Organic tower growth historically has a positive correlation with wireless industry investments and consumer technology trends. A strong domestic wireless investment environment is spurring the performance of the U.S. operations of American Tower, James Taiclet, company chairman, president and CEO, said during the first quarter earnings call.
From 2010 to 2012, American Tower experienced an aggregate spend on wireless capital expenditures (capex) between $25 billion and $30 billion, which led to organic core growth rates of 7 percent to 8 percent. In 2013, wireless capex grew to $35 billion, leading to organic leasing growth of 9 percent. That trend continued in the first quarter, pushing organic core growth beyond the tower company’s expectations.
“In fact, during the first quarter, our domestic segment once again outperformed their own expectations, generating organic core growth in the quarter of 9.2 percent,” Taiclet said. “This growth, which was 120 basis points above the high end of our long-term targeted range of 6 percent to 8 percent, was driven by a combination of contractual escalators, collocations, amendments and payments tied to our holistic master lease agreements (MLA), and all net of churn.”
The correlation between organic growth and wireless investment is enhanced by master lease agreements that mitigate churn and facilitate additional investments by existing tenants.
Taiclet said the company’s MLAs make it well positioned to capitalize on wireless carriers’ investments as they continue to deploy 4G technology.
“We believe that these investment trends will continue for at least the next several years since subscriber adoption of 4G devices and advanced wireless services is outpacing the capabilities of today’s wireless networks. And the industry is still in an early stage of 4G upgrade cycle,” he said.