American Tower Raises Financial Outlook, Reduces Tower Builds

American Tower (NYSE: AMT) is still the largest independent tower company in the world, according to Inside Towers Intelligence. At the end of 3Q23, the company reported a global portfolio consisting of 222,858 towers in 25 countries across five regions. That figure is up one percent year-over-year compared to 220,096 in 3Q22 but down one percent sequentially from 224,019 in 2Q23. The reduction is a result of the company selling or decommissioning 1,667 towers, mainly in India and Africa, while building only 505 towers in the quarter, primarily in Africa. That build-to-suit construction is nearly half of the 948 towers per quarter pace averaged through the first half of 2023, and just a third of the 1,718 average towers built each quarter through 2022. Of note, AMT spent approximately $61 million in the quarter, primarily to acquire sites related to a prior sublease agreement with SBC Communications, a predecessor entity to AT&T (NYSE: T) as well as other communications infrastructure assets.

AMT attributes the BTS reductions to a combination of slower network builds in key markets like North America, macroeconomic headwinds from higher capital costs and foreign exchange rates, and the overhang of its machinations with Vodafone Idea in India, as Inside Towers reported. Under the circumstances, the company is taking measures to manage its capital effectively. It is maintaining its previous 2023 capex midpoint guidance of $1.7 billion but is shuffling how that money is being used. AMT reduced by four percent its discretionary capex that includes new tower builds worldwide that it now estimates at 2,650 to 3,750 for the year, down from its earlier guidance of 3,450 to 4,550.

At the same time, the company increased the capex allocation for ground lease purchases by 32 percent while leaving startup capital unchanged and trimming site redevelopment expenditures by three percent. To balance the reductions, the company raised the allocation for tower maintenance and corporate expenses by eight percent. 

AMT delivered strong financial performance in the quarter largely on the strength of its comprehensive master lease agreements with its biggest customers in the U.S. The Big 3 MNOs and DISH collectively accounted for 48 percent of the $2.8 billion in 3Q23 total property revenues, which were up seven percent YoY. CoreSite data centers accounted for eight percent of the total. International tenant billings and energy pass-through charges made up the 45 percent balance. Adjusted EBITDA came in at $1.8 billion, while AFFO was $1.2 billion, both up by 10 percent YoY.

The company sees escalating mobile data demand as a long-term driver for both tower and data center infrastructure expansion and subsequent increases in organic tenant billings. It points out that only about 50 percent of its sites have 5G equipment deployed on them so far. AMT also expects to announce a resolution on the disposition of its ATC India tower operations by the end of the year.

On the strength of its financial performance in the quarter, AMT raised its outlook for overall annual organic tenant billings growth of more than six percent. The company expects more than five percent organic tenant billings growth in the U.S. and Canada region, after accounting for Sprint site decommissioning, and over seven percent across its international markets where growth is being driven by higher new business and churn delays.

AMT’s revised guidance for the full-year 2023 compared to 2022 includes property revenue of $10.94 billion, up from $10.88 billion, Adjusted EBITDA of $7.05 billion compared to $6.99 billion, and AFFO of $4.57 billion versus $4.53 billion.

By John Celentano, Inside Towers Business Editor

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