American Tower Sees Long Term Growth Despite Short Term Dips

American Tower (NYSE: AMT) reported steady returns for 3Q22, despite economic headwinds in some countries and some customer churn. Property revenues grew 10 percent year-over-year to $2.6 billion for the quarter. Adjusted EBITDA grew to $1.6 billion, a six percent YoY increase, resulting from both top-line revenue growth and cost controls. Organic leasing increases along with newly built towers contributed to the growth. In the quarter, AMT constructed nearly 1,600 new sites, 1,200 in India alone, making it the ninth consecutive quarter of over 1,000 builds worldwide. At the end of 3Q22, the company reported a base of 221,132 towers in 24 countries, an increase of two percent compared to 3Q21. AMT remains the largest independent tower company in the world.

The company has a positive outlook for the next several years despite what it deems to be some short-term headwinds. Importantly, at the end of August, it signed a new comprehensive MLA with Verizon that is expected to allow Verizon to efficiently accelerate its 5G network deployment over a multiyear period. The Big 3 accounted for 46 percent of AMT’s global property revenues in 3Q. With all the MNOs in full 5G deployment mode, AMT does not expect any slowdown in its site leasing revenue streams for a number of years. The company points out that even with overall U.S. wireless capex declines expected in 2023, as Inside Towers reported, demand for mobile data keeps escalating so the MNOs have to keep building their networks, both on towers and with small cells.  

This expanded MNO activity is driving AMT’s services that the company provides to assist its MNO tenants with site installation and maintenance work. The company expects to generate around $250 million in service revenues in 2022, roughly the same as in 2021.

The company’s data center business is growing, with CoreSite yielding returns which AMT anticipated when acquiring it in 2021. Data centers accounted for eight percent of total 3Q22 property revenues, growing at roughly three percent per quarter since then.

Tom Bartlett, AMT President and CEO comments, “Our tower portfolio, coupled with our U.S. data center business, represents a distributed portfolio of real estate with accessibility to robustly interconnected core networks and native access to cloud on ramps. We believe the combination of these platforms will be critical as data processing extends from the core to the edge.” 

He says the company has identified over 1,000 sites within its existing U.S. tower portfolio that it sees as “shovel-ready candidates for mobile edge deployment based on location, parcel footprint, land control and existing fiber and power access.” Over the next several months, AMT plans to break ground on its first one megawatt edge facility on an owned tower site. The company believes the tower and data center combination offers potential new customers a differentiated value proposition.

In international markets, AMT executed a new multi-market MLA with Airtel Africa, its largest customer in the region. Under the MLA, Airtel will locate its cell sites on AMT’s existing towers in Nigeria, Kenya, Uganda, and Niger. In addition, AMT has a committed build-to-suit pipeline to support Airtel Africa’s 5G deployments with low-carbon sites.

Still, AMT is facing some short-term head winds. Sprint-related churn partially offset growth by about four percent. Some of that churn is part of the existing T-Mobile MLA and the balance on legacy Sprint leases. Most of that churn should dissipate in 2023.

In India, AMT has had difficulties collecting rents from mobile carrier Vodafone Idea Limited (VIL) which has its own financial stress. VIL has committed to right-sizing its finances and to paying AMT the accrued charges.

In all international markets, AMT manages inflation by indexing MLA annual lease escalators to local CPI rates. And higher energy costs are ‘passed through’ to customers. 

The company raised its full-year 2022 property revenue outlook to $10.4 billion, up 15 percent YoY, Adjusted EBITDA to $6.6 billion, an 11 percent increase over 2021, but lowered its AFFO to $4.6 billion due the VIL situation, higher interest expense and some foreign exchange losses. It plans to spend about $2 billion in total global capex with $200-300 million in U.S. data centers.

When asked about the prospects for more acquisitions in Europe, Bartlett says, “We do have a sizable build-to-suit program [underway] and we see even more of a build-to-suit opportunity coming forward … particularly in Germany. With regards to further M&A, we stepped away really just due to the sellers’ expectations of value. There’s just a significant delta between the bid and the ask at this time.”

By John Celentano, Inside Towers Business Editor

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