Speaking at the Goldman Sachs 2021 Communacopia Virtual Conference today SBA Communications President and CEO Jeffrey A. Stoops said his company has optimism about 2022. He talked about SBA’s leases, its deal with Dish, its C-Band agreement with Verizon and technology that will sustain company growth into the foreseeable future.
“The big picture for why we have had sustained levels of activity should continue,” Stoops said. “The reasons are pretty straightforward: the emergence of Dish building out a nationwide wireless network. It is also the material increase in the amount of macro activity we’re beginning to see from Verizon, obviously triggered by the C-Band auction.”
Stoops said that he believes that SBA has entered the sustainable part of the 5G cycle. “All of the four nationwide customers, including Dish, are all heavily engaged with projects that are going to extend for quite some period of time,” he said. “I feel very good about this new level of activity being sustainable for the foreseeable future.”
Stoops said he is highly confident about long-range new-lease signings — although he said he doesn’t believe that SBA’s signings in 2021 will reach the level the company achieved in 2019. “I think we hit a certain level in Q2 — and that level is being sustained, with the opportunity for continued upward bias in terms of backlog and activity,” he said. “I’m talking about activity going on around the company and out in the field right now—and that really translates into lease signings. The financial results from activity will lag the benefits from that activity. So, it feels pretty good right now — as we move toward the end of the year, we’re not seeing anything from a project perspective. We’re very optimistic about 2022.”
Last month, SBA reported second-quarter results that included a net income of $152.7 million or $1.37 per share, AFFO per share growth of 15.3 percent over the prior year period, and revenue of $575.5 million. The company raised its outlook for 2021, adjusting funds from operations of $10.32 to $10.72 per share and revenue of $2.26 billion to $2.30 billion. At the time, Stoops said he believed the second quarter was the start of a multiyear business expansion for both tower builders and carriers — and that the next two quarters would increase sequentially.
“Our second-quarter performance was our best in quite some time,” Stoops said at Communacopia. “U.S. wireless carrier activity increased substantially in the quarter. Domestically, we produced record services revenue, we had the highest revenue added per tower based on signed leases and amendments since 2014, and our leasing and services backlogs were at multiyear highs at quarter end. While this increased leasing activity will benefit our reported 2021 revenue, the majority of the incremental revenue will begin to be recognized in 2022.”
Reflecting on the C-Band agreement SBA signed with Verizon in April, Stoops said he sees a lot of win-wins. Verizon paid $45.45 billion for an average of 161 megahertz of C-band spectrum nationwide in an April FCC auction, which will allow Verizon to offer increased mobility and broadband services to millions more consumers and businesses.
The C-Band is a mid-band spectrum that provides a middle ground between capacity and coverage and will allow Verizon to offer both increased mobile 5G coverage and home broadband services to millions more consumers and businesses. Because the C-Band spectrum requires new network equipment to be placed on existing towers, Verizon sought additional agreements with SBA and Crown Castle, which both already host Verizon infrastructure equipment.
About the SBA deal with Verizon, Stoops said that both parties look for kind of the same thing in such a deal. “They both look for a certain word — though sometimes from different metrics — and that word is ‘certainty’; certainty in terms of term, certainty in terms of volume. Those are things that are important to a tower company. And then on the customer side, certainty in terms of rate. And the ability to plan. So, when those things come together and they can be agreed to, terms can be agreed to in a mutually attractive and accessible manner—then they get done. And that’s exactly what happened with Verizon.”
Stoops said that the Verizon/SBA master license agreement (MLA) provided efficiency and eliminated different types of red-tape issues. “That will allow us to move quicker,” he said. “And what it basically did was provide both parties with a greater sense of partnership of working together, which has freed up all kinds of activities and avenues for us to keep working together. So, when you get the basics right in terms of certainty and terms, and there’s a mutual meeting of the minds, we’re very much in favor of MLAs.”
Stoops added this about C-Band and Verizon: “Verizon is getting out there ahead of when the spectrum is clear, but whether it’s this quarter or next, it’s becoming clear that C-Band is going to be a heavily macro-tower—and those of us in the industry who focus in that area will benefit.”
Stoops had this to say about new leases and Dish: “We are in a bit of a new paradigm for the next couple of years as Dish builds out because it is all going to be brand new leases. New leases are always good. And he made this comment about the recent $5 billion deal Dish made with AT&T in July to move Dish’s wireless customer traffic to AT&T’s network: “The bottom line is a more viable financially stronger Dish, which I believe this makes them, with AT&T, is good for our industry.”
Meanwhile, Stoops also took the time to address mobile edge computing. “We continue to believe that that is an area that is going to be high demand and very attractive for years to come,” he said. “I think we have five units now constructed and operating. We have been able to provide some synergies between those units and are two data centers — and that’s another area in which we see real possibility. I think it’s got a long way to go. I think you need to see some applications out in the consumer world, but it’s coming.”
Mike Harrington is a contributing editor