November 3, 2014 — After several quarters that were dominated by new leases, amendments accounted for two-thirds of the commenced new business activity domestically at American Tower in the third quarter, because of voice-over-LTE (VoLTE) rollouts, according to Tom Bartlett, company CFO.
“We saw very active amendment activity, which reflects additional equipment being placed on towers by our customers, in part driven by VoLTE rollouts,” Bartlett said. “As a result of the continuing strong new business trends in the U.S. we are raising our expectations for organic core growth in the United States to 9.5 percent for the full year.”
The two leading national carriers in VoLTE are Verizon and AT&T. Verizon is just finishing coverage and will be launching the product in the next year. AT&T says a VoLTE commercial launch should occur within the next year. T-Mobile has been working on VoLTE, according to Taiclet, but the towerco has yet to hear from Sprint on its VoLTE plans.
“So, over the course of 2015, I think you will see more advertising for this kind of product, more handset deployment that includes the technology that’s needed. And so it will take a few years to roll it all out, but it looks like it’s starting in 2015,” he said.
In September, Verizon quietly launched a VoLTE service branded Advanced Calling 1.0, which got high marks for clarity, according to Mark Lowenstein, a wireless analyst and consultant.
“The voice quality, when you’re talking with someone who also has a VoLTE device, is fantastic,” he wrote. “It sounds like the person is right next to you, and there is not the slight latency or over-talk that sometimes happens on cellular calls. In an area with good cellular signal, VoLTE sound is better than landline, regular cellular and VoIP calls.”
Verizon and AT&T announced on Nov. 3 that they are working on enabling VoLTE-to-VoLTE connections between Verizon Wireless and AT&T customers, which is expected to be achieved in 2015.
“Interoperability of VoLTE between wireless carriers is crucial to a positive customer experience,” said Krish Prabhu, president, AT&T Labs and Chief Technology Officer, AT&T. “We are pleased to work with Verizon on this initiative. We continue to work with others in the industry on similar collaborative arrangements and hope to see similar collaboration across the industry in the near future.”
Strong Capex Marks Q3
Overall, elevated carrier capex spend led to a strong third quarter for American Tower as its domestic rental and management revenue grew more than 25 percent with core growth of around 28 percent. Domestic organic core growth was more than 9 percent, which consisted of 3 percent from escalations and more than 8 percent from existing site revenue growth less 1.6 percent from tenant churn.
“This organic core growth reflects our tenants continued aggressive network investments in 4G,” Barlett said.
With all of the projections that carriers will increase capex devoted to network densification and small cells, analysts questioned whether growth is going to slow in the coming years.
While not giving guidance for 2015, American Tower officials expressed confidence that the tower company could maintain 6 percent to 8 percent domestic core organic growth during the five-year and 10-year time horizons. Taiclet said American doesn’t see picocells, microcells or Wi-Fi to be a threat to its core business, which is in rural and suburban areas with fewer than 5,000 people per square mile.
“We do think that because of the consistent technology trends, the strength and size of the mobile operators, and also the fact that in the United States 85 percent of the people have to be served over that time, we are not going to see a tremendous fluctuation in our growth rates anywhere,” he said.