Despite Slowdown, Tower Industry Was Robust in 2014

December 17, 2014

By J. Sharpe Smith —

December 18, 2014 — Despite news of a work stoppage at AT&T and general fears of a slowdown, this year seems to have been a stellar one for the tower industry.

In July, MasTec, a top AT&T supplier, reported reduced levels of second-quarter wireless project revenues as the carrier’s projects were deferred or reduced in scope. Second-quarter communication segment revenues were $45 million to $50 million less than prior expectations.

“We saw some work [from AT&T] deferred from several months ago to next spring,” John Paleski, Subcarrier Communications, told AGL Link. “It affected us, but not very much. We had a lot of initial builds with AT&T that they were very committed to. These were sites they sorely need for quite a while. We have been very busy and have a lot of work in the pipeline.”

Subcarrier also does a lot of microwave backhaul work for AT&T and Verizon, which it expects to continue into next year. Along with work for the carriers, Subcarrier is building towers for E911 systems and Homeland Security purposes.

“We can report that 2014 was another fantastic year for Subcarrier,” Paleski said. “It was a record setting year for tower builds, acquisitions and revenue. Our relevant year-over-year metrics increased by nearly 15 percent.”

Tower developers are busier than they ever have been before building new sites for carriers trying to keep up with the demand for data, Howard Mandel, Peppertree Capital Management told AGL Link.

Peppertree is a private equity fund manager, whose cell tower developers include AW Towers, Branch Towers, Clearview Tower, Horvath Towers, K2 Towers, Pegasus Tower Development and the startup Blue Sky Towers.

“The quantity of tower development has increased because of the demands for data; therefore, the amount of capital we are deploying is much larger,” Mandel said. “It was our best year in terms of making investments and our portfolio companies being able to deploy capital and build lots of towers.”

A typical good year for an independent tower developer is to build 15 to 25 towers in a year, Mandel said. Peppertree has several companies doing more than 25 towers and a few of them doing multiples of that number.

While these new towers create new inventory that may eventually be rolled up by an aggregator, Mandel said that the short-term goal is to lease up the towers, manage them and build up recurring revenue.

Horvath Towers, which does build-to-suit towers, doubled the number of towers it normally builds in 2014.

Milestone Builds Record Number of New Towers in 2014

Wireless tower owner and developer, Milestone Communications reported that 2014 has been its most active year yet in wireless infrastructure development. The firm received zoning approval for 30 new towers, triple the number from last year.

“Verizon played a huge role in our growth in 2014 and continues to be the mainstay in our industry. They are steady and consistent,” said Len Forkas, president and CEO, Milestone Communications. “AT&T simply slowed spending to catch up and not go over budget in 2014.”

Looking ahead to the coming year, Forkas said it will be interesting to the big four carriers and see how the competitive pressures will affect capex spending.

“Ultimately the network is going to get more stressed and we will see if the new spectrum will alleviate some of the capacity constraints as more and more people consume data,” he said. “Next year will be good, may be not as great as 2014, but the way people rely on the network I can’t imagine that there won’t be a lot of growth in the infrastructure.”