There’s nothing like a new nationwide WiMAX network to invigorate the already booming tower industry, though news of Sprint Nextel Corp.’s WiMAX plans didn’t come in time to boost second-quarter results from Global Signal Inc. or American Tower Corp.
During an earnings conference call, Global Signal said Sprint Nextel’s announcement about its WiMAX network buildout plans would provide significant benefit to the tower company’s bottom line.
Raymond James analyst Marc DeRussy agreed, noting that Sprint Nextel’s WiMAX plans likely will help the entire tower industry. However, DeRussy pointed out that since Sprint Nextel is already a significant customer of Global Signal’s, the tower company stands to gain a great deal of site rental revenues from the network buildout.
Jonathon Atkin of RBC Capital Markets agreed, pointing out that while Sprint Nextel’s WiMAX buildout will benefit the tower companies proportionally, Global Signal currently has the most exposure to the carrier.
Still, increased site rental revenues from Sprint Nextel’s WiMAX network won’t appear on quarterly earnings statements overnight and certainly not all at once, said DeRussy.
For the fifth quarter in a row, Global Signal blamed its net losses on the company’s $1.2 billion cash purchase of 6,600 Sprint Nextel towers, which the company announced in May 2005.
Global Signal said its second-quarter net loss grew to $17 million, due to an 88.7-percent increase in direct site operating expenses to $56.9 million from the Sprint Nextel transaction. The year-ago direct site operating expenses totaled $30.1 million, contributing to the company’s net losses of $9.4 million at that time.
Losses from continuing operations climbed to $16.7 million from $9.7 million a year ago. The company said other general costs, including depreciation, amortization and accretion, increased to $59.9 million from $41.1 million a year ago.
However, the acquisition of the Sprint Nextel sites helped Global Signal’s revenue rise 58 percent to $122.5 million compared with the year-ago total of $77.6 million.
“We showed some good growth on the top line and we are seeing a lot of demand for tower space, very solid lease-up and strong future revenue,” said Jerry Elliot, chief executive officer of Global Signal.
Elliott was named Global Signal’s new president and CEO in mid-April, succeeding Wesley Edens, who now serves as chairman of the company’s board. At the same time, Global Signal also hired Steven Osgood as its new chief financial officer to replace William Freeman, who retired at the end of April.
American Tower
In the wake of investigations into the company’s stock-option granting practices, American Tower released limited second-quarter results-but said it will probably restate its past earnings and report its full second-quarter results within four to six weeks.
AMT said its stock-option investigation has cost the company $1.5 million, a number that could climb to $3 million by the end of the third quarter.
In late May, AMT received a formal letter of inquiry about its stock-option grants from the Securities and Exchange Commission, and the company’s board created a special committee of independent directors to conduct its own internal review of its stock-option practices and related accounting.
As for the company’s financials, AMT’s revenues jumped 73 percent to $325.9 million, higher than Wall Street’s expectation of $321.7 million.
The company’s rental and management revenues also climbed by 73 percent, bringing in $320.2 million as the segment’s gross margin rose 70 percent to $240.6 million.
Demand for tower space remains robust,” stated Jim Taiclet, CEO of AMT. “On a pro-forma basis, adjusted for the impact of our merger with SpectraSite, our second-quarter 2006 tower revenues grew 12 percent over the prior year.”
