While long-term network development trends remain intact, market analyst Robert Gutman with Guggenheim believes the tower stock pullback from the highs set in early September reflects a pause in new purchase orders by TMUS. Gutman said he believes it may last through the start of next year.
“As TMUS has since reiterated that it remains on track to reach the high end of its $5.8-6.1B capex guidance in 2019,” Gutman said, “we believe the pause could be driven by accelerated spending in 1H, which may have pushed the company toward its full budget for the year, and ongoing delay of the combination with Sprint, which we believe the companies had hoped to have already completed by this time.”
Gutman said tower company guidance generally reflects orders in hand and contracted activity and he sees minimal impact on FY19 organic growth guidance. However, a pause in new orders could result in some domestic growth headwind in 1H20. “Though, we believe a slowdown in activity would be more weighted to new builds rather than amendments,” he said, “which might mean a more pronounced impact on private vs. public players. Further, we believe this is a timing issue, with any delayed spending pushed out from the current quarters likely to come back in 2020 budgets.”
While he expects this to be a recurring theme in the Q3 tower prints, he said his firm remains focused on CCI as the company will be the first to provide 2020 guidance in its Q3 earnings report. Gutman said Crown has the highest direct exposure to TMUS at 20 percent of site leasing revenue followed by SBAC at 17.2 percent and AMT at eight percent.
October 15, 2019