SpectraSite finds towers in inferno.

• Author: Maley, Frank
• Position: Tar Heel Tattler

SpectraSite Holdings had a risky yet tantalizing strategy. It would buy up cellular towers, then lease space on them to providers in the booming wireless-communication industry. And the company, started in 1997, grew fast -- sales hit $473 million in 2001 -- taking just a few years to become one of the top tower operators in the nation. In fact, it managed to grow nearly broke.

In September, SpectraSite announced that it was negotiating with its creditors in anticipation of bankruptcy reorganization. Its proposed plan would cut its $2.4 billion debt to $785 million by converting the rest to equity. SpectraSite had made the classic boom-time mistake: It borrowed too much money. Even in a debt-ridden industry, its liabilities ran higher than competitors'. By June, its debt was 20 times its equity.

SpectraSite used the money to buy towers. In 1999, it bought about 2,000 from Nextel Communications for $560 million -- $490 million of it borrowed. In 2000, it scooped up about 3,600 more from SBC Communications for $1.3 billion, about $900 million of that borrowed. It has nearly 8,000 towers ("Tower Power," June 2001). Its size has enabled it to lure big wireless-service providers to its network. Trouble is, consumer demand for wireless hasn't grown as fast as expected, so SpectraSite's revenue...