How to value towers and rooftops

Whether you are buying or selling towers, or simply trying to better understand how to get the maximum value from retained towers, it is essential to create and maintain an accurate asset register. But the value of a tower extends beyond its wind load capacity – location and the proximity and utilisation of nearby towers are also impactful. TowerXchange spoke to our old friends Delmec to understand how they audit towers.

TowerXchange: Please re-introduce Delmec for readers unfamiliar with your company.

Delmec has been a primary component in the telecommunication industry, not only within the infrastructure area but also providing advanced telecom solutions for Africa, Europe, Asia, America and the Middle East for over 30 years. 

With our headquarters based in Ireland, Delmec provide portfolio management, telecom infrastructure consultancy and full infrastructure builds. Our expertise has led us to become a renowned provider of engineering services to the telecom and utility sectors, specialising in full turnkey solutions from design concept to live on air. Our reputation can be witnessed in over 40 countries where key services have been provided to a wide range of clients whom many have continually sought the expert knowledge of Delmec for their telecom’s needs. In Delmec we strive to support our customers to optimise value from their tower assets by demonstrating where we can help them increase revenue, reduce costs and/or build business sustainability through our portfolio of services

TowerXchange: What are the principle drivers of value in telecommunication towers?

There are a number of key elements that add value to a portfolio. Obviously, the overall aim is to accommodate more operators onto the structure, although we feel that accurate data on the structure is paramount to not only its value, but also its lifespan. Similar to buying property, or a car, having detailed data on the tower can vastly increase its value. To begin with, data on the tower from a structural view can determine the additional spend required to accommodate additional equipment. In order to establish this element, we work with our clients to determine the current position of their structures and future revenue potential. We can provide our clients with a capex position should space be leased on their structure. By carrying out this work, our client has every opportunity to maximise their potential revenue from that structure.

Aside from the tower, the infrastructure on the compound is a vital element to the value of the site. Free space in both the compound and the shelter needs to be taken into account to support additional tenants on the site. For example, space on a compound for data centres could be considered which can increase the sites revenue potential. Items such as the equipment in the shelter and power equipment will provide a lot of detail for potential buyers on how efficient the site is and how much it will cost to run. During our due diligence assessments, we record a lot of detail on these items, our clients want to know the condition of these, the availability for more tenants to be added and the efficiency of the equipment. 

Security is another component on the site that needs to be addressed. This is a major factor for rooftop sites, providing details on how easy the site is to access by the public. Again, during our assessment, we go into detail around security and provide our clients with a view on the level of security with a site from both site entrance and shelter entrance. It’s widely known that fuel theft is an issue for a lot of tower owners, therefore the more secure this element is alone, can greatly impact the value of a site. 

Another element we look at is competing towers in the area. The items above demonstrate the value of a site, however the surrounding or competing sites needs to be considered. We look at details of the towers in the surrounding area, providing as much details as possible factoring this element with its revenue potential. So in essence, critical factors for the tower, compound and equipment all need to be taken into account while valuing the site as a whole.

TowerXchange: How would you describe the accuracy of typical telecom tower asset registers? And how do you both improve and, crucially, maintain the accuracy of asset registers?

From what we’ve seen, typical asset registers lack the functions that are essential to the people who need them. 

The key to a good asset management tool is to capture the data that is beneficial to the portfolio, as with all data registers, the information contained in it needs to be maintained. When we are asked to review data on a portfolio, we typically see very limited data on the structure itself. Having a portfolio of thousands of structures with detailed information on each one is instrumental to a tower owner. 

Our asset management tool TiMS [Telecommunication Infrastructure Management System] was developed with our customers in mind and is constantly being upgraded to enhance functionality. Like any database, the information that is entered into the system needs to be vetted. A database is only as powerful as the information contained in it, therefore we focus on ensuring our clients have accurate data. In Delmec, all our field staff are kept up to date with our TiMS database, this ensures all critical details of a client’s portfolio are accurate. This data can be used to make key business decisions and any inaccuracies can be detrimental. Asset registers should not only capture current data but also store historic data that would beneficial to potential operators and capture due diligence procedures for future revenue sites. 

TowerXchange: What factors determine the structural capacity of telecom towers and rooftop poles?

The structural capacity of any structure has certain key factors that determine its suitability to accommodate additional tenants.

Location plays a key role in its capacity. Initially, a structure is designed using certain loading parameters which can differ depending on the application for the structure. For example, when a structure is being designed with a specific environment in mind, possibly a high wind speed region, in an exposed environment located on a hill or mountain, this can lead to an extremely high wind loading. The high loading reduces the structural capacity of the structure, increasing the failure potential. For these applications, a specific type of structure needs to be used which is usually much stronger, in turn increases the cost of the structure. Alternatively, if these factors were changed to a lower wind speed, flat ground with reduced exposure, the structure would not need to withstand such high loading meaning that a stronger or more expensive structure isn’t required. Location plays a major role in determining the capacity of a structure, and it effects both telecom towers and rooftop sites. 

Another factor to consider is the equipment on the structure. Naturally, the more equipment on a structure, the greater the loading. However, it can be confused with equipment weight, rather than physical size. The actual area of the equipment plays a crucial part in the capacity of a structure, an increased panel area will apply a bigger load to the structure, reducing the capacity. Placement of equipment on a structure is vital to maintaining its capacity, among other elements. For our clients, we aim to maximise their revenue potential by providing consultation in this area by understanding the mechanics behind it. 

Lastly, the makeup of the structure itself. There are many different variations of structures, from panel configuration to the type and size of members used. These variations have a major impact on the suitability of the structure, even variations in future upgrading costs of the structure. Within our Design Department, we always try to offer our clients a very economical solution when upgrading their towers. 

On the subject of strengthening towers, there are clever solutions that can be developed to reduce both the material and labour costs of an upgrade. Rooftop sites/poles can bring their own set of complications when assessing structural capacity. The aforementioned considerations will all be key factors when determining capacity, however due to the nature of a rooftop pole, one must consider the how the pole is connected to the rooftop itself. Again, we try to develop clever solutions to allow our clients to keep costs down while maximising their revenue potential. 

TowerXchange:  What commercial and contractual factors affect the lease up potential of a given cell site?

Reverting back to the some of the points in the previous question, there are lot of factors from the tower/equipment, and even the locality of the site. Focusing on the tower, elements such as cost to accommodate the additional equipment can be a major factor. The payback of strengthening a tower to accommodate another tenant may be excessive which will increase the fee for hosting on a tower. Aside from the tower, the compound may also need to be prepared to accommodate more tenants. In cases where the tenants cannot be accommodated without extending the physical size of the compound, both commercial and landlord contractual factors come into play. 

Looking at the technology on the site can bring another set of factors. With the upcoming onboarding of new 5G technologies, tower owners need to be aware that this will not totally eradicate the previous technologies immediately. Tower owners will need to cater for both new and old technologies and, depending on the environment, this could mean that a tower can have multiple technologies all at once. Among the impacts on tower, power and compound itself, the commercial and contractual factors will be heavily affected. 

Tower owners need to review their competing towers also, they need to know what is currently on those towers, and also what are the future potential co-locations for that site. How likely is the population to grow in future years and what may be required in terms of technology and estimated users if it does grow? With the influx of new technologies coming onboard, long term leases need to take these instances into account in order to both maximise their revenue and protect their business.  

TowerXchange: What impact do EMF regulations have on tower lease-up potential and valuations?

We’ve seen a lot of cases where the element of EMF and safety around EMF regulations may not have been a subject of thought for additional tenants or in the initial site acquisition. More so within rooftop sites, EMF levels can play a major part in accommodating more tenants or incorporating newer technologies. For current technologies, the EMF levels need to be addressed when considering more equipment on a site or for general maintenance on a site. I.e. whether they are to a level that requires the site to be turned down or switched off completely while workers are on the site. Obviously, these instances will have an effect on the value that the operators are willing to pay for the site. Furthermore, for upcoming technologies, the long-term view on what effect the next gen technology will have on EMF levels needs to be addressed. The value of some urban sites may be dramatically reduced if they cannot accommodate a technology or frequency. Again, with the current influx of new and old technologies coming onto sites, any potential acquisitions need to review this aspect in great detail. 

TowerXchange: When towers are being sold, how much opportunity is there to audit structures in the portfolio?

For a lot of new site acquisitions, the idea of having the time available to audit each site in detail, i.e. a full tower climb assessment, is not something realistic. The majority of site acquisitions would consist of a ground based due diligence check. This would provide enough detail on the overall site to potential buyers, albeit a small percentage of sites. Ideally having a full suite of audit documentation, design documentation and historic records of each site is very much recommended by us, in most cases this is not available. A lot of new site acquisitions depends on ground based technical assessment (potentially with a small number of tower climbs) and a lot of statistical assessments to give the best valuation possible. 

TowerXchange: What proportion of sites can you typically audit, what does that audit consist of, and how long does it take?

We can carry out audits/inspections with various scopes. For the acquisition of a new portfolio, we tend to carry out either a due diligence audit or a full structural audit. With the full structural audit, you would typically take details of the full structure down to a bolt grade. This will allow our clients to assess the actual capacity of their structure, however for larger acquisitions, we typically carry out a percentage check. 

When we’re approached to carry out some due diligence work, we will review what information we are provided. This is usually very limited and will consist of tower location, height and possibly type. We will carry out physical site visits on possibly 5-10% of the portfolio at specifically selected sites. We create our selection on the best sites that will provide us with the best view of the greater portfolio. If we’re carrying out a structural audit, this may take 1-2 days depending on location, or if we’re carrying out a ground based due diligence survey, this may be half a day in some cases. 

Our due diligence surveys can be very detailed, recording the structure, power, and site maintenance details, also competing towers, site security and the potential for additional tenants. We will then use this detail to provide our clients with an overall view of the potential portfolio. This due diligence report allows our clients to then compare the collated date with that of the MNO’s for data validation. 

TowerXchange: Does a site audit have to involve a tower climb, or can the process be expedited using drone technology?

It’s really dependant on the level of information that’s required from the assessment. A full structural audit will contain the full geometry of the structure, the equipment [tower and ground] and the compound details also. We would always recommend this to assess the towers structural capacity, although depending on what is required, there are other visits which aren’t as detailed. 

We are currently reviewing certain drone technology solutions on the market, many of which can give you a lot of detail on the site. There are a number of limitations we have found by using drones. For one, correctly assessing the member and bolt details is still a limitation we feel. Some drone technologies have creative ways of assessing this, however due to their precise nature, they would need to be exact to the millimetre. In addition to this, items such as torque checking, grade testing and not to mention the legal limitations in certain countries can hamper the advancements made in this area. Currently we are researching heavily in drone technology but also in 3D scanning technology which has seen major advances in recent years. Drones can certainly benefit site visits and provide a lot of detail on the site, although we have not seen it match the accuracy of a full structural climb down carried out by an experienced team.

TowerXchange: We’ve seen a few tower portfolios coming to market as a result of MNO bankruptcies. Does a tower with no tenants have any value? Indeed, does it have negative value?

As the idea of a tower is to generate revenue by selling space, having a structure that has no tenants, in theory will not generate revenue. That said, if the tower is not consuming any power, then the opex is significantly reduced. The asset itself has a value for the owners, although landlord fees and other costs are still present on their balance sheets. To say that a tower without any tenants has no value is technically not accurate. The value to the MNO may not be in the current forecast but may be valuable in later financial periods. We also have to consider non-GSM tenants, where space on the tower could be leased to backhaul providers, which in turn creates value.

Another aspect to consider is why is the tower empty? There are many potential factors such as the cost of accommodating a tenant (rectification, maintenance, etc) or the cost to decommission the tower may be extensive, whereas the tower owner may leave the tower idle until such a time where a decision needs to be made on the asset. The long-term outlook for the tower needs to consider new technologies, population growth and other potential uses for the tower in different locations. MNOs need to expand their knowledge on the use of the structure itself. We have seen some of our clients dismantle certain towers and then splitting them to use on other smaller sites such as rooftops or in locations where the wind loading may be less severe resulting in an increased structural capacity.