Maybe Not Immediately, but Tower Leasing Will Grow in New Year

January 6, 2016

The Year Ahead

By J. Sharpe Smith

January 7, 2016 — The tower industry is set for increased leasing in late 2016 and 2017 connected to AWS-3 overlays and Sprint’s network improvement, wrote RBC Capital Markets Analyst Jonathan Atkin in the Telecom & Infrastructure – 2016 Outlook.

“We see deployment of AWS-4 spectrum (currently held by DISH) as a potential unexpected catalyst but find it less likely that a new network or overlay will emerge from the 600 MHz auctions or from FirstNet,” Atkin wrote.

RBC Capital Markets predicted that carriers and tower operators will benefit from a number of events in 2016, including AT&T’s DTV integration and network investments in Mexico, the 600 MHz spectrum auctions and initial LTE-unlicensed technology pilots. The firm’s analysts will be looking for additional clarity on potential build-out of DISH’s spectrum holdings, particularly in the AWS-4 band, through a merger or a partnership; as well as clarity on the infrastructure and financing of Sprint’s network improvement.

Other industry experts also believe that the wireless infrastructure industry will pick itself up and rebound. But the extent of that comeback is still in question. Alex Gellman, CEO, Vertical Bridge, noted that while there are some conflicting opinions, the consensus is that AT&T will increase its amendment activity this year, T-Mobile will be more active and Sprint is still a wild card.

“It would be hard for 2016 to not pick up compared with 2015, which was the weakest in memory,” Gellman said. “I’m cautiously optimistic that 2016 is going to be better, but I’m not sure how much better. There are certain things the carriers do when they are gearing up to spend money, and I am not seeing that on a big scale.”
Still, there is an assumption in the industry that the carriers need to start investing in the network, both because they took last year off and because use of mobile data continues to surge.

“Last year was a year of planning and spending on spectrum and acquisitions. Volume was down, but according to early indications, the industry is recovering and we will see more activity in 2016,” said Marty Travers, president, telecommunications, Black & Veatch. “If you take a year of lesser activity and the usage continues to grow, eventually carriers will need to reinvest in capacity to keep up.”

Amendments and collocations will be driven by the deployment of new spectrum, such as AWS-3 and WCS, FirstNet’s 700 MHz, and the 600 MHz band broadcast spectrum, according to Wells Fargo Securities. “All of these demand drivers lead us to believe 2016 will be another important year for the tower companies as they are the instrumental infrastructure element required to build out any new spectrum,” wrote Jennifer Fritzsche, managing director, Wells Fargo Securities.

Ben Cardwell, senior vice president, CommScope, wrote that the industry is in a lull between the LTE and 5G buildouts, but 2016 will begin to see rollouts of technology that will eventually become part of the 5G ecosystem.