SBA Communications (NASDAQ: SBAC) and the Department of Trade and Industry (DTI), a division of the Philippine government, revealed SBA’s plans to deploy a total of 1,470 telecommunications tower structures in the Philippines, over the next 5 years, with a total project cost of $205m USD (10.76bn Philippine pesos). As such, SBA’s tower deployments in the Philippines imply a cost to build of ~$140k per tower.

Financially, SBA Communications notes that it is achieving “double-digit” (i.e., 10%+) Day-1 tower cash flow yields on newly constructed towers in the Philippines.

Philippines – New Market for SBA Communications

In 2021, SBA Communications established itself as a passive telecommunications tower infrastructure operator in the Philippines, supporting wireless communications. Presently, SBA is constructing and operating towers in the Philippines, with its current portfolio standing at 20 towers installed.

Furthermore, by the end of Q2 2022, SBA expects to build 42 more towers, meaning its total portfolio will reach 62 towers at quarter-end. More broadly, during 2022, the company’s goal is to build 180 telecommunications towers.

SBA’s expansion activity to-date in the Philippines includes the incorporation of its local entity, working with government agencies for all necessary permits, and hiring local staff in local offices. Overall, the company plans to hire 353 employees in the Philippines.

Customers

SBA Communications is establishing relationships with each of the country’s three major mobile network operators, namely Globe Telecom, PLDT (Smart Communications), and DITO Telecommunity. To-date, SBA has secured build-to-suit (BTS) commitments from both Globe Telecom and PLDT, as anchor tenants on its shared tower infrastructure.

Demand Drivers

In the Philippines, there is strong demand for connectivity given that Filipinos spend more time online than any other country within the ASEAN region, as well as most other countries in the world. As such, expansion of wireless networks in the Philippines will support demand for significant new greenfield tower builds in the country over the next several years.

SBA anticipates that every year for the next 10 years, “thousands of towers will be built in the Philippines”. Because of this, SBA is initially focusing on building greenfield sites in the Philippines.

Currently, the Philippines has only ~24k cell sites and SBA expects the country will need at least 30k more sites.

Competition – Tower Companies in the Philippines

Presently, there are 20+ tower companies with licenses to operate in the Philippines. However, SBA only deems 5 to 6 of these companies/competitors as having the capabilities, wherewithal, and customer support to secure meaningful build-to-suit (BTS) commitments from mobile network operators for new sites.

Beyond SBA Communications, below are the deployment plans of select tower company competitors operating in the Philippines:

  • American Tower: operates 239 sites in the Philippines, as of Q1 2022
  • EdgePoint Infrastructure (DigitalBridge): acquiring 2.9k towers located across the Luzon Island group of the Philippines, from PLDT, in a $666m USD sale-and-leaseback transaction
  • edotco Group (Axiata): pro forma for pending acquisitions, edotco’s owned portfolio will grow to 3.0k towers located primarily in Luzon, Visayas, and Mindanao, in the Philippines
  • PhilTower (Macquarie Capital): currently rolling-out more than 1k sites across the Philippines for mobile network operators Globe Telecom and PLDT
  • Pinnacle Towers (KKR): builds and operates telecommunications infrastructure in the Philippines through its subsidiary Frontier Tower Associates. The company has undertaken BTS tower projects for mobile network operator Globe Telecom
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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