Wall Street analysts are almost unanimous in their outlook for the tower industry. And their outlook for the tower industry is good.
“FirstNet, AWS-3, WCS and 600 MHz should all provide healthy tailwinds to tower operators. On top of this, small cells present an incremental growth opportunity. Much of the radio bandwidth available for 5G will be at very high frequencies, which has significant implications for coverage, implying a material need for densification via small cells,” noted the analysts at Wall Street research firm Barclays in a recent report.
“There was a pregnant pause caused by T and S capex pullback in 2016,” noted the Wall Street analysts at Wells Fargo in their own missive on the tower industry. “We suspect that as more ‘naked’ spectrum is deployed across carrier networks, and Big 4 look to densify their networks for capacity’s sake, towers are well positioned to capture the incremental network spend by the carriers.”
Crown Castle, along with its fellow tower players SBA Communications and American Tower, likely will handle the bulk of the new spectrum buildouts as all of the nation’s top wireless carriers work on expanding and improving their wireless networks.
But Barclays predicted that it will be AT&T leading the way in terms of pure tower deployments. Indeed, the carrier has pointed out that it owns more than 40 MHz of unused spectrum across 700 MHz, AWS-3 and WCS that it hasn’t yet employed. Barclays said those licenses, coupled with AT&T’s agreement to aid the buildout of FirstNet’s public safety network, will result in a significant spending effort.
“In terms of the direct opportunity, we anticipate that the carrier will have to deploy new equipment on approximately 45-50K towers, as well as build an additional ~2K new towers, in order to meet the nationwide coverage requirements of the FirstNet network build,” the Barclays analysts wrote.
But AT&T won’t be alone. Sprint’s Tarek Robbiati promised the carrier would double its spending on its network this year after cutting it back dramatically in 2016. “Regarding our guidance for cash capital expenditure excluding these devices, we expect spending to double year-over-year to approximately $3.5 billion to $4 billion as we ramp up our densification and utilize the expanded toolbox of the various cost-efficient coverage and capacity options,” Robbiati said during Sprint’s quarterly conference call with investors earlier this month, according to a Seeking Alpha transcript of the event. “We expect network CapEx to remain around this level for the next three years, but could potentially increase if we see the right opportunity to efficiently accelerate our network plan.”
Of course, Verizon has been spending cash to deploy small cells to densify its network, while T-Mobile will be looking to put its vast 600 MHz holdings into use.
Indeed, underscoring analysts’ renewed interest in the tower sector are figures from CTIA showing a notable slowdown in tower buildouts last year. As reported by Wells Fargo, “the industry added 708 net sites in 2016 vs. 9,571 in 2015. We would expect to see a material change in this trend in 2017 as carriers look to further densify their networks and new spectrum (AWS-3, WCS, 2.5GHz) continues to be deployed.”
Wells Fargo added that the number of wireless subscribers per cell site has increased to 1,257, up from a low of 1,082 in 2012. “This number has trended between 1,100 and 1,200 per cell site until 2013, when estimated subscribers increased and cell site count plateaued at ~300K. In our view, this stat – perhaps more than any – highlights the need for further network densification in the U.S.”
The reports from Wells Fargo and Barclays come ahead of the Wireless Infrastructure Show. FierceWireless will be hosting an event at the show: "Pushing the Spectrum Boundaries: How to Prepare for a 5G World."