SBA cites ‘very active’ T-Mobile during Q2

SBA Communications is rounding out the trio of big tower companies reporting impressive second quarter results.

SBA reported second quarter net income of $69.5 million, or 64 cents per share, and total revenue of $625 million, representing a 13.3% growth over the prior year period.

During the quarter, the company, which operates as a real estate investment trust (REIT), entered into an agreement to acquire about 2,600 Grupo TorreSur (GTS) tower sites in Brazil, which it considers complementary to its existing towers there, and it expects to quickly integrate those assets. The towers include leases with all the major carriers in Brazil.

The company’s services business had its best quarter in company history, boosting its confidence in U.S. carrier activity for the rest of this year. The company increased its services outlook by 33% over initial guidance provided in February.

SBA President and CEO Jeffrey Stoops said the company is well positioned to weather the challenging, broader macro environment.

“While there is a range in the degree of activity from each of our customers around the globe, collectively, they are producing very high levels of demand, which we expect will keep us very busy for the remainder of this year and well into 2023,” he said during Monday’s quarterly earnings call. “As of this moment, we are not seeing any material adverse impact on our activity levels from supply chain labor or COVID-19 issues.”

Stoops’ comments about wireless carrier activity levels reinforced those by wireless executives during their own quarterly calls. SBA’s markets are mostly suburban highway corridor and rural.

In terms of who’s leading the charge in carrier activity, T-Mobile is “certainly No. 1,” with its “very active” 2.5 GHz and 600 MHz deployments, according to SBA executives, with Verizon and Dish rounding out the top three.

Stoops said he listened to AT&T’s earnings call, and based on the numbers discussed, it sounds like they were talking mostly about building out in dense urban markets, which makes a lot of sense because that’s where new generational upgrades start.

That signals SBA has a long runway to go with AT&T and its work with C-band and 3.45 GHz spectrum. As for Dish, it’s also an “active contributor,” having met its 2022 regulatory buildout requirements and now working toward 2023 regulatory requirements.

Of course, SBA is excited about the 2.5 GHz, which kicked off on Friday and will result in even more spectrum being deployed.

A better barometer?

SBA is the last of the big three public tower companies to report second quarter results.

Crown Castle’s management reiterated its outlook for solid growth in 2022 and beyond, while American Tower’s management affirmed it expects domestic growth to pick up in the second half of 2022 and step up again in 2023, noted MoffettNathanson analyst Nick Del Deo in a report for investors on Monday.

“Between the solid financial results, positive commentary, and appealing acquisition, there really isn’t much of anything to complain about in today’s results,” he wrote after SBA's earnings were released.

What makes Crown Castle and American Tower a bit different from SBA with respect to their outlooks is the former have a large share of their business contracted under holistic master lease agreements, which serve to de-link physical activity on their towers from revenue trends, to varying degrees, he said.

In contrast, “we believe that an acceleration in SBA’s revenue growth will be far more dependent on physical activity levels, perhaps making its results and outlook a better barometer of what’s actually happening in the field,” Del Deo said.

All said, overall activity levels bode well as the focus turns to 2023 bookings, according to analysts at Cowen.

“SBA reported upside 2Q22 results and raised guidance across the board,” noting record site development revenues, solid activity and solid backlog, wrote the Cowen analysts. “Activity remains ‘very busy for the remainder of this year and well into 2023,’ which bodes well as we pivot focus to 2023 bookings. The 2023 U.S. bookings whisper of low $70MMs and our $75MM estimate are looking far more beatable.”