American Tower Corporation executives are pleased with the towerco’s financial performance in 2017. Company Chairman, President and CEO Jim Taiclet told brokers and Wall Street analysts on Tuesday’s earnings call: “We far exceeded our goals” for the 10-year plan. One metric — the company ended 2017 with 150,000 sites for towers and small cell systems; the goal was 100,000.
Officials estimate aggregate capex for mobile carriers to be in the $30 billion range in 2018. That bodes well for strong tenant lease growth this year for AMT, according to the executive. (See financial figures here.)
AMT is launching the next 10-year plan to “deliver operational efficiency to expand” profit margins, he said. The company’s core profit-maker remains its “extensive mobile tower footprint.” Taiclet said AMT would continue to build and acquire additional tower assets that meet its investment criteria.
The company looks forward to what the FirstNet build-out will mean and it’s already seeing a “strong” lease application flow. The U.S. continues to be an “extremely dynamic” market and “we expect record levels of new business development this year,” Taiclet said.
The executive cited a “robust tower build potential due to expanded carrier growth in Mexico,” where a consortium is building-out 4G. The same could be true for Brazil, which is also pivoting to 4G. AMT is part of the action in India, where consolidation among carriers that was expected to occur over a four to five year timeframe is now being compressed. “By 2020 a re-ordered market will return,” with three or four national mobile operators and two to three towercos, including AMT, said Taiclet. The remaining carriers each “will have hundreds of millions of customers,” he said. “We are positioned to take advantage of that over the next two to 10 years once consolidation wraps up.”
MoffettNathanson analyst Nick Del Deo wrote in a report after the call, that for India, the market seems increasingly cognizant of the risks, and this marks the first time American Tower has “come clean” in a comprehensive manner. “After everything shakes out, will the Indian market be as attractive as the vision management describes? We won’t know until a few years from now, but we’re somewhat skeptical.”
Spencer Kurn with New Street Research said AMT’s domestic organic growth guidance is essentially flat, “which is consistent with guidance from CCI and SBAC and likely conservative,” Kurn said. “International organic growth guidance is below expectations, driven largely by consolidation churn from carriers in India,” he said. Although guidance is “below the Street,” Kurn said AMT has a history of guiding conservatively at this point in the year, so he doesn’t expect consensus estimates to move significantly lower.
And while towers and those leases are it’s bread and butter, AMT is also exploring developing environmentally responsible advanced power systems for tower sites that could replace diesel generators. Doing that brings the operating cost to the mobile carrier down by about half. “For new customers on existing sites, we think in the 5G world,” this could be a game-changer, said Taiclet.
AMT is also exploring whether it has a role in delivering internet connectivity to planes or for a delivery company (like Amazon), that uses drones or autonomous vehicles. The FAA is thinking a tower-based control network with a new architecture would be needed that may have siting needs, according to Taiclet. “We’re going to work our way through with each industry to see if siting needs [are] coming directly from us or through mobile carriers.”
By Leslie Stimson, Washington Bureau Chief, Inside Towers
February 28, 2018