Related to our top story, carriers have been pushing for different, and in their minds, better, lease terms with traditional towercos for a while. The issue is key with all the different types of tower work coming to a head in 2018, including the FirstNet build, television repack and continued carrier network densification.
Asked about the tower lease situation last week at the 2017 Wells Fargo Media & Telecom Conference, American Tower Investor Relations Director Igor Khislavsky characterized it “as a very typical” tenant-landlord relationship. “If you own an apartment building you want the highest possible rent for that apartment. This is no different. Our focus is trying to deliver best level of service we can.” Commercial level discussions with tower tenants “are the same,” said Khislavsky.
Concerning pricing in general, Wells Fargo tower analyst Jennifer Fritzsche said, “Some people call it nickel and diming” to be charged “every time you touch the tower.”
In response, Khislavsky said, “All components of our pricing are up for discussion. Fundamentally we own a real estate asset. Whether discussing amendment pricing, new leasing, escalators, those have been steady for a long time,” he said adding, “our escalators tend to be three percent on average in the U.S.”
Asked whether the towerco has master lease agreements, Khislavsky confirmed that American Tower does have MLAs in place with all of its major customers. “In broad strokes, the idea of an MLA is, rather than having a site-by-site exercise,” if the parties are able to reach a “holistic agreement,” price becomes easier for all parties. An MLA is “more efficient” and “cycle times get better and we are able to lock in new business over a multi-year period.” Of course, details are not publicly disclosed, he added.
Crown Castle agrees that all of the upcoming tower work in 2018, means “new demand for macro towers,” according to CFO Dan Schlanger. Asked the same question about tension between towercos and carrier tenants, he said: “We try to supply what we can to make things as easy as possible in terms of flexibility and pricing. But we don’t want to give up the economics to make that happen.” He said there have been discussions of the tower lease model with customers. We want to make them happy, but not to the detriment of our shareholders.”
November 14, 2017