/* ----------------------------------------------- Comment out annoying Snap... ----------------------------------------------- */

Friday, January 05, 2007

Tower Business: Do Sale and Leaseback Deals

Cell Sites are a key competitive advantage for Mobile Operators and they are always caught in a quandary – they don’t want the cost of cell-sites tying up capital on their balance sheets and don’t want to sell them to someone who will rent space to every last man and his dog.

I think a little lateral thinking is required and would recommend investigating turning the cell sites into property assets and do a sale and leaseback deal similar to the Tesco property deal announced this morning. Effectively, they are parking the assets in a 50:50 Joint Venture with a pension fund, presumably the resultant vehicle will be heavily geared and has secured financing of 4.5% per annum. Tesco has agreed to a 20 year rent with rent rises geared to inflation, cap and collared at 0%-3.5%.

This sounds like a perfect strategy to partner with long term holders who want a guaranteed return (ie the pension funds), satisfy the stock market in using capital more efficiently, keep the private equity barbarians at bay and most importantly not sell the asset to some cowboy who will rent space to your competitors at the first opportunity.

Also, it has triggered some rusty part of the brain cells and I think there is some additional tax benefits which Gordon Brown created in his most recent taxpayer rip-off plans, better known as the UK Annual Budget, but I will have to speak to a tax expert to get confirmation of that.

I am going to investigate further, because I can think of another great use for a vehicle in holding back the creeping onslaught of communistic practices in the UK telecoms market. But more of this later, after a little more research…