SBA Communications today announced its Q1 2021 earnings, further detail on its tower agreements with Verizon and DISH Network, new acquisition disclosures, and updated its full-year 2021 outlook.

U.S. Growth Rates in Q1 2021 – SBA Communications

SBA Communications’ U.S. gross organic revenue growth rate deceleration (i.e., excluding the impact of churn) continued in Q1 2021. Specifically, SBA’s U.S. gross organic revenue growth rate has slowed from 8.6% in Q3 2019 to 5.6% in Q1 2021. At the same time, the company’s U.S. net organic revenue growth rate has also slowed from 5.9% in Q3 2019 to 3.1% in Q1 2021.

SBA Communications U.S. Organic Revenue Growth Rates

Overall, SBA states that it expects Q1 or Q2 2021 (which could result in a similar level of growth) to represent the trough in terms of gross organic leasing revenue growth. In particular, this view is supported by SBA Communications’ strong Q1 2021 in its services segment (a leading indicator). Strength in Q1 2021 was driven by SBA’s support services for the C-band network plans of Verizon, AT&T, and T-Mobile.

SBA also highlights growth in the backlog of both its services business and new lease & amendment applications, which are further leading indicators. In turn, this backlog will translate into Verizon, AT&T, T-Mobile, and DISH Network being very active from 2022 onwards.

Verizon and DISH Network – Tower Agreements

In Q1 2021, SBA Communications executed new master agreements with both Verizon and DISH Network.

Verizon

SBA Communications’ new agreement with Verizon secures at least $22.5m of additional straight-line revenue during 2021. Specifically, this relates to Verizon’s deployment of new C-band radios and antennas on SBA’s towers, for the build-out of its nationwide 5G network. However, SBA Communications clarifies that, to-date, it has signed leases and amendments, but has not yet installed any C-band equipment.

Additionally, as part of this agreement with Verizon, SBA extended the duration of its existing Verizon lease agreements. In turn, the company’s lease agreements with Verizon now have an average non-cancelable lease term of ~8 years. Indeed, this long-duration contract is critical for SBA Communications because it eliminates near-term risk of Verizon’s churn on its towers.

DISH Network

In February 2021, SBA Communications agreed a minimum lease commitment (i.e., “thousands” of sites) under a new master lease agreement with DISH Network. Notably, this will be accounted for as new leasing, as opposed to amendment revenue, given DISH’s greenfield build-out.

Towers Portfolio and Acquisitions – Q1 2021

As of March 31, 2021, SBA owns or operates 33.7k communication sites, 17.3k of which are in the United States and 16.5k of which are located internationally (primarily Brazil and South Africa). During the first quarter of 2021, the company also built-out 62 towers.

Acquisitions

In Q1 2021, SBA Communications completed the acquisition of 731 communication sites for $976m in cash ($1.3m per site). Specifically, the majority of these sites relate to the company’s acquisition of wireless tenant licenses on 697 utility transmission structures from PG&E.

Subsequent to Q1 2021, SBA Communications is purchasing an incremental 413 communication sites for $110m in cash ($266k per site). The company notes that these sites are located internationally, within its existing markets. Therefore, these additional sites are likely in Brazil, South Africa, or a combination of the two. Finally, SBA expects to close the majority of its pending acquisitions by Q3 2021.

Full-Year 2021 Outlook – SBA Communications

SBA Communications increased its full-year 2021 outlook for most of the company’s key metrics. Overall, the two key drivers of the 2021 outlook increase are SBA’s agreement with Verizon and the closing of certain pending tower M&A deals. Below is a summary of SBA Communications’ current full-year 2021 outlook:

SBA Communications Full-Year 2021 Outlook
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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