Tower company SBA Communications reported very strong first quarter 2022 earnings, yesterday. Its CEO Jeff Stoops, said, “I believe the rest of the year will be similar to the first quarter, excellent blocking and tackling on our part against a very strong demand environment. We are in a great industry during a time of increasing organic growth, and we are more financially healthy than at any time in our history.”
SBA has tower deals with all three of the big U.S. wireless carriers. And they’re all very busy deploying mid-band 5G spectrum.
SBA also has a deal with Dish Wireless. And Stoops provided a little encouragement that Dish is making headway to deploy its new greenfield 5G network. Dish has pledged to cover 20% of the U.S. population with its network by June 2022 and expand that coverage to 70% of the population by June 2023. But the company hasn’t gone live with 5G in any market yet. And its first deadline is fast approaching.
Since Dish’s tower deployments affect SBA’s revenues, the tower company has insight into Dish’s progress.
Stoops said that Dish’s “activity level is pretty broadly distributed…. As we move through the year, things are known with a greater degree of certainty. But for the most part, we feel pretty good about Dish's contribution.”
He added, “They're very active, actually busier with us than we thought they would be for a rolling 12-month period. And they continue to be very, very busy and driving hard toward satisfying their June 2023 regulatory obligations.”
The company reported first quarter total revenue of $620 million and net income of $188.3 million or $1.72 per share. It increased its outlook for full year 2022 revenues by $65 million.
AT&T, T-Mobile, Verizon and Dish represented 95% of total incremental domestic leasing revenue signed up during the first quarter.
T-Mobile is continuing its nationwide deployment of 2.5 GHz and 600 MHz spectrum. While Verizon and AT&T increased their 5G-related signings with SBA, particularly focusing on their C-band deployments.
Brendan Cavanagh, SBA’s chief financial officer, said during the first quarter, amendment activity represented 55% of its domestic bookings, and 45% of domestic bookings came from new leases.
Well Fargo analyst Eric Luebchow wrote today, “We believe SBA can achieve $80 million of U.S. leasing in 2023. Importantly, SBA noted an uptick of activity from AT&T, who we expect to be a material driver of leasing activity in 2H'22 and 2023 as they jointly deploy C-band and 3.45GHz licenses.”
One analyst on the earnings call mentioned that both Verizon and T-Mobile have said that their capital expenditures will peak this year and then fall off, and he asked how that will affect SBA.
Stoops said he thinks deploying 5G will be “a multiyear endeavor,” and he noted that C-band spectrum “clears in phases over years.”
“There's a lot of work to be done,” he said. “And at least on the C-band deployment side of things, they are just in their infancy.”
SBA also had a strong quarter with its international business. During the first quarter, it signed up 49% of new international revenue through new leases and 51% through amendments to existing leases. “Coupled with increased escalators due to higher consumer price indexes in many of our markets, this leasing activity drove some of our strongest organic international leasing revenue growth in years,” said Stoops.
SBA’s strongest international market is Brazil. It recently acquired a new data center in Sao Paulo that will allow it to “more fully explore” the potential for tower mobile edge computing.
SBA’s competitor American Tower has been especially focused on mobile edge compute at its tower sites.
The stand-alone data center in Sao Paulo cost about $49 million. The data center currently produces approximately $8.3 million in annual revenue and $3.5 million in annual adjusted profit.