023. Building a nationwide network from scratch in a matter of years is difficult, even given the best intentions. Doing it while trying to save money is even harder. We have been involved in network launches, and deploying the first 80% of sites is easy; it is the last 20% that cause the most headache. As the year goes on, tower owners and building owners should expect that DISH will offer more in rent and signing bonuses to launch critical sites and markets. Simultaneously, DISH capex and opex will measurably rise this year as the number of sites required to build out the market will grow beyond current industry expectations.
Predictions for Tower Companies.
- The public tower companies (AMT, CCI, SBAC, DBRG) will have their peak year in 2022 in terms of US carrier activity. With new collocations from infill and DISH and substantially high modification activity, this year should be similar or slightly outpace to 2021 in terms of activity. (Before you run and invest in the tower companies- some analysts feel that they are already priced at a premium.)
- Tower valuations will remain at or near an all-time high. Between low-interest rates, aggressive acquisition strategies by the public tower companies, and new buyers (including international infrastructure funds) entering the field with lower ROI expectations, 2022 should be another banner year for tower owners looking to sell.
- Significantly more Sprint sites will be decommissioned in 2022 than in 2021. As master lease commitments with the big tower companies start to end, T-Mobile will look to quickly shed the expense of operating two networks. If T-Mobile hasn’t contacted you yet, the probability that they won’t keep your Sprint site increases by the month.
Predictions for 5G.
- 2022 will not be the year of 5G. While we will get mid-band 5G across much of the US from T-Mobile, and to a lesser extent, Verizon and AT&T, there isn’t (and won’t be) a killer application yet. The 5G user experience will be remarkably similar to the 4G experience (only faster) for the consumer. However, venue owners and enterprises should expect a full-on rush by both the carriers and third parties interested in providing private LTE/5G networks in venues using CBRS spectrum (both licensed and unlicensed). The wireless service providers realize that the money in 5G is not with consumers but with businesses and enterprises seeking better and more secure communications. Expect the providers to promise the world of 5G, but the actual experience to fall short, at least for now.
- On a related 5G note, the carriers will not deploy a sizable number of new small cells in 2022. Last year saw limited activity from wireless service providers in the deployment of small cells, which seemed to decline as the year went on. As their focus will be on mid-band modifications, new infill macrocells, and fiber deployment, the wireless service providers will allocate capex in those directions.
Predictions for Leaseholders.
- Landowners will continue to reap the rewards of cell site leases, especially those with sublease revenue share clauses. Given all the bullish activity we have forecasted above, tower owners should see additional revenue. As they recevied additional revenue, the value of the tower climbs. As the value of the tower climbs to the owner, the value of the ground lease underneath it typcially climbs as well. Even if your lease has awhile until expiration, the offers to extend the lease will continue far in advance of expiration.
- Lease optimization companies will continue to pester leaseholders to negotiate lower lease rates and better terms on existing leases despite the boon year for towers. As we observed last year, agents for lease optimization companies will continue to suggest that towers are becoming worthless due to 5G, small cells, satellites, balloons, consolidation, and every other reason they can come up with. Rest assured that your lease is as valuable today as it has been in the past, if not moreso. For example:
- Cell tower lease buyout valuations will remain at an all-time high. With multiple lease buyout entities actively competing for lease assets, sellers stand to benefit once again. Additionally, one of the buyout companies that previously shut its doors will be resurrected this year, which leads to further competition for those limited number of lease assets that are available. However, there may not be as many sellers in 2022, given that many leaseholders sold in late 2021 to avoid the possibility of increased capital gains tax rates in 2022.
Predictions for Steel in the Air.
Lastly, at Steel in the Air, we look forward to another year of helping landowners and structure owners make data-driven, unbiased, and informed decisions regarding their leases and assets. As we enter our 18th year, we remain excited and engaged in the wireless industry. We love helping landowners and tower owners maximize their lease and tower assets. We expect to spend more time with private LTE and private 5G over the next year.
Expect more helpful and thought-provoking content, including more webinars in 2022. Join us on January 26 at 3pm for our first – a discussion with Bruce Wendt of SteelTree Partners. Bruce will share his thoughts about tower valuations and the market for towers in 2022.
If you would like to discuss these predictions or need assistance relative to cell site leases or towers, please reach out to us or share a question/comment on our Q&A. Happy to share our thoughts or learn more about what you envision for 2022.