Tower One’s Long Latin American Runway: $TO.C $TOWTF

Tower One Wireless Corp.

We are interested in a new stock that is making connectivity possible in the far reaches of South America. Tower One Wireless Corp. (CSE: TO, OTC: TOWTF, Frankfurt: A2AFT9) was founded with a mission to own and operate cellular network infrastructure sites in high-usage, South American markets. This telecommunication infrastructure developer is just getting going, with thirty tower sites either built or in the acquisition stage in Latin America. They are working nimbly to grow that number and further capitalize on their existing towers as well. Tower One sources important properties to build towers in municipalities where there is limited or no cellular coverage, resulting in a greater chance for multiple streams of rent revenue (tower sharing or colocation).

Alex Ochoa, chief executive officer of Tower One, stated: “Collocation in the tower business allows us to increase our income with limited incremental investment, thus increasing the return on investment. In addition to that benefit, Tower One can transfer a discount to the cellular operators in the form of lower monthly rental payments, thereby strengthening our long-term business relationship.” Tower One is now in late-stage negotiations with a second telecom carrier to deploy its antennas on their towers as well.

For a look at their latest Investor info and PPT, click here.

Tower One focusses on built-to-suit towers where height of the tower is the main concern. Finding strategic locations for their towers increases the probability of multiple carriers sharing the tower and minimizes competitive risk. At a minimal cost to build the towers, approximately $40,000, Tower One can then turn around rent it out with long term, 10-15 year contracts to multiple operators. Tower One is also on the hunt to acquire entire portfolios of towers, and they have a few portfolio targets on the dart board already. 

Latin American Wireless Cell TowersIn addition to the seven towers built and 23 in site acquisition, Tower One has 14 granted building permits, 13 Cellular Search Rings, and over 300 gas station locations scouted for future development. The 8th, 9th and 10th towers have completed the social development consultation process and are in the final stages of site acquisition, with construction expected shortly. The company was awarded 14 building permits in the city of Barranquilla for their 10 additional search rings (desired co-ordinates for additional towers) from a telecom carrier, where cellular coverage and capacity is weak.

News out today announced that Tower One has even setup a real estate subsidiary company, TOWER TWO SAS, which will purchase and own the real estate on which its cellular towers will be built, providing a stronger asset base and more lease revenue. This company is getting into their groove.

Tower One was founded in 2015 and recently came to the Canadian markets through an acquisition completed on January 12, 2017 for 100% of the securities of Tower Three through the issuance of 30 million shares at 10 cents to the sellers on a pro rata basis.

Tower One is interesting on many levels from an investment standpoint.

  1. There are limited entry points to this business, and the team is well-connected
  2. There are only a few publicly listed tower companies out there, not one of which is a microcap
  3. They have a sizeable pipeline
  4. Down the road we should see EBITDA margins of 60% or more
  5. They plan to list on the Colombian stock exchange where there are slim pickin’s

Colombian pension funds are now allowed to invest up to 20% of their holdings in alternative investments. And with an increase in infrastructure spending, there is a greater need for more wireless coverage all over South America. This company should stand out on the Colombian exchange. 

Focused on 4G & 5G LTE Infrastructure Expansion in Latin America

Tower Three, before it melded with Pacific Therapeutics and became Tower One Wireless Corp., was a private company formed in Colombia. Hence the strong Latin American flavor to the story. The privco was founded by Latin American entrepreneurs with a mission to own and operate high-quality cellular network infrastructure sites in thriving South American markets.  Why are they thriving? The big city centers are lit up, but a lot of the countryside and rural areas are still dark. There remains a long runway in the Latin American Tower market, in particular for early-moving companies.

Here is a recap of pertinent news of late, oldest to newest:

August 2, 2016: Pacific Therapeutics to acquire Tower Three Wireless

September 26, 2016: Pacific Therapeutics target receives 1st rental payment (PACIFIC THERAPEUTICS RECEIVES REVENUE UPDATE FROM TOWER THREE)

— Alex Ochoa, chief executive officer of T3, stated, “This is a monumental milestone for Tower Three as we have now become a recurring-revenue-generating company with immediate cash returns starting within 45 days of every tower construction completion.”

October 13, 2016: Pacific Therapeutics boosts placement to $2.25-million

October 20, 2016: Pacific Therapeutics firms up deal to buy Tower Three- (DEFINITIVE AGREEMENT WITH TOWER THREE)

January 26, 2017: Tower One Wireless to trade on CSE Jan. 26 (Changes name from Pacific Therapeutic to Tower One)

February 1, 2017: Tower One Wireless builds seven towers in Colombia

February 9, 2017: Tower One Wireless forms subsidiary in Argentina

March 15, 2017: Tower One Argentina Update: 10 Cell Sites & Real Estate Subsidiary

Cell towers in Latin AmericaTower One’s high quality telecom infrastructure attracts long term lease agreements with triple-A telecom clients. They have an average 30 day construction schedule with rental payments starting day 45. A recent Stockhouse article on $TO.C stated that Tower One is targeting Latin America where “there has been a major transformation in recent years towards deregulation, privatisation and mergers and acquisitions. This is providing revenue opportunities for not only local companies, but foreign operators as well. While telecom infrastructure is well developed in many of the business centres across the continent, small urban centres and rural areas remain severely underserviced. Consumer demand for mobile and broadband will continue to fuel investment into the sector as telecom providers aggressively compete for a share of these burgeoning markets.”

Tower Market Demand in Colombia and Argentina

Market demand for towers in Colombia is around 1,300 towers a year servicing a population of 48 million. Argentina can sop up 3,000 a year with a population of 48 million. The tower industry is relationship-based, and it is not yet saturated in competition; there are only 11 tower companies in Colombia, for instance, doing the same thing.  

Argentina’s government has embarked on a progressive, large-scale national broadband plan, which could bring online 10,000 new cell sites over the next three years. The Minister of Communications said in September of last year that the new regulatory reforms could lead to US$20-billion in telecom infrastructure investments over the next four years.

Ten percent of the world’s internet users are from Latin America. Smart phones, if you haven’t heard, have swept the land and dammit if “No Service” zones aren’t the worst! Wireless operators are salivating for more and more data revenue. New wireless towers augment the capacity of mobile operators which strain to keep up with the insatiable thirst for data.

Wireless tower infrastructure in Latin America plays a particularly crucial role in enabling broadband Internet access as fixed infrastructure has traditionally been relatively weak and underdeveloped across the region. The wireless tower industry is represented by mobile operators and tower companies as owners of tower assets. In Latin America, mobile operators and towercos operate over 161 thousand wireless towers.

Excerpt from “Wireless Tower Market in Latin America: Regulatory Changes Coupled with Mobile Data Growth Will Unlock Opportunities

Why aren’t cell phone operators building their own towers? Why are the operators who need the towers turning around and divesting entire portfolios of towers to companies like Tower One? Because, wireless operators want to focus on their core business, they have already depreciated the towers on the books and this is a quick injection of cash. The original thought was that the more towers they built, the better the service, the more clients they would attract. But the dynamic has changed to more independently owned towers where the Bell/Telus/Rogers of Latin America (Claro/Tigo/Telefonica) want to lease a percentage of their towers. The legwork and negotiations involved in the process of securing the site and the permits is not a worth maintaining entirely separate divisions of the operation. So now, 50-80% of the towers required are rolled out to independent tower companies. It’s a who-ya-know type of business.

Strong Leadership Team

Tower One has compiled a team with both capital markets and cellular infrastructure and development experience with one of South America’s largest tower developers. They have a goal of building 100 towers in 2017, which means newsflow and more importantly, cash flowing in.

Alejandro Ochoa is the President/CEO & Director of Tower One. Mr. Ochoa has over 18 years of experience within the financial services industry, having worked at firms such as Morgan Stanley, Prudential Securities and Raymond James. Mr. Ochoa has a Investment Banking background, and he continues to be a LATAM consultant with Mackie Research’s IB department. Mr. Ochoa understands the South American Tower business and the capital markets. Dedicated to Latin America, he has advised, raised capital and transacted in Colombia, Mexico, and Peru. He helped list Facebook on the Colombian stock exchange, and plans to list Tower One there as well to access retail and institutional support from Colombia, Peru and Chile. He has also covered Telecom Infrastructure companies from the United States, Argentina, and Colombia, so he certainly has the necessary 3-dimensional background.

Octavio De La Espriella T. is the COO of Tower One and the former COO for Continental Towers. He helped expand Continental’s portfolio to over 200 towers in a two year period. His main role is to interface on behalf of Tower One with the four principal operators of Colombia: Claro, Tigo, Avantel, and Movistar.

This team will be able to access capital at strategic times, and leverage relationships in Latin America to grow their tower portfolio.

Insiders, who own 50-60% of the stock, also signed a voluntary 3 year lock up agreement. That there is a feather in the hat for this management team.

The Social Mission

Social equity, economics, and environmental factors are of central importance to Tower One. “People, Planet and Profit,” three very important P’s. This company has a strong desire to make a difference in communities that need infrastructure and accessible wireless.

One Laptop Per Child (OLPC) is a not-for-profit initiative with a mission to create and distribute educational devices for the developing world. Tower One supports this important initiative through a monthly draw. They help communities of Latin America even further by offering free wifi to the public where they can. Digital inclusion is a thing now, and any city, town, village without access to internet is score 1 poverty, 0 for business.

Free Trading Shares

TOThe free trading placement shares hit the airwaves May 10th, 2017, but as pointed out above, a huge chunk of the float is locked up for 3 years. There are around 52 million shares out and today it trades at $0.36 for a market cap of roughly $18 mill. Warrants that could bring in over $6 mill are priced at $0.40. They did pay a price to buy Tower Three, and so 2017 is a benchmarking year to see if this capable team can continue to roll out the biz plan. Can this scale up smoothly? Insiders think so, which is always a good sign. They have a very low burn rate (roughly $25,000 a month). Eight people work in Colombia, and whether there are seven towers or 100, the current team can handle the operation.

The questions for this company are not “Can they raise and be conservative with the money? Can they build and lease a tower?” Proof of concept has happened, the business model is playing out, and the scale potential is super intriguing for retail investors. The question seems to be will relationships with cell operators and local industry know-how forged over the previous two decades blossom into a great microcap success story. Tower One found a stealth entry point into South America’s tower runway. You need relationships to thrive, or there is no entry here. The capital was secondary in going public. Mr Ochoa saw a huge opportunity and great value in listing Tower One in order to be a dynamic contender in this industry. 

 

~DISCLAIMER~

This is not in any way investment advice or any sort of stock recommendation. Please do your own due diligence and talk to a qualified investment advisor.

The contents of this article are for informational purposes only.  Nothing in this article, in any way whatsoever, should be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy, hold or sell any security. Note the inherent risks when investing in microcap stocks.

Tower One Wireless Corp. is a client to an arm’s length party to one of the owners of the Stock Syndicate. One or more of the Stock Syndicate owners does own shares in Tower One Wireless Corp. with no plans to sell in the next 90 days.

Leave a Reply

Your email address will not be published. Required fields are marked *