Expectations are tricky things. T-Mobile built up high hopes that it would rapidly roll out post merger. Despite the hype, the carrier did not come out of the blocks running in the second quarter after the Sprint merger closed. Both American Tower and SBA Communications said their second quarter earnings were affected.
In the second quarter, American Tower reported organic tenant billings growth of 4.7 percent in the United States, composed of new business activity, which contributed 3.7 percent; escalators, which contributed 3.2 percent and churn of 1.9 percent.
“As expected, this growth rate reflects a sequential deceleration, driven primarily by relatively modest contributions to our new business from T-Mobile over the last few quarters,” said Rod Smith, American Tower chief financial officer and treasurer. “With that said, we have seen new business activity from T-Mobile begin to pick up, with further acceleration anticipated toward the end of the year.”
American Tower is updating its expectation regarding the post-merger acceleration in new business activity from T-Mobile, which projected increased levels of new business from T-Mobile beginning in August.
“Although we have seen a modest increase in activity, it has not yet reached the level we expect to eventually see based on T-Mobile’s public comments,” Smith said. “As a result, we now expect this acceleration of new business to come much later this year.”
T-Mobile completed its merger with Sprint on the first day of the second quarter and then sold Boost to Dish Network. Tom Bartlett, American Tower president and CEO, said he believed the carrier’s buildout may have been slowed by the M&A activity.
“So we believe it clearly is [a matter of] timing and are looking forward to really supporting them as they continue to really build out their network even further,” he said.
T-Mobile Shortfall Also Touches SBA Communications
SBA Communications reported that domestic operational leasing activity levels were similar to first quarter level and the fourth quarter of 2019 but slower than the comparable year-ago period, according to Brendan Cavanagh, SBA chief financial officer. Domestic same-tower recurring cash leasing revenue growth over the second quarter of last year was 6.7 percent on a gross basis and 4.5 percent on a net basis, including 2.2 percent of churn. During the second quarter, amendment activity represented 69 percent of domestic leasing revenue, and 31 percent from new leases.”
“We’ve seen a slower start than we expected to new revenue bookings post the T-Mobile-Sprint merger, but recent increases in leasing activities and backlogs give us confidence in the rest of the year,” Cavanaugh said. “We expect to see increasing levels of operational activity in the United States as we move through the year, with the reported financial results to follow.”