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Tag Archives: SBA Communications

Joining American and Crown, SBA Goes REIT

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.

RBC Remains Bullish on Public Tower Companies

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.

SBA Communications: 2Q Solid With Steady Leasing

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.

SBA Communications in Q1 Steady as She Goes

By J. Sharpe Smith

SBA CommunicationsMay 5, 2016 — Enjoying a solid start to 2016, SBA Communications reported that carrier activity was consistent with the last three quarters of 2015, featuring mostly amendments to existing macro sites, according to the towerco’s first quarter earnings call. Aside from normal churn and an iDEN de-commissioning hangover, which will last most of 2016, SBA achieved organic leasing revenue growth of 8.1 percent in the first quarter.

“By application and executed contract volume, the activity is substantially amendments,” said Jeffrey Stoops, president and CEO. “We expect the investments in macro sites by our U.S. customers will remain heavily weighted towards amendments for the remainder of this year.”
SBA projected increased growth in the long term (by 2020) through new sites and amendment activity, but conservative short-term estimates led Wells Fargo Securities to maintain its Market Perform rating for its stock.

“While this is a positive, SBAC continued to speak to a more muted domestic spending environment, which does not seem to be changing near term,” wrote Senior Analyst Jennifer Fritzsche.

During the quarter, carrier activity centered on the AWS-1 (Advanced Wireless Services at 1.7 GHz and 2.1 GHz) and 700 MHz deployments, as well as refarming of 2G and 3G spectrum to LTE,

“We are in the very early innings of AWS-3 (1.6 GHz, 1.75 GHz, 2.15 GHz), WCS (Wireless Communications Service at 2.3 GHz) and 2.5 GHz spectrum deployments all of which remain opportunities ahead of us,” Stoops said. “The amount of activity around an investment in our customers’ existing macro sites continues to be robust and underscores the importance of macro sites in our customers’ network plans.”

SBA lowered its services guidance to reflect reduced work from Sprint, while other carriers are expected to remain steady, compared with last year.

American Tower

Carrier activity reported by American Tower in the first quarter took place in the AWS-3, WCS, and 2.5 GHz bands, as well as through refarming 2G and 3G spectrum into 4G in the 800 MHz and PCS bands. Refarming drove amendments as old antennas were swapped out for more advanced antennas, according to James Taiclet, American president and CEO.

“This shift drives further investment into cell sites through technologies such as carrier aggregation as well as adding new cell sites to reduce the transmission radius and, therefore, the quality improvement for each signal,” he said. “This increase in cell site density is expected to drive incremental collocation opportunities on macro towers, as customers like us demand higher and higher peak speeds to enhance our user experience.”

Organic growth of U.S. property revenue is projected to be 5.5 percent by American Tower, compared with 12 percent for international properties.

Crown Castle International

Crown Castle saw organic site rental revenue grow 7 percent plus 3 percent cash escalations minus 2 percent from churn in the first quarter.

Jay Brown, Crown Castle CFO, also said carrier activity won’t increase in 2016. Additionally, the execution of new leases and amendments will be backloaded, 40 percent in the first half and 60 percent in the second half.

“Our view is that leasing activity in the full year of 2016 is going to be very similar to what we saw in 2015. And we continue to hold that view,” he said.

Tower Company Prices $500M in Tower Revenue Securities

By J. Sharpe Smith

SBA Communications has priced $500 million of Secured Tower Revenue Securities Series 2015-1. The move, which will pay 3.156 percent interest annually, provides the tower company with low cost capital and fulfills investors’ needs for reliability.

“Over the last few years, the institutional yield investors have come to understand the quality of tower cash flow; therefore, the market has developed for transactions like the one SBA has priced,” Howard Mandel, president, Peppertree Capital Management.

Net proceeds from the offering will be used to repay drawn amounts on the revolving credit facility of SBA Senior Finance II and for general corporate purposes.

“It’s all about cost of capital for the tower company,” Mandel said. “SBA is refinancing existing debt with a long term, debt-like instrument.”

With interest rates remaining low, investors are having difficulty finding securities that will generate a predictable, acceptable return, which makes the SBA securities especially appealing, according to Mandel.

“For the investors, it’s about their need for yield,” Mandel said. “These investors are willing to take a relatively low return because tower rent fits the desired parameters (i.e., predictable, high credit) – and there are not a lot of good alternatives in the market.”