American Tower Outlook Bullish on 2Q Performance

American Tower (NYSE: AMT) is on a roll. The company reported in its 2Q22 earnings call that all key operating metrics were up by either low double-digit or high single-digit percentages. Total property revenue came in at $2.6 billion, up 17 percent over the $2.2 billion in 2Q21. Net income jumped 20 percent YoY to nearly $900 million, Adjusted EBITDA reached $1.7 billion, a 13 percent YoY increase and consolidated AFFO grew 7 percent to $1.2 billion.

AMT is a global story that is the sum of its regional parts. The tower company was very active during the quarter, constructing 1,514 new towers, predominantly in India and Africa and acquiring another 118, mainly in Europe. The company also sold or decommissioned 762 poor performing sites in India and Latin America to bring its total tower count to 220,096 at the end of the quarter, an increase of nearly 4 percent from a year ago. This tally makes AMT the largest independent tower company in the world.

The U.S. and Canada are the foundation of AMT’s business, accounting for $1.2 billion or 47 percent of total property revenues for the quarter even though the region only accounts for 19 percent of its towers. AMT’s three largest MNO customers led by T-Mobile together with AT&T and Verizon, accounted for $1.1 billion or 42 percent of total global property revenues. 

DISH and other wireless service providers make up another 6 percent while data centers contributed $191 million or 7 percent reflecting the contribution of the CoreSite acquisition last year. International tenant revenues were 30 percent of the total while international pass-through revenues added another 15 percent. Though not common practice in North America, tower companies operating in international markets often will “pass-through” some operating expenses, particularly power, to their tenants and declare the amount in the revenue tally.

Total capital expenditures for the quarter were $378 million, down 4 percent sequentially due to the timing of new builds and supply chain delays, but up 32 percent YoY. AMT raised its full-year 2022 capex mid-point guidance to around $2 billion to support the 6,500 global towers build program. This figure includes roughly $300 million for new data center construction in the U.S. Discretionary capex, primarily for the construction of new sites, new ground-up data center facilities and expansion within existing data centers, accounts for 43 percent of the total.

AMT management is bullish on the company’s outlook for the next several years. Secular trends of escalating mobile data demand is driving 4G expansion and new 5G builds with newly-available spectrum across international markets. This leads to demand for more towers. At the same time, rationalization and consolidation of carriers in big markets like Brazil and India supported by a favorable regulatory climate is spawning demand for new infrastructure. The company also points out that its annual lease escalators in international markets typically are tied to inflation and not a fixed rate as in North America markets. Inflation-indexed escalators are helping AMT ride through adverse economic conditions in regional markets. 

With T-Mobile as its largest customer, the company acknowledged that its organic tenant billings for 2022 in the U.S. and Canada region will be down by about 4 percent. This decline is due to churn resulting from Sprint lease terminations as T-Mobile finalizes its network integration and cell site rationalization.

On the upside, the company is not expecting any shortcomings on Verizon C-band deployments despite not having a holistic, or all-inclusive, master lease agreement with Verizon as AMT does with T-Mobile and AT&T. Even though the Verizon MLA is a pay-as-you-go arrangement, AMT expects to support Verizon with towers located in markets where Verizon must activate C-band licenses.

With a confluence of market drivers, AMT provided upbeat guidance for full-year 2022: total property revenue is expected to grow 14 percent YoY to $10.4 billion, along with Adjusted EBITDA of $6.6 billion, up 10 percent, and consolidated AFFO of $4.7 billion, a 7 percent increase.

By John Celentano, Inside Towers Business Editor

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