American Tower (AMT) Continues To Strengthen Global Operations

American Tower Corp. (NYSE:AMT) , a leading wireless tower operator and real investment trust, is significantly expanding its international operations. According to CEO Jim Taiclet, the company’s total revenue from international business is likely to outperform the U.S. revenues in the next three to seven years.

At present, American Tower operates approximately 150,000 antenna properties worldwide, of which, the U.S. accounts for only a little over 40,000 cell sites. However, in 2016, 59% of the company’s total revenue came from this region while international operations together accounted for the remaining 41%.

American Tower has a strong presence in Latin America, Asia and Australia. The company operates around 58,000 cell sites in India alone. Management expects India to contribute around 10% of total revenue by 2018.

In Mar 2017, American Tower inked a new tower lease agreement worth $100 million with the U.S. telecom behemoth AT&T Inc. (NYSE:T) . As a result of this renewed deal, management has raised its 2017 revenue guidance to a range of $6.31 to $6.49 billion from the previous estimate of $6.21 to $6.39 billion. Adjusted EBITDA is projected in the range of $3,810–$3,910 million. Consolidated AFFO will likely be $2,700–$2,800 million.

American Tower generates most of its revenues from long-term (typically 5-10 year) tower leases with major wireless carriers. In addition, the company provides on-site maintenance and servicing of antennas, amplifiers, and base station equipment. Since moving equipment from one tower to another is cumbersome, carriers normally renew these contracts upon expiration. This generates a strong long-term lease upcycle.

In the U.S., American Tower competes fiercely with Crown Castle International Corp. (NYSE:CCI) and SBA Communications Corp. (NASDAQ:SBAC) . We believe that geographic diversifications will help the company reduce dependence on the U.S., in which the wireless market is highly saturated.

The U.S. is still extremely lucrative owing to the continuous evolution of high-speed mobile technologies. However, we remain slightly concerned about alternative technique innovations like satellite-delivered radio and video services reducing the need for tower-based broadcast transmission.

Price performance of American Tower

So far, 2017 has turned out to be highly successful for American Tower. Year to date, the stock price has gained 27.30% outperforming the Zacks categorized REIT-Equity Trust Industry’s growth of a mere 5.71%. Nevertheless, high customer concentration, foreign currency exchange rate risks, stiff competition, integration risks, rising operating expenses and a highly leveraged balance sheet are near-term concerns for the company. We believe that these are primarily responsible for the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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