Public Safety Network: A Boon For Tower Operators In 2018

Wireless tower operators in the United States had a robust 2017. We believe that there are several reasons for this dream run to continue in 2018, the primary being the thrust in the U.S. public safety network.

Recently, AT&T Inc. (NYSE:T) and the First Responder Network Authority (FirstNet) together revealed that all the 50 states of the nation, as well as two U.S. territories and Washington D.C., have entered the FirstNet project, the first dedicated nationwide wireless network for first responders.

Notably, in March 2017, AT&T was selected by FirstNet to build and manage the first nationwide broadband network dedicated to America's police, firefighters and emergency medical services.

As part of the 25-year contract, FirstNet will provide AT&T with a swath of 20 MHz of spectrum in the 700 MHz frequency band for the entire duration. AT&T will also be given success-based payments of $6.5 billion over the next five years to design and build the network. The company is expected to spend around $40 billion over the life of the contract to build, deploy, operate and maintain the network.

Per the deal, AT&T will be able to use this highly valuable spectrum for both commercial and consumer purposes. This is why several industry researchers believe that the FirstNet project may come as a boon to cell tower operators such as American Tower Corp. (NYSE:AMT) , Crown Castle International Corp. (NYSE:CCI) and SBA Communications Corp. (NASDAQ:SBAC) . SBA Communications became the first tower company to confirm that it has received applications from AT&T for the buildout of the FirstNet network.

The market for U.S. public safety network for first responders and civil protection services is becoming intensely competitive. In August 2017, Verizon Communications Inc. (NYSE:VZ) announced plans of dedicating network capacity to emergency services providers. The company will make Band 14 devices available and ensure full interoperability with any Band 14 radio access networks (RANs) deployed by FirstNet. Band 14 is the 700MHz LTE band allocated for the public-safety network. Additionally, Rivada Networks has also decided to lay out public safety network.

Wireless services are advancing fast in terms of additional features and capabilities. Much of the infrastructure and upgrades require effective site management of cell towers and equipment. Tower operators effectively address this opportunity as more than 90% of its quarterly revenues come from wireless carriers.

Tower operators generally have long-term (typically five - ten year) tower lease agreements with the U.S. national carriers. We believe that a strong business model coupled with growing deployment of public safety networks will give a major boost to wireless tower operators in 2018.

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Zacks Rank

Crown Castle has a Zacks Rank #4 (Sell). Verizon, AT&T and SBA Communications carry a Zacks Rank #3 (Hold). American Tower sports a Zacks Rank #2 (Buy). You can see Zacks Investment Research