Both Sprint (NYSE:S) and AT&T (NYSE:T) are expected to deploy LTE on thousands of additional cell tower sites, including sites gained through acquisitions and subsequently repurposed, which will lift the bottom lines of independent tower companies, according to a new report from Moody's Investors Service.
The ratings agency pointed to Sprint's recent announcement that it will launch a nationwide TD-LTE network using 2.5 GHz spectrum from its now wholly owned subsidiary Clearwire. Due to the weak propagation characteristics of that high-band spectrum, Sprint said it will need to deploy more sites beyond the 38,000 Network Vision sites that it has already mapped out.
Sprint's strategy should benefit independent tower companies such as American Tower, Crown Castle International and SBA Communications, Moody's said. It predicted each will enjoy a boost in EBITDA during 2014 due to Sprint's actions.
"We expect that Sprint will repurpose the Clearwire tower sites and add an estimated 15,000 to 18,000 cell tower sites, which will generate increased leasing revenue that the carrier pays to the tower companies," says Gregory Fraser, Moody's vice president-senior analyst. "These new tower sites will replace the 16,500 Clearwire sites scheduled to be decommissioned and will therefore eliminate the risk that lost rent from those towers would not be replaced with new rental revenue."
Moody's assessment echoes an earlier research note issued by New Street Research analyst Jonathan Chaplin, who predicted Sprint's total cell site count will increase to somewhere between 50,000 and 60,000 sites, more than offsetting disconnects of old Clearwire sites.
Moody's also said that once AT&T acquires Leap Wireless (NASDAQ:LEAP), it "may take similar steps to those of Sprint," which will likewise benefit independent tower firms. AT&T is expected to further its LTE deployment by taking advantage of Leap's underutilized spectrum on roughly 15,000 to 20,000 sites, including the 9,700 leased sites AT&T will gain through buying the regional carrier.
AT&T announced on July 12 that it intends to pay $1.2 billion for Leap. The deal is expected to close in the next six to nine months.
Yesterday, AT&T disclosed the names of 50 additional markets where it intends to deploy LTE by year's end, bringing its total LTE coverage to more than 400 markets and nearly 270 million POPs. The operator already provides LTE coverage to more than 370 markets with 225 million POPs.
In November 2012, AT&T announced Project Velocity IP (or Project VIP), through which it will expand its LTE network to 300 million covered POPs by the end of 2014 and deploy more than 10,000 new macrocells, 40,000 small cells and 1,000 distributed antenna systems (DAS) throughout its network.
For more:
- see this Moody's release
- see this AT&T release
Progress report: A snapshot of U.S. LTE deployments in 2013
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