It appears that the subprime issues will have an impact on the wireless/tower sector particularly regarding cell phone tower acquisitions and cell phone tower lease buyouts– especially for the mom and pop side of the industry. We suspect that 1/4 to 1/3 of the new tower being built this year come from Mom Pop tower companies or individuals.
One of our associates mentioned that they have definitely seen a greater number of restrictions on commercial loan terms. As interest rates rise and loan covenants become more restrictive, small borrowers will find it more difficult and more expensive to borrow to build a tower or finance other business or non-business related purchases.
Meanwhile, the large tower companies and lease buyout firms who have fixed cost of capital will be sitting in the proverbial cat-bird seat. As the disparity between their cost of capital and the small borrower’s cost of capital increases, the buyouts or the tower acquisition offers will start to look more attractive and in some cases absolutely necessary for those who have extended too far or assumed that they could get low cost funds to finish an existing project. This could have the affect of reducing cell tower valuations.