American Tower has seen organic growth of more than 7 percent this year and the good times will keep on coming in 2019 and beyond, Igor Khislavsky, senior director, investor relations, said in an interview with Batya Levi, analyst with UBS Securities, at the UBS 46th Annual Global Media and Communications Conference 2018, Tuesday in New York City.
“The trends that are supporting our growth levels this year are inherently multi-year in nature. For example, AT&T is doing one-touch with FirstNet, and they are one-third of the way through,” Khislavsky said according to Seeking Alpha transcript. “From that respect, our expectation is there will be continued strong growth in the United States.”
American Tower has been growing at industry leading rates all year, because the tower company has been able to effectively monetize the growth of all four carriers.
“We spend considerable effort internally to model out the builds carrier by carrier. We expend quite a bit of manpower to be in position to capture the activity in the marketplace,” Khislavsky said. “If you look at, not really, this year, but the last couple, we have consistently had the lowest churn rates in the industry. We have consistently had solid growth rates that lead the pack. That is a reflection of our positioning.”
While the tower company has had much higher volume in 2018, the activity isn’t fundamentally different from previous years. Amendments still account for 70-75 percent. Carriers are putting more equipment, because of the number bands that are being deployed simultaneously, increasing the loading, the weight and the size of the footprint, as well as the amount paid to American Tower.
“We have been on the historically high end of the cost for an amendment,” Khislavsky said. “In the past, amendments have ranged from $200 up to $1,500. We have been in the $1,000 ballpark.”
Khislavsky was upbeat about the pending Sprint/T-Mobile deal. American Tower is “net neutral to net positive,” because the carriers have promised a lot of capex spend building out 5G if the deal goes through.
“The question is whether the competitive dynamics of having three carriers rather than four encourages incremental spending across the board,” Khislavsky said.
The overlap between the two carriers in American Tower’s tower portfolio is 4 percent of total revenue today and by the time the leases expire in three years, it will be lower as the business continues to grow. Khislavsky promised a “constructive” approach to potential churn.
“Concerning the 25,000 [net] sites that will be decommissioned, we are making sure we are offering them as much flexibility as possible from a contractual perspective,” he said. “We want to achieve a happy medium in terms reducing some of the churn risk, capturing some of the upside of some of the deployments they are planning.”
CBRS Offers Opportunities
On a lighter note, Khislavsky discuss American Tower’s involvement in the Citizens Broadband Radio Service, CBRS Alliance and its investment in Federated Wireless which is developing the technology for spectrum sharing. CBRS could potentially allow the addressable indoor wireless market to move beyond the major venues and increase American Tower’s market share.
“So we’re exploring that. It’s early stage at this point, but we’re excited about the opportunity,” Khislavsky said. “It could be a way for us to grow our indoor business from the 2 percent to 3 percent that it represents today and maybe to a slightly higher level.”
Another spectrum opportunity for wireless is in C-Band, which the FCC is currently investigating. Khislavsky said the mid-spectrum is interesting because it combines propagation characteristics of the millimeter wave spectrum with characteristics of lower band spectrum.
“I think our view is that a significant portion of that spectrum ultimately gets deployed on macro sites, which should benefit us, but that’s probably a couple years out,” he said.
American Tower Eschews Fiber-backed Small Cells
Small cells are the hot topic right now. However, the long-term return on investment involved in fiber-backed outdoor small cell business still doesn’t make sense for American Tower, because of the upfront cost to acquire the fiber, the opex costs and high levels of churn that enterprise fiber businesses. The towerco prefers the returns that it is getting in macro towers internationally.
“There are pretty decent returns in that type of business, but the numbers don’t justify us deploying that incremental dollar or capital versus the other options that we have,” Khislavsky said. “We can deploy capital not only in the U.S. but also throughout the 17 markets in which we operate.”