CS: Tower owners have solid growth drivers

|About: American Tower Corporation (AMT)|By:, SA News Editor

"The tower industry has several favorable characteristics ... such as recurring revenue streams with long-term contracts, high operating leverage and a benign competitive environment," writes Credit Suisse's Joseph Mastrogiovanni. 4G upgrades, data traffic growth, and pending spectrum auctions are all seen as catalysts.

At the same time, Mastrogiovanni sees U.S. M&A activity - particularly a potential Sprint/T-Mobile deal - as a risk.

American Tower (AMT), just started at Outperform, is his top pick in the space. He likes the company's international exposure (1/3 of revenue), and is the most insulated from M&A.

Crown Castle (CCI) and SBA (SBAC) have been started at Neutral. Mastrogiovanni likes CCI's long-term potential, but also notes it has "the highest exposure to U.S. consolidation risk."  He sees SBA benefiting from a lack of master lease agreements with AT&T/Verizon, but thinks it's also exposed to industry M&A.

Worth noting: M&A only becomes a major issue if regulators approve a Sprint/T-Mobile deal. All signs suggest they still have their concerns.

Crown Castle CEO Ben Moreland has argued a pending auction for the high-frequency AWS band will lead to "thousands" of new cell sites. A larger auction involving low-frequency spectrum is set for mid-2015.