Like the other public tower companies, American Tower experienced a solid first quarter. The comm-infra firm’s total revenue increased 8.3 percent to $2,159 million in the first quarter 2021, while net income increased 55.8 percent to $652 million, adjusted EBITDA increased 13.3 percent to $1,440 million and consolidated AFFO increased 23.8 percent to $1,123 million.
“Looking forward, in the U.S., we expect that the gathering 5G momentum will enable us to leverage our extensive site portfolio and mutually beneficial relationships with key tenants to drive sustainable, predictable, recurring long-term growth in cash flows,” Tom Bartlett, American Tower’s CEO, said in a prepared statement.
Internationally, American Tower began 2021 by entering into the Telxius Towers transaction, which Bartlett said he expects to transform the company’s European business.
“Internationally, large multinational carriers are aggressively investing in their wireless networks to keep pace with rapidly growing mobile data usage as smartphone penetration accelerates and network technologies advance,” Bartlett said. “Our global teams followed that by delivering a strong quarter, highlighted by elevated demand for our sites, the construction of nearly 2,000 new towers and highly attractive growth in consolidated AFFO per Share.”
Spencer Kurn, analyst for New Street Research, wrote that American Tower’s results, along with Crown Castle International and SBA Communications, are confirmation that “activity levels are rising sharply as carriers accelerate 5G deployments, which bodes well for growth later this year and into 2022.”
In a U.S. Communications Infrastructure Research note, Nick Del Deo, senior analyst, MoffettNathanson, noted that, like the other public tower companies, American Tower benefits from T-Mobile’s 2.5 GHz buildout, the C-band deployments and Dish Networks’ nationwide 5G build. However, he wrote about some wrinkles will set American Tower apart.
“First, American Tower is set to get hit with Sprint-related churn much earlier than its peers, with the first slug coming in Q4 of this year,” Del Deo wrote. “We try to focus on churn over the cycle in our work, but the market also cares about annual growth rates. Second, American Tower’s greater embrace of [master lease agreements] MLAs is likely to mute the benefits of the coming leasing upswing (and mute the deceleration on the other side), as more of its revenue is already locked in.
“And third, American Tower seems to be taking the most deliberate steps to try offsetting the pain of the Sprint churn to minimize its impact,” he added. “These include: ramping up new tower construction overseas; driving cost efficiencies within its business; and stepping up accretive M&A activity, most notably InSite Wireless Group and Telxius.”
Just before Christmas, American Tower received his biggest present of 2020, closing on its acquisition of InSite Wireless Group for the sum of $3.5 billion. The purchase was funded by a combination of cash on hand and revolver borrowings.
Tom Bartlett, American Tower’s CEO, said in a prepared statement, that the transaction will be immediately accretive, and he expects to quickly begin driving new leasing activity on the assets.
“As 5G densification initiatives in the United States accelerate and network deployments in international markets continue, we believe we are well positioned to generate attractive, sustainable long-term growth, including on these new sites, while playing a key role in enhancing mobile broadband connectivity,” he said.
American Tower expects the assets acquired from InSite to generate $150 million in property revenue and approximately $115 million in gross margin in 2021.
Tom Bartlett, American Tower CEO, told the Q3 earnings call last week how American Tower aims to use its neutral-host real estate portfolio to help customers deal with the convergence of wireless and wireline networks, which will lead to numerous additional services that call for mobile data centers.
“We believe that this convergence along with increasing digitalization, network virtualization and cloud-native software-defined services will lead to increasing demand for distributed, interconnected global edge compute processing,” Bartlett said.
Infrastructure at the edge should remain a critical component of the network architecture as it evolves, according to Bartlett, which is where American Tower’s real estate assets reside.
“We are focused on developing communications infrastructure business models that augment the value of our existing assets, expand our revenue base beyond traditional tenants, and enhance our leadership role in the wireless ecosystem,” Bartlett said. “At the highest level, our goal is to selectively extend our digital infrastructure core capabilities to further encapsulate neutral hosted wireless connectivity, transport, and compute functions as part of our comprehensive platform.”
American Tower plans to offer tenants an integrated suite of complementary solutions to fit within the increasingly complex network designs.
American Tower will focus its investments on business models with contracted long-term revenue commitments from Tier 1 customers; multi-tenancy and multi-service offerings with low ongoing maintenance capex; operating leverage characteristics similar to towers; and synergies and adjacencies to existing American Tower assets and skillsets, Bartlett said.
In the United States, as 5G deployments accelerate, American Tower expects an increasing number of lower latency applications and more cloud-based customer demand for application-level and network compute functions at the edge.
“There are two distinct solutions within this emerging ecosystem: distributed compute and mobile edge compute,” Barlett said. “We believe that these two offerings will develop on different timelines and will allow us to provide differentiated valued propositions for our customers.”
On the distributed computing side, enterprise workloads continue to move to the public cloud. In the near term, on- or off-premise private cloud computing is also being used as a hybrid solution. American Tower has begun deploying micro data center facilities at select tower sites and has seen early indications of solid demand in collaboration with partners like Flexential, a nationwide data center platform.
“Small and medium-sized businesses are often willing to move legacy workloads to more responsive, proximate, cost-effective data centers, and we believe that many data centers at some of our macro towers can represent optimal locations for these installations,” Bartlett said.
In the long term, however, 5G mobile edge compute solutions at the tower to represent a much larger opportunity to fulfill the need for low latency, according to Bartlett.
“The foundational concept of our mobile edge strategy is the expectation that localized neutral host, multi-operator, multi-cloud micro data centers can be the most cost- and technology-efficient means to which latency can be reduced,” he said. “These facilities can be optimally located at select macro tower sites that already have power, fiber and multiple wireless tenants, rather than each cloud provider and carrier forging ahead with their own connectivity arrangements.”
Colo Atl, an American Tower company and provider of carrier-neutral colocation, data center and interconnection solutions, is in the early stages of small-scale deployments at the tower sites.
“At this point, we think a scaled solution is still at least a few years away, but there is tangible progress being made, and we are excited about the possibilities,” Bartlett said. “Underlying this excitement of the potential future 5G related use cases that we expect to drive rapid uptake of mobile edge compute functions.