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A Multi-billion-dollar Industry That's Hidden in Plain Sight

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A Multi-billion-dollar Industry That's Hidden in Plain Sight

FN Media Group Presents OilPrice.com News Commentary

PR Newswire

LONDON, March 28, 2018 /PRNewswire/ --

One massive investment opportunity is going largely unnoticed, perhaps by design. A multi-billion-dollar sector, whose main assets are often quite literally hidden in plain sight. Once you find out what it is... and how much money it makes every month... you'll start hunting for it in your neighborhood. In fact, it might be the most profitable business there. Included in today's commentary: American Tower Corporation (NYSE:AMT), SBA Communications (NASDAQ:SBAC), Crown Castle (NYSE:CCI), Charter Communications (NASDAQ:CHTR), Vodafone (NASDAQ:VOD).

Once You See It, You Can't Ignore It 

Unlike most infrastructure projects, this industry does its best to make their assets less visible to the public, while their services reach out to a rapidly growing portion of the population. They like it that way.

With profit margins that are over 80 percent in some markets, and a bevy of investment grade tenants at the ready to guarantee early and ongoing cash flow, it's a wonder how this industry still remains under the radar of most investors.

But, for those investors who are already aware of this sector, they've been keenly rewarded.

Already, the public market has witnessed three companies in this field soar to dizzying heights. Every one of them has a multi-billion-dollar market cap.

Since recently going public, Tower One (TO; TOWTF) is now the fourth publicly-traded company in North America in this industry, and it is the only small-cap entry point into an industry with up to 80 percent EBIDTA margins, and near-instant cash flow.

Demand for these high-yielding assets in question has skyrocketed over the past 10 years, causing the combined market cap of the 3 main companies trading in North America to rise to more than $120 billion.

This was all with those main companies producing less than half a million units.

And somehow, this instant cash flow business model is still under the radar, as investors are literally passing by these assets every day without thinking about them.

Look Up, Way Up 

What are they? Look up...

Cell phone towers are everywhere, increasing their coverage every year, all while designers do everything in their power for the public not to notice them.

Towers are often designed to blend into their surroundings, sometimes even disguised as palm trees, crosses, and public art installations.

And demand for wireless cell phone towers has skyrocketed over the past 10 years in North America and many developed nations.

Now the entire planet is shifting to wireless communication.

There's a reason that the three companies that focused on this infrastructure niche could start from zero, collectively build almost half a million towers, and rise to a combined market cap of more than $120 billion.

Now the wave of high speed mobile data, and telecom coverage is spreading at a rapid rate in the developing world.

And there's only one small-cap entry point available to the average investor looking to get in at the beginning of a major growth arc story.

Tower One Wireless Corp. (TO; TOWTF) is entering this market with a niche advantage. It's tackling the surging demand for new towers in South America-particularly in Argentina and Colombia.

Liquid Real Estate 

An advantage that cell phone tower owners have over other real estate conglomerates is that all of their tenants have an investment grade credit rating.

So, to any investor looking at the credit risk side of the industry, it's quite simple.

You build a tower, costing between $50k to $100k (depending on the size), which takes 30 days to build. By day 45, you're probably already collecting cash flow from tenants with big pockets-namely multi-billion-dollar telecoms.

The return on investment per-tower is the most eye-opening aspect of the sector.

The typical client is a multi-billion-dollar telecom, and the typical lease is a monthly payment over 10-20 years.

With just one client in place, the towers can be paid off within a few short years, leaving a majority of the tower's lease to build and compound profit.

An average client's lease on a tower comes to around $12,000-$15,000 per year. If even just one client is signed, then the tower is often paid off before the halfway mark of a ten-year term.

Those profit margins are increased in multiples every time that the tower is assigned to more than one carrier, with many towers capable of handling up to four tenants without diluting service.

But even with just one client, a single $50,000 tower, can return back $120,000 over the course of a ten-year term. And a 3-client tower is close to $360,000, for a 7x return on initial investment.

Argentina 

Tower One (TO; TOWTF) has targeted South America as its field for expansion, as the growth in demand is rising in the region more rapidly than in North America.

In particular, the company sees a major opportunity in Argentina, which is making gains after a shift in political policy more towards growth and stability.

Aggressive demand in Argentina has been projected to require an additional 10,000 towers in just three years.

With an already known potential client base, Tower One (much like other tower companies) doesn't have to spend on marketing. Contracts in South America are a result of relationships, a commodity that the Tower One (TO; TOWTF) team, which includes the former President and CEO of Deutsche Telekom USA, now T-Mobile, and the former COO of Continental Towers, which built over 200 towers in Colombia under his watch, is already entering the game with.

Competitors 

American Tower Corporation (NYSE:AMT) has a mkt cap of more than $60 billion, having risen from a share price of $0.75 in 2002, to its current share price of $143. American Tower has accrued a portfolio of approximately 147,000 towers, for an average value of over $377,000 per tower.

SBA Communications (NASDAQ:SBAC) has a mkt cap of over $20 billion, having risen from $0.22 per share in 2002, to over $170 per share today. SBA has a portfolio of over 26,000 towers for an average value of over $615,000 per tower.

Crown Castle (NYSE:CCI) has a mkt cap of over $45 billion, having risen from $1.47 per share in 2002, to nearly $111 per share today. Crown Castle has a portfolio of approximately 40,000 towers for an average value of over $931,000 per tower.

All three comparables are far along in their story and see value in the South American wireless boom as well. But Tower One has an advantage over its competitors, in that it's at an earlier stage in the story, a much smaller company that can move quickly but with the same strategy for growth.

Tower One Projections 

Currently, Tower One (TO; TOWTF) has a portfolio of 42 towers, with another 10 towers under development/construction and 80 sites ready to build.

With an initial investment of only $10 million, and a growth path set through an aggressive South American expansion plan, Tower One is seeking to capitalize on a massive demand in a growing industry.

According to America Towers, there are 10,000 new towers required in Argentina alone.

Tower One has projected itself to be at 100 towers by Q2 of 2018, with a fair value projection of $60.4 million (based on an average per-tower value calculated from the comparables), or a 2.5x increase from today's market cap.

By Q4 2018, Tower One expects to have amassed 200 towers, with a projected $101 million market cap, based on a $504,000 value per tower.

Long story short, Tower One projects a future where its $10 million initial investment can be grown into a value of over $200 million in assets in just two years.

By averaging the per-tower value of the three majors, we get approximately $660,000 per tower, with an average revenue of $51,000 per tower. Tower One believes this target is achievable.

As Argentina seeks to build 10,000 new towers in the coming years, that leaves a value of $6.6 billion in towers, with potential revenue of $510 million up for grabs.

Management 

And it's likely they'll get their fair share of the market because...

Tower One (TO; TOWTF) is led by Alex Ochoa. The returns Ochoa was witnessing on each tower is what drew Alex Ochoa to the market. In fact, he left being a Director at Mackie Research Capital, one of the top retail and institutional brokerage firms in Canada, to build Tower One Wireless, and capitalize on his relationships formed in South America.

Taking on the role of COO will be former COO of Continental Towers, Luis Para. While CEO at QMC Towers, Luis helped expand the company's portfolio to over 2,500 towers.

The Inside Track 

Soon this story will get out. This is more than a passion project for Alex Ochoa and his team. The opportunity was so good that Ochoa left a prestigious position at Mackie Research to pursue this tower boom.

Management has locked up 40 percent of the shares in the company.

With just a $10 million initial investment, the company will now begin its path towards major growth targets.

At a starting point of $0.25 per share, and a current market cap of $11.8 million, Tower One gives investors a chance to enter into a market that has already seen other companies experience huge growth.

The company's vision is to finance and build at least 300 towers in the next 24 months, while creating a profitable income stream.

At competitors' tower valuation today, the company could be worth over $200 million once they've reached that marker.

If Tower One (TO; TOWTF) can hit its two-year goal of 300 towers, which should value the company's assets at over $200 million, that would be 20x the current market cap, subject to share dilution and debt financing.



Honorable mentions in the telco space:



Charter Communications (NASDAQ:CHTR) Charter is the second largest cable operator in the U.S. and a leading broadband communications services company providing video, Internet and voice services to over 26 million customers.

Vodafone (NASDAQ:VOD) British telecommunications giant Vodafone has a significant presence in Europe, the Middle East, Asia and Africa. We see Vodafone as a good income investing pick in the telecom sector as it boasts a healthy 5.6% dividend, making it one of the more interesting big telecom stocks to hold right now.

By Charles Kennedy



Forward-Looking Information

This news release contains "forward-looking information" identified by the use of forward-looking terminology such as "plans", "expects" "intends" or variations of such words or indicates that certain actions, events or results "may", "could", "would", "might" or "will be" taken, "occur" or "be achieved". Forward-looking information includes, but is not limited to the POWTF's intention to have 100 towers by Q2 2018, 200 towers by Q4 2018 and 300 towers within 2 years; that the margins on cell tower operations are huge, generally around 80%; that a cell tower can be built in just one month, and a cell operator can be brought online two weeks later; that cell operators sign deals for 10 or 20 years; that shortly after construction on a tower starts, it can generate cash; that the tower value can be substantially higher than building costs based on demand and rental rates; that demand for the towers will continue to be strong; that 10,000 towers are needed in South America; . These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Tower One to be materially different from those expressed or implied by such forward-looking information, including but not limited to: risks related to not being able to agree with telecom companies on important aspects of tower rental; the estimation of personnel and operating costs; that the cell market in South America will not grow as expected; that Tower One may not receive required regulatory approvals; construction of cell tower risks, including cost overruns, labor issues, technology that doesn't work as well as expected; delays or problems in construction; the availability of necessary financing; cell operators may not come to quick or long term agreements as expected; competitors may offer cheaper, faster or better services, reducing expected revenues; general global markets and economic conditions; risks associated with currency fluctuations; competition faced in securing experienced personnel with appropriate industry experience and expertise; the reliance on key personnel; financing, capitalization and liquidity risks including the risk that the financing necessary to fund continued development of Tower One's business plan may not be available on satisfactory terms, or at all; the risk of potential dilution through the issuance of additional common shares of Tower One; the risk of litigation; and the risk that cybercrime, climate change including unusual weather, or changing technology may severely damage Tower One's business. There may be many other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. We undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as required by law. Investors are cautioned against attributing undue certainty to forward-looking statements.

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