American Tower operates 178.8k towers, which are critical for the carriers it serves in five distinct geographical regions. The company operates towers in the United States (40.6k), India (73.6k), Latin America (40.9k), Africa (18.8k) Europe (4.8k).
AT&T, Verizon and T-Mobile – Three Major Wireless Carriers in the United States
AT&T, Verizon and T-Mobile are each crafting their own individual approach to the roll-out of 5G technology. This is based on their specific spectrum assets, coverage goals and a number of other factors. At the same time, these carriers are optimizing their networks in the context of tremendous data usage growth. Data usage is intensifying the wider implementation of 5G and thus carriers are increasingly partnering with American Tower. In order for carriers to reap all of the benefits of 5G standards and network, these carriers would eventually need to use high-band, millimeter wave spectrum.
Wireless Carriers – Capital Expenditures
Historically, AT&T, Verizon and T-Mobile have spent, in aggregate, between $30 billion and $35 billion a year on capital expenditures. Further, a similar amount of investment is expected to continue to be spent annually going forward. Prior generations of wireless technology have resulted in capital expenditures increasing by ~$5 billion a year, with every new “G” that was rolled out. For 2G, carriers spent $15 billion a year. Next, 3G resulted in a $20 billion to $25 billion annual spend rate. Finally, 4G had a $30 billion to $35 billion annual spend rate. However, it is anticipated that 5G will remain at a similar spend rate to 4G at $30 billion and $35 billion a year.
T-Mobile and Sprint – Accelerating Innovation and Increasing Competition in the U.S. Wireless Industry
T-Mobile and Sprint’s consummated merger has resulted in a continued acceleration of spending from T-Mobile. Indeed, this will persist beyond 2020, as the company continues to focus on network quality.
American Tower expects the merger to be net-neutral or net-positive for its prospects over the mid- to long-term. American Tower’s belief is that the combination of carriers will speed up the deployment of multiple bands of spectrum. Specifically, a number of mid-band assets will be deployed. Further, the accelerated nationwide 5G coverage requirements associated with this transaction will drive more demand for new tenancies on tower assets.
T-Mobile Decommissioning – From Two Carriers to One
Decommissioning of tower sites (estimated to be 35k sites) will occur at locations where both T-Mobile and Sprint are colocated on the same tower. As T-Mobile optimizes its network and rolls out 5G, decommissioning will occur. However, American Tower expects a significant demand opportunity, in the form of adding 10k net new sites for T-Mobile. This is a result of the new needs from the combined T-Mobile and Sprint. American Tower’s extensive United States tower portfolio can benefit carriers like T-Mobile in the near-term and in the future.
American Tower to Benefit from T-Mobile’s Future Investments
T-Mobile has indicated that the company will spend $40 billion over the next three years. This investment will help advance the company’s network and prepare for a high-quality, very robust 5G service nationwide. Inevitably, T-Mobile’s spending will result in the United States wireless market having three strong carriers instead of two very large companies.
In contrast, historically, the two formerly smaller T-Mobile and Sprint independent businesses competed against the behemoths of AT&T and Verizon. T-Mobile is rolling-out the first and most robust 5G network. Therefore, more pressure will be added to AT&T and Verizon, in order to increase their spending to keep their network quality competitive. In turn, this will force AT&T and Verizon to roll-out their 5G networks quicker.
DISH Network – Building the United States’ Greenfield 5G Network
Overall, DISH will be a viable competitor. In turn, competitive carriers are valuable customers for American Tower. Given DISH’s greenfield design, the company has advantages that no other new carrier entrant has ever possessed in the United States. Specifically, these advantages include:
Software-Defined Networking (SDN)
Software-defined networking (SDN) capabilities will significantly reduce the company’s core network cost, of switches, data centers and storage. Much of the legacy core network hardware has now been converted into a software solution, which will be cheaper for DISH to implement and operate.
DISH Has Already Invested $21+ billion in Wireless Spectrum Licenses
These include both the sub-6 GHz and millimeter wave spectrum bands. This spectrum is available for DISH to use immediately. Whereas other carriers still need to go to the auction market and buy additional spectrum to supplement their holdings.
Established Roaming Agreement with T-Mobile
DISH’s roaming agreement is 7-years in length, on attractive prices from T-Mobile, will allow DISH to get started, provide the company time to begin recruiting subscribers, marketing, and sales. DISH already has an existing mobile group that knows how to sell, market, and bundle wireless services with their existing satellite services.
5G Technology Only – No Generational Transition
DISH is using 5G technology only to launch its whole network. Thus, it will not have to migrate customers from 3G to 4G and from 4G to 5G technology.
American Tower, DISH and Carriers Partner
American Tower’s United States business will benefit from long-term upside with carriers like DISH. Specifically, DISH’s commitment to building a new, fourth nationwide 5G network capable of serving 70% of the United States population by June 2023. American Tower expects to secure meaningful new business from DISH. Particularly, as DISH rolls out a full-fledged 5G mobile architecture over the coming years.