Clayton Funk 2018-03-05 07:06:00
The wireless tower industry continues to be a frothy deal market when measured in multiples of cash flow paid by buyers and the number of people trying to buy towers. For the last several years, the merger-and-acquisition market has remained seller-friendly. The number of transactions was lower in 2017 because there wasn’t as much new tower inventory among the dozens of tower developers as there was three or four years ago. The new tower inventory reduction resulted from wireless carriers either not building a significant number of new sites or consolidating tower development among a handful of companies. When it comes to building new towers, AT&T Mobility has been largely inactive and Sprint remains inactive. Verizon Wireless, however, has been consistent with new tower construction and has several tower developer partners across the country. T-Mobile US, which is highly active, has development deals with a couple of major vendors. After that, there are a handful of other companies that it relies on for tower development. When AT&T was active four or five years ago, it would have 25 or 30 different companies building towers across the country depending on regional relationships. Now, in a fashion similar to that of T-Mobile, AT&T is focusing on a small number of companies to build their new towers. “...the future may see fewer, but larger, transacations...” Additionally, the carriers themselves may not be spending as much money on new towers because they are spending money on small cells and fiber optics. Besides tower developers, there is a subset of tower owners that MVP Capital remains very active in representing. For example, we completed several broadcaster sale/leaseback deals in 2017, ranging from a single site to nearly 20 towers. On a multiple of EBITDA basis, the broadcasters’ towers could be worth twice as much as their stations. Utilities own towers, government entities own towers and rural wireless carriers own towers. A large number of tower owners remain that are not your typical cell tower developers with a business plan to build and sell towers in a five- to seven-year period. MVP Capital has invested a significant amount of resources and time into the fiber, small cell and distributed antenna system (DAS) space, other areas of shared wireless infrastructure that have attractive investment characteristics similar to towers. We have completed several transactions for fiber providers for selling their companies and raising capital. We raised capital for a neutral-host DAS developer/owner/operator in 2017, and we see a significant amount of activity in that space over the next couple of years. Although the number of tower transactions in 2017 was similar to the number from the year before, the future may see fewer, but larger, transactions, from five to 10 towers up to 50 to a couple of hundred. Every deal is different, but towers are regularly selling at multiples of 20 times cash flow or higher. Valuations are at peak highs, and it is hard to see how they could go any higher. Clayton Funk is a managing director in MVP Capital’s Towers Group. Visit www.mvpcapital.com.
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