5G may not impact tower leasing activity in a meaningful way until the end the decade, but tower spending has already picked up as operators deploy LTE radios and antennas that will be software-upgradeable to 5G. Tower leasing activity increased in 2017 and tower owners expect similar growth rates in 2018. Despite new carrier spending related to AT&T’s FirstNet and Sprint’s increasing network investment, tower owners are not expecting double-digit growth in leasing activity this year.

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“Despite positive commentary and data points from the mobile carriers and equipment supply chain regarding new network technology spending initiatives, the towers’ initial 2018 guidance implied little year-on-year improvement in gross organic domestic growth,” wrote analyst Robert Gutman of Guggenheim Securities in a recent note.

American Tower’s midpoint projection for gross domestic leasing activity is the highest among the publicly owned tower companies, according to analyst Robert Gutman of Guggenheim Securities. The company is calling for 8.1% growth, versus 7.9% last year.

Crown Castle expects 7.9% growth and SBAC projects 6.8%. Gutman believes that overall, spending will be weighted towards the second half of the year.

“We believe new leasing for the public tower players will likely be 2H weighted – implying a more limited 2018 revenue contribution (consistent with guidance calling for steady growth),” Gutman wrote in a research note. “That said, we believe the towers are on the doorstep of a new spending cycle that should provide meaningful growth over the next few years – with extension into the next decade driven by 5G capabilities and increasing processing capacity at the edge (e.g. tower sites).”

Demand for processing capacity at the edge gives tower owners an opportunity to lease space at the bottom of the tower as well as the top, leveraging fiber to the tower to connect edge-based servers to the mobile core. Of the three public tower companies, Crown Castle has been the most aggressive in pursuing this opportunity. The company has invested in Vapor IO, a startup founded to develop compact, neutral host mini-data centers designed to sit at the base of a cell tower.

One wild card for the tower industry could be the entrance of new competitors with deep pockets. Read More.

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