On July 28, American Tower (AMT) held its earnings call for Q2 2016. Leah Stearns, SVP, Treasurer and IR, Thomas Bartlett, CFO and EVP and James Taiclet, Chairman, President and CEO of American Tower joined the call and discussed AMT’s performance and future outlook.
Key financial data
In terms of revenue, AMT reports growth of 23% to over US$1.44bn while adjusted EBITDA grew to US$869mn (+14%). Adjusted EBITDA margin was around 60% in Q2, including the negative effect of pass-through of approximately 9%.
Bartlett highlighted how AMT had yet another strong quarter thanks to tenant billing growth as well as good performance margins and reiterated how AMT’s Indian team is currently integrating more than 42,000 sites into the company’s portfolio following the Viom’s acquisition.
In terms of property revenue growth, the negative 60-basis point impact from a US$7mn revenue reserve are linked to Oi which is currently undergoing judicial reorganisation and Bartlett stressed how they will pursue the full amount owed and that the carrier has already resumed payments for amounts “owed subsequent to their judicial reorganisation filing date.”
AMT’s international business produced average organic tenant billings growth of 13.7% and all international markets reported double-digit growth rates with LatAm at 12%, EMEA at 20% and Asia at 10%. The company expects organic tenant billings growth around 14% for 2016, led by strong markets such as Mexico, Nigeria and Uganda.
In terms of portfolio, AMT reported adding 57,000 new sites in Q2 2016 thanks to the Viom, Airtel Nigeria, and TIM Brasil acquisitions and organic growth of 400 sites.
AMT’s international growth strategy
Taiclet stressed that AMT’s international segments scored a very strong Q2 and defined them as “turbocharger for [AMT’s] market-leading domestic business.” The CEO noted how since the first international investment in Mexico back in 1999, AMT has “methodically expanded” its geographical footprint and scale. And added that “it is our experience that due to a number of common factors the fundamental drivers of tower demand are consistent across our selected geographies.”
These drivers include the technology and service demand as well as a common ground of applicable technology standards. Secondly, he referred to the towerco ability to buy from carriers and transforming “single-use, non-performing cost centre assets into high-performing multi-use commercial real estate.” This trend of buy and leaseback has been successfully applied in various international markets including LatAm, India, Germany and Africa.
Lastly, Taiclet noted how by utilising “standard portfolio theory” AMT has been able to “selectively diversifying” its asset base while also reducing cash flow fluctuations and extending growth patterns over a long timeframe. Thanks to this approach, AMT’s international sites acquired between 2010 and 2013 are currently yielding around 12% and those added between 2014 and 2015 around 10%. Taiclet stressed that the longer the company has assets in its portfolio, “the more revenue and cash flow they generate.”
Answering questions from analysts, Bartlett defined the expected growth for LatAm this year around 12% and added that in spite of all the challenges the market is facing (in Brazil and beyond), the overall regional performance has been quite steady.
India
Taiclet took a question on India and stressed that “it’s a critical difference to be a truly independent provider of siting in any country versus a captive provider of siting. In other words, you’re a subsidiary or an affiliate of the mobile operator itself. […] I can speak about our contracts with all mobile operators in India as being market based and therefore arm’s length and certain provisions that may apply to captive contracts may or may not apply to ours.”
The CEO went on and added that competition among operators in India is extremely tough, and that much will depend on how fast operators embrace 4G and offer new technology and services to their customers. Closing on India, Taiclet noted how thanks to the Viom merger, AMT managed to add TATA to its customer base thanks to it’s deep historical links to Viom.
Europe
One of the last questions covered Europe and the lack of involvement of AMT in any of the recent transactions that have taken place in the region. Taiclet stressed that AMT has been active in Europe for around ten years but hasn’t seen the asset trading price ever meeting the company’s investment criteria since its entrance in Germany. That said though, he reaffirmed that AMT remains open to opportunities in Europe should its investment criteria be met.
