Fritzsche: “The TMUS Pendulum Has Swung (Not in a Good Way)”


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Jennifer M. Fritzsche, Senior Analyst at Wells Fargo Securities, said its analysts have recently been doing some tower checks and have been on the speaker circuit of some local tower conferences. Bottom line, according to Fritzsche, is while T (AT&T) continues to be a bright spot for towers, checks would suggest TMUS has seen a significant slowdown in activity as it waits on the outcome of the Sprint merger. 

“We believe this pullback will likely be a contributor to slower 2H19 organic growth vs. strong 2018 and 1H19 trends,” she said. “While some of the tower cos have alluded to this decelerating growth, our concern is this trend could linger into early 2020. With VZ more focused on fiber and Sprint and TMUS in deal limbo mode, that could make the comps for growth the 1H20 more challenging for the U.S. macro activity,” Fritzsche said.

In the past 18 months, Fritzsche said, TMUS has been the gift that has continued to keep giving to the towers. But there has been a recent shift. Checks suggest in late August, there was a message from TMUS corporate to hold off new cell site deployment and amendment activity. 

“We confirmed this with several of our private contacts that this has been true for macro cell sites; small cell activity seems to be continuing at a fairly healthy clip,” she said. “The reasons given from the market level TMUS contacts to these companies seems to be due to the lack of closure of the Sprint deal. Perhaps even more concerning is several of these same contacts have confirmed what was reported in recent trades that, also since August, TMUS has significantly pulled back payments to vendors in the wireless services arena,” Fritzsche said. “One contact described this as a ‘systematic conservation of capital’ on part of TMUS. It is unclear if these longer payment cycles are only being seen by the private services companies or also being seen by the public tower companies themselves. In summary, there seems to be a fairly noticeable change in TMUS in 2H19 vs. 1H19 at many levels of its network activity,” she said.

During Wells Fargo analysts round of checks, they got somewhat mixed messages in regard to VZ. Some contacts used the same “steady as she goes” mantra. However some analysts indicated that VZ has only recently green-lighted its tower activity as it had been more focused on small cell activity. Most agreed that in terms of capital priority at VZ it seems to be in this order: 1) fiber, 2) small cells, and 3) macro. 

“We believe VZ has been slower of late as it waits for standardized 5G equipment and a possible change in its spectrum portfolio (all eyes on C-Band),” Fritzsche said. “The positive side of the tower checks continues to be T’s FirstNet initiative. This ‘One Touch’ initiative has been a positive for both incumbent tower cos (note: both AMT and CCI have agreements with T related to FirstNet) as well as smaller private tower cos. Our checks would suggest for new tower builds – T is working more with private tower builders,” she said.

September 30, 2019

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