Tower Lease Renegotiation

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Leasing space on your tower is a great option for generating additional revenue; however, many tower owners have received letters from tenants stating that their lease must be renegotiated or they will remove their equipment - either terminating or not renewing the lease. If you haven't received one of these notices, it will be a matter of time before you do. Carriers are looking for new and creative ways to save money. One of their most aggressive initiatives is to renegotiate leases at a much lower rate than the initial value. In many cases, they are also seeking additional space on the ground and on the tower, as well as the ability to have blanket permissions to make changes as needed. Most of these letters are designed to instill fear of losing the revenue stream and sadly many people agree to the new, less profitable terms, when in fact there may be no reason to accept them.

It costs them money to leave

The first thing to know is that it costs carriers about $200k to develop a typical collocation site, not including equipment. Here are a few other considerations:

■ Along with that expense, they brought some infrastructure into that site, including power and fiber (typically) lines. In many cases there were costs associated with structural reinforcement of the tower.
■ Many municipalities require a zoning process for antennas collocated on an existing structure (typically a use variance of some type), which takes time and money to gain approvals. Removal of the equipment would void the approval.
■ The network may require significant redesign to move the location of any site.
■ There is an added cost to decommission a site.

As you can see, from a carrier's perspective, they are not compelled to just pull down the site and leave.

But they may have a good reason

On the flip side of this, there is an ongoing effort to consolidate sites where feasible. This is particularly true where carriers have merged (i.e. Cingular/AT&T and soon, T-Mobile/Sprint, etc.). In terms of getting to an acceptable "economy of scale" there are benefits to decommissioning certain sites, particularly where one or the other carrier owns their tower and it is a simple matter to migrate them to it.

The end-game for carriers who are merging with other carrier is, to some degree, to increase subscriber base; but to a larger degree, it is about having more spectrum. The growth of smartphones is putting high demands on the networks due to people using more data. It is critical to have additional spectrum to support the current 4G and emerging technologies. Current technology allows base stations to consolidate the spectrum from multiple carriers into a single system. In fact, the "base" station may no longer be located at the base. More about that later. Yes, there could be a legitimate reason the carrier is going to want to pull out.

How do you deal with this?

In my opinion, the best way is to have as much information as possible in order to understand what options a carrier might have if they leave. Here are a few points to consider:

■ Is the location of your tower in a high traffic area? If the tower is located near a busy street, intersection or highway, the site is probably carrying a lot of traffic. A carrier would be less likely to disturb it.
■ Are zoning regulations restrictive for locating new or adding to existing structures in the immediate area? If so, you're probably fine, otherwise they might be compelled to move or consolidate to another site.
■ Are there a lot of towers in the area? Just because there is a tower doesn't mean it is useable. You should find out if there is sufficient (or permitted) ground space to locate equipment. It's not unusual for some older tower sites to be unusable due to a lack of space to locate ground equipment.
■ Are the other towers structurally useable? With the change to the 222G guidelines, many older towers are no longer feasible, due to undersized foundations or steel. The major portions of 222G are also incorporated into the most current building codes, and therefore would require significant structural modifications to be useable for the addition of new equipment.
■ Are you near any historical areas? There are particular restrictions to construct new structures/or to add equipment to existing structures that might cause some visual impact to registered historical areas, national parks and other areas. If a carrier is already on an existing structure that was grandfathered prior to many of the current environmental regulations, they are most likely going to stay put.

- continued on page 2

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