Hasn’t Verizon Sold Towers Before?

Yes, Verizon or related entities previously sold portfolios of towers to public tower companies. These include:

Why is Verizon Considering Selling Its Cell Towers Now?

Wireless carriers sell portfolios of towers for a few reasons. First, a wireless carrier may sell their towers to fund future development. Towers are considered non-core assets for wireless carriers. Second, in this case, Verizon is aware of the high valuations on cell tower assets and has decided that this is a good time to sell these non-core assets. Interestingly, 2023 would have been a better year, as towers valuations peaked in the middle of the year.

How Much Are Verizon’s Towers Worth?

Various analysts have offered estimates of the value of Verizon’s tower assets, ranging from $500,000 per tower to $1,400,000 per tower. The truth is that only Verizon and the advisor really know. When a large portfolio of carrier-owned towers like this is sold, the advisor puts together a confidential information memorandum (CIM) that includes the specific details of the towers. Of these, some details are more critical than others. For a extensive view of how towers are valued, please see our page on Cell Tower Valuation.

Long story short, there are a few key factors that will influence the value of Verizon’s remaining tower assets. These include:

1. Number of tenants. The more subtenants there are on a tower, the higher the revenue and tower cash flow. The higher the tower’s cash flow, the higher the tower’s valuation.
2. Location of Competing Towers. Are these towers built to accommodate multiple wireless providers, and are they in locations where other wireless carriers are likely to sublease?
3. The Sale/Leaseback Terms. Most carrier tower portfolio sales include a sale and leaseback agreement. The sale/leaseback defines how much Verizon will pay to remain as a tenant on the towers in the future and under what terms. The sale/leaseback lease rate and terms have a significant impact on tower valuation, especially in a carrier sale transaction like this. Will Verizon pay a higher lease rate, which would also generate a higher per tower price? Will Verizon expect to pay for future equipment modifications, or will they look to never have to sign another amendment?

How Much Do You Think the Towers Are Worth?

Without the specific confidential information above, it is hard to reliably place a value on the Verizon tower portfolio. But offhand, we would anticipate that the towers are worth somewhere between $1,000,000 and $1,200,000 per tower. At our estimate of 5,600 towers, that would equate to a market value of $5.6 Billion to $6.7 Billion.

Who is the Likely Buyer?

The Big 3 tower companies have historically almost always purchased these portfolios.  (American Tower, Crown Castle, and SBA Communications.) Right now, though, it may be hard for those companies to be competitive on offers for this specific portfolio. The public tower companies may be limited in how much they can offer as their stocks are trading at or near their 5-year lows. In contrast, infrastructure funds and private tower companies have completed more tower portfolio acquisitions over the past year. These buyers have consistently bid higher amounts in our competitive bidding offerings. The issue for these sets of buyers is that few of the private buyers have the team and infrastructure in place to acquire and manage a portfolio this large.  Vertical Bridge may be a potential buyer and several infrastructure funds have looked to make larger investments in the sector, although they may need a management team to acquire a portfolio this large.

I Have a Ground Lease Under a Verizon Tower. How Will the Sale Impact Me?

As this is a sale of towers from a wireless carrier to a tower company, it is unlikely that there will be much impact on landowners who have Verizon tower ground leases. The checks may continue to come from Verizon, or the tower company may take over the payments. Your existing lease will remain in place, and the terms and conditions will be the same. Verizon will continue to use these towers and may even commit to remaining on the towers for a long time under the sale/leaseback.  A tower company may do a slightly better job of marketing the towers for use by other wireless providers, which may increase your rent if you have a revenue share.

The only negative side of a potential sale is that you may have to deal with a tower company in the future regarding lease issues instead of Verizon. Tower companies tend to be more aggressive when dealing with landowners than carriers and can be harder to contact and resolve issues with. Additionally, tower companies tend to be more assertive when trying to renegotiate cell tower leases or extend cell tower leases with landowners.  Ultimately, though, Verizon selling its cell towers is generally advantageous to landowners.

What Should I Do Next?

Our guidance is to wait until a sale is announced and consummated. At that time, the buyer may send out estoppels or other requests. We would recommend not signing anything until you have had your attorney review the request. In the past, some tower companies have tried to send out estoppels that amend the terms of the lease or change its interpretation after buying a carrier portfolio. (An estoppel is intended to confirm existing lease terms, not add new ones.) If you have questions regarding your situation or lease, please contact us.

Questions About Verizon’s Potential Sale of Its Towers – CONTACT US.

Introduction

The telecommunications landscape is buzzing with discussions of a potential acquisition of U.S. Cellular by industry giants T-Mobile and Verizon. This strategic move could significantly impact the rural telecommunications sector, where U.S. Cellular has been a major player. This post delves into what the acquisition means for cell tower landowners and tower companies.

Background on the Parties Involved

• T-Mobile has expanded its footprint significantly throughout rural areas over the last 5 years, creating an overlap in most US Cellular markets.
• Verizon remains the largest U.S. cellphone carrier, focusing on maintaining its market dominance and expanding its technological edge.
• U.S. Cellular commands a market value of approximately $3 billion and is the 5^th largest operator in the US, with a substantial portfolio of spectrum assets and ownership of over 4,400 cell towers.

Implications of the Acquisition

1. Market Dynamics
   • The acquisition could reshape the competitive environment within the telecommunications industry, potentially reducing the number of service providers and consolidating control over rural markets.
   • The deal faces potential hurdles from regulatory bodies concerned with antitrust laws, given the reduced competition and possible market monopolization, especially in rural areas.
   • As the maps above show, T-Mobile and Verizon both have coverage over most of the US Cellular markets.
2. Impact on Spectrum and Network Coverage
   • U.S. Cellular’ s spectrum assets are beneficial for both T-Mobile and Verizon, potentially enhancing their capabilities to provide extensive rural coverage and support for both fixed wireless and mobile communications.
   • This acquisition could improve network infrastructure in underserved areas, albeit by reducing the number of competitors in those areas.
3. Effects on Cell Tower Landowners and Tower Companies
   • Lease Terminations: The consolidation will lead to the termination of U.S. Cellular ground leases for towers that lack additional wireless tenants, and collocation leases on towers where overlap occurs with T-Mobile or Verizon’s existing sites.
   • Lease Rate Adjustments: To the extent that leases are not terminated, T-Mobile and Verizon’s lease optimization companies will attempt to use the threat of termination to negotiate lower lease rates.  They may also try to renegotiate leases that they plan on terminating so that they can reduce the remaining rent and try to eliminate any obligation they have regarding removing the equipment or tower.
   • Cell Tower Lease Buyout Impacts: The value of buyouts for leases involving U.S. Cellular could decrease significantly.
   • Tower Usage and Capacity: The demand for tower usage might fluctuate, especially in rural areas where U.S. Cellular is predominant, potentially affecting the deployment strategies of remaining carriers.
4. Future of Infrastructure Investments
   • If US Cellular ceases to exist, that’s one less carrier to collocate on cell towers. That will lower the lease-up for towers overall.
   • Certain tower locations may lose their strategic value if they primarily serve U.S. Cellular, influencing both operational decisions and the financial valuation of these assets.

Strategic Considerations for Stakeholders

• Landowners and tower owners should not make hasty decisions, as it will likely take at least one year before any transfer of spectrum/subscribers to T-Mobile or Verizon has been approved by regulators.
• Be careful of any attempts to renegotiate tower leases or ground leases, especially those where T-Mobile or Verizon agents attempt to claim that the acquisition of US Cellular sites will allow T-Mobile or Verizon to terminate their leases.
• The deal is by no means done. Thus, we will continue to monitor what happens going forward.

The potential acquisition of U.S. Cellular by T-Mobile and Verizon could significantly impact the telecommunications landscape, especially affecting cell tower landowners and tower companies. Stakeholders should stay informed and proactive to navigate the potential changes effectively.

If you are unsure what to do about your towers or your US Cellular leases, contact us. We can’t promise that we can stop your lease from being terminated, but we can provide actionable and helpful advice about your options.

We examined applications for environmental notice to the FCC for the last month.  Here are the companies that have been most active in submitting to the FCC over that time frame.  Notably, Tillman is still active, outpacing other tower companies.  Vertical Bridge is next up with 36 new submissions, primarily under a subsidiary named “The Towers, LLC.”  Verizon (including Alltel) and AT&T also crack the top 5.  Boldyn Networks was previously Mobilitie.  There are also a number of mid-sized tower companies on the list.  Many of these new towers are being built as build-to-suit towers for AT&T and Verizon, along with a lesser number of towers for T-Mobile.

Compare this to our list of the top tower companies in the United States organized by number of towers.

Here is the older language from a Verizon template lease:

• “RIGHT OF FIRST REFUSAL.  If LESSOR elects, during the Term (i) to sell or otherwise transfer all or any portion of the Property, whether separately or as part of a larger parcel of which the Property is a part, or (ii) grant to a third party by easement or other legal instrument an interest in and to that portion of the Property occupied by LESSEE, or a larger portion thereof, for the purpose of operating and maintaining communications facilities or the management thereof, with or without an assignment of this Agreement to such third party, LESSEE shall have the right of first refusal to meet any bona fide offer of sale or transfer on the same terms and conditions of such offer.

Here is the new language.

• “THIRD PARTY COMMUNICATIONS FACILITY OPERATORS.  If, during the Term, LESSOR receives an offer or letter of intent from any person or entity that is in the business of owning, managing or operating communications facilities or is in the business of acquiring landlord interests in agreements relating to communications facilities, to purchase fee title, an easement, a lease, a license, or any other interest in the Premises or any portion thereof or to acquire any interest in this Agreement, or an option for any of the foregoing, LESSOR shall provide written notice to LESSEE of said offer (“LESSOR’s Notice”).”

We typically recommend removing ROFRs entirely from leases.  However, in some cases, the landowner isn’t in the position to demand its removal.  In those cases, we recommend limiting the ROFR to the sale of the lease and only to companies that own towers or that purchase leases.  It is good to see that Verizon has changed their default language.  We still have some issues with the language above, but at least it’s fairly restrictive in terms of what it applies to.

We would prefer that Verizon call the clause what it is- a ROFR clause instead of a “Third Party Communications Facility Operators” clause- as that has the potential to deceive landowners who don’t take the lease to their attorney.

Perhaps the Verizon agent made the same mistake we made initially and failed to review the drawings carefully. Or perhaps Verizon’s agent attempted to characterize these units as radios instead of antennas because the lease expressly forbids the addition of antennas without the payment of additional rent. Perhaps they didn’t care to let our client know that they are adding new frequencies to the rooftop- which would also require landowner approval because the client is a municipal public safety agency. This is an uncharacteristic “mistake” for Verizon whom we have found to be straightforward to deal with in most cases with the exception being when they have retained lease optimization companies like Md7 to renegotiate their leases.

First Lesson Learned: Review All Construction Drawings Carefully

Going forward, building owners and tower owners should CAREFULLY review proposed drawings from Verizon (and other carriers). If you are asked to “consent” to equipment modifications, we recommend always first asking for construction drawings. Then if the carrier indicates that they want to replace existing radios, ask them specifically for specification sheets for each remote radio and ask them if any of the “radios” are combination radios and antennas. Each lease is different, so your lease may allow the carrier to make these changes without your consent or authorization. Either way, smart building owners and tower owners should be fully aware of all equipment being added to their tower or rooftop.

Second Lesson Learned: Expect to See More CBRS Antennas Added on Rooftops and Towers

Verizon’s intentions to deploy CBRS outdoors are by no means secret.

We have observed small cell applications with 3.5GHz capable equipment included in the past. However, this is the first time that we have seen Verizon adding CBRS to a rooftop macrocell. This is a good indicator of the mainstream use of CBRS and possibly of Verizon’s intentions in the upcoming CBRS auction which the FCC still has yet to set a date for. For more on CBRS, see https://en.wikipedia.org/wiki/Citizens_Broadband_Radio_Service.

We also expect that we will be seeing more of these installations especially in urban and suburban areas as Verizon looks to CBRS to help meet the pending demands of 5G.  If you a landowner or tower owner and are unsure how to review and address these types of requests from Verizon or other carriers, see our page on Equipment Modifications and Lease Expansions for more details.  If you are an investor and want to know what impact these types of CBRS installations will have on the public tower companies (AMT, SBAC, CCI), contact us for a consultation.  If you want to see more of these types of articles, please sign up for our newsletter on the form below.

Here is Verizon’s agent’s latest request to a city client to one of our municipal clients who has several leases with Verizon and other wireless carriers for difficult to replace macrocell sites on City land/towers/etc. Please note that this verbiage is unadulterated other than removal of the name of the City and removal of the rent guarantee amount.

I hope you’re well and Happy Friday!!!

I am the authorized agent for Verizon and they would like to renegotiate the current lease as the attachment attests to. 

I’d like to start with saying that Verizon enjoys and treasures the current relationship which is why Verizon would like to renegotiate lease terms and continue a long term (sic) relationship instead of exercising any termination rights they have.

Again, Verizon would like to renegotiate lease terms instead of exercising any termination rights they have. Verizon enjoys and treasures the current relationship and we hope you do too. But timing wise, we need to resolve this soon. 

With The (sic) City being the landlord, Verizon understands the reluctance of negotiating or accepting different terms. At the same time, Verizon believes if you understand their point of view, then it makes these tough decisions easier to agree to.

Verizon’s intent is to reduce rent and look into the flexibility to make changes to meet network demand. Why does Verizon want to do this? Legislation and technology have changed.

First, small cell technology and 5G is the future and Verizon’s goal is to update their network accordingly. You can get a quick synopsis of small cell technology here:

https://www.youtube.com/watch?v=0oqITdNQfsg&t=4s  – Verizon’s Small Cell video. 

https://www.youtube.com/watch?v=YvDuyoXEXJQ  –  90 minute installation of a small cell in 30 seconds. 

Small cells and 5G has made the older larger towers and antennas expendable especially since the carriers have teamed up with the FCC, state and local governments to stream line the implementation of this new network.You can verify here:

https://www.fcc.gov/5G

https://www.nytimes.com/2018/09/26/business/5g-technology-fcc-rules.html

https://www.bloomberg.com/news/articles/2018-09-26/fcc-seeking-more-5g-deployment-limits-fees-as-new-york-objects  –  Confirming lower fees for new small cell antennas. 

https://www.cnet.com/news/fcc-limits-fees-for-5g-deployment/  –  Confirming lower fees for new small cell antennas. 

This has all happened within the last couple of months, even though it’s been in the works for years. If you notice, the dates for these articles are 09/26/2018. The FCC just approved this and all the major carriers are moving forward. 

The advantage of Verizon partnering up with the FCC, state and local governments is that the fees for putting up the new antennas are much lower than what private land owners charge for the current soon to be outdated towers and antennas. This is why Verizon would like to renegotiate.Verizon is comparing what is more economical in the long term. Verizon is calculating the difference between your rent compared to what it would cost to update the surrounding areas with small cells using the public right of ways.  

The FCC has capped the fees and rent to keep them under $1000 per year and average $500.  That’s a huge difference from what is currently being paid on the current lease. 

Plus Verizon will be submitting a lot of permits for the installation of 5G in your city. So in fact, the city will be making more than the sum of this lease. We are asking for this reduction as a courtesy since we are going to be partners on the next generation network in your city and Verizon sees potential in this site as is with upgrades. Especially with all the work that went into completing this site and lease in the first place.Verizon appreciates your efforts. 

In Verizon’s estimation, they feel we can maintain a long term relationship at the current site with the terms I have attached. As a token of good faith, Verizon is willing to guarantee rent for 60 months or 5 years ($xxx,000).This way you can budget with the confidence that the rent money is coming for the next 5 years. 

I hope what I have described makes sense and you see Verizon’s point of view. Again, Verizon would like to renegotiate lease terms instead of exercising any termination rights they have.Verizon enjoys and treasures the current relationship and hopes to maintain it for the long term and we hope you do too.

Please respond or call with any questions. I’ll follow up in a few days as well since Verizon needs to resolve this by the end of December and year so their engineers know to include your site or not in the construction of the new 5G network in 2019.  

Please forward the email to the decision makers or board since I am the last attempt to solidify a long term agreement.    

If the city has no intention of wanting to be a landlord to Verizon, please have them put that in writing or respond to this email so we can have it in writing and inform Verizon.That way Verizon knows exactly where things stand and can plan accordingly. 

If the city has a counter, let me know as Verizon will entertain it. I know they’re (sic) offer is low so make sure you counter. No guarantee it gets accepted, but they will review it and move towards an agreement. They want to keep the new rent under a specific number which I’m not previewed to (sic) but I can submit counters.

Out of 90,000 current 4G sites, less than 5,000 sites have been flagged for potential involvement in the new 5G network and this site is one of them. Especially with all the work that went into completing this site and lease in the first place.Verizon appreciates your efforts. 

Verizon hopes the city wants to be involved in this relationship long term. 

I find the following sections interesting:

Out of 90,000 current 4G sites, less than 5,000 sites have been flagged for potential involvement in the new 5G network and this site is one of them. 

Verizon will be submitting a lot of permits for the installation of 5G in your city. So in fact, the city will be making more than the sum of this lease. 

As a token of good faith, Verizon is willing to guarantee rent for 60 months or 5 years ($xxx,000).  This way you can budget with the confidence that the rent money is coming for the next 5 years. 

First, Verizon doesn’t have 90,000 macrocells – so they are including small cells in this count. Secondly, I strongly doubt that Verizon has only flagged 5,000 sites for potential involvement in the “new 5G” network.Third, a 5 year “guarantee” in this business is virtually worthless. Ironically, Verizon already pays the least of the wireless leases this city has in place at this location.

If you have been contacted by Verizon (or their agent Md7) feel free to reach out to us – we can let you know whether there is anything to be concerned with which in most cases, there isn’t. We can help review the proposal and your current lease and let you know if any concessions are worth considering. Please read this article about Md7 first – and then contact us if you need more help.

Yesterday, in a surprise press release by Verizon, Verizon indicated that it had formed a joint venture with AT&T and Tillman Infrastructure to develop “hundreds” of communication towers with “the potential for significantly more new site locations in the future”.  Tillman Infrastructure is relatively new to the US- but owns a few thousand towers in Asia.  The press release further states that “These new structures will add to the overall communications infrastructure in the US, and will fulfill the need for new locations where towers do not exist today. They also will serve as opportunities for the carriers to relocate equipment from current towers.”

“WHERE TOWERS DO NOT EXIST TODAY” – REALLY?

Our landowner clients have been contacted by Tillman Infrastructure for placement of new towers on their property. However, despite Tillman’s claim to the contrary that the towers will be built where towers do not exist today, virtually all of the proposed Tillman towers we are seeing or hearing of appear to be near existing cell towers.  In other words, Tillman is building new towers right near existing public towerco towers because AT&T appears to be unwilling to continue paying the higher rent that they are paying on an existing tower. The requests that we have seen are primarily in rural areas, presumably where ground rent will be cheaper and where there is no zoning to prevent the proliferation of towers as being proposed by Tillman. (How do we know?  Because we maintain a comprehensive tower location and lease rate database and can easily look up the location of other nearby towers and in many cases identify specific tenants on those towers.)

VERIZON ENTERS THE FRAY

The first interesting aspect of the press release is not that Tillman is out building collocation replacement towers for AT&T on a build-to-suit basis, but that Verizon issued the press release.  This strikes us as a clear attempt by Verizon to enter a fray between the tower companies and the carriers where historically their public opposition has been muted.  We have already noted Verizon’s reluctance to collocate on public tower company towers in the past- this is another option. However, we suspect that there isn’t much of a commitment on Verizon’s behalf other than that they will consider relocating to new towers from existing towers where Tillman can make them a much better offer than what they are paying already on the existing tower. To us, this press release suggests that neither Verizon nor AT&T has been successful at convincing the public tower companies to adjust their Master Lease Agreements (MLAs) significantly and that both companies are now trying publicly (desperately?) to damage the public tower companies by trying to impact their market valuation.  (SBAC dropped slightly yesterday while AMT and CCI were both relatively unimpacted.)   We suspect that previous negative comments by all the carriers during previous industry conferences and during earnings calls have been ineffective at changing deal terms in the MLAs and investors were not treating the threats seriously because the economics of building a single tenant tower on inferior build-to-suit terms are poor.   However, if both Verizon and AT&T are willing to move from an exisitng tower, suddenly the economics for the proposed tower become more attractive to the build-to-suit partner.

ONLY A FEW HUNDREDS TOWERS?

The second interesting impact of this note is that it specifically calls out that the agreement is for a few hundred towers.  We struggle to understand why any of the three companies (except Tillman) would want the investment community to know that it is only a few hundred towers that are being considered currently.  While there is a veiled suggestion that it could be more, this press release would have potentially had more impact on investors had it been silent on the number of towers being considered.  A few hundred towers is a drop in the bucket for any of the public tower companies.

Clearly there are benefits to AT&T and Verizon of relocating. Not only do they save rent, but they also avoid costly modification upgrade fees and possible structural modification Capex on the existing tower to accomodate additional equipment.   With FirstNet on its way, AT&T likely sees this as an alternative to dealing with the tower companies.

If you are a landowner who has been contacted by Tillman for a tower on your property, please contact us and we can help you evaluate their offer and whether you have room to negotiate and if so, by how much.   We will review whether there is an existing tower in the area and if so, whether there are other properties besides your that Tillman can select.  Please note that Tillman has advised our clients that if they get a consultant involved with negotiating the lease, that Tillman will take their tower elsewhere- so don’t tell them we are involved.  There may be a time where it makes sense to do so though, at which point, we will advise you to tell them.

If you are an investor who wants to know more about specific areas of focus for Tillman, estimates of how many sites Tillman is pursuing, and which tower companies seem to be targeted more than others, please reach out to set up a paid research call.   We can also intelligently discuss the financial justification for moving and what amount of rent savings justifies relocation.  We can also discuss how the public tower companies will combat these efforts and when they will be effective and when they won’t.  Lastly, Tillman isn’t the only company focused on collocation relocation build to suit efforts – its just the first one that has gone public with its endeavor.

So in this article about Verizon attachments to Arizona Power (APS) utility poles in the Phoenix market, it is interesting to see how Verizon is installing a 6-panel array on top of utility poles. Also interesting is that Verizon is leasing ground space adjacent to the pole from the nearby landowner for their equipment space. Given the size of the equipment space, it appears that this is a macrocell.  However, the APS representative states that this is being treated as a pole attachment under the FCC pole attachment rate schedule.  I am surprised that APS allowed this large of an installation to be placed on the pole for the nominal FCC pole attachment rate.

It is hard to tell whether the antennas would fit within a 6′ cubic space that is allocated within the Arizona small cell law for antennas.   There is a better photo of the equipment and pole inside the article.   The City of Phoenix is pretty favorable to pole attachments in general, so whether it meets the 6 cubic feet of space limitation or not may be immaterial.  However, in other jurisdictions, this installation may not be approved administratively under the state law.