SBA Communications (NASDAQ: SBAC), like its towerco brethren, is benefiting from heightened cell site deployment activity among its biggest mobile network operator customers.
On the strength of site amendments and upgrades, and new leasing activity, SBAC’s site leasing revenues for 3Q21 grew to $417 million, up 9 percent on a year-over-year basis while international site leasing revenues grew nearly 14 percent to $109 million. Site development services were up almost 40 percent to $54 million due to demand for site preparation work that SBAC provides to its tenants. Adjusted EBITDA reached $407 million, a 9 percent increase over $373 million in 3Q20 while AFFO grew 12 percent YOY to $303 million.
SBAC’s major U.S. MNO tenants were very active in the quarter. Verizon commenced its C-band deployments and T-Mobile continued its nationwide 5G coverage with 600 MHz and 2.5 GHz spectrum. DISH signed multiple new lease agreements to facilitate its rapid 5G build-out, while AT&T maintained a steady pace. Led by T-Mobile at 40 percent of the total, these four MNOs accounted for 96 percent of SBAC’s 3Q21 U.S. site leasing revenues.
SBAC finished 3Q21 with a new multiyear high backlog of pending leases from DISH and amendment applications from the incumbent MNOs. Site development and services revenue reached record levels in the quarter with MNOs focused on building out their 5G networks, particularly on macro towers. SBAC expects to see elevated domestic leasing activities through the balance of 2021 and well into 2022.
Accordingly, SBAC raised its full year 2021 outlook. On a YoY basis, the company is guiding to $2.1 billion in site leasing up 7 percent and $200 million in services revenues up 55 percent. Adjusted EBITDA is projected at $1.6 billion, up 5 percent, and AFFO is expected to increase 11 percent to $1.2 billion.
Discretionary capex for new tower builds, tower augmentations, site acquisitions and ground lease purchases is expected to be $1.4 billion compared to $400 million in 2020. The company is evaluating data center and edge computing opportunities at or near towers with selective investments in that space.
Reflecting on SBAC’s prospects, President and CEO Jeff Stoops comments, “We’re in a very good time for the industry and for SBA specifically. Our customers are very busy. Our financial position is very strong, and the future continues to hold many opportunities for us.”
Note that SBAC derives 80 percent of its revenues for the U.S. even as international markets are returning to pre-pandemic levels of activity. During the quarter, the company derived 55 percent of new international revenue through lease originations and 45 percent through amendments to existing leases. The largest leasing revenue contributions came from Brazil and South Africa, its two largest international markets.
SBAC expects increased network investment by its international MNO customers over the next several years as markets continue to recover from the pandemic, and upcoming spectrum auctions are planned across several markets, including Brazil.
In the quarter, SBAC expanded its portfolio by acquiring 144 sites for $57 million and building 87 new towers. Of the total increase, 23 sites were acquired in the U.S. with the remainder bought or built in international markets. Another 13 sites were decommissioned in the same period. At the end of 3Q21, SBAC owned or operated 34,072 communication sites, with a 51-49 percent split between the U.S and its territories, and international markets, respectively.
Total cash capex for 3Q21 was $93 million, consisting of $83 million of discretionary cash capex (new tower builds, tower augmentations, acquisitions, and purchasing land and easements) and $10 million of non-discretionary cash capex (tower maintenance and general corporate).
Subsequent to 3Q21, SBAC purchased or is under contract to purchase approximately 1,700 communication sites for around $231 million in cash, including roughly 1,400 sites and roughly $175 million in cash relating to the previously announced deal to acquire towers from the Airtel Tanzania.
During the quarter, SBAC invested nearly $12 million to buy land and easements and to extend land lease terms. At the end of 3Q21, the company owned or controlled for more than 20 years the land underneath approximately 72 percent of its towers.
By John Celentano, Inside Towers Business Editor
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