$10 million sale repositions TeleSite.

Bud Finley could see a corporate fork in the road coming two years ago for his TeleSite Services. Finley needed access to deeper pockets to finance a program of buying communication towers and leasing slots to wireless companies marketing phones, pagers and other cellular or digital products.

He viewed this as the arena where long-term profits would be made for firms like his that specialize in developing antenna sites in the rapidly growing wireless market.

To take full advantage of this opportunity, that meant selling some or all of the Little Rock venture he formed in 1992.

In mid-May, Finley went whole hog and sold the company and two affiliates, TeleSite Management and MetroSite Management, to Integrated Site Development Inc. of Cary, N.C.

"We're looking at a couple of other acquisitions," says Steve Clark, chairman of ISD. "We're also talking with some major carriers about buying all or part of their tower networks."

ISD's goal is to erect and own 2,000 or more towers during the next few years. With up to three tenants per tower, each property would generate $50,000-$60,000 annually for a total revenue goal of $100 million-plus.

The cash and stock deal for TeleSite is valued at more than $10 million. Finley's minority ownership in ISD is boosted by the possibility of a future public stock offering. Finley will join ISD as vice chairman under a two-year employment contract.

"I'm not the least bit unhappy to take a second-place role," he says. "I'm a visionary, not a manager. I predict it will be wildly successful."

Finley will coordinate the transition of TeleSite operations to ISD subsidiaries and focus on corporate strategy and new business development. Tracy Gill will remain president of ISD-TeleSite.

On the backside of the TeleSite sale, corporate coffers were filled with $150 million through two New York financiers: First Boston Corp. and J.H. Whitney & Co., the venture capitalist firm founded by the heirs of cotton gin inventor Eli Whitney.

J.H. Whitney invested $35 million in a private stock offering and provided a $15 million line of credit. First Boston has agreed to fund up to $100 million for tower construction and opened the door for an even larger commitment as developments warrant.

"I didn't have $100 million or the energy to beat the bushes," Finley says. "Before the sale, I was personally on the line for a $3 million credit agreement that I had to pledge the family farm to get."

TeleSite operates field offices in Savannah, Ga., Cincinnati and Memphis. Sales office in Atlanta and Dallas are scheduled to open later this year. ISD brings an office in Raleigh, N.C., to the table. TeleSite has a staff of 110 divided in a 50/50 mix of employees and contractors.

Little Rock will remain home for TeleSite, and the company will move forward with its relocation from a 9,000-SF Riverdale location to a new 20,000-SF office building in west Little Rock. The only change to that September move is that Finley will own the building and lease it to ISD-TeleSite.

TeleSite revenue totaled almost $12 million in 1996. The company is shooting for $16 million in 1997 although Finley believes market conditions may not allow the company to hit that goal.

"There's a herd mentality among carriers, and we're in a development lull waiting for the next round of activity," he says.

Capital Idea

TeleSite's sale and new capital package follows a similar move by the industry leader, SBA Communications Corp. of Boca Raton, Fla. SBA raised $30 million in a private stock offering with a consortium led by Baltimore's Alex Brown & Sons Inc. Investors have committed $20 million more if things go according to plan.

SBA tallied $63 million in revenue developing cellular phone towers during 1996 and has made Inc. magazine's 500 fastest growing companies list three consecutive years.

Like Finley, SBA founder Steve Bernstein identified owning towers and leasing space for equipment and antennas as the wave of the future. The arrangement would free up cash for communication firms now footing the bill for tower construction and allow cellular phone companies to focus on what they do best: selling network time.

Cash from long-term leases are attractive, but towers don't come cheap, often costing between $100,000 and $500,000 apiece. That's what prompted SBA and TeleSite to take their respective paths to Wall Street.

Industry forecasts indicate that demand for antenna sites will almost quadruple to more than 100,000 by the year 2005. The $21 billion auction of additional communication licenses by the Federal Communication Commission is pushing the continued demand for antenna sites. Tower development is still hot, however, the need for more towers will fade.

"It's not over, but you can see the end from here," Finley says. "You better align yourself with someone who can take you long-term in this."

SBA's Bernstein would like to become an antenna king, owning a big portfolio of properties with each site leased to multiple wireless companies. It's a vision shared by Finley and others, too.

Two other leading competitors aligned themselves with stronger financial partners in May. TEA Group Inc. of Atlanta sold to Castle Tower Corp. of Houston. Whalen & Co. of Lafayette, Calif., was purchased by TetraTech Inc. of Los Angeles.

Finley considered selling a third of TeleSite to the Dallas-based Heartland Capital Appreciation Fund Ltd., a $52 million equity partnership created by Llama Co.'s Alice Walton and Texas banking executive Bernie Carrico.

"They would've been a minority partner, but since they were the money behind it, they actually would be the majority player," Finley says.

The sale to ISD was an offshoot of Finley negotiating a deal with Wal-Mart Stores Inc. to lease its property and signage around the country for antenna sites. Wal-Mart asked Finley to make a sales presentation, which was followed by two other sessions.

"They wore me out," Finley says.

He left the negotiation table with Wal-Mart to devote time to deals deemed to be more fruitful. Ultimately, U.S. Towers landed the national contract with Wal-Mart in an alliance with Sprint.

Finley's time spent talking with Wal-Mart wasn't in vain though. The retailing giant asked Steve Clark, the head of U.S. Towers, to work with TeleSite and make the project happen.

Discussions between Clark and Finley ultimately led to the formation of ISD and the sale of TeleSite.

"We've been reactive, and I haven't had a proactive thought in five years," Finley says with a laugh. "That's what this ISD deal is bringing to the table. We have to go sell ourselves to the industry. I never had a sales force because I never had to. Business was coming to us."

TeleSite's first development was a free-standing tower in Paragould for Alltel Mobile Systems Inc. in 1992. That grew into network development for GTE Macro Communications Corp. and GTE MobileNet in Cincinnati and parts of Tennessee, Alabama and Kentucky.

More recent deals include a $2 million deal to develop antenna sites in Nashville, Tenn., for PowerTel PCS Partners Ltd., a consortium led by South Carolina Electric & Gas Co. of Columbia, S.C. The value of the deal doesn't include sale/leaseback opportunities afforded by TeleSite's new financial backing.

In January, TeleSite inked an exclusive management contract with Cracker Barrel Old Country Store Inc. of Lebanon, Tenn. The deal allows TeleSite to market antenna sites on Cracker Barrel's 300 interstate properties and signs.

A marketing deal with a national hamburger chain is near completion, Finley adds.

The company handles real estate transactions, typically leases, in 16 states for antenna sites. The work includes coordinating a check list that includes building permits, environmental reports, site drawings, zoning review, survey work, soil borings and structural tests.

"That's what we do in multiples of hundreds and now, hopefully, in the thousands," Finley says.