Limited Downside Risk For American Tower

International Towers On The Rise
Total Tower Assets By Country

American Tower Corporation announced the financial results for its Q412 operations on February 26 2013, reporting generally strong growth . An important growth driver has been the contribution of international markets to total revenue, as the company looks to expand its operations to emerging markets. BMI believes mobile operators are becoming increasingly willing to sell their communication tower infrastructure to companies such as American Tower and we remain bullish about tower sharing prospects over the long term .

The company reported an increase of 17.6% of total revenue in Q412, up to US$768.4mn, while bringing its total tower portfolio to 54,343. Of the total revenue, international revenues accounted for US$239.8mn (31.2%) and had increased 36.3% compared to Q411. By comparison, domestic revenue only increased by 7.5% to US$ 499.9mn and although it still accounts for the majority of total revenue, American Tower's international operations are playing a bigger role. This can be attributed to the acquisition of tower assets overseas, which totalled 3,624 over the quarter, compared to just 866 in the United States. This can be mainly attributed to American Tower's entrance into Germany . However, emerging markets in Latin America and Africa play a large role in the company's strategy.

This strong growth is a trend we expect to see continue, in domestic markets and abroad, due to the growing demand for data, the development of new technology, release of wireless spectrum by government and the growing recognition from mobile operators that tower sharing lowers costs.

In the United States, the major operators have all launched 4G and as this technology takes off, the demand for data will increase. New handsets such as the iPhone 5 and BlackBerry 10 should satisfy consumer appetite for data access , but will also require more capacity from infrastructure to operate efficiently. In some developing economies in Latin America for example, 4G launches may be some way off, but 3G services are proliferating as they become more affordable. Cisco forecasts that data traffic in the United States will grow nearly 10 times by 2017, with 75% of this growth being delivered by communication towers. The FCC has taken steps , such as releasing additional spectrum for Wi-Fi, to ease congestion of data traffic. The Brazilian government announced it would allocate 'digital dividend' spectrum to mobile operators, in line with other Latin American countries such as Chile, Argentina, Colombia and Mexico.

Strong 2012 For AMT
AMT Share Price (US$)

Operators are increasingly looking to lower the costs of tower management by selling infrastructure to companies such as American Tower. The sale of tower assets brings in revenue, and the leaseback arrangements minimise general costs of maintaining and upgrading communications infrastructure. These trends are happening all over the world and carriers that American Tower has bought tower assets from include Verizon , AT&T , Deutsche Telekom , América Móvil , Telefónica and MTN . We expect other operators to follow suit, with international markets contributing more revenue to American Tower as mobile broadband and the demand for data takes off. This is reflected in the share price , which saw impressive growth in 2012, with limited downside risk in future .


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