What Management Said
Read the full Q2 2025 transcript ↗Some of the information we will discuss on this call is forward-looking, including but not limited to any guidance for 2025 and beyond. and international businesses performed very well, and we are pleased to increase our full-year guidance across all key metrics, both in total and on a constant currency basis. The backlog also remains healthy, which bodes well for the remainder of the year and into 2026. bookings, our services business outperformed our expectations, and we are increasing our full-year services revenue guidance by almost 20%.
Most of the increase is related to construction services as carrier installations accelerate across the U.S. I am optimistic about domestic organic growth opportunities over the next year or two due to the specific initiatives of each of our major customers, but I am also optimistic about the long term. Additionally, with bonus depreciation being permanently reinstated, improving available liquidity for our customers, we could see greater investment in their networks as they have more capital available to invest. As indicated in our updated full-year guidance, we are increasing international churn by $5 million, primarily related to Oi.
As previously disclosed, Oi Wireline, the remaining Oi business post the wireless business breakup, which is mostly point-to-point wireless backhaul, represents approximately $20 million of run rate revenue. Today, Canada represents approximately CAD 27 million of annual leasing revenue in Canadian dollars and CAD 15 million of cash flow after taxes. In addition to portfolio acquisitions, you should expect SBA to continue to deploy capital towards a mix of share repurchases and/or debt reduction, as seen in our latest quarter and revised outlook. We continue to be committed to a balanced approach to capital allocation, opportunistically using each of these different options to invest in value-creating assets or to return capital to our shareholders.
What went well
- Second quarter results exceeded internal projections, with both the U.S. and international businesses performing very well, leading SBA to increase full-year guidance across all key metrics in total and on a constant currency basis.
- U.S. activity levels continued to improve, marking the sixth sequential quarter of increased bookings, with a continued trend toward more collocations driving new points of presence with key customers.
- The services business outperformed expectations, and SBA increased full-year services revenue guidance by almost 20%, mostly from construction services as carrier installations accelerated.
- SBA added approximately 4,300 sites through the partial early closing of the Millicom transaction, deploying $550 million to become the leading tower operator in Central America.
- SBA agreed to sell its Canadian tower business to a leading global infrastructure fund at a valuation much higher than its public-company valuation, expected to be immediately accretive to AFFO per share upon closing.
- S&P upgraded SBA's corporate credit rating to BBB investment grade on July 30th, driven by new criteria for digital infrastructure companies, bringing SBA one step closer to the investment-grade debt market.
- The board declared a quarterly dividend of $1.11 per share, an increase of approximately 13% over the third quarter 2024 dividend.
- Current leverage of 6.3x net debt to Adjusted EBITDA (pro forma for Millicom) remained near historical lows, with a strong cash interest coverage ratio of 4.3x.
- SBA repurchased 799,000 shares for $172 million at an average price of $215.33.
What went wrong
- One international carrier customer in Brazil, Oi, presented a challenge, prompting SBA to increase international churn guidance by $5 million, primarily related to Oi.
- Oi filed an amendment to its judicial reorganization plan on July 2nd citing unforeseen financial difficulties, leading SBA to book a bad debt allowance and assume a portion of the roughly $20 million of Oi Wireline run-rate revenue churns this year and next.
- Domestic net organic leasing revenue growth was only 1% due to 4% of churn, including $11 million of Sprint consolidation churn in the quarter.
- International net organic leasing revenue growth was just 0.8%, including 7.5% of churn, as total international churn remained elevated due to ongoing carrier consolidation and Oi wireless churn.
- The timing of revenue commencement is being delayed because the mix has shifted toward new collocations, which take longer to install and begin generating revenue than amendments.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Site leasing revenue (2025) | FY2025 | Increased |
| Tower Cash Flow (2025) | FY2025 | Increased |
| Adjusted EBITDA (2025) | FY2025 | Increased |
| FFO and AFFO per share (2025) | FY2025 | Increased |
| Services revenue (2025) | FY2025 | Increased by almost 20%, mostly construction services |
| International churn (2025) | FY2025 | Increased by $5 million, primarily Oi |
| Sprint churn (2025) | FY2025 | ~$50-52 million |
| Sprint churn (2026) | FY2026 | ~$50 million |
| Sprint churn (2027 and thereafter) | 2027+ | ~$20 million total |
| New leases and amendments contribution (2025) | FY2025 | Unchanged (kept the same despite higher activity) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Domestic organic leasing revenue growth (gross) | +5% | Sustained bookings momentum and improving activity levels |
| Domestic organic leasing revenue growth (net) | +1% | Offset by 4% churn, including $11 million of Sprint consolidation churn |
| International organic leasing revenue growth (net, constant currency) | +0.8% | Offset by 7.5% churn from carrier consolidation and Oi wireless churn |
| Services revenue guidance | +almost 20% (full-year guidance raise) | Accelerating carrier construction and installation activity across the U.S. |
| Quarterly dividend per share | +~13% (to $1.11) | Approximately 35% of the midpoint of full-year AFFO outlook |
| Sites acquired | 4,329 sites for ~$563 million in Q2 | Partial early closing of Millicom transaction in Guatemala and Panama |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Portfolio review | Ongoing | Expanded in Central America via Millicom (~4,300 sites, $550 million) while exiting subscale Canada; balanced capital allocation toward buybacks and/or debt reduction | — |
| Demand drivers | 5G densification and FWA | Sixth sequential quarter of rising U.S. bookings; FWA subscriber growth, AI-intensive apps, 5G Advanced use cases, and 800 MHz of new spectrum to be auctioned seen as durable long-term drivers | — |
| Oi / Brazil | Elevated but manageable churn | Oi filed amended judicial reorganization citing financial difficulties; bad debt allowance booked; ~$20 million Oi Wireline run-rate revenue at risk over 2025-2026 | — |
| Investment grade | High-yield issuer retaining flexibility | S&P upgraded corporate rating to BBB investment grade; no change yet to financial policy but one step closer to IG debt market | — |
| Satellite / direct-to-device | Emerging competitive question | Viewed as complementary to terrestrial towers, suited to economically hard-to-cover rural areas; EchoStar LEO plans seen as potentially favorable for the tower industry | — |
| Spectrum | Uncertain auction authority | FCC auction authority reinstated and 800 MHz of spectrum to be auctioned; 100 MHz to be auctioned by mid-2026, higher bands requiring new equipment at towers | — |
Q&A Summary
How durable are the FWA, densification, and coverage demand drivers, and are there any rent-reduction initiatives?
Cavanagh said the demand drivers feel good over an extended horizon, with FWA subscriber growth and rising broadband traffic supporting years of network investment. He said there are no specific initiatives that would materially lower rents; the focus is helping customers meet network goals at a fair, balanced price.
Why is collocation activity strong but revenue not yet coming through?
Cavanagh explained that the shift toward more new collocations versus amendments delays revenue commencement, because new leases take longer to install and begin generating revenue; full-year new lease and amendment guidance was kept the same, implying greater second-half contributions.
Why couldn't SBA scale in Canada, and what does the sale imply for other small markets?
Cavanagh said Canada's carriers own their sites (noting TELUS's captive tower company), making it hard for a non-Canadian company to reach meaningful scale; the sale realized a valuation well above SBA's public-company valuation. He said it does not automatically signal exits elsewhere -- SBA prefers to build scale in subscale markets (as in Central America) but will consider downsizing where it cannot.
What is the exposure and planned churn from U.S. Cellular and DISH?
Cavanagh said total UScellular revenue is about $20 million a year, unlikely to all go away and only over several years if it did, so the impact should be small. DISH represents roughly $55 million a year; SBA continues to serve them, they still sign some leases and amendments, and there is no planned churn at this moment.
Confirming the Sprint churn cadence beyond 2025?
Cavanagh confirmed roughly $50 million of Sprint churn in 2026 and a grand total of about $20 million thereafter (mostly 2027), not $20 million per year.
What is the fair long-term AFFO-per-share growth rate and the biggest headwind?
Cavanagh said the biggest issue is interest rates, with much of the roughly $12.5 billion of debt at a low ~3.7% average rate coming due over the coming years; normalizing for that, he would be comfortable with mid- to high-single-digit AFFO-per-share growth, though reaching it is several years out depending on rates.
How does S&P's investment-grade upgrade change SBA's cost of debt, and what flexibility is given up?
Cavanagh said SBA has not gone IG partly to retain flexibility to lever up for sizable opportunities, but its ABS issuance already achieves near-IG rates; the benefit would mainly be on unsecured (high-yield) paper and possibly the term loan. He said SBA does not think it would give up much and continues to explore the shift as it naturally moves in that direction.
More on Sba Communications Corp
Reported 2025-08-04 · figures from the Sba Communications Corp Q2 2025 earnings call.
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