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Wireless Wars: The Billion Dollar Tech Boom no one is Talking About

OilPrice.com News Commentary

LONDON, June 19, 2017 /PRNewswire/ --

There's an explosive new real estate in town. It doesn't have any walls, and it's driven by our voracious appetite for technology and connectivity. But the biggest opportunity is a highly profitable $75.6-billion niche segment few investors know about.

When the wireless revolution first swept across the U.S., most investors were skeptics, thinking cell phones were for the already-rich, or for drug dealers. But those that saw this opportunity for what it was and what we see now,made billions. And they are still making billions today. Companies included today are Crown Castle International Corp. (NYSE: CCI), American Tower Corp. (NYSE: AMT), SBA Communications Corp New (NASDAQ: SBAC), Shaw Communications Inc. (NYSE: SJR), TELUS Corp. (NYSE: TU)

Ronald Reagan dished out public domains to private upstarts like candy in the 1980s-via lotteries, and then they were re-sold to telecoms giants, such as AT&T.

Mark Warner of Colombia Capital, dubbed 'The Man with the Golden iPhone', made $150 million on these lotteries, and he was just getting started. He wasn't wealthy, and he wasn't a drug dealer-he simply saw the coming revolution. Then he became a U.S. Senator.

Likewise, Steve Case-Washington's new 'tech whisperer' made his fortune when he founded AOL. He's worth $1.39 billion today.

But that was the beginning of the wireless revolution. Now the quickest and purest way to profit in this industry is in a niche segment that you might have been taking for granted.

Three companies in this most profitable niche have seen crazy 10-year returns for early-in investors.

  • Crown Castle International Corp. (NYSE: CCI): CCI rose from about $2.00 to its current price of $101, handing investors a 4,950 percent return.
  • American Tower Corp. (NYSE: AMT): AMT rose from about $1.50 to its current price of $131, handing investors an 8,633 percent return.
  • SBA Communications (NASDAQ: SBAC): SBAC rose from about 30 cents to its current price of $134, handing investors a 44,566 percent return.

Still, today, only 25 percent of the world has access to the vast global communications network. But the wireless revolution that swept through the U.S. and minted millionaires out of the investors in these three companies is now sweeping through South America.

And one little-known company is next in line to take advantage of this explosive opportunity.

They are in the same profitable niche as the three companies above: Cell phone towers.

That company is Tower One Wireless (CNX: TO + TOWTF).

The three little-known companies that cashed in on the cell phone tower niche by building 450,000 towers and rising to a combined market cap of more than $100 billion were just the beginning.

Tower One Wireless is next in line to repeat this in South America.

Only 100,000 cell towers have been built so far in South America - a far cry from the 520,000 towers needed by 2020.

That's 420,000 TOWERS that need to be built in the space of just 3 years!

That's 5X growth!

South America has been slower than other regions in migrating towards a TowerCo model-but now that wireless is affordable across the globe it's about to roll out big.

And that represents a huge opportunity for early-in investors.

Independent tower companies are springing up to meet massive demand for cell towers by wireless companies scrambling to compete with each other to provide unlimited wireless Internet and mobile phone data.

These most profitable of wireless 'landlords' build thousands of cell towers and rent them out to wireless providers scrambling to rapidly increase their capacity and coverage.

This type of business model is usually kept top secret because it generates so much net profit and continuous cash flow.

There are only 4 publicly-traded cell tower companies on the planet, and Tower One Wireless (CNX: TO + TOWTF) is one of them.

Founded in 2015 and sporting a market cap of just $11.23 million, Tower One is the only small-cap entry point into the industry, period.

The three others are basically in the same business; huge multi-billion-dollar market cap companies. Naturally, the law of large numbers limits how quickly they can grow, and stock prices limit first-in opportunities for investors to make outsized gains.

According to a Mott McDonald study on South America's Cell Tower Investment Opportunity, rapid wireless subscriber growth and heavy investments in LTE rollout make South America a fertile investment opportunity for tower companies.

But even more importantly for investors, this is one of the easiest niches to make money in. The simplicity is elegant: You either rent or buy land, you have a fixed cost installation for your tower infrastructure, and then you rent your installation to giant telcos.

A single tower can serve up to 4 telcos, while the tower company sits back and enjoys pure profit for years and years.

Very few industries can boast of such a clear-cut path to profitability. In fact, it might be the most profitable real estate investment by square foot on the planet.  

This is the model that is most likely to attract C-level executives from Fortune 500 companies to South America.

Here are 5 reasons to watch Tower One Wireless (CNX: TO + TOWTF) very closely:  

1. Little Competition
Tower One is the only small-cap tower company in South America, and provides an excellent opportunity to grow your capital. All the other three incumbents are mature companies worth tens of billions apiece. Small-cap companies with great business models offer some of the best opportunities for capital growth.
The great thing is that the big boys such as American Tower have no advantage over Tower One in South America despite their size. This is mainly because they are all starting operations at the same time. Everyone is starting from scratch, so the playing field is leveled.

2. 80 percent EBITDA Margins

The margins in this business segment are potentially massive. We are talking about 80 percent EBITDA margins, much higher than typical margins by other sectors.
Each tower costs from $50k - $100k, and generates $12k-$15k per year, per operator. Assuming each tower serves two operators, it takes only two years for the tower to pay for itself. And then the profits start flowing.


3. Massive Demand in a Growth Industry

The growth runways for Tower One Wireless (CNX: TO + TOWTF) are fantastic. Basically, the more towers the company builds, the more valuable it becomes. South America needs 420,000 towers built over the next three years. Tower One expects to collect ~$180k in profit from each tower.
So, the South American market is worth $180k * 420,000 = $75.6 billion.

Tower One Growth projections:

                              Current: 11 towers

Market cap only $11m (25 towers in development/construction)

                              Q1 2018: 100 towers

Q1 2018 Fair value would be $60.4m Market Cap ($504k value per tower). That's a more than 6x increase from today's Market cap.

                              Q1 2019: 250-300 towers

Q1 2019 Fair value would be $200-300m Market Cap ($504k value per tower). That's more than 22x current market cap.

This is a potential multi-bagger in just two years.

Tower One estimates that it will need to raise $5-$10m (in equity or debt) to finance and build the next 200 towers. After this, the company should be able to self-finance future growth through internal cash-flow.


4. Power Team + Plenty of Experience in Telco 

Tower One is led by a world-class team and industry insiders with high-level experience in the top echelons of the telco industry.
Alex Ochoa (CEO) - Alex recently left his directorship at Mackie Research Capital, one of the top retail and institutional brokerage firms in Canada, to focus solely on building Tower One Wireless. Alex and his management team have previously financed the tower industry for over $150 million and helped create tens of billions of dollars worth of shareholder value.

Rolland Bopp (Advisor) - Roland is a former CEO of Deutche Telekom USA known today as T-Mobile which is part of Deutche Telekom AG of Germany. And, knowing how profitable the cell phone tower market is, he's joined the team and headed toward a billion dollar pay day.

With 60 percent of shares in the hands of its management, you can be sure that supply will remain tight, meaning higher share prices.
Alex Ochoa and team are major stakeholders in Tower One (with 30m shares) and are focused on maintaining sound structure while creating shareholder value. He has voluntarily locked up the entire 30m shares for 3 years.
Early-in investors can therefore expect very minimal share dilution, so with this supply locked up, demand will send the price even higher.


5. Potential for Immediate Cash Flow 

It takes just 30 days to build out cell tower infrastructure, and by day 45, you're already collecting cash flow. A typical contract runs for 10-20 years, so there is excellent predictable revenue visibility with no down years.
Each tower on average yields $1,000 per tenant, per month. Each tower has the ability to attract up to four operators per month. On a realistic basis, the ability to add a second tenant is 75 percent, a third is about 50/50, a 4th would be a long shot. So, with 1 operator, you're looking at 25 percent cash on cash, with 2 operators you double that, with a third, you triple that.
But here's what's truly unique about the TowerCo model: To get that 2nd and 3rd additional operator, you have zero additional expense.
The bottom line is this: Tower One Wireless (CNX: TO + TOWTF) is the only small cap entry point into an industry with just four publicly-listed companies. It's also the only small-cap positioned to take advantage of the massive South American market where the next wireless revolution is already unfolding with demand for over half a million cell towers.
So, for investors looking for a first-in opportunity in an industry that is bursting at the growth seams, the best way is to slip in through the back door of what makes all this connectivity possible in the first place.

Honorable Mentions in the Telco Space:

Shaw Communications, Inc. (NYSE: SJR): Shaw is really shining. There are major catalysts here for this Calgary-based communications company, whose shares have recently jumped after selling of its data center business and buying wireless airwaves. Shaw is selling 100% of its wholly-owned ViaWest, Inc. subsidiary for about US$1.675 billion to Peak 10. Shaw is also the parent of the newly-acquired Wind Mobile, now 'Freedom Mobile', which will likely squash the competition with its LTE network as Canada's are craving better connectivity.

Telus (NYSE: TU): This is the third-largest telco in Canada, and for the past several years, it's outperformed all of its peers, including on the NYSE and TSX. And significant growth is in the works for the coming several years; in fact, we're looking at the fastest growth in Canada. Dividend yields should hold at greater than 4%.

By. James Burgess of Oilprice.com

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