SBA Communications recently surprised some investors with news that it will sell its stake in ExteNet Systems, and today the company shed some light on the decision during its second-quarter earnings call. SBA Communications CEO Jeffrey Stoops said that it had doubled its initial $43 million investment in ExteNet over five years, and that the company had learned a lot from the experience.
“We had a window seat there for a very long time and we saw … 10, 20, 30 reasons why we simply prefer the macro site business,” said Stoops. “We’ve taken it all in and concluded that to substantially increase our … overhead expenses to vigorously compete for what we believe is a lower margin, capital-intensive business is … inconsistent with our long-term views … it was really a financial decision.”
Stoops said his company leads the tower industry in tower cash flow margins, which are above 81% in the U.S., and that the way to continue that trend is to maintain a focus on macro sites. Small cells and DAS are growing, Stoops said, but do not represent a long-term threat to the tower business.
SBAC built 117 towers during the second quarter, some in the U.S. and some in Latin America. In addition, the company purchased 317 new cell sites, most of which are in the United States.
Like American Tower, which reported earnings yesterday, SBAC said that Verizon Wireless and T-Mobile US were its biggest customers during the second quarter. Stoops said that AT&T’s spending was better in the second quarter than the first, but still far below the levels seen in early 2014. He said that Sprint was steady and that he expects significant spending in the future related to Sprint’s next-generation network build.
SBAC’s projections for the second half of 2015 do not assume any additional spending related to Sprint’s next-generation network, Dish Network, FirstNet or the AWS-3 spectrum. However, Stoops said that he expects all four of these to contribute to SBAC’s revenue at some point in the future.
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