14 June, 2011

Commscope to acquire Andrew Corp - the concrete power-pole problem

I’ve just heard that telecommunications maker Commscope has agreed to acquire Andrew Corporation. Andrew acquired my old company Deltec in July 2001. We sold because we got a good price, but also we foresaw mobile infrastructure manufacturers coming under increasing pressure from declining network builds, supply overcapacity, and industry consolidation. This might come as a surprise to people who see mobile phone usage exploding. But as mobile network cells get smaller to handle more traffic, and as frequencies get higher, the antennas don’t need to be as large or as sophisticated. The ultimate cell site will look like a chunky mobile phone with inbuilt stub antennas.

There’s also a lot of existing equipment reuse - e.g. putting CDMA over the old 800 MHz AMPS frequencies doesn’t of itself require new antennas, or new towers, cables, equipment shelters, etc..

I call this latter phenomenon the concrete power-pole problem. My old power company Electra used to have its own concrete power pole manufacturing facility to support high demand for new electricity reticulation. Once the core network was built, we only needed a few new poles a month, for maintenance. Needless to say, I got out of making concrete power poles, too.

Deltec’s owners preferred to sell rather than be a mid-sized fish in a shrinking pond full of sharks eating each other. Although Deltec’s Teletilt antenna technology has done well under Andrew, and is now licensed to most of the surviving players, overall Andrew’s share price has reflected the industry’s woes. In July 2001, it was about $16.50. 6 years and several major acquisitions later, Andrew has just accepted Comscope’s offer of $15.00 a share.

The core business of both Commscope and Andrew is cable manufacture - boring but solid business where scale and integration synergies can bear rich fruit - so I expect to see Commscope divesting the equipment divisions. I’m picking our old arch-rival Kathrein to pick up the antenna business.

First posted July 5th, 2007

No comments: