Nothing Is More Reliable Than This Safety Stock's Industry

The continued growth of the cellular communications industry, especially with 5G deployment, will help American Tower (AMT 0.58%) gain a bigger presence in the U.S. and around the world. In this video clip from "The Rank" on Motley Fool Live, recorded on March 7, Fool.com contributors Tyler Crowe, Jason Hall, and Matt Frankel discuss the REIT's rosy future.

Tyler Crowe: Sure. American Tower owns and leases, doesn't operate, owns and leases cellphone towers to anyone that wants to hang broadcast equipment on it. Most of its revenue is going to come from telecom companies. You might get the occasional anyone else who might put some broadcast, maybe seeing surveillance, things like that, some government property.

But the vast majority is we're talking about telecom companies. It's a simple, easy cash-generative business. Build the land. The operating costs of running a cellphone tower is marginal at best. I think you've just got to keep a backup power just in case. Even the telecom company pays for the power anyways. Costs are super low and the rates of return for a good cellphone tower is 25% annually. If you can get multiple tenants, I guess would be the word that we want to use here.

Specifically, American Tower I find is incredibly interesting one because it gives you an incredible presence globally. I just had it up recently, I think only 20% of their entire tower network right now is only in the United States the rest is international. They've got 25 countries, six continents. I guess the safety of it is telecom companies, they've got to spend, they've got to invest, and they just can't shut down their networks.

There's the growth element involved with 5G getting deployed and the amount of equipment that's going to have to be deployed in the field. Just means more rents for cellphone tower companies. It's just been one of those companies, it never does anything incredible, blow your mind 20% in a day. But it hits singles. It's got a .450 on-base percentage and just singles and doubles all year long.

Jason Hall: Tyler, this blows my mind about this business. The consistent level of cash margin that it generates. This is exactly what you were talking about. It's incredible. I love the fact that despite its name, Matt and I, we've argued about this before. It's not the American Tower. It's International Tower.

Crowe: It was until about 2012.

Hall: A decade ago, Tyler? [laughs]

Crowe: They're too busy making money to care about what the name says.

Matt Frankel: I always say they should swap names with Crown Castle (CCI -0.13%).

Hall: A 100%, yeah.

Frankel: Because they are actually an American tower company whereas I would be willing to bet there's an American Tower within 20 miles of you right now. [laughs]

Hall: They don't have a presence in Georgia as far as I know.

Frankel: They don't?

Hall: No.

Frankel: They have to be near you somewhere though.

Hall: I think the closest is probably India. They have a very large presence in India, and Europe's pretty good. But the big money they've been spending lately has been Sub-Saharan Africa, or actually just the entire African continent. Because one of the things that's going on there is like the U.S. and Europe 10 years ago with the transition from 3G to 4G, that's what's happening right there now.

Many other countries there are getting multiple telecom companies like conglomerate telecoms like Airtel, which is an Indian one that they've now got presence in 20 African countries, MTN is South African based another 15-20 countries. Anywhere where we're getting these multinational telecom companies, specifically, American Tower is going in, buying up towers from people and then releasing space.