Short-Seller Muddy Waters Sees Cracks in American Tower
We note that six banks have responded to the results by lowering price targets: Barclays, Citi, J.P. Morgan, Macquarie, Pacific Crest, and Stifel.
Dismal Q2 for International Highlights our Previously Expressed Concerns
AMT’s Q2 2013 international gross and operating margins declined 200 bps and 470 bps, respectively, since Q2 2012.1 International EBITDA growth has been close to zero for the past three quarters.
These disappointing results highlight the “feed the beast” problem of AMT’s M&A driven international growth, coupled with the distortions caused by its de facto lending business – particularly that additional tenants are not meaningfully impacting margins. The 280 bps growth YoY in SG&A as a percentage of international revenue shows both the inefficacy of AMT’s CPI-linked escalators in hedging against wage inflation, and the incoherence of AMT’s strategy of making piecemeal investments into numerous markets (i.e., Chile, Peru, Colombia, Ghana, Uganda, Germany) just because they can do deals there.
When the Beast is Hungry, Growth and Margins Drop
The below graph showing the per tower valuations of international acquisitions since 2009 illustrates the dual problems of needing to feed the beast and the distortions caused by AMT’s de facto lending business. (We excluded Site Sharing from this graph because it is an outlier and would unduly skew the trend line.)
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