Insiders Picking Up Global Signal

In the end, the managements at Sprint and Global are the ones who know all the details. Assuming both sides of the negotiation included veterans of the industry, one can assume that Global neither "stole" the towers nor overpaid wildly for them. Insiders at Global seem to be indicating that the deal should be beneficial to Global Signal's valuation, however. They have been savvy in the past, and to a great extent I'm relying on their judgment now.

Further acquisitions should open up similar risks and opportunities over the coming year. Global is expected to continue its role as a consolidator, and is on the short list of many expecting SBA Communications(SBAC Quote) to be the next big player purchased. If Global's management pays too much for a future purchase, it will certainly not be the first team to be tripped up by excessive acquisitions.

Another risk that is more unique to Global Signal than its peers is interest-rate risk. Assuming that Global's shareholders are more yield-driven than those of other tower owners, rising rates obviously make competing income investments more appealing.

Friendly Trends

Consumers' thirst for cellular signal capacity is growing steadily as more and more people adopt cell phones and use them for more signal-intensive applications. Future applications, including games and downloading video content, promise to keep this trend intact.

As telecom companies build out their wireless networks, they require more space on towers. Larger tower owners are able to benefit from their scale to operate more efficiently. Recognizing this, consolidation activity has picked up among tower owners, and Global Signal has been one of the primary acquirers.

Consolidation should help pricing power as well. Fewer players means fewer new towers are likely to be built, as consolidators will seek to fill capacity on existing towers before building new towers operating below capacity.

The positive trends in the tower industry are hardly a secret, however, and the stocks of most tower operators have appreciated sharply over the past year. Global Signal has specifically been discussed as being fully valued after its recent run.

But the "fully valued" concern was published regarding Global Signal nearly a year ago as well, and the stock delivered excellent returns nonetheless. The investment thesis for Global Signal continues to be a forward-looking one, and insiders appear confident that their firm can continue to thrive in the dynamic tower industry.