We expect stronger leasing in 2018 and believe that more meaningful acceleration could occur around mid-2018 and beyond with increased low-band spectrum deployments and resumption of Sprint capex spending.
Among the other carriers, we expect T-Mobile leasing activity roughly on par with 2017, and at Verizon, a decrease in site addition with a greater emphasis on small cells/ODAS. A headwind worth monitoring is site relocation activity as AT&T, T-Mobile, and Verizon engage built-to-suit partners to construct towers adjacent to their existing sites, but we do not believe U.S. churn will fall outside of normalized ranges over the next few years.
We anticipate amendment rather than colo-driven contributions due to WCS and AWS overlays, comingled with FirstNet. We continue to see a gradual ramp in outdoor small cells. We estimate FirstNet will drive materially higher amendment activity in 2018–20 (~47K site project); early work is not included in our 2017 estimates. We view progress on FirstNet as positive for towers, primarily benefiting CCI and SBAC given both operators’ current U.S. focus and CCI’s macro portfolio mix.
We believe most tower operators are finding T-Mobile to be the most active carrier with regard to site modifications and site additions. This reflects its focus on the deployment of low-band spectrum (700 MHz) for both capacity and coverage, as well as ongoing refarming activities in the other bands (L1900). We expect 600-MHz deployments will sustain material amendment activity through 2020, with 2018 activity roughly on par with 2017.
Sprint is targeting increasing its capex spend from $3.5–4.0B in FY17 to $5–6B per annum in FY18 and FY19. Sprint’s primary focus is its tri-band project (deployment of 2.5 GHz and 800 MHz gear at more of its sites), driving greater amendment potential for towercos, as well as new tower builds. Thus, we expect a notable ramp in activity during 2018.
Priorities include macro site additions, refarming in the AWS, PCS and 850 MHz bands and 4T4R deployments (touching roughly 13K sites). Small-cell/ODAS deployments remain a focus, with an expected ramp in CRAN hub installations and a greater mix of owned infrastructure. We believe 2018 site additions will decrease, with a greater emphasis on small cells/ODAS.
Jonathan Atkin is a Managing Director of RBC Capital Markets and has been a senior analyst at the company since 2000. His focus areas include telecom services, telecom infrastructure, wireless, satellite, Internet, hosting and colocation providers. During 2008-2010, the Financial Times has ranked Jonathan as the No. 1 and No. 3 stock pickers in the telecom and wireless services sectors.