American Tower and Crown Castle International executives will speak at RBC Capital Markets’ invitation-only online conference, “Global Tower and Wireless Infrastructure Summit,” on Sept. 28. RBC Capital Markets is part of Royal Bank of Canada. According to the bank, it is one of the largest banks in the world and the fifth-largest in North America, as measured by market capitalization.
The online conference has scheduled the chief financial officer of Crown Castle International, Dan Schlanger, to speak at 3:20 p.m. Eastern time. Crown Castle will make available on its website a live audio webcast link for Schlanger’s presentation, and the company will archive it for replay. According to Crown Castle, the company owns, operates and leases more than 40,000 cell towers and about 80,000 route miles of fiber-optic cable supporting small cells and optical fiber services in every large U.S. market.
The executive vice president of American Tower, Oliver Puech, who also is president of the company’s Latin America and Europe, Middle East and Africa (EMEA) business, is set to speak at 4 p.m. Eastern time. American Tower will make available on its website a live webcast link for Puech’s presentation. According to American Tower, the company is one of the largest global real estate investment trusts, and it is an independent owner, operator and developer of multitenant communications real estate with a portfolio of more than 214,000 communications sites.
UPDATE – Sept. 24, 4 p.m.
Alejandro Ochoa, CEO of Tower One Wireless, has been scheduled to participate in the RBC Capital Markets summit on Sept. 28 at 1:35 p.m. Eastern time, according to a statement from the company. A live webcast link of the presentation will be available on the company’s website under the investors section or here: https://kvgo.com/rbc/tower-one-sept-2021.
“Ochoa will present the outlook for wireless infrastructure in Latin America,” the statement reads. “Tower One’s principal business is to build, own and operate multitenant wireless telecommunications infrastructure in Latin America. Tower One leases space on its towers to mobile network operators. The company is focused on the build-to-suit tower industry whereby a long-term lease is secured with a tenant prior to building a tower. The company owns and operates towers in Latin America — Colombia and Mexico — with a combined population of about 160 million people.”
August 30, 2016 — RBC Capital Markets remained overweight on the public tower companies, including American Tower and SBA Communications, with a “slightly greater weighting” toward Crown Castle International in the firm’s Mobile Infrastructure Recap for the second quarter.
“Towers are our only coverage sector with identifiable catalysts for (modest) revenue acceleration driven by various network activities at AT&T and T-Mobile, though slowing activity at Verizon could mute this trend somewhat,” wrote Jonathan Atkin, RBC analyst.
RBC’s preference for CCI is driven in part by the towerco’s involvement in U.S. outdoor small-cells and prospects for increasing tenancies from AT&T and T-Mobile. The firm also believes CCI’s dividend will increase the shareholder base.
Additionally, S&P, Dow Jones and the MSCI U.S. REIT Index have made rules changes concerning REITs, which will have a favorable impact both American Tower and CCI.
“We believe the REIT GICS creation later this week will act as a structural catalyst favoring the tower REITs,” Adelstein wrote. “AMT and CCI, each of which are top-five REITs by market capitalization, have up to now not been included in the two most heavily benchmarked REIT indices (FTSE/NAREIT and RMZ), yet will be included in the new REIT GICS category, which we believe could drive index-related buying.”
Site Leasing and Organic Growth
RBC predicted a small increase in tower leasing in 2016 compared with 2015. While macro-site deployment will be down, activity will increase in macro-overlays, small cells and carrier aggregation.
“Verizon and T-Mobile should remain active, with each contributing slightly fewer macro-site additions vs. 2014, offset by greater macro-overlay activity and increased small cell efforts,” Atkins wrote. “AT&T should remain inactive on macro-site deployments but noticeably more active on site overlays. Sprint remains mostly dormant on macro site additions, focusing on carrier aggregation and BTS small-cell deployments.”
RBC predicted increased overall activity at T-Mobile in 2017 and possibly AT&T, with Verizon posting less macro-site and more small-cell activity.
March 10, 2016 — In contrast to Wells Fargo Securities, which downgraded the tower sector from outperform to market perform last week, RBC Capital Markets continues to overweight tower stocks based on “historically attractive valuations and prospects for a modest second half of 2016, followed by 2017 acceleration in leasing.”
In its Wireless Network and Site Leasing Update, dated March 19, RBC projected a “modest uptick” in leasing in the second half of this year compared with 2015. Leasing catalysts include amendments by AT&T, with some contributions by T-Mobile and Verizon driven by “project/budget seasonality, spectrum refarming, and activity in the AWS-3 band.”
“Verizon and T-Mobile should remain the most active leasing contributors, as they were during 2015. Each should add slightly fewer macro sites vs. 2014 but increase their overlay activities and small-cell efforts,” wrote Jonathan Atkin, RBC analyst. “AT&T should remain mostly inactive on macro-site deployments but be noticeably more active on site overlays.” Sprint, however, remains a no-show on the site development radar, he added.
Details on 2016/2017 Site Activity
While AT&T’s 2016 site additions should remain below the 1,000, Atkin wrote, the carrier will touch more than 30,000 of its 66,500 sites with LTE carrier-additions (1900 MHz) or overlays (WCS, AWS-3). Up from 2015, but down from 2014, according to RBC.
T-Mobile will continue its 700 MHz coverage buildout with spectrum refarming at 1900 MHz and macro-site densification. Other areas of activity include initial AWS-3 overlay and small-cell densification at 5 GHz. Continued AWS-3 overlays, and 700 MHz densification in metro areas should highlight 2017.
Verizon’s macro site deployments in 2016 will be less than 2015, but it will continue refarming on 15,000 sites at 1900 MHz band and increase its small-cell deployments.
Sprint’s focus areas included LTE additional-carrier deployments at 1,900 MHz, conclusion of 800 MHz overlays, carrier aggregation at 2.5 GHz, and metro-specific projects.
“Earlier efforts [at Sprint] around organic small-cell deployments, BTS monopoles, and new municipal structures have made little apparent progress, though we believe Mobilitie has hired more than 700 staff to pursue permitting work,” Atkin wrote.
June 4, 2015 — The tower industry appears to be taking a breather from its torrid pace of last year. But RBC Capital Markets expects it to pick up again next year.
“Despite a slower 2015 leasing environment in the United States and few apparent near-term operating catalysts, we believe the 2016 set-up for tower stocks is favorable,” Jonathan Atkin, senior analyst, wrote in a Tower Update.
The firm reduced its leasing forecast from 18,000 to 16,000 broadband equivalents (BBEs) for 2015, based on lower expectations for AT&T and for near term deployment on WCS spectrum.
“AT&T completed 3,700 site additions during 2014 (630 during 4Q14), with slowing trend (115 added during 1Q15). The carrier continues LTE carrier additions (targeting more than 18,000 carriers during 2015). We believe earlier target of [in excess of] 8,000 WCS deployments is not achievable and hence have reduced our overlay estimate,” Atkin wrote.
Sprint activity remains slow in most regions, with a few exceptions. Ongoing projects include LTE deployments at 2.5 GHz and 800 MHz, CDMA at 800 MHz and LTE second-carrier deployments at 1,900 MHz.
Verizon, T-Mobile Primary Leasing Drivers in 2015
Verizon should be more active on small cell deployments 2015 and outdoor DAS deployments will be flat. A decline in LTE deployments in the AWS band this year, should be offset by 1900-MHz LTE deployment.
“LTE overlays continue at T-Mobile, with new 700-MHz coverage sites ramping,” Atkin wrote. “We expect MetroPCS CDMA shut-off at mid-year, with decommissioning largely complete by YE15. The company added 113 new sites in 1Q15.”
2016: Improved Deployment Prospects at AT&T, Sprint
RBC is optimistic about 2016, primarily because of expectations that AT&Y will resume infill activity and begin overlays in the WCS or AWS-3 bands. Additionally, Sprint is expected to densify its networking using macrocells, helping all tower companies, and to deploy small cells, helping Crown Castle.
“Site additions [at Sprint] should ramp in the second half of 2015 as the company embarks on infill coverage, with activity likely to accelerate during 2016-2017, in our view,” Atkin wrote.
November 20, 2014 — AT&T’s announced Y/Y reduction in capex during 2015 is consistent with our macro tower leasing outlook which already projects a decline next year. From a network perspective, the AT&T reduction appears inconsistent with RootMetrics data suggesting a recent degradation in quality. Amongst towercos, American Tower and SBA Communications expectations contemplate a modest U.S. leasing slowdown in 2015, but Crown Castle International’s 2015 guidance strikes us as potentially aggressive. American Tower could benefit incrementally from AT&T’s acquisition of Iusacell (2 percent exposure).
• AT&T’s recently announced Y/Y reduction in capex during 2015 (to $18B, from ~$21B in 2014) synchs with our earlier research suggesting a slowdown in site leasing activity during the next several quarters. We project a Y/Y slowdown in wireless capex from $11.5B in 2014 to $10B in 2015.
• Although AT&T mentioned the near-completion of certain network milestones, we believe the reduction may be driven the desire for financial flexibility around the U.S. AWS-3 spectrum auctions and Iusacell acquisition.
• Our compilation of RootMetrics network quality scores across top-25 metros suggests that AT&T has seen some degradation of performance relative to its peers. Thus, from a network-quality perspective, we find AT&T’s capex reduction surprising (which leads us to suspect financial flexibility as a factor).
• Verizon: In contrast to AT&T, we expect Verizon’s capex levels during 2015 to be approximately equal to 2014 levels at ~$17B (with ~$11B wireless), with a continued emphasis on network densification through cell-site additions and small-cell deployments.
• At Sprint and T-Mobile we believe there is greater potential variance to our wireless capex estimates, but our current 2015 projections are $5.2B and $4.64B, vs. 2014E levels of $5.26B and $4.37B. T-Mobile’s initiatives include the ongoing overlay and new site deployments at 700 MHz, with AWS-3 overlays a likely emphasis in 2H15.
• Our earlier cell site forecasts already anticipate a slowdown of new macro sites (from roughly 3,600 in 2014 to 1,500 2015. We anticipate AT&T WCS overlays will cover approximately 12% of AT&T’s cell sites during 2015, benefiting all three tower operators.
• While we believe this reduction is already reflected in expectations for American Tower and SBA Communications, we note that Crown Castle’s 2015 guidance assumes a modest increase in leasing activity on its macro sites in 2015, so the AT&T slowdown could represent a potential headwind.
• AT&T’s announced acquisition of Iusacell could benefit American Tower, which has 2 percent exposure to this carrier and stands to benefit from the deployment of Iusacell’s unused AWS band.
Jonathan Atkin is an analyst with RBC Capital Markets (415) 633-8589; [email protected]