These are heady days for American Tower, the world’s largest owner of wireless infrastructure. The rapid, continuing rollout of 5G technology this year has spurred a tower leasing and building boom in rural and suburban areas and a small-cell boom in dense urban areas.
With the adoption of 5G technology, American Tower saw its share-price surge 12.7 percent during the past three months. The question is: Will the real-estate giant be able to continue its winning streak rolling after the 5G fervor starts to ebb?
Speaking at the REITweek 2021 Investor Conference, held on June 9th, Tom Bartlett, American Tower chief executive officer, touted his company’s successful business model and talked about ways to replicate its successes.
Bartlett says his company has a roadmap for building 40,000 to 50,000 sites, worldwide, over the next three to five years. “We generate double-digit ROIs right out of the gate with that kind of investment. There is no other model that will generate those kinds of returns, right out of the gate — and then we’ll be able to enjoy the growth in those markets as carriers and other customers continue to come on those sites.”
During the first quarter of 2021, the company generated about 57 percent of its revenue from the U.S. and Canada with the remainder coming from Latin America (16 percent), Asia-Pacific (13 percent), Africa (11 percent) and Europe (2 percent). In addition, the company generated 1 percent of total revenue from services.
The U.S. nationwide 5G rollout has analysts optimistic on American Tower and other communication leasing businesses. For instance, Morgan Stanley analyst Simon Flannery recently hiked his price target, citing tower and carrier commentary in recent months that has increased his confidence in the 5G leasing cycle. Flannery expects the so-called “Big three” carriers to become increasingly active in their 5G mid-band network deployments while Dish also builds out its network.
Just before last Christmas, American Tower received its biggest present of 2020, closing on its acquisition of InSite Wireless Group for the sum of $3.5 billion. The purchase was funded by a combination of cash on hand and revolver borrowings.
Bartlett, in a prepared statement last December about the Insite acquisition, said: “As 5G densification initiatives in the United States accelerate and network deployments in international markets continue, we believe we are well positioned to generate attractive, sustainable long-term growth, including on these new sites, while playing a key role in enhancing mobile broadband connectivity,” he said. Meanwhile, American Tower expects the assets acquired from InSite to generate $150 million in property revenue and approximately $115 million in gross margin in 2021.
“And as 5G evolves,” Bartlett said at the REITweek conference, 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.”
Bartlett maintains that American Tower’s strategy also fits the small-cell market. “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.”
Meanwhile, American Tower is gazing up at a future potentially higher than the sky. “Satellites, I think will be playing a role, but given a lot of the attributes of the satellite technology, it will be best to use in those areas where the tower technology just isn’t economically to be on the oceans in your very, very rural areas around the world.”
One challenge of satellite communications, Bartlett says, is that people and satellite moving at the same time creates havoc with being able to provide a high-quality signal—and it’s also expensive. “So, you go back to the quality of service and the pure economics, and there is nothing like that 150-foot, 175-foot tower.”
Mike Harrington is a contributing editor