Bullish on Top Tower Co’s Despite Decline in New Leasing Activity

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According to Benzinga, analyst Walter Piecyk of BTIG is bullish on the wireless tower market and issued Buy ratings on SBA Communications Corporation (SBAC) and American Tower Corp (AMT).

“Stable growth in a high margin, low capital intensive business should still be attractive to investors, even in an uncertain interest rate environment,” Piecyk said. Though the analyst believes the consolidation of wireless operators would be a negative, he sees a lesser likelihood of M&A in the sector, Benzinga said.

SBA: “Piecyk said that SBA’s gross tower leasing growth rate is the highest, but will still be impacted by about $50 million of churn from Metro, Leap and Clearwire over the next three years,” Benzinga said. “On the positive side, Piecyk highlighted that SBA’s escalators and new activity are not as pressured by large-sale leaseback transactions like its peers. Further, SBA’s superior margins surpass its peers as it is under-indexed to carrier-built towers.”  

American Tower: “Piecyk believes American Tower offers the fastest growth in domestic tower leasing revenue due to its low churn. In 2010, the company signed a 10-year master lease agreement (MLA) with Sprint that limited the impact of iDEN churn,” Benzinga reported.  

Crown Castle: While CCI’s domestic tower revenue growth may trail the other two, “its willingness to invest in fiber will lift its growth rates,” according to Piecyk. “The analyst maintained his Neutral rating on Crown Castle, as the stock is trading at only 4.7 percent discount to estimated fair value of $91.50,” Benzinga reported.

“The Sector: On the sector front, Piecyk expects continued decline in new tower leasing activity, which is the post-paid phone net adds of the tower industry,” Benzinga said. “Tower bulls would argue that the decline in new leasing activity is already factored into analyst models, but this is driven by AT&T’s drop in activity not the risk of small cells,” Piecyk concluded.

December 21, 2016

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