American Tower sees a strong future ahead for its portfolio of cell towers it acquired earlier this year from Verizon Wireless (NYSE: VZ), according to an American Tower executive. T-Mobile US (NYSE:TMUS), in particular, has been looking to co-locate its network gear on those towers as it expands its LTE network.
In February Verizon agreed to lease the rights to 11,324 of its towers and sell 165 additional towers to American Tower for $5.056 billion in cash. The deal closed at the end of March.
Leah Stearns, American Tower's treasurer and head of investor relations, said yesterday during an appearance at the Oppenheimer Technology, Internet & Communications Conference that Verizon will use those towers over time to add more equipment. Moreover, she said, the tower company is "seeing a very healthy pipeline develop for those assets."
T-Mobile is spending on roaming overbuilds, she said, meaning that T-Mobile is building out its own network assets in areas where it used to pay other carriers to roam. T-Mobile has been active in submitting co-location applications on those sites, Stearns said. T-Mobile also has been aggressively deploying its 700 MHz A Block spectrum as part of its goal to boost its LTE footprint to 300 million POPs by year-end (it's currently at 290 million).
Stearns said that American Tower has been looking to add an incremental tenant to the Verizon sites and that the integration of those assets is going well and should be wrapped up in early 2016.
Moreover, she noted that the towers in the Verizon portfolio are on average 30 or more percent taller than other carrier tower portfolios that have been sold or leased over the last several years. That gives American Tower more space, literally, to add network equipment from other carriers.
"Because of that, we have just much more vertical space to lease out to our customers," Stearns said. "And so that creates a significant amount of incremental capacity for us to be able to leverage in that sales process. And we think that's incredibly important because we can drive that revenue growth without the capital intensity and the time that it takes to redevelop properties."
Overall, Stearns said that American Tower thinks that U.S. carriers network investment will increase in the years ahead with LTE data traffic growing 50 percent per year. "Doubling of network traffic every two years will result in them in needing to continue to invest over the long term," she said.
AT&T Mobility (NYSE: T) has a holistic master lease agreement with American Tower, but Stearns said that AT&T has not leased space on towers recently outside of that master lease "bucket." AT&T contracted for a certain amount of equipment, which had been driving growth at American Tower the last several years. That activity has "tapered off," she said, as AT&T "has become more focused on deploying what it contracted for."
Over the next 12-18 months, as that holistic agreements ends, AT&T will return to leasing on a site-by-site basis with American Tower unless a new holistic agreement is negotiated, Stearns said.
Meanwhile, Stearns said that Sprint (NYSE: S) has been "fairly muted" in its activity on American Tower-controlled sites recently and noted that Sprint has committed to "rededicating their capital to building out" its 2.5 GHz spectrum for TD-LTE and expects demand to pick up in the next several quarters.
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