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Comments on news posted 2013-10-21 08:32:56: AT&T has announced that they're the latest company to sell and lease their towers to a third company. According to an AT&T press announcement, AT&T will sell and lease around 9,600 of theire wireless towers to Crown Castle in exchange for $4. ..


ITALIAN926
join:2003-08-16

1 edit

ITALIAN926

Member

?

quote:
AT&T in turn will AT&T will sublease capacity on the towers
Need some editing.

As far as the deal, if this is a money loser, how then is Crown Castle expected to make money? I simply dont understand it. I would never lease a car, because I always keep my cars a minimum of 10 years. Regardless as to how much up-front money they get, if AT&T is in business the next 100 years, its a bad move.

Maybe their long term plan is wireline afterall. Wireless has a limited future
openbox9
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join:2004-01-26
71144

openbox9

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Re: ?

said by ITALIAN926:

Regardless as to how much up-front money they get, if AT&T is in business the next 100 years, its a bad move.

Why not let the experts do what they do best? Telcos provide wireless services and tower companies manage and maintain towers. Sounds efficient to me.

ITALIAN926
join:2003-08-16

ITALIAN926

Member

Re: ?

quote:
Sounds efficient to me.
Making decisions that saves a dollar today, but costs you $10 tomorrow is not efficient at all. This is the typical, irresponsible way of doing business today, infatuation with short-term profits, without a care in the world of the negative impacts of tomorrow.
en103
join:2011-05-02

en103

Member

Re: ?

Companies like AT&T will buy and sell as needed.

They'll sell the towers to a tower management company today, then lease the towers (giving them some cash that they need 'today'), then eventually, AT&T will purchase the tower management company itself or become a major shareholder when it suits them (i.e.costs more to lease than its worth). I suspect that AT&T probably has some stock invested in these tower companies anyways.

skeechan
Ai Otsukaholic
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join:2012-01-26
AA169|170

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With that logic, why not MAKE the handsets too? Why? Because others are better at it.

And it depends on what they do with the cash. If they pay down debt, they save of debt service costs. If they make other investments, those have a return too.

AT&T can simply get a better return on capital somewhere else than in tower ownership.
BiggA
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join:2005-11-23
Central CT

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If you can save $10 now, invest it, put the returns towards the extra cents of cost tomorrow, and then dodge $2 in taxes, then it makes sense. It's really all about the taxes when it comes down to it. Either that, or they buy a stake in CC. lol.
openbox9
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join:2004-01-26
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What if you can invest that dollar today to make $11 tomorrow?

JasonOD
@comcastbusiness.net

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I own shares of T and I disagree here. The wind is at their back (financially speaking), and in doing this they are pissing away tower access rights, which is akin to printing money.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Re: ?

I'm a T shareholder also and I don't necessarily have a problem unloading unnecessary O&M requirements. I haven't dug into the numbers yet, but my guess is that this is a good decision.
axus
join:2001-06-18
Washington, DC

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Tower leasing company will lease to ALL providers, which is good and more efficient, right? What happened in the past, would each wireless company build their own towers? The only problem might be if a "tower company monopoly" replaces 4 different wireless companies there, and jacks up the price.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Re: ?

said by axus:

Tower leasing company will lease to ALL providers, which is good and more efficient, right?

Yes. You think that T's radios are the only ones on these towers now?

n2jtx
join:2001-01-13
Glen Head, NY

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n2jtx to ITALIAN926

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said by ITALIAN926:

quote:
AT&T in turn will AT&T will sublease capacity on the towers
As far as the deal, if this is a money loser, how then is Crown Castle expected to make money? I simply dont understand it. I would never lease a car, because I always keep my cars a minimum of 10 years. Regardless as to how much up-front money they get, if AT&T is in business the next 100 years, its a bad move.

Maybe their long term plan is wireline afterall. Wireless has a limited future

This is all the latest trend in short term thinking. A lot of businesses and the government too are selling their buildings for a quick infusion of cash and then leasing them back. Also, for tax paying entities (ie. NOT the government), there are tax advantages to leasing back a building instead of owning it.

As for Crown Castle, they would be free to sell space to any and all comers to make additional revenue. Of course, some day the piper will have to be paid and once the AT&T leases are up, I am sure Crown Castle will be free to charge whatever they want in rent and AT&T will have to cough it up. I suspect the same thing will apply to all these entities selling their buildings. Eventually they will start having to pay whatever the market rate is for rent and they will come to regret their decision. Of course, that is a fourth quarter problem so no need to worry about it now...
InvalidError
join:2008-02-03

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InvalidError to ITALIAN926

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It is called opportunity cost.

While selling infrastructure and buildings might not seem to make sense when considered on its own, doing so frees up millions or even billions to invest elsewhere where the capital may generate more revenues than what the leases cost.

In the process, they also shed property tax obligations and can write off the lease as a tax-deductible expense so the net cost of the lease is much lower than its nominal cost.

It may seem counter-intuitive but if they are doing it, you can bet your shorts it is because it ultimately improves their bottom-line.

n2jtx
join:2001-01-13
Glen Head, NY

n2jtx

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Re: ?

My church had a similar issue about a dozen years ago. We own two parsonages. Here on Long Island, rents are high to begin with and where we are located, well above average for the rest of the island. Some of our trustees were pushing the idea that we should not be in the real estate business but instead sell the houses and provide a rental stipend to our ministers. We did not sell the houses as we discovered we would be paying tens of thousands of dollars a year in rental stipends in order to attract talented personnel. Money that would be gone. We might spend the same money now on our parsonages but those are capital assets and the money we plow into them improves that asset.

The long term problem I see with many of these leases will be sticker shock. When you own a property outright, your costs are maintenance and taxes. Once you sell, you are beholden to whatever price the landlord wants to charge. What will AT&T do if after the lease term ends Crown Castle demands triple the rent? They either pay it or go out and start over building new towers. Yes leasing makes their bottom line look great today and for the short term but they wind up losing monetary control of a major part of their infrastructure. Plus, what if Crown Castle eventually gets a far better offer for their space from some new startup and refuses to renew AT&T's lease? I can see them leasing their vehicles and other assets not critical to their business but the towers are a necessary component of their survival.
TBBroadband
join:2012-10-26
Fremont, OH

TBBroadband

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Re: ?

What T will pay in rent would be much less than an actual tower customer such as the local WISP. They'll be lucky if they pay a couple thousand per tower at that rate with how man they are leasing.

VZW is the same way- Crown Castle manages several of their sites in Ohio but VZW's agreement is that they're the only one on the tower.

Killa200
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join:2005-12-02
TN

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Killa200 to InvalidError

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Not to mention also freeing up the ongoing cost of owning these properties from upkeep and maintenance of the tower and non-carrier specific entities on site. This is actually a fairly common process for wireless carriers. They want a tower here, but don't want to maintain it. They build one where they need it, and sell that asset to a tower management company. This lets them lease only the space they need, and invest only the engineering needed to make additions to that space and the cost to maintain current assets on site.

The tower company gains a property, that they will maintain, that they can then lease out to others as well.

battleop
join:2005-09-28
00000

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"9,600 of theire wireless towers"
itguy05
join:2005-06-17
Carlisle, PA

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Simple - it's a tax write-off as assets incur taxes and depreciation. Expenses do not and go against your profits for tax purposes.

Say I own my building - I pay taxes on that and it's an asset and the few expenses I have for that building go to reduce my liabilities. As well as it gets depreciated down to 0 at some point.

If I lease my building, all those expenses get to become a cost of business and eat into profits I am taxed on. It reduces my tax liability.

It makes little sense in the very long run but in the short term, it can be a huge tax advantage. As well as you can better take advantage of markets in the future. Today the real estate market is doing OK. I can sell my building for $1 million and lease for $250k a year. In year 4 the RE market tanks. I could either make an offer for the building or negotiate my rent downward to, say $175k a year. Win for me. However the reverse is also true, in year 4 I could be paying $300k/year for rent.
dudeman456
join:2005-04-29
New York, NY

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Or if they are in business for 8 to 9 years.

Zenit_IIfx
The system is the solution
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Zenit_IIfx

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Nah, its not that they think Wireline is the future

They did this to reduce taxes and not be as responsible for infrastructure.
Towers/Land costs money. Let someone else deal with it.

I am sure they still own the GSM/LTE equipment up on those towers though, its just space to place their equipment.

ITALIAN926
join:2003-08-16

ITALIAN926

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Re: Nah, its not that they think Wireline is the future

Sort of a sarcastic comment, I will change my smiley to a wink.
TBBroadband
join:2012-10-26
Fremont, OH

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That's the way it works. its a co-location deal.

cableties
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join:2005-01-27

cableties

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Until Crown Castle is bought out...

by a Chinese-owned telecom...

Cci
@comcast.net

Cci

Anon

Re: Until Crown Castle is bought out...

said by cableties:

by a Chinese-owned telecom...

Crown Castle doing an IPO of 36 million shares at $76/share on Oct 22 to come up with the funds for this deal.
»www.streetinsider.com/Co ··· 028.html

No Chinese buyout.
TBBroadband
join:2012-10-26
Fremont, OH

TBBroadband

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Re: Until Crown Castle is bought out...

but nothing is stopping their US companies from buying shares into that IPO.
en103
join:2011-05-02

en103

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Re: Until Crown Castle is bought out...

I agree - and I suspect that companies like AT&T will purchase a handful of shares - or become a major shareholder, as this ties directly into their line of business.
itguy05
join:2005-06-17
Carlisle, PA

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If AT&T were smart they would buy 18.5 million of those shares....
BiggA
Premium Member
join:2005-11-23
Central CT

BiggA

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Re: Until Crown Castle is bought out...

That's probably what they are going to do. Then they can have their cake, eat lots of it, and not pay any taxes on it.

KrK
Heavy Artillery For The Little Guy
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join:2000-01-17
Tulsa, OK

KrK

Premium Member

Re: Until Crown Castle is bought out...

Exactly what they will do. Own and control but pay no taxes
decifal7
join:2007-03-10
Bon Aqua, TN

decifal7

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once

Didn't sprint sell their towers and lease back from this same company? This some how just seems like a future setup for some serious issues somehow.. Multiple providers on the same towers.. I hope they keep the frequencies managed properly... Otherwise holy crap heh
nonymous (banned)
join:2003-09-08
Glendale, AZ

nonymous (banned)

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Re: once

said by decifal7:

Didn't sprint sell their towers and lease back from this same company? This some how just seems like a future setup for some serious issues somehow.. Multiple providers on the same towers.. I hope they keep the frequencies managed properly... Otherwise holy crap heh

That is the way it is done. Plus anyone else say even wisps may also use the same towers. Or business and government may be on some towers also.
Heck also water towers, church steeples and tall buildings downtown are used for multiple antennas no problems.

trparky
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join:2000-05-24
Cleveland, OH

trparky

Premium Member

Re: once

I've seen some towers in my area that have four or five different antenna arrays on them all at different heights on the tower. I'm going to assume here that that tower probably has four carriers on it.
dudeman456
join:2005-04-29
New York, NY

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Sprint sold it to TowerCO, though I think Nokia is the one doing the maintenance in some parts of the U.S., and Alcatel in others.

GorbGuy
join:2003-09-23
Middleville, MI

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GorbGuy

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Just some simple math...

9,600 tower space leases at $1,900/month/site...
- $18,240,000 per month in tower leasing
- $218,880,000 per year
- $2,188,800,000 over the 10 yr. life

I'm in the wrong business.

•••
rody_44
Premium Member
join:2004-02-20
Quakertown, PA

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rody_44

Premium Member

Look at it this way

You have a at@t tower and its costing you lets say 5000.00 a month. You sell it and now it has verizon and t mobile on the same tower. Now instead of costing you 5000.00 it is generating 10,000 a month in income. Its a win win for everyone involved. They could be giving the cell tower away and it make financial sense.
They are getting 4.85 billion dollars. Interest alone more than pays what the lease will cost. Instead of costing them money the towers now become income earners.

•••
jriskin
join:2001-10-11
Topanga, CA

jriskin

Member

Don't think AT&T is as short sighted as the headlines may suggest...

I'm not an expert, but i did dig deeper into the actual deal. "Crown Castle (CCI -0.9%) is trading lower following its $4.85B deal to buy and acquire leasing rights to 9.7K AT&T towers"

"Crown Castle will have the rights to lease about 9.1K AT&T towers and purchase roughly 600 others. The average term of the lease rights is about 28 years, after which Crown Castle has an option to purchase the towers for approximately $4.2B. AT&T will sublease space on the towers for at least 10 years with an option to renew up to a total of 50 years."

»seekingalpha.com/news-ar ··· nsaction