SBA Communications (SBAC): Leverage, AFFO and Churn Risk After AT&T–EchoStar

Immediate development: spectrum deal and sell‑side repricing hit SBAC#

SBA Communications [SBAC] dropped sharply on the combination of an industry‑level shock — the AT&T–EchoStar spectrum consolidation — and follow‑through from a major sell‑side downgrade. The stock is trading at $208.13, down -4.89% on the latest quote, after a Bank of America downgrade that explicitly tied valuation compression to expected higher tower churn post‑transaction (BofA reduced its multiple on 2026 AFFO from 20.0x to 18.0x) BofA Downgrade SBAC - Summary. That market move matters because it comes on top of a capital structure where net debt is $15.57B at the end of FY2024 — a figure that shapes SBAC’s ability to absorb timing shocks and keep a steady AFFO cadence SBAC FY2024 financials (filed 2025-02-26).

The immediate news hook is therefore twofold: a change in carriers’ spectrum footprints that alters deployment cadence and a visible re‑rating by at least one major bank. Both elements raise the probability that SBAC’s near‑term AFFO growth is a timing story rather than a permanent pullback — but they also increase scrutiny on leverage and free cash flow conversion.

Financial performance snapshot: strong cash generation, mixed operational trends#

SBA reported FY2024 revenue of $2.68B versus $2.71B in FY2023 (a decline of -1.11%, calculated from the reported figures), while net income rose to $749.54MM from $501.81MM in 2023 — a YoY increase of +49.37%. Operating income widened to $1.44B, lifting the operating margin to roughly 53.7% on our calculation (operating income $1.44B / revenue $2.68B) versus 34.1% in 2023. These movements reflect a strong margin expansion year driven by lower operating expenses as reported in the FY2024 filings SBAC FY2024 financials (filed 2025-02-26).

Free cash flow remained robust at $1.11B in 2024 (versus $1.31B in 2023 on the prior year basis), and operating cash flow stayed healthy at $1.33B. Those cash flow levels funded a $424.19MM dividend payout and $200.02MM of share repurchases in FY2024, evidence that the company continues to prioritize shareholder distributions even as it invests in new builds and services backlogs SBAC FY2024 cash flow statement.

Table 1 below condenses the core income statement trajectory and highlights the margin inflection between FY2023 and FY2024.

Source: SBA Communications FY2024 financials (filed 2025-02-26). Calculations performed on reported line items.

Two observations stand out from these numbers. First, net income and operating income moved materially higher thanks to expense dynamics and one‑time items in the period, but EBITDA declined year‑over‑year — a divergence that requires careful reading of non‑operating items and accounting adjustments. Second, the revenue base was effectively flat, underlining that the operating leverage to profit was the primary driver of improved bottom‑line metrics in FY2024.

Balance sheet and leverage: net debt dominates capital structure#

At year‑end FY2024 SBAC reported total assets of $11.42B, total liabilities of $16.47B, and total stockholders' equity of -$5.11B. Net debt (total debt less cash) was $15.57B and total debt $15.76B — large numbers that materially affect leverage ratios and refinancing sensitivity SBAC FY2024 balance sheet.

Using SBAC’s reported FY2024 EBITDA of $1.47B, a simple net debt / EBITDA calculation gives a leverage of ~10.59x (net debt $15.57B / EBITDA $1.47B) on FY2024 figures. This contrasts with the TTM metric included in the data set (net debt/EBITDA TTM 8.66x). The difference likely arises from timing and EBITDA adjustments (TTM vs fiscal year EBITDA, and potential pro‑forma or adjusted EBITDA treatments used by data vendors). We prioritize the company’s fiscal year line items for consistency with the audited balance sheet and income statement, but the discrepancy should be noted because many sell‑side models and credit analysts will rely on adjusted or trailing twelve‑month EBITDA when assessing covenant headroom and rating agency thresholds.

Net debt as a share of market capitalization is also significant: net debt $15.57B divided by market cap $22.35B yields ~69.70%, indicating that enterprise value is heavily weighted to leverage. Calculated enterprise value using quoted market cap plus net debt equals $37.92B; dividing that EV by reported EBITDA gives an EV/EBITDA of ~25.81x on FY2024 numbers — again higher than the EV/EBITDA TTM of 21.98x reported elsewhere in the dataset. These spreads matter because even modest multiple compressions or slight cash flow weakness can materially change credit and capital allocation dynamics for SBAC.

Table 2 summarizes the balance sheet and cash flow key metrics.

Source: SBA Communications FY2024 filings.

Quality of earnings: cash flow vs accounting earnings#

A core investor question is whether SBAC’s increased net income in 2024 is backed by durable cash flow. The answer is broadly yes: FY2024 net income of $748.68MM is supported by operating cash flow of $1.33B and free cash flow of $1.11B, indicating real cash generation. Depreciation and amortization was reported at $269.52MM in 2024, a sizable non‑cash addback that supports operating cash flow reconciliation. However, EBITDA fell year‑over‑year while net income rose, pointing to reclassification or one‑time items (for example, acquisition‑related adjustments or changes in depreciation, interest or tax items) that investors should unpack in the 10‑K/10‑Q footnotes SBAC FY2024 cash flow statement.

Overall, cash generation has been resilient, underpinning dividends and buybacks. But the fall in EBITDA and the high net‑debt load mean that any extended slowdown in leasing or material uptick in transition costs caused by higher churn could pressure both operational cash flow and discretionary capital returns.

Strategy and the AT&T–EchoStar shock: timing risk, not immediate covenant risk#

The AT&T–EchoStar deal consolidates mid‑band spectrum and gives AT&T capacity that can be deployed strategically rather than immediately, which shifts the timing of densification and tenant add‑ons from carriers to tower owners. The industry narrative — summarized in sell‑side notes and the company’s own commentary — is that the transaction raises short‑term tower churn (site swaps, tenant moves, make‑ready work) before a longer‑term rationalization of deployments AT&T EchoStar Deal Details. Bank of America quantified the effect as an incremental churn that compresses near‑term AFFO multiple assumptions, which was the proximate cause for the downgrade to Neutral cited by several market participants BofA Downgrade Detailed Note.

What this means for SBAC’s strategic execution is straightforward. The company has three visible levers to offset temporary U.S. softness: (1) deploy up to 800 new tower builds planned for 2025, which management has highlighted as a tangible growth engine, (2) expand services revenue (management guided materially higher for the year on the Q2 2025 call), and (3) accelerate international leasing via build‑to‑suit programs such as the Millicom‑related initiatives. Those levers can sustain AFFO growth if management executes on build economics and international demand materializes at forecasted yields SBAC 800 Tower Builds 2025 and SBAC Q2 2025 Earnings Call.

However, the industry re‑rating demonstrates limited tolerance for timing risk because SBAC’s asset mix is more tower‑centric than peer portfolios that offer fiber or data center adjacencies. That difference was central to BofA’s downgraded stance: peers like AMT and CCI have diversification options that can smooth revenue when U.S. carrier cadence slips Offsetting Drivers Comparison (AMT, CCI, SBAC).

Capital allocation in the period of uncertainty#

Management’s capital allocation in FY2024 shows a continued willingness to return cash to shareholders: dividends paid $424.19MM and share repurchases $200.02MM. The dividend per share for the trailing period is $4.31, yielding ~2.07% at the current share price of $208.13 (4.31 / 208.13 = 2.07%). The payout ratio reported in the dataset is ~51.49%, consistent with the company’s stated stance of balancing distributions with growth projects SBAC dividends and payout history.

From a capital‑markets perspective, the S&P upgrade to investment grade (reported by the company and discussed on the Q2 call) is an important offset to the churn shock because it reduces refinancing cost risk and increases the potential runway for continued buybacks and dividends even while EBITDA growth slows. That said, the high net debt load means management will need to be judicious about share repurchases in the event of sustained leasing weakness: the elasticity of AFFO per share to buybacks is high, but so is the downside to leverage if cash flow weakens.

Competitive position: concentrated exposure and differing optionality vs peers#

SBAC’s U.S. revenue concentration among the top three carriers (approximately 66% in 2024) increases sensitivity to any single carrier’s deployment decisions. The EchoStar transaction is therefore material because it changes USA carrier plans without altering bilateral lease contracts. Against peers, SBAC is narrowly focused on towers rather than the broader infrastructure mixes (fiber, small cells, data centers) that AMT or CCI deploy. That positioning preserves a pure play in towers — with operational advantages in build economics and services — but limits optionality when domestic carrier capex re‑timelines Top Carriers Revenue Concentration 66%.

Put differently, SBAC can win a lot if carrier capex resumes as expected, but the company is more exposed to timing volatility in the U.S. than a more diversified competitor.

Key risks and monitoring items#

The most material near‑term risk is a prolonged pause or meaningful slowdown in U.S. densification that reduces leasing increments and services revenue. This risk manifests in several measurable ways: slowing sequential AFFO per share, rising net debt/EBITDA on a trailing basis, elevated transitional costs related to churn (site swaps and make‑ready expenses), and tighter fixed charge coverage. Investors and credit analysts should watch quarterly AFFO per share, net debt-to-adjusted EBITDA on a consistent (vendor‑agreed) basis, and the pace of new builds and service wins reported each quarter Tower Churn 2025 Analysis.

A second risk is execution on the international build program. Millicom‑related and other international project pipelines are propositions that take time to convert; if these projects slip or deliver lower ARPU/lease terms than expected, intended offsetting growth will be smaller.

Finally, macro and interest‑rate shifts matter because leverage is high. While the S&P upgrade improves refinancing prospects, a materially higher cost of debt environment would increase interest expense and pressure AFFO flow‑through.

What this means for investors — actionable monitoring (no recommendations)#

Investors should treat the AT&T–EchoStar shock as a timing and sequencing event that elevates near‑term volatility. The core data points to watch are quarterly AFFO per share (and guidance vs consensus), the company’s reported net debt and any covenant disclosures, and sequential trends in services revenue and new‑build economics. If AFFO weakness proves temporary and international/new‑build pipelines convert as planned, the long‑term cash generation profile remains intact. If churn costs are sustained and leasing velocity declines materially, leverage metrics will be the constraining factor.

Specifically, monitor the following: (1) quarterly AFFO figures and management commentary on churn; (2) net debt / adjusted EBITDA using a consistent EBITDA definition (watch for differences between vendor TTM and fiscal EBITDA); (3) services revenue growth and margin expansion metrics; and (4) execution versus the announced 800‑tower build program for 2025 SBAC 800 Tower Builds 2025.

Synthesis: timing risk amid proven cash generation#

SBA Communications enters a higher‑volatility phase driven by external carrier consolidation and a sell‑side re‑rating that prices in a shorter‑term slowdown. Nevertheless, the company generates real cash — FY2024 free cash flow of $1.11B and operating cash flow of $1.33B — and management has prioritized dividend increases and buybacks even as it invests in growth. The countervailing force to the churn risk is SBAC’s pipeline of new builds and services expansion, which, if executed, can restore AFFO momentum.

Two technical flags deserve attention. First, our recalculation of net debt/EBITDA on FY2024 figures is ~10.59x, materially higher than some vendor TTM ratios; reconcile the EBITDA definition in any credit or valuation model before drawing conclusions. Second, current ratio dynamics also show data timing differences — using the FY2024 current assets and liabilities gives a current ratio of ~1.10x, not the 0.37x TTM ratio reported elsewhere — again underscoring the need to align reporting windows when assessing liquidity.

Key takeaways#

• Market reaction: BofA’s downgrade and the AT&T–EchoStar deal increased short‑term churn expectations and compressed multiples on near‑term AFFO forecasts BofA Downgrade SBAC - Summary.

• Cash flow resilience: FY2024 produced $1.33B in operating cash flow and $1.11B in free cash flow, supporting dividends and repurchases, but EBITDA fell year‑over‑year even as net income rose SBAC FY2024 cash flow statement.

• Leverage is high: net debt $15.57B produces a net debt/EBITDA of ~10.59x on FY2024 EBITDA, although vendor TTM figures show a lower ratio (8.66x); reconcile definitions before comparing across models.

• Strategic offsets: management’s 2025 plan (up to 800 builds, expanded services revenue, international programs) can offset U.S. timing risk if executed with targeted ROICs SBAC Q2 2025 Earnings Call.

• Watchlist: quarterly AFFO per share, net debt / adjusted EBITDA (consistent definition), services revenue growth, and progress on the 800‑tower build program.

The data present a clear investment story: SBAC is a cash‑generative tower owner facing a timing shock that elevates volatility and compresses near‑term multiples, but not (based on current filings) an immediate solvency crisis. The critical variables for the next several quarters will be the pace at which carriers translate spectrum consolidation into new leasing activity and SBAC’s execution on its build and services pipeline.

All dollar and ratio calculations in this piece are derived from SBA Communications’ FY2024 reported line items and the provided Q2 2025 commentary in the company filings and earnings call materials. See source links embedded throughout the article for primary documents and sell‑side commentary.