American Tower today announced its Q4 and full-year 2021 earnings and provided updates on its i) U.S. and Canada organic tenant billings decline, ii) outlook for 2022, iii) long-term growth targets, iv) details on its permanent financing strategy for its CoreSite acquisition, and v) plans for new site builds in 2022 and beyond.

As of Q4 2021, American Tower owns over 220k communications sites globally, of which 42.9k are located in the U.S. & Canada and 177k reside in international markets.

Financial Performance in Q4 2021 – American Tower

In Q4 2021, American Tower reported total revenue of $2.45bn, a 0.4% decrease quarter-over-quarter, and adjusted EBITDA of $1.52bn, a 2.4% decrease quarter-over-quarter. Therefore, the company’s adjusted EBITDA margin was 62.0% in Q4 2021, a ~130 bps decline quarter-over-quarter.

Property Revenue

For Q4 2021, American Tower’s property revenue was $2.38bn (97% of total), which grew 2.0% quarter-over-quarter (FX-neutral basis). Decomposing this figure:

  • United States & Canada: property revenue of $1.25bn, implying growth of 1.3% quarter-over-quarter
  • International: property revenue of $1.13bn, implying growth of 2.8% quarter-over-quarter (FX-neutral basis)

Operational Performance in Q4 2021 – American Tower

Overall, American Tower generated net organic tenant billings growth of only 1.7% in Q4 2021.

Organic Tenant Billings Growth for Q4 2021
American Tower Organic Tenant Billings Growth Q4 2021

Of this total, the U.S. and Canada’s net organic tenant billings actually declined by 0.5%, which derives from gross organic tenant billings growth of 6.0% and churn of 6.5%. Indeed, during Q4 2021, American Tower experienced $67.1m in churn in the U.S. and Canada, primarily from T-Mobile (legacy Sprint).

In contrast, international markets experienced 5.7% net organic tenant billings growth on a blended basis in Q4 2021. Specifically, organic growth in international markets was strong in Africa (7.3%), Latin America (7.4%), and Europe (6.6%), while improving in India (1.3%), given lower churn levels.

Full-Year 2021 and Outlook for 2022 – American Tower

Full-Year 2021

For full-year 2021, American Tower reported total revenue of $9.36bn, a 16.3% increase year-over-year, and adjusted EBITDA of $5.98bn, a 15.9% increase year-over-year. Therefore, American Tower’s adjusted EBITDA margin was 63.9% in full-year 2021, a ~20 bps decline year-over-year.

Outlook for 2022

For full-year 2022, American Tower provides an outlook for total property revenue of $10.2bn to $10.4bn. Of this total property revenue, American Tower expects the following contributions by region, at the mid-point:

  • U.S. Property Revenue: $5.67bn, an increase of 14.7% year-over-year
  • International Property Revenue: $4.64bn, an increase of 14.4% year-over-year (FX-neutral basis)

Additionally, the company forecasts adjusted EBITDA of $6.5bn to $6.6bn. Overall, the mid-point of American Tower’s 2022 outlook infers a year-over-year increase of 14.5% and 10.7% in total property revenue and adjusted EBITDA, respectively (FX-neutral basis).

Through its full-year 2022 outlook, American Tower is forecasting consolidated net organic tenant billings growth of ~3%, which derives from gross organic tenant billings growth of at least 5% and churn of ~2%.

Organic Tenant Billings Growth Outlook for 2022
American Tower Organic Tenant Billings Growth Outlook 2022

Geographically, American Tower’s organic tenant billings growth outlook for 2022 is decomposed as follows:

  • U.S. & Canada: ~1% net organic tenant billings growth, which derives from gross organic tenant billings growth of ~5% and churn of ~4%. In isolation, the impact associated with Sprint (T-Mobile) represents 3.7% of churn
  • Europe: ~9% net organic tenant billings growth, with Germany being the key driver. Importantly, churn is expected to decline to ~1.5% in 2022 (from 2.4% in 2021) as American Tower benefits from its lower-churn Telxius assets and reduced cancellations across its legacy business, as wireless carrier consolidation events in Europe conclude
  • Latin America: >6% net organic tenant billings growth. Notably, CPI-based escalators, are anticipated to be ~300 bps higher in 2022, than in 2021. However, this benefit will be partially offset by higher churn of ~5% in 2022, driven by Telefónica in Mexico, as well as Nextel in Brazil, from consolidation by Claro (América Móvil)
  • Africa: ~6% net organic tenant billings growth, driven by colocation and amendment growth, as well as higher escalators
  • Asia-Pacific (mainly India): ~2% to 3% net organic tenant billings growth. Churn, which has been historically elevated in India, is expected to halve, from ~10% in 2021 to 5% in 2022

Long-Term Growth Targets

American Tower expects average U.S. & Canada organic tenant billings growth of at least 4%, from 2021 through 2027, on a reported basis. Moreover, excluding the impacts of churn from Sprint (T-Mobile), this organic tenant billings growth would average at least 5%, over the same time period.

U.S. & Canada Organic Tenant Billings Growth
American Tower Long-Term Growth Targets Q4 2021

Furthermore, between 2023 and 2027, American Tower is targeting an acceleration in U.S. & Canada organic tenant billings growth rates to at least 5% on a reported basis and at least 6%, excluding churn from Sprint (T-Mobile).

Notably, Sprint (T-Mobile) churn excluded in the normalization (above) reflects both churn as part of American Tower’s master lease agreement (MLA) with T-Mobile and churn that is expected to occur outside of the T-Mobile MLA.

Portfolio Growth – M&A and Tower Builds by American Tower

CoreSite Realty

In December 2021, American Tower closed on its $10.4bn acquisition of CoreSite Realty (NYSE: COR) which operates 25 data centers in the United States. As of Q4 2021, American Tower’s total data center portfolio comprised 27 facilities, including both DataSite and Colo Atl.

In aggregate, American Tower’s 27 data centers offer 223 megawatts of power capacity across 3.5 million net rentable square feet (NRSF). Additionally, in terms of interconnection, these facilities house 35.3k total cross-connects.

Financing

American Tower provided preliminary assumptions related to the permanent financing strategy for its CoreSite acquisition. Specifically, American Tower has assumed that ~50% of the ~$10bn CoreSite purchase price will be financed through a common equity issuance, which is assumed to occur in the first-half of 2022. Beyond a common equity issuance, American Tower is also evaluating the possibility of issuing mandatory convertible preferred stock and/or private capital partnerships, similar to ATC Europe.

In-line with maintaining an investment grade balance sheet, American Tower will seek to reduce its net leverage, which stands at 6.8x in Q4 2021, to net leverage levels in the high ~5x range by mid-2022.

India Towers

During Q4 2021, American Tower redeemed 100% of Macquarie SBI Infrastructure Investments Pte Limited’s and SBI Macquarie Infrastructure Trust’s holdings in ATC Telecom Infrastructure Private Limited (ATC TIPL), for total consideration of 12.9bn Indian Rupees ($173.2m USD). As a result of the redemption, American Tower now holds a 100% ownership interest in ATC TIPL, a subsidiary of American Tower in India.

Site Builds by American Tower

During full-year 2021, American Tower constructed nearly 6.4k new sites, averaging 11.6% Day-1 net operating income (NOI) yields. Of this total, 85%+ of the newly constructed sites were in Asia-Pacific/India (3.7k sites) and Africa (1.8k sites). Particularly, in Africa, the company is building the majority of its new sites in Nigeria, Kenya, and Uganda.

For full-year 2022, American Tower anticipates building a total of 6.0k to 7.0k tower sites globally. Specifically, these new builds include India (4k+ sites), Africa (1.9k sites), Latin America (500 sites), and Europe (500 sites). Also, American Tower is “on-track” to meet its long-term goal of constructing 40k to 50k communications sites globally, from 2021 to 2025.

New Markets for American Tower – Bangladesh, Philippines

In Q4 2021, American Tower updated its disclosures about its growth in new markets in the Asia-Pacific region, namely Bangladesh and the Philippines.

Bangladesh

American Tower operates in Bangladesh via its subsidiary Transcend Infrastructure Holdings. As of quarter-end, American Tower operates 120 sites in Bangladesh, adding 44 sites quarter-over-quarter.

Philippines

American Tower operates in the Philippines via its subsidiary Transcend Towers Infrastructure. As of Q4 2021, American Tower owns 97 sites in the Philippines, adding 74 sites quarter-over-quarter.

Adam Simmons is the Founder & CEO of Dgtl Infra. He started his career with an S&P 500-listed big box retailer, in an operations management role. Adam's entrepreneurial "itch" led him to start a 5G-driven company, focused on innovative retail solutions using augmented reality and shoppable videos, which was eventually sold to an advertising and consulting group. After, realizing the potential of 5G, Adam shifted his efforts towards investing in the "building blocks" of 5G - known as digital infrastructure, completing a number of strategic investments, buying cellular towers, data centers and fiber networks.

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