RBC Raises 2013 Cell Site Addition Estimates

December 18, 2013

Cellular carriers are reporting robust network overlay and cell site expansion activity, which should translate to strong site leasing for tower operators through 2014, according to RBC Capital Markets, which increased 2013 estimates from 21,400 to 22,800 additional cell sites.

The firm also set its estimates for 2014 from 21,100 to 24,100 additional cell sites. The prime drivers will be AT&T, Sprint and Verizon.

“We expect new site additions (and tower leases) to ramp noticeably at AT&T and Verizon, driven by capacity in-fills; overlay activity to accelerate at Sprint; and continued strong overlays at T-Mobile and Verizon,” RBC Analyst Jonathan Atkin wrote in an equity research note.
AT&T added 1,000 new sites through the third quarter of 2013 as it continued to focus on LTE coverage and capacity.

“AT&T’s] applications for new site leases have accelerated during 2013. We anticipate a marked acceleration in new site leases in 2014,” Atkin wrote. “The company is also active on site-hardening efforts (back-up generator capacity), which should augur favorably for American Tower’s shared-generator business, and adding LTE carriers as HSPA+ traffic levels decline.”

Sprint’s projects include the deployment of LTE in the 2.5-GHz and 800-MHz bands, the deployment of CDMA in the 800-MHz band and the deployment of additional LTE carriers in the 1900-MHz band.

“[Sprint] is hiring several hundred project managers as it shifts away from the OEM-focused network deployment model toward a more in-sourced approach,” according to Atkin. “We believe the company is targeting 10,000 sites for 2.5-GHz LTE by year-end 2014, roughly six months behind earlier plans due to equipment availability constraints.”

T-Mobile is upgrading several hundred MetroPCS sites to HSPA+ capability but is fairly dormant on new site deployments, according to Atkin. The T-Mobile LTE overlay is less invasive, particularly in those portions of the network that employ Ericsson gear, and therefore triggers less incremental rent.

“We have seen no movement toward decommissioning MetroPCS sites,” he wrote. “We believe the carrier is working on network designs that incorporate the use of 700-MHz licenses (which it may purchase from Verizon).”

Verizon has led the industry in year-to-date site additions with 1,700 and remains active in LTE overlay on the AWS band, which triggers an additional amendment following the earlier LTE deployment at 700 MHz.

“Search-ring activity [at Verizon] is at the highest levels in several years, which we believe will translate to a continued acceleration in new leases,” Atkin wrote.