American Tower CEO: 4G initiatives by operators benefit tower firms: Past consolidation led to advanced network builds

American Tower Corp. (ATM) CEO Jim Taiclet took the company’s first-quarter conference call to comment how various 4G initiatives either under way or being pursued by wireless operators would impact the tower business. Basically, Taiclet said the underlying drivers of increased smartphone adoption and data consumption will fuel tower builds going forward.
Upon news that AT&T Mobility (T) is trying to purchase T-Mobile USA Inc. (DETEGY), investors questioned the overlap of towers used by the two operators and its potential impact on American Tower and other tower firms. Taiclet reiterated that while there is some asset overlap, previous acquisitions by other operators resulted in faster deployment of next-generation services, which was positive for the tower industry.
“We view the increase in penetration of smartphones, tablets and similar broadband devices and the monthly volume of bandwidth drawn by each device as the two most important indicators of future further demand for tower space in any given market,” Taiclet said. American Tower estimates U.S. smartphone penetration to double by 2013, and adoption of tablets and other broadband devices to double annually through 2013.
All 4G buildouts depend on spectrum, funding and the ability of original equipment manufacturers and handset suppliers to build devices that run on those networks, Taiclet said. If an industry development is likely to increase penetration of high-bandwidth devices at a faster rate, it is beneficial to American Tower.
Specifically, Taiclet addressed Sprint Nextel Corp.’s (S) Network Vision initiative, AT&T Mobility’s potential acquisition of T-Mobile USA and plans to build 4G networks at Clearwire Corp. (CLWR) and LightSquared.
Sprint Nextel’s Network Vision initiative will enable the operator to use its 800 MHz spectrum more efficiently, using Ethernet and fiber to backhaul traffic to the core network, reducing costs. While American Tower might see increased revenue initially as Sprint amends its leases, the tower firm likely would see churn from legacy iDEN tower overlaps around 2015. However, Taiclet said that Sprint likely would still have to increase its cell-site density as more tablets and other broadband devices are adopted.by its customers.
Clearwire.’s and LightSquared’s plans to build out 4G networks depend on funding and reliable infrastructure equipment and iconic devices. American Tower expects both companies to find a way to use their spectrum, whether as standalone entities or in partnership with someone else, noting that any arrangement that accelerates 4G adoption is good.
Likewise, the pending merger between AT&T and T-Mo would enable AT&T to increase its spectrum position, and allow AT&T to bring its substantial financial and supply-chain resources to more people quickly.
Taiclet said past mergers between Cingular/AT&T Sprint and Nextel and Verizon Wireless and Alltel all sparked next-generation network initiatives that ultimately benefitted tower firms.