T-Mobile announced a new 15-year master lease agreement (MLA) with American Tower, paving the way for faster 5G deployments.
In a press release, T-Mobile said the new agreement allows the “un-carrier” to increase momentum in 5G, adding coverage and enhancing speed in thousands of cities and towns across the country.
“Through our multiyear agreement with American Tower, we’ve secured T-Mobile’s ability not only to accelerate our aggressive 5G build, but also to continue to deliver connectivity for our customers well into the future,” said T-Mobile President of Technology Neville Ray in a statement.
Thin on details, the announcement comes after executives at American Tower, Crown Castle, and SBA all reported in second-quarter earnings calls that they weren’t seeing as much tower activity and new business from the new T-Mobile as they expected.
In T-Mobile’s second-quarter earnings call last month, CEO Mike Sievert took the opportunity to point out the tower companies were facing losses due to the combination with Sprint, which eliminates a lot of new sites they would have needed as standalone companies.
All that seems to have blown over, as T-Mobile and American Tower say their new agreement enhances T-Mobile’s access to American Tower’s U.S. sites while locking in synergies and facilitating T-Mobile’s “continued rapid, efficient deployment of broad and deep nationwide 5G.”
The agreement also provides long-term revenue growth visibility to American Tower.
“We look forward to strengthening our valued partnership with T-Mobile through this mutually beneficial, long-term agreement,” said American Tower CEO Tom Bartlett in a statement. “We’re excited to help T-Mobile deploy next-generation 5G service across the country quickly and efficiently by utilizing our extensive nationwide portfolio of communications sites.”
Wall Street, not surprisingly, viewed it as a positive development. American Tower shares were trading up more than 3% this morning.
“We believe the agreement paves the way for T-Mobile to integrate Sprint’s spectrum into their network, sets parameters for them to decommission Sprint’s legacy sites, and significantly increases visibility on revenue growth for AMT,” wrote New Street Research analyst Spencer Kurn in a note for investors. “We view the agreement as positive for T-Mobile, AMT, and the Towers more broadly, as agreements with T-Mobile are key catalysts for the acceleration in organic growth that we expect over the next several years.”
All of Sprint’s leases with American Tower were set to expire in late 2021, which could have driven a large churn event in 2021 and 2022, he noted. “Details of the MLA are sparse, but we believe the MLA has spread this churn over a multi-year period, which should soften the impact of the churn from Sprint and ensure positive organic growth for AMT over the next several years,” Kurn wrote.
The expectation is that T-Mobile will quickly move to sign MLAs with Crown Castle and SBA Communications, further accelerating T-Mobile’s network initiatives.