SBA Communications (NASDAQ: SBAC) reported positive results for 1Q21. With an updated site leasing deal with Verizon (NYSE: VZ), SBAC raised its 2021 business outlook.
Site leasing revenues for the quarter were $505 million, up 3 percent from $492 million in 1Q20. Notably, site development revenues jumped 77 percent to $44 million from $25 million a year ago. Much of that activity was related to pre-construction work ahead of VZ’s C-band deployments and readying sites for DISH Network’s (NASDAQ: DISH) 5G build.
Total revenues reached $549 million, up 6 percent from $517 million in 1Q20. Adjusted EBITDA grew over 5 percent to $390 million year-over-year while AFFO increased by 10 percent to $286 million.
The recent deals with VZ and DISH have SBAC feeling upbeat.
On April 1, the company signed a new global agreement with VZ to facilitate VZ’s 5G network buildout including the deployment of VZ’s newly acquired C-band spectrum. This new agreement includes an extension of committed terms under SBAC’s existing agreements with VZ, establishing equipment specific pricing, terms and conditions for upgrades to VZ’s existing leases, and offering parameter and volume incentives for new site leases. The new agreement extends VZ’s lease commitments of non-cancelable terms by an average of eight years.
“The agreement with Verizon as well as the substantial minimum lease commitment under our new master lease agreement with DISH at our existing activity levels and building backlogs with both T-Mobile and AT&T are all part of the foundation for a strong couple of years of heightened activity. Our domestic leasing backlogs are as high as they have been in quite some time,” enthused Jeff Stoops, SBAC CEO, during the company’s 1Q21 earnings call.
SBAC anticipates higher levels of operational leasing activity, meaning lots of signed leases and amendments but little equipment installations through 2021, acknowledging that the VZ agreement will contribute to improved organic leasing revenue growth in future years.
Stoops pointed out that 2022 is likely the big growth year. He expects accelerated C-band deployment activities with Verizon and AT&T (NYSE: T), and a lot of site work as T-Mobile (NASDAQ: TMUS) and DISH press ahead with their respective 5G deployments.
The company expects churn from decommissioning existing Sprint sites to have a small impact in 2021, increase in 2022, then level out through 2024. The biggest churn impact potentially will come in 2025 and 2026.
SBAC expanded its global tower portfolio in the quarter. It acquired 731 communications sites, 712 domestically including wireless tenant licenses on 697 utility transmission structures from the previously announced PG&E transaction, and 19 towers in international markets. The company built 62 new sites, 60 in international markets and two in the U.S., while decommissioning or reclassifying five sites.
At the end of the quarter, SBAC owned or operated a total of 33,711 sites with 17,259 or 51 percent in the domestic market and the 16,452 balance of site in international markets.
SBAC’s total cash capital expenditures for 1Q21 were $1.1 billion, consisting of $8.2 million of non-discretionary cash capex (tower maintenance and general corporate) and $1.1 billion of discretionary cash capex (new tower builds, tower augmentations, acquisitions, and purchasing land and easements). In addition, the company spent $6.5 million to purchase land and easements, and to extend lease terms.
Despite the relatively even split of towers between domestic and international markets, SBAC derives 80 percent of site leasing revenues from the domestic market. Moreover, its site leasing revenue sources are highly concentrated. The three national MNOs account for 90 percent of the company’s domestic revenues.
Prior to the quarter-end, SBAC purchased or agreed to purchase 413 sites that will add to its portfolio in its existing markets. It anticipates closing on the majority of the sites under contract by the end of 3Q21.
On the strength of 1Q21 results and projected growth under the new deals, SBAC raised its financial midpoint guidance for full year-2021 for site leasing revenue to $2.1 billion, Adjusted EBITDA to $1.6 billion and AFFO to $1.2 billion.
By John Celentano, Inside Towers Business Editor
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