American Tower (AMT -0.64%) is the leading independent global owner and operator of cell towers. The real estate investment trust's (REIT) portfolio consists of roughly 221,000 multitenant communications sites worldwide.

There was initially some concern about whether 5G networks would utilize macro towers or if smaller cell nodes would serve as the backbone infrastructure. However, American Tower's first-quarter results show that cell towers will remain essential in supporting the rollout of 5G. Because of that, the infrastructure REIT sees towering growth ahead.

A worker climbing a cell tower.

Image source: Getty Images.

Towers continue to drive growth

American Tower posted solid first-quarter numbers. The REIT's total revenue soared 23.2% to nearly $2.7 billion, while its adjusted funds from operations (AFFO) rose 6.1% to almost $1.2 billion. It got a boost from completing $20.8 billion of acquisitions last year, including purchasing nearly 33,000 communications sites and other communications infrastructure like data centers.

While that spending spree helped drive strong revenue growth, the REIT also benefited from solid organic tenant billings growth of 3%, despite some customer churn-related headwinds. CEO Tom Bartlett commented on what's driving organic growth in the earnings release. He stated:

We're off to a strong start in 2022 with Organic Tenant Billings Growth accelerating sequentially in each of our reported segments. 5G is ramping up in the U.S. and Europe today, while 4G coverage and densification initiatives continue to grow in earlier stage markets, and it is clear to us that macro towers will continue to be critical infrastructure for carrier network investments over the next decade and beyond.

One example of the importance of cell towers for U.S. customers is its agreement with DISH Networks (DISH). American Tower signed a master service agreement with DISH last year to lease space on up to 20,000 communication sites to help support DISH's 5G network rollout. Cash payments on those leases are starting this year and will grow over time as DISH deploys its network.

Tower demand is only going to get stronger

Bartlett discussed the longer-term outlook for the company's tower assets on the first-quarter conference call. He stated that:

Growth in our foundational U.S. and Canadian business continues to be propelled by the rapid acceleration in mobile data consumption that we've seen over the last decade plus. Back in 2017, the average smartphone in the U.S. was consuming roughly six gigabytes of data per month. And today, in the early stages of 5G uptake by consumers, that number has grown by a staggering 240% to over 20 gigabytes on a monthly basis, as both 5G handsets and coverage become increasingly pervasive. This upward trend is expected to continue, with industry estimates now forecasting an average monthly consumption rate of 54 gigabytes by 2027.

Bartlett noted that mobile carriers are investing aggressively to meet this expected demand. They're upgrading existing communications sites with new equipment and making investments to deliver greater cell-site density to improve network performance in the coming years.

One clear takeaway from these investments is that "macro towers will continue to be crucial infrastructure for the long runway of carrier network investments that lie ahead," according to Bartlett. He continued by stating:

Macro sites have historically been the most cost-effective means for carriers to provide broad-based network coverage to the vast majority of the U.S. populous, and evidence suggests that remains unchanged in a 5G world. To support this point, over the last five years, our backlog of contractually guaranteed revenues in the U.S. has more than doubled on a per-site basis. This speaks not only to our team's capacity to secure long-term profitable cash flow growth from our more than 43,000 distributed sites but also to the long-term value our tenants place on our macro tower assets as a critical component of their network deployment strategy for 5G and beyond.

Because of that, he expects "strong growth on our tower assets, both in the near and longer term." American Tower's CEO sees growth ramping up in the back half of this year, expecting to exit 2022 at a high point. Meanwhile, he sees "strong mid-single-digit organic tenant billings growth in 2023 and beyond."

Add that to the company's faster-growing international operations, and the REIT sees at least 10% annual AFFO per-share growth through at least 2027. Meanwhile, there's upside to that outlook from additional acquisitions and new site and data center developments.

Tower-powered growth ahead

American Tower expects demand for its cell towers to remain strong for several years as mobile carriers roll out their 5G networks. While they'll also utilize smaller cells and fiber optic networks, macro towers will continue to do most of the heavy lifting.

Because of that, the REIT expects to continue delivering strong AFFO growth. That should enable it to keep growing its dividend and produce compelling total returns for investors, making it a great REIT to own for the long haul.