Tower owners expect steady growth as new competitors gear up
by Martha DeGrasse 4/3/18
Tower leasing activity picked up in 2017 and tower owners expect continued growth in 2018. The three largest tower owners are projecting growth rates that are very close to those seen last year.
American Tower's midpoint projection for gross domestic leasing activity is the highest among the publicly owned tower companies, according to analyst Robert Gutman of Guggenheim Securities. The company is calling for 8.1% growth, versus 7.9% last year.
Crown Castle expects 7.9% growth and SBAC projects 6.8%. Gutman believes that overall, spending will be weighted towards the second half of the year.
"We believe new leasing for the public tower players will likely be 2H weighted – implying a more limited 2018 revenue contribution (consistent with guidance calling for steady growth)," Gutman wrote in a research note. "That said, we believe the towers are on the doorstep of a new spending cycle that should provide meaningful growth over the next few years – with extension into the next decade driven by 5G capabilities and increasing processing capacity at the edge (e.g. tower sites)."
Demand for processing capacity at the edge gives tower owners an opportunity to lease space at the bottom of the tower as well as the top, leveraging fiber to the tower to connect edge-based servers to the mobile core. Of the three public tower companies, Crown Castle has been the most aggressive in pursuing this opportunity. The company has invested in Vapor IO, a startup founded to develop compact, neutral host mini-data centers designed to sit at the base of a cell tower.
One wild card for the tower industry could be the entrance of new competitors with deep pockets. AT&T and Verizon have jointly agreed to build hundreds of new cell towers with Tillman Infrastructure, a company founded last year by Sanjiv Ahuja’s Tillman Global Holdings. Tillman Infrastructure will build to-suit with AT&T and Verizon, and both carriers have agreed to co-anchor the co-located towers. In addition, the companies said they may move some equipment off existing towers and onto the new ones.
“Tillman is uniquely positioned to take advantage of mutually beneficial relationships with mobile operators as they develop their 4G and 5G networks," said the company's new CEO, William Hague. Hague came to Tillman from AT&T, where he ran the carrier's tower leasing business.
Japan's SoftBank also entered the U.S. tower business last year, creating a U.S. infrastructure joint venture in partnership with Australia’s Lendlease. Lendlease Towers will develop and acquire rooftop and tower assets and has said it is targeting a $5 billion telecom asset portfolio.
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