The joint venture between Verizon, AT&T and Tillman Infrastructure to build hundreds of towers across the nation may not be as disruptive as it seems, according to Nick Del Deo of MoffettNathanson.
The three companies announced the effort this week, saying it “will add to the overall communications infrastructure in the United States,” filling in gaps in current tower footprints and also enabling the nation’s two largest carriers to move equipment from towers they’re currently using. Construction plans will begin early next year, and towers will come online “quickly” as they are completed.
On paper, at least, the initiative appears to pose a serious threat to venerable tower companies such as Crown Castle International and American Tower, and the carriers seem to be subtly positioning it as such.
“We need more alternatives to the traditional tower leasing model with the large incumbents,” Susan Johnson, AT&T’s SVP of global supply chain, said in a press release. “We look forward to working with Verizon as we establish site locations and sign new lease agreements with additional suppliers in the coming years.”
But while the effort may have an impact in “the coming years,” it won’t make much of a dent overnight. Crown Castle and American Tower each claim roughly 40,000 towers, according to Wireless Estimator, so a rollout of hundreds of new towers may benefit the involved parties but they are far from a clear and present danger to incumbents, as Nick Del Deo of MoffettNathanson explained.
“Will Tillman (or any other firm that tries to partner like this with the carriers) be successful in picking off some sites and enabling AT&T to relocate? Of course,” De Deo told FierceWireless. “Will they secure some share of new builds? Of course. Will there be some sites where the Big Three towercos grant price concessions to retain AT&T an Verizon as tenants? Of course. Will this have a material impact on the financial results of the Towers? No.”
In addition to the matter of scale, the tower segment is rife with barriers to entry that make it difficult for any newcomer to quickly gain traction and grab market share, Del Deo continued. Building towers takes time and money—including acquiring access to real estate—and relocation challenges include zoning headaches, questions of capacity and the cost of moving and setting up equipment, among other things.
One of the most potentially important factors of the joint venture, though, is one of its most overlooked: the fact that the nation’s two largest carriers are working together on network-related issues in a wireless market in which almost nobody ever plays nice, observed Iain Gillott of iGR Wireless Research.
“The fact that those two are talking to each other and working together is interesting; that’s what could scare the tower companies more,” Gillott told FierceWireless. “What if AT&T decides to go on to the next phase and share the equipment on the tower? That would change the economics of the industry.”