EUR 850.00 For Business Accounts Only

Morningstar | Strong U.S. Market and Good International Prospects Provide Rosy Outlook for American Tower

We think American Tower’s strategy to diversify its tower portfolio globally leaves it best positioned among the three U.S. tower companies, as it is primed to benefit from the continually increasing demand in mobile data worldwide. The tower business in general is very attractive. Wireless carriers enter long-term leases that include rent escalators (annual increases of about 3% in the United States and generally tied to inflation internationally), which gives the firm a highly visible and stable revenue stream, and towers have significant operating leverage. Adding tenants to existing towers and equipment upgrades by tenants both provide sharp revenue increases while adding little incremental cost. As data use grows and networks get more stretched, locating equipment on more towers and upgrading equipment are primary solutions for carriers. Consumers’ ever-increasing need for mobile data and little geographic overlap with competitors result in normalized churn of about 1%.We think American Tower is well served being the market leader in the U.S, which is the most profitable market. American Tower generates more than half its total revenue and has over one fourth of its towers in the country. In addition to being the most profitable geography, the U.S. growth trajectory remains strong. Mobile data use has been growing 40%-50% per year and is expected to continue at a similar clip through 2021. We think the looming upgrade to 5G networks will extend the required carrier investment for years to come.American Tower’s prospects are similarly bright in its international markets, where its biggest presence is in India, Brazil, and Mexico. Many international markets are a decade behind the U.S. and are now building their 4G networks. Indian data usage has been growing 100% per year, and carriers have been substantially increasing spending to improve networks. Latin American countries now have over 200 million people in the middle class, a significant proportion of whom are under 40 years old (the heaviest data users). Brazil and Mexico collectively account for half the Latin American population and 70% of its purchasing power.