Interesting fact. Many property owners are confident in the security of their land leases for telecommunications machines (BTS) because they have always owned them. However, no bank in the world will lend against a single lease for telecommunications infrastructure, given the termination clause. The risks associated with termination and rent reductions are real. Usually the termination period is very short, up to a few months. Therefore, such a lease does not represent any value to the bank.
Banks typically require borrowers to have a steady and predictable source of income and collateral that can be easily monetized in case of default. In the context of commercial real estate, such as office buildings, shopping centers or hotels, banks evaluate the value of the property, its location, rental potential and income history. In the case of BTS mast leases, where such facilities can be easily removed or their value can drop sharply due to technological changes or political decisions, such collateral becomes much riskier.
In addition, banks may provide loans against real estate with terms that vary sharply depending on the risk profile. These typically include a lower loan-to-value (LTV) ratio, higher interest rates and shorter repayment terms to minimize the risk of loss of principal. In the case of telecom antenna leases, due to their potential volatility and difficulty in assessing value, these terms can be even more restrictive, making them rarely accepted as credit collateral.
Banks may also require additional collateral or personal guarantees from borrowers, especially in industries considered high-risk, such as GSM telecommunications. In this case, the value of the collateral must be clearly higher than the amount of the loan, and the lease agreement must contain clauses that protect the bank from premature termination of the lease or other factors that could affect the financial stability of the project.
Mobile telecommunications is a unique area in the commercial real estate sector, where the tenant, not the landlord, dictates terms. Tenants demand rent reductions, set maximum increases, sell masts to tower companies for billions of euros, sponsor sports teams, and convince governments that the only way to ensure coverage is to further restrict the rights of property owners.
Mobile telecommunications is breaking out of traditional commercial real estate models, creating a unique dynamic between tenants and landlords. In this industry, tenants, not owners, often have the negotiating advantage, a phenomenon rarely seen in other sectors.
Power dynamics
Tenants in the telecommunications industry, such as mobile network operators, wield significant influence due to the nature of their business, which requires the siting of infrastructure, such as antennas and masts, on strategically important properties. This infrastructure is crucial to ensuring coverage and quality of service, hence tenants can put pressure on property owners to demand better lease terms, including lower rents and limits on rent increases.
Changing roles
Usually it is the property owner who has the upper hand in lease negotiations, dictating the terms of the agreement. However, in mobile telecommunications, this role is often reversed. Operators can negotiate contracts that not only limit annual rent increases, but also include clauses that allow renegotiation of rates during the term of the contract, which is extremely rare in other types of commercial real estate.
Impact on politics and society
Telecommunications operators often engage in activities that seek to shape public policy in ways that benefit their interests. They convince governments that restrictions on property owners are necessary to expand infrastructure and improve service coverage. Such actions can include arguing that without additional concessions from property owners, the development of 5G networks would be severely compromised. This translates into policies that may favor operators at the expense of property owners.
Economy and community
The sale of masts to tower companies, which then manage the telecommunications infrastructure, is another aspect that affects the economics of the sector. These transactions often amount to billions of euros and have a significant impact on the structure of the telecommunications market. Operators, getting rid of direct responsibility for infrastructure, can focus on developing services and innovation.
The mobile telecommunications sector presents an unusual business model in commercial real estate, where the relationship between tenant and landlord is far differently defined than in most other industries. This inverted power dynamic has far-reaching implications not only for market participants, but also for broader economic policy and infrastructure development.
Government attempts to expropriate hundreds of thousands of property owners in Europe would violate the U.S. Constitution, where property rights are respected. Meanwhile, 5G coverage in the United States has reached 95%, while in Europe it is about 80%; in the UK even less than 50%.
The development of 5G network coverage varies significantly between the United States, Europe and especially the United Kingdom. These differences are due to a number of factors, including regulatory approaches, infrastructure investment and market interest.
United States
In the United States, the achievement of 95% 5G coverage is the result of heavy investment by major telecom operators such as AT&T, Verizon, and T-Mobile. These companies have invested billions of dollars in acquiring frequency bands and building new infrastructure. Federal regulations and cooperation with local authorities often facilitate the process of installing new masts and equipment, speeding up network development.
One of the key aspects of the U.S. approach is also the use of a “race to the top” model, where operators compete to cover as much area as possible as quickly as possible to attract customers seeking fast and reliable Internet access.
Europe
In Europe, 5G network coverage is around 80%, indicating slower adoption and growth than in the US. This is partly due to more complicated regulatory processes and the challenges of population density and historic buildings in many urban areas. Many European countries have embarked on a strategy of more balanced and gradual network expansion, focusing on key urban areas before extending services to less populated areas.
In addition, the fragmentation of the market in Europe, where each country has its own regulations and standards, can hinder the coordination and efficiency of service deployment across the continent. Differences in national policies also affect the speed and efficiency of implementing new technologies.
United Kingdom
In the UK, 5G network coverage is much lower, at less than 50%. This could be the result of a combination of factors, including delays due to political decisions (such as Brexit-related issues) and problems related to the exclusion of vendor Huawei’s equipment, which required the remodeling and partial rebuilding of existing infrastructure. In addition, approval processes for new masts are often long and complicated, further delaying network expansion.
The differences in 5G network coverage between the United States, Europe and the United Kingdom are due to a variety of policy, regulatory, investment and market approaches. In each of these regions, local challenges and strategies affect the speed and effectiveness of deployment of this advanced telecommunications technology.
Europe’s main problem is the inefficiency of markets. Regulation is unable to solve this problem. Europe’s telecommunications sector is characterized by a patchwork of overburdened operators, where the costs of inefficiency outweigh the rents of mast sites. Operator-sponsored tower companies do not offer a solution, as they inherently favor their parent companies.
The inefficiency of markets in Europe is a complex problem that significantly affects the telecommunications sector, and most importantly, the development and diffusion of technologies such as 5G. Key challenges associated with this problem include market fragmentation, high operating costs and regulatory hurdles.
Market fragmentation
The European telecommunications sector is highly diversified, with a large number of operators operating in each country, which often leads to excessive competition and market fragmentation. Each country has its own regulations and standards, making it difficult for operators to effectively scale their operations on a wider European scale. This makes investments in new technology and infrastructure costly and complex, which in turn affects profitability and operational efficiency.
High operating costs
The cost of inefficiency often exceeds rents for mast sites, a symptom of deeper structural problems. Inefficiencies can result from outdated infrastructure, a lack of investment in modern technology, and overregulation, which places additional administrative and financial burdens on operators. These high costs make it difficult for operators to reinvest profits in network expansion and modernization.
Regulatory hurdles
Regulations in Europe are often designed to protect consumers and preserve market competitiveness, but they can also unintentionally stifle innovation and technological development. For example, strict antitrust laws can hinder the market consolidation that would be needed for more efficient and sustainable deployment of new technologies.
Tower companies sponsored by operators
Tower companies, which are sponsored by operators and tasked with managing telecommunications infrastructure, are also a problem. While they may in theory contribute to greater operational efficiency, in practice they often favor their parent companies, leading to conflicts of interest and further inefficiency. As a result of this arrangement, resources are not used optimally and innovation potential is limited.
Need for change
To solve these problems, changes are needed in both the approach to regulation and the strategy of the operators themselves. Greater facilitation of market consolidation is needed, which could help reduce operating costs and enable more efficient investment in new technologies. In addition, regulatory reforms should be directed at creating an environment conducive to innovation, while maintaining a high level of competition and consumer protection.
In the United States, you can see the clear objectives of the various market players: operators focus on data (voice and data are now treated simply as data), tower companies focus on steel infrastructure, and land aggregators focus on land. This collaboration benefits all parties. Achieving 95% coverage does not come from seeking government favoritism that harms hundreds of thousands of property owners and deprives the economy of billions of euros in potential investment, while protecting a few executives and their shareholders.
The contrast between the situation in Europe and the United States is clear when looking at the operating model and structure of the telecommunications market. In the United States, the telecommunications market is characterized by a clear division of roles and responsibilities, which promotes efficiency and innovation. The achievement of 95% coverage for 5G networks is the result of this very specific market organization.
Clearly defined roles in the US market
In the United States, each group of telecom players has clearly defined goals and specializations that work together to create an effective ecosystem:
1 Telecom operators – focus mainly on data transmission. By integrating voice and data services into a unified data stream, operators can optimize network management, increasing efficiency and reducing costs. This allows faster deployment of new technologies and services that are better suited to growing consumer expectations.
2. tower companies – are engaged in the management of physical infrastructure such as telecommunications masts and towers. They focus on the maintenance, expansion and optimization of the steel infrastructure, which is key to maintaining signal continuity and quality. Their specialization allows them to reduce costs and increase operational efficiency, which directly translates into better service quality for end users.
3 Land aggregators – specialize in acquiring and managing land on which to install telecommunications infrastructure. Their activities enable more efficient and organized use of space, which is important both for network expansion and for minimizing conflicts with local communities and authorities.
Benefits of role clarity
Such specialization and clarity of roles contribute to synergy in the market, which is crucial for the rapid development and scaling of new technologies such as 5G. The independence of these players from each other allows for more objective negotiation of prices and terms, which promotes fair competition and innovation.
Unlike the situation in Europe, where regulation and market inefficiencies often hinder development, in the US the telecommunications market is less dependent on government intervention, allowing for more natural technological and market evolution. This translates into faster adoption of new technologies and greater network coverage.
The success of the United States in achieving such a high level of 5G network coverage is not the result of seeking government favoritism, but the result of an efficient market model that fosters innovation and cooperation among various market players. This model can serve as an example for other regions, demonstrating the value of specialization and clearly defined roles in the telecommunications sector.
If operators wanted to be protected like utilities, they should be regulated in a similar way. Their profits should go to subscribers (customers), not shareholders. However, this is not the solution they prefer. Instead, they want their inefficient operations to be supported by governments while retaining their salaries and share value.
If telecom operators would like to gain status and protection similar to public utilities, their operations should be regulated with an emphasis on serving the public interest, meaning that a larger portion of their profits should be reinvested in developing infrastructure and improving service to customers, rather than distributed as dividends to shareholders. This approach aims to ensure that services are accessible, affordable and reliable, just as they are for water, gas or electricity.
Obstacles to implementing such a model
Operators, especially those in mature, competitive markets, often oppose such regulations because they can limit their profitability and flexibility in making business decisions. They would prefer to maintain their pricing structures and profit distribution model that favors shareholders, which is typical of most companies operating in a free market.
Impact on wages and share value
The drive to maintain high executive compensation and shareholder value may favor short-term financial goals, but often at the expense of long-term value and stability for customers and society. This approach can lead to conflicts of interest, where decisions are made based on what best serves the company’s internal interests rather than the end users of their services.
Alternative regulation model
An example of an alternative approach could be the regulatory model used in some countries, where operators are required to reinvest a certain percentage of their revenues in infrastructure development or service price reductions. Such a model can help balance the needs of all stakeholders: operators, customers and shareholders, while ensuring that telecommunications fulfills its role as a key public utility service.
Challenges for public policy
Maintaining inefficient operations through government support without appropriate requirements for efficiency and service improvements can lead to technological stagnation and lack of innovation. Such policies can result in higher costs for consumers and less competitiveness in the market. Therefore, it is crucial to strike a balance between regulations that support innovation and ensuring that operators act in the best interest of the public, not just in the interest of their boards and shareholders.
Telecommunications operators, if they are to be treated as public utilities, must be prepared for greater regulation and responsibility for providing value to the broader community, not just to their direct financial beneficiaries. This approach may require significant changes to their operating and financial models, but it is key to ensuring that telecommunications as a service fulfills its core missions in society.
Government officials are more easily persuaded than markets, which, like an invisible hand, pursue the truth themselves. This is why 5G coverage in the United States has reached 95%, with market participants specializing in data, steel and land. This is an example of a functioning ecosystem. Meanwhile, coverage in Europe is 81%, and even less in the UK.
The differences in 5G network rollout performance between the United States and Europe, especially the United Kingdom, point to profound differences in market and regulatory approaches. These differences lead to different conclusions about market efficiency, government intervention and technological innovation.
Lessons from market efficiency
1 Market self-regulation: In the United States, the telecommunications market shows a strong capacity for self-regulation, which has fostered faster adoption of new technologies such as 5G. This is due to greater competition and flexibility for companies to experiment and invest without the burden of excessive regulation.
2 Regulatory hurdles: In Europe, by contrast, greater government involvement and stricter regulation can slow innovation and development. Persistent protectionism and complex regulations can limit the ability and willingness to invest in new technologies.
Lessons from government intervention
3 Policy impact on innovation: Governments that actively support the development of telecommunications infrastructure through pro-innovation policies can significantly accelerate the adoption of new technologies. The example of the United States shows that properly targeted government support that allows markets to operate freely is effective.
4 Problems with over-regulation: In Europe and the UK, where governments are trying to control market development too tightly, the results may be less optimistic. Overregulation can stifle market initiatives and limit infrastructure development, as seen in the slower pace of 5G network rollout.
Lessons from technological innovation
5 Role of specialization: Specialization in the United States in the areas of data, steel (infrastructure) and land (location) fosters an efficient ecosystem that effectively develops new technologies and services. Each market segment focuses on its core competencies, resulting in better performance.
6 Need for policy alignment: In order for Europe to match U.S. performance, there needs to be a better alignment of government policies that support innovation and investment in technology. This includes reducing regulatory barriers and promoting greater cooperation among EU countries on telecommunications.
The reach of 5G and the differences in its expansion between regions of the world show how market and regulatory approaches are key in shaping technological efficiency. Learning from these experiences can help better design policies that effectively support the development of critical infrastructure for modern economies.
Not regulation is the answer, but the problem. Europe should support market specialization, not suppress it. Many parties could support the development of 5G networks if only they were allowed to do so. At TIP, we want to work with both tower companies and operators, bringing billions of euros of investment to the market. So why not let us do it? Because, Marco, the bankers are right! Lease aggregation promotes market efficiency, because banks are more willing to lend to portfolio owners rather than to individual owners.
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Also read:“What is the third wave in telecommunications infrastructure?“
