The US tower operators are riding high on the boost to their business from 5G expansion and telcos’ rising interest in an edge cloud to support their disaggregated networks and their 5G services.
Crown Castle’s CEO Jay Brown said, on his firm’s Q1 earnings call, that “following a period of building excitement and anticipation, we have seen a significant increase in activity as our customers have started to upgrade their networks to 5G at scale”.
The towerco raised its 2021 forecast for site rental revenues and for EBITDA as a result, emerging triumphant a year after activist investor Elliot Management sought to force Crown to reverse its strategy to grow a fiber, small cell and edge infrastructure business to complement its towers. In fact, fiber and small cells have proved an important part of Crown’s 5G success to date.
Wall Street analysts were positive – Cowen & Co wrote in a client note: “We continue to have a positive view of Crown Castle including its fiber/small cell strategy.” Verizon recently announced extended tower deals with Crown and SBA, which covered macro and small cell sites to support its upcoming 5G roll-out in its C-band spectrum.
C-band deployments by the major operators should be a significant boost for their tower suppliers in 2021 to 2023, since this midband spectrum requires a relatively large number of sites compared to the 600 MHz band where T-Mobile and AT&T have been rolling out coverage-centric 5G. While Verizon’s and AT&T’s millimeter wave spectrum needs even more sites per square mile, these 5G cells have only been deployed in limited zones.
Analysts at Wall Street firm New Street Research predict that C-band deployments by all the US telcos will boost Crown’s organic revenue growth by around 0.7% in 2022 and by 1.4% in 2023.
Unlike its main rivals, American Tower and SBA, Crown has not pursued international expansion, but has instead looked for growth by diversifying its portfolio. Brown told the earnings call: “One of our core principles of our strategy is to remain US-only, because we believe it represents the best market for wireless infrastructure ownership since it has the most attractive growth profile and the lowest risk.”
He added: “The demand for our shared infrastructure offering across towers, small cells and fiber is tied to the robust demand for mobile data in the US, which continues to increase by more than 30% annually.”
He maintained his outlook for US small cells despite T-Mobile’s decision to cancel thousands of deployments that had been planned by Sprint, after it acquired the MNO. He expects to hit 15% growth in small cells this year, representing a build-out rate of about 10,000 new cells per year. The company currently operates around 80,000 small cells.
Over at American Tower, CEO Tom Bartlett was also focused, on the Q1 earnings call, on new infrastructure, in his case edge compute. He believes this market will eventually be worth billions of dollars a year to towercos and says his firm has been getting into position to take advantage as soon as that opportunity materializes.
“Given that our attractively located tower sites have existing access to fiber and power while already hosting multiple communications providers, they are a natural candidate to represent hub locations for these low latency wireless edge data centers,” he told analysts, and also hinted at potential partnerships with edge providers. “We intend to explore global joint ventures or partnerships to effectively leverage these inherent opportunities, and we continue to work through a number of different scenarios on that front,” he said.
He also believes that, once operators start to deploy disaggregated RANs, that will increase the number and variety of sites and infrastructure they will require, including edge cloud to support virtualized basebands, and radio sites capable of housing Massive MIMO antenna arrays. He believes the trend to break the RAN into at least three parts will be stimulated by Open RAN platforms.
“It’s different types of equipment that our customers are able to put together to be able to load onto the site, and at the base level, at the baseband unit, which is where the data center element comes in,” he said, while not expecting to see major movement for some years yet.
More immediately, like its rivals, American Tower is looking to the C-band deployments to drive its domestic growth. “By all accounts, 2022 should be a good year for the domestic tower leasing industry,” wrote analysts at MoffettNathanson in a client note. “Between initial C-band deployments, T-Mobile making progress with its 2.5 GHz roll-out, and Dish Network entering the early stages of its greenfield network build, there is reason for optimism that growth will accelerate for all players.”