American Tower (NYSE: AMT) is morphing into more of an ‘infrastructure as a service’ provider than the traditional tower company model of securing and managing tenant leases. As one of the largest global real estate investment trusts (REITs), AMT owns, operates and develops a multitenant communications tower portfolio of over 178,000 sites at year-end 2019. The bulk of AMT’s reported $7.58 billion 2019 revenues were derived from organic tenant billings.
What is interesting is that AMT is adding value and incremental lease charges at its sites with backup power generators, batteries, solar energy and fiber optic cable connections at towers. AMT also is investigating how it can leverage newly-released CBRS 3.5 GHz frequency bands both for its own in-building wireless solutions and for its customers, along with deploying edge computing to support 5G deployments at its tower sites.
AMT’s revenues have grown steadily at a 7 percent compound annual growth rate (CAGR) for the past three years. The U.S. market accounted for $4.2 billion or 55 percent of the billings on a base of nearly 41,000 sites or just 23 percent of AMT’s global tower count. The company added roughly 13,600 communications sites to its global portfolio through a mix of 9,200 sites acquired in the U.S., Latin America, and Africa and a significant build-to-suit (BTS) construction program involving 4,400 sites, the most in the company’s history.
In its 4Q19/FY2019 earnings call, AMT provided guidance that its 2020 capital expenditures will be in the $1.1-1.2 billion range. Since 2015, AMT’s capex has grown at a 10 percent CAGR. Note that 85 percent of the budget is allocated to cash-generating projects with the balance for non-cash generating activities such as tower site maintenance and corporate IT infrastructure.
Among cash-generating allocations, Discretionary Capital Projects accounts for 34 percent of the total budget or about $390 million, mainly for new site builds and shared generator installations. AMT expects to build even more in 2020, an astounding 6,000-7,000 sites with roughly 1,000 in Africa, 600 in Latin America, 5,000 in India and the rest in the U.S. Another 16 percent of the total capex goes towards Ground Lease Purchases for land underneath communications sites. Start-Up Capital Projects, 12 percent of the budget, are specific to acquisitions and new market launches. At 23 percent or about $270 million, Redevelopment capex increases capacity of tower sites (height extension, foundation strengthening, extension of ground space) which yields new incremental tenant revenue.
Going forward, AMT expects to achieve progress on its strategic initiatives to grow its asset base, innovate for 5G, drive energy and operating efficiencies, and maintain an industry leadership role. The approval of the T-Mobile/Sprint merger in the U.S. removes much uncertainty that hung over the market in 2019. AMT expects after a period of site rationalization in 1H20, the new T-Mobile (NTM) site activity will pick up in 2H20. Note that AMT has not factored any DISH Network activity into its 2020 outlook but anticipates some movement as DISH inherits tower assets from NTM as part of the merger approval.
As a sidebar, AMT indicated that it is testing and will field trial edge computing applications that support 5G at selected tower sites in the U.S. southeast later this year.
In India, recent legal and regulatory rulings have set the tone for Indian carriers going forward. With a population of 1.3 billion and the bulk of its nearly 74,000 Asia sites in India, AMT expects to be there for the long haul. In Africa, the company is shoring up the reliability of 18,000 sites with solar power and battery backup. AMT expects continued long-term performance in Latin America with its nearly 41,000 sites while maintaining strong relations with key customers, Telefonica and AT&T Mexico.
Innovations, adapting to prevailing market conditions and supporting its customers with new value-added services are driving AMT to become more than just a ‘tower company.’
By John Celentano, Inside Towers Business Editor