U.S. Wireless tower cos face prolonged slump-S&P
Reuters, Friday January 3, 1:43 pm ET
biz.yahoo.com
NEW YORK, Jan 3 (Reuters) - Wireless tower companies, battered by weak balance sheets and slow demand, are not likely to pull out of their slump for some time because companies that lease their antenna space are spending less, Standard & Poor's said on Friday. "The weak business profile of the U.S. wireless tower industry is unlikely to improve in the next 18 to 24 months," S&P analyst Michael Tsao said in a report. Without an infusion of equity capital, wireless tower companies will have a tough time reducing debt and some may have to restructure, he said.
Tower companies lease antenna space to wireless telephone companies such as AT&T Wireless Services (NYSE:AWE - News) and Sprint PCS (NYSE:PCS - News). As the wireless industry suffered from a slowdown in subscriber growth, spending on tower leases fell, leaving tower companies struggle to repay debt.
Two tower companies, SpectraSite Holdings Inc.(Other OTC:SITEQ.PK - News) and Pinnacle Holdings Inc., filed for Chapter 11 bankruptcy last year, although Pinnacle emerged from bankruptcy in November after restructuring its debt.
When tower companies went public in the late 1990s, many observers expected them to be able to generate enough cash to reduce their heavy debt loads, S&P said.
"However, heavy debt-financed acquisition activities, volatile capital markets and earlier-than-expected flattening of capital spending by carriers all made this expectation unrealistic," S&P said.
S&P said it does not expect wireless carriers to increase their spending because some are facing their own financial challenges and are certain to limit network expansion plans. Moreover, cell phone usage in the United States is expected to grow at a slower rate, hurting demand for cell antenna sites.
Companies facing "liquidity challenges" include American Tower Corp.(NYSE:AMT - News), SBA Communications Corp.(NasdaqNM:SBAC - News) and Crown Castle International Corp.(NYSE:CCI - News), S&P said. All three carry "junk" ratings and are on review for downgrade. |
