We upgrade our recommendation for American Tower Corp. (AMT) to Neutral backed by its solid first-quarter 2011 financial results. The company’s top line witnessed significant upside primarily due to the rise in demand for broadband data services coupled with American Tower’s global expansion strategy.

American Tower continues its strong performance driven by substantial demand for tower space to facilitate high-speed wireless data and on demand video services, together with super-fast 3G/4G technologies. Verizon Wireless already started deploying LTE from end 2010.

AT&T will follow suit from mid-2011. Furthermore, wholesale 4G operators like Clearwire Corp. (CLWR) and LightSquared venture have become major growth area for wireless tower companies.

We believemassive demand for wireless data and video in the developed markets coupled with diversification into several emerging markets will boost the company’s long-term growth. Rental & Management revenue, adjusted EBITDA, and free cash flow remain favorable.

In a major development, on May 19, 2011, the board of directors of American Tower has approved the commencement of the steps necessary to reorganize the company for qualifying as a real estate investment trust (REIT) for tax purposes. However, the conversion will not take place before January 1, 2011.

AmericanTower is quickly expanding its business operations in various emerging markets. In addition to Brazil and Mexico, American Tower has taken a major initiative to expand its operations in India. This will generate long-run sustainable business for the company. Furthermore, the company is also expanding the Latin American markets of Chile, Peru, and Colombia. Recently, American Tower has entered into the South African market.

However, the proposed acquisition of T-Mobile USA by AT&T (T) may become a long-run negative for American Tower. T-Mobile currently accounts for around 8% of American Tower’s consolidated revenue. At present, these two companies simultaneously shares 3,100 sites of American Tower.

 
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