PCIA 2014: Tower companies see record applications, and Wall Street takes notice

ORLANDO, Fla. – Surging mobile data demand means that wireless operators need to add coverage and capacity to their networks, and that often means co-locating a cell site on a tower occupied by one of their competitors.
“Volume and demand for co-locations and new towers is creating a flood of applications,” said Rodney Smith, CFO at American Tower’s U.S. Tower division. Smith spoke along with executives from Crown Castle International and SBA Communications at PCIA’s 2014 Wireless Infrastructure Show.
“We have seen record application volume this year,” said Ben Moreland, CEO of Crown Castle, adding that most applications are for co-location. Right now his company is busy preparing the towers it purchased from AT&T for co-location, integrating almost 10,000 sites with its legacy portfolio of towers.
“We’re up to our ears in integration,” said Moreland. “It’s 9700 sites and we are about halfway through.”
American Tower is also in the process of integrating new towers, after buying Global Tower Partners for almost $5 billion last year. Smith said the GTP assets are actually showing slightly higher growth rates than American Tower’s legacy towers, and that the company is “ahead of schedule in terms of capturing synergies.”
Tower companies expect the boom to continue as the Federal Communications Commission makes more spectrum available to operators through the upcoming AWS-3 spectrum auction and the 600 MHz incentive auction. In addition, the spectrum held by Dish Network and by FirstNet could eventually be deployed for wireless communications, leading to more applications for cell sites on existing towers and/or construction of new towers.
Brendan Cavanagh, EVP and CFO at SBA Communciations, said that even without the Dish and FirstNet spectrum, the tower companies will have plenty of applications for the foreseeable future. The significant opportunity remains with the big four carriers for now,” he said. “We’re seeing growth opportunities today that we didn’t even see years ago.”
Wall Street takes notice
Investors have validated the tower companies’ bullish outlook, and even in a strong market the stocks of the three public tower companies have outperformed. Crown Castle, American Tower and SBA Communications have all seen their stock prices rise 50% or more during the past three years, with SBA up more than 100%.
“SBA is a small cap stock, it is the only one not a dedicated [real estate investment trust], and it really has the best growth potential,” said Jennifer Fritzsche, managing director at Wells Fargo. Fritzsche added that most of SBA’s towers are “developer” towers that can serve several operators, as opposed to dedicated carrier towers.
Fritzsche said that American Tower is her firm’s current favorite among the tower stocks, largely because of its international portfolio. “We do like the international growth opportunity especially in Latin America,” she said.
Of the three public tower companies, Crown Castle has been the least aggressive internationally. Moreland said the company continues to evaluate international opportunities and continues to find the best risk-adjusted returns in the United States. But that does not mean Crown Castle is not diversifying beyond U.S. towers.
“Our small cell/DAS business is the largest in the U.S. market,” he said, adding that Crown Castle has about 12,000 individual site nodes on the air and a lot more under construction. “It’s a complementary business to the macro sites, one that we think fits well with our model of shared infrastructure.”
“Small cells is definitely all the buzz right now and Crown really has the most exposure there through the acquisition of NextG,” said Fritzsche. “I do think that this is something that is not just buzz and real substance behind it. We follow AT&T, Verizon, Sprint and T-Mobile, and in each of the conversations that we have we can hear that strong sense of urgency. AT&T, while it has its own antenna solutions group, definitely seems to still be willing to outsource to carriers like Crown. And Verizon, especially with the roll out of AWS, really has a strong small cell focus.”
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