As carriers focus their capital spending on top-tier venues, it is up to businesses to pay for and acquire their own in-building wireless solutions. That was a key takeaway in the latest webinar hosted by Nextivity and T-Mobile. The webinar explored the topic of financing in-building cellular solutions. Here’s a recap of what building owners need to know.
Evolving requirements need to be captured in a building’s wireless master plan
According to Bruce York, Director of Carrier Sales & Development at Nextivity, the pandemic accelerated a change in thinking by enterprises about their IT infrastructure and digital transformation, and the role wireless will play in that transformation. Cost, performance, time to market, changing attitudes, and new laws all affect the requirements for in-building wireless solutions today and need to be reflected in a building’s wireless master plan, according to York, who moderated the webinar discussion and fielded OEM-related questions.
It is not sustainable for MNOs to invest in bringing the outdoor signal inside buildings, as was discussed in the webinar. Rather, it is incumbent on property operators to fund and implement their own plans.
Luke Lucas, Senior Manager, National Network Business from T-Mobile explained that the carrier’s Build Your Own Coverage (BYOC) program helps system integrators and venue owners capture requirements into an actionable wireless master plan. The plan helps to deliver a predictable outcome for reliable in-building coverage at a price point that meets budget parameters. This includes connecting with the different players within the in-building coverage ecosystem, such as system integrators and OEMs, and aligning those technology providers with appropriate finance partners. The plan will also help define a realistic deployment timeline for the project.
Financing options for OpEx and CapEx
There are many capital sources available for companies that now have to pay for and acquire their in-building wireless solutions; and different ways to finance and make acquisition easier, according to the financing experts from Mitsubishi, Macquarie Group, and Sentry Financial that participated in the webinar.
Jim Ambrusch, Vice-President with Mitsubishi UFJ Lease & Finance (MUL) explained that there are financing options available based on whether it is more advantageous for a borrower to show the acquisition as OpEx or CapEx on their balance sheet. For example, MUL offers two different product types: a lease transaction and a $1 purchase option lease.
“In the FMV [fair market value]lease structure, MUL actually owns the equipment. We purchase it from the vendor. We depreciate the assets on our tax return. The customer pays us for the right to use the equipment for the agreed upon term. At the end of that term, they have options. They can purchase the equipment, they can extend the lease, or they can return the equipment without penalty. This lease structure provides customers with an OpEx model or a usage type model,” Ambrusch said.
“In contrast, in a $1 purchase option lease, the customer owns the asset. They depreciate the asset on their tax return. We simply lend them the money to acquire the equipment and related solution. So that $1 purchase option lease is a CapEx or an ownership type model,” he added.
Bo White, Vice President at the Macquarie Group, said his organization has seen a migration towards managed service contracts where end clients don’t interact with the financing provider. To make it easier for end clients to acquire product, White explained that his organization teams up with system integrators and/or vendors and wraps their solution, equipment, and services into a financing program. “These types of programs require quite a bit of design work on the front end. But then they’re built to scale,” said White.
The Macquarie Group offers different solutions and different infrastructure that support different deal sizes, particularly in the smaller ranges (i.e., $10,000 to $1 million). Its portal, which is called ASCEND, allows partners to input all customer information remotely without having to contact the financing provider. According to White, this gives partners a lot more control and helps them scale their platform. On the larger deals, there’s a lot more structuring and a lot more tailoring to meet the end customer’s needs.
Scott Young, CEO at Sentry Financial, said in today’s market with COVID-19 and the big expense of in-building wireless systems, he is seeing a bigger push for financing project costs. For larger companies, Young explained, their CapEx budgets might have been diminished or put on hold so they now have to find other ways to finance their in-building wireless solution. Young agreed with other presenters that a leased structure is more of an OpEx expense and said that the main purpose of this service model is to address CapEx/OpEx issues.
“We’re assuming very high end-of-term residual values, which provides very low customer payments and a tremendous value proposition. You’re just not going to see those metrics from a banking institution because they’re not in the equipment management and ownership business, they’re in the lending business,” said Young. “From the standpoint of going to market with the lowest cost, most attractive method of obtaining new technology with a built-in back door to cost-effectively move out of it, third-party leasing is a powerful tool to deliver that value proposition.”
Address financing upfront
Many solution provider salespeople might be hesitant to engage the customer in a discussion about financing because they don’t feel capable when the conversation turns to cashflow and financial reporting and income tax benefits. No one expects them to be financial experts, but by addressing financing early in the sales process, financial professionals can be brought in to uncover financing options and craft a customized solution that will help meet building owners’ financial and technology needs, and make the process as seamless and simple as possible.
As T-Mobile’s Luke Lucas said, “One of the tools integrators want in their toolkit is financing and they ought to introduce it upfront because you never know whether the customer has the budget set aside or doesn’t, and what you don’t want to do is lose a deal because they haven’t thought about or arranged financing.”
For more information, you can watch the entire webinar.