Insights | Telecoms market commentary

Since the implementation of the Electronic Communications Code in 2017, landowners have seen a significant fall in rental income from having communications equipment on their land.

The Product Security and Telecommunications Infrastructure Bill in 2023, which comes fully into force on the 29 April, will give even more powers to the operators to renew leases. They already have significant powers under the Digital Economy Act 2017, which introduced the ECC.  

The operators can now apply for an interim rent order to fix any new site payment from the date of their application rather than when any new lease is agreed. These measures have been put in place to reduce procrastination by landowners in agreeing renewal terms, and will probably have that effect.

Landowners, who can include social and sports club, churches and charities, often receive lease renewal approaches from the operators with heads of terms offering derisory site payment sums. These approaches become increasingly difficult for landowners to assess due to the different approaches taken by each of the major network operators (MNOs) as well as other operators.

The telecoms landscape is even more confusing for landowners when operators make approaches for new sites, offering higher site payments and incentive premiums than they offer for a lease renewal. MNOs are willing to offer higher site payments and one-off incentives for new Shared Rural Network sites as they can face substantial fines – up to 10% of their annual turnover, if they fail to meet their coverage obligations.

There have been several cases which have set benchmarks for the procedure to determine lease renewal site payments under the Code, most of which the operators will quote within their offer letters. Consensual lease renewals are being agreed above these site payment levels so being offered the same site payment as might be imposed by Tribunal gives no incentive for consensual agreements to be reached.

The table below shows the site payments imposed in various Tribunal cases and the equivalent site payment values once increased by inflation from the date of the relevant decision to January 2024.

The MNOs are generally still quoting rental figures as determined by the Tribunal cases for lease renewals and haven’t adjusted these for inflation so the amounts offered are inadequate and now below the equivalent level that is likely to be awarded by the Tribunal.

Site payments for a lease renewal should reflect a consensual agreement rather than one imposed at Tribunal. The table below outlines typical site payments being offered to landowners by operator’s agents.

However, landowners have rarely been willing to agree deals at these initial low levels. Operators have tried to incentivise landowners by offering a one-off capital payment or a series of payments, reducing the site payment over several years. These payments are time sensitive, are not guaranteed and differ from operator to operator. Most consensual deals are being negotiated in excess of the operator’s initial offers, with payments being agreed within the following ranges:

The tables highlight a large difference in what a variety of operators are initially offering and what can be achieved when a land agent is able to negotiate a consensual deal.  Whereas the level of site payment is important part of any agreement care needs to be taken to agree the best overall terms for a lease renewal to future proof any agreement for the longer term.

The role of the land agent is crucial in achieving the best lease terms and higher site payments in a new code world where landowners have seen their rental incomes drastically fall. The operators should also cover any reasonable professional fees incurred for progressing a consensual lease agreement.

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