SBA Communications (NASDAQ: SBAC) kept pace with its towerco brethren and reported solid gains in 2Q22 across all of its key operating metrics. Seeing trends for increased amendments and new leasing activity in both the domestic and international markets, SBAC raised its performance outlook for full-year 2022.
SBAC’s global tower portfolio grew from 33,764 to 36,297 at the end of 2Q22 through a combination of acquisitions and new builds, mainly in international markets that now account for 52 percent of the total. Site leasing revenue was $580 million compared to $524 million in 2Q21, an 11 percent year-over-year increase. Site development revenue, that is, billable services to prepare sites for tower tenants, was up almost 40 percent to $72 million compared to $51 million in 2Q21, reflecting the increased activity among its mobile network operator tenants.
Net income in 2Q22 was $69 million, down 55 percent from $153 million in 2Q21, and including a $43 million loss, net of taxes, on the currency-related remeasurement of U.S. dollar-denominated intercompany loans with foreign subsidiaries. Adjusted EBITDA was $438 million, up 9 percent YoY and AFFO came in at $335 million, a 14 percent increase from 2Q21.
Upbeat Outlook
“While there is a range in the degree of activity from each of our customers around the globe, collectively, they are producing very high levels of demand, which we expect will keep us very busy for the remainder of this year and well into 2023. As of this moment, we are not seeing any material adverse impact on our activity levels from supply chain labor or COVID-19 issues,” says Jeff Stoops, SBAC President and CEO.
In 2Q22, SBAC acquired 210 communication sites and one data center in Brazil, for total cash consideration of $127 million. SBA also built 100 towers during the quarter. The company also spent $10 million to purchase land and easements and to extend lease terms. Capital expenditures for 2Q22 were $191 million, including $180 million of discretionary cash capex (new tower builds, tower augmentations, acquisitions, and purchasing land and easements).
For full-year 2022, SBAC updated guidance for site leasing revenue to $2.3 billion vs $2.1 billion in 2021, site development revenue of $270 million vs $205 million in 2021, Adjusted EBITDA of $1.74 billion and AFFO of $1.32 billion vs $1.6 billion and $1.19 billion, respectively. Full-year 2022 discretionary capex is $1.42 billion, up from prior guidance of $535 million.
Domestic Market
SBAC ended the quarter with 17,395 towers in the U.S. and its territories. Site leasing revenue was $442 million, compared to $419 million in 2Q21. The four national MNOs – T-Mobile, AT&T, Verizon, and DISH – together accounted for 96 percent of 2Q22 revenues.
Domestic new lease and new amendment application backlogs remain very healthy. SBAC’s MNO customers during the quarter signed new leases and amendments primarily associated with new spectrum deployment to support their network build outs. T-Mobile continued its nationwide deployment of 2.5 GHz and 600 MHz spectrum. Verizon and AT&T each increased their 5G-related signings focusing on C-band deployments and AT&T began to add in 3.45 GHz spectrum. DISH continued to sign up new lease agreements for its nationwide 5G network build out.
SBAC expects Sprint churn to reduce revenues by about $24 million in 2022, and in the $15-25 million range in 2023.
International Markets
Internationally, SBAC had 18,902 towers at the end of the quarter. International leasing growth came from steady new lease and amendment activity in Brazil, along with significant agreements in South Africa and El Salvador, and increased inflation-based escalators in all international markets. During the quarter, international revenues of $138 million were a mix of 51 percent in new leases and 49 percent from amendments to existing leases.
Additionally, the company is under contract to purchase approximately 2,600 sites from Grupo TorreSur (GTS) in Brazil for $725 million, which is expected to close during 4Q22. The majority of GTS sites are located in Sao Paulo state, and mostly in urban or suburban areas. The sites have 2.1 tenants per tower with growth opportunities from recent 5G spectrum auctions in Brazil as the driver. This acquisition will increase SBAC’s Brazilian tower portfolio to over 12,500 sites.
On this portfolio, now bankrupt MNO, Oi, and legacy Nextel leases represent 17 percent of the business. Though anticipating churn on these leases, SBAC believes its large base of towers in Brazil will be an asset in upcoming Oi consolidation discussions and position SBAC to capture more of the necessary incremental network investment that will be required of the remaining three legacy MNOs -Telefónica, Claro and TIM Brasil.
By John Celentano, Inside Towers Business Editor
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