Cell Tower REITS — likely to grow in value with the push for 5G

5G REPORTER

A Real Estate Investment Trust is one of the many ways an investor can break into the competitive 5G infrastructure market. The complicated relationship between tower companies and carriers is only the beginning of the obstacles to entry for investment: zoning and other rules delay construction. High costs of infrastructure and cash flow issues make it a difficult point of entry. With infrastructure projected to soar, many investors looking to benefit from the 5G market are turning to REITs.

 

Tower companies and wireless carriers

Tower companies own the install, and the carriers rent space. The tower companies own all vertical infrastructure, including towers, poles, masts, and often the parcel of land located beneath these structures and the underground cables. The tower companies often own the small-cell nodes, which provide high-frequency, short-range signals for 5G. 

The wireless carriers often rent this invested installation from the tower companies. They often mount their ownequipment, such as transmitters or antennas. 

REIT tower companies (examples)

  • American Tower – The largest REIT in the world when it comes to market capitalization. Converted to a REIT back in 2012.
  • Crown Castle International – The largest operator of small-cell networks across the US. 40,000 towers and 60,000 miles of fiber. Converted to a REIT back in 2014.
  • SBA Communications – Has towers in all 50 US states. Converted to a REIT back in 2016, but also owns assets in Canada, Central America, and South America.

Examples of these three tower company’s tenants:

  • Verizon
  • Sprint
  • T-Mobile
  • AT&T
  • The Police
  • The Emergency Services
  • Broadband providers
  • Data providers
  • Cable companies

Why is it hard for new tower companies to break the market?

Unfortunately, it can be challenging to break into the US tower market. Local zoning restrictions and eyesore laws create high barriers to entry. Existing companies often resort to installing new equipment and developing towers they already have on their roster to avoid drawn-out battles for new towers. People tend not to like towers being built near their homes as they can impact housing prices. 

Cash flow 

Leases for “space” on cell towers usually run ten years. They also often include five-seven year opt-out clauses, as well as annual escalators/inflation adjustments. There is a 98%-99% renewal rate for tenants in the US at the moment, due to steady and consistent the cash flow. 

With 5G spurring the call for new installations and improvements to existing infrastructure, the demand for Tower REITS will only increase.

NOTE: 5G Reporter does not offer investment advice. This feature is meant for information and news purposes.

 

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