SBA Communications reported another quarter where it saw plenty of activity from carriers, upping its expectations for 2021 and setting the stage for 2022 as 5G network deployments ramp.

“U.S. wireless carrier activity continued at materially higher levels compared to the beginning of the year,” said SBA President and CEO Jeffrey Stoops in a statement. “Domestically, we produced record services revenue, surpassing our second quarter record, and our leasing and services backlogs reached new multi-year highs at the quarter-end.”

The statement is very similar to what Stoops said in reporting Q2 results.

RELATED: SBA: Dish, Verizon very busy in Q2

SBA is coming off a second quarter where it cited the highest quarterly level of lease signups in the U.S. since 2014, with a particularly busy period from Verizon and Dish Network. Other tower companies like Crown Castle are also riding the start of a deployment wave. Crown Castle expects in a 20% bump in core leasing next year above an already high 2021.

On the quarterly earnings call, Stoops said each major customer among the big four was busy in Q3, while categorizing AT&T as “steady” compared to last quarter.   

“Verizon beginning their C-band deployments, T-Mobile continuing their ubiquitous deployment of their 600 MHz and 2.5 GHz spectrum, Dish continuing their torrid pace from the second quarter signing up new agreements to facilitate the build out of their brand new nationwide 5G network, and AT&T remaining steady,” Stoops said, according to a transcript. He believes AT&T’s activity levels “will ramp up as we move into next year.”

RELATED: Verizon readies for C-band deployments with Crown Castle, SBA deals

In a press release Stoops said that some revenue from the Q3 tower leasing activity is expected to show up on the balance sheet before the end of the year, helping SBA to increase 2021 outlook, but the lion’s share will be recognized in 2022.

In Q3 SBA revenue totaled $589.3 million for 12.7% growth year over year. U.S. site leasing revenue accounted for $426.8 million while international contributed $108.7 million. Adjusted funds from operations (AFFO) was $302.5 million, and AFFO per share rose 13.9% versus Q3 2020 to $2.71

For the full year 2021 SBA now expects higher site leasing and development revenue, tower cash flow, adjusted EBITDA, AFFO and AFFO per share.

In the third quarter, 55% of SBA’s U.S. bookings, or putting revenue under contract, came from new leases while 45% were amendments.

Stoops said that carriers are particularly targeting upgrades on macro networks for their 5G buildouts.

RELATED: Dish inks tower deal with SBA for 5G network

“Based on our backlogs and conversations with our customers, we expect elevated domestic leasing activities to continue through 2022 and perhaps beyond,” Stoops continued. Ongoing and future spectrum auctions in the U.S. and certain international markets are further boosting optimism for higher leasing levels from carriers “for the foreseeable future.”

The FCC is currently conducting its third mid-band spectrum auction for 5G, which stood at $21.5 billion in gross proceeds as of Tuesday afternoon. It offers licenses in the 3.45 GHz band and is the most recent chance for carriers to secure mid-band frequencies that deliver a favorable mix of both coverage and capacity for wireless service.  

RELATED: 3.45 GHz spectrum auction keeps chugging with price above $21B

Specific to 3.45 GHz, Stoops said the spectrum will require new radios meaning incremental activity – and without clearing schedules like those attached to C-band to remove current satellite operations, doesn’t “see any reason why we wouldn’t start to see some activity in the second half.”  

Sprint churn pushed to 2022

Wells Fargo analysts noted that the impressive third quarter where SBA saw 3.6% organic growth is amid the backdrop of T-Mobile integrating Sprint sites and AT&T not yet leasing as actively as the firm expects.

It also sets the company up for around 4% growth into 2022, they said, as it starts to see greater impacts from Sprint churn.

“We believe AT&T will start to momentum in the short to medium term, which should help offset part of the expected Sprint churn,” wrote Wells Fargo analysts led by Eric Luebchow. 

RELATED: AT&T drums C-band progress, tees up 5G+ branding

The expectations for leasing also benefitted from some of SBA’s Sprint churn being pushed into next year, the firm said.

“U.S. carrier activity continues to exceed management’s expectations, which has driven leasing bookings to all-time highs, and some Sprint churn originally expected in 2021 has been bumped into 2022,” Wells Fargo analysts wrote in a November 2 note to investors.

SBA expects a $7 million impact from Sprint churn in 2021, increasing to around $35 million in 2022. For 2023 and 2024 the company estimates a $10 million to $20 million range each year, with the biggest hits in 2025 and 2026 of around $45 million each.  

Fellow tower company American Tower is expecting to feel the majority of its own Sprint churn starting in the fourth quarter.

As to the shift in timing for turning off some Sprint sites, SBA CFO Brendan Cavanagh said he thinks the decision by T-Mobile to delay the shutdown of Sprint’s CDMA network by three months, “probably is a factor in it.”

RELATED: Dish says Neville Ray testified 14 times about CDMA timeline

In terms of where Sprint is coming off sites, Stoops said it’s a mix of co-located sites where T-Mobile and legacy Sprint both have a presence as well as when they have other sites that are located nearby.

“We don’t have total vision on what they’re [T-Mobile] doing with other neighboring sites,” Stoops said. “But I would say it’s a mix of the two. But obviously, the greatest focus as it relates to our portfolio will be the sites where they have direct overlap.

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