Deploying and maintaining small cell networks could present an interesting opportunity for tower firms. Research firm IHS forecasts that the small cell market will hit 3.8 million units in 2019, up from only 901,000 in 2014. The firm also estimates that the volume of indoor units will surpass that of outdoor units by 2016.
However, there is no consensus among tower firms regarding how much they should focus on small cells and there are still questions about which small cell technology to use. This uncertainty could provide an opportunity for companies looking to become small cell specialists.
All three of the major tower companies have reported earnings recently and all three have very different views on small cells.
SBA Communications recently agreed to sell its stake in ExteNet Systems. SBA executives indicated that cash flow margins are much higher with macro cells than they are with small cells, which motivated the sale. Via its ExteNet stake, SBA CEO Jeffrey Stoops said that his company had a "window seat" on small cells and saw "10, 20, 30 other reasons why we just simply prefer the macro site business."
Crown Castle begs to differ. The tower company spent $60 million on the construction of new sites, with the lion's share of that going toward small cells. While small cells represent only 8 percent of Crown Castle's site rental revenue, site rental revenues from small cells during the second quarter grew by more than 30 percent.
Crown Castle executives also said that the company's pending acquisition of fiber company Sunesys will more than double its fiber footprint available for small cell deployment. The Sunesys deal is expected to close sometime this quarter. With Sunesys in its portfolio, the tower company will have a "DAS and small cell portfolio with 15,000 nodes supported by 16,000 miles of metro fiber."
American Tower, meanwhile, has a very different perspective. CFO Thomas Bartlett said that his company now has about 300 distributed antenna systems, having added 32 over the past year. The tower company believes that indoor DAS opportunities are particularly strong internationally and Bartlett said that indoor DAS is "a good complement to our core global macro tower business."
It's interesting that these three big tower firms have such different small cell strategies. While Crown Castle is making small cells a major focus, American Tower is putting most of its efforts into DAS and SBA is forgoing the small cell opportunity in lieu of its macro cell business. This lack of consensus could provide an opportunity for enterprising firms that want to focus on small cells and I believe we will hear more about small cell specialists in the future. --Jeff