Tower companies are well positioned to benefit from the secular growth trends driving ongoing investments tied to the 3G to 4G migration by telecommunications carriers, says Ben Lowe, an Associate Analyst at Stifel, Nicolaus & Co., Inc.
“So from a tower perspective, anytime that we see this technology migration, whether it’s 2G to 3G, now 3G to 4G, this isn’t a one- or two- or even three-year investment cycle for the carriers. This is often a five- to seven-year investment cycle,” he said.
Lowe has American Tower Corporation (AMT) as his number one pick among the tower companies due to its scale and position to benefit from the attractive industry trends while also capitalizing on company-specific growth initiatives including its ongoing investment overseas.
“AMT has gone into a lot of these emerging markets and introduced this model, where they are doing sale leasebacks with some of the incumbent carriers in those markets, and they’ll buy that tower portfolio again. It will have a low average tenancy, and then they are going to increase that cash flow on those sites over time as they add tenants. That serves to enhance and extend their growth opportunity,” he said.