With a predicted $1.1 trillion of investment coming from mobile phone operators by 2025, and 80% of towers set to be upgraded to 5G networks, the future for mobile tower owners is robust and well defended.
Even if the number of new operators coming to market were to stall in the future, the need to update technology and offer increased capacity to customers means that mobile tower owners should continue to see rising demand. As more devices come online worldwide, and the perpetual data loop continues to expand with the adoption of new and more sophisticated technologies, the need to expand transmission capacity to limit congestion on busy networks is likely to support rental income and will result in demand from existing tenants for years to come.
We can look to the US as an example of a relatively mature, but successful, market in which there is less new building activity, but continued support from an increase in demand, generated by existing and prospective tenants and the contractual price escalators mentioned previously.
It is evident that the outlook for mobile tower owners is bright, with solid growth prospects ahead; annual rent increases and increasing demand mean that the opportunity to lock-in steady returns through investment in the owners of mobile towers can be significant.
Dividend yields are also well defended, supported by long-term, contracted rental payments from high quality tenants. Among the largest listed mobile tower owners, dividend growth has been consistent and sustained for years. American Tower, a Fortune 500 REIT which owns 187,000 telecom towers all over the world, currently yields 2% and has grown its dividend every year over the past decade. Likewise, Crown Castle International, a REIT with a network of 40,000 mobile towers in the US, has increased its dividend every year for the past eight years and currently yields 2.8% per share.
There is no end in sight for the growth of data, and so the ability to forecast stable returns by investing in communication towers is relatively predictable. 5G will be integral to the roll out of future digital technology, enabling large scale and stable data coverage that will ensure industry and cities can function seamlessly. From digital entertainment and ‘e-health’ to smart cars and smart parking, the potential application for digital technologies appears unlimited.
A focus on mobile communication towers will form an integral pillar of the VT Gravis Digital Infrastructure Income Fund, with exposure to best-in-class REITs that are specialists in the sub-sector and at the forefront of development. As a result, we believe investors will benefit from the steady and sustainable future growth we expect to see from these companies in the coming years.