Is That Salsa On Your Steering Wheel?

Time for the Way Cellular Antenna Leases Are Negotiated to Change.

The way cellular antenna leases are identified and negotiated is out-dated and has changed little since the cellular phone industry’s explosive growth began in 1995. Md7 Chairman and CEO, Michael Gianni, describes the traditional site acquisition process as agents “parachuting in, grabbing a rental car and driving all over town leaning over the steering wheel while they eat a burrito and look up in the air for potential cell sites.” Those traditional site acquisition agents had no incentive to negotiate a good lease with low rents and solid contract language that lasted the life of a traditional cell site. The traditional cellular antenna lease was just another “pay-point” on a fixed fee services agreement. Agents not only negotiated the lease but had to battle municipal administrators for permits and zoning approvals and many other pay-points before their work was done and a new site could be constructed. They were given as many search rings as they could handle and paid to get leases signed as fast as possible – there were few if any incentives to keep the rent down and negotiate solid lease terms.

While this strategy worked well in the short-term – it enabled cellular operators to build networks as fast possible, this was a classic case of “if you want it bad, you get it bad.” If you are in a hurry and don’t take the time to negotiate a lease properly you will pay for it in the long run. Cellular phone operators are now paying the long term price. The national average for cell site rent is estimated to be around $1,750 per month. If this is accurate, then for every 50,000 cell sites, a carrier has an annual rent roll of approximately $1 billion. The largest cellular operators in the United States have an estimated 65-70,000 cell sites. Thus they are pushing $1.5B and it increases by 3% every year before they even build one new site.

Carriers used competition to beat the site acquisition pay-point as low as it can go. Site acquisition agents are now commoditized and many of the good ones have moved on (or cashed out). But the leases are no better; the starting rents are still too high and language still has to be amended each time a site is modified. With the advent of 4G, our industry will double and maybe even triple the number of cell sites in the United States. Time to change the way cell sites leases are negotiated.

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