We are a leading wireless and broadcast communications infrastructure company
with a portfolio of over 22,000 communications sites. Our portfolio consists
of towers that we own and towers that we operate pursuant to long-term lease
arrangements, including approximately 20,000 tower sites in the United States
and over 2,800 in Mexico and Brazil. In addition to these tower sites, we also
offer access to over 10,000 rooftop and tower sites in the United States that
we manage for third parties. We also operate in-building distributed antenna
systems in malls and casino/hotel resorts. Our primary business, which we refer
to as our rental and management segment, is leasing antenna space on multi-tenant
communications sites to wireless service providers and radio and television
broadcast companies.
Our communications site portfolio provides us with a recurring base of leasing
revenues from our existing customers and growth potential due to the capacity
to add more tenants and equipment to these sites. Our broad network of communications
sites enables us to address the needs of national, regional, local and emerging
wireless service providers. Through our network development services segment,
we also offer limited services that directly support our site leasing operations
and the addition of new tenants and equipment on our sites. We intend to capitalize
on the continuing increase in the use of wireless communications services by
actively marketing space available for leasing on our existing sites and selectively
developing or acquiring new sites that meet our return on investment criteria.
We believe our strategy of focusing operations on our rental and management
segment has made our consolidated operating cash flows more stable, will provide
us with continuing growth and will enhance our returns on invested capital because
of the following characteristics of our core leasing business:
• Long-term tenant leases with contractual escalators. In general, a
lease with a wireless carrier has an initial term of five-to-ten years with
multiple five-year renewal terms thereafter, and lease payments typically increase
3% to 5% per year.
• Operating expenses are largely fixed. Incremental operating costs
associated with adding wireless tenants to a communications site are minimal.
Therefore, as additional tenants are added to a site, the substantial majority
of incremental revenue flows through to operating profit.
• Low maintenance capital expenditures. On average, a communications
site requires low annual capital investments to maintain.
• High lease renewal rates. Wireless carriers tend to renew leases because
suitable alternative sites may not exist or be available and repositioning a
site in a carrier’s network is expensive and may adversely affect network
quality.
We believe the continuing growth in the number of wireless service subscribers
and the minutes of use per subscriber will require wireless carriers to add
new cell sites, and new equipment to existing cell sites, to maintain the performance
of their networks in the areas they currently cover and to extend service to
areas where coverage does not yet exist. As wireless carriers continue to add
subscribers and seek to limit churn, we also anticipate they will focus on network
quality as a competitive necessity and will invest in upgrades to their networks.
In addition, we believe that as wireless data services, such as email, internet
access and video, are deployed on a widespread basis, the deployment of these
technologies may require wireless carriers to further increase the cell density
of their existing networks, may require new technology and equipment, and may
increase the demand for geographic expansion of their network coverage. To meet
this demand, we believe wireless carriers will continue to outsource their communications
site infrastructure needs as a means of accelerating access to their markets
and more efficiently deploying their capital, rather than constructing and operating
their own communications sites and maintaining their own communications sites
service and development capabilities.
Competition and Customer Demand
Rental and Management
Our rental and management segment competes with other national and regional
tower companies, such as Crown Castle International Corp. and SBA Communications
Corporation, as well as wireless carriers and broadcasters that own and operate
their own tower networks and lease tower space to third parties, numerous independent
tower owners and the owners of non-communications tower sites, including rooftops,
utility towers, water towers and other alternative structures. We believe that
site location and capacity, price and quality of service historically have been
and will continue to be the most significant competitive factors affecting owners,
operators and managers of communications sites.
Customer demand for our rental and management segment is also affected by the
emergence and growth of new technologies. Technologies that make it possible
for wireless carriers to expand their use of existing infrastructure could reduce
customer demand for our communications sites. The increased use of spectrally
efficient air-link technologies, such as lower-rate vocoders, which potentially
can relieve some network capacity problems, could reduce the demand for tower-based
antenna space.
Network Development Services
Our network development services segment competes with a variety of companies
offering individual, or combinations of, competing services. The field of competitors
includes site acquisition consultants, zoning consultants, real estate firms,
right-of-way consulting firms, structural engineering firms, tower owners/managers,
telecommunications equipment vendors who can provide turnkey site development
services through multiple subcontractors, and our customers’ internal
staffs. We believe that our customers base their decisions on network development
services on various criteria, including a company’s experience, track
record, local reputation, price, and time for completion of a project.