CONFIDENTIAL

U.S. Tower Industry

Market Review and Analysis

COMMERCE CAPITAL GROUPInvestment Banking for Infrastructure

2005

Table of Contents

I. Summary

II. Market

III. Drivers and Trends

IV. Opportunities

V. Risks

VI. Commerce Capital Group

CCG

I. Summary

Summary

Commerce Capital Group (CCG) seeks to represent small and mid-sized tower owners in selling their tower(s). CCG seeks to achieve maximum tower value while tower owners can focus on their business.

• Over the past 12 – 18 months, the U.S. Tower industry has returned to favorable selling conditions for tower owners. Top industry analysts believe now is an excellent time to capitalize on the industry’s strong growth drivers and favorable economics

• After selling a tower, the average tower owner is now achieving a 20% rather than 10% return on their initial tower investment

• Tower sales are currently priced 10-30% above what they were 12 months ago. The average tower used to sell at 10x TCF (tower cash flow), but CCG is currently witnessing average tower prices at 11.7x TCF with the average private tower price at $330,000

• Top industry analysts believe that numerous growth drivers fueling the tower industry will strengthen the tower market over the next several quarters, giving tower owners a great opportunity to sell their tower(s)

• Large tower companies generally purchase large quantities of towers, achieving small individual purchase prices. However, Mom and Pop tower owners, owning ten towers or less, are able to achieve greater values for their towers due to single valuable purchases

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The Tower Owner’s Opportunity

• CCG’s identified buyers have asked CCG to show them any number of towers available for purchase

• CCG’s analysts have conducted extensive research on the tower industry and are knowledgeable in tower transactions

• Our relationships developed in the industry have given CCG an opportunity to assist small and medium size tower owners in selling their tower(s) quickly, efficiently, and accurately

• We believe that, when engaged, CCG is able to provide tower owners client oriented services that help facilitate multiple offers and an accurate assessment of the value of their tower(s)

• While long-term tower valuations are uncertain due to several risks factors, CCG and other top industry analysts believe that now is a good time to capitalize on current market valuations

• This research piece provides our assessment to where the tower market has been, currently is, and where it is most likely to be in the future

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II. Market

Market Size and Statistics

• The U.S. Cellular Subscriber market achieved 55% penetration in 2003 and there were approximately 218,860 domestic wireless towers

• Tower companies own approximately 120,000 towers in the Untied States, with Mom and Pop (ten towers or less) owning 30% of that market

• While the number of actual wireless “sites,” including billboards, water towers, rooftops, poles, or silos, is estimated to be over one million, the market is still comprised of a variety of owners

Tower Market Breakdown Number of Towers Owned by Tower Companies

1. Fryer’s Tower Market Analysis Report 20042. Morgan Stanley Equity Research 8/18/04

Sources:

55%

Industrial10%

Tower Companies

Government4%Broadcast

14%

Carriers17%

Mom & Pops

30%

Top 5 29%

Top 2528%

Top 10013%

36,50015,750

34,50033,500

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Three Basic Types of Towers

The tower market is comprised of three types of towers: guyed, lattice (also called self-supporting), and monopole. Each tower serves specific types of tenants and offers different economics.

Guyed Towers – Being the tallest type of tower, ranging from 1,000-2,000 feet in height, these towers are supported by guyed wires anchored into the ground. Guyed towers have the lowest steel costs, smallest foundation, lowest construction costs and can accommodate the highest number of tenants—upwards of 30 in some cases. These towers support microwave, AM/FM radio, paging, television broadcasts, two-way radio, cellular, PCS and wireless ISP antennae. While well suited for rural markets, they are not well suited for top tier market cellular deployments.

Lattice Towers – Being between 100-450 feet in height, these towers generally have three legs that taper in toward the top of the tower, forming a triangular structure. Supporting on average 12 tenants, they require more steel, have higher construction costs, have a longer construction time, and require larger foundations versus guyed towers. However, lattice towers require 80-85% less land than guyed towers (because there are no wires stretching out). Like guyed towers, lattice towers can support microwave, AM/FM radio, paging, television broadcasts, two-way radio, cellular, PCS and wireless ISP antennae.

Monopole Towers – Being the smallest type of tower, ranging from 50-200 feet in height, they are the simplest to construct, have minimal land requirements, and see a much greater community acceptance (and an easier time obtaining permits) versus lattice and guyed towers. Because these towers are so low to the ground, they generally cannot send signals over long distances without interference from buildings, trees, hills, etc. Thus, these towers are primarily used by PCS and cellular carriers to pass calls within 3 to 10 miles to end users or to other towers. Usually supporting up to five or six tenants, the monopole tower is viewed as the most economical and attractive type of tower because its structure and height are well suited for increasingly granular mobile wireless network coverage and its low cost maximizes economic return.

Sources:

CCG81. 1. Bank of America Equity Research 8/25/04

Tower Economics

Single Tower Costs

• Currently, monopoles can be built as low as $500 per foot or less, depending on requirements. While free standing and guyed towers are typically more expensive, they provide greater collocation opportunities. One can assume that the average tower is 180 feet in height and costs between $250,000-$300,000 to take from start to finish. Permitting and zoning costs are rising to as much as the total amount of construction costs, while these costs used to account for only 10% of the entire tower project

Tenants

• On an average tower, the type of technology that a tower can support determines the amount and type of tenants. Mixed use of tower space is dependant upon demand, location, and the structural integrity of a tower. Preferred tenants include telephony and broadband equivalent (BBE) tenants

Revenue

• A typical mix of tenants of a mature structure in a good location would be 2 broadband tenants and 3-4 whip antennas. This mix of tenants would produce annual revenues of approximately $6-8,000 per month, or annual revenues of between $75-100,000 per year for suburban operation, and $120-175,000 per year for urban structures (1)

• While revenue is highly dependent upon the tower’s location, height, and structural capacity, the average four year old commercial tower generates $40,000 per year. Some single tenant structures usually produce between $15-20,000 per year, while large broadcast structures may produce over $20,000 per month from a single tenant (1)

Sources:

CCG91. Fryer’s Market Report 2004

III. Drivers and Trends

Growth Drivers

137 234433

617842

1,0691,287

1,5191,737

1,9262,089

2,228

0

500

1,000

1,500

2,000

2,500

1999

2000

2001

2002

2003

2004

E20

05E

2006

E20

07E

2008

E20

09E

2010

E

Total Minutes of Use (in bn) (top six carriers only)

AMT CCI GSLMargins

Rev./Tower $48,035 $45,574 $62,406SG&A/Tower $1,906 $7,564 $10,601Gross Margin 58.7% 63.9% 69.8%SG&A % of Sales 3.4% 14.5% 13.6%EBITDA Margin 55.2% 49.4% 56.2%

Maintenance Capex% of Sales 1.5% 4.8% 5.9%Per Tower $1,400 $2,489 $1,250

Balance SheetNet Leverage 7.2x 5.1x 5.6xCoverage 1.6x 1.3x 3.6x

Attractive Business Model Among the Largest Tower Owners

• Attractive Business Model Driving Strong Free Cash Flow – The tower business model includes a high probability in breaking even with one tenant, a low churn rate (<4%), low maintenance expenditures (<5% of total revenue/year), and long-term contracts with price escalators ranging from 3-5% (4)

• Network Quality Improvements – Carriers are intensely focused on improving both the capacity and coverage of their networks. The amount of coverage a subscriber receives is the number one factor when deciding to switch and/or choose a carrier. Carriers are currently adding antennas to existing towers and seeking entirely new towers

• Increased Cellular Subscriber Penetration - Subscriber growth is strong. Last year alone, 18 million subscribers were added bringing the U.S. penetration to 55% and is projected to grow to 80% by 2010 (2)

• Ever Increasing Minutes of Use (MOU) – This vital growth driver is estimated to more than double by the end of the decade

Sources:

CCG111. E = Morgan Stanley Research Estimates2. Morgan Stanley Equity Research 8/18/043. Fryer’s Tower Market Analysis Report 2004

4. Bank of America Equity Research

Growth Drivers

• Low Industry Debt Levels – Most towers owners have a significant amount of equity in their tower(s)

• Increased Carrier Capital Expenditures (CAPEX) 2004 will see a 7% increase alone.(3) Carriers must respond to consumers demand for increased quality of service

• Increased Consolidation - While 50% of the nation’s towers are not owned by the top six carriers, consolidation will continue to increase and drive the tower merger & acquisition market

• Wireless Number Portability (WNP) – This allows consumers to take their wireless phone number to any carrier. Therefore, carriers are quickly trying to improve existing networks to achieve greater customer satisfaction and avoid the churn that WNP encourages

• Homeland Security - The U.S. will be transmitting more information due to increased security requirements

• New Technologies = Increased Capacity Needs and Additional Lease Revenues

High Speed DataEVDO – Verizon & Sprint UMTS – Cingular & T-Mobil

900 MHZ, GSM and other 3G technologies – higher speed networks require more equipment at each cell site and often double the cell-site density

Wireless Broadband – Wi-Fi transmits high-speed video and multimedia information

Sources:

CCG121. Morgan Stanley Equity Research 8/18/042. Fryer’s Tower Market Analysis Report 20043. Goldman Sachs Estimates, David Small

Trends• Increased Environmental and Zoning Regulation – The two most hindering regulations are the National

Environmental Policy Act (NEPA) and State Historic Preservation Office (SHIPO)

• Collocation –While collocation simplifies the zoning process, most new built towers are now required to have collocation capabilities. Some wireless service providers have been able to co-locate more than 85% of their network on existing structures

• Tenant Increases - The number of tenants per tower has been gradually climbing at approximately .20-.25 per year and has been estimated to reach 2.6 by year end 2005 (2)

• New Build is Low – Carriers will be more likely to co-locate their network rather than build new towers. Industry analysts believe that new build will not be a significant trend

New U.S. Site Development

2304

4047

3297

585

71 1630

500

1000

1500

2000

2500

3000

3500

4000

4500

1999 2000 2001 2002 2003 2004E

New Site Development Among Largest Tower Companies(American Tower, Crown Castle, SBA, SpectraSite)

2003 2004E ChangeCingular 1,700 2,750 + 1050Nextel 1,200 2,200 + 1000T-Mobile 3,300 4,000 + 700Sprint 1,800 2,500 + 700Verizon 2,000 2,000 + 0AWE 3,300 800 - 2500Total 13,300 14,250 + 950

Sources:

CCG131. Raymond James Research2. Morgan Stanley Equity Research

I. Opportunities

Tower Valuations

While tower companies are realizing favorable current market conditions, it is important to be aware of what drives the value of an individual tower and what hinders a tower from selling.

Capacity – Is the tower used up?

Regulation – FAA, OSHA, and FCC

Non Restrictive Zoning

Age of Leases

HAAT – Height Above Average Terrain

Structural Integrity

Tower Comparable with 3-4 mile radius

Tower Value Drivers

Location

Tenant Credit Worthiness

Number of Tenants

Costs of Operation – taxes, maintenance & admin.

Land Terms – owned or long term ground lease

Land Title Review

Environmental Issues – NEPA/SHIPO

What Causes Towers Not to Sell?

Tower Value Drivers Are Not Met

Disagreement on Tower Price

Due Diligence Comes Back Negative

Disagreement By Parties Over A Mutual or End Objective

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Charts and Graphs

While the average tower used to sell at 10x tower cash flow (TCF), CCG is currently observing average tower prices at 11.7x TCF with the average tower priced at $330,000. Tower sales are currently priced 10-30% above what they were 12 months ago.

• Current market conditions are giving tower owners another chance at selling their towers

• Tower owners are now achieving a 20% rather than 10% return on their initial tower investment

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31.0x

10.9x13.1x

24.0x

11.3x 12.5x14.6x

9.2x11.7x

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

30.0x

35.0x

Oct. 2000 Oct. 2002 Sep. 2004Public Company Average Wireless Carrier Sale Transactions

Private Tower Transactions

TCF

Mul

tipl e

Public vs. Private Market Valuations Average TCF Multiple for Private Towers

8

12.7

19.5

17.7

14.7

22.5

19.1 18.2

810.5

11.7

0x

5x

10x

15x

20x

25x

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Sources:1. Daniels & Associates Research

IV. Risks

What Went Wrong in 2002?

• The tower industry lost over 25% of its value in 2001 and 2002 along with the coming of age and embracing reality. Furthermore, the high hopes of vertical integration were found to be unwarranted. The following are the primary reasons why the tower industry plummeted in 2002:

Excessive debt loads

Costs of maintaining inventories of sites did not match decreased levels of demand

The tower owners inability to efficiently manage expansion

EBITDA of service businesses declined significantly

Over-expansion through purchase of non-strategic assets

Spending reductions by carriers, which were also under pressure (for example, Nextel shares traded below $2.50)

The hopes of increased revenues via deployment of 3G technologies began to fade in 2001 and continued its descent throughout 2002. Although the wireless carriers were upgrading system performance during this time, those upgrades did not translate into spikes in lease-up rates. Rather, existing facilities were being revamped to improve wireless delivery

Sources:

CCG181. Fryer’s Tower Market Analysis Report 20042. Morgan Stanley Research

Risks to the Tower Industry

• Carrier Consolidation – Resulting in consolidation of tower leases

• Possible CAPEX Decrease

• Pressure on Rents

• Higher Interest Rates

• Alternative Tower Structures

• Increased FCC, FAA and Local Zoning Regulations

• Cable, Satellite, and Newer Technologies:

Satellite Radio Technology

WiMAX – This is a standards-based wireless technology that provides high-throughput broadband connections over long distances. WiMAX systems can be used to transmit signal as far as 30 miles. It is currently being tested and producing extraordinary results. Expected to impact the tower market in 2005 and 2006

Voice Over Internet Protocol (VoIP) – Allows consumer to make telephone calls using a broadband Internet connection instead of a regular or analog phone line

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VI. Commerce Capital Group

Mergers and Acquisitions Advisory

CCG assists tower owners in achieving their financial and strategic goals. We create a highly disciplined process that is designed to best position a client’s negotiating leverage.

Seller Representation

• It is important for tower owners to obtain guidance and expertise when making the critical decision to sell their assets. Our understanding of trends, value drivers and recent comparable transactions, enables us to develop plans that will accelerate the realization of our clients’ goals, both personal and corporate.

Buyer Representation

• At CCG, we understand that a successful strategy requires the development of precise search criteria uniquely designed for the specific needs of the buyer.

– Formulation of acquisition criteria– Identification of primary targets and initiation of contact– Negotiation of terms– Maintenance of client anonymity– Capital raising, if needed– Final negotiations/closing

– The decision to sell– Due diligence– Marketing the tower– Final negotiations/closing

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What Can We Do For You?CCG’s experienced team of professionals welcomes an opportunity to work with tower owners in selling their tower(s).

• Focused on infrastructure services, CCG is a private investment banking firm, providing capital raising, merger, acquisition, financial advisory, and corporate finance services to small and middle-market sized companies. These companies may be publicly traded, privately held, family-controlled or management-led enterprises.

• We would welcome an opportunity to work with tower owners in assistance with tower sales. Our clients/relationships have previously been established, giving the tower owner a fast, efficient, and profitable sale.

Relationships

Knowledge&

Experience

CommerceCapital Group

(Active Tower Buyers)

EngagesTower Owner

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