American Tower rules out datacenter investments in Latin America

Unlike some of its peers, US telecoms tower group American Tower Corporation (ATC) is not considering entering the Latin American datacenter market – at least not in the foreseeable future.

According to CEO Tom Bartlett, despite all the “noise” about buying datacenters outside of the United States, that is not what the company is looking at.

“With regards to M&A on the datacenter side, we are very focused on developing the US market,” Bartlett told analysts and investors in an earnings conference.

“The US is our chessboard as we speak, relative to our datacenter activity.”

Last December, ATC completed a US$10.1bn deal to acquire 25 datacenters, 21 cloud on-ramps and over 32,000 interconnections in eight major US markets from CoreSite.

In August, the company closed a US$2.5bn Stonepeak investment in the US datacenter business, while securing an additional US$570mn funding from Stonepeak.

The original investment gave Stonepeak around 23% of CoreSite. With the additional funding, its stake is expected to reach 29%.

According to Bartlett, the US datacenter business is going well and over 20% of ATC’s datacenter development under construction is now pre-leased.

“Our tower portfolio, coupled with our US datacenter business, represents a distributed portfolio of real estate with accessibility to robustly interconnected core network and native access to cloud on rent. We believe the combination of these platforms will be critical as data processing extends from the core to the edge,” he said.

In Latin America, other major real estate infra groups or funds operating in the tower segment are adding or considering adding datacenters or edge datacenters to their portfolios. 

That is the case with DigitalBridge, IHS Towers and Phoenix Tower International, for instance.

ATC, however, seems to be focused on its core cellular tower business and, in some LatAm markets, fiber optics.

“In Latin America, we are increasing our organic growth expectations to greater than 7%, up modestly from approximately 7% in our prior guidance, reflecting a continuation of the CPI-linked escalation benefits in the region,” said CFO Rod Smith.

Escalation, or escalator, is often a clause in tower lease agreements that ensures contracts keep pace with inflation.

Yet, ATC is expecting heightened levels of churn over the next 12-18 months in the region as telcos’ consolidation advances in some markets, particularly Brazil and Mexico, Bartlett said.

Most immediately, ATC sees churn rates in Latin America going from about 5% in Q3 to over 8% in Q4, according to Smith.

As part of this process, the company is also seeing accelerated decommissioning-related settlements in the region, which it expects to total approximately US$85mn for the full year.

DEPLOYMENTS

Worldwide, American Tower upheld its construction guidance of approximately 6,500 new sites this year. 

The company built 1,578 sites globally in Q3, 68 of which were in Latin America. In the same quarter last year, new builds in LatAm had been 202.

Latin America is the second main geography for ATC after the US and Canada, having accounted for 16.1% of Q3's total property revenue. 

Total revenue in the region stood at US$420mn in the quarter, up from US$391mn in the same period 2021. January-September LatAm sales amounted to US$1.27bn, compared to US$1.09bn a year earlier.

Of its Latin America portfolio of 45,558 owned towers, 20,643 were in Brazil, down from 22,839 at end-June. 

By number of towers, Brazil is the third largest market for ATC after the US and India.

The others in Latin America were in Mexico (9,627, down from 10,027), Colombia (4,977, down from 4,982), Peru (3,938, down from 4,379), Chile (3,738, down from 3,875), Paraguay (1,445, flat) Costa Rica (695, down from 697) and Argentina (495, down from 503).

ATC also reported a further 2,688 operated towers in Latin America, of which 2,052 were in Brazil. Operated towers are held under long-term finance leases, including those subject to purchase options.

Finally, the group said it had 371 owned distributed antenna systems (DAS) in the region as of end-September, of which 138 were in Chile, 121 in Brazil and 92 in Mexico.

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