Jennifer M. Fritzsche, Senior Analyst of Wells Fargo Securities met with several private tower companies, small cell providers and RF engineers at the CTIA conference in Las Vegas last week with the sense that things remain somewhat muted in the macro tower landscape although small cell activity remains quite robust. “We view this as more of a timing issue and see BOTH the small cells and tower cos playing a key part in the 5G network landscape,” Fritzsche said.
She offered the following comments on other areas of the telecom market based on her observations at major industry trade show:
- “AT&T SPENDING – SOMEWHAT MIXED MESSAGES While some carriers continue to be steady in their spend, there seem to be questions about AT&T’s spending ramp. We got mixed messages here. Some said T had released some search rings lately – which is an improvement from 1H16 activity. While this is encouraging, many noted that the tension with the tower cos and T remains quite high.
- WORRIES ABOUT ‘BLINK’ ON BUILD TO SUIT (BTS) PRICING Most of the activity from the carriers seems more focused on amendment related revenue vs. new builds. We heard some concern that if AT&T does release a new build to suit contract, the “ask” would be at prices much lower than the standard set in the industry today (with slightly lower escalation but more flexibility with amendments). The concern is some new companies trying to build their tower portfolios and scale could accept such a deal which would “muck up” the typical BTS model and economics. While this is an overhang for the group, we note that few if any of the public tower cos have been given BTS work from the carriers in the past few years. Thus the incremental negative to the 3 public tower cos (AMT, CCI and SBAC) is not extreme in our view,
- SMALL CELL PROVIDERS ARE BUSY BEES! We also have the opportunity to meet with some of the small cell providers including Mobilite and some of the other larger private Distributed Antenna Services (DAS) players. Our sense is small cell activity remains very robust with all four carriers spending on this initiative. The focus of this spend seems to vary among the carriers. For the two large incumbents we believe they have accepted more of a turn-key model approach for small cells. This should benefit companies like ExteNet and CCI. Carriers like Sprint have taken a non-traditional approach. We met with the CEO of Mobilite – a large network vendor for S. Based on this meeting we remain confident S is doing more than meets the eye in taking a surgical approach to its network and deploying its 2.5 GHz spectrum. While we recognize there is a healthy amount of skepticism about this strategy, something is clearly working as best evidenced by Sprint’s improving results from third-party independent network evaluators. From an overall market standpoint, we expect small cells to continue to ramp in 2017. But the continuous take-away from the many panels and meetings we attended is the 5G world needs a heterogeneous network – where BOTH small cells and macros play a significant role.”
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