August 30, 2016 — RBC Capital Markets remained overweight on the public tower companies, including American Tower and SBA Communications, with a “slightly greater weighting” toward Crown Castle International in the firm’s Mobile Infrastructure Recap for the second quarter.
“Towers are our only coverage sector with identifiable catalysts for (modest) revenue acceleration driven by various network activities at AT&T and T-Mobile, though slowing activity at Verizon could mute this trend somewhat,” wrote Jonathan Atkin, RBC analyst.
RBC’s preference for CCI is driven in part by the towerco’s involvement in U.S. outdoor small-cells and prospects for increasing tenancies from AT&T and T-Mobile. The firm also believes CCI’s dividend will increase the shareholder base.
Additionally, S&P, Dow Jones and the MSCI U.S. REIT Index have made rules changes concerning REITs, which will have a favorable impact both American Tower and CCI.
“We believe the REIT GICS creation later this week will act as a structural catalyst favoring the tower REITs,” Adelstein wrote. “AMT and CCI, each of which are top-five REITs by market capitalization, have up to now not been included in the two most heavily benchmarked REIT indices (FTSE/NAREIT and RMZ), yet will be included in the new REIT GICS category, which we believe could drive index-related buying.”
Site Leasing and Organic Growth
RBC predicted a small increase in tower leasing in 2016 compared with 2015. While macro-site deployment will be down, activity will increase in macro-overlays, small cells and carrier aggregation.
“Verizon and T-Mobile should remain active, with each contributing slightly fewer macro-site additions vs. 2014, offset by greater macro-overlay activity and increased small cell efforts,” Atkins wrote. “AT&T should remain inactive on macro-site deployments but noticeably more active on site overlays. Sprint remains mostly dormant on macro site additions, focusing on carrier aggregation and BTS small-cell deployments.”
RBC predicted increased overall activity at T-Mobile in 2017 and possibly AT&T, with Verizon posting less macro-site and more small-cell activity.