U.S. tower companies (towercos) together invest over $3 billion a year in wireless infrastructure. That capital expenditure (capex) is incremental to the roughly $30 billion that the carriers spend to build out their network coverage and capacity. Whereas the carriers invest in the radio access network, the switching/routing core and backhaul, the tower companies invest in structures, both up in the air and on the ground, to support the carriers’ network equipment.
How does that towerco capex total break down and where is that money allocated? Understanding this breakdown is important for tower fabricators, climbing contractors and service providers to know how to plan their business with these towercos going forward.
Over 100 U.S. companies, according to an Inside Towers database analysis, operate and maintain over 120,000 towers combined. This group is a mixed bag of tower companies, broadcasters, railroads and utilities, wireless service providers, public safety entities and others.
The Big 3 – American Tower, Crown Castle and SBA Communications – together account for 95,000 towers or 78 percent of the total. Add in the next biggest companies – US Cellular and Vertical Bridge – then the top five companies operate over 100,000 towers, nearly 85 percent of the installed base.
Even with network densification and the proliferation of small cells, the bulk of the investment for the next several years at least, will still be in tall towers that support macrocells. In 2018, new tower construction alone, accounts for 35 percent or nearly $1 billion of the total investment. The industry is adding several thousand new towers a year. On top of that, modifications, augmentations and additions to existing structures account for another 29 percent or $760 million. And maintaining this base of towers runs close to $250 million or nine percent of the annual total. Collectively, this is a target of around $2 billion a year for tower fabricators, erectors and service companies to address.
Other towerco capex allocations include buying, rather than leasing, the ground under the towers to the tune of nearly 11 percent or about $300 million annually, and merger and acquisition activity of more than $400 million a year.
Most tower companies just focus on towers with little diversification. The big guys are the exceptions. American Tower has distributed antennas system (DAS) neutral host installations, but for the most part is sticking to the tower model.
Crown Castle is the outlier. The company is the largest in terms of its infrastructure mix: over 40,000 towers, more than 60,000 small cells already installed or planned, and 65,000 miles of fiber optic cable. The company also has the biggest capex budget at more than $1 billion. A significant portion of Crown Castle’s new construction capex is split between towers, including small cells, and fiber.
In the big picture, the macrocell model likely will hold up for some time and is appropriate for sites operating with low-band (600, 700, 800 MHz) and mid-band (1900, 2500, 3500 MHz) frequencies to provide coverage over wide areas. However, a big move into millimeter wave (mmW) frequencies at 28 and 39 GHz or above for 5G deployments will dictate locating antennas closer to customers with small cells everywhere. This suggests that tower companies, especially those operating in populated areas, will need to diversify their infrastructure portfolio with increasing numbers of small cells.
John Celentano is an Inside Towers contributing analyst. He can be reached at [email protected]
by John Celentano, Contributing Analyst
November 26, 2018
