American Tower Corp: International 5G Tower Stock Poised for Huge Growth

American Tower Stock Up 25% Since March

American Tower Corp (NYSE:AMT) is perhaps the best of the three U.S. 5G infrastructure real estate investment trusts (REITs). The company might be based in the U.S., but its recent international acquisitions leave it primed to benefit from the continually increasing demand for global mobile data.

Last December, American Tower entered the Canadian market through its agreement to purchase InSite Wireless Group. In January, the company announced that it was acquiring Telxius Towers, which has operations in multiple countries.

In spite of the coronavirus pandemic crippling the global economy in 2020, American Tower Corp reported strong results that year, with management saying it expects the company to extend its long track record of sustainable growth in 2021.

That doesn’t mean AMT stock has had an easy ride. Investors can be a fickle bunch. While American Tower stock is down four percent year-over-year, it has rallied 10% since the start of 2021 and 25% since the February/March 2021 sell-off.

For income investors, American Tower provides a two-percent dividend, which works out to $4.96 per share annually.

AMT Stock Overview

As a REIT, American Tower Corp owns and operates more than 180,000 cell towers throughout the U.S., Asia, Latin America, Europe, and the Middle East. It leases space on its towers to wireless service providers, which install equipment on the towers to support their wireless networks.

The company’s biggest market is also the most lucrative: the U.S., with more than 40,000 towers. Outside the U.S., American Tower has a big presence in India, Brazil, and Latin America.

American Tower’s biggest clients are AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), and T-Mobile US Inc (NASDAQ: TMUS). (Source: “Introduction to the Tower Industry and American Tower,” American Tower Corp, last accessed April 16, 2021.)

In March, American Tower announced that it had entered a long-term master lease agreement with DISH Network Corp (NASDAQ:DISH). (Source: “American Tower and DISH Announce Long-Term Master Lease Agreement,” American Tower Corp, March 15, 2021.)

Under the agreement, DISH may lease space on up to 20,000 American Tower communication sites. Cash payments from DISH Network Corp to American Tower will begin in 2022 and grow over time as DISH deploys its communications network.

Acquisition of InSite Wireless Group

In December 2020, American Tower closed on its $3.5-billion acquisition of InSite Wireless Group, which owns, operates, and manages approximately 3,000 communications sites, primarily in the U.S. and Canada. (Source: “American Tower Announces Agreement to Acquire InSite Wireless Group,” American Tower Corp, November 5, 2020.)

InSite’s portfolio includes more than 1,400 towers in the U.S., more than 200 owned towers in Canada, and roughly 70 distributed antenna system networks in the U.S. InSite Wireless Group also controls more than 600 land parcels under communications sites and approximately 400 rooftop sites.

In addition to marking American Tower’s foray into the Canadian 5G market, the acquisition is expected to enhance the company’s organic growth and cash flow trajectory as 5G deployments accelerate and densification initiatives move forward.

American Tower Corp expects the acquisition of InSite Wireless Group to generate approximately $150.0 million in property revenue and approximately $115.0 million in gross margin in 2021.

Agreement to Acquire Telxius Towers

In January, American Tower announced that it had entered definitive agreements with Telefónica, S.A. to acquire Telxius Towers. The $9.4-billion agreement includes 31,000 communications sites in Germany, Spain, Brazil, Chile, Peru, and Argentina. (Source: “American Tower Announces Telxius Towers Transaction,” American Tower Corp, January 13, 2021.)

Most of Telxius Towers’ sites are concentrated in Germany (12,500) and Spain (11,300). There are also about 7,000 sites in Latin America. American Tower said it expects to spend approximately $500.0 million to construct a pipeline of about 3,300 new sites in Germany and Brazil through 2025.

American Tower Corp expects the assets from Telxius Towers to generate approximately $775.0 million in property revenue, $410.0 million in gross margin, and approximately $390.0 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)—at current foreign exchange rates—in their first full year in its portfolio.

The transaction is expected to be immediately accretive to consolidated adjusted funds from operations (AFFO) per share, and it’s expected to close in multiple tranches, beginning in the second quarter of 2021.

Solid Q4 & Full-Year 2020 Results

American Tower announced that its revenue for the fourth quarter ended December 31, 2020 increased 10.3% year-over-year to $2.1 billion. The REIT’s property revenue was up 10.0%, at $2.1 billion (Source: “American Tower Corporation Reports Fourth Quarter and Full Year 2020 Financial Results,” American Tower Corp, February 25, 2021.)

Its fourth-quarter net income slipped 36.5% to $365.0 million, or $0.82 per share. American Tower’s adjusted EBITDA increased 13.0% to $1.3 billion. Its consolidated AFFO was up 8.9%, at $936.0 million.

The company’s full-year revenue increased 6.1% to $8.0 billion, with property revenue increasing 6.5% to $7.95 billion. Its full-year 2020 net income was down 11.7%, at $1.7 billion, or $3.79 per share. American Tower’s full-year adjusted EBITDA increased 8.7% to $5.1 billion and its consolidated AFFO advanced 7.6% to $3.8 billion.

Analyst Take

American Tower Corp is one of the world’s largest 5G infrastructure REITs. And it continues to get bigger and better.

The company put on a strong performance in 2020, driven by solid organic growth, acquisitions, and a record year of new site construction. Despite the pandemic, American Tower increased its dividend and maintained a strong balance sheet.

Moreover, the transformational acquisition of Telxius should help establish the company as a leader in Germany and Spain and continue its winning ways throughout the year.

All that adds up to good news for American Tower stock investors.