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How Forex Volatility Could Affect American Tower’s Operations

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May. 14 2018, Updated 6:31 a.m. ET

A weak dollar opens up the scope

While the US dollar was expected to gain from the growing economy and the rising interest rates, the recent tax cuts have flipped the scenario. With the tax rate cut, the US fiscal deficit continues to rise. As a result, the country has to borrow from other nations in order to finance its debts, which enhances the scope of foreign funding for American Tower (AMT) and its peers (VNQ) like Crown Castle (CCI), SBA Communication (SBAC), and Simon Property Group (SPG).

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American Tower’s exposure to forex volatility

American Tower’s worldwide operations make it severely exposed to exchange rate volatility. With the primary base in the US, the company’s business is further spread across Europe, the Middle East, and Africa (or EMEA), Latin America, and Asia. Other than currency fluctuations, the company’s international operations are also subject to several economic, political, and other risks that could materially and adversely affect its revenues or financial position.

Exchange rate effect in 1Q18

In 1Q18, the company’s total property revenue witnessed a $20 million foreign exchange currency impact. Of this $20 million, Latin America accounted for $4 million, Asia accounted for $12 million, and EMEA accounted for the remaining $4 million.

In the next article, we’ll discuss American Tower’s inorganic growth.

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