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SBA Communications CFO Brendan Cavanagh Sees Strong Revenue Ahead

By Don Bishop

The focus will be on optimizing efficiency and maximizing opportunity, said Brendan Cavanagh, executive vice president and chief financial officer of SBA Communications, speaking of the company’s objectives. Leasing and services for wireless carriers form a large part of the telecommunications tower-owning company’s business, and Cavanagh said whatever SBA can do to capture the upcoming heightened level of activity from them also is what the company would be focused on.

“Beyond that, it’s on allocation of capital, obtaining quality assets at appropriate valuations and opportunistically buying back our stock,” Cavanagh said. “The revenue opportunity will be strong in the coming years, based on what we do and the critical nature of our assets for the delivery of wireless communications.”

Cavanagh spoke via online video on Jan. 5 at the Citi AppsEconomy Conference.

“The question is around growth opportunities, right?” Cavanagh asked. “It’s difficult to be specific when you’re looking out five or 10 years. I’m not looking to provide multiyear guidance or even 2022 guidance. However, history can be a good guide.”

The SBA executive said the company would provide 2022 earnings guidance in late February. In the meantime, he spoke in general terms about the company’s prospects.

“Each wave of technology change or deployment of new spectrum bands generally requires some incidental equipment or at least changes to existing equipment at the tower sites,” Cavanagh said. “That continuous change, with the built-in escalators we have, is ultimately what drives growth.”

Escalators are clauses in contracts that raise the rental rates each year. Cavanagh said most of SBA’s rental contract escalators are set at a little more than 3 percent. He said for the last decade or so, that escalator rate has exceeded the U.S. currency inflation rate, adding to SBA’s profitability.

“The cycles of higher growth in the tower industry will typically come when all the carriers are busy at the same time,” Cavanagh said. “When you look at what period is going to be busier than another, it’s driven by how many of the carriers are active at a particular point in time. We’re headed into a period when we expect four very active carriers. We should see pretty good growth in the next couple of years.”

Growth Target

Cavanagh said SBA Communications targets 5 percent to 10 percent annual portfolio growth. He said it depends on the opportunities that the company sees. Growth is a function of the quality, the return threshold and the inventory of assets available to acquire, he said.

“You should expect that we will continue to build and buy assets as we have always done,” Cavanagh said. “We probably will prioritize the United States. Given that there is a limited supply, domestically, portfolio growth will likely come more from international and possibly new markets.”

The business model SBA has adopted, Cavanagh said, differs from the model used by some of our peers. He said it is a centralized model.

“We do almost all of the back office functions at our corporate headquarters in Florida, even if it is for South Africa or Brazil or anywhere else,” Cavanagh said. “Some things have to be handled in those markets, such as sales and marketing and certain operational aspects. But when it comes to accounting and even some of the legal work, the human resources work, you don’t need too much in those markets. You can do a lot of that, centralized, which allows us to have greater synergies and greater consistency across all of our markets.”

An advantage for SBA the comes from centralizing the back office functions, Cavanagh said, is the ability to stand up a new market and use the capability the company already has at its headquarters, in many cases, more efficiently.

Business from Dish Network

Because of Dish Network building a new mobile communications network from the ground up, almost all the business from Dish comes in the form of new collocation agreements, Cavanagh said.

“It’s not adjusting something that exists at the site like a lot of the amendment activity from the incumbents is,” he said. “There’s a little more of a delayed timeframe when starting from nothing. The timing may have a little more uncertainty because it is new and different. We haven’t experienced it in the same way, at least not for a long time.”

Cavanagh said that the activity level from Dish in signing new agreements was ahead of schedule during 2021. This means he expects SBA to have a strong 2022 and 2023. He said it is a matter of whether Dish starts construction and building out its network faster than SBA expected it would in 2022, therefore pulling more of the year-over-year growth into 2022.

“Or, does it start later in 2022, leaving something for 2023?” he asked. “I can’t tell you, absolutely.”

Foreign Investing

According to Cavanagh, SBA’s foreign assets generally are performing well. He said the company has seen organic leasing activity improve throughout the year, and he said he expects 2022 to be a solid year. The need for wireless investment in these markets remains high, he said.

“Although the pandemic caused a problem in some of our international markets early on, the impacts are limited, at this point,” Cavanagh said. “What the pandemic did is highlight the greater need for wireless connectivity and expansion in these markets. Although things change rapidly, I wouldn’t expect COVID-19 will have much of an effect on leasing in the United States and internationally.”

Edge Compute and Tower Sites

If it does materialize that tower sites are  logical locations for network edge compute expansion, Cavanagh said, SBA is well-positioned. He said there is an opportunity to use its existing investment to create a new revenue stream.

“At a minimum, there will be edge deployments,” he said. “If you just think about the introduction of 5G standalone architecture and open RAN, they have created the need to deploy IT infrastructure at the edge. It will provide densification to lower the latency.between the cell phone and cloud service.”


As his session time drew near the end, Cavanagh described the advantages that SBA has in comparison with its peers. He said one advantage was the quality of SBA’s adjusted funds from operations (AFFO) per share.

“Our AFFO per share contains the most recurring cash that is distributable,” he said, “and from that standpoint, it is the best.”

Another advantage Cavanagh SBA has, compared with its peers, is that it provides the highest exposure to the domestic tower business.

Cavanagh said that rising interest rates connected with U.S. currency inflation would affect SBA little in the next few years, despite the level of debt the company carries, because the company refinanced its debt at a low interest rate that will remain unchanged for several years.

“Our cost of debt is the lowest it has been in the company’s history,” Cavanagh said. “There’s a lot of room, there, for us. Inflation won’t actually be as impactful as some might think in the next several years.”

Bill Bates Moves From Brookfield to IHS as Senior Vice President and Chief Strategy Officer

IHS Holding, which does business as IHS Towers, has hired Bill Bates as its senior vice president and chief strategy officer. The head of IHS Towers, Sam Darwish, said that Bates’ hiring is critical to IHS and continues the momentum the company achieved following its listing on the New York Stock Exchange in October 2021. The listing, Darwish said, provided IHS Towers with access to what he called the world’s largest and deepest pool of capital.

“Bill’s appointment is an important step in this journey,” said Darwish, the company’s chairman and CEO.

Bates, who will be based in the United States, said that he has been in and around the tower business for 30 years.

“I have followed the IHS story for quite some time,” he said. “IHS’s growth profile has been very impressive. Sam and the team have built a fantastic platform coupled with world-class operational expertise.”

Bates’ background includes 20 years of experience in telecommunications. IHS Towers said Bates was instrumental in SBA Communications’ growth in emerging markets.

“He joins IHS Towers from Brookfield Asset Management, one of the largest telecom infrastructure investors globally, where he has spent the last five years investing in towers, fiber and data centers,” the company said.

IHS Towers is one of the largest independent owners, operators and developers of shared telecommunications infrastructure in the world by tower count and is the only tower company solely focused on the emerging markets, according to a statement from the company. It said the company has more than 30,500 towers in nine markets, including Brazil, Cameroon, Colombia, Côte d’Ivoire, Kuwait, Nigeria, Peru, Rwanda and Zambia.

SBA, Uniti Execs to Speak at Citi AppsEconomy Conference

SBA Communications’ chief financial officer, Brendan Cavanagh, is set to speak at the Citi AppsEconomy virtual conference at 1 p.m. Eastern time on Jan. 5, 2022. SBA said it would make available an audio recording of Cavanagh’s presentation at the company website, www.sbasite.com.

The Citi AppsEconomy Conference formerly was known as the Citi Global TMT West Conference.

According to SBA Communications, the real estate investment trust owns and operates wireless communications infrastructure including towers, buildings, rooftops, distributed antenna system (DAS) networks and small cells. It said the company has a portfolio of more than 34,000 communications sites in fourteen markets in the Americas and South Africa.

Another real estate investment trust, Uniti Group, will be represented at Citi AppsEconomy by two of its executives. Its senior vice president, chief financial officer and treasurer, Paul Bullington, and its vice president of finance and investor relations, Bill DiTullio, are set to speak at 3 p.m. Eastern time on Jan. 6, 2022. Uniti said it would make available a live webcast of the virtual event on Uniti’s website at www.uniti.com under the Investors tab. It said the webcast would be available for replay for a limited time on Uniti’s website following the presentation.

According to Uniti, the company acquires and constructs mission-critical communications infrastructure, and provides fiber-optic cable routes and other facilities in support of wireless communications. The company said that, as of Sept. 30, it owns 126,000 fiber route miles, 7.5 million fiber strand miles and other communications real estate in the United States.

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.

SBA’s Stoops Talks Dish Deal, Verizon Pact, New Leases, Sustained Growth

By Mike Harrington

Jeffrey A. Stoops, president and CEO of SBA Communications

Speaking at the Goldman Sachs 2021 Communacopia Virtual Conference today SBA Communications President and CEO Jeffrey A. Stoops said his company has optimism about 2022. He talked about SBA’s leases, its deal with Dish, its C-Band agreement with Verizon and technology that will sustain company growth into the foreseeable future.

“The big picture for why we have had sustained levels of activity should continue,” Stoops said. “The reasons are pretty straightforward: the emergence of Dish building out a nationwide wireless network. It is also the material increase in the amount of macro activity we’re beginning to see from Verizon, obviously triggered by the C-Band auction.”

Stoops said that he believes that SBA has entered the sustainable part of the 5G cycle. “All of the four nationwide customers, including Dish, are all heavily engaged with projects that are going to extend for quite some period of time,” he said. “I feel very good about this new level of activity being sustainable for the foreseeable future.”

Stoops said he is highly confident about long-range new-lease signings — although he said he doesn’t believe that SBA’s signings in 2021 will reach the level the company achieved in 2019. “I think we hit a certain level in Q2 — and that level is being sustained, with the opportunity for continued upward bias in terms of backlog and activity,” he said. “I’m talking about activity going on around the company and out in the field right now—and that really translates into lease signings. The financial results from activity will lag the benefits from that activity. So, it feels pretty good right now — as we move toward the end of the year, we’re not seeing anything from a project perspective. We’re very optimistic about 2022.”

Last month, SBA reported second-quarter results that included a net income of $152.7 million or $1.37 per share, AFFO per share growth of 15.3 percent over the prior year period, and revenue of $575.5 million. The company raised its outlook for 2021, adjusting funds from operations of $10.32 to $10.72 per share and revenue of $2.26 billion to $2.30 billion. At the time, Stoops said he believed the second quarter was the start of a multiyear business expansion for both tower builders and carriers — and that the next two quarters would increase sequentially.

“Our second-quarter performance was our best in quite some time,” Stoops said at Communacopia. “U.S. wireless carrier activity increased substantially in the quarter. Domestically, we produced record services revenue, we had the highest revenue added per tower based on signed leases and amendments since 2014, and our leasing and services backlogs were at multiyear highs at quarter end. While this increased leasing activity will benefit our reported 2021 revenue, the majority of the incremental revenue will begin to be recognized in 2022.”

Reflecting on the C-Band agreement SBA signed with Verizon in April, Stoops said he sees a lot of win-wins. Verizon paid $45.45 billion for an average of 161 megahertz of C-band spectrum nationwide in an April FCC auction, which will allow Verizon to offer increased mobility and broadband services to millions more consumers and businesses.

The C-Band is a mid-band spectrum that provides a middle ground between capacity and coverage and will allow Verizon to offer both increased mobile 5G coverage and home broadband services to millions more consumers and businesses. Because the C-Band spectrum requires new network equipment to be placed on existing towers, Verizon sought additional agreements with SBA and Crown Castle, which both already host Verizon infrastructure equipment.

About the SBA deal with Verizon, Stoops said that both parties look for kind of the same thing in such a deal. “They both look for a certain word — though sometimes from different metrics — and that word is ‘certainty’; certainty in terms of term, certainty in terms of volume. Those are things that are important to a tower company. And then on the customer side, certainty in terms of rate. And the ability to plan. So, when those things come together and they can be agreed to, terms can be agreed to in a mutually attractive and accessible manner—then they get done. And that’s exactly what happened with Verizon.”

Stoops said that the Verizon/SBA master license agreement (MLA) provided efficiency and eliminated different types of red-tape issues. “That will allow us to move quicker,” he said. “And what it basically did was provide both parties with a greater sense of partnership of working together, which has freed up all kinds of activities and avenues for us to keep working together. So, when you get the basics right in terms of certainty and terms, and there’s a mutual meeting of the minds, we’re very much in favor of MLAs.”

Stoops added this about C-Band and Verizon: “Verizon is getting out there ahead of when the spectrum is clear, but whether it’s this quarter or next, it’s becoming clear that C-Band is going to be a heavily macro-tower—and those of us in the industry who focus in that area will benefit.”

Stoops had this to say about new leases and Dish: “We are in a bit of a new paradigm for the next couple of years as Dish builds out because it is all going to be brand new leases. New leases are always good. And he made this comment about the recent $5 billion deal Dish made with AT&T in July to move Dish’s wireless customer traffic to AT&T’s network: “The bottom line is a more viable financially stronger Dish, which I believe this makes them, with AT&T, is good for our industry.”

Meanwhile, Stoops also took the time to address mobile edge computing. “We continue to believe that that is an area that is going to be high demand and very attractive for years to come,” he said. “I think we have five units now constructed and operating. We have been able to provide some synergies between those units and are two data centers — and that’s another area in which we see real possibility. I think it’s got a long way to go. I think you need to see some applications out in the consumer world, but it’s coming.”

Mike Harrington is a contributing editor