DigitalBridge-backed firm buys more US cell towers amid debate over demand

Vertical Bridge, the US cell tower division of digital infrastructure giant DigitalBridge, will purchase around 220 cell towers from Shentel in a deal worth $310.3 million.

However, the transaction comes during a time of upheaval in the industry. For example, there's a battle underway over control of Vertical Bridge's tower rival, Crown Castle. Meanwhile, companies including SBA Communications, American Tower and Dycom continue to debate when network operators might resume spending on their wireless networks.

Each of the big cell tower owners in the US is now under new leadership, potentially setting the stage for a change in tactics.

Vertical Bridge's Shentel deal also again highlights the quick pace of consolidation in the US cell tower industry.

The developments come amid ongoing concerns over the long-term health of the US cellular industry since 5G has largely failed to produce a major boost in network operator financials.

Terms of the sale

Late last year, Shentel executives said the company would pursue a sale of its towers to fund additional acquisitions following the company's recent $380 million deal for fellow fiber provider Horizon Telecom. Shentel joined UScellular in putting its cell tower business up for sale.

Shentel said it would use the proceeds from its Vertical Bridge deal to fund the expansion of its Glo Fiber network to another 600,000 homes and business passings by the end of 2026.

"We are pleased to add these purpose-built broadband telephony towers to our growing portfolio. The towers are high quality assets with available capacity for additional tenants and are located in difficult areas to build new towers due to zoning restrictions and terrain challenges. The geographic concentration of the portfolio offers a unique opportunity for future deployment of existing and new technologies," said Vertical Bridge's CEO, Ron Bizick, in a release.

Vertical Bridge counts around 11,000 total towers across the US.

Vertical Bridge's move isn't a total surprise. In February, DigitalBridge's Marc Ganzi said that the company's Vertical Bridge division was involved in M&A. He also said Vertical Bridge has a "monster pipeline" of built-to-suit projects, which involve towers built specifically for one network operator.

A debate over demand

However, questions remain over how and when US network operators might resume spending on their networks. Indications that operators had tightened up their purse strings emerged early last year – and the depth of that spending slowdown caught several executives in the cell tower industry by surprise.

"At this point, we're not necessarily forecasting a material pickup in activity. But to the extent there is that pickup in activity, it's mostly going to impact next year," Brendan Cavanagh, SBA Communications' new CEO, said this week during SBA's recent quarterly earning call.

However, officials with American Tower offered a different outlook. "What we're seeing from the carriers in the US is we are seeing an uptick in the conversations around activity. We've seen a modest increase in application levels already this year that's off to a pretty low base at the end of last year, but we are seeing some increase in activity," the company's CEO, Steven Vondran, said this week, according to Seeking Alpha.

Vondran explained that, based on the conversations American Tower is having with its wireless network operator customers, spending may start rising toward the end of this year.

Finally, executives with Dycom offered another data point: "We don't see it growing anytime soon," said Dycom CEO Steven Nielsen in response to a question about the demand the company is seeing for its wireless network installation services.

The proxy fight

While officials with SBA and American Tower debate the state of the market, officials with Crown Castle are fighting over the company's ownership structure.

The latest: Crown Castle's founder Ted Miller filed a lawsuit to block Elliott Investment Management's proxy campaign against the company.

"We believe Crown Castle's board must be reconstituted with directors that have the necessary industry expertise and skillsets to execute a long-term strategy that will enhance operational excellence, fix the Company's broken culture, and restore and unlock meaningful value for long-suffering shareholders," Miller said in a release.

The lawsuit represents the latest twist in Crown Castle's boardroom drama. Executives at Elliott successfully managed to oust Crown Castle's CEO in their efforts to force Crown Castle to sell its fiber and small cell business.

But now, Miller and his investment vehicle, Boots Capital Management, are trying to block Elliott's efforts. However, Miller, too, supports the sale of Crown Castle's fiber and small cell business. He believes that sale could generate up to $15 billion.

[Editor's note: An earlier version of this story's headline incorrectly stated that DigitalBridge had purchased towers from Shentel. We've updated the headline to reflect that it was Vertical Bridge, a firm in which DigitalBridge has a controlling stake. 3/4/2024, PH]