Commercial gridlock over telecoms towers could impact 5G roll out

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Commercial gridlock over telecoms towers could impact 5G roll out

Commercial gridlock over telecoms towers could impact 5G roll out

The roll out of the UK’s new 5G mobile network could be impacted by a deadlock over potential rent reductions between network operators and telecom tower site landlords.

The market has found itself polarised as network operators and landlords struggle to reach agreement on the level of rent to be paid on the telecoms tower sites.

As a result, commercial agreements are not being reached that are needed to allow for the construction and upgrading of infrastructure necessary for 5G. Data now shows that as of March 31, 2018 there are 39,220 mobile phone masts throughout the UK.*

Under the new code, landlords are set to receive lower rents for mast sites. Rents will be based on the value of the land to a landlord, e.g. agricultural fields, rather than on the value of the land to a network operator. As a result, rent values for proposed and existing mast sites are likely to be significantly lower.

5G will allow for much faster download speeds (greater than 10 gigabits per second) than the current 4G. Network operators are currently trialling its roll out, with plans to introduce it to London and other selected cities in mid-2019.

Victoria Dobson, Legal Director, in our Real Estate – Telecoms team comments: “The new code has had the effect of initially creating a stalemate between network operators and landlords.”

“If the position of the network operators and of the landlords do not meet somewhere in the middle quite soon such polarisation in the market may impact the roll out of 5G.”

“The impasse created by the new code had been predicted by many commentators and was raised as a possibility with the Government during the initial consultation phase.”

“Since the introduction of the new code, we have seen a steep decline in the number of lease renewals. Parties are currently not agreeing on rental values in the ‘new code’ world.”

“Both sides are communicating but there is a general feel in the market of both sides taking a ‘wait-and-see’ approach as cases start to go through the Tribunal system before they take action.”

“Some parties are now even going around the new valuation mechanism and entering into agreements with confidentiality clauses to prevent setting a precedent on rental values.”

“As the largest change in the telecommunications masts sector in a generation, the new code is largely in response to the rapid growth in the importance of mobile networks over the past decade. It is designed in part to help expand coverage by making it easier and more cost-effective for network operators to build and maintain the necessary infrastructure.”

*Communication stations (national scheme) – covers telecommunication masts, Valuation Office Agency

For more information on this topic, please contact Victoria Dobson, or you can give us a call on 0345 070 6000.