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SBA Communications Reports Strong Third-quarter Results

By Mike Harrington

A week after wireless infrastructure giants American Tower and Crown Castle both reported strong third-quarter results, SBA Communications, today also reported robust third-quarter numbers.

The three publicly traded REIT (real-estate investment trust) tower titans have all been profiting greatly from this year’s 5G wireless communications network building boom. Further, the three firms expect 2022 to be a banner year with the deployment of 5G wireless communications networks’ extended opportunities to create value for shareholders.

Jeffrey A. Stoops, president and CEO of SBA Communications.

“We had another good quarter, exceeding our own expectations, and we continue to see very strong levels of carrier activity,” said Jeffrey Stoops, SBA Communications president and CEO today in a public forum. “The increased level of U.S. wireless carrier activity we experienced last quarter continued in the third quarter. U.S. wireless carrier activity continued at materially higher levels compared to the beginning of the year,” said Stoops.

Highlights of SBA’ third quarter included a net income of $47.8 million or 43 cents per share; average funds from operations (AFFO) per share increased 13.9 percent over the third quarter of 2020; and total revenue of $589.3 million, a 12.7 percent growth over the prior year period.

“Domestically, we produced record services revenue, surpassing our second-quarter record, and our leasing and services backlogs reached new multi-year highs at quarter-end,” Stoops said. “While we expect some revenue recognition from third-quarter leasing activity by year-end, contributing to our increased full-year 2021 Outlook, we anticipate the substantial majority will begin to be recognized in 2022. Based on our backlogs and conversations with our customers, we expect elevated domestic leasing activities to continue through 2022 and perhaps beyond.”

SBA’s revenue in the third quarter of 2021 was $589.3 million compared to $522.9 million in the prior year period, an increase of 12.7 percent. Site leasing revenue in the third quarter of 2021 of $535.5 million was comprised of domestic site leasing revenue of $426.8 million and international site leasing revenue of $108.7 million. Domestic cash site leasing revenue in the third quarter of 2021 was $415.4 million compared to $389.6 million in the prior year period, an increase of 6.6 percent. Site development revenue in the third quarter of 2021 was $53.8 million compared to $36.2 million in the prior year period, an increase of 48.8 percent.

Brendan Cavanaugh, CFO of SBA Communications.

“SBA had another great quarter, with financial and operating results ahead of expectations, and continued strong momentum into the end of the year,” Brendan T. Cavanaugh, CFO of SBA Communications said today.

“Domestic operational leasing activity or bookings, representing new revenue placed under contract during the third quarter, was at a similar level to the second quarter, which had represented the higher quarterly level since 2014,” Cavanaugh said. “Even with this high level of execution, our domestic new lease and new amendment application backlog continued to grow during the quarter — and finished the quarter higher and at a new multiyear high. … The big four carriers of AT&T, T-Mobile, Verizon and Dish represented 96 percent of total incremental domestic leasing revenue during the quarter.”

Site leasing operating profit in SBA’s third quarter was $436.8 million, an increase of 10.9 percent over the prior year period. Site leasing contributed 97.2 percent of the SBA’s total operating profit in the third quarter. Domestic site leasing segment operating profit in the third quarter was $361.5 million, an increase of 10.6 percent over the prior year period. International site leasing segment operating profit in the third quarter was $75.3 million, an increase of 11.9 percent from the prior year period.

 

Jay Brown, CEO of Crown Castle

On Oct. 20, Jay Brown, Crown Castle’s CEO, revealed his company’s third-quarter results. The company said it would  increase its annualized stock dividend by approximately 11 percent. Brown also said that Crown Castle expected a 20 percent increase in core leasing activity for its towers segment for full year 2022 when compared to projected 2021 levels — approximately 50 percent higher than the trailing 5-year average for its towers business.

“The dividend increase is supported by the expected combined growth in 2021 and 2022, and represents the second consecutive year of dividend growth that meaningfully exceeds our long-term growth target of 7 to 8 percent per year,” Brown said. “We are generating this level of growth as a result of a robust tower leasing environment, which we expect will continue in 2022, consistent small-cell install volumes in 2021 and 2022 and stable fiber solutions growth, which combine to produce expected average funds from operations per share growth at the high end of our long-term target.”

Brown also said, that as of Sept. 30, Crown Castle had 40,000 towers with an average number of tenants of 2.3 per tower; and 80,000 route miles of fiber-optic cable. It reported that the market value of all of its outstanding common shares was $74.9 billion.

On Oct. 28, American Tower reported that for the third quarter of 2021, its revenue increased 21.9 percent to $2.454 billion, with property revenue increasing 19.2 percent to $2.369 billion. The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 19.5 percent to $1.552 billion, and its consolidated AFFO increased 13.3 percent to $1.158 billion.

Tom Bartlett, CEO of American Tower

“We saw strong demand trends across our global business in the third quarter, supported by carrier investments in network densification, new network technologies and spectrum deployments,” said Tom Bartlett, American Tower’s CEO. “As a result, we continued to help our customers deliver critical connectivity to billions of people across the world while generating double-digit growth in both AFFO per share and our common stock dividend.

“We continue to view mid-band spectrum, which includes the recently auctioned C-band and the two and a half gig band currently being deployed in the U.S., as the workhorse of the true 5G experience, and we believe to be the fundamental enabler of the immersive next-generation 5G applications and use cases that are set to emerge as coverage improves and advanced devices penetrate the market. Importantly, we continue to expect the propagation characteristics of the sub-6 gig frequencies, compared to traditionally deployed mobile spectrum to necessitate significant network densification over the long-term supporting a multiyear period of strong growth on our tower sites. We’re seeing the leading edge of this activity in the U.S.”

Mike Harrington is a contributing editor.

Infrastructure Investors Driving up Value of Towers

By J. Sharpe Smith, Senior Editor

The marketplace for tower assets continues to be very competitive on a global as well as domestic basis, in part, because of the increased involvement of long-term investors, SBA Communications President and CEO Jeffrey Stoops said the recent earnings report. Investors, such as infrastructure funds pension funds, insurance companies and sovereign wealth funds, are attracted to industry’s with low competition and high barriers to entry, and they also invest for the long term.

“In the last 12 months, these funds have outbid strategic investors for a number of communications assets around the globe,” Stoops said. “Now why is that important? Because I know that the assets being purchased by these funds at much higher multiples are nearly of the same quality as ours.”

In an interview with AGL eDigest, separately, Tarpon Towers CEO Ron Bizick agreed with Stoops, saying towers are attractive to infrastructure funds, because they are stable, long-term businesses, with steady cash flows.

“It is not surprising that pension funds and infrastructure funds would gravitate toward that stability,” Bizick said. “They accept much different returns on their investments, compared with private equity. They can underwrite returns in the high single digits or low double digits, which is a far cry from the many of the traditional private equity funds in the United States.”

Infrastructure funds have enormous amounts of money, which they invest over a much longer period of time. Their deals can be written for less in annual returns.

MacQuarie Infrastructure and Real Assets, for example, has been investing in cell towers, along with bridges, roads and tunnels, among other things, for more than 20 years.

“We set out to offer investors a new kind of investment.  One with long-term horizons offering sustainable, predictable returns and low correlation to traditional asset classes: infrastructure,” the firm’s web site said. “Today we have an unrivalled track record in infrastructure asset management.  We take a responsible, long-term approach to building sustainable value throughout the investment cycle by investing wisely, managing with discipline and selling at the right time.”

SBA’s Solid Q4, Catalysts Provide Momentum for 2018

SBA Communications reported site leasing growth of 4.9 percent in the fourth quarter 4th Quarter 2017 with  $414.1 million in revenues. Domestic site leasing revenue accounted for $333.5 million and international site leasing revenue totaled $80.5 million.

“We ended the year with solid results and strong momentum as we move into 2018,” commented Jeffrey A. Stoops, president and CEO.  “In 2017, we saw steady activity across all our markets and we executed well, with results exceeding our plan and initial guidance.”

As far as the outlook is concerned,  all four major U.S. wireless carriers are expected to be active through 2018, and FirstNet activity is growing and has begun to produce revenue, Stoops noted.  “We are optimistic that the anticipated improved organic leasing activity and continued opportunistic capital allocation will keep us on track to achieving our goal of $10 or more of AFFO per share in 2020,” he said.

Matthew Niknam, analyst, Deutsch Telecom Research, wrote that his firm maintains a positive outlook for the towers. “SBAC’s 4Q17 results showcase the industry’s optimism around increasing activity across all four national carriers. The biggest swing factors this year (and drivers of potential upside to guidance) are AT&T’s FirstNet deployment and Sprint’s accelerating capex (including a ~20% increase in macro sites over the next two years).”

SBA added 1,165 sites to its portfolio during the fourth quarter and met its portfolio growth goals for the year, growing by 6.5 percent. It expects to again achieve its portfolio growth goals of 5 percent to 10 percent in 2018.

“We have moved into 2018 with solid momentum and the opportunity to build on the momentum we have,” Stoops said. “We are off to a fast start in terms of portfolio growth.”

SBA Reports Strong Q2 2017 Results, Bright Future

By J. Sharpe Smith

For the second quarter in a row, SBA Communications saw an increase in new leases in Q2, 2017, although the majority its business came from amendments. Domestic cash site leasing revenue was $325 million, compared to $312.8 million in Q2, 2016, an increase of 3.9 percent year over year.

Organic leasing activity came primarily from refarming of 2G and 3G spectrum to LTE, as well as in the AWS-1 and 700 MHz bands. The tower company has also begun to see 600 MHz applications, which are the result of the Broadcast Incentive Auction.

“The second quarter was another steady one for SBA,” Jeffrey A. Stoops, president and CEO. “U.S. leasing activity was up over the second quarter of last year as well as sequentially from the first quarter. Portfolio growth was also up in the second quarter over first quarter levels, reflecting timing of opportunities.”

Stoops said SBA is beginning to see specs and examples of how FirstNet is going to look, although the public safety deployment will not have an impact on 2017 results.

“At this point we believe AT&T will roll this out through its turf vendors, which is how it has done much of its deployments in the past,” he said. “That is the first level of agreements and contracts that have to be worked through. As the turf vendors execute the plan after a particular state opts in, then we will receive applications and will be in the position to move forward. We are getting increasingly closer to that point.”

FirstNet will be a prominent component of future wireless infrastructure activity, according to Stoops, along with deployments in the AWS-3, WCS, 2.5 GHz, and 600 MHz spectrum.

“Looking ahead, we continue to feel good about the environment in which we are operating. Our customers have many things to accomplish in the coming years,” he said. “Although the deployment has not yet officially begun [on FirstNet], all indications are that we are getting closer to the commencement of a large wave of infrastructure associated with this project.” As of now, seven states have opted in.

During Q2, 2017, SBA purchased 228 communication sites and the rights to manage 37 additional sites for $124.2 million, which it paid for with 487,963 shares of stock and $60.9 million in cash.  SBA also built 96 towers during the quarter. As of June 30, 2017, SBA owned or operated 26,562 communication sites: 15,947 domestic and 10,615 international.


 

Organic Leasing Growth Highlights Q3 for SBA

By J. Sharpe Smith

November 5, 2014 — SBA Communications has experienced unparalleled organic leasing activity in 2014, well above expectations in terms of revenue added per tower, Jeffrey Stoops, president and CEO, said during the company’s third quarter earnings call. Domestic site leasing revenue for the quarter grew to $283 million from $252 million year over year.

Domestic tower cash flow for the third quarter of 2014 was $228.8 million compared with $199.2 million in the year earlier period, an increase of 14.8 percent.

“Our organic leasing activity, which has been particularly strong this year and materially ahead of our expectations, was once again the reason for our outperformance [in the third quarter],” Stoops said. “We are experiencing strong demand across our portfolio, both domestic and international. We are seeing the benefits of the demand in both our leasing and services segments.”

Although SBA expects strong leasing activity for years to come, the 2015 forecast will return to growth more similar to 2011 to 2013, Stoops said. Similar to the other public tower companies, SBA is factoring in the decommissioning of iDEN sites and possible terminations from MetroPCS, LEAP and Clearwire, which represent $80 million in annual revenues. SBA expects to retain at least a third of that $80 million in the long term.

The 2015 outlook for site leasing revenue, tower cash flow, adjusted EBITDA and AFFO includes an assumed negative impact of $16 million associated with 2015 iDEN lease terminations.

“We expect the continued benefits of solid leasing activity for the next few years as carriers build out their initial [LTE] footprints to be followed by capacity spending as consumer adoption increases. Our network speed and quality are now and will remain a priority,” Stoops said.

Leasing activity levels at AT&T and Verizon continue to be high, representing the majority of new business for SBA, which also benefited from continued contributions from Sprint’s Network Vision project and now from the carrier’s 2.5 GHz build out. T-Mobile’s 4G network upgrade activity has been accelerating, and, overall, backlogs continue to be healthy.

SBA reported that its services business continued to be strong in the third quarter, with Sprint and T-Mobile serving as the primary customers, with an increase in activity from Verizon. In Q4, services are expected to remain strong, resulting in an increased outlook. Services outlook for 2015 is strong but tempered somewhat by uncertainties concerning Sprint’s 2.5 GHz build.