American Tower and DISH Network today announced that they have entered into a master lease agreement (MLA) through which DISH is able to lease space on up to 20k of American Tower’s communications sites. Notably, the perimeter of this agreement, only gives DISH Network access to a portion of American Tower’s portfolio of 42.7k U.S. tower sites.

Overall, DISH Network will use American Tower’s infrastructure as part of its new nationwide 5G network. Indeed, DISH has now signed 11 agreements to facilitate this 5G network build-out. Specifically, DISH has access to tower infrastructure from all four of the largest providers, including: American Tower, Crown Castle, SBA Communications, and Vertical Bridge. Additionally, in February 2021, DISH Network signed 7 agreements, comprising 4k+ towers, with a series of smaller operators.

Agreement Overview – American Tower and DISH Network

After lengthy negotiations, American Tower was ultimately willing to accommodate lower pricing from DISH Network, in exchange for the long-term tenor of a master lease agreement (MLA). Indeed, American Tower was motivated to secure a deal with DISH Network as it will enhance the company’s long-term U.S. organic growth trajectory.

Master Lease Agreement (MLA) – Details

Under the agreement, cash lease payments from DISH Network to American Tower will commence in 2022 and grow over time as DISH’s network deployment progresses. In addition, DISH may lease shared generators from American Tower on select sites. Finally, DISH will have the ability to use American Tower’s zoning, permitting, and other pre-construction services.

Agreement Rationale – American Tower

American Tower’s share price has been under considerable pressure over the past 8+ months. This is in-part because the company has continued to have a material deceleration in its U.S. organic growth rates.

United States Organic Growth Rates

American Tower’s U.S. gross organic revenue growth rate was 5.6% in Q4 2020, as compared to 7.8% in Q4 2019. Additionally, American Tower’s U.S. net (which includes churn) organic revenue growth was 4.0% in Q4 2020, as compared to 6.2% in Q4 2019.

Moreover, American Tower’s guidance for 2021 only anticipates U.S. net organic revenue growth of 3.0% for the year (see below). This further growth deceleration includes the impact of churn from legacy Sprint agreements, which T-Mobile is currently rationalizing.

American Tower Organic Tenant Billings Growth Outlook 2021
2021 Organic Tenant Billings Growth Outlook

Additionally, American Tower’s guidance for 2022 foresees an even more significant negative impact from Sprint churn, resulting in U.S. net organic revenue growth of only 1.0% for the year.

DISH Network to Offset Sprint Churn

At the time that American Tower provided guidance, it had not yet made today’s announcement for the master lease agreement (MLA) with DISH Network. Therefore, any leasing from DISH, which only commences in 2022, will help offset some of the legacy Sprint churn. In turn, this will help mitigate the significant U.S. organic growth deceleration that American Tower expects for 2022.

However, DISH Network’s leasing activity in 2022 will not completely offset the significant 3%+ Sprint churn that is anticipated. Therefore, American Tower’s U.S. organic growth rates will be under pressure until the Sprint churn issue is complete by 2023+.

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