Founded in 1995, American Tower is one of the largest global real estate investment trusts (REITs) and a leading independent owner, operator and developer of multitenant communications real estate. Their primary business is leasing space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. In addition, they offer tower-related services in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily support their site leasing business, including the addition of new tenants and equipment.
The company's portfolio consists of towers that they own and towers that they operate on long-term lease arrangements, as well as distributed antenna system (DAS) networks, which provide seamless coverage solutions in certain in-building and outdoor wireless environments. In addition to the communications sites, they manage rooftop and tower sites for property owners under various contractual arrangements.
They also hold property interests that they lease to communications service providers and third-party tower operators. The company's communications real estate portfolio of over 100,000 sites as of December 31, 2015, included over 40,000 communications sites in the United States, over 15,000 communications sites in Asia, over 12,000 communications sites in Europe, Middle East and Africa (EMEA) and nearly 33,000 communications sites in Latin America.
The company's portfolio consists of towers that they own and towers that they operate on long-term lease arrangements, as well as distributed antenna system (DAS) networks, which provide seamless coverage solutions in certain in-building and outdoor wireless environments. In addition to the communications sites, they manage rooftop and tower sites for property owners under various contractual arrangements.
They also hold property interests that they lease to communications service providers and third-party tower operators. The company's communications real estate portfolio of over 100,000 sites as of December 31, 2015, included over 40,000 communications sites in the United States, over 15,000 communications sites in Asia, over 12,000 communications sites in Europe, Middle East and Africa (EMEA) and nearly 33,000 communications sites in Latin America.
American Tower Corporation is a real estate investment trust. It invests in the real estate markets across the globe. The firm engages in leasing of space on multi-tenant communications sites to wireless service providers, radio and television broadcast companies, wireless data and data providers, government agencies and municipalities and tenants in a number of other industries. American Tower Corporation was founded in 1995 and is headquartered in Boston, Massachusetts.
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| 17 August 2016 Price $114.56 1yr Target $129.22 Analysts 18 Dividend $1.99 Payout Ratio 122.83% 1yr Cap Gain 12.79% Yield 1.73% 1yr Tot Return 14.52% P/E 70.93 PEG 2.36 Beta 0.58 | EPS (ttm) $1.62 EPS next yr $2.78 Forward P/E 41.27 EPS next 5yr 30.05% 1yr Price Support $83.53 Market Cap $48.49 Bil Revenues $5.25 Bil Earnings $691.30 Mil Profit Margin 13.16% Quick Ratio 0.80 Current Ratio 0.80 Debt/Equity 2.76 | 1yr RevGR 16.36% 3yr RevGR 18.19% 5yr RevGR 19.17% 1yr EarnGR -29.5% 3yr EarnGR -4.09% 5yr EarnGR 8.91% 1yr DivGR 29.28% 3yr DivGR 25.93% 5yr DivGR --- ROA 2.50% ROE 10.30% |
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Overview of the Business
American Tower is one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multi-tenant communications real estate. Their primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. They refer to this business as their property operations, which accounted for 98% of total revenues for the year ended December 31, 2015. They also offer tower-related services in the US, including site acquisition, zoning and permitting and structural analysis, which primarily support their site leasing business, including the addition of new tenants and equipment. The company refers to this business as their services operations.
The company's portfolio primarily consists of towers that they own and towers that they operate on long-term lease arrangements, as well as distributed antenna system (“DAS”) networks, which provide seamless coverage solutions in certain in-building and outdoor wireless environments. In addition to the communications sites, the company manages rooftop and tower sites for property owners under various contractual arrangements. They also hold property interests that they lease to communications service providers and third-party tower operators. The company's communications real estate portfolio of 100,615 communications sites, as of December 31, 2015, included 40,426 communications sites in the U.S., 15,074 communications sites in Asia, 12,176 communications sites in Europe, Middle East and Africa (“EMEA”) and 32,939 communications sites in Latin America.
American Tower Corporation was originally created as a subsidiary of American Radio Systems Corporation in 1995 and was spun off into a free-standing public company in 1998. Since inception, they have grown their communications real estate portfolio through acquisitions, long-term lease arrangements and site development. In 2015, they significantly expanded their portfolio by (1) obtaining the exclusive right to lease, acquire or otherwise operate and manage 11,449 wireless communications sites from Verizon Communications Inc. in the US and (2) acquiring 4,716 communications sites in Nigeria from certain subsidiaries of Bharti Airtel Limited. In addition, in October 2015, the company signed a definitive agreement pursuant to acquire a 51% controlling interest in Viom Networks Limited, a telecommunications infrastructure company that owns and operates over 42,000 wireless communications towers and 200 indoor DAS networks in India.
American Tower is a holding company and conduct their operations through their directly and indirectly owned subsidiaries and joint ventures. Their principal domestic operating subsidiaries are American Towers LLC and SpectraSite Communications, LLC. They conduct their international operations through the subsidiary, American Tower International, Inc., which in turn conducts operations through its various international holding and operating subsidiaries and joint ventures.
The use of Taxable REIT Subsidiaries (TRS) enables the company to continue to engage in certain businesses while complying with REIT qualification requirements. As of December 31, 2015, the company's US REIT qualified businesses included the company's US tower leasing business, most of our operations in Costa Rica, Germany and Mexico and a majority of the services segment and indoor DAS networks business.
Property Operations
American Tower's property operations accounted for 98% of their total revenues for each of the years ended December 31, 2015, 2014 and 2013. Company revenue is primarily generated from tenant leases who lease space on the company's communications real estate, where they install and maintain their individual communications network equipment. Rental payments vary considerably depending upon numerous factors, including, but not limited to, tower location, amount and type of tenant equipment on the tower, ground space required by the tenant and remaining tower capacity. American Tower's costs typically include ground rent (which is primarily fixed, with annual cost escalations) and power and fuel costs, property taxes, repairs and maintenance expenses. Property operations have generated consistent incremental growth in revenue and have low cash flow volatility due to the following characteristics:
Communications Sites.
Approximately 95%, 95% and 96% of revenue was attributable to the communications sites for the years ended December 31, 2015, 2014 and 2013, respectively. American Tower leases space on their communications sites to tenants providing a diverse range of communications services, including cellular voice and data, broadcasting, mobile video and a number of other applications. Their top tenants (by revenue) are the following for the year ended December 31, 2015:
In addition to their communications sites, the company also owns and operates several types of managed network solutions, provide communications site management services to third parties, manage and lease property interests under carrier or other third-party communications sites and provide back-up power sources to tenants.
Managed Networks. American Tower owns and operates DAS networks in the US and certain international markets. They obtain rights from property owners to install and operate in-building DAS networks, and they grant rights to wireless service providers to attach their equipment to those installations. They also offer outdoor DAS networks as a complementary shared infrastructure solution for tenants in the US and in certain international markets. Typically, the company designs, builds and operates their outdoor DAS networks in areas in which zoning restrictions or other barriers may prevent or delay deployment of more traditional wireless communications sites. They also hold lease rights and easement interests on rooftops capable of hosting communications equipment in locations where towers are generally not a viable solution based on area characteristics. In addition, they provide management services to property owners in the US who elect to retain full rights to their property while simultaneously marketing the rooftop for wireless communications equipment installation. As the demand for advanced wireless devices in urban markets evolves, American Tower continues to evaluate infrastructure solutions, including small cells, that may support our tenants’ networks in these areas.
Property Interests. American Tower owns a portfolio of property interests in the US under carrier or other third-party communications sites, which provides recurring cash flow under complementary leasing arrangements.
Shared Generators. American Tower has contracts with certain tenants in the US on which the company provides access to shared backup power generators.
American Tower's property operations accounted for 98% of their total revenues for each of the years ended December 31, 2015, 2014 and 2013. Company revenue is primarily generated from tenant leases who lease space on the company's communications real estate, where they install and maintain their individual communications network equipment. Rental payments vary considerably depending upon numerous factors, including, but not limited to, tower location, amount and type of tenant equipment on the tower, ground space required by the tenant and remaining tower capacity. American Tower's costs typically include ground rent (which is primarily fixed, with annual cost escalations) and power and fuel costs, property taxes, repairs and maintenance expenses. Property operations have generated consistent incremental growth in revenue and have low cash flow volatility due to the following characteristics:
- Long-term tenant leases with contractual rent escalations. In general, a tenant lease has an initial non-cancellable term of ten years with multiple renewal terms, with provisions that periodically increase the rent due under the lease, typically annually, based on a fixed escalation percentage (approximately 3% in the United States) or an inflationary index in our international markets, or a combination of both. Based upon foreign currency exchange rates and the tenant leases in place as of December 31, 2015, the company expects to generate over $30 billion of non-cancellable tenant lease revenue over future periods, absent the impact of straight-line lease accounting.
- Consistent demand for our sites. As a result of rapidly growing usage of wireless services and the corresponding wireless industry capital spending trends in the markets we serve, the company anticipates consistent demand for their communications sites. They believe that their global asset base positions them to benefit from the increasing proliferation of advanced wireless devices and the increasing usage of high bandwidth applications on those devices. They have the ability to add new tenants and new equipment for existing tenants, which typically results in incremental revenue. Their legacy site portfolio and established tenant base provide them with a solid platform for new business opportunities, which has historically resulted in consistent and predictable organic revenue growth.
- High lease renewal rates. Tenants tend to renew leases because suitable alternative sites may not exist or be available and repositioning a site in their network may be expensive and may adversely affect the quality of their network. Historically, churn has been approximately 1% to 2% of total property revenue per year.
- High operating margins. Incremental operating costs associated with adding new tenants to an existing communications site are relatively minimal. Therefore, as tenants are added, the substantial majority of incremental revenue flows through to gross margin and operating profit. In addition, in many of the international markets, certain expenses, such as ground rent or power and fuel costs, are reimbursed and shared by the tenant base.
- Low maintenance capital expenditures. On average, the company requires relatively low amounts of annual capital expenditures to maintain their communications sites.
Communications Sites.
Approximately 95%, 95% and 96% of revenue was attributable to the communications sites for the years ended December 31, 2015, 2014 and 2013, respectively. American Tower leases space on their communications sites to tenants providing a diverse range of communications services, including cellular voice and data, broadcasting, mobile video and a number of other applications. Their top tenants (by revenue) are the following for the year ended December 31, 2015:
- U.S.: AT&T, Verizon Wireless, Sprint and T-Mobile accounted for an aggregate of 87% of U.S. property segment revenue.
- Asia: Vodafone, Idea Cellular, Airtel and Aircel accounted for an aggregate of 73% of Asia property segment revenue.
- EMEA: MTN Group Limited, Airtel, Cell C and Vodafone accounted for an aggregate of 82% of EMEA property
segment revenue. - Latin America: Telefónica, AT&T, Nextel International and Telecom Italia accounted for an aggregate of 70% of Latin America property segment revenue.
In addition to their communications sites, the company also owns and operates several types of managed network solutions, provide communications site management services to third parties, manage and lease property interests under carrier or other third-party communications sites and provide back-up power sources to tenants.
Managed Networks. American Tower owns and operates DAS networks in the US and certain international markets. They obtain rights from property owners to install and operate in-building DAS networks, and they grant rights to wireless service providers to attach their equipment to those installations. They also offer outdoor DAS networks as a complementary shared infrastructure solution for tenants in the US and in certain international markets. Typically, the company designs, builds and operates their outdoor DAS networks in areas in which zoning restrictions or other barriers may prevent or delay deployment of more traditional wireless communications sites. They also hold lease rights and easement interests on rooftops capable of hosting communications equipment in locations where towers are generally not a viable solution based on area characteristics. In addition, they provide management services to property owners in the US who elect to retain full rights to their property while simultaneously marketing the rooftop for wireless communications equipment installation. As the demand for advanced wireless devices in urban markets evolves, American Tower continues to evaluate infrastructure solutions, including small cells, that may support our tenants’ networks in these areas.
Property Interests. American Tower owns a portfolio of property interests in the US under carrier or other third-party communications sites, which provides recurring cash flow under complementary leasing arrangements.
Shared Generators. American Tower has contracts with certain tenants in the US on which the company provides access to shared backup power generators.
Services Operations
American Tower offers tower related services, including site acquisition, zoning, permitting and structural analysis services. Services operations support their leasing business, including the addition of new tenants and equipment on their sites. This segment accounted for 2% of the company's total revenue for each of the years ended December 31, 2015, 2014 and 2013.
Site Acquisition, Zoning and Permitting. American Tower engages in site acquisition services for themselves in connection with their tower development projects, as well as on behalf of tenants. The company typically works with tenants’ engineers to determine the geographic areas where new communications sites will best address the tenants’ needs and meet their coverage objectives. Once a new site is identified, we acquire the rights to the land or structure on which the site will be constructed, and we manage the permitting process to ensure all necessary approvals are obtained to construct and operate the communications site.
Structural Analysis. The company offers structural analysis services for wireless carriers in connection with the installation of their communications equipment. American Tower's team of engineers can evaluate whether a tower structure can support the additional burden of the new equipment or if an upgrade is needed, which enables the company's tenants to more accurately assess potential sites before making an installation decision. The company's structural analysis capabilities enable the company to provide higher quality service to their existing tenants by reducing the time required to achieve operational readiness, while also providing opportunities to offer structural analysis services to third parties.
Services Operations
American Tower offers tower related services, including site acquisition, zoning, permitting and structural analysis services. Services operations support their leasing business, including the addition of new tenants and equipment on their sites. This segment accounted for 2% of the company's total revenue for each of the years ended December 31, 2015, 2014 and 2013.
Site Acquisition, Zoning and Permitting. American Tower engages in site acquisition services for themselves in connection with their tower development projects, as well as on behalf of tenants. The company typically works with tenants’ engineers to determine the geographic areas where new communications sites will best address the tenants’ needs and meet their coverage objectives. Once a new site is identified, we acquire the rights to the land or structure on which the site will be constructed, and we manage the permitting process to ensure all necessary approvals are obtained to construct and operate the communications site.
Structural Analysis. The company offers structural analysis services for wireless carriers in connection with the installation of their communications equipment. American Tower's team of engineers can evaluate whether a tower structure can support the additional burden of the new equipment or if an upgrade is needed, which enables the company's tenants to more accurately assess potential sites before making an installation decision. The company's structural analysis capabilities enable the company to provide higher quality service to their existing tenants by reducing the time required to achieve operational readiness, while also providing opportunities to offer structural analysis services to third parties.
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