Investing in Cell Towers – An Important Infrastructure of the Digital Age

CellTowerThe growth in the use of smartphones, tablets, and other portable devices to access the internet has been phenomenal, and promises to continue. That growth makes investing in cell towers an alternative investment worth exploring.

The needs of wireless broadband subscribers is something of a moving target. In order to keep up with this growing demand, wireless broadband providers rely heavily on cell tower companies to enable them to continue upgrading their technology and service.

To illustrate this point, AT&T and Verizon have almost completed their network structures upgrades to 4G-LTE (Long Term Evolution) status. Sprint and T-Mobile should have their upgrades completed soon as well. However, even with those upgrades completed, none of these carriers will be sitting back waiting for the current technology to wear out. Instead, they will begin working on the next step, which is to further upgrade their services to the next generation of wireless technology – LTE-Advanced. Once that upgrade is completed there will, no doubt, be another technological advancement for them to begin planning for.

Cell tower companies build the thousands of wireless communications towers spread throughout the country. The quality of their tenants and the longevity of their leases is what makes them a good investment opportunity. These leases are typically 5 to 10 years in duration with multiple renewal options of 5 years each. Also included in these leases are annual escalations of 3.5 to 4 percent, which may provide cell tower investors with an inflation hedge.

Additionally, the building and maintenance costs of these towers are, most cases, carried by the tenant. As a result, when tower space is leased to additional tenants, and some can hold up to 5 tenants, the profit margins for the tower owners increase.

One final point to consider is the ever-expanding government involvement in fostering the spread of wireless broadband service, even in less populated areas of the country. Lawmakers see the value of expanding wireless broadband service, both as a political matter and a public policy matter. This will only increase the demand for cell towers nationwide. And that increase in demand makes investing in cell towers even more attractive.

If you’d like to learn more about investing in cell towers, or other alternative investment opportunities, contact us online or call 800-453-5155.