American Tower expecting to build close to 300 sites in LatAm in 2023

American Tower Corporation (ATC) forecasts that it will deploy close to 300 telecom towers across Latin America this year, of a total of 4,000 it plans to build worldwide during 2023.

“That's the expectation. The biggest chunks really come from Africa and India in the range of 1,600, 1,700 sites each in those areas. In Europe, we're going to drive just over 400. In Latin America, maybe just under 300 sites,” CFO Rod Smith told investors in a results call.

The biggest tower company in Latin America ended 2022 with 328 new sites built in the region, well below its initial projection of 500 for the year, as weaker-than-expected demand and churn related to the consolidation of regional telcos hit the figure.

In 2021, ATC built 628 towers throughout the region, up from 403 in 2020.

ATC’s Latin American portfolio totaled 48,548 owned towers at end-2022, down slightly from 48,892 at the end of 2021, between decommissioning and new builds. The tower count comprises the markets of Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay and Peru.

Of the firm's total portfolio, there were 22,808 towers in Brazil at year-end. The country remains the third largest market for ATC in number of properties after the US and India. 

In Latin America, Brazil was followed by Mexico (9,838 sites), Colombia (4,980), Peru (4,399), Chile (3,866), Paraguay (1,447), Costa Rica (702), and Argentina (508).

Worldwide, ATC reported property revenues of US$10.4bn for the year and US$2.64bn for the fourth quarter, up 14.9% and 11.2%, respectively. Total revenues reached US$10.7bn for 2022 and US$2.70bn for 4Q22.

The region contributed US$427mn of the group's revenues in Q4, up from US$372mn in the same quarter of 2021, and US$1.69bn in full-year 2022, up from US$1.45bn in 2021.

“Our international property revenue grew by nearly 13%. International organic tenant billings growth was 6.6%, led by Europe at 8.4% and followed by Latin America at 7.9%, Africa at 7.7%, and APAC [Asia-Pacific] at 2.6%,” Smith said.

GLOOMY OUTLOOK

Despite the relatively good revenue performance, Latin America offers a gloomy growth outlook for ATC in the coming years due to the churn impact related to the termination of contracts and decommissioning of towers thanks to the consolidation of telecom operators. 

The biggest churn rates are expected to be in Mexico and Brazil. 

Telefónica is due to have the biggest impact, since the Spanish group is now using AT&T’s telecom infrastructure in Mexico rather than its own.

As a result, American Tower is projecting a churn rate of 8% for the region this year. Organic growth in tenant billings in the region is expected to be around 2%.

“Growth in Latin America will be moderated by churn headwinds associated with a continuation of Telefónica churn in Mexico and Oi churn in Brazil, where we'll see some staggered impacts over the next several years,” warned Smith.

The company expects to receive over US$130mn in settlement payments, comprising the periods of 2022 and 2023, related to the termination of tower leasing contracts from its customer telcos. 

“Similar to last year, we do expect to receive some settlement payments from Telefónica over the course of the year, which will be captured outside of the organic tenant billings growth metric. We've assumed approximately US$50mn in 2023 payments compared to the over US$80mn we received from Telefónica Mexico and Nextel Brasil in 2022,” said the executive.

ATC’s main clients in the region are Telefónica, with tower contracts in all the markets except Paraguay; AT&T (contracts in Argentina, Brazil, Colombia and Mexico); América Móvil (all markets); and Telecom Italia and Orange.

Taking into account Telefónica's operations in Spain and Germany, the Spanish group represents around 9% of American Tower's total property revenue.

“When it comes to the churn pieces in our guide specifically, when you look here in 2023, Telefónica is really the biggest piece. And I don't want to get too detailed in terms of customers,” said the CFO.

“But I think everyone knows what's happening in Mexico with Telefónica and joining AT&T as an MVNO there. So that's driving a fair amount of the churn. We're also seeing some churn remaining from América Móvil really through the Nextel assets that were purchased down in Brazil. Those are the two things other than smaller churn, smaller customers throughout the region.”

As for Brazil’s Oi, whose mobile operation was acquired by Telefônica Brasil, Claro and TIM, the biggest churn impact is expected to come over time.

Oi represents revenues of about US$100mn for American Tower, and most of the contracts with the telco are longer-term.

“It [Oi] represents about 1% of our overall business. About one third of that is tied in with their landline business, and we fully expect that the landline business of Oi will keep those sites over time. The other two thirds, we have, on average, five to six years remaining on the length there. Oi is not a significant impact today, but that may start unfolding this year and into next as we negotiate with the three players who kind of carved up Oi,” said Smith.