American Tower names Vondran as CEO, explains lull in 5G

American Tower reported its Q3 2023 earnings yesterday and also announced that its CEO Tom Bartlett plans to retire on February 1, 2024.

The company’s board of directors has chosen Steve Vondran to succeed Bartlett as president and CEO. To facilitate the transition, the board has promoted Vondran to chief operating officer for the interim period between November 1 until February 1, 2024.

Vondran has served as president of the U.S. Tower Division, which includes the U.S. data center business, since August 2018, and has held various leadership positions since joining the company in 2000, including general counsel for the U.S. Tower Division from 2010 to 2018.

Eugene Noel, the company’s chief operating officer for the U.S. Tower Division, will become the new president of that division.

Q3 earnings

Bartlett kicked off the earnings report by addressing the lull in 5G investment that currently seems to be plaguing the U.S. wireless industry. He said, “Just as we saw with the 3G and 4G rollouts, we expect the 5G investment cycle to play out in three phases.” The phases include two peak periods of higher spend that are bridged by a temporary phase of more moderate activity.

He said the first phase is coverage-driven to upgrade infrastructure with new spectrum bands and radio technology.

“As the cadence of initial coverage investments begins to moderate from record spend of over $40 billion in 2022, the first peak of the 5G cycle, we retain a high degree of conviction that there's a long tail of network investment to come,” he said.

U.S. carriers moderated their 5G spend in 2023 to roughly $35 billion.

During Phase 2, which we’re now in, carriers will begin to harvest the network efficiency benefits of their initial investments and reduce spend from the record levels of 2022.

But he predicts that carriers will ultimately enter a third stage where they focus on densifying their 5G networks. “We continue to believe that 5G will advance and enable the next generation of mass market consumer use cases, particularly once 3GPP Releases 17 and 18 are in the market, coupled with 5G cores,” he said.

In terms of its Q3 numbers, American Tower reported that its total revenue of $2.8 billion increased 5.5% compared to the third quarter of 2022. Net income decreased 29.6% year over year to $577 million, which it attributed to foreign currency impacts as well as the recognition of a $322 million goodwill impairment charge associated with its India towers business. The company is in the process of trying to sell a majority stake in this India business.

“We believe this impairment accurately reflects the current market conditions, evolving risk premiums associated with operating in the India market and more generally increases in the cost of capital,” said American Tower CFO Rod Smith.

Another downside on Q3 earnings was that the company revised its outlook to include a reduction in U.S. services, resulting in a $20 million decrease in gross margin compared to its previous expectations for the year.

“Although, quarter-to-quarter variations in tower leasing activity have impacted our services revenue in 2023, our leasing revenue remains unaffected, underpinned by the comprehensive master lease agreements currently in place,” said Smith