Cash is king. So when evaluating a company's performance, investors place emphasis on a firm's free cash flow. Analysis of free cash flow -- defined here as cash from operations minus capital expenditures-provides more insight into the finances of a company, but is not without its faults. By analyzing capital expenditures, let's delve into the details of wireless infrastructure providers American Tower (NYSE: AMT), Crown Castle International (NYSE: CCI), and SBA Communications (Nasdaq: SBAC) to see what is behind the cash flow for these firms.

Background on the wireless infrastructure industry
American Tower, Crown Castle, and SBA Communications provide the cell phone towers that enable the wireless providers to let us chat, text, and surf the web on our mobile phones. This doesn't come cheaply however, as the tower providers naturally incur large amounts of capital expenditures. The wireless tower companies make huge investments (capital expenditures) to build and maintain their towers. So analysis of the free cash flow for this industry should place emphasis on capital expenditures, which is cash leaving the firm.

In some cases, tower operators deem it more prudent to buy existing wireless towers rather than construct new ones. For example, American Tower recently purchased towers in South Africa. Acquiring towers may be beneficial to an operator if it can obtain a bargain price or if it is trying to expand quickly.

Unfortunately, this complicates matters in terms of analyzing free cash flow. For instance, purchasing towers from other companies is often classified as acquisition costs instead of capital expenditures, as is the case with both American Tower and SBA Communications. In this circumstance, the cost of obtaining existing towers would not be reflected in the above mentioned definition of free cash flow.

Capital expenditures and growth strategy
The amount the three wireless infrastructure companies invest in their businesses can be explained by the growth strategies of the firms. Constructing new towers is the main source of capital expenditures for wireless tower operators. American Tower spent more than half of all its capital expenditures in 2009 on constructing new towers. In addition to this, it coughed up another $183.9 million to acquire additional towers, which as mentioned above is reflected in acquisition costs and not capital expenditures. SBA grew its business mainly through the purchasing of existing towers in 2009. So its capital expenditures were relatively low for the year. Meanwhile, Crown Castle employed a different strategy than its two competitors and focused solely on building its own new towers in 2009. As will be discussed later, the growth strategies of the tower operators can have ramifications for analyzing free cash flow.

Looking into the future, we can expect these three competitors to be more aggressive in terms of their growth strategy. Crown Castle has stated that it intends to increase its capital expenditures nearly 30% in 2010. American Tower expects a similar increase to its capex. SBA is looking to expand its tower portfolio 5% to 10% annually. With these firms pursuing growth opportunities, we must be sure to account for this in our outlook for free cash flow.

The shining tower of cash
Now that we have delved into the abyss known as capital expenditures, let's see what that means for free cash flow.

For the foreseeable future, the wireless infrastructure industry should continue to grow. All three of the tower operators have been fairly consistent in their ability to grow their free cash flow over the last five years. However, SBA Communications has been demolishing its peers with its absurd growth of cash under the above mentioned definition of free cash flow.

Yet, in order to complete our assessment of free cash flow, we have to loop back to our discussion on capital expenditures and growth strategy. If acquisition costs are subtracted from our definition of free cash flow, a different picture emerges. Under this definition, Crown Castle would have only have had positive free cash flow for the last two years, while American Tower would be hardly affected by comparison(though it should be noted, the company has been on an acquisition binge in the current fiscal year). SBA Communications, meanwhile, would not have achieved positive free cash flow in any of the last five years.

Given growth prospects and strategies, American Tower and Crown Castle appear to be the best bets for generating the most cash for shareholders in coming years. All of the tower operators will be shelling out big bucks to expand, but both American Tower and Crown Castle have proven they can generate enough cash to cover their growth. It will be an interesting battle between the two and investors should be sure to keep watch of which one of these companies ends up at the top of the free cash flow tower.

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Gerard Torres has no beneficial interest in any of the companies mentioned in this article. American Tower is a Motley Fool Rule Breakers choice. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.