By Lewis Krauskopf
NEW YORK (Reuters) – A hitch in a proposed merger of U.S. wireless carriers Sprint Corp
Shares of American Tower Corp
Shares climbed further Tuesday after earnings reports from SBA and American Tower.
Investors had bid up shares of cell-tower stocks on news of the deal’s chances dwindling because the combined wireless company would have been expected to cut costs by reducing the number of cell-tower sites, said Nick Del Deo, analyst at MoffettNathanson Research.
“The market interpreted the lower odds of a deal as being positive for towers because of lower risk of cell site decommissionings,” Del Deo said. “They would decommission tens of thousands of cell sites if they were to get together.”
Cell-tower stocks already were surging in 2017: Crown Castle shares have climbed 23 percent, American Tower has soared 36 percent, while SBA Communications has minted a gain of more than 50 percent.
This contrasts sharply with the dour performance of telecommunications shares such as Verizon
Cell-tower growth prospects have improved as carriers seek to deploy more spectrum bands to improve their networks, which would require more hardware to be built on the towers, says RBC Capital Markets analyst Jonathan Atkin.
“Towers are more a play on wireless network spending, they’re not a play on carriers themselves,” Atkin said.
The cell-tower stocks struggled in the wake of the U.S. election of President Donald Trump last November. For example, expectations that Trump’s agenda would lead to higher inflation weighed because the cell-tower companies operate under long-term contracts, Del Deo said, but such concerns have faded somewhat.
The fear was “if inflation went up a whole bunch they wouldn’t be able to reprice their contracts for a long period of time,” Del Deo said.
The stocks continued their runs on Tuesday following results from SBA and American Tower. SBA shares gained 4.7 percent, while American Tower and Crown Castle both rose less than 1 percent apiece.
(Editing by David Gregorio)
