American Tower Corp Weighs In On Disappointing Second-Quarter Numbers

American Tower Corp AMT reported poor second-quarter numbers on Wednesday. Both EPS of $0.30 and revenue of $1.174 billion came way below analysts' consensus estimate of EPS of $0.49 on revenue of $1.184 billion.

James Taiclet, American Tower CEO, was on CNBC Thursday to weigh in on company's earnings and explain the company's business model.

Accounting And FX Problems

On the reasons behind the earnings and revenue miss, Taiclet said, "A couple of accounting. It's a straight line lease accounting which is pretty complicated activity, non-cash...and foreign currency to complete that story."

Business Model

Taiclet explained how it make sense for big telecom operators to use American Tower's services, saying, "What our core business is doing is it's turning sort of a non-performing asset owned by a wireless operator for their own use --it's a cost centre for them -- into a profit centre because we will take that site from them, open it up for commercial leasing."

Taiclet was asked the average number of tenants on each of the tower operated by the company. He replied, "In the United States it's averaging about 2.5, so between 2 and 3. Our international markets are averaging between 1 and 2."

Room To Grow

On how many additional towers the company can put up in the market it caters, he said, "We could essentially double the tower count over a long period of time, so it get to that 200,000. That's the theoretically available opportunity for us."

Taiclet also explained how even if the company accomplishes putting up 200,000 towers in the market it caters it won't ensure proper coverage "because at the same time the technology is advancing and you are going to need more infrastructure. It's just like plumbing a water system, the more water you are putting through the plumbing system, you are going to need more pipes, you are going to need more valves, you are going to need more storage areas."