It was another strong quarter for the three major cell tower companies, American Tower AMT, Crown Castle CCI, and SBA Communications SBAC. All three firms are still on pace to meet or exceed our full-year estimates, and Crown and SBA gave 2010 forecasts that were encouraging. Even though American Tower didn't release its targets for next year (we expect it to issue an outlook after the fourth quarter), it remains our favorite play because of its superior asset base, diversification, and debt load. Last quarter, American Tower had a record operating margin of more than 40%. Although this easily outpaced that of Crown (27.7%) and SBA (10.7%), it's worth noting that all three firms are expanding their margins to all-time highs. American Tower continues to expand its tower portfolio abroad, acquiring 230 sites in Brazil (versus only 74 in the United States) and another 326 sites in India last quarter. In all, the firm expanded its portfolio by 13% from the year-ago period and now has the largest tower portfolio in the industry at just more than 26,000. More importantly, operating income per tower was up from the year-ago quarter for the first time in 2009. Although American Tower has the best long-term story, SBA and Crown might have actually had the more impressive quarter. SBA was able to increase its free cash flow by 17% year over year, which was the best growth performance in the industry. Better yet, the firm's board of directors authorized a $250 million stock buyback. Even though our revenue projections are slightly above the top end of SBA's 2010 forecast range (we are projecting $623 million while the firm gives a range of $587 million-$622 million) we expect management to lift its targets going forward.On the other hand, the end of Crown Castle's 2010 site rental revenue forecast was actually 1% above our projection. The same can be said of the firm's 2009 revenue target, which management raised because of stronger-than-expected leasing activity. Year-to-date lease applications are up 38% in the U.S. from those in 2008, despite the dicey economic backdrop. Crown has done a good job with its balance sheet, as it brought its net debt down to 5.7 times earnings before interest, taxes, depreciation, and amortization, a 17% improvement from a year ago. Ultimately, the growth outlook for the industry remains bullish. Carriers are rolling out their next-generation network upgrades, and consumers can't get enough of integrated handsets such as the iPhone. More than 42% of new handset sales are smartphones, and these devices generate 3 times the traffic of a basic handset. The carriers will need to continue investing in their network infrastructure to accommodate growth and to maintain (and improve) the quality of their service. American Tower is still best in class, but all three firms are investment-worthy.
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American Tower Corporation Full Analyst Report
Analyst Notes
07-30-09 | 4:49PM Good Looking 2Q for AMT
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SBA Communications Corporation Full Analyst Report
Analyst Notes
07-30-09 | 10:53AM No Surprises from SBA
05-20-09 | 4:20PM SBA Has a Strong 1Q
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Crown Castle International Corporation Full Analyst Report
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