Following several years of lean results, tower companies appear to be righting their ships thanks to network expansions and new technology investments.
Indeed, Mark DeRussy, analyst with Raymond James Equity Research, said the tower sector remains solid as carriers continue to focus on network quality in the hopes of retaining subscribers.
“Data is emerging, becoming a larger part of the overall demand for tower space,” said DeRussy. “However, at this point, voice remains the largest driver for tower space.”
Jonathan Atkin, analyst with RBC Capital Markets, agreed, noting that “wireless network buildouts continue to benefit tower owners and the entire sector.”
DeRussy added that although the upcoming advanced wireless services auction in June is likely to impact the tower industry, the auction is not likely to create any instability amongst tower companies. “That’s the beauty of these tower businesses, there is limited opportunity for any real surprises on the upside or on the downside,” DeRussy explained.
And while Atkin says he doesn’t expect massive consolidations amongst tower companies, DeRussy said he expects major changes, namely that of carriers selling off their tower assets.
“All towers should be owned and operated by neutral third parties,” said DeRussy. “It makes more economic sense for that infrastructure to be shared.”
DeRussy pointed to T-Mobile USA Inc., saying the carrier may sell tower assets to fund its auction spectrum spending.
“This business lends itself to having scale advantages,” DeRussy said. “It could be the big players, or it could be mid-sized players using acquisitions as an opportunity to move up in the ranks. Smaller companies will probably get bought, and there are a number of mid-sized and regional tower companies that are on, or will be on the market soon. Whether its mom-and-pop, middle-market, or more assets coming out of carriers themselves, not to mention at some point in time, the public guys getting together, there will be more consolidations in this industry. It’s just a matter of time and price.”
For its part, American Tower Corp. narrowed its financial losses, reporting first-quarter net losses of $2.6 million from revenue of $320.4 million, compared to the year-ago loss of $31.6 million based on revenue of $184.4 million.
“American Tower made significant progress over the past quarter,” stated Jim Taiclet, chief executive officer of American Tower. “We have substantially completed the integration related to our merger with SpectraSite [Inc.], while continuing to deliver strong performance across our entire portfolio.”
In early March, American Tower pointed to accounting changes and an increase in outstanding shares as it posted fourth-quarter net losses of $87.3 million based on revenues of $307.6 million. At the time, the nation’s largest tower company said its 67-percent increase in revenue was due in large part to its acquisition of SpectraSite in August, which gave the company 10,000 additional towers.
American Tower said its first-quarter revenues increased by 74 percent, $108.5 million of which was attributable to SpectraSite rental and management segment revenues.
During the quarter, the company said it constructed 54 towers and installed 13 in-building systems.
Looking forward, American Tower, which owns about 22,000 towers, said it expects to post net income of $1 million to $3 million from revenue of between $317 million and $322 million.
The nation’s second-largest tower company, Crown Castle International Inc., also appears to be closing in on its losses, reporting first-quarter net losses of just $6.7 million, a sharp decline from its year-ago net loss of $126.9 million.
CCI posted site-rental revenue of $161.9 million, up more than 14 percent on last year’s $141.5 million.
Looking forward, CCI said it expects second-quarter revenues of between $167 million and $169 million, ending the year with revenues of between $665 million and $675 million.
CCI operates more than 12,000 towers nationwide and launched a DVB-H mobile TV subsidiary, Modeo L.L.C., in January. Modeo plans to use CCI’s network for towers and dedicated spectrum to compete with Aloha Partners L.P. subsidiary Hiwire and Qualcomm Inc.’s MediaFlo. Modeo has said it plans to launch commercial DVB-H services in up to 30 U.S. markets by next year, and that a network in New York City will be up and running sometime this year.
