The nation’s three largest cell tower companies presented a unanimous message in separate appearances at an investor conference this week: Things are looking good in 2018.
“The fundamentals around the U.S. tower market remain bullish,” wrote the analysts at Deutsche Bank Research, which hosted a conference this week featuring executives from SBA Communications, American Tower and Crown Castle. “SBAC acknowledged as much, stating that there is ‘every opportunity’ for activity levels to increase from here.”
Indeed, the Deutsche Bank analysts noted that SBA’s CEO Jeff Stoops pointed to three specific catalysts in the U.S. market:
- AT&T’s FirstNet build-out, which he said would be a "material" revenue opportunity for SBA.
- Sprint’s continued 5G network effort, which he said includes the deployment of 2.5 GHz capabilities on the 6,000 sites SBA operates for the carrier.
- And T-Mobile’s ongoing effort to add 600 MHz capabilities to its network following the operator’s purchase of roughly $8 billion worth of 600 MHz licenses in the FCC’s incentive auction last year of TV broadcasters’ unwanted spectrum licenses.
Other tower companies offered similar commentary.
“AMT expects 2018 to be a record year for commencements, driven from investment across all the carriers. From a timing perspective, 2H typically sees stronger growth (vs. 1H), and AMT expects to see a similar pattern in 2018. However, the company noted that application volumes were +10% qoq in 4Q17, so it also expects to start the year off strong,” the Deutsche Bank analysts wrote. “Specifically, many of the applications seen in 4Q had a FirstNet component (and were thus, we believe, included in the guidance); as more states continue to meet FirstNet requirements, AMT anticipates its contribution to continue to grow. Additionally, as Sprint ramps capex (by +50% yoy) this year, AMT does not expect this investment to drive a stair step function higher in growth. Rather, it will likely be steady over the course of 2018/2019.”
Interestingly, the Deutsche Bank analysts said that American Tower has “started to engage" in conversations with several new "nontraditional customers" (i.e. Silicon Valley, data centers). More broadly, AMT is preparing for new uses cases that will drive future revenue opportunities for the company (i.e. driverless cars/drone technology).”
Similarly, the Deutsche Bank analysts said that Crown Castle is also looking toward future technologies and how those might impact its own tower business. “Longer term, CCI believes land will become an increasingly valuable addition to its asset mix, as companies look to process data closer to the network (ie. edge computing near tower sites). Today, CCI owns about one third of the land under its towers, with the remaining two thirds under leases with an average term of 30 years or more,” the analysts wrote.
Overall, the nation’s wireless carriers have made it clear they expect to begin spending more on their wireless networks than they have in the past. For example, Wall Street Research firm Barclays recently noted that capex among the “big four” (Verizon, AT&T, T-Mobile and Sprint) will rise by 10% this year, which the Barclays analysts said would be the largest increase in the past five years.