Cell Tower Landlord’s Checklist
Know Your Rights Amid Mobile Carrier Mega Mergers
UPDATE July 2019: The FCC and the Department of Justice have now both signaled their intent to approve the merger of Sprint and T-Mobile, the 3rd and 4th largest cell phone providers in the United States. Wireless trade press reports that the merged entity will shutter 35,000 of their 110,000 existing towers — but then build an additional 10,000 towers to meet their joint needs. That means there could be as many as 45,000 amendments to access agreements covering these sites. When the merger was first announced over a year ago, Best Best & Krieger LLP provided the below Cell Tower Landlord's Checklist to offer insights for the landlords of the ground on which many of these towers stand. This information is still valid, and helpful in the wake of the latest development.
In addition to the proposed merger between Sprint and T-Mobile and its planned consolidation of cell sites, providers such as Verizon and AT&T are trading their interests in towers and other wireless deployments. AT&T started the ball rolling when it revealed it had entered a $4.85 billion deal with Crown Castle to lease 9,100 towers, and purchase another 600, from AT&T. That deal was soon followed by Verizon announcing it was transferring operations of its cellphone towers to American Tower Corporation.
Cell tower landlords, which can include private businesses and local government agencies, should be aware that there are different and detailed issues to be addressed when a tower operator — as opposed to a traditional provider — is the other party in a rooftop or ground lease. In 2015, we offered a Landlord’s Checklist for Cell Tower Transfers and, in response to recent developments, we’ve updated the checklist to help landlords protect themselves amid the turmoil of the merger of the country’s 3rd- and 4th-largest mobile carriers. This updated list also addresses the transfer of a rooftop, ground lease or right of way vertical infrastructure license from a traditional provider, such as AT&T or Verizon, to an infrastructure host, such as American Tower or Crown.
Relax and Don’t be Bullied: Site managers and other vendors may tell you that, if you are a T-Mobile or Sprint landlord, you need to lower your rent or they will drop your site. Don’t buy it. First, even Sprint and T-Mobile don’t believe that the merger will be closed for more than a year. They are publicly saying June 2019 is their target date — and that’s if everything goes perfect. Most analysts don’t believe things will go perfectly. In addition to other recent attempted mergers that were opposed or denied, all agree that the merger of the two companies will result in near-term job losses. Job losses is one thing the Trump administration has made clear are not acceptable. Make Sprint, T-Mobile and whoever their tower management company might be honor the terms of their agreement.
Authority to Transfer: Most leases or licenses require the landlord’s consent in writing before any transfer can be made. (All future licenses should have such an approval requirement.) Has your tenant properly requested your permission or simply assumed it? If past is prologue, it will be the latter. Don’t permit them to do so.
Needed Additional Protections: While previously, and against the advice of counsel, you may have allowed a national carrier to self-insure the terms of the original agreement because, after all, they are a household name — you don’t want to do that now. In addition, most infrastructure providers hold each tower under a self-contained corporation, and you already own the most valuable portion of that corporation: the ground. Make sure, as a condition of transfer, you update your insurance requirements.
Enforcement: Carriers are not just tenants. They are typically a regulated provider in your community for whom, often times, you are a very large customer. That means you have various ways to exercise leverage over the carrier — as a regulated and licensed provider and by exercising your purchasing power. Since infrastructure providers are a pure real estate player with few assets in your community (i.e. typically only the tower), consider requiring additional means to protect your citizens, such as performance bonds.
Clean Slate: Landlords should always determine whether there are any noncompliance issues on towers before agreeing to approve any transfers. For instance, it is advisable to ensure that the national carrier is current on its payments and is not otherwise in violation of its agreement with you. It is also a good time to police the site to ensure there are no unapproved co-tenants on the tower. Localities should also take care not to sign any estoppel certificates or other documents that might waive their rights going forward — never agree to a clean slate without talking to an attorney first.
First Tenant or Co-Tenant?: Most agreements provide that the tower owner may deploy its equipment on the tower for a set price, but that the rent generated by any additional tenants must be shared with the landowner. The new tower owner may try to argue that Verizon is not a co-tenant. The answer to the question of whether they are the first tenant or a co-tenant is not clear, and will turn on your agreement’s terms.
Different Business Plan: Localities should be aware that traditional tower owners’ business plans are different than Verizon’s. Verizon viewed the tower as a means to provide service to its customers. A real estate provider will view the tower differently. It is the tower itself, not the services the tower makes possible, that makes the new owner money. A tower to a tower owner is no different than an apartment building to a landlord. Tower owner/operators must sublease space to multiple carriers simultaneously to generate a profit. Increased subleasing provides the possibility of improved services throughout the radius of the tower. These potential benefits to the tower owner and cell customers will result in increased administrative burden for rent collection and wear-and-tear on the site.
For more information on the merger and how it may impact your business or agency, please contact the authors of this Legal Alert to the right in the firm’s Telecommunications and Municipal Law practice groups, or your BB&K attorney.
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Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.