SBA Communications (SBA) is the third largest public cell tower company in the U.S. SBA currently owns approximately 14,929 towers in the United States and 2,562 towers in Brazil, Canada, Costa Rica, El Salvador, Guatemala, Nicaragua, and Panama. It also manages 4,800 towers, buildings, and properties that are owned by other parties, although only 1/10th of these actually produce revenue for SBA.
In February 2012, SBA acquired 2,300 towers from Mobilitie, most of which had T-Mobile as the anchor tenant, along with Distributed Antenna System (DAS) assets in Chicago, Las Vegas, New York City, and Auburn, Alabama. In May of 2012, SBA also acquired 3,256 towers from TowerCo, which were located in the U.S. Many of those towers were anchored by Sprint or Nextel. SBA’s revenue is generated by cell site leasing, due primarily to the collocation of wireless carriers, as well as leases that it shares with landowners. Seventy-six percent of its revenue comes from domestic carriers and 24% from international carriers. In the US, this revenue comes from the following carriers: AT&T (23%), Sprint (24%), T-Mobile (14%), and Verizon (13%). In July 2013, SBA followed ATC’s lead and expanded its international operations with the purchase of 2,113 towers in Brazil.
SBA’s towers currently average about two tenants each, and typically sit on land that is leased from property owners. Of the towers SBA owns in the U.S., the majority of them are on property where the subject site is the only lease the landowner has with SBA. That means that SBA is party to leases with over 10,000 individual property owners.
Similar to American Tower Corp (ATC) and Crown Castle (CCI), the top two public tower companies in the U.S., SBA controls the ground space under approximately 70% of their towers for a period of time equaling 20 years or more. To remain competitive with ATC and CCI, SBA’s strategy is to increase the number of tenants per tower. The average remaining term on an SBA cell tower ground lease is 31 years, with a minority of towers tied to leases with less than ten years remaining until expiration. Compared with ATC and CCI (both of which show average lease terms of about 23 years), this indicates that SBA has fewer ground leases that are subject to increased rent in the near term. In the first quarter of 2013, SBA spent $13.6 million on the acquisition of ground space underneath their towers, demonstrating its desire to stay ahead of the game when it comes to competing for ground space with lease buyout companies.
SBA states that “Amendment activity continues to be high, with customers adding to or replacing existing equipment through amendments to existing leases, and we are experiencing increasing demand for new cell sites particularly in the U.S.” Consumer demand, which drives capacity growth of wireless services, results in the development of more cell sites, and thus the erection of new cell towers within any given coverage area. This is good news for both existing and prospective cellular leaseholders.
When new wireless tenants elect to collocate on existing cell towers, tower companies’ revenue can increase. However, it’s important to recognize that not all cell towers were originally created equal. For instance, many of the towers that were acquired from T-Mobile were built as single-carrier towers, meaning that they didn’t have the capacity required to accommodate more than one wireless carrier. Since it’s less costly (taking into consideration all factors, including local zoning ordinances) to expand upon existing towers than it is to build new ones, SBA will likely be instrumental in upgrading existing towers. This is also good news for leaseholders. It means that current leases are not likely to be terminated any time soon. In fact, leaseholders might expect to see an increase in rental revenue in the case where the original lease footprint is expanded upon to accommodate new carriers and their equipment.
Steel in the Air has assisted many landowners with various offers from SBA Communications. There are five main proposals that landowners, property owners and local governments receive from SBA Communications:
Please contact us to discuss any questions you might have about a proposal you have received from SBA. The initial discussion is free and once we talk to you and understand your needs, we can advise you should retain our services and what the cost will be. Unlike our competitors, we offer the flexibility of either a fixed-fee consulting service or a contingency-based service.
Please contact us to discuss any questions you might have about a proposal you have received from SBA. The initial discussion is free and once we talk to you and understand your needs, we can advise you about whether you should retain our services and what the cost will be. Unlike our competitors, we offer the flexibility of either a fixed-fee consulting service or a contingency-based service.
Finding the sweet spot in lease negotiations requires knowledge of industry dynamics and company-specific deployment plans. Relocating cell sites is expensive; however, if their gears are already moving, companies might eat the costs – especially when they’re dealing with property owners who are difficult or too demanding.
Consumer demand for higher speeds brought on by robust and rising smartphone and tablet usage, and the pervasive 4G LTE and 5G technology migration, will drive future demand for cell site leasing. The number of cell sites in the U.S. alone surpassed 400,000 by 2015.