SBA Communications today announced its Q2 2021 earnings and gave updates on its U.S. organic revenue growth rates, leasing drivers, key customer activity, tower acquisitions, and build-to-suit activity.
Q2 2021 Results – SBA Communications
As of June 30, 2021, SBA owns or operates 33.9k communication sites, 17.3k of which are in the United States and 16.5k that are located internationally (primarily Brazil and South Africa).
During the quarter, SBA Communications’ total revenue was $575.5m, which grew 13.5% year-over-year. Decomposing this figure, the company’s site leasing revenue was $524.1m, an increase of 7.9% year-over-year (FX-neutral basis) and site development revenue was $51.4m (a record result), an increase of 100%+ year-over-year (FX-neutral basis).
U.S. Organic Revenue Growth Rates – SBA Communications
SBA Communications’ U.S. gross organic revenue growth rate deceleration (i.e., excluding the impact of churn) continued in Q2 2021. Specifically, SBA’s U.S. gross organic revenue growth rate has slowed from 8.6% in Q3 2019 to 5.5% in Q2 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 3.0% in Q2 2021. Indeed, this implies churn of 2.5% for the quarter.
Overall, SBA states that it expects its gross organic leasing revenue growth will begin to increase in the second-half of 2021. Particularly, this view is supported by SBA Communications’ record Q2 2021 for its services segment, a leading indicator (see below).
U.S. Leasing Drivers, Customers in Q2 2021 – SBA Communications
SBA Communications’ domestic tower new lease and amendment signings (bookings), which represent new revenue placed under contract during Q2 2021, was at its highest quarterly level since 2014. Specifically, new leases comprised 66% of the company’s domestic signings, while amendments made-up 34% of domestic signings.
SBA notes that step-function changes from DISH Network drove new lease activity, while Verizon’s C-band deployments generated significant amendment business. At the same time, wireless carriers T-Mobile and AT&T contributed mostly through amendments focused on building-out their 5G networks by upgrading their macro networks. Specific leasing drivers were initial C-band initiatives, 2.5 GHz deployments, FirstNet amendments, and general coverage expansion.
Overall, the Big-4 wireless carriers of Verizon, T-Mobile, AT&T, and DISH Network represented 97% of total incremental domestic lease signings during the quarter. As a result, SBA’s leasing and services backlogs were at multi-year highs at quarter-end. Moreover, SBA indicates that Q2 2021 is the beginning of a multi-year increase in U.S. wireless carrier capital expenditures.
SBA Communications’ increased leasing activity will benefit reported 2021 revenue. However, the majority of the company’s incremental revenue will begin to be recognized in 2022.
Tower Acquisitions and Build Activity
Acquisitions
In June 2021, SBA Communications announced that it is acquiring 1.4k towers in Tanzania from Airtel Tanzania, a subsidiary of Airtel Africa, for a purchase price of $175m, equating to a valuation of $125k per tower.
Additionally, during Q2 2021, SBA acquired 57 communication sites for total cash consideration of $67.0m, implying a valuation of $1.2m per tower. Finally, subsequent to quarter-end, the company agreed to purchase 400 towers for $95m, signifying a valuation of $238k per tower.
Overall, SBA anticipates that the majority of its pending acquisitions will be consummated by the end of Q1 2022.
New Builds and Land Purchases
During the second quarter of 2021, the company built-out 98 towers. In addition, the company spent $11.8m to purchase land and easements and to extend ground lease terms.
