American Tower Corp. (AMT) CEO Jim Taiclet said the company would continue its plan to buy and build tower assets internationally and domestically in 2011, as it brings its operational efficiencies to all of its markets and uses its intellectual property to evaluate new opportunities around building, buying and operating to maximize lease-up rates. Speaking at Citi Group’s 21st Annual Global Entertainment, Media and Telecommunications Conference, Taiclet said the company has an optimistic attitude going into 2011.
Taiclet also addressed the company’s ongoing study of whether to become a real estate investment trust (REIT).
The company added 8,000 tower sites in 2010, bringing its total number of towers to 35,000. Of the 8,000 added in 2010, about 1,000 were added in the United States and 4,000 sites were added in South Africa and Ghana. The company also has tower assets in India, and Latin America and expects to add more assets in all those markets this year.
The performance in its domestic and international buys have mirrored or exceeded its original business models, Taiclet noted. While the company announced just 19% of its revenues were from international operations in the third quarter, American Tower expects to reach 25% international revenues in 2011.
Regarding organic growth, Taiclet said its towers in Mexico perform about the same as its U.S. assets, but could get more tenants assuming Nextel International Inc. can build out new spectrum won at auction. Brazil also should get a boost as that country awarded new spectrum. American Tower’s Colombia, Peru and Chile tower assets could grow even faster because tower collocations are not common in those countries. “We expect the lease-up in those regions to be faster than Brazil.” Ghana, because it is an emerging market with little collocation experience, could perform much like the South American markets.
In the United States, American Tower also expects continued growth as AT&T Mobility and Verizon Wireless introduce more diverse devices and build their 4G networks, while smaller operators will have to address their networks in order to stay competitive with the nation’s largest operators. “A lot of those new devices … are going to be running on the 3G network while the 4G network is being introduced so there is going to be activity in a robust fashion on the 3G side and the 4G side and that combination is going to drive the bus for leasing demand.”
By 2012, American Tower speculates there will be four solid competitive 3G/4G networks operating in the United States.
Taiclet also commented on how American Tower could be impacted by Sprint Nextel Corp.’s decision to take 20,000 sites off its network. The company expects that between 2014 and 2018, it would experience less than 1% churn per year if most of the iDEN sites are decommissioned.
While Taiclet said there is no magic formula guiding how fast people adopt mobile broadband service, the company believes that people will adopt mobile broadband much like they adopted mobile voice, so in six to eight years., smart phones and super phones will be the majority of devices, rather than the minority, which is good for the entire tower sector. The company sees solid U.S. growth this year and plans to “maximize our share of that business and also turbo-charge it with our international growth.”
The company’s Distributed Antenna Systems business and its shared generator businesses are growing but remain small percentages of the company’s overall revenue, Taiclet said. Each business contributes about 1% to 2% to revenues and eventually the company would like to see DAS contribute between 4% and 5% of revenues over a two- to three-year timeframe , but as the core tower business continues to grow, they likely will remain a small revenue contributor overall.
The company is considering switching to a REIT stock, which brings some financial benefits. Taiclet said internally the company is assessing its operational readiness, the governance required to get board and shareholder approval to make the change and working with the IRS to get feedback on how the agency would view the transition.