SBA Confident About Latin America Expansion


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Goldman Sachs Communicopia 2016

SBA Communications logoSBA Communications Corporation President/CEO Jeffrey Stoops downplays any notion of a “heightened tension” between tower owners and carriers. In an appearance at the Goldman Sachs Communacopia 2016 Tuesday in New York City, Stoops joked that those stories tend to appear during investment conferences.

Turning serious though, he said in the field right now it’s business as usual with a “very stable” leasing environment. In terms of rental negotiations, “Our customers are trying to minimize costs every step of the way. They continue to try and increase revenue. Where they have alternatives, our customers will seek the best low-cost option that meets their needs.”

The upshot means SBA (NASDAQ: SBAC) will probably build “a few less towers in the U.S.” in the near-term as it makes use of existing sites “which will carry growth for us,” without mentioning figures. As for lease agreement negotiations with carriers in general, price and financial terms aren’t usually sticking points.  

But what can be tough to negotiate “is the concept that from a certain point the customer can add or change … the weight-loading on the tower.” That doesn’t mean SBA charges for that change in every case, “but to give up that contractual right in advance” is something the company has found difficult to agree to in the past, according to Stoops.

Noting that SBA’s customers are between technology generations, he said it’s a little early to predict whether there will be a shift in demand going into next year. Carriers “have more latitude for infill and capacity,” for LTE deployment. AWS-3 LTE spectrum has not been deployed much to-date due to clearing, technical issues and equipment readiness, according to the CEO. The company doesn’t feel “it will happen this year to the same degree as we had hoped.”

Asked about ongoing “record” tower M&A, Stoops said “as an acquirer in the market there are repeat sellers we do business with.” Lack of supply in the U.S. is leading to price escalation, according to the CEO but there are also plenty of deals the company chooses not to do. “There’s things going for greater than 25x cash flow” that are “not as good as what we have.”

Asked about trends, he said: “There’s no doubt small cells will be prevalent” in the next few years and a growth driver. “Where we can play is where we have exclusive relationships” and deploy capital to jump over barriers to entry.

Finally, SBA has been investing in telecom infrastructure in Latin America. That’s due to its population growth, a multi-carrier environment and citizens that are embracing social media and video, he said, speaking of Brazil specifically.

The video market there is nascent because of network quality; with wireless networks about 10 years behind the U.S., according to Stoops.

The company has improved its tower cash flow yield some 10 percent and while operations are going well, lease subs would be even better if the economy improved, he said. Overall, Stoops believes Brazil will be a good market for SBA in some two years.

SBA has plans elsewhere in Latin America, having just entered Chile. It could build as many as 300 towers there. It has also done some work in Columbia and is evaluating Argentina, though he acknowledges “currency concerns” there. Overall, the company feels “good” about the expansion into Latin America. It’s easy to get to and from Boca Raton, Florida and it is in the same time zone, he adds.

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