Tower Service Providers, Ready for the 5G Spectrum Repack
Ever stop and think about the towers that provide our 4G LTE service, probably not; because it is so common-place, that unless there is a major interruption, we don’t think twice on how we access our apps, texts, and emails. In late February we spoke on a panel regarding working capital tools and challenges in the tower services industry at the National Association of Tower Erectors (“NATE”). During our panel we discussed the challenges facing business owners that may limit their availability to obtain traditional credit facilities and other considerations when entering a finance agreement.
The business environment for industry contractors in the industry is challenging. Demand for services can be difficult due to industry acquisitions and the need for upgrades. Due to this demand it is hard to retain employees; contracts with larger contractors, carriers, and tower owners; and extended terms up to 90 days. All of these conditions are placing working capital pressures on industry contractors.
In the summer of 2016, the FCC voted on new rules for the adoption and expansion of wireless broadband for 5G technology. The capital expenditure is expected to be 60% greater than 4G for the carriers. The demand for bandwidth from consumers and commercial customers does not stop and it is increasingly harder for carriers to keep up with the demand, offer new products and reduce costs to customers. One of the most discussed points amongst industry experts is the spectrum auction that re-purposed “84 MHz of low-band spectrum, including 70 MHz of licensed spectrum and 14 MHz for unlicensed use,” of broadcast TV waves. Even though all of the towers will have to be “re-packed” with the new wireless technology the timeline for the project is estimated to take over 3 years to complete.
What does this mean for all industry contractors? There will be an opportunity to take advantage of the influx in the industry and to flourish. Between the 5G deployment and spectrum re-packing the tower services industry will see a steady inflow of demand over the next few years. While many are taking a cautious approach to adding new crews and infrastructure to handle the future demand for services, it will become imperative; and having a flexible working capital facility in place over the next few years is going to be critical for tower service contractors to meet the demands.