Crown Castle International’s results in the second quarter exceeded its expectations, reflecting strong demand for towers, small cells and fiber and generating AFFO per share growth of 8 percent for 2019, up from its prior outlook of 7 percent growth and at the high end of its long-term growth target, stated Jay Brown, Crown Castle’s CEO, said on the company’s Q2 earnings call today.
“We believe our ability to offer towers, small cells and fiber solutions, which are all integral components of communications networks and are shared among multiple tenants, provides us the best opportunity to generate significant growth while delivering high returns for our shareholders,” Brown said.
Crown Castle’s current tower leasing activity is its highest in more than a decade, causing it to increase its full year 2019 Outlook.
“Crown Castle entered 2019 with momentum on the tower side of the business, and I am excited that we are experiencing even higher levels of tower activity than we expected. We believe this level of activity will carry into next year,” Brown said.
Crown Castle is constructing 30 percent more small cells than last year as carriers invest in their current networks while beginning 5G deployments. However, it now expects to deploy 10,000 small cells in 2019, which is at the low end of its expected range of 10,000 to 15,000.
“The significant increase in small cell deployments is straining the response time of municipalities and utilities, resulting in longer construction timelines than we previously experienced,” Brown said. “These pressures are most acute in several top markets where we are seeing the highest volume of activity.”
Site rental revenues grew approximately 6 percent, or $69 million, year over year, including $66 million in organic contribution to site rental revenues and a $3 million increase in straight-lined revenues. The organic contribution to site rental revenues represents 5.7 percent growth, comprised of 9.5 percent growth from new leasing activity and contracted tenant escalations, net of 3.8 percent from tenant non-renewals.
November 15, 2016 —
American Tower sent out a a press release that said the carriers accounted for 10 percent and 8 percent, respectively, of the towerco’s consolidated property revenues at the end of the third quarter.
“Tower investors become concerned when they hear merger rumor and they worry about T-Mobile and Sprint overlap,” Clayton Funk, managing director, MVP Capital. “It’s all totally speculative. Who knows if they will even try to merge again.”
American Tower currently has separate leases for antenna space with Sprint and T-Mobile US on the same site at 5,500 communications sites it owns or operates. The revenue generated from each of on these sites represented 4 percent of American Tower’s consolidated property revenues for the third quarter. The average remaining non-cancellable current lease term on these sites with Sprint and T-Mobile USA is approximately 5 years.
SBA Communications also released its exposure to a T-Mobile/Sprint hookup, which represents 16 percent of total site leasing revenue. However, overlapping sites represent only 5 percent of total site leasing revenue, and those leases will be in place for three to five years.
“The Democrats blocked a Sprint/T-Mobile US merger once before. Who knows if the Republican administration will even allow it, even though they are usually for less regulation,” Funk said. President-elect Trump has already voiced his opposition to the AT&T/Time Warner merger.
Wall Street, at least on Monday, was not impressed. All three public tower stocks dropped. As of 11 am, they were down from 2.28 percent to 3.82 percent.
Carrier stocks, on the other hand, have been up, perhaps spurred by the merger rumors or by the election, but Jennifer Fritzsche, senior analyst, Wells Fargo, believes that it may be too early to speculate on merger, especially since FCC Commissioners have not been confirmed or even nominated yet.
“With Sprint up 13 percent the day after the election (vs. a +1% move in the S&P) clearly people are thinking rules of the past may have to be revisited in DC,” wrote Fritzsche. “While we continue to believe the sector will see more M&A –– it seems very early to speculate. Republicans are likely to hold more offices on that 8th floor of the FCC building.”
Trefis, a research and analysis firm, wrote in Forbes, that while the market may be betting the new administration will be more amenable to consolidation in the telecom industry, that does not mean it makes business sense for Sprint to buy T-Mobile US.
The firm noted that T-Mobile US’ stock is up by more than 70 percent since 2014, when Sprint last tried to buy it. Its market cap has grown to $44 billion, which might be a tough lift for Softbank, which just spent $32 billion for British chip designer ARM Holding.
Many in the industry say that Deutsche Telecom has been looking to sell T-Mobile US to any of a number of companies –– from Sprint to AT&T and DISH to Comcast –– for some time now. Nothing will happen immediately as Deutsche Telekom has put the sale of T-Mobile US on hold during the broadcast incentive auction, sources told Reuters.
October 20, 2016 — Vertical Bridge has announced the closing of $196 million initial principal amount of Series 2016-2 Secured Tower Revenue Notes in a private asset-backed securitization transaction.
The Notes were issued by Vertical Bridge CC and were issued in two classes consisting of $174.2 million initial principal amount of Class A Notes and $21.8 million initial principal amount of Class B Notes. The Notes were priced with an annual yield to expected maturity of 5.25% for the Class A Notes and 7.00% for the Class B Notes. The Notes were rated at the closing by both Morningstar and Kroll. The Notes have an anticipated repayment date of October 2021 and final legal maturity of October 2046.
“This issuance is Vertical Bridge’s second securitization in 2016 and reflects the high quality of the radio broadcast towers we have acquired and the long term stability of cash flows resulting from the mission critical role that tower infrastructure plays in the delivery of media and communications. Together with our founding investors, Digital Bridge, we have been accessing the securitization market for nearly a decade and we anticipate regular ongoing issuances to support the continued growth of our communications infrastructure investments,” said Alex Gellman, CEO and Co-Founder of Vertical Bridge.
The Securities are collateralized by tenant lease payments on a geographically diverse portfolio of 407 radio broadcast tower sites. The proceeds of this offering will be used to fully repay the existing credit facility on these tower sites.
Guggenheim Securities served as Structuring Agent and Bookrunning Manager for the offering.
October 11, 2016 — SBA Communications will become the last of the three major public tower companies to elect to be taxed as a real estate investment trust (REIT) beginning at the end of this year. The conversion was not a real surprise. American Tower and Crown Castle International have already gone REIT and SBA has been working on it for two years.
“REIT status is the optimal structure for our business given the real estate nature of our assets,” said Jeffrey Stoops, SBA’s president and CEO. “We believe a REIT structure will provide many opportunities for creating long-term shareholder value.”
REITs, which may legally avoid paying U.S. federal income tax, generally must pay out at least 90 percent of their taxable income in the form of dividends to shareholders. SBA’s determination as to the timing and amount of future dividend distributions will be based on a number of factors, including REIT distribution requirements, investment opportunities around its core business and its existing federal net operating losses (NOLs) of $1.15 billion as of December 31, 2015.
SBA may use these NOLs to offset its REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized. SBA does not expect that it will be required to make any distribution of accumulated earnings and profits in connection with its REIT conversion.
October 4, 2016 —
Diamond currently markets, develops and manages leasable space for wireless infrastructure at more than 200,000 properties for a wide variety of property owners. But it is not just a numbers game, according to Ed Farscht, Diamond CEO.
“We don’t just accumulate assets. We are targeting assets that are attractive to our carrier customers and help them address the wireless needs of their users,” Farscht said. “CBRE manages thousands of office buildings, property complexes, and various other real estate assets, many of which are in highly populated areas. These properties are in areas of need for our carrier customers.”
Several factors come into play when Diamond determines whether a wireless deployment will add value for a carrier. The wireless infrastructure company looks at the population, size of the market, the location and the type of facility.
“We look at the type of facilities and if there is a large number of people congregating. Also whether there is a significant need for in-building wireless coverage,” Farscht said. “By having a relationship with these properties we can address the needs of the carriers and the needs of the building owners.”
As a property manager and a provider of a broad range of integrated services, CBRE helps building owners address cost saving and amenity opportunities, including technologies such as wireless coverage inside their buildings. As building owners address the significant wireless demand inside their facilities, CBRE and Diamond will work together to provide value to CBRE’s customers, according to Farscht.
“If we can find solutions for a clients’ properties and solutions for the carriers that address their customers’ needs and the tenants’ needs, I would say that’s a win-win,” he said.
In addition to its macro tower business, Diamond is also actively working with its customers on small cell, internet of things, Wi-Fi and DAS solutions. “Working with CBRE, Diamond can look at either building a tower, an indoor DAS, a rooftop cell site or an antenna on the side of the building,” Farscht said.