In addition to adding towers to their portfolios, tower management companies also have started to bring wireless construction capabilities in-house in an effort to offer their carrier customers one-stop shopping.
SpectraSite Holdings Inc., which recently secured a purchase lease-back and build-to-suit arrangement with Nextel Communications Inc., last week signed a definitive agreement to purchase Westower Corp. largely for Westower’s construction capabilities. The Nextel deal gave SpectraSite about 2,000 existing towers nationwide, as well as a commitment to build the next 1,700 towers Nextel requires during the next five years.
“SpectraSite has a huge build-to-suit obligation to fulfill,” said Don Bechter, vice president of Daniels & Associates, Denver. “Westower brings that capability to them.”
Another large tower management company, American Tower Corp., made a similar deal last year when it acquired OmniAmerica Inc. and OmniAmerica’s construction arm, Specialty Teleconstructors.
Meanwhile consolidation among tower-related companies is expected to continue. Rumors are circulating that Clear Communications Group, which provides engineering, construction and maintenance services, may be looking to combine with TWR Lighting Inc. Clear Communications would not comment on the rumor.
Doug Wiest, chief operating officer at American Tower, which closed its acquisition of OmniAmerica earlier this year, said American Tower saw an opportunity to provide a full-service operation for its customers, taking siting from the search ring to line and antenna installation. Carriers, he said, weren’t necessarily pleading for one-stop shopping, but once they realize its benefits, they are finding it to be an advantageous solution.
“Carriers in general want someone to come in and buy, build, maintain and acquire sites for them,” said Bechter of Daniels & Associates. “They want one-stop shopping.”
For tower management companies, in-house construction provides control.
Stephen Clark, chief executive of SpectraSite, said control over the quality of construction and buildout schedules is a benefit.
Another key consideration is cost savings. American Tower believes it realizes a minimum of a 10-percent savings on average for each tower it builds itself rather than sub-contracting the work out, said Wiest.
“One thing that happened that I didn’t expect was there were quite a bit of synergies between the tower construction, tower management and tower development areas,” said Wiest. “It was really a one plus one equals three type of thing.”
SpectraSite’s Clark said buying a construction company also provides new customer relationships. The Westower transaction will increase SpectraSite’s tower portfolio only by about 200, but Clark noted Westower has build-to-suit relationships with four carriers, three of which are new for SpectraSite.
In addition, Westower strengthens SpectraSite’s presence in the Western United States and expands its presence into Canada and Brazil.
Both American Tower and SpectraSite said they will continue to use third-party construction companies, especially in situations where the capacity of their in-house construction capability is maxed out.
Speciality Teleconstructors also continues to do construction work for carriers regardless of whether American Tower has build-to-suit agreements with them. The company also does construction work for other tower management companies, said Wiest. “In American business today, companies are doing business with their competition more and more,” said Wiest. “It’s happening all over in the computer business.”
Rich Berliner, president and CEO of Berliner Communications Inc., which provides a range of services including construction, said he isn’t worried about what effect the trend will have on how much work will be available for his company.
“It is a great benefit to us in being unattached because we can work for any and all of the tower companies in situations where they have more work than they can handle,” said Berliner, who noted the company is still doing most of its work for carriers. “No matter how much capacity they buy, there is always going to be subcontracting work.
“It validates the full-service approach that we have taken all along,” noted Berliner. “The more services you offer, the better.”
However, bringing construction in-house does provide some challenges for tower management companies.
“The big advantage to outsourcing is you don’t have the cost structure in terms of more employees, offices, trucks and that kind of thing,” said Bechter. “There also could be a period where you are not constructing sites, and then that business is sitting there idle.
“The construction business tends to be project based and not a recurring revenue business,” said Bechter.
“The biggest challenge is all of a sudden we’re a construction company,” said American Tower’s Wiest. “The biggest challenge for anyone in this situation is marrying the corporate cultures and getting everyone focused in the same direction.”
