Telecoms infra group SBA Communications sees another strong quarter in Brazil

Brazil delivered another strong quarter for US telecom infrastructure group SBA Communications.

The country, which is SBA’s largest international market, accounted for 15.5% of the group’s non-US dollar denominated cash site leasing revenues in Q1, despite some slowdown in tower builds.

“We remain excited about our opportunities in Brazil over the coming years as we build on our strong customer relationships and expect meaningful 5G related investments and continued expansion of wireless services throughout the country,” CEO Jeff Stoops told investors in an earnings call.

The main hurdle for the company remains the mobile business acquisition of SBA’s customer Oi by TIM, Telefônica Brasil and Claro Brasil, which is expected to continue to pressure the company's churn.

“In Brazil … we had another good quarter, although the impact of the previously discussed TIM agreement weighed on our first quarter, same-tower organic growth. This growth rate in Brazil was 4.7% on a constant currency basis, including the impact of 5.9% of churn,” added CFO Brendan Cavanagh.

SBA's international churn also remains elevated, although in line with expectations and previously provided outlook. 

Some 42% of new international business in Q1 came from amendments to existing leases and 58% through new leases, with particularly strong contributions from Tanzania, South Africa, as well as Brazil.

Cavanagh said the merger in Brazil led to some slowdown on new tower builds. He sees this trend as temporary, though, with deployments picking up over time. 

SBA’s executives expect the stabilization of the currency exchange rate. 

A set of 2,600 sites acquired in August 2022, from Grupo TorreSur (GTS), for US$725mn is performing especially well, the executives said.

Overall, the performance in Brazil was “ahead of our internal expectations, with contributions from each of the big three carriers in that market,” said Cavanagh, referring to Telefônica, Claro and TIM.

Telefónica accounted for 23.1% of SBA’s international revenues, América Móvil 20.1% and TIM 16%. Oi now represents less than 3%.

SBA’s top three clients are US telcos T-Mobile, AT&T Wireless and Verizon Wireless, with 39.6%, 28.4% and 19.9% of US site leasing revenues.

Total revenues were US$676mn, up by 9% year-over-year. Site leasing revenue in the quarter was US$617mn, of which US$$455mn in the US and US$162mn internationally.

SBA Communications built 479 sites globally in 2022 and 52 in Q1. It also acquired 14 sites in the first quarter, with further 66 under contract to purchase this year. These acquisitions are set to represent US$63.7mn in value.

The group owns or operated 39,362 sites across 16 markets in the US, South America, Central America, Canada, South Africa, the Philippines and Tanzania. Nearly 21,950 of those were located outside the US. 

The main operations and offices in Latin America are in Brazil, Argentina, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Nicaragua, Panama and Peru.

Unlike rival American Tower, which sold its Mexican fiber business, SBA does not intend to divest its few non-tower assets.

"Other than some assets which are very [minor] to the operation of our datacenter in Brazil or our towers internationally, we don't have any fiber businesses internationally, so nothing really to divest there," said Stoops.