SBA Communications (NASDAQ:SBAC) reported second-quarter results in line with its expectations and modestly increased its full-year 2026 outlook for site leasing revenue, funds from operations (FFO) and FFO per share, citing higher straight-line revenue and improved net cash interest expense.
Chief Financial Officer Marc Montagner said second-quarter FFO per share was $3.05. The company paid a quarterly cash dividend of $1.25 per share and declared another $1.25-per-share dividend payable Sept. 17 to shareholders of record as of Aug. 20. The declared dividend is about 13% higher than the dividend paid in the prior-year period, according to Montagner.
Leasing Activity Remains Steady
In the U.S., SBA added about $9 million of new lease and amendment billings during the second quarter, with most activity coming from new co-locations as carriers densified networks and expanded coverage. Internationally, the company added about $4 million of new lease and amendment billings.
President and Chief Executive Officer Brendan Cavanagh said U.S. application volumes entering the second half remained relatively consistent with the first half of the year. One customer was more active than the others, though he said changing levels of activity among carriers were not unusual.
The company expects U.S. new-leasing contributions to be lower in the second half than in the first half, consistent with its prior outlook. Cavanagh said the company had not changed that expectation.
International demand remained healthy, though churn continued to be elevated because of carrier consolidations, bankruptcies, restructurings and network rationalizations. Cavanagh said SBA is working with customers on longer-term arrangements intended to provide more stable and predictable cash flow, sometimes involving rental relief in exchange for greater contractual certainty.
SBA expects it is nearing the end of its period of heightened international churn, though Cavanagh declined to provide a specific outlook for next year while discussions with customers continue.
Investment-Grade Debt Offering Reshapes Capital Structure
In July, SBA issued $3.5 billion of unsecured investment-grade bonds, its first such offering. The company used net proceeds to fully repay its Term Loan B and outstanding balances under its revolving credit facility. As of the call, SBA’s revolver was fully paid down and it had about $570 million in cash.
The offering included:
- $1.35 billion of notes due in 2030 with a 4.78% cash coupon;
- $1.35 billion of notes due in 2031 with a 5.15% cash coupon; and
- $800 million of notes due in 2033 with a 5.45% cash coupon.
The bonds had a blended cash coupon of 5.11% and a weighted average maturity of five years. SBA also established a new unsecured revolving credit facility with $2.5 billion of capacity.
Montagner said secured debt now represents less than 50% of the company’s debt following the transaction. SBA ended the quarter with approximately $13 billion in total debt and net debt-to-adjusted EBITDA leverage of 6.4 times, within its target range of 6 to 7 times. In June, S&P upgraded SBA’s credit rating to BBB from BBB-.
The company continues to assume that its $1.2 billion asset-backed securities maturity in November will be refinanced at a 5.25% rate. While SBA expects to benefit from its investment-grade status, Cavanagh noted that some debt being refinanced had lower rates than current market borrowing costs.
Buybacks Take Priority Over Higher-Valued Acquisitions
Cavanagh said SBA intends to resume share repurchases in the second half of 2026 after completing its July refinancing. He said management views buybacks as the best use of capital at current valuation levels and characterized the company’s shares as trading below what management believes is their intrinsic value.
The company will continue building towers and considering acquisitions, but Cavanagh said the limited supply of U.S. assets available for purchase generally carries valuations substantially higher than SBA’s own valuation. As a result, he said repurchasing shares is currently more attractive than pursuing acquisitions that could be dilutive.
SBA expects to build roughly 600 new towers during 2026, primarily in Central America, with a meaningful number also planned in Tanzania. The company built 99 towers in the second quarter, up from 75 in the first quarter. Cavanagh said construction activity should rise in each successive quarter through the rest of the year.
New tower construction has offered stronger returns internationally than in the U.S., where competition has at times compressed potential returns, according to Cavanagh. He said SBA sees opportunities in Africa and Central America and expects risk-adjusted returns on international builds to exceed its cost of capital, often beginning on the first day of operation.
Spectrum, Edge Computing and Satellite Seen as Longer-Term Drivers
Cavanagh pointed to future spectrum auctions as potential long-term sources of equipment deployments and leasing growth. The Federal Communications Commission adopted a plan to auction 160 megahertz of Upper C-band spectrum beginning in April 2027. Combined with previously auctioned Lower C-band spectrum, the auction would create 440 megahertz of contiguous mid-band spectrum for wireless use.
He said the FCC’s build-out conditions, including population-coverage requirements and automatic license termination for failure to meet a later benchmark, should encourage spectrum holders to deploy their licenses. However, Cavanagh said the new spectrum opportunities are more likely to affect results over the next five or more years rather than materially influence next year’s leasing growth.
SBA also sees potential opportunities in edge computing. Cavanagh said the company is speaking with multiple parties interested in more distributed computing architectures that use power- and fiber-connected locations to reduce latency, improve redundancy and support artificial intelligence-oriented applications. He said developments could emerge over the next 12 months, though he did not identify customers or provide financial estimates.
Management said roughly half of SBA’s U.S. portfolio could be well suited to the edge-computing uses currently under discussion. The facilities being considered would generally be smaller than one-megawatt deployments, Cavanagh said.
On satellite direct-to-device services, Cavanagh said SBA views satellite connectivity as complementary to terrestrial wireless networks rather than a replacement. He said satellite providers seeking to offer ubiquitous, high-quality service competitive with traditional mobile networks would likely need terrestrial network components. SBA has spoken with multiple satellite providers, he said, but characterized the discussions as early stage.
While some rural or fringe tower locations could face competitive pressure from satellite service, Cavanagh said SBA’s internal analysis suggests those sites represent no more than roughly 2% to 3% of its portfolio, while satellite data could also help identify locations where additional terrestrial infrastructure is needed.
About SBA Communications (NASDAQ:SBAC)
SBA Communications Corporation (NASDAQ: SBAC) is a real estate investment trust that owns, operates and develops wireless communications infrastructure. Its core business is the leasing of space on communications towers, rooftop sites and other wireless structures to mobile network operators, broadband providers and other wireless service customers. The company also provides site development, construction and ongoing site management services to support the deployment and operation of wireless networks.
In addition to traditional macro towers, SBA offers a range of infrastructure solutions designed for dense urban and suburban markets, including small cells, distributed antenna systems (DAS) and fiber backhaul and transport services.
