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More Tower Deals on Tap for US Tower Companies?

Most deals will keep tower sites in European hands, but we believe US TowerCos could expand further in Europe, supported by their M&A and financing capabilities.

US TowerCos have two crucial advantages when competing for assets. Firstly, they are often more experienced with the next industry growth phase, beyond the simple colocation of macro sites. Small cells are far more developed in the US, and US TowerCos are already generating attractive returns on these assets (e.g., US TowerCos have highlighted double-digit cash flow yields on small cell investments in US metro areas). Secondly, US TowerCos tend to have easier access to raising large amounts of equity than European corporates, given more flexible equity raising accessibility/policies and a tendency for more flexible financing and transaction structures.

We see strong organic growth on both sides of the Atlantic. Growing data demand is likely to drive further site growth, given comparatively limited no-mmWave spectrum release post C-band and with few near-term spectral efficiency gains beyond Massive MiMO. New services such as autonomous cars could drive significant step-ups in usage (e.g., seven robotaxis could consume as much data as an entire mobile network in Germany).

The US is likely to see record CAPEX spending in 2022 as the major telecom operators and European operators are increasingly putting mobile Capex off-balance-sheet with build-to-suit from TowerCos. Further, our Asian telecom services colleagues are already starting to reflect 6G in their longer-term CAPEX forecasts, highlighting another future industry driver.

Tower stocks have sold-off YTD 2022 alongside other long-duration Assets. We believe concerns may be overdone as rising yields are driven by rising inflation and tower stocks have positive carry on inflation (1% higher inflation equals ~1% higher EBITDA).

@Jakob Bluestone @Sami Badri