SBA increases tower footprint, contract leases across LatAm

Telecoms tower firm SBA Communications expanded its tower footprint and sales from leasing contracts in Latin America during the third quarter.

The improvement comes despite headwinds from the consolidation of telcos across the region.

“We again experienced strong contributions broadly from many of our markets, including Central America, Brazil and South Africa,” said CEO Brendan Stoops in a presentation to investors.

“Brazil, our largest market outside of the US, was again ahead of our internal expectations, and each of the big three carriers in that market remained busy with coverage expansion, densification and integration of the legacy Oi wireless network.”

SBA provides structures for antennas of the three largest operators in Brazil: Telefônica Brasil, Claro and TIM.

The company also used to be a supplier for Oi, whose mobile network was sold to the trio of telcos. With the integration of Oi's network and the decommissioning of sites, SBA's base of towers and leasing contracts has decreased, increasing churn.

OI AGREEMENTS

SBA previously booked US$10mn associated with an agreement reached with TIM Brasil, related to TIM’s acquisition of a portion of Oi Mobile’s business. 

The TIM agreement includes longer-term business commitments from the company related to Oi sites and represents a long, mutually beneficial relationship with the Brazilian carrier. 

The group is negotiating similar deals with Claro and Telefônica Brasil, the other two buyers of Oi’s mobile operations.

“In Brazil, our largest international market, the same-tower organic growth rate was 2.6% on a constant currency basis, including the impact of 6.3% of churn, the growth rate of which reflects a decline in the Brazilian inflation index,” said CFO Brendan Cavanagh.

The executive stressed that the 2023 outlook does not include churn assumptions related to the Oi consolidation other than that associated with the TIM agreement, as SBA previously informed.

“However, we continue to discuss potential arrangements with other carriers related to the Oi consolidation that could have an impact on our current year international churn.”

The net growth rate in Brazil was again significantly impacted by SBA’s previously discussed TIM agreement.

The same potential churn impact occurs in other markets, such as Central America, including carry-over impacts from Digicel in Panama and carrier consolidations in Central America.

The groups Telefónica, América Móvil and TIM are SBA's top three international clients. They accounted for 22.8%, 19.7% and 15.7% of international site leasing revenues, respectively, as of end-September. 

Compared with the previous quarter, Telefónica and América Móvil saw their share of that total decline, while TIM's proportion increased.

Despite the ongoing deconsolidation of Oi's sites, the telco still accounted for 3.4% of SBA's international leasing revenues by the end of Q3.

During the quarter, 77.8% of SBA’s cash site leasing revenue was denominated in US dollars. 

The majority of non-US dollar-denominated revenue was from Brazil, which represented 16.0% of consolidated cash site leasing revenues in the period.

Stoops said that leasing across many of SBA’s Central American markets “was also ahead of expectations,” driven by the need of carriers to meet constantly growing demand of their users for wireless data in those markets. 

“I'm pleased with our operational execution internationally, and I'm optimistic for the future based on significant network needs across many of our markets,” said the CFO.

In 4Q22, SBA expanded its Latin American portfolio by acquiring 2,642 sites for US$737mn, which included 2,632 sites from Grupo TorreSur (GTS) in Brazil for approximately US$725mn. SBA also purchased 349 sites from Movistar Chile last year.

MORE LAND, MORE ACQUISITIONS

The group posted total 2Q23 revenues of U$683mn, up 1% year-on-year. Net income fell 14.4% to US$85.4mn.

Meanwhile, international (non-US) cash site leasing revenue was US$169mn, up 22.4%.

SBA acquired 45 sites for US$40.8mn in the quarter. The specific sellers and markets were not disclosed. The company also spent US$15.1mn to purchase land and easements, and on extending lease terms. 

Overall, subsequent to the third quarter of 2023, SBA purchased or is under contract to purchase 215 communication sites for approximately US$74mn. These acquisitions are expected to be concluded by the end of 2Q24.

As for organic deployments, SBA said it built 86 towers during the quarter. 

As of September 30, 2023, the company owned or operated 39,546 communication sites, 17,469 of which were in the US and its territories and 22,077 were international.