Cell Tower Companies Debt Rides High On Phone Demand

Loans tied to cell phone towers are finding solid demand among investors and escalating phone usage is likely to make the paper even more sought after. Because one tower can hold a number of signals for a variety of companies, the names are looked upon as good diversification with expected steady-revenue. As a result many of the larger tower names are currently trading between 98 and 101.

"The fact that you have growth in minutes of use, these telecommunications companies follow the path of the wireless companies, so as the tower companies build out and want to expand capacity, broadband capacity, they will be adding cell sites," explained Catherine Cosentino, an analyst at Standard & Poor's. "Towers are viewed as an even better way to play the industry, to diversify," said one investor who looks at the sector. "It is a solid business model and people like them a lot."

Mark Slaven, cfo at one of the operators, SpectraSite, noted, "Overall demand is strong and positive." Another investor explained that tower companies are doing better than they were in 2002-2003 because they are no longer reliant on speculative builds and are now more focused on building to a suitor, knowing there will be an anchor tenant. Lance Cawley, cfo at Mountain Union, said financial leverage is now within a comfortable range for the industry and because the lease activity by wireless carriers has been so robust it has helped increase cash flow.

There were 175,725 cell sites in December 2004 compared with 162,986 in December 2003, according to CTIA, the international association for the wireless telecommunications industry. According to a Federal Communications Commission report, for the first time there are more wireless subscribes in the U.S. than there are wireless service lines. "Clearly overall growth of the tower sector is tied to growth in the wireless sector and the wireless sector has grown... and the wireless companies continue to be successful," explained Steve Kunszabo, director of investor relations at Centennial Communications.