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Tower REITs Seek Expansion Opportunities on Solid Demand

Tower real estate investment trusts (REITs) like American Tower AMT, SBA Communications SBAC and Crown Castle Inc. CCI are well-poised to benefit from increased capital spending by wireless carriers. This is due to the incremental demand from global 4G and 5G deployment efforts, growing wireless penetration and spectrum auctions.

The advancement in mobile technology, such as 4G and 5G networks, and the proliferation of bandwidth-intensive applications have driven the growth in mobile data usage globally.

Moreover, wireless connectivity usage has significantly increased owing to the advent of next-generation technologies, including edge computing functionality, autonomous vehicle networks and the Internet of Things. Also, rampant usage of network-intensive applications for video conferencing and cloud services, and remote-working scenarios have aided the rise.

This has resulted in wireless service providers and carriers expanding their networks and deploying additional equipment for existing networks to boost their network coverage and capacity to meet the rising consumer demand.

Consequently, the tower leasing demand has increased tremendously. This is expected to fuel the top-line growth of tower REITs.

Also, with the increased innovation and adoption of data-driven mobile devices and applications, such as machine-to-machine connections, social networking and streaming of video, wireless consumer demand is expected to escalate considerably.

To capitalize on this upbeat trend, American Tower, SBA Communications and Crown Castle have been focusing on strategic acquisitions and development activities.

In the second quarter, SBAC acquired 210 communication sites and one data center in Brazil for total cash consideration of $127.3 million and built 100 towers. It is also under contract to acquire roughly 2,600 sites from Grupo TorreSur in Brazil for $725 million. The transaction is expected to be completed in the fourth quarter of 2022.

Similarly, in 2021, AMT acquired Telxius’ European and Latin American tower divisions, consisting of 31,000 communications sites in Argentina, Brazil, Chile, Germany, Peru and Spain. This provided the company with a significant scale in these attractive markets and enabled it to diversify its footprint with a strong, primarily tier-1, multinational tenant base.

During the second quarter of 2022, AMT spent roughly $90 million on the acquisition of 118 communications sites and other communications infrastructure assets. These included 96 communications sites relating to its prior-announced agreement with Orange S.A. and fiber connected to its communications sites in Spain from Telefónica de España S.A.U.

AMT’s development plan also assumes the construction of approximately 6,500 new sites across its international footprint.

CCI, too, expects to double the rate of small cell deployments next year compared with the 5,000 nodes it anticipates putting on air in 2022, as 5G deployment is expected to require a greater scale of small cell deployment to increase the capacity and density of the wireless network.

Further, these REITs have solid balance-sheet strength with ample liquidity and financial flexibility. This supports their expansionary efforts to capitalize on future growth opportunities.

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