By "Building Better Wireless", SBA generates revenue from two primary businesses - site leasing and site development services. In their site leasing business, they lease antenna space on multi-tenant towers and other structures to a variety of wireless service providers under long-term lease contracts. Their site development business offers wireless service providers and operators assistance in developing their own networks through site acquisition, zoning, construction and equipment installation.
SBA's principal operations are in the US but they also own and operate towers in Brazil, Canada, Costa Rica, Ecuador, El Salvador, Guatemala, Nicaragua and Panama. Expansion is driven by their (1) their consumers’ increased use of mobile applications, particularly data, (2) Wireless service providers seeking to increase the quality and coverage of their networks, and (3) Spectrum auctions, which result in new market entrants as well as additional network deployments from existing wireless service providers.
The company's size, experience, capabilities and resources make SBA a preferred partner for wireless service providers both domestically and internationally.
SBA Communications Corporation owns and operates wireless communications tower structures, rooftops, and other structures that support antennas used for wireless communications in the United States and its territories, South America, Central America, and Canada. It operates through two segments, Site Leasing and Site Development. The company leases antenna space to wireless service providers on towers that it owns or operates; and manages rooftop and tower sites for property owners under various contractual arrangements. As of December 31, 2015, it owned 25,465 towers; and managed or leased approximately 5,500 actual or potential towers. The company also provides a range of site development services, including network pre-design; site audits; identification of potential locations for towers and antennas; support in buying or leasing of the location; assistance in obtaining zoning approvals and permits; tower and related site construction; antenna installation; and radio equipment installation, commissioning, and maintenance. SBA Communications Corporation was founded in 1989 and is headquartered in Boca Raton, Florida.
(Summary) (Company) (Chart)
21 August 2016
1yr Target $129.07
Payout Ratio 0.00%
1yr Cap Gain 14.00%
1yr Tot Return 14.00%
EPS (ttm) $-0.30
EPS next yr $1.23
Forward P/E 92.34
EPS next 5yr 17.00%
1yr Price Support $20.91
Market Cap $14.09 Bil
Revenues $1.62 Bil
Earnings $-38.60 Mil
Profit Margin ---
Quick Ratio 0.40
Current Ratio 0.40
1yr RevGR 7.33%
3yr RevGR 19.52%
5yr RevGR 21.21%
1yr EarnGR ---
3yr EarnGR ---
5yr EarnGR ---
1yr DivGR ---
3yr DivGR ---
5yr DivGR ---
SBA Communications is a leading independent owner and operator of wireless communications tower structures, rooftops and other structures that support antennas used for wireless communications, which are collectively referred to as “towers” or “sites.” Their principal operations are in the US but they own and operate towers in South America, Central America, and Canada . Their primary business is site leasing which contributed 96.8% of the total operating profit for the year ended December 31, 2015 . This is composed of (1) leasing antenna space to wireless service providers on towers that they own or operate and (2) managing rooftop and tower sites for property owners under various contractual arrangements. As of December 31, 2015, the company owned 25,465 towers. They also manage or lease approximately 5,500 additional towers. Their other business line is their site development business where they other assist wireless service providers in developing and maintaining their own wireless service networks.
Site Leasing Services
SBA's primary focus is the leasing of antenna space on their multi-tenant towers to a variety of wireless service providers under long-term lease contracts in the US, Canada, Central America, and South America. The company receives site leasing revenues primarily from wireless service providers, including AT&T, Sprint, T-Mobile, Verizon Wireless, Oi S.A., Telefonica, Claro, and Digicel. Wireless service providers enter into tenant leases which relates to the lease or use of space at an individual site. The site leasing business generates substantially all of the company's total segment operating profit, representing 96.2% or more of the company's total segment operating profit for the past three years. Their site leasing business is classified into two reportable segments, domestic site leasing and international site leasing.
Domestic Site Leasing. As of December 31, 2015, SBA had 15,778 sites in the US. For the year ended December 31, 2015, the company generated 83.5% of their total site leasing revenue from these sites. The company received domestic site leasing revenues primarily from AT&T, Sprint, Verizon Wireless, and T-Mobile. In the US, wireless service providers typically enter into tenant leases which relate to the lease or use of space at an individual tower. Tenant leases in the US are generally for an initial term of five to ten years with five 5-year renewal periods at the option of the tenant. These tenant leases typically contain specific rent escalators, which typically average 3- 4% per year , for both the initial and renewal option periods . Our ground leases in the US are generally for an initial term of five years or more with multiple renewal terms of 5 year periods, at our option, and provide for rent escalators which typically average 2 - 3 % annually.
International Site Leasing. As of December 31, 2015, the company owned 9,687 towers in international markets, including Brazil, Canada, Costa Rica, Ecuador, El Salvador, Guatemala, Nicaragua, and Panama. The company receives international site leasing revenues primarily from Oi S.A., Telefonica, Claro, Digicel, and TIM. Their operations in these countries are solely in the site leasing business but the company expects to continue to expand operations through new builds and acquisitions. Tenant leases in Canada typically have similar terms and conditions as those in the US. Tenant leases in the Central American and South American markets typically have an initial term of ten years with multiple five year renewal periods. In Central America contracts have similar rent escalators to leases in the US and Canada while leases in South America typically escalate in accordance with a standard cost of living index. In Brazil, site leases are typically governed by master lease agreements, which provide for the material terms and conditions that will govern the terms of the use of the site. Site leases in South America typically provide for a fixed rental amount and a pass-through charge for the underlying ground lease rent. Ground leases in Canada, Central America and South America generally have similar terms and conditions as those in the US, except that the annual escalators in the South American ground leases are based on a cost of living index.
Domestic and International Expansion. SBA expands their tower portfolio, both domestically and internationally, through the acquisition of towers from third parties and through the construction of new towers. In their tower acquisition program, they pursue towers that meet or exceed internal guidelines regarding current and future potential returns. The majority of the international markets typically have less mature wireless networks with limited wireline infrastructure and lower wireless data penetration rates than those in the US. Therefore the company's expansion in these markets is primarily driven by (1) wireless service providers seeking to increase the quality and coverage of their networks, (2) increased consumer mobile data traffic, such as media streaming, mobile apps and games, web browsing, and email , and (3) incremental spectrum auctions, which have resulted in new market entrants, as well as incremental voice and data network deployments. In the company's new build program, SBA constructs towers (1) in locations that a re strategically chosen or (2) under build-to-suit arrangements. Under build-to-suit arrangements, SBA builds towers for wireless service providers at locations that they have identified. Under these arrangements, SBA retains ownership of the tower structure and the exclusive right to co-locate additional tenants. When SBA constructs towers in locations chosen by the company, they utilize their knowledge of customers’ network requirements to identify locations where multiple wireless service providers need, or will need, to locate antennas to meet capacity or service demands. During 2016 , the company intends to build between 590 and 610 new tower structures, domestically and internationally.
Site Development Services
The company's site development business, which is conducted in the US only, is complementary to the company's site leasing business and provides SBA with the ability to keep in close contact with the wireless service providers who generate substantially all of the company's site leasing revenue and to capture ancillary revenues that are generated by site leasing activities, such as antenna and equipment installation. The company earns site development services revenues primarily from the full range of end to end services the company provides to wireless service providers or companies providing development or project management services to wireless service providers. Services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas; (4) support in buying or leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance.
The Company's Strategy
SBA's primary strategy is to continue to focus on expanding the site leasing business due to its attractive characteristics such as long-term contracts, built-in rent escalators, high operating margins, and low customer churn. The long-term and repetitive nature of the revenue stream of the site leasing business makes it less volatile than the site development business, which is more cyclical. By focusing on the site leasing business, the company believes that they can maintain a stable, recurring cash flow stream and reduce their exposure to cyclical changes in customer spending. Key elements of our strategy include:
Maximizing Use of Tower Capacity. SBA has constructed or acquired towers that accommodate multiple tenants and a majority of their towers are high capacity towers with significant capacity available for additional antennas. The company believes that an increased use of towers can be achieved at a low incremental cost. As of December 31, 2015, the company had an average of 1.8 tenants per tower structure.
Disciplined Growth of our Tower Portfolio. The company believes that tower operations are highly scalable and that they will be able to increase their tower portfolio without proportionately increasing selling, general, and administrative expenses. During 2016 the company intends to grow their tower portfolio domestically and internationally through tower acquisitions and the construction of new towers.
Capitalizing on our Scale and Management Experience. SBA is a large owner, operator and developer of towers, with substantial capital, human, and operating resources and have been developing towers for wireless service providers in the US since 1989 and owned and operated towers for ourselves since 1997. The company believes that their size, experience, capabilities, and resources make them a preferred partner for wireless service providers both in the US and internationally.
Controlling our Underlying Land Positions. SBA has purchased or leased the land that underlies their towers at commercially reasonable prices and that these will increase their margins, improve our cash flow from operations, and minimize exposure to increases in ground lease rents in the future. As of December 31, 2015 , approximately 73% of their tower structures were located on land that they own or control for more than 20 years. The average remaining life of those ground leases, including renewal options under our control, was 33 years. As of December 31, 2015, approximately 5.8% of our tower structures have ground leases maturing in the next 10 years.
Using our Local Presence to Build Strong Relationships with Major Wireless Service Providers. Given the nature of towers as location-specific communications facilities, all that the company does is best done locally. As a result, the company has a broad field organization that allows the company to develop and capitalize on experience, expertise and relationships in each of their local markets which in turn enhances customer relationships.
The three communication tower companies recently viewed demonstrate what a critical and powerful industry this really is. There's obviously a lot of money to be made here in any of the three companies and a more thorough and current review should be made by any individual thinking about investing in this industry. At this point in time I believe that American Tower is probably the better of the three companies but that may be splitting hairs and may drastically change in the months and years ahead.
I really believe that the internet of the future is a wireless internet not tethered to a specific location. The idea that an individual has to find a connection to the internet will come to an end as the internet will be everywhere wirelessly. But I also believe that the internet will be even more critical in the future and it will never be free. There will be plenty of money to be made and the tower companies will be a large part of that business.