Many radio and television broadcasters have opted to sell their tower assets to the tower consolidators. The tower companies often find these assets appealing because, in general, they have been under-managed. Broadcasters rarely make any effort to market their tower space. That often results in towers with significant upside potential for the new owners. Another incentive for the broadcasters to “cash in” is the discrepancy in the trading multiples between the businesses (both businesses trade on multiples of cash flow). At the present time, we see the following multiples of cash flow:
- Radio stations – 6.0x – 7.0x
- TV stations – 8.0x – 10.0x
- Towers
- Broadcast tenants – 10.0x – 12.0x
- Broadband tenants – 15.0x +
Clearly, a broadcaster is motivated to release an asset on the books at 6.5x for a price at 10.0x or greater. From the tower company’s perspective, adding only one additional tenant radically reduces the effective purchase multiple. It is “win-win.’ We expect to see more broadcast tower sales in the future.
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