AT&T filed a lawsuit against American Tower arguing that the tower company is not complying with amendments to the companies’ tower leasing agreements.
However, at least one Wall Street analyst reported that the disagreement between the companies centers on a “small number of leases” and likely won’t affect American Tower’s second-quarter revenues.
The lawsuit, highlighted by WirelessEstimator and others, centers on a “holistic agreement” between American Tower and AT&T for the installation of AT&T’s network equipment on American Tower cell sites. However, the companies disagree on the exact details of the agreement and how it should affect the fees that AT&T pays to American Tower.
“It is important to note there are no punitive damages being sought by AT&T but rather, AT&T is asking the court to interpret the language of the contract. Our sense is this has been a point of discussion between the two cos for an extended period of time,” wrote the analysts at Wells Fargo in a note to investors this morning about the lawsuit.
Importantly, the Wells Fargo analysts wrote that they do not believe the lawsuit will affect the broader work between AT&T and American Tower, a key issue considering AT&T is in the midst of an increase in its network spending in order to deploy its 700 MHz FirstNet and WCS spectrum, as well as setting the groundwork for its forthcoming 5G services. Indeed, earlier this year AT&T raised its capex from $21.6 billion last year to fully $25 billion this year.
“We do not believe this legal issue will impact the broader activity levels we expect to see between AT&T and AMT (or its tower peers),” the Wells Fargo analysts wrote. “Following a series of checks at the services and vendor level, we continue to believe the FirstNet and ‘One Touch’ initiative by AT&T is moving forward to the ‘real estate’ segment of the build. This should bode well for towers as this involves antennas being added on the towers themselves (which translates to more revenue growth). We continue to expect to see a ramp in activity from AT&T in 2H18.”
Indeed, American Tower executives have offered a positive outlook on the industry in part due to AT&T’s spending. “Our wireless carrier tenants are expected to spend over $30 billion in capex this year,” said American Tower’s James Taiclet on the company’s quarterly earnings conference call with investors in April, according to a Seeking Alpha transcript of the event. “Taking into account other multiyear initiatives like FirstNet, we believe we are well positioned for a sustained period of attractive U.S. organic growth.”