To: djane who wrote (3576 ) 3/24/1999 2:47:00 AM From: djane Respond to of 29987
IBD. Cell Towers At A Premium, So Carriers Learn To Share investors.com Date: 3/24/99 Author: Reinhardt Krause Use of cellular phones is growing, but it's getting harder for wireless carriers to site the towers they need to transmit signals. Regulators want to make room for new players in the wireless industry, figuring more competition will drive down prices. But they are reluctant to chew up more land with unsightly towers. The towers, which house antennas, are needed to relay wireless radio signals. So the industry is looking at letting multiple cell-phone system operators use the same towers, which can be 120 feet tall. Sharing towers, called co-location in the industry, is partially behind a series of deals involving cell-phone system operators and third-party tower owners. ''There have been initiatives at the local level,'' said Mark Feidler, president of the mobile unit for BellSouth Corp., one of the regional Bells. ''Municipalities have begun to encourage co-location,'' BellSouth agreed to sell 1,850 cellular towers to Crown Castle International Corp. of Houston for $610 million in early March. It was the third such deal in four months. BellSouth will pay Crown $1,200 a month for each site it uses, analysts say. Many wireless carriers are renting space from towers they once owned as part of a lease-back deal. For BellSouth, selling off cellular towers makes sense for several reasons. Building and managing towers can be a management drain. ''It's a combination of receiving attractive value for the assets and allowing us to turn our attention to our core business (of adding subscribers),'' said Feidler. ''They're (Crown) probably more effective at running it than ourselves.'' Feidler says BellSouth doesn't consider owning towers to be an advantage. The phone carrier is not worried about Crown leasing towers in its region to new cell-phone rivals. ''The belief that your (tower) sites are a competitive differentiator has subsided in the industry,'' said Feidler. Forced to share their wire lines from the 1996 Telecommunications Act, Baby Bells also seem to be resigned to the notion they someday will also have to share wireless equipment. Crown Castle is snapping up other properties. It paid $650 million to Bell Atlantic Corp.'s wireless unit for 1,420 towers in December. Crown Castle also bought 650 towers from West Point, Ga.-based Powertel Inc. for $275 million on March 16. So-called consolidators like Crown are getting more attention from wireless carriers looking to unload potential problems. For one, it's getting harder to find sites for towers, which are considered eyesores in many communities. In urban areas, rooftops are used. As carriers hunt for new locations, they've even sought alternatives such as mounting antennas on church steeples. But more local communities want control over tower siting. ''People wouldn't have believed five years ago how tough it is get tower space,'' said Walter Catlow, president of cellular operations for another Baby Bell, Ameritech Inc. Other buyers are getting in line. Cell phone operator Nextel Communications Inc. sold 2,000 towers to Cary, N.C.-based SpectraSite Communications Inc. for $560 million in February. Nextel will pay SpectraSite $1,600 a month to use each tower, analysts say. Nextel also obtained a 17% equity interest in SpectraSite as part of that deal. SpectraSite plans to build 1,700 new towers for Nextel over the next five years. Crown will construct 500 new towers for BellSouth. The independent firms also will be free to market existing towers to other cell-phone companies. Analysts say other wireless carriers are expected to embrace similar deals, with lease-back provisions. Ameritech's Catlow won't discuss his company's plans. But he acknowledges the lease-back approach has merit. ''You can do some nice balance sheet stuff as far as capital goes - such as an undepreciated plant - when you sell them off,'' he said. ''And independent operators can maximize a tower's use.'' There are 65,000 cell-phone towers in the U.S., 30,500 of which are owned by wireless carriers such as AT&T Corp. and BellSouth, statistics show. Merrill Lynch & Co. projects 35,000 new towers will be built in the U.S. over the next three to five years. The trend toward multi- tenant towers could be good news for new industry players called personal communications services firms, analysts say. PCS companies paid the government several hundred million dollars each for radio spectrum licenses in 1996. These firms are building new digital cellular systems to compete with older cell phone companies like the regional Bells and AT&T, which bought McCaw Cellular Communications Inc. for $11.5 billion in 1994. But PCS entrants face constraints in building out wireless networks. It also may not be cost-effective or practical for each cellular firm to build its own network of towers - especially to serve low-traffic areas, analysts say. (C) Copyright 1999 Investors Business Daily, Inc. Metadata: BLS TRWS BEL PTEL AIT NXTL I/4811 I/4891 I/4892 E/IBD E/SN1 E/T