While all the headlines belong to 5G, it is clear that LTE deployment is fueling tower growth now and into the future. In the second quarter, American Tower experienced its highest U.S. organic tenant billings growth since 2014.
“The rapid adoption of unlimited data plans in the U.S. wireless market has elevated aggregate year-over-year mobile data usage growth to roughly 40 percent,” said Jim Taiclet, American Tower’s CEO. “This is, in turn, fueling record levels of U.S. commenced new business for American Tower, resulting in organic tenant billings growth of 7.4 percent in the second quarter.”
American Tower’s organic tenant billings growth was well ahead of Wells Fargo’s 6.4 percent estimates and up from 6.3 percent in the first quarter of this year. As with the other tower companies, American Tower reported activity from all four carriers. The towerco increased its full year 2018 expectations for U.S. organic tenant billings growth to 7 percent.
“While all three towercos were optimistic about carrier spending environment in 2H18, American Tower was the only one to see material growth in Q2 results,” wrote Jennifer Fritsche, Wells Fargo senior analyst. “That said, U.S. growth was offset by India carrier consolidation churn and incremental FX headwinds.”
The growth was 80 percent amendments and 20 percent collocations, according to Taiclet, with carriers were adding capacity on existing sites either by adding spectrum or new equipment. Organic run-rate new business added in the second quarter was up by more than 100 percent compared with last year. While the growth was principally 4G-related, some of it was due to the FirstNet deployment.
“We saw tremendous new business activity in the first half of the year, dominated by lease amendments for large equipment overlays on the sites, resulting in amendment pricing at the high-end of our historical range,” Bartlett said.
Taiclet Sees Bright Future for Macrotowers Beyond 4G
Robust data growth, deployment of new spectrum and the introduction of advanced technology all play into the confidence of future domestic growth in macrotowers held by American Tower.
This confidence is driven by prospects that deployment of mid-band spectrum, as part of the 5G rollout, will drive incremental growth in ATC’s macrotowers.
“We continue to believe that a high level of U.S. organic growth is going to be sustainable over a multi-year period because of on-going positive secular trends that are further enhanced by upcoming deployments of 5G technology,” Taiclet said.
Mid-band spectrum for 5G — 2.5 GHz, 3.4-3.8 GHz, and 3.7-4.2 GHz — has propagation characteristics that are well suited for the use of macro towers or rooftop macrocells in suburban and less dense environments, according to Taiclet.
“We also anticipate a multiyear period of elevated demand in the U.S. as our tenants invest in 4G capacity and quality while launching mobile 5G networks, enhanced Internet of Things services and other initiatives that we expect will sustain demand for our comprehensive telecommunications real estate portfolio,” he said.
The tower company’s global footprint includes 129,000 communications sites, which account for 37 percent of property gross margin, while 40,000 U.S. towers make up the rest.
“The United States will continue to be the core engine of cash flow growth and margin expansion for American Tower for years to come,” said Tom Bartlett, executive vice president, chief financial officer and treasurer.