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Tag Archives: Jonathan Atkin

RBC Capital Markets Maintains Enthusiasm for Towers

By J. Sharpe Smith

J. Sharpe Smith

Smith

March 10, 2016 — In contrast to Wells Fargo Securities, which downgraded the tower sector from outperform to market perform last week, RBC Capital Markets continues to overweight tower stocks based on “historically attractive valuations and prospects for a modest second half of 2016, followed by 2017 acceleration in leasing.”

In its Wireless Network and Site Leasing Update, dated March 19, RBC projected a “modest uptick” in leasing in the second half of this year compared with 2015. Leasing catalysts include amendments by AT&T, with some contributions by T-Mobile and Verizon driven by “project/budget seasonality, spectrum refarming, and activity in the AWS-3 band.”

“Verizon and T-Mobile should remain the most active leasing contributors, as they were during 2015. Each should add slightly fewer macro sites vs. 2014 but increase their overlay activities and small-cell efforts,” wrote Jonathan Atkin, RBC analyst. “AT&T should remain mostly inactive on macro-site deployments but be noticeably more active on site overlays.” Sprint, however, remains a no-show on the site development radar, he added.

Details on 2016/2017 Site Activity

While AT&T’s 2016 site additions should remain below the 1,000, Atkin wrote, the carrier will touch more than 30,000 of its 66,500 sites with LTE carrier-additions (1900 MHz) or overlays (WCS, AWS-3). Up from 2015, but down from 2014, according to RBC.

T-Mobile will continue its 700 MHz coverage buildout with spectrum refarming at 1900 MHz and macro-site densification. Other areas of activity include initial AWS-3 overlay and small-cell densification at 5 GHz. Continued AWS-3 overlays, and 700 MHz densification in metro areas should highlight 2017.

Verizon’s macro site deployments in 2016 will be less than 2015, but it will continue refarming on 15,000 sites at 1900 MHz band and increase its small-cell deployments.
Sprint’s focus areas included LTE additional-carrier deployments at 1,900 MHz, conclusion of 800 MHz overlays, carrier aggregation at 2.5 GHz, and metro-specific projects.

“Earlier efforts [at Sprint] around organic small-cell deployments, BTS monopoles, and new municipal structures have made little apparent progress, though we believe Mobilitie has hired more than 700 staff to pursue permitting work,” Atkin wrote.

Verizon, T-Mobile Lead Tower Leasing; Sprint Ramps

By J. Sharpe Smith — 

July 2, 2015 — Verizon and T-Mobile (TMUS) continue to lead in tower leasing activity, with Sprint entering a more active phase and AT&T mostly focused on LTE capacity in the United States and coverage/modernization in Mexico, according to RBC Capital Markets’ Wireless Network & Tower Leasing Update.

Atkin Headshot (3)

Atkin

“We continue to believe the 2016 set-up is favorable for towercos, with a Y/Y ramp in leasing becoming noticeable in the first half of 2016. We favor Crown Castle International (CCI) versus its peers based on strong prospects for macro and small-cell leasing and improved churn,” writes Jonathan Atkin, RBC analyst.

AT&T appears inactive on new leasing but fairly active on LTE carrier additions, but with minimal benefit for towers, according to Atkin.

“We believe AT&T is moving relatively slowly with the turn-down of legacy Leap sites. AT&T announced $3B of incremental capex in Mexico for modernization and coverage expansion, spread out from 2015 through 2018,” he wrote.

Sprint’s network improvement plans are taking shape, with a 70K macro-mini cell-site addition project set to launch in July, according to RBC’s research.

“We believe the project is about to enter the site acquisition, engineering and permitting phase, once vendors are finalized in the first half of July,” Atkin wrote.

T-Mobile appears focused on LTE and coverage expansion at 700 MHz and seems to be nearing completion of its LTE overlays in the PCS and AWS bands while ramping up network-hardening efforts on the East Coast.

“We believe T-Mobile will shut down all remaining MetroPCS CDMA equipment at mid-year (June 30th) with full decommissioning targeted by late 3Q or early 4Q,” Atkin wrote.

Verizon remains the most active carrier in deploying new macro sites, according RBC, and its small-cell deployments are also more advanced than the other carriers. Its small cells use a cloud RAN design, which inhabits street furniture connected by fiber to centralized hardware locations.

Wireless Infrastructure Impact

Tower beneficiaries from increased activity at Sprint are CCI, because of its outdoor small cell focus, and SBA Communications with its U.S. exposure, according to RBC. AT&T’s increased Mexico spend should benefit AMT, which derives roughly 6 percent of total revenues from its 8,700 Mexico sites. AMT should also benefit from 4G upgrades on legacy Iusacell and Nextel leases, which comprise more than 70 percent of its Mexico revenues.

“We maintain our favorable views on American Tower (AMT) because of improving U.S., Mexico and India trends, and SBAC, because it has the strongest core U.S. growth rate and prospects for Brazil leasing,” Atkin wrote.

2015 Wireless Capex, Network and Tower Forecast

WirelessWatch-biggerbut smaller

By Jonathan Atkin —

November 20, 2014 — AT&T’s announced Y/Y reduction in capex during 2015 is consistent with our macro tower leasing outlook which already projects a decline next year. From a network perspective, the AT&T reduction appears inconsistent with RootMetrics data suggesting a recent degradation in quality. Amongst towercos, American Tower and SBA Communications expectations contemplate a modest U.S. leasing slowdown in 2015, but Crown Castle International’s 2015 guidance strikes us as potentially aggressive. American Tower could benefit incrementally from AT&T’s acquisition of Iusacell (2 percent exposure).

 

AT&T
• AT&T’s recently announced Y/Y reduction in capex during 2015 (to $18B, from ~$21B in 2014) synchs with our earlier research suggesting a slowdown in site leasing activity during the next several quarters. We project a Y/Y slowdown in wireless capex from $11.5B in 2014 to $10B in 2015.
• Although AT&T mentioned the near-completion of certain network milestones, we believe the reduction may be driven the desire for financial flexibility around the U.S. AWS-3 spectrum auctions and Iusacell acquisition.
• Our compilation of RootMetrics network quality scores across top-25 metros suggests that AT&T has seen some degradation of performance relative to its peers. Thus, from a network-quality perspective, we find AT&T’s capex reduction surprising (which leads us to suspect financial flexibility as a factor).
Other Carriers
• Verizon: In contrast to AT&T, we expect Verizon’s capex levels during 2015 to be approximately equal to 2014 levels at ~$17B (with ~$11B wireless), with a continued emphasis on network densification through cell-site additions and small-cell deployments.
• At Sprint and T-Mobile we believe there is greater potential variance to our wireless capex estimates, but our current 2015 projections are $5.2B and $4.64B, vs. 2014E levels of $5.26B and $4.37B. T-Mobile’s initiatives include the ongoing overlay and new site deployments at 700 MHz, with AWS-3 overlays a likely emphasis in 2H15.

Towers
• Our earlier cell site forecasts already anticipate a slowdown of new macro sites (from roughly 3,600 in 2014 to 1,500 2015. We anticipate AT&T WCS overlays will cover approximately 12% of AT&T’s cell sites during 2015, benefiting all three tower operators.
• While we believe this reduction is already reflected in expectations for American Tower and SBA Communications, we note that Crown Castle’s 2015 guidance assumes a modest increase in leasing activity on its macro sites in 2015, so the AT&T slowdown could represent a potential headwind.
• AT&T’s announced acquisition of Iusacell could benefit American Tower, which has 2 percent exposure to this carrier and stands to benefit from the deployment of Iusacell’s unused AWS band.
_________________________________
Jonathan Atkin is an analyst with RBC Capital Markets (415) 633-8589; jonathan.atkin@rbccm.com

AT&T, Verizon Wireless to Lead 2014 Tower Adds: RBC

AT&T and Verizon Wireless will drive a robust market this year for wireless infrastructure, according to the Wireless Retail and Network Update by RBC Capital Markets, while T-Mobile and Sprint will surge next year. The firm projects site additions and new lease equivalents will rise as high as 25,000, compared to just under 23,000 in 2013.

“For the wireless sector, 2014 demand drivers will likely feature an increased mix shift toward new leases, driven by capacity/infill requirements at AT&T and Verizon,” wrote Jonathan Atkin, RBC analyst.

The drivers of leasing and amendment demand this year, according to RBC Capital Markets, reflect continued LTE overlay work, including Verizon’s deployment of LTE in the Advanced Wireless Service (AWS) band, and a robust pace of new site additions.

Last year AT&T and Verizon added 2,000 and 2,600 sites, respectively. Around half of those adds came in the fourth quarter, according to RBC stats.

“We believe each carrier plans to continue that late-year run rate through 2014,” Atkin wrote. “As it pertains to AWS [band] activity at Verizon, we believe the carrier will add 12,000-13,000 sites in 2014, with a similar pace plausible in 2015 as the company completes its coverage at that frequency.”

In the second-half 2014 and 2015, Atkins expects Sprint will accelerate its 2.5 GHz LTE deployments, which may have been delayed due to equipment shortages. T-Mobile will increase to its LTE coverage footprint at 1900 MHz to reach 250 million in population and deploy of LTE at 700 MHz covering 158 million in population. RBC estimates 7,000-8,000 sites will be slated for LTE deployment at both 700 MHz and 1900 MHz.

“We believe Sprint continues to be challenged in its network improvement initiatives, due to equipment availability constraints for its 2.5 GHz LTE deployment, using 8T8R [eight transmitter/eight receiver] technology, and it is facing greater competitive challenges at retail than anticipated earlier in the year from T-Mobile and AT&T, with its tablet-centric postpaid growth a pressure on ARPU,” Atkin wrote.

Sprint plans to deploy Sprint Spark, which uses 8T8R carrier aggregation technology, in 100 largest metro areas in the next three years, with initial availability in five markets beginning last fall. A company press release stated that Sprint 4G LTE service will be available by mid-2014 to approximately 250 million Americans, and Sprint expects 100 million Americans will have Sprint Spark or 2.5 GHz coverage by the end of 2014.

Sprint is still behind Verizon’s LTE speeds and has not made much progress in its network upgrade initiatives recently, according to RBC’s analysis.

“We believe activity levels will ramp further in 2015 at Sprint and T-Mobile as we believe the 8T8R 2.5 GHz deployments (Sprint) and 700 MHz and 1900 MHz LTE overlays and coverage expansion (T-Mobile) will gain momentum,” Atkin wrote.

Crown Castle’s T-Mobile Tower Buy a Win-Win

Crown Castle International’s purchase of T-Mobile USA ’s 7,200 towers for $2.4 billion in cash late in September not only helps fund the carrier’s LTE build out, but it also reinforces its position as the largest U.S. tower company with 30,000 towers and small cell operations in over 50 markets. Both of which are good news for the tower industry.

“T-Mobile is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort,” said John Legere, T-Mobile’s recently hired CEO, in a prepared release.

The urban locations of T-Mobile’s towers ­­– 83 percent of them are in the top 100 markets and 72 percent are located in the top 50 markets – were a good fit for Crown Castle.

“Consistent with our focus on the top 100 U.S. markets, the T-Mobile assets are expected to provide significant growth driven by the continued demand for wireless data services, particularly in the most densely populated areas in the United States,” Ben Moreland, Crown Castle’s president and CEO, said in a prepared release.

According to RBC Capital Markets Analyst Jonathan Atkin, T-Mobile’s financial stability was the key result from the tower sale. “In our view, the tower deal will have little operational impact on Deutsche Telekom or Crown Castle, and serves mainly to provide Deutsche Telekom with financial flexibility for pursuing its U.S. LTE build,” Atkin writes.

Crown Castle estimates that the T-Mobile towers will produce $125 million to $130 million in adjusted funds from operations before financing costs in 2013, and have sufficient capacity to accommodate at least one additional tenant per tower without significant incremental capital.  T-Mobile has committed to maintain its communications facilities on the towers for a minimum of 10 years with annual rent escalation provisions tied to the consumer price index.  Further, T-Mobile’s rent includes the rights, subject to certain limitations, to complete its current network modernization on these sites.

Crown Castle announced on Wednesday that it is offering $1.65 billion in senior debt to finance the T-Mobile tower transaction. It will also use cash on hand and funds from its revolving credit facility.