Although the tower company will see some churn related to network rationalization, Jim Taiclet Jr., American Tower’s chairman, president and CEO, reiterated his expectations that the merger of T-Mobile and Sprint will be “net neutral to net positive” in the mid- to long-term. Taiclet spoke during the company’s fourth quarter 2019 earnings call.
“This optimistic perspective has been driven by our belief that the combination would speed up the deployment of multiple band spectrum, including a number of mid-band assets, and that the accelerated nationwide 5G coverage requirements associated with this transaction will drive further demand for tower space,” Taiclet said.
Tom Bartlett, American Tower’s chief financial officer, agreed, saying that the new business activity is expected to increase in the second half of this year and into 2021.
“With all that said, we remain incredibly constructive on the long-term demand trends for tower space in the United States, and given the forecasted demand growth, anticipated spectrum deployments and opportunities associated with 5G,” Bartlett said.
American Tower anticipates even stronger long-term upside from Dish’s commitment to building a new full nationwide network.
“We anticipate that [network rationalization] will be more than offset by incremental industry network investments in coverage, capacity and densification over time,” Taiclet said. “We’re excited to partner with all of our tenants, including the new T-Mobile and Dish, to help speed the deployment of fast, efficient 5G broadband service to consumers throughout the country.”
Meanwhile, in the United States, American Tower is revamping master lease agreements and working with its tenants to optimize service levels to support both 4G and 5G deployments, reducing cycle times and increasing efficiency in network deployments. The tower company’s goal is to reduce its run-rate SG&A (selling, general and administrative) expense as a percentage of revenue, while adding scale, growing revenue and improving business processes.
“Among the contributors to this are our master lease agreements that provide for more streamlined administrative processes for site applications and our highly capable in-house zoning and permitting and structural engineering teams,” Taiclet said.
Bartlett said the post-merger New T-Mobile will bring American Tower roughly the same organic tenant billings growth it would have had before the merger, or perhaps slightly higher in the first quarter. He said he expects more of the billings growth to fall into the second half of this year, which will be positive for American Tower ahead of 2021.
In the United States, Bartlett said, American Tower is well positioned to benefit from the new wireless industry structure, working with existing and new tenants to deploy 5G wireless communications equipment. He also commented on other areas that represent growth possibilities, such as edge compute.
“As far as edge compute is concerned, my vision long-term is that there’ll be a lot of value to being able to interconnect at the cell site for multiple mobile operators and multiple cloud providers to benefit from the latency improvements and the throughput and responsiveness of 5G in the future,” he said.
American Tower is testing edge compute with Colo Atl in the laboratory and at six sites at American Tower locations in the Southeast.
“This year we decided to go ahead and test this out with a few very well-regarded parties in those fields,” Barlett said. “We hope to lead the infrastructure definition of what it is going to take to do these kinds of edge compute solutions.”
Quotes Courtesy The Motley Fool.