China Tower Corporation Limited, the largest tower company globally, today announced its Q3 2021 earnings and provided updates on its tower and DAS operations, as well as renewal agreements with China Mobile and China Telecom. Notably, China Tower is a state-owned enterprise (SOE), primarily owned by China’s three largest wireless carriers: China Mobile, China Unicom, and China Telecom.

Financial Performance in Q3 2021 – China Tower

In Q3 2021, China Tower reported total revenue of RMB21.9bn ($3.4bn), a 1.8% increase quarter-over-quarter, and EBITDA of RMB16.1bn ($2.5bn), a 3.0% increase quarter-over-quarter. Therefore, the company’s EBITDA margin was 73.5% in Q3 2021, a ~85 bps improvement quarter-over-quarter.

Tower Revenue

For Q3 2021, China Tower generated tower revenue of RMB19.2bn ($3.0bn), a 1.7% increase quarter-over-quarter.

Distributed Antenna System (DAS) Revenue

In Q3 2021, China Tower produced distributed antenna system (DAS) revenue of RMB1.1bn ($171m), a 0.7% increase from Q2 earnings.

Operational Performance in Q3 2021 – China Tower

As of September 30, 2021, China Tower had 2.0 million tower sites in China with a tenancy ratio of 1.69x. Indeed, this equates to 3.4 million tenants with equipment on the company’s towers.

During the quarter ended September 30, 2021, the company added 3.0k towers to its portfolio. At the same time, net tenancy additions were 22k during the quarter.

China Tower’s unit economics for its towers, yield a revenue per tower site of RMB19.8k (~$3.0k) annually.

Renewal Agreements – China Tower, China Mobile, China Telecom

China Tower entered into renewal agreements with wireless carriers China Mobile and China Telecom, defining parameters for their future use of China Tower’s infrastructure (e.g., leasing and pricing). Notably, these are related-party transactions as China Mobile owns 27.9% of China Tower, while China Telecom owns 20.5% of China Tower.

In terms of timing, these two-year renewal agreements take effect from January 1, 2022, and expire on December 31, 2023. Importantly, these agreements may be a catalyst to accelerate China Tower’s recent slow pace of tower construction and tenant lease-up.

Existing Tower Deployment Targets

China’s largest wireless carriers have indicated they will roll-out, via China Tower, 640k 5G base transceiver stations (BTS) in 2021. Specifically, this includes deployments in the following radio frequencies:

  • 700 MHz: 200k base transceiver stations (BTS) from China Mobile and China Broadcasting Network
  • 2.1 GHz and 3.5 GHz: 320k base transceiver stations (BTS) from China Unicom and China Telecom
  • 2.6 GHz: 120k base transceiver stations (BTS) from China Mobile
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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