The art of the deal
Tower owners and operators are wizards when it comes to RF engineering, not so much when it comes to negotiating with their tenants. So said Robert Schwaninger, who will be conducting a session entitled, “The Secrets of Contract Negotiation,” in a couple of weeks at IWCE 2008 in Las Vegas.
“They often feel that contracts are outside their [area of expertise], so they enter into them after barely reading them,” he said. “What they’ll read is, ‘How long does it last, and how much money?’ They don’t read the rest of terms, which is bad business.”
Schwaninger, who represents numerous tower owners in his telecommunications law practice, told me this week in an interview that failure in this area can have long-lasting implications.
“A bad contract is a bad contract. But a bad contract that lasts for 30 years is a really stinking contract,” he said. “You might be able to survive one that only went on for six months and you lost money. But what do you do with one that goes on for 30 years?”
Schwaninger said a big part of the problem is that tower owners typically don’t know how to assess their own assets or determine their leverage in a negotiation.
“When they don’t put a value on their own assets, they don’t know what the hell they’re doing when they negotiate a contract that involves those assets — whether it’s money, tower space or air time,” Schwaninger said. “In which case, when someone makes them an offer … they don’t know whether they are being offered a good deal or a bad deal.”
Regarding leverage, Schwaninger said the best way to determine whether you have it is to determine whether you’re comfortable walking away from the deal. “If you don’t feel comfortable walking away, you’ve lost leverage, you don’t have leverage,” he said. “The next issue is, how comfortable is the other person walking away? How essential is this particular asset, this particular contract, to what they’re trying to accomplish?”
Schwaninger also advised tower owners to avoid taking the word of the other party. “‘This is our standard contract,’ is one of the biggest lies. … When someone hands you a contract, the first thing you have to do is say, ‘Does this make sense for me?'”
He also cautioned against being intimidated by “contract-ese.”
“Being unwilling to accept language you don’t understand often will allow you to get to better language you do understand, and [the contract] will meet your expectations,” Schwaninger said. “You will discover, when you do that, that a lot of the people negotiating contracts on the other side didn’t write them. So, they don’t understand the language either. By asking them to explain what something means … many times you wind up with much better terms.”
Another tip Schwaninger offered was to make sure you “control the clock” in any contract negotiation.
“Some people get intimidated by time. Sometimes they’ll say, ‘Gee, my next quarter would look better if I got this contract.’ That’s not the basis for contract negotiation,” he said. “So, what you have to do is, decide what the other guy’s timing is. If he’s in a hurry, you’re not.”
We covered a lot more during our chat, but rather than divulge more, I’d rather you get it directly from the source, which you can do by attending Schwaninger’s session on Friday, Feb. 29 from 10:00 to 11:00 a.m. Though I must note — in the interest of full disclosur — that my company produces IWCE, it doesn’t change the fact that this session is just one of many outstanding sessions that IWCE’s Stacey Orlick and Cristina Cotto have put together for this year’s conference. I’ll be attending many of them — hope to see you there.
E-mail me at [email protected].