The good, the bad and the ugly-it's an apt
description of the current state of the cellular tower industry
and what it means for metals fabricators and other suppliers
that service it.
On the bright side are strong market
fundamentals driven by a variety of factors, including wireless
services being used for more minutes both through traditional
cellular phone handsets and wireless broadband access cards for
laptop computers, Stan Catey, vice president of cable products
and towers at the Andrews Wireless Solutions Group of CommScope
Inc., Westchester, Ill., said.
Dimming the view is the margin squeeze being
felt due to rising raw materials costs, which suppliers have
found hard to pass along in a very competitive market.
Then there is the downright unsightly Despite
strong cellular market growth, rocketing materials costs are
likely to quash some plans for new tower construction.
Some regions are tougher than others, a
spokesman for cellular tower manufacturer Fred A. Nudd Corp.,
Ontario, N.Y., said. There are some areas of this country, like
New York, where the tower market is becoming saturated,
resulting in soft tower demand, especially during an economic
downturn. He added that he sees cell phones as a discretionary
item and not absolutely necessary when you are financially
However, Brian Gibson, fabrication and sales
manager at Trinity Products Inc., O'Fallon, Mo., is more
optimistic. While the first quarter was a little softer than it
had been at the end of last year, he said activity was still
"All in all I think that 2008 will be another
good year with about 5 percent growth and that the market will
remain strong for at least another two years, given that with
new technology there is a need to put cellular towers closer
together. Previously, wireless carriers needed towers to be, on
average, about five miles apart. But now they are looking at
having them about three miles apart," he said.
For a while, growth had been restrained
somewhat by the way people tend to look at cellular towers,
which generally use flat-rolled, structural angles and tubular
products for the structure, as well as copper or aluminum
cabling going from each antenna to the "shelter" area of the
"Towers are treated like real estate by their
owners," Bruce Yim, president of Excel Tower Services Inc.,
Charlotte, N.C., said. "They put multiple carriers on one tower
and charge them rent."
While this "co-location" trend continues,
there can only be so many "renters" per tower. "More and more
towers are reaching their maximum capacity," he said, which
should continue to result in increased tower erection and/or
renovations of existing towers.
"Structurally, towers are engineered for a
certain load," he said, "And now people want to increase the
load capacity of the towers, sometimes by beefing up some steel
This "beefing up" process is usually more
common in self-supporting lattice towers and varies greatly by
project, Yim said. "They could go with a thicker grade of
steel, with more angles added to the flat roll. It is all
engineered. It depends on what is currently on the tower, what
is proposed to be on the tower, what the wind load is and a
number of other factors. Sometimes we are asked to just change
six horizontal angle pieces. Sometimes we change up to 50
percent of the tower," he said.
However, rising costs of materials including
steel could have a dampening effect on both new tower erection
and tower renovations, Gibson countered. Both flat-rolled coil
and plate prices have increased substantially-about 50 percent
in just the past two months or so. "A lot of companies haven't
budgeted enough for that kind of increase," he said.
Other materials have also increased
substantially in price, including copper and aluminum, Catey
said, adding that pricing considerations are partly responsible
for aluminum cabling being viewed as an attractive alternative
to copper during the past few years. While aluminum has also
been rising, at the end of March it was fetching around $1.35 a
pound, less than copper, which was hovering around $3.70 a
pound on the London Metal Exchange.
"Aluminum is an excellent alternative," he
said, explaining that while copper has been traditionally used
by the cellular industry, aluminum cabling has been used for
just about the same length of time in cable television
As far as aluminum and copper is concerned,
supply hasn't been much of an issue, just price, Catey said,
adding that Andrews Wireless Solutions has been able to pass on
some of the price increases, but not all. "It has been a real
challenge. But we have been trying to keep our margins up
through a combination of seeking out alternative products and a
number of manufacturing efficiencies."
There are both supply and pricing issues for
steel, Gibson said, explaining that lead times have stretched
out to six to eight weeks from four to six weeks previously and
could extend further. "No one is buying inventory at this
price, so we have to wait for mill rollings. The situation is
made worse by the fact that not many imports are coming into
the United States and a lot of ferrous scrap is going overseas
because of the weak U.S. dollar. The end result is that
companies will have to plan better," he said.
Trinity has been telling its customers when
it expects steel to come in and at what price, and then has
been scheduling deliveries accordingly, Gibson said. And in an
effort to recoup steel price increases as best as possible, the
company's sales force is getting new quotes from mills every
two weeks and to update those before signing contracts with
Fabricators' margins are definitely being
squeezed, especially given the increasingly competitive nature
of the cellular industry, Yim said. With carriers constantly
trying to drive prices down at a time when materials costs are
rising, there have been many layoffs in the industry-a problem
that's getting worse with fears about an economic recession.
"It is making carriers tighten their budgets and slow down new
purchases," he said.
But that is likely a short-term situation.
"The underlying, long-term fundamentals in the industry are
very good," Catey said.