Cellphone tower companies race higher

American Tower, SBA Communications are winning big as wireless companies expand 5G.

  • By Corrie Driebusch,
  • The Wall Street Journal
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In the race toward 5G, tower companies are asking investors, “Do you hear us now?”

As the biggest wireless companies in the U.S. prepare to bring 5G to more customers, cellphone-tower operators are shaping up to be big winners in the stock market. They could be ready to get another boost if or when the deal between T-Mobile US Inc. (TMUS) and Sprint Corp. (S) closes, some analysts say.

Shares of Crown Castle International Corp. (CCI), American Tower Corp. (AMT) and SBA Communications Corp. (SBAC) all hit records in 2019, and are currently up at least 20% from where they traded six months ago. Cellphone companies like Verizon (VZ), AT&T (T) and T-Mobile pay these tower companies fees to use their high-up real estate.

A concern among some investors is that these companies soared too high too fast. Of the trio, only shares of SBA Communications have risen in the past month. Part of the reason for that is a slowdown in talks between T-Mobile and Sprint.

While final conditions for the merger deal remain to be seen, a key component of the Federal Communications Commission’s conditions is an accelerated 5G rollout in rural areas, UBS notes. That stands to benefit American Tower most, as about 65% of its macro portfolio covers the most rural part of the U.S., according to a research report by UBS last month that looked at the FCC’s antenna registration database of tower locations throughout the U.S.

Another potential overhang has been worries that private operators could be competition for these three big public tower owners as wireless carriers seek out lower rents. However, UBS’s report also found that the big three public tower companies remain the dominant players in a hot business, with the largest private owner of tower sites accounting for just about 2% of all towers. That bodes well for SBA Communications, American Tower and Crown Castle.

“While the private operators have increased their tower counts…this competitive threat is far more limited in practice at this time,” UBS said in its note.

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