The tower industry is set for an upturn in the second half of 2020 with the resolution of the legal challenges to the Sprint/ T-Mobile merger and the birth of a new facilities-based nationwide carrier, said Jeffrey Stoops, president and CEO of SBA Communications during the fourth quarter 2019 earnings call.
“In order to meet their required 5G coverage goals, the new T-Mobile will require meaningful upgrades across their combined portfolio, deploying 2.5-GHz spectrum to legacy T-Mobile sites and 600-MHz spectrum to legacy Sprint sites. These efforts will drive amendment activity for SBA,” he said.
The Sprint/T-Mobile merger, however, still must get through the California Public Utilities Commission before the transaction closes. “I think they will go quickly [with tower deployment once the deal closes, but I think we’re going to have to wait and see as to when that happens,” Stoops said.
Another catalyst will be Dish’s heavy investment in a new 5G nationwide network. Stoops said Verizon and AT&T will respond with their own 5G initiatives, further driving additional collocation activity.
“We believe [AT&T and Verizon] will embrace the new competitive landscape and continue to invest significantly in their own [5G] networks,” Stoops said. The number towers built out by AT&T and Verizon, however, will not grow significantly year-to-year, he added.
The release of 5G-enabled handsets and new 5G apps will also spur the network investment required to support these technologies — not to mention the release of additional mid-band spectrum, which will make for a long deployment cycle.
“The initial 5G deployment cycle has really only just begun, particularly as it relates to macro sites and the deployment of mid-band spectrum and massive MIMO architecture,” Stoops said. “The anticipated auctions of CBRS [Citizens Broadband Radio Service] and C-band spectrum later this year will only serve to further support this upward investment trajectory over the next several years.”
Brendan Cavanagh, SBA executive VP and CFO, said SBA expects CBRS to be primarily a small cell indoor service but with some macrotower outdoor use, as well.
“But we don’t think, at least for SBA, the CBRS spectrum will be nearly as impactful as the C-band spectrum,” Cavanagh said.
SBA Communications reported that it had a “great start” to 2019 with strong carrier leasing and services results, and it increased expectations for the year, during its first quarter earnings call yesterday.
“Our first quarter was about as simple, straightforward and solid as we could have hoped for,” Jeffrey Stoops, president and CEO, said. “We exceeded our expectations across all financial metrics. We continued to see healthy operational leasing activity and our services business again had a strong quarter.”
Total revenues rose 7.6 percent year over year in the first quarter of 2019 to $493.3 million. Domestic cash site leasing revenue rose 6.7 percent to $361.2 million.
“Our customers rolled into the new year with the continued strong levels of activity we saw in the second half of 2018, and that level of activity continues,” Stoops said. “In the U.S., both our leasing and our services results in the first quarter were ahead of expectations, contributing to the increase in our full year Outlook.”
SBA anticipates increases in site leasing, both organic and inorganic during the rest of the year. Increases in organic growth will come from a higher concentration of amendments versus new leases. SBA has a healthy backlog in services business, but the full year services guidance anticipates a slowdown in the second half due to the Sprint/T-Mobile merger.
During the first quarter, SBA acquired 54 towers for 36.1 million and built 72 sites, mostly internationally. An additional 256 sites are planned to be purchased by the end of the third quarter for 123.9 million.
Six weeks ago, few people knew there even was a Mobile Infrastructure Hall of Fame. But as WIA President and CEO Jonathan Adelstein took the stage for the first induction ceremony in a crowded room of 500 of the industry’s leaders, it felt like there has always been one. Or at least there was a pent-up demand for one.
“Today, these five honorees come from companies with a combined market cap of around $200 billion. They employ nearly 100,000 people and growing. And they’re driving the innovation economy with wireless broadband few dreamed possible in the flip phone era,” Adelstein said. “These five leaders are inducted tonight because of their foresight, their vision, and their tenacity. Each faced down challenges — and overcame them all.”
Gathering the top wireless CEOs and others at a ballroom in Washington D.C. on a Wednesday night in mid-November to honor its best had another altruistic goal. It raised $500 thousand for the WIA Foundation in support of training, education and apprenticeships.
“Tonight, the [inductees] lend us their presence because each believes — with us — that another challenge lies ahead for the wireless industry. To build world-class 5G networks — we need a world-class 5G workforce. Together, we’re taking steps to meet that challenge — building a workforce that’s worthy of this great industry,” Adelstein said.
The evening was attended by such notables as FCC Chairman Ajit Pai, Commissioners Michael O’Rielly and Brendan Carr, U.S. Sen. Steve Daines, and other guests from the FCC, Congress and the Administration.
The inaugural class of Hall of Fame inductees included: Neville Ray, CTO, T-Mobile; Steven Bernstein, founder, former CEO and current board member of SBA Communications; Steven Dodge, founder, former CEO, American Tower; John Kelly, former CEO, Crown Castle; and Jose Mas, CEO, MasTec Network Solutions.
John Legere, president and CEO of T-Mobile, lent his star power and sense of humor in a heartfelt tribute to Ray, who has 25 years of wireless experience and has led the carrier through the LTE roll out, from the zero POPs in 2012 to 324 million POPs today. The first 200 million POPs were built in six months. He also pushed new technology into the field, including Wi-Fi calling, VoLTE, License Assisted Access and 4X4 MIMO and 256 QAM.
“Neville Ray is truly a genius,” Legere said. “This is a guy that gets things done. You give him the goal and the resources, and you just know that it will be done. You get out of the way.” He joked that Ray’s budget of $50 billion also played a key role in the success. “Give the guy some cash and he makes it happen.” Ray later clarified that he only got $40 billion.
Jeffrey Stoops, president and CEO, SBA Communications, praised Bernstein’s decision-making ability and leadership qualities.
“He can quickly and incisively distill complex issues down to straightforward decisions has been a critical part of our success,” Stoops said. “More importantly, it’s his entrepreneurial spirit and his values, including honestly, integrity, fair play, quality, customer service and hard work, that Steve instilled in SBA that remains a driver of our continued growth and success.”
Jim Taiclet, chairman, president and CEO, American Tower, said Dodge has been a “true trailblazer” for the tower industry, and has served as innovator throughout his 40-year career, which included banking, media and telecom.
“He founded and took public three pioneering companies. The first was American Cable Systems, which he grew into an industry leading position and sold to Continental Cable. Then he went on to American Radio Systems, which was sold to CBS, and then American Tower Corporation. The only flaw in Steve’s plan was an apparent lack of creativity with company names.”
Ben Moreland, former CEO of Crown Castle, introduced Kelly as the “most wonderful person” he has ever known. Kelly served as a mentor to Moreland and “set a high bar as a humble leader and a really nice guy,” Moreland said. Kelly was CEO of Crown from 2001 to 2008 and remained on the board for a number of years afterward.
“He inspires people to be the best they can be,” Moreland said. “He instilled a very customer-centric focus that required us to always think about a win-win situation with the carriers.”
After Mas became CEO of MasTec, the company grew to 22,000 professionals nationwide, quadrupled its revenues, increased earnings six-fold, and reached a ranking of 428 in the Fortune 500, O’Rielly said in his introduction.
Additionally, Mas diversified MasTec beyond telecom construction into renewable energy, oil & gas and electric transmission, among others.
“Mr. Mas is not just as successful businessman. He is a long-time leader in the Miami-Dade United Way’s Toqueville Society, which donated $15 million to improve lives last year. Most recently Mas and his brother Jorge joined a consortium with David Beckham to raise $25 million to bring a new Major League Soccer team to Miami,” O’Reilly said.
Third quarter 2018 financial results for SBA Communications were ahead of its expectations with domestic cash site leasing revenue topping $350 million compared to $327.9 million in the year earlier period, an increase of 6.9 percent. Domestics site leasing profit rose 8.9 percent year over year, as well.
“Customer activity remained strong both domestically and internationally for SBA Communications in the third quarter, we executed new domestic leasing business at a rate which was well above the year ago period and the highest since 2014. That new business will certainly positively impact future financial results, said Jeffrey A. Stoops, President and CEO.
The Big 4 carriers all contributed to SBA’s growth, with newly signed up domestic leasing revenue coming from 60 percent amendments and 40 percent new leases. And the big four carriers represented 95% of total incremental domestic leasing revenue that was signed up during the quarter.
During the third quarter of 2018, SBA purchased 679 communication sites for $106.9 million. SBA also built 90 towers during the third quarter of 2018. As of September 30, SBA owned or operated 29,357 communication sites, 16,249 of which are located in the United States and its territories, and 13,108 of which are located internationally.
“Our domestic and international backlogs remain very healthy. We continued to allocate capital opportunistically to a mix of portfolio growth and stock repurchases, materially investing in both while staying within our target leverage range,” Stoops said. “We believe the combination of strong customer demand, operational excellence and disciplined yet opportunistic capital allocation will allow us to continue to drive shareholder value through growth in AFFO per share.”
Jeffrey Stoops was a partner with Gunster, Yoakley & Stewart, a Florida law firm, in 1996 when he met Steven E. Bernstein, whose company, SBA Communications, was a client of the firm. Bernstein was seeking legal advice after being approached by a blind public shell company that wanted to merge with SBA and give him a small payout.
“One day, I got a call,” Stoops said. “It was lunch time. I was at my desk working. It was SBA asking me if my law firm did any M&A (mergers and acquisitions) work. From that phone call, I met Steven Bernstein.”
Stoops ended up advising Bernstein against merging SBA with the shell company and instead to bring on investors. A partnership was born. “Steven really didn’t initially understand the value of SBA,” Stoops said. “I helped him see that value and avoid that deal. I think we all would agree that selling to the shell company would have been a big mistake.”
It was the beginning of the beginning. To understand the cell tower industry, it is important to go back to the time when the carriers still coveted control of their towers and few independent companies owned wireless infrastructure. Professionals like Stoops and Bernstein and others with SBA would eventually build a completely new sector of infrastructure landlords, which is now the multibillion-dollar wireless infrastructure industry. It is also story about a man who departs his position with a law firm to join a fledgling tower services company and leaves his personal and professional imprint on one of the three largest cell tower companies in the United States.
Making the Jump
Still working for the law firm, Stoops then began shepherding SBA through a round of $30 million in private equity financing, which saw immediate success. “It was uncanny, the reaction to SBA,” he said. “Some of the best investors in the country who looked at the opportunity immediately signed up.”
Before the round of funding was closed, Bernstein made Stoops an offer to join the company. Stoops decided to leave his comfortable position as a law firm partner to join the upstart firm as senior vice president and general counsel in March 1997.
“I have to say, another element of personal success is a comfort and ability to take risk,” Stoops said.
“Measured risk. What I like to call calculated risks. Certainly, leaving Gunster and joining SBA was one of those. When you look back in time, you have to agree that my timing was exquisite. And obviously, who could have known? I have to consider myself a very fortunate guy to have gotten into this business back when it was just getting off the ground.”
Stoops had been with the law firm for 13 years, working his way up from first-year associate to partner in the corporate, securities and mergers-and-acquisitions area of the firm. The move might have seemed strange to someone from the outside. But it wasn’t.
“I really did not dislike working in the law firm,” Stoops said. “In fact, I enjoyed it quite a bit. It was a very intellectually stimulating profession. But you’re always an advisor. You weren’t really the decision-maker. You weren’t the principal, and ultimately, the success or failure of the activity or the mission was not yours.”
Stoops wanted to be the principal. He wanted to be the person with the responsibility to bear the ramifications of a decision, right or wrong.
“Maybe from an early stage, rightly or wrongly, I was happy to be making decisions for others, whether they liked it or not,” he said. “Probably, one of my greatest skills has been my ease and ability to make decisions.”
A Change in Strategy
When Stoops joined SBA, it was the largest site acquisition, consulting and construction firm in the tower industry, but Bernstein was not confident the company was going to continue to grow long-term. In the mid-’90s, carriers had begun to relinquish control over their wireless infrastructure, however, and were open to selling their towers as they embarked on a massive buildout.
“The idea came up that we could use our existing skillsets and customer base to turn the company into an asset-ownership business,” said Stoops.
Stoops was perfectly positioned with his experience in securities and M&A to secure funding and execute purchases of tower portfolios, so he began leading SBA in the hunt to acquire towers, in addition to building them.
“Through purchasing small mom-and-pop companies, the company began to grow,” Stoops said. “We started learning how to be good tower owners and operators.”
SBA purchased its first 12 towers in upstate New York in June 1996. By 1998, it owned 150 towers. SBA also landed the first build-to-suit construction project in the industry with BellSouth, the predecessor of modern-day AT&T. “I had a chance to help create and shape this industry for Wall Street and for everybody else, because when I joined SBA, there was no book on the shelf that said here’s what you need to do. We got to make it all up as we went along.”
When the Bottom Dropped Out
SBA Communications went public in June 1999 at $9 a share and Stoops moved up to become chief financial officer. The stock rose to a high of $57 in 2000, but there was no playbook for what would happen the next year. After extensive speculation on internet companies created a bubble on Wall Street, the stock exchanges came crashing down, bringing SBA’s stock and the rest of market with it.
SBA found itself overleveraged at 15 times cash flow and hanging by a thread with a stock price of 19 cents a share in October 2002. There were five public tower companies at that time. Two of the tower companies, SpectraSite and Pinnacle Towers, had already declared bankruptcy. It looked as though SBA would join them.
Advisors told the tower company it, too, should declare bankruptcy, and it began going down that path. But Stoops, who had become CEO in January 2002, opposed it. “Where I grew up, bankruptcy was a dirty word and something to be avoided at all costs,” Stoops said. “People like Steven Bernstein would have been directly wiped out. No matter how the advisors tried to spin bankruptcy, it was not an OK thing to do.”
Stoops engineered a plan to sell towers and renegotiate with the banks. During the bankruptcy discussions, SBA, which had grown to 3,000 towers, decided to sell 800 towers to AAT Communications to pay off the credit facility that was causing the financial problem. The plan saved the company.
“That was quite a chapter in our history,” Stoops said. “It might be the one that I’m most proud of, because we did not go bankrupt, and our shareholders were saved from being wiped out. One of the things that I take a great pride in is the ability to cut through a lot of noise and advice that you get from all kinds of crazy sources and do what’s right.”
The lesson that Stoops learned through the event was the importance of the financing structure to the success of the tower company. Today, he keeps leverage at about 7.5 times cash flow.
The dot-com crash and the subsequent Great Recession in 2008 actually strengthened Stoops’ belief in the tower industry. Even as the markets tumbled and money dried up, the tower industry remained resilient. SBA’s tower leasing business continued to grow.
“Each of these crises were capital markets-driven events,” he said. “We’ve learned some and adjusted accordingly. In 2008, we restructured our debts so that we have a variety of markets that we now use to finance.”
Growth, Growth, Growth
After the dot-com crash, SBA began to grow again. In 2006, that growth went into high gear. Only three years after selling towers to AAT Communications, SBA bought those towers back, along with the rest of AAT. At the time, AAT was the fifth-largest tower owner. SBA bought it for $1 billion, thereby increasing its tower portfolio by 55 percent to 1,855 owned tower sites and 250 revenue-producing managed sites in 44 states. In 2012, SBA would more than double that number when it bought 3,252 towers from TowerCo and 2,300 towers from Mobilitie.
The management staff at SBA realized a number of years ago that the company would eventually reach a point where it wouldn’t be able to find opportunities to buy towers in the United States to continue to grow at the rate at which it was accustomed. Instead of expanding into related businesses, SBA decided to expand its tower business internationally.
An acquisition in Canada in 2009 marked the first time SBA had ventured beyond the U.S. border. Latin America was next, with a purchase in Panama in April 2010. The company then entered Costa Rica right after it opened up. It expanded substantially in Central America with more than 2,000 towers and, in Brazil, another 7,000 towers. SBA is now operating in 12 foreign countries, allowing it to continue its growth.
During its short history, SBA has had many growth milestones, beginning with its public stock offering in 1999, expanding internationally in 2009 and topping 10,000 towers in 2011. Today, seven years later, SBA owns and operates more than 27,000 towers across North, Central and South America. And it manages 5,000 communications site locations on behalf of third-party landlords. It became a real estate investment trust in 2016, and Standard & Poors added the company’s stock to its S&P 500 Index in 2017.
Big Company, Small Company
SBA looks like a big company from the outside because of its capitalization and assets. Actually it operates much like a small company, as evidenced by its flexibility and nimble decision-making. Stoops stays in close touch with the field without using committees. His leadership style is straightforward and transparent. He believes in being upfront with staff on the direction of the company.
“If you communicate well and you stick to your principles — we’re pretty big on principles here, with integrity being the most important principle — the leadership part just comes pretty naturally,” Stoops said.
And the direction of the company is pretty straightforward as well, focusing on towers and nothing else. “Sticking to my knitting” is not the type of high-tech metaphor one would expect from the head of a major wireless tower company, but it is one that Stoops happily uses to remind people that SBA focuses on its core competency in every business decision it makes. It has never wavered.
“SBA is the opposite of ‘mission creep,’ ” Stoops said. “We stay narrowly focused. And that takes work, believe it or not, because there are all kinds of people who want us to get involved in all kinds of different things. I spend most of my days saying ‘no.’ That actually serves us well because today we are the most highly valued public tower company in the world, and we got there because we didn’t jump down a bunch of rabbit holes.”
The keys to Stoops’ continued success are that he is committed and hardworking, along with being inquisitive and open to learning new things.
“Learning new things helps keep you from getting entrenched in old habits,” he said. “That’s something that I preach around here all the time because, given our success, it’s sometimes a little easy. I fear complacency. The fact that we have been so successful, it’s easy for folks to say, ‘Well, why change? It has obviously worked very well,’ and we all know that that’s not the right answer.”
Back in 1996, Stoops was the right person at the right time with the skillsets to help Steven Bernstein move SBA into tower ownership. Today, with Bernstein continuing serving as chairman, Stoops steers the company with a steady hand as it heads toward deployment of the fifth generation of cellular.
J. Sharpe Smith
J. Sharpe Smith joined AGL in 2007 as contributing editor to the magazine and as editor of eDigest email newsletter. He has 27 years of experience writing about industrial communications, paging, cellular, small cells, DAS and towers. Previously, he worked for the Enterprise Wireless Alliance as editor of the Enterprise Wireless Magazine. Before that, he edited the Wireless Journal for CTIA and he began his wireless journalism career with Phillips Publishing, now Access Intelligence. Sharpe Smith may be contacted at: firstname.lastname@example.org.