More Growth to Come as Sprint and T-Mobile USA Join the 4G Roll Out
By Don Bishop
Growth, both organic and through acquisitions, was the dominant topic as executives from the big three tower companies spoke at the Wireless Infrastructure Show on Tuesday in Orlando, Florida. Ben Moreland, president and CEO of Crown Castle International; Brendan Cavanagh, senior vice president and chief financial officer of SBA Communications; and Rod Smith, senior vice president and chief financial officer of American Tower’s U.S. tower division, spoke with PCIA President and CEO Jonathan Adelstein during “The View from the Top: An Executive Roundtable,” a plenary session.
“We’re up to our ears in integration,” Moreland said, speaking of Crown Castle’s acquisition of a portfolio of towers from AT&T. “We’re integrating 9,700 sites we acquired from AT&T at the end of last year.” He said with an acquisition of this size, it normally takes six to nine months before a tower company is able to accept applications for antenna space rental on the acquired sites at the same speed as other sites.
Smith spoke about American Tower’s acquisition of towers from Global Tower Partners, saying, “At this point we’re ahead in terms of capturing our selling, general and administrative expense synergies that we originally had in our investment case. That provides a tailwind for future margin expansion. We also posted strong growth in those assets in the first quarter of 2014. The core organic growth for the GTP assets was 9.9 percent for the first quarter. That outpaces the core organic growth for the quarter for the legacy American Tower sites, which was 9.2 percent.” He said both numbers are well ahead of the 6 to 8 percent core organic growth rate that American Tower targets for the long term.
Cavanagh addressed the issue of 4G network build outs and their effect on the tower business. “Although we’ve seen record growth during the past couple of years from our Big Four carrier customers in the United States, the backlog remains at a record level,” he said. “The growth trajectory for continued deployment is significant for the next few years. Many amendments have been for 4G upgrades, and it is still going on. And the carriers are engaging in a lot of coverage builds, too. We expect to see growth during the next few years comparable with what we’ve seen during the past few years.”
Moreland said Crown Castle expects a record application volume this year. “We’ve never seen it as busy as it is now,” he said. “A lot of amendments are carrying out 4G deployments, depending on which carrier. We’re seeing significant collocation activity return to the market.” Leading the way are Verizon and AT&T, he said, adding that he expects it to continue with Sprint and T-Mobile USA later on. He said the carriers and Wall Street recognize that the use of towers for network build outs represents an efficient use of capital.
Smith said that during the past several years, American Tower has invested $7 billion in U.S. infrastructure. He said the company also has assets in 12 countries in four continents. He said 64 percent of the company’s acquisition capital has been spent in the United States in the past several years. “We absolutely are bullish on the U.S. market,” he said.
Smith said Verizon has completed its initial roll out of LTE. “We describe its network as a mile wide and an inch deep,” he said. “They’re going to have to come back in and densify the network.” He said AT&T is moving rapidly through its initial LTE upgrade. Sprint and T-Mobile also are working on LTE upgrades. “It’s been a long time since we saw all four wireless carriers as active as they are,” he said. “We believe that will continue.”
The executives spoke about progress with loosening restrictions on wireless infrastructure. “There definitely seems to be a shift at the FCC to appreciating what wireless infrastructure does and to try to speed the process for deployment,” Moreland said. “Even so, you have things that fly in the face of that, whether it’s rules about public notices for towers’ effects on migratory birds that seem to be the opposite of the overall theme. But there’s a positive shift.”
Cavanagh said there has been a recognition of the value that wireless infrastructure brings to the consumer and the economy that is significant. Smith added that the U.S. government seems to recognize the value of bringing broadband services to people across the country.
Moreland tied innovation at the consumer wireless device level with growth for the wireless infrastructure business. He also noted spectrum owned by the First Responder Network Authority and Dish Network look like future opportunities for antenna space rental. “Over time, that spectrum will be deployed in some shape or form that will result in further sharing of our infrastructure,” he said.
Cavanagh said the clearer growth opportunity lies with the four large U.S. commercial wireless carriers. “It’s nice to know that there are other guys out there with additional swaths of spectrum that will ultimately be deployed,” he said. “Whether it’s in partnership with an existing carrier or independently, that will help to sustain the growth rate for years to come.”
In past years, the “View from the Top” roundtable has featured as many as five executives from large tower companies, but with consolidation reducing the number of large tower companies and concentrating tower holdings among Crown Castle, American Tower and SBA Communications, this year’s roundtable had fewer figures on the stage.