Industry Eye: Winds of change in the world of telecoms could blow in some financial benefit to landowners

As a result, we have seen some seismic shifts in the world of telecoms leases and sites over the past year – and the forecast is for more to come. Following their announcement in 2007, T-Mobile and H3G have been pursuing negotiations with landlords of telecoms sites to put leases into joint names to enable them to converge their networks. As well as improving their overall coverage, the aim is to reduce the number of UK sites from 18,500 to 13,000, thereby eliminating the costs of running some 5,500 sites.

Similarly, O2 and Vodafone are undertaking their Cornerstone project to investigate the possibility of sharing structures. The two operators have broadly similar coverage and are likely to reduce their portfolio of over 20,000 sites to two-thirds or less. Finally, Orange, following a merger with T-Mobile, is planning the decommissioning of some 8,000 masts (almost 50 per cent of its network) over the next four years.

While all this is good news for operators, who will save substantial sums of money on rents and maintenance, it is bad news for the landowners who have enjoyed rental income from these sites. But all is not lost.

Every lease should contain a clause requiring the operator to reinstate the land upon termination – which could carry a cost of 15,000 to 30,000 per site. Subject to any specific planning conditions or obligations, the operator may be happy to make a payment to the landlord to absolve themselves of the responsibility.

While the lease requires the site to be fully reinstated, landowners may be happy simply to take down the mast themselves and leave the concrete slab in situ.

In addition, not all leases actually give the operator the right to enter adjoining land to carry out the decommissioning and may only allow access for construction.

Those landowners who want the site to be reinstated completely could still negotiate a "ransom payment" to allow the operator back onto the land to comply with their obligations.

More exciting, however, is the opportunity that decommissioning could present to landowners. Not only could they negotiate an additional payment to keep the site but there may be an alternative use for it.

An existing planning consent for a telecoms site should stand a good chance of being amended to allow for a small wind turbine.

The beauty of this is that landowners already have a concrete base and a tower and are connected to the National Grid – often the most expensive aspect of construction.

It's not quite as straightforward as simply installing a turbine on top of the mast – the tower must be large enough and in good order. For example, a purpose-built 25-metre tower could support a 50kW turbine with nine-metre blades, which could not only replace an existing electricity supply to a large dairy unit of, say, 15,000 per annum, but could also generate a further 15,000 of electricity to be sold back to the National Grid.

Bolting a generator unit on to an existing structure could halve the installation costs, but a telecoms mast may only support a 10kW or 20kW turbine.

Those who are not keen to invest in a turbine themselves could consider leasing the site to an operator who would be prepared to obtain planning, buy and install the turbine and manage the site for a number of years, paying in return a rent that could essentially replace the lost rental income following the mergers, takeovers and network convergences happening in the telecoms world.

James Farrell is a partner at Strutt & Parker. He heads their business in Yorkshire and North East, and can be contacted on 01423 706770 or by email at james.farrell@ struttandparker.com

CW 10/4/10