Investigation: The true cost of mast rental agreements

Investigation: The true cost of mast rental agreements


Our research:

  • 184 councils responded
  • 106 councils with mast agreements
  • 52,000 number of masts in the UK
  • £8,652 average rent
  • £4,946 average rural rent
  • £7,500 Deloitte industry funded rural rent calculation
  • -34% Difference in rural rent calculation between our data and Deloitte's
  • £11,346 Average urban rent
  • £9,200  Deloitte industry funded urban rent calculation
  • +18% Difference in urban rent calculation between our data and Deloitte



Mobile operators have long complained of the cost of mast rents and access fees paid to private landowners, now they are relying on Parliament to change the law in their favour. If written into law, a new Electronic Communications Code (ECC) would grant operators the power to acquire mast sites, cap rents and secure access, with or without a landlord’s support.


With this such a significant change poised to occur, Mobile decided to investigate the validity of the operators’ argument, and whether the cost of building and maintaining the network is as difficult and expensive as the networks suggested.


‘Ransom rents’

Keen to improve rural coverage, but not necessarily to pay for it, the government has been convinced by networks of the need for new legislative powers. Explaining poor rural coverage, operators told the government they were being hindered by obstructive landowners, who blocked the development of mast sites and asked for exorbitant fees for access. The operators said they frequently submitted to these demands because they had no choice other than to secure the site.  


At the Digital Economy Bill’s first reading, Conservative MP Andrew Percy explained very clearly the argument: ‘Before this debate, the operators told me that they can build a new site and put in new kit in about three months, but, because of the complexities of the [ECC] code, it takes a year to 18 months to complete that work.


‘With landowners in rural areas, it can be more complicated and difficult to get access. The average punter expects an outage in the network to be fixed within four hours. At the moment, it takes about 48 hours – and sometimes a lot longer – for the companies to negotiate access.


‘We need to end the practice of landowners being able to demand ransom rents because the lack of alternative sites locally means a lack of competition. That is a particular problem for rural rollout.’


Aggressive negotiations

‘Ransom rents’ is a phrase that has dominated the debate from the start. All of the consultation documents use the phrase, which was also namechecked by MP Percy in his Commons address. The suggestion being that landowners lever the importance of their site to extract extortionate amounts of cash from the networks.


However, ‘Negotiation Strategy’ documents from Cornerstone (CTIL) the Vodafone and O2 infrastructure business, which Mobile has acquired, show that in 2012, far from being held to ‘ransom’, the operators were aggressively challenging the rents they were paying and trying to mislead landowners into believing that the shared masts sites were ‘NOT shared’.


The document calls for the re-negotiation of all sites on terms that were more favourable to the networks, with the aim of achieving ‘a minimum rent cost reduction of 30%’. The strategy shows that the negotiators offered ‘no guarantees’ to any landlord and planned to have ‘ALL agreements  “Rent Challenged” regardless of any previous rent challenge activity (even where all other terms are “perfect”)’ as an ‘absolute instruction from both CTOs’.


The ‘Negotiation Strategy’ reveals that in 2012, Vodafone and O2 sought to mislead landowners over the nature of Cornerstone’s sharing agreement. Despite the fact that, by the document’s own admission, one piece of radio equipment would be installed on site and both operators would pass their radio signal through it, it would not be described as sharing. ‘This is NOT considered to be sharing,’ the document says, ‘all agents negotiating revised terms need to ensure this is agreed and understood by site providers.’ The Cornerstone project has consistently referred to ‘network infrastructure sharing’ and ‘shared sites’ itself when describing its own progress.


Publicly on its website, Cornerstone says that it is ‘committed to ensuring [that it] create[s] strong commercial partnerships that provide mutual benefit’ between itself and landowners. The statement strikes a distinctly different tone from the ‘Negotiation Strategy’, which asserts the desire to ‘create an estate that the operators can use without Landlord hindrance’ because it was ‘the final chance to get the network “right” and we all need to deliver.’


In response to the document, a statement from Cornerstone told Mobile that networks needed flexibility to be effective to keep pace with market changes: ‘Operators have to be able to evolve in our rapidly changing mobile environment. In order to achieve this we have to ensure we can access Vodafone and O2’s mobile phone masts to develop, improve and maintain the services available to their customers and, where necessary, have the flexibility to move to another site that provides better and more reliable coverage, lower operational costs or where access is guaranteed.


‘CTIL relies on its contractual and statutory rights to operate the network and will seek to improve upon and enforce those rights where appropriate. However, CTIL also recognises the importance of building positive relationships and is working in partnership with many in the landlord community to ensure that the new Code will deliver practical benefits to all.’


Mast costs revealed


Mobile wanted to test the two key pillars of the network operator’s arguments in connection with the cost of mast sites and restrictions to access. There are few publicly available statistics on the cost of the network to the operators – the most regularly quoted and referred to is a Deloitte report commissioned by the Mobile Operators Association from 2015, the major conclusion of which was that £270m could be unlocked for investment in improving networks if the ECC was changed.


Splitting the sites by urban and rural locations, the report found that on average, operators paid £7,500 a year in rent for sites in rural areas and £9,200 a year for urban areas. In terms of access agreements, there is little in the public domain other than quotes from senior network figures. With little else to guide us to the validity of these figures, Mobile undertook the task of gathering our own set of data with regard to mast costs.


Using Freedom of Information Requests we were able to acquire information from more than 100 UK councils. The first significant evidence these requests revealed was that site access was always written into the agreement. We could not find one case where complete access to the site for maintenance and upgrades of equipment came with stipulated additional costs.


The data compiled by Mobile relating to the sites showed that estimates on the average cost were 34% less for rural sites and 18% more for urban sites, compared to the Deloitte information. The data clearly suggests that any reduction in rents is likely to come from urban sites rather than rural locations.


For Michael Watson, partner and head of property litigation at Shulmans this represents a real problem. He believes that the cutting of city centre rents will not result in better rural coverage: ‘Ed Vaizey and the chaps at the DCMS were hoodwinked, if he thinks that reducing London city centre rents from £30,000 to £200 will see that money go shooting into the rural areas, he’s wrong.


‘It’s extremely naïve to think that they’ll then pump this money into rural sites – why would they? They’ll put a mast somewhere where it makes a profit. I think that goes without saying. If they can make a profit from it, they’ll find land – someone will give them some land.’


‘The thing that we never get to see is the site traffic data and the income figures for each site, because some of these things are gold mines. Actually, if you found out that the site was earning £1m a month in revenue, to say paying £30,000 a year in revenue is an exorbitant rent doesn’t stack up does it?’


Responding to both Mobile’s data and the assertion from Watson that the money saved from changes would not necessarily be invested in rural mast building, a Department for Culture, Media and Sport (DCMS) spokesperson said they were working alongside Ofcom on a ‘Code of Practice’ for the implementation of the code: ‘Reforming the Electronic Communications Code will help boost mobile coverage in the UK, in part by reducing the rollout costs of new infrastructure such as masts. Government and Ofcom are working with industry and landowners to make sure there is a strong Code of Practice in place that supports the deployment and maintenance of a modern digital communications network.’


Minority cause law change?

Undoubtedly, there are cases where network development is held up by legal disagreements. The circumstances of each dispute vary and are always open to interpretation. The question is what is the scale and impact of such cases.


A report carried out by Analysys Mason on behalf of DCMS on the proposed changes to the code found that landlord termination of leases occurred on around 3% of the portfolio a year. The network operators estimated that approximately 20% of these were designed to force a change in the contract, with the cost of relocating to a new site typically between £80 000 to £100,000.


Cornerstone told Mobile that this minority was significant enough to impact service: ‘Whilst the vast majority of our Landlords and their advisors work with us constructively there is a significant minority who hinder or obstruct access as a bargaining tool to drive up payments.  This has a direct impact on the user experience Vodafone and O2 can provide to their customers and if not addressed, significantly increases the cost of running the network estate.’


Responding to Mobile’s investigation, a spokesperson for Three said that alterations to the ECC were needed to tackle this issue: ‘It is vital that operators are able to roll out new sites economically, as well as accessing sites in a timely matter to fix faults quickly. The new code will ensure that rents are based on a fair economic assessment of the land that they are located on and provide improved access for operators to fix faults when they arise. The new framework has been drawn up following consultation with landowners, government and the telecoms industry, and will result in a better experience for customers at the same time as respecting the rights of landowners.’


An EE spokesperson added that there were third parties who were also acting on behalf of this minority, exploiting the value of the sites for financial reward: ‘The expansion of mobile networks in the UK is being hampered by some parties who gain financially by slowing down or not allowing important upgrade and maintenance work, effectively holding consumers and operators to ransom over vital access to mobile coverage.’


The utility argument


The argument about whether mobile connectivity should be considered a utility is one that impacts the status of mobile operators in many ways. EE argues that, considering the role it plays in developing national infrastructure, it should be afforded the same rights as other utility companies, as a spokesperson for the operator explained: ‘All operators have extensive coverage obligations agreed with the government and Ofcom. However, mobile operators still pay up to 30 times more than water and electric companies for site rental and access. This makes it more difficult for operators to deploy and maintain coverage in ever more rural areas.


‘The costs of running any one of these sites varies enormously, and we are deploying new sites – a large proportion of which are in remote and rural areas – regardless of whether or not they are profitable on an individual basis.’


Network perspective: Cornerstone’s example

Responding to Mobile’s request for an example case where progress had been delayed due to a troublesome landlord, Cornerstone provided the following example: ‘The owner of a large tower that had equipment in place, providing coverage and transmission links to other sites, demanded rent of circa 300% of the commercial market rental value for other local sites, together with significant access fees for maintenance and fault resolution. 


‘During the course of negotiations the owner refused access to the tower, and at times to the cabin; as a result we were unable to maintain equipment or remedy faults.  The impact of this denial of access was erratic and at times complete loss of coverage in the immediate area and other linked cells. 


‘Negotiations continued over three years, however, we were unable to reach commercially acceptable terms. After further reduction in the service available for the local community, a temporary site was deployed to ensure our customers could use their phones and devices while a replacement is progressed.’



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