Update: At press time today, American Tower reported financial results for the quarter ended June 30. The company’s revenue increased 20.2 percent to $2.299 billion; property revenue increased 17.9 percent to $2.233 billion; net income increased 66.8 percent to $748 million; adjusted EBITDA increased 21.8 percent to $1.476 billion; and consolidated AFFO increased 18.7 percent to $1.097 billion.
The wireless building boom ignited by the 5G rollout has been a big boon for the nation’s two largest owners of wireless infrastructure — American Tower and Crown Castle — but, so far this year, tower building is overshadowing small cell construction.
On July 27, Crown Castle International said it had revised its previous expectations to roll out 10,000 small cells in both 2021 and 2022 — halving the number to 5,000 small cells for both years. The company attributed its revision to a combination of factors, including carriers’ desire to use macro sites for near-term 5G deployments.
Crown Castle still believes its small cell market will flourish. “The fundamental need for small cells continues and the unit economics remain in line with our expectation,” said Crown Castle president and CEO Jay Brown during the firm’s second-quarter earnings call last week. “There has been a reprioritization of the capital spend here in calendar year 2021 of moving toward getting those macros upgraded for 5G and re-prioritizing in the near term some of those small cells,” Brown said. “We think it’s just timing… that they’re pushing out to the right, and obviously, when you look at our results and our outlook, we’re seeing the push on that going toward towers.”
Crown Castle’s tower building activity is booming, increasing its expected 2021 growth 12 percent, with reported income from operations of $333 million in the second quarter of 2021 — compared with $200 million for the second quarter of 2020. Customers are prioritizing their 5G deployments toward macro sites rather than small cells, and that’s shifting expectations in that realm. Factors affecting the company’s small-cell business include the cancellation of Sprint small cell orders and zoning and permitting challenges.
“We are seeing the highest level of tower activity in our history as our customers are focusing on utilizing towers in the first phase of deploying their 5G networks nationwide,” Brown said. “This initial focus on towers has led to delays in some of our small cell deployments that impact the timing of when we expect to complete the nearly 30,000 small cells currently in our backlog. We continue to believe the deployment of 5G in the United States will extend our opportunity to create value for our shareholders as our ability to offer towers, small cells and fiber solutions, which are all integral components of communications networks, will be critical as our customers densify their networks to deliver 5G.”
On June 9, speaking at Crown Castle International’s (CCI) Management Presents at Nareit’s REITweek 2021 Virtual Investor Conference, Dan Schlanger, Crown Castle chief financial officer and executive vice president, said his company has invested heavily in fiber-optic cable and small cells, but that Crown Castle and his carrier customers would continue to focus on towers as the best and most economic and efficient way to deploy communications to large populations in large geographic areas.
Last week, during Crown Castle’s second-quarter earnings call, Schlanger said that the company is taking steps to complement its total return opportunity with a lower risk profile, which includes allocating capital to opportunities in the United States and extends to how the company manages its balance sheet. “To that point, we were able to opportunistically access the bond market and extend the maturity on our credit facility during the second quarter, extending our debt maturity profile and reducing our overall cost of capital,” Schlanger said.
Meanwhile, American Tower’s stock rose 32 percent for the first six months 2021 — and is up more than 70 percent since bottoming in March 2020. American Tower remains the world’s largest owner of wireless infrastructure, with an $86 billion market value, compared to Crown Castle’s $53 billion market value. The company maintains a multitenant real-estate portfolio of 214,000 communications sites. SBA Communications, valued at $23 billion, is the third-largest owner of wireless infrastructure. All three firms are structured as REITs (real estate investment trust) companies.
At press time today, American Tower released its second-quarter results for 2021, revealing the company’s revenue increased 20.2 percent to $2.299 billion.
American Tower CEO Tom Bartlett said, “In Q2, secular growth trends in mobile continued to support meaningful carrier capital investment and wireless network technology advancements throughout our footprint. In addition to delivering double-digit growth in AFFO per Share and 15 percent dividend growth, we added nearly 27,000 sites through our Telxius Towers acquisition in the quarter, augmenting American Tower’s position as a leading independent provider of communications real estate in Europe.
“Looking forward, we expect to leverage the competitive advantage provided by our scaled, diversified portfolio of more than 214,000 communications sites to drive sustainable long-term growth and attractive returns, capitalize on new opportunities associated with 5G and execute our vision of making wireless communication possible everywhere.”
Like Crown Castle’s Jay Brown, Bartlett says that American Tower’s strategy also fits the small-cell market. At the REITweek conference in June, Bartlett said, “What we have found is that, given our complement of markets that we are in and the over 200,000 sites that we have, the better place for us to be able to drive value creation or return on investment is just replicating the model that we’ve built in as many as markets has made sense. And as 5G evolves, we’ll see the need for densification and small cells, which will play a major role, particularly in very dense urban markets — New York, Boston, Philadelphia — where you can’t put a large site into a very dense urban market.”
American Tower’s $3.5 billion acquisition of InSite Wireless last December has bolstered the company’s small-cell business. InSite’s distributed antenna system (DAS) and small cell division specializes in the design, installation, operation and maintenance of shared wireless infrastructure solutions that enhance the quality and capacity of wireless voice and data services in public facilities and complex environments, according to American Tower.
Mike Harrington is a contributing editor.