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American Tower Corporation

American Tower Corporation's Guidance and Outlook

Key Financial Metrics and Guidance

2024 Outlook:

  • Property Revenue: Expected to increase by approximately $60 million compared to the prior outlook, driven by $31 million in core property revenue outperformance, $45 million in additional pass-through revenues, and $12 million in straight-line revenue. Growth was partially offset by $28 million of negative FX impacts.
  • Organic Tenant Billings Growth (OTBG):
    • U.S. and Canada: Expected to grow by approximately 4.7%, or 6.5% excluding Sprint-related churn. This includes about $230 million in colocation and amendment growth contributions.
    • International:
      • Africa: Expected to grow by approximately 12%, primarily due to continued uptick in colocation and amendment demand.
      • Europe: Expected to grow by 5% to 6%, driven by accelerating new business contributions.
      • Latin America: Expected to grow by approximately 2%, reflecting continued delays in anticipated consolidation-related churn.
      • Asia Pacific (APAC): Expected to grow by approximately 5%, supported by strong new business and delayed churn.
  • Adjusted EBITDA: Increased by $60 million, reflecting strong conversion of incremental property revenue, prudent cost controls, and an additional $14 million in cash SG&A savings. Partially offset by a $20 million reduction in U.S. services business and a $14 million negative FX impact.
  • Attributable AFFO per Share: Raised by $40 million at the midpoint, or approximately $0.09 on a per-share basis, moving the midpoint to $9.79 per share. This was driven by solid cash adjusted EBITDA growth, partially offset by financing costs and cash taxes.

2025 Outlook:

  • AFFO Growth: The company expects to resume dividend growth in 2025, aligning with AFFO per share growth. The dividend growth rate is expected to closely mirror the average AFFO per share growth rate over time.
  • Churn Impact: Elevated Sprint churn will continue to impact growth rates through Q3 of 2025, with the final tranche of Sprint churn commencing in Q4 of 2024.
  • Capital Allocation: Focus on deleveraging and strengthening the balance sheet, aiming to achieve a net leverage target of 5x by the end of 2024. The company plans to maintain a relatively flat dividend payout in 2024 to support this goal.

Strategic Initiatives and Long-Term Guidance

5G Deployment Cycle:

  • Phase 1 (Coverage Build-Out): Completed in most markets, with carriers now focusing on harvesting network efficiency benefits.
  • Phase 2 (Capacity Build-Out): Expected to begin in 2025, characterized by densification efforts to meet increasing data demands.
  • Long-Term OTBG Growth: The company expects an average annual OTBG growth rate of at least 5% in the U.S. and Canada segment between 2023 and 2027, despite some moderation in 2024.

Data Center Segment (CoreSite):

  • Leasing Activity: Record signed new business in 2022, with expectations to exceed this in 2023. The company aims to replenish sold capacity in existing campuses, with development spend increasing to $450 million in 2024.
  • Growth Rates: CoreSite is expected to deliver upper single-digit to double-digit growth rates, driven by strong demand for hybrid cloud infrastructure and AI-related workloads.

International Markets:

  • Emerging Markets: The company is reducing exposure to emerging markets, reallocating discretionary capital to developed markets. Emerging markets are expected to contribute low single-digit growth rates over the next few years.
  • Developed Markets: Increased investments in developed markets like Europe, where the company sees opportunities for mid-teens USD yields. The company is also expanding its U.S. data center footprint.

Capital Allocation and Balance Sheet Strength

  • Debt Reduction: The company is committed to reducing gross debt and accelerating the pathway to achieving its net leverage target of 5x. The India sale proceeds will be used to pay down existing indebtedness.
  • Dividend Policy: The company plans to maintain a relatively flat dividend payout in 2024, resuming growth in 2025. The dividend is expected to grow in line with AFFO per share growth and REIT taxable income.
  • Buybacks: Buybacks are not a priority in the near term. The company will focus on deleveraging and strengthening the balance sheet before considering share repurchases.

India Sale Impact

  • Financial Impact: The sale of ATC India will result in a reduction of approximately $0.09 per quarter in attributable AFFO per share, assuming a closing date in the second half of 2024. The company expects to realize approximately $2.5 billion in total proceeds, with $2 billion used to pay down existing indebtedness.
  • Portfolio Rebalancing: The divestiture of India will reduce emerging market exposure from around 2/3 of total capital allocation in 2021 to less than 1/3 in 2024, further enhancing portfolio quality.

Risk Factors and Uncertainties

  • Foreign Exchange (FX): The company is exposed to FX headwinds, particularly in Africa and Latin America. The company is monitoring these risks and adjusting its outlook accordingly.
  • Interest Rates: Rising interest rates are impacting financing costs, which are partially offset by interest income and disciplined capital allocation.
  • Churn: Elevated churn in certain regions, particularly in Latin America and Africa, is expected to moderate over time but will impact growth rates in the near term.

Conclusion

American Tower Corporation remains focused on delivering durable, high-quality earnings growth and total shareholder returns. The company is well-positioned to capitalize on the ongoing 5G investment cycle and the growing demand for hybrid cloud and AI-related infrastructure. Strategic initiatives, including the India sale and increased investments in developed markets, are aimed at optimizing the portfolio and enhancing long-term value creation.

Last updated on 01/14/2025 05:14 AM

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