The U.S. tower industry has reached the maturity stage of the growth cycle. Here are eight reasons why some believe that.
1. Tower companies are moving into international markets to increase their portfolios. Exhibit 1 – American Tower added 8,000 towers in 2010, but only 1,000 were in the U.S.
2. A close look at financial statements shows that revenue growth is coming from existing tenants rather than from new towers.
3. More money is chasing towers than there are towers available. Several tower industry veterans with millions of equity investor funds at their disposal cannot find towers for sale.
4. The build to suit market is ultracompetitive. Many firms that have built towers to meet carrier new site needs have left the market as competition has erased profit margins.
5. Tower companies are seeking other uses for their cash. The most common tactic is to buy out the leases under their towers. Others are considering increased dividend payments
6. At least one major tower company is considering changing to a Real Estate Investment Trust (REIT) structure. REIT status provides significant tax benefits to companies who pay out large portions of their earnings as dividends to their investors.
7. Tower Companies are developing additional service offerings for the carriers in order to find new revenue growth engines. Likewise, tower companies are investing in ownership of fiber and microwave networks that carry wireless traffic from cell sites to switching centers.
8. Tower companies have traded upside revenue for from new rents for 4G equipment in exchange for extending the term length on their existing collocation agreements.
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