Following relatively solid financial results from American Tower and SBA Communications, Wall Street analysts are predicting that U.S. wireless carriers will spend a total of $31 billion on their networks this year, “which would mark the first year of growth after three years of declines,” wrote the analysts at investment banking firm UBS in a note to investors.
“Mgmt suggested U.S. activity has picked up driven by spectrum deployments (700 MHz, AWS-3, and WCS) and densification efforts,” the UBS analysts said of American Tower executives.
In comments during the company’s earnings conference call with investors, American Tower executives cited continued growth in traffic—driven in part by the recent move to unlimited data plans—as the driver behind carrier spending.
“First of all, it’s the fact of our pipeline and the conversations with that with all our customers in terms of their expected activity for 2017. Then it’s just the ongoing expectations of that 30% to 40% growth in data traffic and the unlimited plans,” said American Tower’s Tom Bartlett during the company’s earnings conference call, according to a Seeking Alpha transcript of the event.
“Expectations that near-term U.S. domestic demand improvement should continue through 2017 were a clear positive emerging from American Tower's 4Q results,” wrote the analysts at Wall Street research firm Barclays. “We remain constructive on the company's prospects as we expect new U.S. spectrum deployment to serve as a net positive for the sector.”
Similarly, American Tower rival SBA posted solid fourth-quarter financial results, pushing Wall Street research firm Jefferies to boost its expectations for the tower company. “We expect spectrum deployments in 2017 could provide upside to guidance with AWS-3, FirstNet, and possibly 600Mhz expected to begin deployment. Adding to our positive outlook, the company authorized $1bn in buybacks, supporting an attractive 11% AFFO/share growth at the midpoint of a conservative guide,” Jefferies analysts wrote in a note to investors about SBA.
And executives at SBA pointed to other positive trends beyond the wireless industry. “In addition, potential regulatory changes such as a rollback of net neutrality and corporate tax reform would positively impact our customers improving their net cash flow and therefore their ability to materially further invest in their wireless networks. Such an environment would be positive for us and would further support steady continued growth of our revenue base,” said SBA’s Jeff Stoops during his company’s quarterly conference call with executives, according to a Seeking Alpha transcript of the event.
However, not all analysts predict a rise in carrier spending. “Looking through results to date, carrier spending remains muted—with three of the four major carriers (AT&T, Sprint and Verizon) having reported fourth-quarter results—and aggregate capex being $1.1 billion, or 15.1%, below consensus,” Jonathan Schildkraut of Guggenheim Securities wrote earlier this month. “By carrier, wireless capex for AT&T, Sprint and Verizon missed consensus estimates by 14.6%, 47.9% and 9%, respectively.”
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For its part, AT&T just today announced it expects its 2017 capital expenditure to be in the $22 billion range. Last year the carrier spent $22.9 billion on its network.