SBA Communications today announced its Q3 2021 earnings and provided updates on its U.S. and International organic revenue growth rates, leasing drivers, tower acquisitions, and build-to-suit activity.

Q3 2021 Results – SBA Communications

As of Q3 2021, SBA owns or operates 34.1k communication sites, 17.3k of which are in the United States and 16.8k that are located internationally (primarily Brazil and South Africa). During the quarter, SBA Communications’ total revenue was $589.3m, which grew 2.4% quarter-over-quarter. Decomposing this figure:

  • Site Leasing: revenue of $535.5m, an increase of 2.2% quarter-over-quarter. Of this total, $426.8m (80% of total) was generated in the United States, while $108.7m (20% of total) was produced internationally
  • Site Development: revenue of $53.8m (a record result), an increase of 4.7% quarter-over-quarter

Additionally, SBA Communications delivered adjusted EBITDA of $407.0m, a 1.7% increase quarter-over-quarter. Therefore, the company’s EBITDA margin was 69.1% in Q3 2021, a ~50 bps decline quarter-over-quarter.

U.S. Organic Revenue Growth – SBA Communications

SBA Communications’ U.S. gross organic revenue growth rate inflected positively in Q3 2021, reversing its previous downwards trend. Specifically, SBA’s U.S. gross organic revenue growth rate was 5.7% in Q3 2021, improving over its two prior quarters. Similarly, the company’s U.S. net organic revenue growth rate also improved to 3.3% in Q3 2021. Indeed, this implies churn of 2.4% for the quarter.

U.S. Leasing Drivers, Customers in Q3 2021 – SBA Communications

SBA Communications’ new leases comprised 55% of the company’s U.S. signings, while amendments made-up 45% of U.S. signings. Overall, the Big-4 wireless carriers of Verizon, T-Mobile, AT&T, and DISH Network represented 96% of total incremental U.S. lease signings during the quarter.

SBA Communications’ U.S. new lease and new amendment application backlog finished Q3 2021 higher, setting a new multi-year high. Based on its backlog and conversations with customers, SBA expects elevated U.S. leasing activities to continue through 2022. For example, the company expects that new 3.45 GHz spectrum acquired by wireless carriers “will require new radios” to be deployed on towers, starting in the second-half of 2022.

International Organic Revenue Growth – SBA Communications

SBA’s International gross organic revenue growth rate was 7.9% in Q3 2021, improving quarter-over-quarter. In particular, Brazil’s gross organic revenue growth rate was 9.5%, on a constant currency basis, which is expected to continue to remain strong as Brazil completes its 5G spectrum auction.

Conversely, SBA Communications’ International net organic revenue growth rate was 5.2% in Q3 2021, a decline quarter-over-quarter. Therefore, SBA is experiencing heightened levels of churn in its international markets.

During Q3 2021, International churn rose by 0.5%, reaching 2.7% for the quarter, as compared to 2.2% in Q2 2021. As a reference point, International churn in Q3 2020 was only 0.4%.

Furthermore, SBA notes that International churn is “anticipated to increase further”, with a jump in Q4 2021 and 2022, due to “carrier consolidations and other network and contract modifications in Central America”. Specifically, the company points to consolidation-related churn with Claro (América Móvil) acquiring Telefónica’s operations in Guatemala as a contributing factor. Notably, América Móvil’s tower company, Sitios Latinoamérica, presently owns 3.3k sites in Guatemala.

Tower Acquisitions and Build Activity

Acquisitions

SBA Communications expects that its acquisition of 1.4k towers in Tanzania from Airtel Tanzania for $175m ($125k per tower) will close in stages starting in Q4 2021.

Additionally, during Q3 2021, SBA acquired 144 communication sites for total cash consideration of $57.1m, implying a valuation of $397k per tower. Of this total, 23 sites were in the United States and 121 sites were in international markets.

Finally, subsequent to quarter-end, the company agreed to purchase ~300 towers for ~$56m, signifying a valuation of $187k per tower.

New Builds and Land Purchases

During Q3 2021, the company built-out 87 towers. In addition, the company spent $11.6m to purchase land and easements and to extend ground lease terms.

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G.

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