Three of the nation’s largest wireless network installation companies offered uniformly positive outlooks for the U.S. market this week, noting that they expect wireless network operators to continue to spend money to build out their networks and install new network technology, including 5G.
And those glowing comments—from executives at American Tower, SBA Communications and Boingo—were clearly noticed by a number of Wall Street analysts. Specifically, the analysts at Deutsche Bank Research pointed to “accelerating wireless carrier capex” this year, and said that U.S. nationwide carriers are expected to increase their overall capex in 2018 by 14% over last year to $30.5 billion, which the analysts noted is the biggest capex figure they’ve seen since 2014.
“LTE densification and early 5G activity are key drivers, with increasing activity across each of the carriers,” the Deutsche Bank analysts wrote. “We maintain a positive stance on the US Towers, with Buy ratings on Crown Castle (CCI) and American Tower (AMT). We also view Hold-rated SBA Communications (SBAC) as a top beneficiary of these key trends. Our recently updated estimates imply an uptick in 2H18 tower revenue trends from several spectrum build catalysts, with these catalysts supporting above average growth in forward years as well.”
American Tower executives offered a particularly optimistic outlook on the U.S. tower market for 2018.
“We anticipate that our core U.S. tower market will enjoy strong tenant demand in 2018 and beyond. Based on the mobile operators' recent public statements, the aggregate U.S. carrier capex should be in the $30 billion plus range in 2018, a level which supports robust organic tenant billings growth for our business,” said American Tower CEO James Taiclet Jr. during the company’s recent quarterly conference call with investors, according to a Seeking Alpha transcript of the event. “With all four national carriers in the U.S. offering unlimited data plans and with increasing mobile video consumption among consumers, we can also expect another year of at least 30% aggregate data growth in the U.S., all of which places further demands on wireless networks. And with the announced deployment plans for the FirstNet public safety network, a midband spectrum build-out expected in the 2.5 gigahertz band, and the potential launch of low-band 5G coverage projects, we expect tenant organic billings growth of over 6% this year in the United States.”
Similarly, Boingo said its Distributed Antenna System business continues to grow; the company said it deployed 4,300 new DAS nodes in 2017 and now counts 11,200 DAS nodes in its backlog. And Boingo CEO David Hagan said the company would also expand its DAS business into small cells (though he said small cells likely wouldn’t be a “major contributor” to the company’s 2018 revenues).
“We remain encouraged by the many opportunities at Boingo and see several drivers ahead,” wrote the analysts at Jefferies following the release of Boingo’s fourth-quarter results. The analysts specifically pointed to continued demand for DAS and small cells as reasons they’re positive on the company.
Similarly, the executives at tower company SBA voiced confidence in 2018:
“We anticipate a meaningful increase in domestic operational leasing activity in 2018 over 2017, driven largely by incremental activity from Sprint, and the ramp up of FirstNet related activity with AT&T. Combined with steady contributions from T-Mobile and Verizon, we expect to see domestic leasing activity in the form of new lease and amendment signings build throughout the year which should begin to show itself in the financial results in the second half of the year,” SBA EVP and CFO Brendan Cavanagh said during the company’s quarterly conference call with investors this week, according to a Seeking Alpha transcript of the event. “We expect that this increased domestic leasing activity will result in a very positive run rate leasing revenue level by year-end.”
However, the analysts at Barclays sounded a note of caution, writing that SBA’s outlook for 2018 came in below their expectations.
“While management's guidance does seem conservative, it fell short of expectations suggesting a more prolonged ramp in activity pickup vs. what was anticipated. Ultimately, our own carrier and supplier checks suggest an improved growth rate should emerge in the back half of the year heading into 2019,” Barclays' analysts wrote in a note to investors this week.