SBA Communications eyes terrestrial D2D growth and carrier spectrum deployments

Tower infrastructure provider SBA Communications is positioning itself to capitalize on the emerging direct-to-device (D2D) satellite market, as the company confirmed it has held discussions with multiple satellite providers about potential terrestrial network partnerships.

Speaking on the company's second-quarter earnings call earlier this week, Brendan Cavanagh, president and chief executive officer of SBA Communications, said there is a "need for a terrestrial component of those networks," signaling that the tower operator sees satellite technology as complementary rather than competitive to its existing infrastructure business.

While Cavanagh declined to name the satellite providers involved in the talks, he made clear that SBA has identified the D2D sector as a key area of future growth. "With regard to satellite solutions, there's been a lot of discussion around direct-to-device satellite technology. Our view remains unchanged. Satellites are a complement to terrestrial wireless networks, not a substitute for them," he said.

The executive elaborated on the opportunity, noting that "potential new entrants offering direct-to-device satellite-based coverage will require a terrestrial component to their networks in order to provide ubiquitous, high-quality coverage at a level competitive with traditional networks." This assessment aligns with the broader industry trend, as the three largest US carriers have already established their own D2D partnerships—T-Mobile working with SpaceX's Starlink, while AT&T and Verizon have paired with AST SpaceMobile.

The trajectory of the D2D opportunity largely depends on spectrum allocation, though Cavanagh expressed confidence that terrestrial infrastructure will play an essential role. "If that is the case, obviously, that will be good for us, because we will be able to provide a solution that gets them to market and on air as quickly as possible," he said, adding that "we're very early in those conversations, so it's premature to talk about anything specifically, but I'm hopeful that over the coming year or two, we will have more specifics that we can discuss as that starts to develop."

On the spectrum front, Cavanagh voiced optimism for the tower industry in the coming years, echoing comments made by American Tower's CEO Steven Vondran earlier this week. The Federal Communications Commission (FCC) announced last month that it will auction 160MHz of spectrum in the Upper C-band next year. Cavanagh said carrier spectrum deployments will "contribute to organic growth for years to come," and praised the FCC for imposing stricter build-out requirements on spectrum holders to accelerate network deployment.

The Upper C-band's build-out obligations require 45 percent population coverage two years after the transition deadline and 80 percent coverage six years after, with automatic license termination as a penalty for non-compliance. "These tougher build-out requirements are now expected to also extend to private investment firms and others that hold spectrum into the future," Cavanagh noted. "This structure will be helpful in ensuring that license winners are serious about deploying spectrum for the benefit of the American wireless consumer."

Looking ahead, Cavanagh highlighted the unprecedented scale of federal spectrum bands under consideration for repurposing, including 1.6 GHz, 2.7 GHz, 4.4 GHz, and the 7 GHz band. "While it will be several years before these airwaves are made available for commercial use, real progress is being made that will be supportive of network investment in our infrastructure for the next decade," he said.

In the company's second-quarter financial results, SBA reported site leasing revenue of $663.9 million, up 5.1 percent year-on-year, while net income came in at $196.5 million, down 12.9 percent from the same period last year. "Carrier activity remained steady, with our customers both upgrading sites and expanding their networks through new colocations," Cavanagh said, adding that the company saw increased new tower construction as it ramped up efforts in Central America building sites for Millicom and others.

As of the end of Q2, SBA operates 46,390 sites, comprising towers, buildings, rooftops, distributed antenna systems, and small cells. In the US, the company owns 17,362 sites, plus 29,028 towers internationally. During the quarter, SBA added six tower sites for $10.5 million and spent $17.2 million to purchase land and easements and extend lease terms.

Cavanagh said SBA expects to build "in the ballpark of 600 sites" for the full year, with most located in Central America and Tanzania. In the last quarter alone, the company built 99 new towers, up from 75 in Q1. "We expect this number will increase steadily over time. New tower builds continue to be a good use of capital, and we expect the risk-adjusted returns to exceed our cost of capital, often on day one," he said.