Following a dinner meeting with tower execs in NYC and findings from the Mobile World Congress, Wells Fargo Securities has come away impressed with the future of tower stocks. Senior Analyst Jennifer Fritzsche said it’s time to “get off the sidelines of the Tower sector” by upgrading it from Market Weight to Overweight.
“With this move, we have upgraded shares of CCI ($91.50) to Outperform from Market Perform. We believe CCI is best positioned to benefit from incremental AT&T spend ramp and need for more of a converged wireless spend (macro/small cell/fiber),” Fritzsche said. In her latest report she added comments on the major carriers impacting the tower sector.
AT&T – “Much to come in terms of spending,” Fritzsche said. “FirstNet may be the driver but not the only initiative. Consistent with our findings from [Mobile World Congress], it is clear to us towers are positioned to benefit from additional spend from T related to FirstNet. There are specific network milestones which have to be achieved in a certain period of time for FirstNet. Checks would suggest, if AT&T officially gets the FirstNet contract (which we see as very likely), T has plans to touch over 40K towers (both new and existing) over the next 5 years. This would be more activity than the towers have seen from AT&T since 2014. If officially awarded FirstNet, we would not be surprised to see T increase its 2017 capex plans. Obviously, such a headline would be a very positive event for the tower sector,” she said.
TMUS “The hare in the race right now,” she said. ”Our contacts would suggest TMUS continues to be aggressive in its spending – especially in areas where it is expanding and building out its low band spectrum. The comment was made that TMUS continues to spend in a “cover to compete” way and has been aggressive in cell splitting (adding new sites) to help relieve some of the more congested areas of the network. Our sense is discussions with tower operators to help with 600MHz spectrum deployment are already ongoing. We do not see TMUS capital investment on this spectrum band to go into slowdown mode – even if a S / TMUS merger is announced. In our view, if such a merger is announced (as has been speculated by the press; neither company has commented), this low band spectrum would only strengthen the combined companies’ spectrum portfolio and be a critical element for coverage in rural areas.”
VZ “The tortoise in the race,” according to Fritzsche, “and not going anywhere however network activity continues to be steady. VZ continues to steadily improve its wireless network and it is not just on small cell side. Our checks suggest there has been a good amount of activity on the macro towers side as well. While VZ surprised many by launching an unlimited plan in February, we believe 2017 network decisions were made with this move in mind. Towers should continue to benefit from this spend.”
March 9, 2017
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