Jefferies Initiates on Tower Operators

Jefferies analyst Mike McCormack published a report on US Equity Research, specifically focusing on Telecom Services, Cable & Satellite. McCormack initiated tower operators including American Tower Corp AMT, Crown Castle International Corp CCI, and SBA Communications Corp. SBAC. Jefferies initiated coverage on American Tower Corp. with a Buy rating and $90 price target. The analyst noted that core growth for the company is driven by carrier network needs. McCormack added, "the company has been returning material amounts of capital to shareholders via repurchases and distributions. While we expect only modest share buybacks in the near-term as the company aggressively de- levers after the recent Global Tower acquisition, AMT will continue to distribute material capital to equity holders. With AMT trading at a mid- teens multiple on 2014 AFFO, we believe the shares offer an attractive entry point to capitalize on industry growth." McCormack initiated coverage on Crown Castle International with a Buy rating and $90 price target. Jefferies reported that Crown Castle is doubling down in the U.S. market, expecting robust growth "as wireless carriers deploy additional equipment, sites, and spectrum to meet the virtually insatiable consumer demand for data." The analyst noted the lower risk profile correlated with U.S. centric business. McCormack added that U.S. wireless operators are expected to continue to improve service quality and Crown Castle's acquisitions of T-Mobile and AT&T will continue to drive peer level growth. Jefferies also initiated coverage on SBA Communications with a Buy rating and $100 price target. The analyst commented that although SBA is the smallest of the big-three tower companies, it is growing AFFO/ share the fastest. Jefferies noted that the company's portfolio has been geared toward nationwide deployment. SBA Communications has close to doubled their global site count since 2011, beginning with the Mobilite acquisition. The company has consistently reported organic revenue growth within 9-10% and expects this growth to continue into next year with 4G implementation. In a comparison, McCormack commented, " Like its largest peer American Tower, SBAC has been actively diversifying internationally. Unlike Crown Castle, SBA's US tower portfolio is not skewed towards the top markets where the wireless operators are facing their largest capacity challenges, dampening its domestic opportunity. Despite the US overhang, we find SBA's overall AFFO growth and mid-teens multiple attractive."