2021-10-18-瑞士信贷集团-塔式房地产信托_对强健的塔楼前景日益增长的信心_35页_1mb

Tower REITs Summary

Core Content

This document outlines a positive outlook for Tower REITs, particularly CCI (Crown Castle), SBAC (SBA Communications), and AMT (American Tower), driven by increased carrier capital expenditures (capex), the impact of Auction 110, and the potential benefits of the bipartisan infrastructure bill. It also discusses the churn headwind and its current status, as well as M&A activity and 5G adoption trends that support the growth of the tower sector.

Main Points

1. Carrier Capex to Peak in 2022 and 2023

• Projected Carrier Capex: Expected to peak at $39.6 billion in 2022 and $37.6 billion in 2023, primarily due to C-band spectrum deployment.
• C-band Impact: Enables carriers to compete more effectively with TMUS, leading to increased competition and accelerated deployments.
• T-Mobile's Capex: Projected to spend $6-8 billion on C-band, with most spending from 2022 to 2024.
• Auction 110: The 3.45 GHz mid-band spectrum will be deployed starting in 2022, offering additional network densification and faster deployment due to compatibility with C-band devices.

2. Churn is Now Priced In

• Sprint Churn: Management teams have been warning investors about Sprint churn for nearly two years, and it is now well understood and priced in.
• Impact on Growth: Despite churn, gross domestic tower site revenue is expected to accelerate, offsetting the negative impact.
• Churn Projections:
  • AMT: Non-recurring churn expected to be 0.9% of total revenue.
  • CCI: 0.6% of total revenue.
  • SBAC: 0.7% of total revenue.
• Comps: TowerCos have favorable year-over-year comps, indicating they have moved past long-term organic growth troughs.

3. Bipartisan Infrastructure Bill

• Broadband Investment: The bill includes $65 billion for broadband, with a focus on rural areas.
• Impact on Towers: While not directly benefiting mobile capex, the bill can supplement wireless capex by reducing the financial burden on carriers.
• Non-Telecom Customers: The bill could unlock additional revenue from non-telecom customers, representing 5-10% of US tower rental revenue.

4. 5G Handset Growth to Accelerate

• Adoption Rates: 5G smartphones are expected to reach 50-54% of total shipments in CY21/CY22, much faster than the 4G adoption cycle.
• China's Role: China has led the aggressive 5G rollout, with most high-end and mid-range models already 5G-enabled.
• US Adoption: Expected to be accelerated by subsidized 5G iPhones, with the iPhone 13 and iPhone 14 models playing a key role.
• Circular Growth Driver: 5G adoption drives carrier capex, which in turn increases demand for tower sites, leading to more profits for TowerCos.

5. M&A Activity and Outlook

• AMT:
  • Acquired Telxius, adding $383 million in property revenue and $129 million in AFFO.
  • Expected to add $625 million in annualized revenue by year 5.
  • Likely to pursue more European acquisitions to maintain capital flexibility.
• SBAC:
  • Acquired over 700 towers from PG&E, generating ~$39.5 million in TCF in the first full year.
  • Maintains a leverage ratio above 7x, but is expected to pursue strategic, value-add M&A.
• CCI:
  • Focused on US market and small cell deployments.
  • 2021 small cell outlook softened due to carrier focus on macro towers, but long-term small cell growth is expected.

6. Valuation Upside

• Valuation Update: Based on P/FY22 AFFOS and DCF models, the following upside is expected:
  • AMT: 21%.
  • SBAC: 19%.
  • CCI: 16%.
• Target Prices:
  • AMT: $324 (from $323).
  • SBAC: $384 (from $325).
  • CCI: $195 (from $192).

Key Information

• C-band and Auction 110 are the primary drivers of tower growth.
• Sprint churn is well understood and priced in, with domestic revenue growth expected to remain strong.
• Infrastructure Bill is a secular tailwind, offering broadband investment that could support wireless capex.
• 5G handset adoption is expected to accelerate, spurring more network densification and tower activity.
• M&A activity is ongoing, with AMT, SBAC, and CCI each making strategic moves to enhance growth and capital efficiency.
• Valuation upside is attractive, with double-digit growth projected for all three TowerCos.

Conclusion

The tower REITs sector is poised for strong growth over the next two years, supported by elevated carrier capex, Auction 110, and the potential impact of the bipartisan infrastructure bill. Despite churn concerns, these are now priced in, and the increased competition among carriers is beneficial for TowerCos. 5G adoption and M&A activity further reinforce the positive outlook, with valuation upside expected for all three companies.