Demand for cellular towers and for small cells is stronger than most observers believe, according to a research note from Macquarie Research, the stock analysis arm of investment bank Macquarie Capital.
In the note, Macquarie analysts Kevin Smithen and Will Clayton said that based upon what they heard from Verizon and from network engineers at the PCIA Wireless Infrastructure conference in April, they are surprised that tower companies such as American Tower and SBA are not "articulating their small cells strategies more aggressively."
The analysts do not believe that small cells will cannibalize demand for macro towers. Instead, they said that to maintain growth and to support deployments of Cloud-RAN (C-RAN), 3.5 GHz and 5 GHz small cells will be important. This is particularly true for Verizon, the analysts said. C-RAN is a centralized, cloud computing-based radio access network architecture that can support 2G, 3G and 4G transmissions as well as future standards.
Additionally, the analysts said that Crown Castle's $1 billion acquisition of Sunesys will give the company "a commanding first-mover advantage" in the small cell market. Crown has said that Sunesys will give the company fiber assets that could potentially serve more than 3,500 small cell opportunities.The deal is expected to close late this year.
The analysts also contend that SBA Communications should purchase small cell maker ExteNet Systems, and that American Tower, which has an existing small cell business, should devote more capital to gaining fiber access in major metro areas.
One bellwether for small cell deployment in the U.S. has been Sprint's plans. "We believe that SoftBank has recently signed-off on Sprint's network plans," the analysts said, noting that Sprint may deploy a C-RAN solution as part of its new "Next Generation Network" strategy, which it disclosed in May.
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