As American Tower reported strong second quarter earnings Wednesday, executives said they expect the pending merger between Sprint and T-Mobile will likely have a positive impact on the tower company’s U.S. business long-term, even if the pair decommissions macro cell sites.
“While there may be some decommissioning of sites as the new T-Mobile optimizes its network and rolls out 5G, we would also expect significant demand from the combined company for our expansive U.S. portfolio during that process and well into the future,” said American Tower CEO and president Jim Taiclet speaking on the company’s second-quarter earnings call.
T-Mobile and Sprint still face legal challenges to their $26.5 billion merger, but if approved, the recently announced settlement with the U.S. Department of Justice includes provisions to set Dish Network up as a fourth national wireless competitor.
Taiclet noted that Dish’s plan to acquire Sprint’s prepaid business and its commitment to deploy a facilities-based 5G broadband network capable of serving 70% of the U.S. population by 2023 also provide an opportunity.
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“As a result, we also expect to secure meaningful new business from Dish as they transition their current narrowband IoT network design into a full fledged 5G architecture over the coming years,” Taiclet added, noting American Tower doesn’t expect the transition to have any material impact on the company’s 2019 results.
As part of the DoJ deal, Dish gets a first-look option for leases at 20,000 cell sites slated to be decommissioned by the new T-Mobile. In terms of that process, executives said American Tower will have to “dig into the contracts on all sides,” but noted there is still certain information, including contractual obligations between Dish, T-Mobile, and Sprint, that the company doesn’t have access to yet. Only once all of the pertinent information is available will American Tower be able to understand how contracts need to be structured, revised or created with Dish for assignments or new leases, Taiclet said.
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The company expects to learn incremental information about Sprint-T-Mobile deal over the coming months.
When it comes to earnings, American Tower reported (PDF) a 5.7% spike in total property revenue year over year to $1.8 billion. In the second quarter net income increased 38.1% to $434 million. Adjusted EBITDA for the period was up 9.2% to $1.1 billion, while consolidated AFFO increased 7.8% to $910 million.
U.S. organic tenant billing growth was 7.5% in the quarter, with U.S. business property revenue growing more than 5% to just over $1 billion.
American Tower expects to add about 10,000 towers in total to its portfolio in 2019. Last week, the company signed a deal to acquire approximately 400 towers in the U.S. for $500 million, though executives did not provide more detail.
Taiclet said American Tower is confident that data usage growth of at least 30% pet year in the U.S. will continue for some time, and that average carrier capital spending of more than $30 billion will also be sustained.
“We can’t really see a scenario where the U.S. wireless industry would be spending less than that transitioning to 5G,” Taiclet said, noting carriers will need to still manage the data usage growth on existing networks while laying the groundwork for introducing 5G networks.
American Tower’s chief executive noted low- and mid-band spectrum for 5G rollouts are likely to be an important part of next-generation network. He said American Tower sees significant opportunities for the company’s adjacent asset classes when it comes to the shared 3.5 GHz band. He noted while it’s still the early days, applying CBRS spectrum for low-cost, indoor solutions provides interesting opportunities.
Taiclet said American Tower also sees an interesting innovation initiative around edge computing, though that has a longer timeline.
“But, we’re already finding that distributed compute and storage is relevant even today,” Taiclet said, adding that the company is trying to figure out exactly what the capillary system needs to look like and who the customers will be.
“I think that will really be parts of 5G, but we can even get started on it now,” he said.