How PTI grew from startup to 1,608 towers in six countries in under a year

In a little under a year Phoenix Tower International (PTI) has accelerated from launch to owning 1,608 towers across six countries in North, Central, South America and the Caribbean. CEO Dagan Kasavana, his team and his backers at Blackstone have written a new playbook for the creation of a towerco that combines acquisition with developer partnerships and BTS to create a new proposition for carriers, sellers and communities across the Americas.

TowerXchange: For readers unfamiliar with PTI, please re-introduce yourself, your team, PTI’s portfolio and the capital structure of the business.

Phoenix Tower International is devoted to helping its wireless infrastructure partners – customers, sellers, landlords and communities – achieve their goals. Focused on the principles of unwavering hard work and integrity, we demonstrate this mission every day through our dedicated operation of the wireless infrastructure sites we own and operate, and the fair and collaborative manner in which we work with our business partners, helping them achieve their goals and thereby creating long lasting business relationships with PTI.

Most of the team behind PTI previously worked together at Global Tower Partners (GTP) prior to the US$4.8bn sale to American Tower. I met PTI’s co-founder Natalya Kashirina working together in M&A at GTP, PTI’s Chairman Tim Culver was SVP and General Counsel at GTP and a partner of mine for ten years now, PTI’s CFO Orlando Porras was an advisor to GTP with EY and PTI’s VP of Operations, Shylesh Moras was an advisor to GTP with Morrison Hershfield. This core team has been working together for years in the tower space and represents the engine of growth for PTI.

PTI will own over 1,600 towers across the Americas upon the closing later this year of our announced deal to acquire 600 towers in the U.S. from T-Mobile. By the end of 2015 we anticipate having 600-700 towers in Brazil, plus a further 400,500 in the rest of CALA including in our current territories of Costa Rica, Panama, Colombia and the Dominican Republic.

PTI could not have achieved this phenomenal growth without the support of Blackstone through their Tactical Opportunities business, who are bullish on the tower sector, and who have shown tremendous confidence in our business plan, enabling us to build a unique new towerco.

TowerXchange: Where will that forecast growth in Brazil come from – all organic or another acquisition in addition to the recent acquisition of T4U?

Blackstone’s Brazilian footprint owned through the affiliated company to PTI, Phoenix Tower do Brasil (“PTB”) includes the 529 towers acquired from T4U, other small developer acquisitions we have in the pipeline, plus substantial build to suit (BTS) activity. We have a pipeline of 250 BTS towers in Brazil, with 15-20 new towers going up every month since the closing and for the foreseeable future.

TowerXchange: Was the acquisition of T4U in Brazil primarily an asset acquisition, or have you drawn substantially from their team and experiences to launch Phoenix Tower do Brasil?

One of the things that we and our colleagues at Blackstone were excited about in the T4U acquisition is that we acquired a platform in Brazil, not just assets. We were impressed by T4U’s large portfolio of well-located towers, many with multiple co-locations already, and the management team in Brazil is fantastic. We knew we needed a strong operational team to manage those assets and realise our aggressive growth plans in Brazil, so we took our existing management team and merged it with T4U’s strong team and employee base to run the business in Brazil. We have a significant team of tower professionals and a management team based locally in São Paulo and across the country that can manage the assets and the carrier relationships professionally and grow the business significantly which allows us to look at opportunities of all sizes in Brazil in the future with confidence.

We also believe that by leveraging the local team’s experience building and operating hundreds of towers in Brazil we can better control the messaging to and experience of our customers, and we can better control vendor relationships – we want our employees and management team to develop direct relationships working with our customers and provide a unique relationship to our business partners in Brazil.

TowerXchange: What’s your vision for Phoenix Tower do Brazil, leveraging the T4U acquisition as a starting point? Do you have appetite to acquire more assets from Brazilian tower builders?

When we look at the tower market in Brazil, we think we’re one of the few companies with significant appetite both for acquisitions and for significant BTS with carriers. PTB is the new entrant in Brazil, but we have significant capital and are seeking the right opportunities to grow, through a combination of BTS, acquisition and developer partnerships.

There are a lot of developers looking for capital in Brazil and the carriers are looking for BTS partners that can execute in a challenging environment. We understand the tower financing market and offer a wide palette of alternate forms of financing to developers. We can provide anything from full financing to enabling developers to provide a greater inventory to carriers with PTI behind them to help them grow and be successful. Different developers need different models to be successful in different markets – we like to find out what they want and need, and form a proposal to meet those needs.

Additionally we are constantly discussing and understanding the needs of our customers and how we can best help them. Domingos Almeida, PTB’s VP of Sales and Development promotes this collaborative approach with each of our customers as we grow in Brazil through direct BTS arrangements. While others may be under-capitalised given the challenging market, PTB is able to meet the significant network demands of our carriers and we believe this helps differentiate us from some of the other developers.

TowerXchange: Tell us about PTI’s entry into the Caribbean. Is there an opportunity to create a towerco of scale in the Caribbean, or is Dominican Republic one of a few markets that offer the right scale?

We acquired 189 towers through the acquisition of Teletower Dominicana from majority investor Amzak Capital Management in June 2015.

The Dominican Republic is a very attractive market with no other independent towercos – we see a lot of opportunities there. Teletower Dominicana, which has since been renamed Phoenix Tower Dominicana is a great business with a strong management team and a great customer base. Our main counterparty in the Dominican Republic, Altice, is a strategic partner with whom we want to do more business with in the future and we value the relationship with them and the other operators in the Dominican Republic.

There are some other markets which we like in the Caribbean. Generally we’re looking for markets with at least three wireless carriers and some existing adoption of co-location. We are able to leverage our operations in the Dominican across the Caribbean which is interesting and allows us to be more opportunistic to execute other tower transactions across the Caribbean given our close proximity in the Dominican Republic.

In every market PTI has local representation that carriers know and trust – one of the hallmarks of our growth structure is that we always have local business strategies with people on the ground who carriers and vendors can call. Of course there are certain resources and operational aspects of the business we can centralise and leverage to oversee other markets. For example our Central America and Caribbean land acquisition programme, whereby we partner with carriers and landlords to acquire land and related rights under wireless infrastructure, is based in Costa Rica but we have local people in Panama and the Dominican Republic executing the programme locally – we never want the customer to feel they don’t have local people in each country who can help with any infrastructure problems.

TowerXchange: PTI has completed several acquisitions from BTS towercos – what advice would you give a ‘build to flip’ tower entrepreneur – how can they make it easier for companies like PTI to acquire them?

My advice to the build to flip tower entrepreneur would be to focus on the details that make the sale process easier.

Where developers have accrued significant value they have had a robust approach to permitting, entitlements and ground leases. They use high quality steel to build strong towers with capacity for additional tenants. Having a thorough approach to site files and recordkeeping makes the due diligence and sale process immeasurably easier and ultimately increases valuations.

Having done hundreds of tower transactions with some developers who were organised and some who were less organised, I’ve found that those who focused on replicating the U.S. tower business model attracted the highest valuations and encountered less surprises. That means negotiating long term ground leases, investing in high capacity towers, and acquiring all the necessary permits to the extent that they are able – and organising site files in a cohesive manner. We have closed deals and will continue to with sellers that have less than 100% of the required site files and through our diligence process will focus on improving the portfolios both pre-closing and post-closing through various creative solutions and hard work. However, I would recommend sellers focus on both obtaining and organising their required site files to make the process as smooth as possible.

TowerXchange: In terms of organisational structure and governance, how do you separate the complexity of overlapping small to medium sized acquisitions whilst still investing in substantial organic growth?

Our business plan was to create a multinational towerco from day one. This challenge is to grow and scale and operate as a best in class tower company while retaining the energy of an entrepreneurial start-up – that energy that carriers, developers and landlords love.

It comes down to the three P’s: process, people and passion.

We need processes, and supporting IT, that can be scaled and customised to meet the needs of each market. A one size fits all approach will not work – every region has different norms, different regulations and different guidelines to be a good partner to our customers, sellers and communities. When a carrier gives us a co-location or BTS order, we need to fulfil it quickly and efficiently. When a carrier expresses interest in a site location we need to get them on that tower as quickly as possible. When undertaking a new transaction, we use a process driven formula we’ve been using for years and years to push through negotiation, due diligence and integration but also which is customised to each country we do business with, relying on local expertise with our local operations teams and transaction advisors.

We’ve hired great people who are well versed with significant experience in towers. We have tremendous transaction experience and provide oversight and process support from our HQ in Boca Raton. Our M&A team, led by Natalya Kashirina, focuses on opportunities and transactions in the U.S. and Latam overseeing multiple opportunities in various stages of vetting, diligence and closing with a unique mix of professionalism and a friendly honest approach which really resonates with our business partners. We have separate legal teams for the U.S. and Latam – each market has its own General Counsel. Our Finance team led by Orlando Porras is overseeing tax structuring and compliance, collections, payables and cash management across all six of our markets. Our operations team, led by Shylesh Moras has resources in country overseeing various BTS implementations and the maintenance of our existing sites. Lastly, our local teams in each market have been in the tower business in these countries for a long time – that experience has been critical to us scaling appropriately and professionally.

Lastly but most importantly: passion. You can’t replicate it or fake it. Our team works long nights, tireless hours on behalf of customers, sellers, landlords and communities. We are professional, hard-working, and we genuinely passionate about what we are building together with the various partners we do business with. There are no shortcuts in this industry  – we have to hire the right people who buy in to an energy that the management team has established and which has enabled us to rollup 1,600 sites in just under a year. That passion drives us, and I’m very proud of the management team and regional teams we have hired and the unique relationship we have developed with our business partners.

TowerXchange: Congratulations on entering into a contract to acquire 600 towers from T-Mobile in the U.S. Do you have a specific vision, or remit from your investors, in terms of the balance between PTI’s domestic and international portfolios?

We have a clear business plan, but there is no specific vision concerning the balance of U.S. and international assets.

Our focus has always been to first simply build a bigger sandbox – to seek out the best transactions across a wider geography – that could be a BTS in Brazil, a developer investment in Central America, a ground lease buyout in Colombia or a carrier sale and leaseback in the U.S. The tower industry is a global industry – if we were focus on one or two tower markets we feel we’d be doing ourselves, our customers and our investors a disservice.

We don’t need to raise new capital every time we see a new market opportunity – this enables us to be a more flexible partner to support carriers in the markets they want to develop, or to partner with developers to help carriers in a different more strategic way. The publics are doing many of the same things of course but at a larger scale. PTI is able to be a more flexible, entrepreneurial partner for our customers. We can help with a 100 tower BTS – that will have my full attention. We can help a local developer secure the capital he needs to drive to scale. We’ll buy five towers in Panama! We will work with a landlord in Costa Rica to monetise their ground lease payments that they can use to pay off their mortgage!  We’ll do what publics don’t have time to do, or what smaller, geographically restricted towercos don’t have the remit to do.

We saw a vacuum in the market – an opportunity to build a towerco that does things differently. We wanted to focus on building partnerships with carriers, landlords, vendors and developers. We want to provide lawful support of our communities by obtaining all the appropriate entitlements. And at the same time we want to execute the best possible transactions across the region.

If we stick to that original business thesis, we will continue to grow organically and inorganically in a way that is logical and well balanced over time.

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Dagan Kasavana is the latest tower industry leader to join the TowerXchange ‘Inner Circle’ Informal Advisory Board.

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