On May 2, SBA Communications hosted its Q1 2016 earnings call. Representing the towerco were Jeffrey Stoops, President, CEO and Director, Mark DeRussy, CFA, VP of Finance and Brendan Cavanagh, CFO and EVP.
SBA reported net organic international cash leasing revenue growth of 12.1%, inclusive of 0.9% of churn, and organic growth in Brazil at 13.5%.
Brazil accounted for 6.6% of cash site leasing revenue, excluding pass-through revenues, and 9.6% of the total leasing revenue for Q1 2016. The actual tower cash flow for SBA’s international portfolios decreased 6.1% YoY (US$37mn). But the figure represents a 14.8% increase without taking into account the impact of foreign currency exchange rates. SBA reported a small decrease in international tower cash flow margins (68% vs 69.1%) in the year-earlier period.
During the first quarter of 2016, the company added 188 new sites to its portfolio, of which 117 were acquired and 71 built. Out of the new builds, 61 were in international markets where SBA reports cash revenue growth around 13% and solid leasing activities.
Brazil
Brazil still delivers results with SBA reporting its best same tower gross organic growth YoY, at approximately 14%. And Stoops added that they expect “solid long-term growth for our business in Brazil. Carrier networks in Brazil significantly lagged those here in the U.S. 4G deployments are in the early stages. The deployment of 700MHz is still largely to come in Brazil, and the demographics of the population heavily support expanding wireless consumption.”
SBA’s new builds dropped by sixty towers and the reduction is mostly in Brazil although SBA is still confident that some of these projects might slip into 2017.
When asked about the market situation in Brazil, Stoops added that in spite of new builds slowing down, the leasing activity is still positive and that should the economy improve, the market could be much better and that SBA is performing in spite of “a very tough economy.”
With regards to Oi and its potential debt restructuring, the CEO noted that the carrier is currently looking at an extra-judicial form of restructuring, which would have no effect on existing contracts and is the preferred option SBA hopes for. Alternatively, Brazil offers two different types of judicial bankruptcy which, Stoops added, are very similar to U.S. Chapter 7 and Chapter 11.
Stoops continued with regards to the judicial solutions by adding that a restructuring process in court would still leave the contracts untouched whereas the equivalent of a Chapter 7 liquidation would cause the loss of all leases, but SBA doesn’t foresee that happening.
M&A
SBA highlighted its commitment to investing in high quality assets in and out of the U.S. and added that there are still a number of interesting opportunities in several markets which are being evaluated.
Stoops concluded that “if we do not believe those opportunities are at the right price or terms, we’re quite comfortable using our leverage capacity to buy back our own stock when we believe the share price is below intrinsic value.”
