Macro Cells Remain Core of Network

Senior Telecom / Media High Yield Analyst Davis Hebert at Wells Fargo shared some takeaways from the company’s 4th annual telecom symposium, “The Wireless Supply Chain—Soup to Nuts,” that happened in New York last week. While there was much to say about small cells, Herbert noted that macro cells remain the “core of the network.” “One operator noted that the most activity has been coming from Verizon and T-Mobile, with AT&T and Sprint rather quiet,” Hebert wrote. “He expected activity to resume for the latter two, as each carrier tends to go through up-and-down spending cycles. The tower M&A environment has been a great sellers’ market. There is more capital chasing tower assets than one panelist had seen since 1997. Verizon certainly took advantage of tower multiples, selling its portfolio to American Tower, but said control and priority on the existing towers had to remain in place.” Continue reading here. 

AT&T Talks Capex

Well it’s been a long time coming, but the AT&T/DirecTV deal has finally been approved by the FCC, and the tower industry is saying, “What now?” It’s been a slow year so far for AT&T in the tower world, and many have noted that the carrier’s pullback has slowed their own work down. Now that the deal has been approved, will AT&T’s work pick back up again? Jonathan Schildkraut of Evercore ISI discussed the particulars of AT&T’s annual capex guidance during their second quarter earnings call last week. “AT&T maintained its annual capex guidance of $18 billion but noted the figure would now include the expected spend for upgrading its recently acquired Mexican wireless network,” Schildkraut wrote. “In speaking to management, they did indicate that the overall mix shift in spending would further tilt toward wireless (from wireline) – implying that even though U.S. capex will be down vs. prior expectations, the amount spent on wireless infrastructure may still remain in the same range.” Schildkraut also noted that when AT&T first announced their $3 billion investment into Mexico by year end 2018, the firm through spending would begin in 2016, but the company made it clear it was start this year. Continue reading here. 

CTI Towers Making Moves

CTI Towers announced it has completed an acquisition with Celtic Corporation, in addition to another tower seller with whom the company has previously worked.  CTI, of which Comcast Ventures is majority owner, continues to own and manage over 500 towers, adding additional assets to its portfolio through tower acquisitions.  “We decided to work with the very capable staff of Excel Capital Advisors as our representatives who introduced us to CTI Towers,” said Michael W. Kay, CEO of Celtic Corporation.  “The process went smoothly and we were pleased to learn that CTI Towers is so highly regarded in the industry. We wish them continued success in growing their company.” CTI Towers, Inc. owns, operates, and maintains wireless towers throughout the United States. The Company leases tower space to wireless carriers, broadcasters, municipalities, utility companies, and others. Continue reading here. 

The Proof is in the Capex

Yesterday, we asked if the expectation that wireless spending will pick up in the second half of 2015 would become a reality. Verizon was the first wireless carrier to report their second quarter results, and the company reported second quarter capex of $4.49 billion, which brings their total to $8.2 billion for the first half of the year. The company projected that wireless capex for the year would be around $17.5 billion to $18 billion. “We expect capex to ramp in 2H,” Jonathan Schildkraut of Evercore ISI wrote. Kevin Smithen at Macquarie Securities slightly raised their 2016 earnings per share (EPS) forecasts to $3.76 following Verizon’s second quarter earnings call. Continue reading here. 

Will Expectations Become Reality?

Multiple reports from analysts predict that the second half of 2015 and early 2016 will see more wireless activity. Amir Rozwadowski of Barclays wrote, “While we expect carrier capex levels to remain tempered during 2Q, expectations for a reiteration of 2015 spending levels by all four major telco’s suggests improving trends should emerge beginning in the back half of the year.” In the story below, you’ll get Jonathan Schildkraut of Evercore ISI’s take. But will it actually happen? Rozwadowski noted that while each carrier has their own initiatives to focus on, the new spectrum and the densification projects will bode well for the industry as a whole. Continue reading here. 

Mark Your Calendars

“I remain committed to achieving our goal of beginning the auction in the first quarter of 2016,” FCC Chairman Tom Wheeler wrote in a blog on July 16. This statement comes after the Commission pushed the Public Notice to establish bidding procedures for the incentive auction, and the Reconsideration of the Mobile Spectrum Holdings Order from last week’s meeting until August 6. “Given the complexity of the reverse auction, and undetermined level of broadcaster commitment to date, we had expected the FCC to be more insistent on pushing the matter through its agenda,” Jennifer Fritzsche, senior analyst at Wells Fargo wrote. Continue reading here. 

No Discounts. No Deal?

After the FCC’s meeting last week, reports have surfaced that Chairman Tom Wheeler has circulated an order recommending rejecting Dish Network’s use of the Designated Entity bidding discounts in the AWS-3 spectrum auction. By using two smaller companies that Dish had an 85% stake in, they were able to secure $3 billion in discounts. Dish claims they followed the rules, but Commissioners and other companies claim it was unfair. “In light of the strong Congressional criticism of Dish’s use of DEs, the FCC has a political motive to deny the discount,” Jonathan Chaplin at New Street Research explained. “As such, investors should not assume that the FCC’s action is solely driven by an assessment of the strength of its legal position against Dish. We doubt that Dish’s legal position and DE structuring was premised on the hope that the FCC would interpret an ambiguity in the law in its favor, as there have been a number of cases in which the FCC has offered its views on the indicia of control. We are certain the Dish lawyers relied heavily on those precedents in crafting the legal structure and doubt they were trying to create new law.”  Continue reading here.