By Michelle Choi, an insider at Lease Advisors
InSite Wireless Group, LLC recently announced the acquisition of a significant number of specific Capital Tower Group (CTG) DAS and telecom assets. Then in a later statement, InSite announced that Co-Founder and former Chief Executive of CTG, Richard M. Grimes, had joined InSite as Chief Operating Officer of DAS and Small Cells Group. David E. Weisman, President and CEO of InSite, said that “it made sound business sense to bring both assets into [the] growing company” which would bring an “influx of new business opportunities.”
Tower companies aren’t alone in taking this type of strategic approach to growing their businesses. In the past year alone, other major mergers and acquisitions involving carriers and even equipment manufacturers have included AT&T and DirecTV, T-Mobile and Dish, and most recently a deal between Verizon and AOL. Additionally, French telecom equipment company Alcatel-Lucent received a $17 billion acquisition bid from Nokia.
Mergers and acquisitions are a frequent occurrence in the telecom industry. According to Dealogic, U.S. mergers and acquisitions for the 2014 fiscal year hit $1.41 trillion—the highest YTD volume on record. Telecom is responsible for a sizeable portion of this growth. The pace of corporate deal making helps companies reorganize for efficiency, expand their domain in the market, and support other ambitions. Combinations of media and telecom capabilities tie customers to more products while meeting their increasing content consumption needs. What has been labeled as “coopetition” and “infrasharing” lower capital expenditure costs in maintenance, personnel, and power, freeing up capital to invest in the development and enhancement of tower sites.
However, as promising as they may be, these frequent changes can be a cause for concern for those heavily vested in the telecom industry. This rapid expansion and changing business dynamics have affected the spending decisions of many telecom companies, slowed investor spending, and has already resulted in the decommissioning of thousands of cell towers due to the resulting redundancy of some sites. Naturally, completed deals and merging operators can halt company spending on development and expansion, at least in the short term. Executive Director at Ernst and Young, Nicolas Clinckx, said that in telecom, “due to the vast diversity and volume of assets and locations to address, the complexity of these projects is mainly linked to organization and management issues, rather than technical ones.”
Considering the exploding demand for data, this growth is exciting and much anticipated. But with negotiations taking years to reach, evaluate, and execute, the InSite, AT&T, T-Mobile, Verizon, and Nokia deals have a long way to go. Mergers and acquisitions may serve both the long term interests of telecom companies and public interest insofar as mergers do not create dominant corporations that weaken customer sovereignty and subdue competition. Otherwise the deals should lead carriers, tower companies, and equipment companies down a path of renewal and growth.
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