The mood was positive during second quarter conference calls of SBA Communications, Crown Castle International and American Tower, but not just because the last quarter was successful. Tower company executives are particularly hopeful that the good times will continue to roll well into the future.
SBA continued to experience strong leasing demand in the second quarter. The majority of amendments, which came from AT&T, Verizon Wireless and Sprint, accounted for almost 80 percent of the domestic leasing revenue added in the quarter. With a strong leasing backlog, the tower company expects the third quarter to be good, as well.
“We had an excellent second quarter, one of the best that I can remember. All of the factors that materially contribute to our financial results came together positively in the second quarter and ahead of our expectations,” Jeffrey Stoops, president and CEO, said, according to a Seeking Alpha transcript. “Probably more exciting is our belief that these factors will continue to combine positively for the rest of 2012 and into 2013.”
SBA’s organic growth was spurred by strong wireless capital expenditures and network upgrades. Although there was little activity by T-Mobile or Clearwire, AT&T and Verizon continued their LTE rollouts driving amendment activity, and Sprint picked up its network provision activity. Stoops expects the trend to continue.
“We have a lot of runway left around amendments. Between AT&T, Verizon Wireless and Sprint we have commenced cash revenue recognition from 4G or network provision amendments on less than 25 percent of their existing sites through the end of the second quarter. There is a long way to go,” Stoops said. “Our backlogs of leases and amendments are very strong and we have clear visibility to continue strong organic growth through the rest of this year and well into 2013.”
American Tower said in its second quarter earnings call that it will experience “consistent incremental demand” for tower leasing in the United States well into the future.
“Each of the four largest U.S. wireless carriers have publicly committed to nationwide LTE network coverage between the 2013 to 2015 timeframe. Once full coverage is achieved carriers will use cell splitting and site augmentation in two phases, which will further enhance coverage. Those phases will continue many years into the future,” said James Taiclet, American Tower CEO, in a Morningstar transcript.
Even with the predictions of a rosy future, Taiclet said the tower company takes measures to guard against dips inn revenue growth.
“For example, we have established a comprehensive master lease agreement structure with two of our largest customers in the United States, which seek to eliminate our exposure to any significant potential future downside risk with those two customers. These new MLAs typically include 10-year contract extensions and they eliminate all churn or decommissioning risk,” Taiclet said.
Crown Castle International exceeded the high-end of its Outlook for site rental revenue in the second quarter, seeing an increase of 15 percent in leasing activity as carriers filed amendments to upgrade their networks. Crown also expects the good times to keep on rolling, increasing its full-year 2012 outlook for site rental revenue by $43 million, site rental gross margin by $36 million and adjusted EBITDA by $63 million.
“We are enjoying unprecedented visibility into future revenue growth as evidenced in our increased guidance,” Ben Moreland, Crown president and CEO, said on the second quarter earnings call. “As the largest single provider of sites to the four largest wireless carriers in the United States, we expect to receive an outsized benefit from the significant 4G upgrade activity from all of the carriers, which we believe is reflected in our current results and updated outlook.”