May 3, 2017 —
SBA Communications’ forecast for the near future was bright and sunny, during its first quarter 2017 earning call, but the most recent quarter included a few clouds caused by churn. The tower company beat Wall Street expectations with a “solid” first quarter with organic site leasing growth of 7.0 percent; however, churn from Metro, Leap and Clearwire reduced that number by 3.4 percent.
“Our results were ahead of our expectations and allow us to increase our full year Outlook,” Jeffrey Stoops, president and CEO, said, during the earnings call. “Domestic carrier activity in the first quarter improved slightly over 2016 levels, and international carrier activity was solid and stable.”
Q1 domestic operational leasing activity was ahead of 2016 levels, with 60 percent coming from amendments mostly by the big four carriers represented.
“Organic leasing activity in the quarter remained primarily from the re-farming of 2G and 3G spectrum to LTE, as well as some AWS-1 and 700 megahertz deployments,” Stoops said.
Stoops was optimistic about future tower leasing opportunities, listing a number of catalysts that will drive domestic organic growth, including the FirstNet award, the 600 MHz auction and future 5G deployments.
“Looking ahead, we continue to feel very good about the environment in which we’re operating,” he said. “Our customers have many things to accomplish over the coming years. Deployments of AWS-3, WCS and 2.5 gigahertz spectrum will all be drivers of future organic leasing activity. In addition, the 600 MHz auction has just wrapped up and the rollout of this spectrum will be another driver of leasing growth over the next few years.”
While he doesn’t anticipate any impact from the FirstNet buildout this year, Stoops said it should be a growth driver for years to come.
During the past quarter, SBA purchased 90 communication sites for $28.2 million in cash and built 58 towers. At the end of the quarter it owned or operated 26,284 communication sites, 15,907 of which are located in the United States and its territories, and 10,377 of which are located internationally.
November 3, 2016 — SBA Communications reported another strong period in the third quarter, with total revenues of $411.3 million compared with $410.7 million, increase of 0.1 year over year. Site leasing revenue of $388.2 million increased 4.3 percent year over year. Domestic cash site leasing revenue was $316.8 million, compared with $306.9 million, an increase of 3.2 percent, year over year.
“Organic leasing demand was steady,” said Jeffrey Stoops, president and CEO. “Amendment activity in the U.S. was very strong, with our customers adding to or modifying existing macro sites to refarm 2G and 3G uses to 4G LTE or to add new spectrum to their networks.”
Domestic tower cash flow for the third quarter of 2016 was $258.9 million compared with $251.0 million in the year earlier period, an increase of 3.2 percent.
During the 3Q2016, SBA purchased 157 communication sites for $30.9 million, built 93 towers, and, as of September 30, it owned or operated 25,878 sites; 15,845 in the United States, and 10,033 internationally.
October 11, 2016 — SBA Communications will become the last of the three major public tower companies to elect to be taxed as a real estate investment trust (REIT) beginning at the end of this year. The conversion was not a real surprise. American Tower and Crown Castle International have already gone REIT and SBA has been working on it for two years.
“REIT status is the optimal structure for our business given the real estate nature of our assets,” said Jeffrey Stoops, SBA’s president and CEO. “We believe a REIT structure will provide many opportunities for creating long-term shareholder value.”
REITs, which may legally avoid paying U.S. federal income tax, generally must pay out at least 90 percent of their taxable income in the form of dividends to shareholders. SBA’s determination as to the timing and amount of future dividend distributions will be based on a number of factors, including REIT distribution requirements, investment opportunities around its core business and its existing federal net operating losses (NOLs) of $1.15 billion as of December 31, 2015.
SBA may use these NOLs to offset its REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized. SBA does not expect that it will be required to make any distribution of accumulated earnings and profits in connection with its REIT conversion.
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.
August 2, 2026 — The second quarter was another solid period for SBA Communications, Jeffrey Stoops, president and CEO told an earning call last week, with steady organic leasing demand.
“Our customers in the U.S. were most active adding to or modifying existing macro sites to refarm 2G and 3G uses to 4G LTE or to add new spectrum to their networks,” Stoops said.
Domestic cash site leasing revenue grew 4.2 percent year over year to $312.8 million in the second quarter. Site leasing operating profit grew 2.3 percent to $295.4 million, year over year. Domestic Tower Cash Flow for the increased 4.6 percent to $255.4 million.
Capex was equally divide between stock repurchases, portfolio growth and ground purchases. SBA also completed refinancing of a portion of its deb, reducing interest costs on its capital structure.
During the second quarter of 2016, SBA purchased 42 communication sites for $40.6 million in cash and built 90 towers. It now owns or operates 25,670 communication sites, 15,843 in the United States and 9,827 internationally. In addition, the Company spent $19.8 million to purchase land and easements and to extend lease terms. Total cash capex was $91.5 million, consisting of $8.7 million for tower maintenance and general corporate and $82.8 million for new tower builds, tower augmentations, acquisitions and purchasing land and easements).
“Our success in each of these areas, organic growth, operating performance, asset growth, stock repurchases and financing, has a positive impact on and contributes to our long term goal of producing AFFO of more than $10 per share in 2020,” Stoops said.