American Tower Corp (AMT) June 3, 2026 Conference Transcript

All right. Looks like we're there.

Live from New York, it's Nareet. Welcome, everybody. The tradition continues. We don't have 51 seasons like Saturday Night Live does, but American Tower and Raymond James and myself, we started doing these presentations at Nareet when American Tower converted in 2012. So we were just doing the math. We've been doing this basically six, yeah, 14, 15.

14 years, 15th time, I think.

Exactly, 15 times. But actually the dirty little secret was before you converted into a REIT, we were still coming to NAIREIT before tower companies converted to REITs, but we couldn't get a room.

Don't tell NAIREIT that. They're going to charge you for those past meetings.

But we would meet in the restaurant and say, REIT investors, you need to get to know tower companies because they're coming and they're going to be big. And certainly that's played out. you guys are some of the largest group of uh of real estate companies that are out there in the nary universe so uh today steve andron's joining us cfo ceo sorry of american tower i'm rick prentice by the way sorry about that head of tmt research at raymond james my definition of tmt telecom satellites media but more importantly towers and digital infrastructure um so steve thanks for coming today thanks for for hosting us yet again rick you betcha um i want to start with uh on the one q call you guys talked about how you're feeling this is the strongest strategic footing and setup you've seen in a decade you've been american tower a long time just like i've been

26 years yeah so we've seen a lot yeah we've lived through this birth boom bust and now rebirth of the tower industry um what do you mean by the strongest strategic footing and how do you square that with the stock performance yeah thanks Rick we've been really focused for the past few years on taking a risk out of the business you know there have been some headwinds in the business in various various areas and so when I think about where we are today from an operational perspective and with our customer base we're on the strongest footing because we've taken some measures to pull risk out of the portfolio our exposure to emerging markets is reduced part of that is because we divested India and part of we change our capital investment philosophy to direct more of our capex toward developed markets where it used to the majority of it used to go to the emerging markets so by doing that we're reducing our exposure in the emerging markets we've also been through kind of a period of reset and repairing a lot of those markets where some of the weaker players have churned out and so now the vast majority of our revenue in those markets is with the top one or two carriers at each market so we think we're largely through the churn events that have kept growth in those markets back over time and remove some of the uncertainty about the revenue stream. So that part of the portfolio is much stronger. Likewise in the U.S., while we don't like having churn from DISH and we didn't like having churn from Sprint, those are two weaker players in the market. It was a little bit more of a question mark. So now if you look at the U.S. revenues and the U.S. growth rates, it's underpinned by the three major characters so from a quality of earnings perspective we've made a number of moves to dramatically increase the uh the safety the uh the reliability of those underlying cash flows on the balance sheet we've taken a number of steps on the balance sheet to shore that up as well so where we sit today is we have the lowest leverage and the highest credit rating among all of our peers and less exposure to interest rate fluctuation than we've had in a long time So, when I look at where we sit today, we have a very strong fundamental base, better than we've had in over a decade in terms of not seeing, you know, negative shocks happen. And there are so many secular tailwinds that are going to promote growth in our business. And when I think about what's underlying our, like, kind of long-term growth algorithm that we've laid out, it's really based on mobile data consumption in the U.S. And mobile data consumption in the US grew at about 35% year-on-year last year, according to CTIA, and it's expected to continue to grow at a pace that requires a doubling of network capacity by the end of the decade. And so that provides a lot of tailwinds to our business to provide more service to our customers to get more bandwidth out to people. We also have things that could accelerate that, because those projections are just current It's downloading videos, and AI is not really factored into that. So the extent that AI comes on devices in a way that's bandwidth intensive, that can accelerate those demand trends. And 6G is just around the corner. I mean, if you think about that, the standards are supposed to come out in 2029. That means deployments are probably going to be in 2030, 2031. That's not that far away. So as we look toward the future, we see continued investment in the networks at a steady rate in the base case. We see a potential for acceleration for some of these other factors in it. And that's going to give us a lot of growth over the long term that will continue to drive this business on a more solid base. So when we think about that, that's the more solid fundamental footing. And I also want to remind people we have Corsite. We have a data center company that's not just a data center. It's an interconnection-rich, network-dense environment that gives us another high-growth vehicle. It's growing double digits in the U.S. with phenomenal returns. So, again, when I think about where we sit today versus where we've been in the past, it's a lower risk business, has a lot of opportunities for upside, and that positions us well to create a lot of shareholder value in the future.

So help us square that with the stock performance. Obviously, interest rates are what they are, and you can't control them.

Well, we're interest rate sensitive. There's a high inverse correlation on that. That's part of it. But there's been a lot of kind of short-term noise in the system, and I think people have to look past these short-term things they're they're not material in the long term and we know another way we've kind of de-risked the way we think about things is we churn dish out 100 percent so there shouldn't be an overhang from that it's it's out of the numbers it's out of the projections everything that we're telling you guys we plan to do is is x dish now we're still going to litigate we're still going to try to collect our money from from those guys but that's just upside from everything that we've said that's out there so i think that there's been some short term noise that's kind of weighed on the sector it's that satellites and the other stuff i'm sure you're going to ask about a couple of these so i'll just tee them up for you but i think that that short-term noise has really created some overhangs and i hope that we're going to move past that and see past that you know when you think about the dislocation between public and private multiples where private capital is valuing towers at a much higher multiple i think they're looking past the short-term stuff and they're looking at it saying you know i don't care about at this noise in the short term, I see 5G densification, I see AI, I see 6G, and they're looking at that long runway of growth ahead, and that's why they're valued at higher than the public multiples are. So hopefully we're turning a corner on some of the short-term stuff.

It feels like we are. It really feels like the tone this week at Nareed has been, oh, maybe we are finding the base here. Maybe people are getting excited about where things can go, and I guess being a wireless tower company the signal to noise ratio signal to noise is the noise has been controlling it maybe people are getting the signal better now I hope so we're trying trying to get the message out yeah let's hit one of those because it definitely was a hot topic came up several times but it feels like a shift is happening let's hit the satellite question okay my favorite topic Rick I know so first when it comes to satellites we have a good perspective on what's going on there we made an investment in ast space mobile in the early days to get a board seat which we still retain so when we talk about what's happening in the satellite space we're

coming from a place of some knowledge here there's absolutely nothing we see in that space that poses a risk to our business model or our carrier customers it is a complementary technology it will supplement the networks and there are some real positives for for both our customers and towers that i'll touch on when you when people express concern about towers to center or being disintermediated by satellite they're not seeing the physics of it there's not enough bandwidth produced by the satellite networks to be able to replace towers to even lightly populated areas the place it's going to be the most effective or where we don't even have towers and if we do have a tower in a place that's that remote it's certainly not going to be our top performing tower so when we've kind of looked at it and said you know in all these possible scenarios what's the risk it's just a minimus you won't even notice it if we did have an effect there that doesn't mean we don't have to build towers in rural Montana and the Grand Canyon yeah I don't want to build those anyway so from a risk perspective I don't see it at all from an opportunity perspective though I think it could be huge the first area of opportunity I think the satellites provide is for my customers they're going to provide ubiquitous coverage in a way that they haven't able to do it before and that's going to enable new use cases so if you think about some of the what ifs that are out there you know people have talked about using the 5g networks to control drone telemetry you know or robotics and things like that you have to have a ubiquitous signal to do that they haven't had that in the past satellite will give them that so I think there are new use cases that can create new revenue streams for my customers that'll spur investment that'll be good for us the other thing that i think is going to happen in this side of that world is it's going to actually highlight the places where towers need to build be built or where coverage needs to improve if you think back to 4g when carriers first built those networks they had some holes in their network so they roamed on each other and that was getting expensive paying each other for roaming so we had we used to talk about roaming over builds in 4g that was a driver of business for us i think with satellites you're going to see a similar phenomenon you know there are places at my house you cannot get a text message out there's no signal and no one's building it today but once that satellite coverage is enabled people are going to use it they'll be roaming being paid to the satellite guys and i'm hopefully i can convince all three carriers to build that neighborhood then you might have a site they could use, huh? Not a tower site.

They can use my rooftop.

I'll make it work somehow. Zoning's going to be tough, but I'll try. So when I look at it, I just look at this being a complementary technology. It's going to help my customers. It could enable some new tower builds. So for me, it's all opportunity. I don't see risk in it at all, and I'm glad to see some of it starting to shift a little bit here this week.

Yeah, that's definitely been my sense. As we came in beginning this week there was still the fear factor and it feels like people like wait this could actually instead of being bad satellites it could be neutral and might even be positive so it feels like we've made some education this week I hope so we're trying great um on some of those opportunities you mentioned drones and robotics and 6g and AI inference upload download I don't think yet yet but we'll hit that as well some of this stuff was maybe gonna be 5g 5g let's face it has maybe underwhelmed we've got fixed wireless which has been a great use case but there's been a lot of stuff that didn't come in why will 6g be what's different I'm still hopeful the end of 5g is gonna

say some of this you know if you go back to 4g at about this point in 4g 2016 we hadn't seen the social media take off the way it did later in the cycle so I there's still time for 5g um with 6g when i read some of the the new white papers coming out you know ericsson's got a great website that lists some of the benefits of it i think it's creating new capabilities it's not just more bandwidth but it's new capabilities it's it's spatial tracking it's things like that and so i think there are going to be new use cases new revenue streams that support that you know with 5g what it really has done for the carriers is reduce the cost per gigabyte and so i think we you know we lose sight sometimes of the fact that they need to keep producing more and more data to meet that that burgeoning demand that we have and without 5g that would have been impossible to do it an economic way so so i think 5g has been a success from that standpoint and fixed wireless has given them new revenue streams so i wouldn't call 5g a bust i would just call 5g not maybe not as much as we were hoping as our customers would get early on. But as I look at 6G, it's just a different set of capabilities is what they're hoping to create with that.

Okay. One of the topics this week at Nareet has also been the edge. We talked about it years ago, and it kind of quieted down. It's back. What's exciting and what's different about the edge, and what's it mean for American Tower?

Well, I got very excited about edge at the beginning of 5g because mobile edge compute was something that was enabled by 5g and i was wrong on the timing it didn't happen as quickly as i thought it was going to be but it's going to happen and i'm more convinced than ever it's going to happen and i'm more convinced than ever that we have a right to win in that space um you're now starting to hear other people talk about it the wireless carriers are talking about it you're starting to hear some of the chip manufacturers talking about it now what is edge that's a question a lot of people are trying to answer, and I suspect that everyone's going to have their own definition for a while until we all agree on what it is, but the way we think about Edge is it's where the wireless networks and the compute come together to enable low latency and to take some of the strain off the networks, both the wireless networks and the wireline networks, where you're backhauling petabytes of data, it's just not efficient to do that, and the reason that we bought CoreSight originally is when you deploy something at the edge, it still needs to be connected back to a data center that has cloud on ramps and kind of a wider compute capability. And we think that controlling both ends of that gives us a right to run that space. I'm not going to predict timelines again because I was wrong the first time, but it is constructive to hear wireless carriers, chip makers, cloud providers all trying to figure it out. And so we have been experimenting. We deployed in Raleigh, North Carolina, we deployed a data center on one of our tower sites as kind of a playground for folks. And, you know, we've got some interesting learnings from that. There's a little bit more demand than I thought for some compute there. It may not be the edge use cases yet that are going to promote that wider ecosystem, but people are working on it and people are thinking about it. So I think we're going to see more developments in that, but I think it's undefined at this point exactly what use cases are going to be there, what that facility looks like, and and when they're going to be deployed.

Yeah, makes sense. It feels like AI and inferencing is also going to play into what you need. And let's talk a little bit about downlink versus uplink.

So one of the things that we think could be an accelerant in the back half of 5G is the adoption of AI. When you look at all of the mobile data projection, growth projections that are out there, they all have an asterisk on them that says, does not assume significant uptake in AI. That's the Erickson Report. It's kind of some of the other projections that folks make. And that's because today when you're using AI on your device, it's typically text. You're chatting with ChatGPT. Maybe you upload a photo, but it's not really bandwidth intensive. And we're not seeing a lot of machine-to-machine today in the AI. Now, you're seeing it on the desktop. And I always believe that whatever's on the desktop today migrates to the wireless device tomorrow. And so I think that you will see these migrate. And when you start seeing more bandwidth-intensive uses of AI, it may change the architecture of the networks. Some of the early indications that we've heard from some technologists in the field that kind of monitor AI applications have said that they're seeing AI apps use 25% uplink versus traditional networks, which are architected to 10% to 15% uplink. And so when you think about what the customers are going to have to do to provide more robust uplink, that's going to be beneficial for towers. Now, I think everyone's still trying to figure out what does that look like. It's not just adding more spectrum. There's actually a re-architecture. Some of the customers have talked about that, and they're trying to figure out how are they going to do that, and we're there to support them. But when I think about what's going to drive higher bandwidth adoption, what's going to drive more activity on our sites than we're anticipating in the base case, AI is certainly one of those.

One of the things that was headlined out there is the carriers, your tenants, your customers, are focusing on, several of them are focusing on convergence, putting mobile and fixed or broadband at least together. Some of them have said they want to cut CapEx to lower levels. How does that impact what you're saying here and the excitement you're feeling about where this industry is headed?

Sure. Well, they've all put kind of broadband and mobility at the center of their strategies. So I don't think anybody's retreating from being a wireless carrier. And when you look at their CapEx spend, that funds a lot of different things. It's not just equipment on towers. It's that. It's fiber. It's investments in the core. It's R&D. There's a number of things they're investing in. So, even if they do take it to a modest reduction in CapEx, that doesn't mean they're not going to invest in their wireless networks and add equipment to towers. The best predictor of activity on our sites is mobile data growth because it's the stress on the networks that requires the carriers to upgrade those networks to meet their consumer And so, while we do look at CapEx as a little bit of a leading indicator on it, there's not a perfect correlation there because they do have optionality in where they do it. But they're not going to let their networks get bad enough to see subscriber chart and hurt their business for the sake of saving a few bucks.

And you mentioned spectral efficiency can help this mobile demand, satisfy it, leasing, but also spectrum. Let's hit spectrum for a second because I always view that as a really nice indicator of what your business might look like in the future.

Well, let me just kind of reiterate. We're expecting the networks to need to double their capacity by the end of the decade. If you look at all the projections of baseline mobile data growth, not AI, but baseline growth doubled by the end of the decade. And we believe about half of that demand will be satisfied by new spectrum being deployed and technology upgrades in 5G. Every time there's a software release, you get more spectrally efficient. But the other half is going to have to be solved through densification, adding more sites and more equipment to existing sites. and so when we think about spectrum more spectrum is good for towers it always is gft yes gft good for towers and so we do have some spectrum that's going to come up for auction next year it'll take a little time to clear it and get deployed some of that spectrum may get deployed initially with a software upgrade but radios are not infinite so even if they initially use a software upgrade for There's a limit to how many, you know, megahertz, gigahertz you can put through an antenna. There's a limit to how much traffic is going to be there. So it's still in that positive for us because that will promote more traffic. The more traffic that comes through there, the more equipment they need. So Spectrum is good. What I'm more excited about in the Spectrum bill and kind of the pipeline is the identification of 6G Spectrum because the U.S. has been a little bit behind the rest of the world in identifying and clearing that Spectrum. And if you look at the big, beautiful bill, it's directed them to identify spectrum in that kind of 6, 7, 8 gigahertz range, which is predicted to be the ranges for 6G spectrum. That's going to go on towers at that high of a frequency. It's not going to propagate as well. You're going to need more towers. You're going to need more sites. And so when I think about 6G, it's the opportunity to get more collocations on existing sites and maybe to build again. So spectrum is good. The more we get, the better. and there's some that's identified, and I'm anxious for that to get sold, cleared, and come to market.

It's good to see the FCC get the authority to have auctions again. We've got an auction currently underway, a fairly small auction, to get that gear going again and get that machine running.

Absolutely. We need the spectrum pipeline to keep turning.

You touched on data centers. I want to come back to that for a second. Some people kind of forget you guys have got core. right now data centers are trading at a higher multiple than towers personally I believe probably should be towers should be probably trading higher walk us through what you see with the data center business why you own a data center business and how do you get full value for that sure well I agree with you on tower multiples by the way probably comes as no surprise to anybody let me first distinguish what core site is and what it's not it's not I don't even like calling it a data center business it is an interconnection network rich hub that lets people communicate to each other it happens to also be a data center um i gotta get an acronym

out of that i don't know yeah i need a better name for it if anybody has any suggestions that that'd be great but the reason i differentiate that is it's a different business you know there's a lot of of noise around a lot of money flowing into hyperscale which are kind of powered shells for single-use facilities. That's not what we do. What we do is we bring networks, enterprises, and cloud providers together in an ecosystem where they can trade data directly without having to go out over the internet and backhaul petabytes of data around. And so we're not a low-cost provider. We're a system that brings customers to clouds and clouds to customers, essentially. And now also AI inferencing is going in those facilities. And that's important because that gives us a more competitive mode around it, a more resilient business. It's a lot safer business, in my opinion, than some of the other stuff that's out there. But the reason we bought Coresight was for that interconnection environment. Because as we started thinking about the edge and what that looks like, we realized that, you know, anybody can drop a shelter somewhere and run a fiber cable to it. But that fiber's got to land back somewhere where it's connected to this rich ecosystem. And we tried to partner with CoreSite before we bought them. We tried to partner with some of the other guys as well, and they wanted all the value to go to them instead of to the infrastructure provider. So we think that by owning both ends of that, that gives us a right to win in that space when it evolves to the edge that we see coming eventually. In the meantime, it's a phenomenally performing asset. Because that interconnection hub is the backbone of how people connect to each other, the The AI inferencing is just as dependent on that distribution as the cloud on ramps were, and so we're seeing tremendous amounts of new business in that. We're dedicating more capital to it, we're building it as quickly as we can. It's a great use of capital, we're continuing to underwrite mid-teens or better stabilized returns, and those get better over time, and those actually get up into the 20s on most of our facilities as they age over time, and it's a very low-risk business for us. So it's not a huge part of our business, it's about 6% of our attributable AFFO. We hope to grow it bigger than that. But in the meantime, it's a double-digit growth engine, and it helps underwrite better growth for us for the long term.

Does it feel like the market's not recognizing the value there, too? Just like the market seems to be not – public markets are not recognizing what the value of a tower portfolio might be.

We are certainly trying to get the message out on that, Rick, and we do talk about it. We get asked that question. Yeah, I don't know what all goes to the valuations. I don't always understand where the stock price trades with the current news on it. But we are certainly trying to get the message out, and we're trying to provide more information on it, talk about it a little bit more. And, again, I think if we can grow it to a larger percentage of the business, maybe people appreciate it a little bit more.

Let's go back to where we started almost was your stock performance, there's a large correlation, inverse correlation to interest rates. What does an interest rate environment really mean to your bottom line, AFFO, your fundamentals, and how you invest? As some other real estate sectors, the interest rates can really swing.

When you think about our core business, our interest rate sensitivity in terms of our AFFO is really just our debt stack. And I'll kind of refer back to the conversation I started with, which is we've taken a lot of that risk out. We've reduced short-term debt. We've been refinancing things that had a lower interest rate on them previously. But, you know, we're kind of getting to the tail end of the really cheap debt refinancing. So you're starting to refinance stuff that had a higher handle on it. So from a cash flow perspective, we've had some headwinds from interest rates. Those are moderating a bit. And those, we believe, if interest rates take kind of where they are, will moderate over time. That's the biggest impact on our cash flow on it. When we think about underwriting our investments, you know, it does affect our cost of capital and kind of how we're sourcing opportunities there, but when we're looking at how to invest to create shareholder value over time, you know, we're looking at what we think the right return criteria is on that, and while it may affect our hurdle rates a little bit, that's not what's preventing us from doing things like M&A today. The reason we're not able to participate in that market is we're not finding the right opportunities that give us the right growth for the long term in the right markets with the right characteristics so I would say it's not really the interest rates that are keeping us out of that market it's more just not having the right deals on the table and fundamentally the leasing activity is driven by mobile demand not driven by the economy by cyclicality it's driven by the addictive nature of a wireless device they're not addictive they're just useful okay they're great don't limit screen time there's no reason to do that the the if you look at the wireless business in general we've been through numerous business cycles over our careers and it's proved to be resilient and it's it's been recession-proof investment investment goes with the technology cycles you're exactly right we don't worry about interest rates affecting demand and if you look at the demand from our customers you know our current projections that we're putting out for everybody in terms of our growth rates represent a new business rate with the three carriers that's roughly in line with the average new business we've had kind of even we had six carriers and five carriers and four carriers you know so we see a healthy demand environment for new business and we don't see that changing based on interest rates or really anything else other than mobile data growth so we think about the growth prospects let's bring it all back up to the 30 000 foot view level what should investors think that american tower can deliver at a revenue and an attributable affo per share growth rate and for dividends as you look out over whatever period you're comfortable sure so you know what we've done is we've given you guys a long-term growth algorithm and let me just kind of walk through the elements of that quickly so when we think about what our business is going to deliver we think we can deliver reliably over time mid to high single-digit FFO per share growth and the components of that are this in our developed markets we expect our organic tenant billings growth rates to be mid single digits so that's the the US and Europe in our emerging markets it should be slightly higher than that Africa is performing higher today we've had a little bit of repair in Latin America but we expect to get through that and get back to that that higher growth rate for emerging markets of course i would expect to have double digit growth rates over time we're also going to be investing capex in new assets so that'll provide some additional growth for us we're also going to expand margins i committed on our last earnings call that we're on the tower side we will expand margins to 300 basis points over the next several years we may have a little bit of fancy headwinds coming up and FX is a little bit of a volatility piece there. But when you add all those things together, that revenue growth should deliver reliably mid to high single-digit AFFO per share growth.

And that equates to dividend growth, basically, too. Or a board decision, but...

So on the dividend side, the guide that we have there is that our policy is to dividend out 100% of our taxable income. Roughly over time, that should equal our AFFO per share growth, subject to board approval but that is how you should think about the dividend is it should grow roughly in line with our AFFO per share.

Is AI, Edge, or any of that stuff in that or is that one of those asterisked items?

Those are asterisked items. That's upside. Our projections for that kind of mid-single-digit growth is based on the baseline case as business as usual. If there are events that change that for the positive, that could be upside from there.

Two, one, zero. We're done. Thank you, sir.