Nextel Communications Inc. last week agreed to sell its portfolio of towers to independent tower
company SpectraSite Communications Inc., ending months of speculation about which tower company the specialized
mobile radio carrier would select for the sale.
The $560 million cash deal has been eagerly anticipated by the
wireless and tower industries, which largely expected Nextel to be the first nationwide wireless carrier to sell its tower
assets to a third-party company.
The purchase-leaseback trend is being driven by carriers’ need to monetize their
tower assets and use those funds to compete in an increasingly crowded wireless market. SpectraSite in August
purchased Airadigm Communications Inc.’s tower portfolio in what it said was the first sale of a carrier’s entire tower
inventory to a third-party company.
Late last year, another large carrier deal paired Bell Atlantic Mobile and Crown
Castle International Corp. in a joint venture that controls Bell Atlantic’s towers. Crown paid Bell Atlantic $650 million
for 1,400 existing towers and gave the carrier a nearly 38-percent stake in the new venture.
At $560 million for
2,000 towers, the Nextel/SpectraSite arrangement is cheaper per tower than the Bell Atlantic/Crown deal, although
analysts are careful to note that comparing tower deal values is more complicated than simply looking at the face value.
The deal also calls for SpectraSite to build the next 1,700 new towers required by Nextel during the next five
years.
Nextel will receive a 17-percent ownership interest in SpectraSite, which will own about 2,200 towers
nationwide when the transaction closes during the second quarter, making it one of the largest independent tower
companies in the United States. Nextel will pay rent of $1,600 per month per tower, which will increase 3 percent per
year, said SpectraSite.
“It’s a smart deal for both sides,” said Mark Ein, a principal at The Carlyle
Group, a private equity firm based in Washington, D.C. “Both companies get a lot out of it.
“It takes
(SpectraSite) up to the next level in terms of scale,” he said.
While Nextel walks away with cash and an
opportunity to focus less on site development and more on its core service business, SpectraSite gets an instant
nationwide network situated in clusters the majority of which are located in the top 100 wireless markets. On average,
Nextel’s towers each can support 2.5 broadband tenants and currently are supporting an average of 1.2 carriers each.
SpectraSite said it plans to upgrade the towers to support 2.75 tenants each.
“We believe this footprint
combined with our site development capabilities will position us as the tower company of choice for completing other
carriers’ network deployments,” said Stephen Clark, chief executive officer of SpectraSite.
The deal is backed
by $400 million cash committed by Welsh, Carson, Anderson & Stowe, which last year purchased Centennial Cellular
Corp. CIBC Oppenheimer Corp. and Credit Suisse First Boston also are providing financing.
A spokesperson for
Nextel said SpectraSite’s strong financial backing played a significant role in its decision to sell its towers to
SpectraSite.
“I think generally this is a good deal for the (tower) industry,” said Don Bechter, vice
president of Daniels & Associates, Denver. “A number of large deals have been out there, but they have been
slow to get done because of the size of the deals, the events last fall in the financial markets and a short list of
companies that could do deals of this size.
“This has brought some money into the industry, and it helps the
industry to have a well-regarded firm like that make a big bet,” continued Bechter.
Many industry experts
expect the deal to open the floodgates for more deals with carriers, many of which are in the process of selecting a
partner but have been waiting for the Nextel deal to set the pace. SpectraSite’s Clark said he expects the deal to serve as
a model for future deals and that SpectraSite will be involved in future deals.
“SpectraSite will play an
aggressive role in the consolidation of the tower industry,” said Clark. “We currently are in active
discussions with other carriers for major new build programs as well as additional tower acquisitions.”
The
SpectraSite deal also added to persistent rumors that Nextel is cleaning itself up to be acquired by another carrier. MCI
WorldCom Inc. often is mentioned as a potential buyer for Nextel.
