SBA Communications in Q1 Steady as She Goes

May 5, 2016

By J. Sharpe Smith

May 5, 2016 — Enjoying a solid start to 2016, SBA Communications reported that carrier activity was consistent with the last three quarters of 2015, featuring mostly amendments to existing macro sites, according to the towerco’s first quarter earnings call. Aside from normal churn and an iDEN de-commissioning hangover, which will last most of 2016, SBA achieved organic leasing revenue growth of 8.1 percent in the first quarter.

“By application and executed contract volume, the activity is substantially amendments,” said Jeffrey Stoops, president and CEO. “We expect the investments in macro sites by our U.S. customers will remain heavily weighted towards amendments for the remainder of this year.”
SBA projected increased growth in the long term (by 2020) through new sites and amendment activity, but conservative short-term estimates led Wells Fargo Securities to maintain its Market Perform rating for its stock.

“While this is a positive, SBAC continued to speak to a more muted domestic spending environment, which does not seem to be changing near term,” wrote Senior Analyst Jennifer Fritzsche.

During the quarter, carrier activity centered on the AWS-1 (Advanced Wireless Services at 1.7 GHz and 2.1 GHz) and 700 MHz deployments, as well as refarming of 2G and 3G spectrum to LTE,

“We are in the very early innings of AWS-3 (1.6 GHz, 1.75 GHz, 2.15 GHz), WCS (Wireless Communications Service at 2.3 GHz) and 2.5 GHz spectrum deployments all of which remain opportunities ahead of us,” Stoops said. “The amount of activity around an investment in our customers’ existing macro sites continues to be robust and underscores the importance of macro sites in our customers’ network plans.”

SBA lowered its services guidance to reflect reduced work from Sprint, while other carriers are expected to remain steady, compared with last year.

American Tower

Carrier activity reported by American Tower in the first quarter took place in the AWS-3, WCS, and 2.5 GHz bands, as well as through refarming 2G and 3G spectrum into 4G in the 800 MHz and PCS bands. Refarming drove amendments as old antennas were swapped out for more advanced antennas, according to James Taiclet, American president and CEO.

“This shift drives further investment into cell sites through technologies such as carrier aggregation as well as adding new cell sites to reduce the transmission radius and, therefore, the quality improvement for each signal,” he said. “This increase in cell site density is expected to drive incremental collocation opportunities on macro towers, as customers like us demand higher and higher peak speeds to enhance our user experience.”

Organic growth of U.S. property revenue is projected to be 5.5 percent by American Tower, compared with 12 percent for international properties.

Crown Castle International

Crown Castle saw organic site rental revenue grow 7 percent plus 3 percent cash escalations minus 2 percent from churn in the first quarter.

Jay Brown, Crown Castle CFO, also said carrier activity won’t increase in 2016. Additionally, the execution of new leases and amendments will be backloaded, 40 percent in the first half and 60 percent in the second half.

“Our view is that leasing activity in the full year of 2016 is going to be very similar to what we saw in 2015. And we continue to hold that view,” he said.