Tower Companies See Long Runway Ahead for 5G

Stock of Crown Castle and American Tower climbed after they released results, MoffettNathanson’s Nick Del Deo told investors Monday. “Crown Castle’s management, which typically tries to temper near-term investor expectations, reiterated its outlook for solid growth in 2022 and beyond,” he said: “American Tower’s management affirmed it expects domestic growth to pick up in H2 2022 and step up again in 2023.” Those two companies do a large share of their business under master lease agreements, but SBA is “far more dependent on physical activity levels, perhaps making its results and outlook a better barometer of what’s actually happening in the field,” Del Deo said.

Each of SBA’s carrier customers was “busy during the quarter signing up new leases and amendments primarily associated with the build out of their networks through the deployment of new spectrum,” SBA CEO Jeffrey Stoops said on a call with analysts. T-Mobile “was very active during the quarter and continued their nationwide deployment of 2.5 GHz and 600 MHz spectrum,” he said: “Verizon and AT&T each increased their 5G related signings with us from the first quarter, with each focused on C-band deployments and AT&T beginning to incorporate 3.45 GHz spectrum into their deployments as well.” Dish Network was also active, he said.

Stoops said SBA is “excited” about the 2.5 GHz auction “which will result in even more spectrum being deployed.” At this point, the tower company isn’t having problems with supply chains, labor or COVID-19, he said. "As the pure-play public tower operator, we believe the company is best positioned for the upcoming 5G investment cycle," he said.

Crown Castle CEO Jay Brown told analysts the industry is having “a multi-year acceleration of activity, which has been driven by 5G and the deployment of largely 5G equipment across sites that they were already collocated on for 4G or prior generations.”

“What we've seen in the past on 2G, 3G, 4G and now 5G” is “something that we're going to continue to see for tower growth for years to come,” Brown said. He forecast “a very long runway of activity from 5G buildouts.” Starting with 2G deployments in the mid-1990s, carriers invested about $125 billion over eight years on wireless voice services nationwide, he said. They spent $200 billion to deploy 3G and another $325 billion on 4G, he said.

“Similar to past generational network upgrades, we expect 5G to drive sustained growth in our tower business, as our customers upgrade existing cellsites and add new sites to our 40,000 towers,” Brown said: “We also believe 5G will be different as it will require the deployment of small cells at scale to increase the capacity and density of wireless network, as more spectrum deployed across existing macro towers will not be sufficient to keep up with the growth in mobile data demand.”

American Tower CEO Tom Bartlett mostly focused on the company’s international portfolio, in his presentation to analysts.

For the quarter, SBA reported earnings per share of 64 cents, which was below expectations, and higher than expected revenue of $652 million. American Tower exceeded expectations on both metrics with EPS of $1.95 on $2.67 billion in revenue. Crown Castle had 97 cents in EPS, and higher than expected revenue of $1.73 billion.