JBL: The Giant and the Rock Can't Miss

American Tower already has the infrastructure for what will be a wireless world; it has a portfolio of more than 15,000 towers. Google (GOOG) has offered to wire the city by the bay, San Francisco, for free. This would ensure that anyone with a wireless computer would be able to access the Internet for free. Whether Google does it or not, Mayor Gavin Newsom has said that San Fran will be wired by the end of 2006.

This will happen all over America in the next few years, despite protests by the cable companies. In Mexico and Latin America where there is no fiber optic cable, there may never be a need for it. They will be wireless countries. American Tower has the infrastructure in Latin America and Mexico as well.

AMT makes money by leasing antenna space on its multitenant towers to cell phone, radio and television companies. AMT will benefit from the future wireless networks that will be built by renting them the tower space.

These wireless networks have to go somewhere and AMT is the best positioned to support them. The margins on the space they will pay to rent the towers will be insane, these margins could be around 90%. It is the equivalent of having a 15-story apartment building that makes money and all of a sudden realizing you have five more floors you can rent.

On Friday, South Korea's Samsung said mobile phone sales jumped 10% over the previous quarter and raised its 2005 estimate for total industry growth to 15% over 2004 levels. With increased cell phone usage, more cells are needed, but the cost of operating a tower is fixed. I believe AMT will be a major beneficiary of the growth with the wireless age that we are on the brink of seeing.

AMT is restructuring its debt, which will free up some cash flow. By year-end 2004 it had saved $60 million in interests. It plans to save up to that much more by 2005 or 2006 through long-term debt restructuring. It believes free cash flow will be more than $200 million in fiscal year 2005. This is very important because, as laid out in my debut column, my basic financial strategy is simple: Keep cash flow positive and stay as far away from debt as possible.

I just recently bought shares in AMT, and I plan on going to see The Rock's new movie. He really should send me a free pass -- movies are expensive.

>To order reprints of this article, click here: Reprints