American Tower had strong growth in the third quarter, and it projects continued growth well into the future, based on several trends.
American Tower saw increases in adjusted EBITDA of 15.1 percent to $350 million in the third quarter, with an increase in operating income of 19.2 percent to $213.4 million. Cash provided by operating activities also increased 7.6 percent to $258.2 million
American extended customer contracts during 2010, and negotiated a master lease agreement with one of its large U.S. customers during the third quarter, which resulted in an increase in rental and management segment revenue of 16.1 percent to $499.8 million. The average lease term was extended to 10 years with a multi-year minimum commitment for additional leasing and amendments.
CEO Jim Taiclet said the company’s future plans are based on optimistic assumptions for both domestic and international markets. American expects advanced data deployments to continue to drive demand for infrastructure at levels commensurate with previous years. Wireless demand in the international market will also drive expansion of the infrastructure.
“Consumers love [data]. Just as nearly everyone subscribed to voice service in the last decade, over the course of the current decade we believe everyone will subscribe to high-speed mobile data service, too,” Taiclet said. “As a result of this adoption curve, increasing data use per user and higher transmission speeds, mobile data consumption will double every year for at least the next four years.”
The surge in data demand and increasing revenue and operating profits are leading U.S. carriers to launch robust 3G and 4G voice and data services, according to Taiclet. For example, AT&T announced service revenue growth in the third quarter of 10 percent, three-fourths of which was driven by data. The carrier’s year-to-date capex is up 55 percent, and it is on a pace to invest $8 billion in wireless capital expenditures.
“This will further justify ongoing investments [in wireless infrastructure] by the carriers. AT&T has shifted its investment meaningfully toward wireless,” Taiclet said.
The scenario is similar at Verizon Wireless, whose wireless service revenues in Q3 were up 8 percent, all of which was attributable to data. The carrier has also shifted its investments toward wireless with year-to-date capex up 20 percent and $8 billion projected in full-year capital expenditures.
“Our other hypothesis is that the U.S. market is so large and competitive that all major service providers must offer their customers a robust data product to be successful,” Taiclet said.