Ballard Spahr announced Feb. 5 it advised EIP Holdings I in acquiring nearly 100 wireless towers from Frontier Communications. Boulder office managing partner Nathan Seiler led the team. The towers are concentrated in Connecticut, New York and California but are scattered across 17 states.
Seiler said the deal completed in mid-January, and he shared some insights about the anatomy of telecommunications deals in general.
He said in the “dawn of the cell tower era,” carriers had their own tower portfolios. But companies later realized they could better use their capital resources by selling the towers and then leasing back access. American Tower Corporation, Crown Capital and SBA Communications have emerged as a few of the largest wireless infrastructure companies.
“That was how the cell tower industry was born,” Seiler said.
He said cell towers are a popular asset class, and increased wireless usage means carriers are always looking for more tower space. Having multiple tenants per tower makes the infrastructure attractive for potential buyers. Seiler said large tower companies also have the ability to build up their tower portfolios in large bundles. “It doesn’t take a ton more work for me to buy 100 or 500 towers than it does for me to negotiate these one-offs if somebody has a pretty good portfolio,” Seiler said. “So that’s one of the value propositions that the tower aggregators have.”
Tower acquisitions have characteristics of both traditional merger and acquisition transactions and real estate deals because they involve the infrastructure itself and the land it sits on. Seiler said buyers have to understand whether they will hold a long-term lease to the land or a perpetual easement.
“You’ll be basically buying the [wireless service] customers and the customer contracts,” he said, which could be law enforcement and emergency services along with what’s more commonly thought of as wireless consumers.
Whether companies in a business agreement will continue working together after the deal closes affects negotiating strategies. Seiler said a deal such as EIP Holdings I’s with Frontier Communications differs from one company totally acquiring another and is like a “living relationship,” so the parties have an incentive to reach a balanced agreement that works for everyone.
Companies in a business agreement may think they’ll always have a good relationship, but Seiler said the contract serves as a backstop for when problems inevitably arise.
“It’s not a zero-sum game and a scorched earth, because if you got every last point that you wanted to get and the other side is really unhappy and you have a long-term relationship with them, that’s not going to be a win-win for folks down the road,” he said. “It’s not that you’re not looking out for your clients’ best interests or making sure that everybody understands the risks and have thought those through, but it’s also part of the general approach that you have for entering into a long-term relationship.”
— Julia Cardi