Next week, companies in the wireless infrastructure business start reporting their Q3 earnings in a rapid-fire sequence of conference calls that will run through early November. The industry is in a high cycle of capital spending and rapid deployments for 5G cell sites, including C-band, fiber connections and data centers that knit all the traffic together.
The economy is trying to revive but still suffering a COVID hangover. Demand for wireless and broadband connectivity has never been higher. And the carriers and their contractors are in an all-out race to build their networks.
What should we be watching for during these Q3 earnings reports? Certainly, each company will be highlighting its best performance for the quarter.
The mobile network operators are in the spotlight. Their respective network activity drives the overall wireless infrastructure business. Here are some points to watch for:
- Verizon (NYSE: VZ): will affirm its “five vectors for growth” strategy while highlighting increases in wireless net adds, updating its C-band activity and fiber deployments; likely will comment on its small cell and fiber builds; VZ does not break out its capex allocations but we estimate in recent years that it spent $9-10 billion a year in wireless and will spend an incremental $10 billion over the next two to three years along with incentive and clearing costs for C-band.
- T-Mobile (NASDAQ: TMUS): will keep touting its lead over other MNOs with updates on low- and mid-band 5G coverage build outs, wireless net adds; may mention its $9-10 billion a year capex budget that includes C-band builds which will not begin before 2023; likely will offer commentary of network activity through year-end 2021 and into 2022, particularly Sprint cell site decommissioning.
- AT&T (NYSE: T): likely will highlight growth in wireless net-adds, fiber homes-passed and HBO Max subscribers; expect an affirmation of increased aggregate capex including C-band post the Warner Media spinoff. Note that T, like VZ, does not break out its capex allocations although it invests $9-10 billion a year in its wireless network and will increment that amount with $6-8 billion along with clearing costs for C-band deployments through 2024.
- DISH Network (NASDAQ: DISH): will offer updates on its 5G Open RAN build out and the progress of Las Vegas network performance validation; likely will reaffirm its $10 billion over seven years capex commitment, at a run-rate of $1-2 billion a year; probably will wait until Q4 call to provide guidance for 2022. (See our article titled, “DISH Network: A Strategic Analysis” in the Intelligence Q2 2021 issue, for further insights.)
The tower companies are well positioned for growth. With both upgraded and new MNO master lease agreements in hand, we expect that the towercos will report accelerating growth in site leasing revenues.
- American Tower (NYSE: AMT): expect property and services revenue growth in Q3 in the domestic market; AMT likely will indicate a modest increase on major international markets particularly in Brazil and India that are recovering from the pandemic along with a favorable ruling by the Indian government that will spur new growth among AMT’s biggest MNO customers; look for some commentary that Europe is picking up its 5G deployment pace along with an update on new tower construction globally year-to-date; AMT should affirm guidance for top line, EBITDA and adjusted funds from operations (AFFO) growth.
- Crown Castle (NYSE: CCI): should show growth on tower site leasing revenues although the fiber/small cell segment may reflect the downturn of small cell installations the company announced in its Q2 call; expect updated guidance on property and service revenues, EBITDA and AFFO growth.
- SBA Communications (NASDAQ: SBAC): should show solid growth in the domestic market from MLAs with Big 3 MNOs and DISH; expect indications of a slow recovery in international markets, especially Brazil and South Africa; don’t expect any meaningful performance from new business in Tanzania for several quarters; likely will reaffirm revenue, EBITDA and AFFO outlook.
- Digital Bridge (NYSE: DBRG): a full-service infrastructure provider with towers, small cells, fiber, and data centers across four continents; its Vertical Bridge subsidiary is the fourth largest tower company in the U.S.; now with DBRG’s assets “rotated” nearly 100 percent to digital infrastructure from classical real estate investments, expect the company to project revenue and profitability through year-end 2021 and into 2022, and show a trajectory in line with 2024 targets.
Inside Towers will be tracking and reporting on these and other publicly held infrastructure companies as they present their results throughout the entire Q3 earning season.
By John Celentano, Inside Towers Business Editor