Clayton Funk and Jason Nicolay of MVP Capital led the Mergers & Acquisitions panel yesterday at the South Wireless Summit. They reviewed some of the trends they’ve witnessed in the past year and discussed what they anticipate for the future.
Funk said the data shows spending from all of the carriers is at an all-time high, which is a positive for the tower industry. “Our industry is only as healthy as the carriers,” he noted. Short term, MVP anticipates carrier spending to continue and perhaps even increase. Longer term, it’s hard to estimate, since 5G spending and rollout timing is up in the air.
Carriers continue to experience compressing margins, so reducing tower rents will be a priority, although, currently, only two of the big four are focusing on that and protecting against future rent increases.
What about the effect of interest rates? The Fed raised rates three times in 2017, and while federal officials indicate there may be more interest rate hikes this year, MVP reports they have not seen “any material effect on tower valuations.”
MVP expressed excitement around DISH’s announcement to deploy on ~40,000 sites by 2020 and utilizing Amazon as a possible partner. It bodes well for future tower lease up, they said. FirstNet, DISH, cable companies and Ligado are all potential new customers for towercos.
Overall, towerco valuations are up in Q1 and the M&A market is strong. Funk said there are many people that want to buy towers, but the pool quickly diminishes with sticker shock. And how about the never-ending question: will small cells overcome macro sites? False, said Funk. He believes they are complementary to macro sites and, “for the most part, work together.”
March 28, 2018
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