On Nov 14, American Tower Corporation (AMT - Free Report) was upgraded by a notch to a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenue from Wireless Operators
Wireless operators have been actively participating in the FCC's spectrum auction (600 Mhz) to drive investments in 5G networks. Notably, Verizon Communications Inc. (VZ - Free Report) plans to launch 5G network next year while carriers like AT&T Inc. (T - Free Report) and T-Mobile US Inc. (TMUS - Free Report) have hinted at a launch before 2020. We believe that increased investment in 5G will boost demand for tower and cell sites of American Towers, thereby driving its top line in the days ahead.
AmericanTower has been specifically focusing on India. Last year, the company acquired a controlling interest in Viom Networks Ltd. which increased the tower count in India. The acquisition will help build stronger ties with mobile network operators such as Airtel, Vodafone, Idea, Tata, Reliance and Aircel. Additionally, American Tower announced a joint venture called ATC Europe with Dutch Pension Fund manager PGGM. The venture will focus on the growth opportunities of telecom real estate in Europe. With the advent of new technologies, especially 5G and Internet of Things (IoT), Europe has drawn the attention of American Tower as its mature market offers high margins.
A Word of Caution
Customer concentration is very high for American Tower and the top four customers account for majority of the revenues. Any loss or consolidation among these wireless carriers will have a significant material impact on the company’s top line.
Threat from Alternative Technologies
A large number of carriers are experimenting with alternative technologies like Voice Over WiFi (VoWiFi). The technology allows users to make and receive calls on Wi-Fi networks as they would on standard cellular networks. Such a feature is useful in areas with strong Wi-Fi but low cellular signal strength. Sprint also plans to use microwave technology instead of the traditional tower backhaul system to reduce dependency and save operating costs. Additionally, AT&T announced its project AirGig that aims to deploy 5G Internet through existing power lines and towers.
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