Will Expectations Become Reality?

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130331_expectations_vs_reality_600_426Will Expectations Become Reality?

Multiple reports from telecom analysts predict that the second half of 2015 and early 2016 will see more wireless activity. Amir Rozwadowski of Barclays wrote, “While we expect carrier capex levels to remain tempered during 2Q, expectations for a reiteration of 2015 spending levels by all four major telco’s suggests improving trends should emerge beginning in the back half of the year.” In the story below, you’ll get Jonathan Schildkraut of Evercore ISI’s take. But will it actually happen? Rozwadowski noted that while each carrier has their own initiatives to focus on, the new spectrum and the densification projects will bode well for the industry as a whole. “In our view, 2016 activity levels could improve over 2015,” he wrote. The Barclays analysts also noted that price to adjusted funds from operations (AFFO) multiples are at or near levels last seen during the summer of 2013. “Though we recognize that the sector is likely to remain out of favor until clarity around rate activity improves, our analysis suggest that against a backdrop of gradually improving fundamentals, current multiples being able to simply meet expectations should allow the industry to deliver healthy total returns over the next twelve months,” Rozwadowski wrote.

Slow Spending in 2Q—What Now?

Well it’s not entirely breaking news that carrier spending had slowed during the second quarter, but how did this affect the carriers and the tower companies? Jonathan Schildkraut of Evercore ISI said, “Similar with 1Q, we believe carrier spending remained largely subdued in 2Q with Verizon and T-Mobile driving the large majority of activity. Checks indicate that AT&T remains on the sidelines (presumably until its acquisition of DTV closes); and sporadic activity from Sprint (despite the supposed approval of its NGN build-out).” Schildkraut also noted that the firm is confident that activity from AT&T and Sprint will accelerate in the second half of this year. “We are less confident that the increase in activity can support meaningful improvements in the full year outlook. We expect investor focus to begin to shift to 2016, where we expect all four carriers to be aggressively deploying capital,” the analyst wrote.

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July 22, 2015 |
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