Tower Lease Renegotiation

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So what's in the letter?

There are a few companies out there that work directly with carriers, they make money based on the savings they bring the carrier. The biggest players in this space are MD7 and Blackdot, although there are a few others.

The letter generally begins like this:

"'Wireless carriers' are changing how they operate due to a variety of factors, including heightened competition in the industry, changing customer needs and the bigger role Internet access is taking. In the past, emphasis was placed on rapidly building out networks in order to improve coverage. Today, the industry is shifting its focus in order to increase operational efficiency and to maximize the value of each cellular site."

Here's where it gets good

"As a result, 'Carrier' is re-evaluating and redesigning its network in order to reduce expenses and streamline operations. These changes will take into account the shifting network requirements, operational redundancies, and overlapping sites throughout the network."

Then, not only do they want to reduce your rent, they want more control over the site.

"In order for your cell site to remain technologically viable for the network long-term, 'Carrier' will also require the addition of expansion language, basically in the form of the following:

"1. Expansion of Permitted Use: Allows 'Carrier' the ability to modify, supplement, upgrade, replace, expand or refurbish their equipment within the existing Premises.

"2. Expansion of the Premises: Allows 'Carrier' to expand the current Premises, on a space available basis, not to exceed an area equal to the current square footage of the Premises, at the current rate per square foot up to $1.50."

What they are looking for here is the ability to make changes to the equipment. The new generation of radio equipment is a major departure from the big bulky ground mounted base stations that you see at the base of a cell tower. The new radio equipment is actually tower-mounted. The radio systems consists of multiple tower-mounted cabinets that house the radio system. The cabinets are typically mounted in the vicinity of each antenna. Keep in mind that each radio weighs about 70 pounds and there could be three or more. Instead of coaxial cables running up the tower, they use a hybrid cable that contains both the power and fiber connections. These radios can add a significant amount of load to some towers.

Here's what they want to offer

"'Carrier values its affiliation with you and would like to continue a long and mutually beneficial relationship for years to come based on one of the renewal options above."

What they will offer you will vary, but likely will be one of these:
■ Increase the term of commitment to 15 years (typically initial 5-year with 2-5 year renewals). They might offer a guarantee of 5 years max.
■ Same as above, but with a 3-year guarantee.
■ Long-term buyout of lease (i.e. give the owner a one-time lump sum at a greatly reduced rent).
■ In all cases the rental amount and yearly percentage of increase are reduced significantly.

You can consider the first two options short term leases (5- or 3-year), because they will reserve the right to renegotiate again after that. The buy-out option may cause you to give up some control over your future plans (i.e. may have a significant impact to the value of a tower you want to sell in the future).

If you are approached to renegotiate your tower lease, do your homework and never accept the first offer, everything is negotiable.

McNamara is president of Applied Wireless, Cape Coral, FL.

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