通信塔REITs：新塔投产和第一季度业绩公布后投资者关注的领域

1、Equity Research Americas | United StatesTower REITsKey Takeaways from Connect (X); Investor Focus Areas Following Tower Initiation and 1Q 2020 ResultsTower REITs | Sector ReviewFollowing the release of our tower sector initiation Tower REITs: Riding the 5G Wave and yesterdays virtual Connect (X) con

2、ference, we summarize key takeaways from the conference and then highlight investor focus areas/feedback following our April 2020 sector initiation. Five Key Takeaways from Connect (X): (1) The FCCs plans to auction CBRS and C- Band are currently on schedule and will be an incremental benefit to Tow

3、erCos in 2021. Although CBRS and C-Band are towards the high-end of the mid-band spectrum, we anticipate the arrival of these spectrum bands to skew only slightly to small cell placement.(2) International 5G build-outs are using mid-band spectrum & the U.S. is likely to use mid-band as well. (3) Mas

4、sive MIMO 5G equipment is larger and heavier than 4G LTE equipment. Digital Bridge (the largest private TowerCo in the U.S.) said that Massive MIMO is so large and so heavy that it is installing larger frames to hold the antennas and using cranes to get them into position. This will result in more r

5、evenue from tower leasing activity for TowerCos, which we expect to appear primarily as amendment revenues. (4) The 5G cycle will likely be longer than the 4G LTE cycle, and will likely accelerate considerably when carriers gain visibility to 5G network monetization. (5) “Twilight tower” permitting

6、offers a tailwind to industry. Following the conference, we continue to see a beneficial sequence of dynamics lifting the tower industry higher as we highlighted in our primer before 1Q 2020 results, accounting for consolidation and 5G. TMUS-S/DISH Industry M&A Only Impacting Tower Industry 0.30% Pe

7、r Year: Following 1Q20 results, we updated our bull/base/bear case scenario analysis of the TMUS-S deal (including DISH plans) and its effects on the tower operators going forward; we left our new build, tenancy ratio, and tower decoms assumptions as is but rolled our base figures to account for 1Q

8、2020 results versus the prior 4Q 2019 figures. Our updated base case scenario (CS view) reflects an annual headwind of 0.3%/year over the next four years, a marginal impact to revenues when compared to the 3% annual fixed price escalators tower leases contain. Importantly, the analysis does not assu

9、me any amendment activity on cell sites added over the next four years, which likely presents some incremental upside to the overall forecasts, especially given the ramp of the U.S. 5G cycle. Understanding AMT & SBAC FX Headwinds; Not as Material as Perceived: One major focus area among investors ha

10、ve been the FX headwinds predominantly driven by a resilient USD and depreciating emerging market currencies (BZL mainly). FX headwinds are not operational impacts for AMT and SBAC because the cash flow generated in each respective international market is re-invested in that respective foreign marke

11、t, consistently, neutralizing the translational impacts of FX headwinds. Therefore, despite short-term FX headwinds/fluctuations, TowerCos will continue to invest in international market tower assets given wireless market growth outside of the U.S. and international tower asset ROICs that continue t

12、o exceed that of U.S. towers. Clarifying TowerCo M&A Roadmaps and Model Projections: A recurring question we get from investors since our tower launch has been in relation to M&A activity and their impacts to our current-year and forward-looking tower projections. In our coverage, AMTResearch Analys

13、tsSami Badri212 538 1727 HYPERLINK mailto:ahmedsami.badri ahmedsami.badriDouglas Mitchelson212 325 7542 HYPERLINK mailto:doug.mitchelson doug.mitchelsonGeorge Engroff212 325 2289 HYPERLINK mailto:george.engroff george.engroffLauren Lucas212 325 4310 HYPERLINK mailto:lauren.lucas lauren.lucasDISCLOSU

14、RE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware t

15、hat the Firm may have a conflict of interest that couldand SBAC are likely to remain the most acquisitive and our forward-looking estimates do not factor-in unannounced M&A even though there remains to be excess cash flow after accounting for capital expenditures, dividends, and share repurchases in

16、 our model forecasts. Additionally, when considering balance sheet leverage, AMT at 4.2x and SBAC at 6.6x by 4Q 2020 are both below their target leverage levels that both management teams have guided to. We see solid opportunity and balance sheet capacity for both AMT/SBAC to remain acquisitive thro

17、ugh COVID-19 and volatile macro-economic dynamics, potentially increasing their AFFOS growth by the end of FY20 and lifting FY21 estimates depending on deal closure speeds. As far as where AMT/SBAC seek acquisition opportunities, Africa and Latin America (LatAm) represent very attractive wireless ma

18、rkets, in our view, that remain in telecom standard technologies 2 generations behind the U.S. (at 2G and 3G, now adopting 4G LTE whereas U.S. has commenced the 5G cycle), with growing populations, inadequate wireline infrastructure, and solid carrier competition. We expect these two regions to dema

19、nd the majority of M&A attention going forward, especially given that assets in these regions appear to have robust ROICs relative to the multiples the assets trade for. US TowerCo Multiple Premium Warranted Versus International TowerCos: Another frequently asked question we receive is why U.S. Towe

20、rCos AMT, SBAC, and CCI trade at such significant premiums to international tower peers. To illustrate this premium we compare US TowerCos trading at an average of 23.7x FY21 EBITDA and International peers CLNX, INW, and RWAY trade at 13.0 x FY21 EBITDA, a material difference for mature businesses t

21、hat are comparable from a business model perspective. As we outline the key differences we arrive to five key reasons why the premium is warranted for US TowerCos: (1) US TowerCos are REITs US TowerCos payout high levels of earnings as dividends with extensive operational history and disclosures, al

22、lowing investors to granularly assess performance over time compared to international peers with limited comparable metrics; (2) Liquidity & Balance Sheet US TowerCos have strong access to liquidity to match international revenues with international costs, mitigating FX headwinds by 60%, and continu

23、e to have balance sheet capacity for further leverage for either Capex deployment or M&A; (3) Revenue Diversification US TowerCos AMT/SBAC are global and indexed to both developed and emerging markets, capturing telecom connectivity cycles in various stages, a feat not many international tower opera

24、tors can match and US TowerCos have significant exposure to US telecoms that come with progressively increasing tenancy and fixed price escalation in USD denominations with little room for lease negotiations for macro cell sites; (4) Execution US TowerCos have a proven track record of business execu

25、tion in both domestic and international markets through multiple economic downturns and upturns, a testament to their ability to navigate the current COVID-19 dynamics well; and (5) Customer Credit & Visibility finally we would point investors to customer credit where the majority of US TowerCo cred

26、it (and their respective revenues) are not at risk largely due to the US carrier business being robust whereas the same cannot be said for international operations where there is scope for issues in India (bankruptcy risks of carriers), Africa (various), LatAm (carrier consolidation impacting tenanc

27、y), and Europe (network/spectrum sharing, limiting tenancy growth). It is for these reasons we continue to favor US TowerCos and see the premium multiples as warranted and expect multiples to keep expanding as tenancy increases, expanding corporate level ROICs. Our Ratings Remain AMT/SBAC Outperform

28、: We remain Outperform on AMT and SBAC due to (1) their global macro tower businesses, which are set to benefit from multiple telecom standard upgrades within high growth developing markets. We view this reduces risk by spreading wireless growth exposure out across geographies and allows the TowerCo

29、s to efficiently disperse capital across the markets they find most attractive, price and growth-wise. (2) Their AFFO payout ratios remain well below REIT peers, with significant room for expansion. Both companies are guiding to 20% dividend growth per year for FY20/21, and come with the optionality

30、 to increase their payout ratios which stand below 60% (due to international operations reducing payout cash flows), whereas many REITs pay out 80-100% of AFFO in dividends. (3) We expect their average tower tenancy to improve following the closure of TMUS-S, especially given industry commentary of

31、mid- band spectrum being used in early 5G build-outs. We view that a telecom carrier landscape with three very strong competitors and one emerging contender, should spur 5G investment and be broad tailwind for the US TowerCos, benefiting AMT/SBAC.Five Takeaways from Connect (X)We attended Connect (X

32、) All Access virtually, and heard panels from industry TowerCo executives, FCC commissioners, and TMUS-Ss Neville Ray. Our five key takeaways following the closing of TMUS-S and from other presentations at the conference are as follows:The FCCs Plans to Auction CBRS and C-Band are Currently on Sched

33、ule and will be an Incremental Benefit to TowerCos in 2021;International 5G Build-Outs are Using Mid-Band & U.S. is Likely to Primarily Use Mid- Band as well;Massive MIMO 5G Equipment is Larger and Heavier Than 4G LTE Equipment;The 5G Build Cycle will be Longer than the 4G LTE Cycle, and will Accele

34、rate Considerably When Carriers Gain Visibility to 5G Network Monetization;Twilight Towers Permitting Offers a Tailwind for Potential Decommissioned Tower Assets.CBRS & C-Band Auctions on Schedule (vs. April 20)The Citizens Broadband Radio Service (CBRS) band is a low-powered, mid-band spectrum at 3

35、.5GHz to 3.7GHz, previously operated by the US Navy for military uses. The Federal Communications Commission (FCC) has designated the spectrum for sharing among three groups of users: incumbent users, priority licensees and generally authorized, which is unlicensed. Priority licenses will be auction

36、ed off in July 2020 (pending no further COVID- related delays) and will allow licensees to use the band in particular U.S. counties so long as they dont interfere with the incumbents (satellite ground stations and the U.S. Navy) and tolerate interference from the incumbents. Generally authorized acc

37、ess gives users the right to use the band as long as they dont interfere with the other two categories of users.The C-Band refers to mid-band spectrum assets. This highly reliable mid-band spectrum is currently owned and operated by satellite companies that deliver video programming to cable provide

38、rs, but is set to be released to the cellular industry, and includes 500 MHz of spectrum between 3.7 and 4.2 GHz. The FCC plans to auction (Dec-2020) 280 MHz of the block of spectrum while preserving about 200 MHz that will continue to be used for TV programming. See Figure 1 below for spectrum char

39、acteristics.Figure 1: Spectrum Considerations and Characteristics Mid-Band Based 5G Deployments to Become More Important Due to Their More Favorable Propagation Characteristics and Speed of DeploymentSource: Credit Suisse Research, AMT, AV&Co. Research & AnalysisThe benefit of CBRS or C-band, compar

40、ed to high band spectrum, like mmWave, can be understood through the economic and technical benefits that they provide. Economically, carriers can overlay mid-band on top of existing macro cell towers or small-cell grids without needing as many new cell sites, as mmWave would require. Technically, t

41、hey are in a range of spectrum with fewer challenging propagation conditions than mmWave. This approach reinforces transmission in a non-line-of-sight environment and facilitates indoor penetration on a scale like lower-frequency bands.Mid-Band is the “Sweet-spot”We expect carriers to utilize these

42、spectrum bands in their 5G plans given that they are in a “sweet-spot” for coverage and capacity (see Figure 1). CBRS and C-Band, like other mid- bands, allow 5G to bring faster speeds, but do so without the extreme capital intensity and technical headaches of mmWave. See Figure 2 below for major gl

43、obal telecom carrier 5G deployment outlooks.Figure 2: Global 5G Deployment Outlook We Expect U.S. Carriers to Begin to Line Up with the International Global Carriers, Utilizing More 3.5GHz Spectrum for 5G, and Mid-Band More Broadly Given Less Densely Populated DemographicsSource: Credit Suisse Resea

44、rch, AMT, Fierce Telecom, Reuters, Telegeography, RCN Wireless, Venturebeast, Company Press Releases, AV&Co. Research & AnalysisWhat does this mean for Tower Operators?Connect (X) Panelist, Niklas Heuveldop (President and CEO, Ericsson North America), noted “we are optimistic about the development o

45、f the CBRS band, including development by mobile network operators, wireless internet service providers, cable companies, enterprises, and neutral host entities. Private LTE applications are expected to be seen in health care, transportation, manufacturing, smart venues, smart cities, and the oil an

46、d gas industries.” Alex Gellman, CEO of Vertical Bridge added “The plans and discussions I have seen around in-building are focused on CBRS. There is little talk about 5G in-building right now”, which highlights the more near- term potential for CBRS.While CBRS and C-Band possess propagation charact

47、eristics that are favorable for small cell deployment, they are still in the mid-band and can be utilized on more traditional tower structures. We expect the mid-band spectrums to provide new tower leases and amendment revenues for small cells and macro towers, alike, benefitting all three tower ope

48、rators, with CCI potentially capturing a bit more value. Although CBRS and C-Band are towards the high-end of the mid-band spectrum, we do not anticipate the arrival of these spectrum bands to skew heavily to small cell placement, as 3-4GHz frequencies have drastically better propagation properties

49、compared to high-band (24GHz+). All in, we view that CBRS and C-Band should be a medium-term tailwind to TowerCo revenues (post-auctions), but will not be game-changers for the industry, nor will they provide an outsized benefit to any one TowerCo, as we believe CCI may see only slightly more value

50、added from the spectrums.5G is Likely to be Built Using Primarily Mid-Band SpectrumAs we mentioned earlier in the CBRS & C-Band section, mid-band spectrum is increasingly important to 5G build-outs. Figure 1 earlier highlighted that mid-band has a healthy balance of capacity, while also having solid

51、 propagation characteristics. High-band spectrum, such as mmWave is abundant and can support incredible speeds, however, it also requires mobile network carriers to outlay significant capex, well above and beyond anything they have ever spent, due to the small geographic radius a mmWave small cell c

52、overs. See Figure 3 as an example of the coverage area provided by small cells and their various forms.Figure 3: Many Small Cells Are Needed to Replicate the Coverage Area of a Single Macro TowerSource: Credit Suisse Research, AMT, AV&Co. Research & AnalysisTMUS: 5G Nationwide Coverage by End of 202

53、0TMUS has stated a goal of nationwide 5G coverage by the end of 2020, likely in time for the release of the first 5G iPhone (expected in September/October 2020). TMUS has noted it intends to use primarily mid-band spectrum in its 5G network, with high-band being used to supplement capacity in dense

54、metro areas. When discussing its 5G build-out, TMUS mgmt. continues to reference its ambition to get to 85,000 macro sites across the U.S. We find it pertinent to remind investors that the national carriers are in a race for 5G coverage and we believe that if mid-band allows TMUS to achieve nationwi

55、de 5G coverage before AT&T and Verizon, then the other carriers will likely attempt to catch-up utilizing any low or mid-band spectrum that they can as those can cover more area and assist in accelerating coverage (catching up). At Connect (X), Niklas Heuveldop noted “30/36 countries decided to laun

56、ch 5G on mid-band, the primary reason is speed of deployment, leveraging existing sites and the balanced coverage/capacity that mid-band offers” and added “the U.S. has to catch-up” which aligns with our expectations of a primary mid-band 5G build-out. We expect small cells to play a much larger rol

57、e with 5G than they ever have before, especially in dense urban areas, but we believe that mid-band and high-band 5G speeds are fairly comparable, while mid-band is less capex intensive and significantly more efficient from a timeliness perspective.Massive MIMO 5G Equipment is Truly Massive, TowerCo

58、 Revenues Should BenefitTowerCo rental charges to carriers and customers are typically based on property location, leased vertical square footage on the tower, and weight placed on tower from transmission equipment and backhaul solutions. Throughout industry discussions, 5G equipment weight often is

59、 a key topic when attempting to understand whether 5G represents a robust incremental revenue opportunity for TowerCos. Massive MIMO, rightfully, is a central piece of these discussions.What is Massive MIMO and Why Deploy it?Massive MIMO technology can be applied to LTE and 5G. Basically, Massive MI

60、MO replaces a handful of antennas on a cell site with dozens or hundreds. Regular MIMO is typically viewed as 2x2 or 4x4 antennas, whereas Massive MIMO is generally 16x16 or 64x64 antennas (although 8x8 is the lowest antenna count to be considered Massive MIMO). For end users of a wireless network,