Very interesting stuff coming out of the Mobile World Congress in Barcelona, a host of market-ready femtocell products being marketed to carriers around the world.
Looking forward to reading the upcoming 10-K from American Tower (NYSE:AMT), the devil is likely in the details.
It strikes me as odd how the cell tower industry has much equity value at all
- Technology development is squarely at odds with the longevity of this industry. Today at MWC Freescale Semiconductor unveiled a "MacroCell-on-a-chip".
- There is an enormous financial incentive for engineers to develop a means of getting more capacity out of existing spectrum. The answer they have developed is cell-splitting, i.e. putting more antennae between existing cells, this means femtocells.
- Towers were a great business when they had networks who needed them and carriers needed tower companies with scale. This is no longer the case. There is very little barrier to entry in the cell tower business. This is evident in AMT's margins. Now there are inexpensive antennas that can be deployed easily..
Several analysts this week have raised their "Target Price" of AMT while at the same time cutting earnings estimates. All it takes is a small adjustment to the DCF WACC, and poof....whatever price you want becomes seemingly justified.
We'll see what the 10-K says soon......TD
Disclosure: I am short AMT.