Credit: Image source: Getty Images.American Tower (NYSE: AMT) continued benefiting from the rapid rise of mobile data usage around the world in the second quarter. Wireless carriers in most countries where it operates kept locking up more space on its towers, which drove a healthy increase in revenue and even stronger cash flow growth. With mobile data usage expected to continue climbing, this trend should keep driving strong growth for the communications tower company in the coming years.
American Tower results: The raw numbers
Data source: American Tower.
Image source: Getty Images.
What happened with American Tower this quarter?
Solid organic growth in almost every market but India drove the quarter's results.
- Latin America led the way again as revenue jumped 10.8% from last year's second quarter to $318 million. Driving the segment's growth was a 12.4% increase in organic tenant billings due to strength in Mexico and Brazil.
- American Tower's U.S. segment also delivered solid results. Revenue grew 6.7% to $957 million, driven by a 7.4% increase in organic tenant billings. The company noted that it saw record levels of new business in the U.S. due to the "rapid adoption of unlimited data plans."
- Revenue in the Europe, Middle East, and Africa (EMEA) segment rose 4.4% year over year to $167 million thanks mainly to 6.8% organic tenant billings growth.
- American Tower's Asia segment, on the other hand, continues to struggle. While revenue did increase by 4.5% to $308 million, organic tenant billings declined 10.2%. The company's operations in India were the source of both growth and weakness during the quarter. American Tower has recently acquired about 20,000 tower sites in the country, which drove the increase in total revenue. However, the consolidation of mobile carriers in the country is having an impact on organic growth, because the combined entities don't currently need as much tower space.
What management had to say
CEO Jim Taiclet stated:
As Taiclet pointed out, American Tower is benefiting from increased data usage by mobile customers in the U.S., as that's driving wireless carriers to secure more space on its towers. The company doesn't see this trend ending soon because carriers are investing to expand their networks to serve existing customers.
Latin America has also been a source of strength, as it posted double-digit organic tenant billings growth in the second quarter due to healthy demand for tower space in Brazil and Mexico. The only issue right now is India. However, the company "fully expect[s] the reordered India mobile industry to invest significantly to bring 4G to its subscriber base once the carrier mergers that are underway are completed."
Looking forward
While Taiclet noted that the "the carrier consolidation process is progressing as we anticipated" in India, it's having an unfavorable impact on the company's outlook. Due to that, and some changes in foreign exchange rates, American Tower is making a couple of slight adjustments to its full-year guidance:
Data source: American Tower.
Overall, while the company does anticipate slower revenue and earnings growth, it still expects cash flow to expand by the same double-digit pace.
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Matthew DiLallo owns shares of American Tower and has the following options: long January 2019 $80 calls on American Tower and short October 2018 $135 calls on American Tower. The Motley Fool owns shares of and recommends American Tower. The Motley Fool has the following options: short October 2018 $135 calls on American Tower and long January 2019 $80 calls on American Tower. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
