All important operating metrics were up by either low double-digit or high single-digit percentages in American Tower’s (NYSE: AMT) 2Q22 earnings call.
- Revenue from property was up 17 percent, from $2.2 billion in 2Q21 to $2.6 billion in 2Q22.
- Net income jumped 20 percent YoY to nearly $900 million,
- Adjusted EBITDA increased 13 percent to $1.7 billion, YoY
- AFFO increased 7 percent to $1.2 billion.
AMT is a global firm composed of regional components. The tower company had a very active quarter, constructing 1,514 new towers in India and Africa and acquiring 118 more in Europe, in addition to selling or removing 762 poor-performing sites in India and Latin America, raising its global tower count to 220,096 at the end of the quarter, up nearly 4 percent from the previous year.
U.S. and Canada Big Spenders
Even though the region only accounts for 19 percent of its towers, the U.S. and Canada account for $1.2 billion or 47 percent of their property revenues for the quarter. Of that, T-Mobile, AT&T, and Verizon, American Towers’ three largest MNO customers, accounted for $1.1 billion in global property revenue, or 42 percent of revenue.
According to the report, data centers produced $191 million in revenue or 7 percent of the total, thanks to CoreSite’s acquisition last year. In addition to DISH and other wireless providers, 6 percent of the total revenue was generated.
Because international tenants contributed 30 percent of the revenue, international pass-through revenue contributed an additional 15 percent. Although tower companies operating in international markets often declare revenue gained by passing through operating expenses, particularly power, to their clients, this is not common practice in North America.
Capex Increased
Capital expenditures for the quarter came in at $378 million, down 4 percent from the prior quarter due to the timing and supply chain delays, but still up 32 percent from the prior year. In order to support AMT’s 6,500-tower global build program, AMT raised its 2022 capex midpoint to roughly $2 billion. About $300 million of the capex will be used to construct new data centers in the United States.
Discretionary expenses, mainly for constructing new sites, new ground-up data center facilities, and expanding within existing data centers, account for 43 percent of the total capex.
Bullish
American Tower is optimistic about its future for the next several years, as increasing mobile data demand are driving 4G expansion and new 5G builds with newly-available spectrum in international markets. At the same time, demand for towers is rising as rationalization and consolidation of carriers in countries such as Brazil and India, where favorable regulatory climates are boosting demand for new infrastructure, creates more demand for infrastructure. In countries outside of North America, AMT’s annual lease escalators are generally tied to inflation and not a fixed rate, which is helping the company weather adverse economic conditions.
T-Mobile reported that its organic tenant billings for 2022 in the U.S. and Canada region will decrease by about 4 percent as a result of churn resulting from Sprint lease terminations as T-Mobile finalizes its network integration and cell site rationalization.
Due to the lack of a master lease agreement with Verizon, AMT doesn’t expect any issues with Verizon C-band deployments. Although the Verizon MLA includes an on-demand fee structure, AMT will contribute towers in areas where Verizon must activate C-band licenses.
The convergence of market drivers is expected to drive total property revenue up 14 percent in 2022 to $10.4 billion, as well as Adjusted EBITDA of $6.6 billion, up 10 percent, and consolidated AFFO of $4.7 billion, up 7 percent, according to American Tower.
For more information, Inside Towers Business Editor John Celentanos provides insight on the tower industry.
