Jennifer Fritzsche, Senior Analyst with Wells Fargo Securities, said in a client report Tuesday, she received a few questions on the July 2 legal complaint AT&T filed against AMT. After reviewing the 15-page legal complaint, Fritzsche said it seems to center around the terms of the two companies’ “holistic agreement” and, more specifically, the prepayment sites which were included under that agreement. In the complaint, AT&T indicates it “seeks a judicial declaration that the Holistic Agreement and the Letter Agreement must be construed together and that the Prepayment Sites must be included in the license fee’s calculation….”
“It is important to note there are no punitive damages being sought by AT&T but rather, AT&T is asking the court to interpret the language of the contract,” Fritzsche said. “Our sense is this has been a point of discussion between the two cos for an extended period of time. While the number of sites this is impacting was redacted, we confirmed that is a small number of leases and this issue will not have a revenue impact through Q2’18.”
She added the biggest question they are getting, is if this lawsuit should be seen as a read through to future looking activity levels between AMT and AT&T.
“We do not believe this legal issue will impact the broader activity levels we expect to see between AT&T and AMT or its tower peers,” she said. “Following a series of checks at the services and vendor level, we continue to believe the FirstNet and ‘One Touch’ initiative by AT&T is moving forward to the “real estate” segment of the build. This should bode well for towers as this involves antennas being added on the towers themselves.”
Fritzsche said she expects to see a ramp in activity from AT&T in 2H18, reminding investors that on its Q1’18 earnings call, AMT raised its domestic revenue growth outlook by 50 bps to 6.5 percent (vs. 6 percent prior). “We believe activity coming from AT&T was a large driver to this more robust revenue outlook,” she said.
July 11, 2018