Partner Clayton Funk Interviewed by Wireless Estimator re T-Mobile's Towers

T-Mobile's towers back on the bidding block with a price tag that could reach $2.75 billion
January 20, 2011 - T-Mobile USA attempted to sell their cell towers in 2007, but after venture capitalists and tower companies spent two million dollars or more in due diligence and were ready to ink an agreement, at the eleventh hour the carrier bowed out, deciding that the timing and the potential returns were not right.

However, in order to raise additional funds for capital spending, a sale may be more attractive now, according to the head of the No. 4 U.S. mobile service's parent company, Deutsche Telekom.

Chief Executive Rene Obermann said today that a sale of T-Mobile's towers could generate "significant" funding to improve the financial self-sufficiency of T-Mobile, which has been a drag on Deutsche Telecom's results.

But he provided the expected caveat and cautioned reporters at an analyst meeting in New York stating, "We're definitely not in a rush," adding that a sale would depend on whether "the financials work out."

T-Mobile's most recent database count shows that the carrier has 8,782 towers.

According to industry observers, based upon the nearly 9,000 towers, offers would most likely begin at $2.25 billion and possibly reach $2.75 billion.

"It's been rumored for several months that T-Mobile would formally explore a sale of their towers as a way to raise capital to invest back into their network," said R. Clayton Funk, Managing Director of Media Venture Partners, LLC.

Wireless carriers, in the past, have viewed their towers as a core asset but that perception has been rapidly changing over the years, Funk said.

"Given how there is plenty of capital available for tower acquisitions and merger and acquisition prices are at all-time highs, T-Mobile's timing is perfect to maximize the value of their tower portfolio, "Funk said.

It's rare that a tower deal of this size comes to market and it should be of interest to the public companies and the larger privately held tower companies such as TowerCo and Global Tower Partners.

Over the years, carriers who have sold their towers and entered into leasebacks have figured out ways to maximize the value of their sites without sacrificing too much in terms of reserving future loading space on the towers. 

"It's a relationship that has to make sense for both parties. The buyer is paying a price that they hope is attractive, but also one where they can still make money from the towers post-closing, while the carrier wants to ensure they are turning over the ownership of their towers to someone they can work cooperatively with in the future," Funk said.

Funk, who has orchestrated a number of large tower asset sales, believes that a sale-leaseback, operationally, makes sense for nearly every owner and operator whether they are a broadband carrier, broadcaster, government entity, or any other wireless operator. 

"Tower companies are proficient at owning, managing and maintaining the sites so the former owner entering into the leaseback can focus on their core business of selling minutes, data plans, advertisements or programming. The biggest issue is if the deal makes financial sense to the seller. Given where tower valuations are in today's market there is a wide valuation gap that favors the carrier, broadcaster or operator," Funk said.

How T-Mobile addresses their network upgrades will affect the price offered for their tower assets.

If their expansion plans show that they're going to build out their high speed network through partnerships with Clearwire or LightSquared, additional co-locations for the acquiring tower company will be limited.

Who's at first?
Obermann stated at the presentation that out of its competitors in the U.S., T-Mobile owns the most towers.

According to WirelessEstimator.com's company ranking, AT&T Towers has a considerably larger portfolio.

Although AT&T states that they have 10,798 tower sites in their database as of Dec. 2010, after deducting pico cells, cell on wheels towers, rooftops without a tower, and other sites that would not traditionally fall under the heading of towers, the number is approximately 10,312, but still ahead of T-Mobile's count.

T-Mobile suitors from 2007 will have an easier opportunity to look at the carrier's current assets and provide a proposal.

However, T-Mobile's holdings totaled only 5,500 towers at that time. The majority of the carrier's new builds were constructed with added capacity and some with a committed client base.

For information regarding the 2007 race to buy T-Mobile's towers, click here.

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