A TowerXchange Interview
SBA Communications has been an acquisitive force in Central and Latin America since 2010, and has sealed several landmark deals with both carriers and towercos. In this interview with TowerXchange, David Porte, Vice President, International within the company, shares his insights into the recent deals SBA closed.
TowerXchange: “What can you tell us about the acquisitions SBA Communications recently sealed in Central and South America?”
Porte: “Highline and Torres Andinas are both private deals, in line with our strategy of direct negotiations that ensure the best outcome for both the seller and the buyer. In fact, we’ve been negotiating quite a few private deals to ensure fair returns and conditions for both parties, without the involvement of banks and brokers.
With regards to Highline, we’ve added approximately 900 towers to our Brazilian portfolio as well as a build-to-suit pipeline. In fact, the Highline portfolio included a set of solid build-to-suit contracts with positive terms that were negotiated before a wave of mediocre contracts were signed by numerous towercos across the region.”
Porte (continued) “The acquisition of Torres Andinas’ sites represents a step forward in our footprint across Colombia and Peru. We’ve known the management of the towerco for a few years and we were glad to pick their portfolio up when they were ready to exit the region. On the other hand, the announced deal with Tigo El Salvador sites did follow a bidding process. We’ve been strong in El Salvador since 2010, and we were glad to seal the deal with very solid T&Cs for both parties.”
TowerXchange: “Can you give us some details regarding the key differences between private and public deals?”
Porte: “Private deals offer more flexibility to the seller and don’t force parties to stick to a certain timeframe, as it happens when deals are carried out by banks. In fact, in public processes the seller is constrained to a given deadline to sell while in private deals, the sale can be put on hold if needed. Private deals are beneficial, both for those looking at quick sales as well as for those who don’t want to rush, offering a higher degree of control. The real key is that bid processes involve complex negotiations and often result in suboptimal T&Cs for the seller. Whereas in private negotiations, both parties can sit down and discuss their terms without any pressure to reach a deal.”
TowerXchange: “What is driving independent towercos to start divesting their portfolios? Is it just a function of their investment lifecycle coming to an end?”
Porte: “I would say that there are three key drivers that are pushing independent developers to divest their portfolios. On one hand, some of them are indeed getting to the natural end of their investment cycle and looking at exiting, as they originally planned. This has happened in a number of cases such as Torres Unidas, Highline do Brasil and Torres Andinas over the past few months. In some cases the investors had to delay their exits for one or two years later than planned due to slower growth and FX reasons.
A second aspect to keep in mind is that towercos could decide to wait longer to divest their assets but they aren’t going to double the money they’ll make by selling in the first five years. There is a 3 to 5-year sweet spot for growth in the industry and although the seller can hold on to its assets for longer, the growth levels won’t be the same on a percentage basis.
Another factor that is driving exits is that there isn’t much build-to-suit (BTS) activity across CALA anymore. In fact, BTS volume is slowing across the region, especially for companies that are not willing to agree to poor contract terms and conditions. So those who want to play by the books and have already built a good portfolio of sites are ready to exit in order to maximise their returns. To give you an example, we’ve recently looked at a portfolio for sale during a private process but the MLAs were the worst we’ve ever seen and simply walked away from the deal.”
TowerXchange: “We’ve been advocating the importance of playing by the books for years now, how come some developers still build towers that acquisitive companies won’t buy?”
Porte: “Some of those entities are backed by investors who aren’t educated enough on the industry principles to understand what is being agreed when signing MLAs and how those terms will lower their chances of making a good exit. While some blame the management teams, the investors need to be educated and engaged. Management incentives need to be aligned with value creation, not simply increasing tower count.
We still have some time to wait before people really learn their lessons and investors wise up. The companies with bad contracts are beginning to mature and investors will need to exit. That’s when they will be disappointed and hopefully the whole investment industry will absorb those lessons. It’s started already where we have seen a few tower portfolios across CALA which quietly went unsold due to bad underlying contracts, low quality towers and lack of permits.”
TowerXchange: “Do you agree that 2018 is shaping up to be a year of consolidation among CALA towercos, and if so, how would you summarise your message to tower owners who are thinking about selling?”
Porte: “I would say that 2018 isn’t going to be bigger than 2017 in terms of deals. Many big players exited the market and there are a few remaining portfolios that could be put up for sale. But questions remain as to whether they are good portfolios!
All I can say to tower owners is that we offer a winning solution for anyone looking at selling, as long as they have good towers. SBA is happy to sit down in private negotiations and partner to achieve desired results for all parties.”
April 9, 2018