American Tower (NYSE: AMT) reported its Q3 results with double-digit growth across all key metrics on a year-over-year basis.
Total property revenues grew to $2.4 billion in 3Q21, up over 19 percent from $2.0 billion in 3Q20. In AMT’s domestic markets, comprising the U.S. and Canada, revenue grew 10 percent to $1.2 billion, accounting for 52 percent of the total.
International markets showed the biggest revenue gains from organic growth and acquisitions, particularly Telxius in Europe, growing 32 percent to $1.1 billion. AMT closed the last tranche of the Telxius deal during the quarter, adding 4,000 towers in Germany. In the same period, Adjusted EBITDA grew nearly 20 percent to $1.6 billion while consolidated AFFO increased 13 percent to $1.2 billion.
AMT is the world’s largest independent towerco. Its global portfolio grew to 217,000 towers, up nearly 38,000 or 21 percent over 179,000 at the end of 3Q20. The growth has been driven by acquisitions including Insite in 4Q20 and Telxius, and new builds, over 4,400 to date, are mainly in India and Africa. Domestic market towers grew 6 percent to nearly 43,000 mainly on acquisitions. Most of the portfolio growth was in international markets.
The company is maintaining its new-build programs in these markets to support growing mobile data demand. To keep up with that demand, AMT’s mobile network operator customers are expanding and upgrading their networks mainly to 4G with 5G to follow. AMT is providing midpoint guidance of 7,000 new tower builds for full-year 2021, and is projecting 40,000-50,000 new tower builds globally over the next five years.
It is important to note that AMT derived 52 percent of its property revenues from its domestic market where it owns and operates just 20 percent of its towers. The company sees significant upside opportunities in international markets and adheres to its marco tower-first philosophy on the assumption that network expansion for the foreseeable future will rely on towers.
This is particularly true with C-band and 2.5 GHz mid-band frequencies currently being deployed in the U.S. AMT CEO Tom Bartlett referred to these mid-band frequencies as “the workhorse of the true 5G experience.” Mid-band frequencies also are being used in international markets for 4G and 5G in urban and rural market coverage that MNO tenants will deliver from macro towers.
AMT’s full-year 2021 midpoint outlook includes total property revenue growth of 14 percent year-over-year to $9.1 billion. It expects overall organic tenant billings growth in the four percent range although U.S. and Canada performance is likely in the three percent range as the first impacts of the Sprint site decommissioning commences in 4Q21 then continues through 2024.
By contrast, AMT expects international markets to yield organic tenant billings growth of 5-6 percent. Furthermore, the company is projecting full-year 2021 overall Adjusted EBITDA of nearly $6.0 billion, up 16 percent YoY and consolidated AFFO growing 15 percent from 2020 to $4.3 billion.
Capital expenditures for 2021 are expected to be $1.5-1.6 billion with over one-third in discretionary capital projects to fund construction of 6,500-7,500 communications sites globally. The balance will cover ground lease purchases, start-up capital projects, and site redevelopment along with maintenance and corporate capex.
Bartlett says AMT sees opportunities for incremental revenue growth. Network virtualization with Virtual RAN (V-RAN) and Open RAN (O-RAN) that moves computing power closer to user applications is an area where AMT is playing. Bartlett identified layers of edge computing from large regional metro data centers to local aggregation centers for V-RAN/O-RAN to multi-access edge computing (MEC) with containerized data centers at towers.
AMT believes it is well-positioned to deliver on the growing demand for edge computing as part of its neutral host operating model. Its recent acquisition of DataSite data centers reinforces that notion.
Power is another expansion area. AMT is placing more emphasis on using renewable and sustainable energy sources such as solar and lithium-ion batteries to reduce dependence on diesel generators. AMT has already expanded its lithium-ion powered site count from 4,500 in 2019 to 6,700 in 2020. The company is targeting another 8,000 sites by year-end 2022 and recently signed a multi-million-dollar bulk battery purchase agreement in Africa to meet that goal.
Bartlett points out, “Our yields on these investments will further expand as we are able to lengthen battery and generator replacement cycles. Importantly, we believe that energy efficiency, the use of renewables and sustainability in our broader sense, can represent an important competitive advantage for us.”
By John Celentano, Inside Towers Business Editor