Since 2004, we’ve had ample opportunity to become familiar with major and minor industry players, including cell tower companies, wireless carriers, and third party buyout companies. Because of this, we’re able to share the following insights:
A. American Tower and Crown Castle leases tend to be the most valuable because these companies pay the most for their own leases.
These two players are the nation’s #1 and#2 tower companies, respectively, and they’re bankrolled in liquidity.So it follows that they can pay more for cell tower leases than third party companies. Here are two reasons that tower companies prefer to purchase leases that they are already party to:
When tower companies purchase leases they are already party to, they enjoy a greater degree of autonomy and are able to rely less on landowner approval.As you can imagine, it’s advantageous for a tower company to own the rights to its own lease, and it can be problematic if someone else does. This is the optimal position for most companies, especially those who foresee equipment upgrades and/ or prefer to make their own decisions rather than navigate through the approval process.
The purchase of a lease is a financially sound investment, and tower companies want to cut costs while increasing profit margins. This equation assumes that inflation will occur at a steady rate and/ or that market demand for mobile connectivity will continue to skyrocket. This is a safe bet, as you might imagine – unless there’s a zombie apocalypse.But even then, the price of mobile phones would peak dynamically – at least initially.
Knowledge is power. If you know that this is their thought process, you have a leg up. And if they know that you know, you have leverage.
B. Cell tower leases with AT&T and Verizon are considered to be the most valuable,followed by T-Mobile. Sprint leases are the least valuable of the “Big Four” carriers.
This involves evaluating the risk factor that the carrier will remain operational during the duration of the lease. The general perception in the wireless industry these days is that AT&T and Verizon aren’t going anywhere, while T-Mobile and Sprint (in particular) have slightly more of a perceived risk especially now with their potential merger. And the greater the risk, the less buyers are willing to pay in a lease buyout.
C.Some third party lease buyout companies buy leases so they can bundle them to sell as a package to a larger buyer.
By bundling leases (this is why the lease buyout companies are also known as “lease aggregators”), lease buyout companies can take groups of risky and non-risky leases and create a portfolio of leases. With larger number of leases, the lease buyout aggregators can diversity risk across a large group of leases which can make the purchase of a portfolio of leases attractive.
This is the most likely reason you have received interest from third party lease buyout companies. In fact, today it’s perfectly nonchalant for lease buyout companies to acquire, sell, and/ or hold bundles of telecom leases, similar to how things operated 15 years ago in the mortgage industry.