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SBA Communications optimistic on Brazilian business environment under Lula

Bnamericas Published: Wednesday, November 09, 2022
SBA Communications optimistic on Brazilian business environment under Lula

Florida-based SBA Communications, the second largest telecoms tower company operating in Latin America, does not expect any significant policy changes under the administration of Brazilian president-elect Luiz Inácio Lula da Silva that could hurt its business.

“I think for us, it’s going to continue to be kind of a good business environment, without a lot of policy changes,” CEO Jeff Stoops told investors in an earnings call. 

“We all know that Lula is left of Bolsonaro, but he has gotten elected by a coalition of not only the more left, but also some of the more centrist population as well. At the same time, if Lula was elected President, the congress actually went more to the right. So, you’re going to have a classic draw between the president and between congress, and congress has a lot of power in Brazil,” he said.

As of September 30, SBA owned or operated 36,519 sites across 16 markets in the US, South America, Central America, Canada, South Africa, the Philippines and Tanzania. 

Of that total, approximately 30% (~ 10,900) were in Brazil, making it SBA’s biggest market outside the US.

For the nine months ended September 30, 2022 site leasing revenue in Brazil was US$210mn, up from US$175mn in the same period of 2021.

In October, SBA wrapped up its previously announced acquisition of 2,632 sites from Grupo TorreSur (GTS) in Brazil for approximately US$725mn in cash. These acquired GTS sites have 2.1 tenants (customers) per tower.

This was SBA’s second acquisition of towers from GTS and is expected to ramp up SBA's portfolio in the country by over 25% to more than 12,500 sites. 

“We believe there are opportunities for growth, particularly with recent 5G spectrum auctions in Brazil as a driver,” Stoops said about the GTS deal.

Earlier this year, SBA also acquired a datacenter in Brazil from local firm Matrix.

In Q3, SBA built 113 towers globally and bought 131 others for US$54.9mn. The company also spent US$9.1mn in the quarter to purchase land and extend lease terms. 

During the quarter, SBA also completed the acquisition of 1,445 sites from Airtel Tanzania for US$176mn, and purchased or is under contract to purchase 34 communication sites for US$28.5mn in cash, comprising different deals that are due to close by the end of 1Q23.

“Our third-quarter results were well ahead of our internal expectations and have allowed us to again increase our outlook for our full-year results,” CFO Brendan Cavanagh said in the call.

SBA is now targeting US$2.61bn-US$2.63bn in total revenues for full-year 2022, up by some US$23mn from its previous outlook, around US$2.32bn of which will come from site leasing. 

SBA is also targeting up to US$1.39bn in discretionary cash capex.

PERFORMANCE AND CHURN

Total SBA’s revenues in Q3 were US$676mn, up 14.6% year-on-year. Site leasing revenue in the quarter was US$587mn, of which US$450mn was in the US and US$138mn internationally.

SBA’s top three clients are US groups T-Mobile, AT&T Wireless and Verizon Wireless.

“International leasing activity was very good again, as we had our best quarter of the year in terms of new revenue signed up,” Cavanagh said.

“In Brazil, our largest international market, we had another very strong quarter. Same-tower organic growth in Brazil was 13.6% on a constant currency basis. As anticipated, international churn remained elevated in the quarter due primarily to carrier consolidations and Digicel’s previously announced exit from Panama,” added the CFO.

Digicel Panamá requested a voluntary liquidation of its concession in early April, after authorities approved the takeover of Cable & Wireless Panamá by Claro (América Móvil). Digicel claimed the move makes competition impossible.

With its “Panamexit”, Digicel turned all its focus to Caribbean and El Salvador.

Churn is expected to hurt SBA in Brazil as well. There, its long-standing major customer Oi sold its mobile operation and related assets – including antennas and tower contracts –to Telefônica Brasil, Claro and TIM

While these players are also SBA’s customers, they plan to decommission a high proportion of the sites taken over from Oi to avoid overlaps.

SBA anticipates churn of approximately US$20mn-30mn associated with the Oi acquisition, plus approximately US$3mn associated with the GTS sites.

“We have begun conversations with some of the carriers that are absorbing the Oi wireless business to discuss potential mutually beneficial and efficient arrangements around the integration of these networks,” said Stoops.

TIM CEO Alberto Griselli said on Tuesday that the company is already negotiating Oi's contracts and that it expects "frictionless" talks with the tower companies. TIM plans to shut down 4,700 Oi sites.

In September 2021, Oi alone accounted for 28.4% of SBA’s international site leasing revenues, while Telefónica (global) accounted for 14.7%, America Móvil 13.6% and TIM 7.3%. 

One year later, due to the Oi acquisition, these shares were 4.0%, 18.6%, 18.8% and 17.2%, respectively.

SBA’s Latin American operations and main offices in the region are in Brazil, Argentina, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Nicaragua, Panama and Peru.

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