Tower firm SBA Communications has held discussions with multiple satellite providers over potential terrestrial deployments for direct-to-device (D2D) offerings.

Brendan Cavanagh, president and chief executive officer, SBA Communications, confirmed that talks have taken place over possible partnerships, noting on the company's Q2 earnings call earlier this week that there is a "need for a terrestrial component of those networks."

Cavanagh didn't name the satellite providers, but said that SBA has identified this sector as an area of growth for the future.

"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," said Cavanagh.

That said, he expects the advancement of this technology to provide growth opportunities for SBA.

"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," he said.

It's worth noting that the Big 3 US carriers have their own D2D partnerships already, with T-Mobile working with SpaceX's Starlink, and AT&T and Verizon pairing with AST SpaceMobile.

A lot of how the D2D opportunity pans out is down to the spectrum allocation, though Cavanagh is confident that terrestrial infrastructure will play a role, and when the time comes, SBA will be ready to support this, he said.

"If that is the case, obviously, that will [terrestrial infrastructure] 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," said Cavanagh.

"I think 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."

"Real progress" is being made with spectrum

On the subject of spectrum, Cavanagh was optimistic for the tower industry for the coming years, as more spectrum auctions are set to take place in the US.

His comments are similar to those of other tower providers, including American Tower's CEO Steven Vondran this week.

It comes as the Federal Communications Commission (FCC) announced last month that it will auction 160MHz of spectrum in the Upper-C band next year.

Cavanagh said that carrier spectrum deployments will "contribute to organic growth for years to come." He also praised the FCC for imposing stricter build-out requirements on spectrum holders to ramp up deployments.

For example, the Upper C-band’s build-out requires 45 percent population coverage two years after the transition deadline and 80 percent coverage six years after. If the second isn't met, it comes with a penalty of an automatic license termination.

"These tougher build-out requirements are now expected to also extend to private investment firms and others that hold spectrum into the future," said Cavanagh. "This structure will be helpful in ensuring that license winners are serious about deploying spectrum for the benefit of the American wireless consumer.

"We now have the largest set of federal spectrum bands ever 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."

Earnings highlights

In the here and now, SBA reported site leasing revenue of $663.9 million for the second quarter, up 5.1 percent year-on-year (YoY). SBA posted net income of $196.5m for Q2, down 12.9 percent YoY.

"Carrier activity remained steady, with our customers both upgrading sites and expanding their networks through new colocations," said Cavanagh. In the second quarter, we saw increased new tower construction as we ramped up efforts in Central America building sites for Millicom and others."

As of the end of Q2, SBA operates 46,390 sites, consisting of towers, buildings, rooftops, distributed antenna systems, and small cells.

In the US, SBA owns 17,362 sites, plus 29,028 towers internationally. For the quarter, SBA reported that the company added six tower sites for $10.5m, while it spent $17.2m to purchase land and easements and to extend lease terms.

Cavanagh said that SBA is expecting to build "in the ballpark of 600 sites" for the full year, with most of these located in Central America and Tanzania. During the last quarter, SBA 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," said Cavanagh on the earnings call.