American Tower (AMT) generates ~55% of its revenue from the US market. In the last reported quarter, its US property revenue grew 4.4% YoY (year-over-year), while its organic tenant revenue grew 6.3% YoY. Accelerated 5G (fifth-generation) deployment by domestic wireless network carriers and the mobile industry’s continuous evolution are expected to further drive demand for communication sites and towers, boosting American Tower’s US property revenue.
Massive capex plans
Emerging technologies such as edge computing solutions, augmented and virtual reality, smart city technology, autonomous cars, drone-controlled networks, and other IoT (Internet of Things) applications provide a massive opportunity for wireless network carriers. However, to run smoothly, these technologies require high amounts of uninterrupted data, which can only be fulfilled once 5G networks are deployed.
During its first-quarter earnings conference call, American Tower stated that US wireless carriers expect capex of over $30 billion this year, with a considerable portion of that going toward tower expansion. Given its portfolio of over 40,000 US communication sites, American Tower looks well positioned to capitalize on this opportunity. The company has raised its 2018 US organic tenant billing growth guidance to 6.5% from 6%.
Evolving mobile industry
The mobile industry is changing rapidly with the continuous addition of smartphone features allowing access to live TV, social media video sharing, and office tools. Furthermore, cellular operators’ unlimited data plans have been driving network traffic.
During its first-quarter earnings conference call, American Tower stated that “as of the end of 2017, four out of five Americans were using a smartphone for an average of over five gigabytes per month. That’s up more than 800% from just five years ago.” It projects the industry to grow by another three to four times in the next five years.
Cellular operators are investing in infrastructure build-outs by adding more equipment and spectrum bands to augment speed, helping the telecom REIT industry. American Tower comprises ~7.7% of the iShares Cohen & Steers REIT ETF (ICF).