Rent reduction pressure on phone mast sites

Landowners who lease out sites for mobile phone masts are being pushed to accept rent reductions of 20% to 30%, which operators’ agents say are needed to make sites viable.

There has been a blanket approach by phone operators threatening to exercise break clauses allowing termination of leases unless significant reductions are agreed, say agents advising farmers.

Sites are being reviewed following a spate of mergers, acquisitions and working agreements in the mobile phone operator market.

“The mast lease market is changing and undoubtedly some sites will go, especially where you have obvious duplication on the same farm,” said Brown & Co’s Jonathan Rush, who advises farmers.

However, threats to leave a site should be viewed in the light of the likely costs to the tenant, which in some cases would involve dismantling a mast, removing the electricity feed and concrete mast foundation and restoring the site to its original condition, said Mr Rush.

He advised landowners to check how strategically important their site was by looking on Ofcom’s site finder website (www.sitefinder.ofcom.org.uk) showing mast location, operator and technical information such as mast height and type of signal.

“You can also look at the phone companies’ own websites – if there’s a coverage hole in your area, or if you’re the only one in an area then you’re in a good position. They won’t take masts away on a whim and some masts are in such a key location that they won’t be going anywhere.”

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In many cases, phone operators were seeking to slash rents before the usual three-year review cycle had run. They also wanted to impose shorter terms, free site sharing with other operators and open market value rents rather than RPI-linked payments, which are part of many existing agreements, he said.

Existing leases typically run for a 12-year term with a review every three years. “They are now more likely to be seeking shorter terms, longer periods between rent reviews and rent according to market value, which they are trying to push down,” said Mr Rush.

Phone operators would sometimes offer to postpone the right to exercise termination break clauses if they achieved a rent reduction, said Mr Rush. “But the postponements are often just one or two years, which is not usually long enough to be attractive.

“We’ve offered concessions on lease terms in some cases but because we wouldn’t agree to a significant rent reduction, the operator’s agent wouldn’t negotiate.”

However, the approach to negotiation was not always consistent, with very similar situations being offered annual rents as much as 20% apart.

“And while some landowners have been approached with ‘rent reduction or we clear the site’ tactics, other agents working for the same operator have approached some of those same landowners and offered enhanced new lease terms,” said Mr Rush.

Landowners should consider several factors when determining their stance:

* Site location and type of mast in relation to others held by same or collaborating operators

* Terms of lease – how long is left to run

* When next break is available to tenant

* Site sharing conditions.

Reducing site numbers was much more of an issue in urban areas than in rural areas, said CLA chief surveyor Oliver Harwood. Each site owners’ approach should take into account the quality and extent of local coverage.

“Have a good look around – check what the threat is and where they might move to. And don’t try to negotiate yourself – get a telecoms expert on site who acts for landowners.”

Vodafone’s media manager Rob Matthews said the company was focused on delivering a first-class network while looking at ways of further reducing operational costs. “Vodafone and O2 have decided that we will share network assets wherever we can, which will reduce the overall number of new base station locations.

“It is widely recognised that the rental market for base station sites has significantly decreased in recent months, and we have been discussing with our landlords whether there is the possibility of increasing the value of our relationship by altering our leases, for example, to include further sharing rights.”

The correspondence site owners had recently received was part of a business as usual renegotiation process with site owners, said an O2 spokesman. “The tough economic climate and ever-demanding needs of customers are key drivers to increasing the number of sites we share and, at the same time, renegotiating competitive rental agreements.

“The specific details attached to each renegotiation vary on a case-by-case basis.”