Crown Castle International officials were in a mood to look backward (as in 10 years), as well as forward, during the company’s fourth quarter 2019 earnings call. In the last decade, the communications infrastructure company expanded its tower business from 22,000 towers in the United States making $1.5 billion in annual site rental revenue up to 40,000 towers generating nearly $3.5 billion in annual site rental revenue. Jay Brown, Crown Castle president and CEO, said 5G promises continued growth in the next ten years.
“The current demand environment that is generating the highest levels of tower leasing activity in more than a decade is largely tied to our customers investing heavily in their 4G networks to keep pace with the 30 percent to 40 percent annual data demand growth,” Brown said. “On top of that continued investment, we anticipate significant long-term demand for our infrastructure as 5G becomes a reality and wireless networks expand from connecting everyone to connecting everything.”
An investment of $15 billion was also made in the last 10 years to establish fiber footprints in locations across the top U.S. markets where Crown Castle expects the greatest long-term demand for small cells.
Crown Castle deployed 10,000 small cells in 2019 and, at the end of the year, had more than 40,000 small cells on air with another 30,000 in the pipeline. Additionally, the company generated 3 percent revenue growth from fiber solutions using 80,000 route miles of fiber. Similar growth is anticipated this year.
“Making those significant investments in assets and capabilities, we believe, will expand our future growth opportunity as 5G is deployed,” Brown said. “Adding to my optimism, we believe the new T-Mobile along with AT&T and Verizon are in a great position to leverage their scale and valuable spectrum assets ultimately promoting more investment across the industry.”
Crown Castle’s equity market capitalization increased from nearly $10 billion to more than $60 billion since 2010, generating a compound annual total return of greater than 18 percent for shareholders. However, the company suffered from a decreased activity in the fourth quarter and early into 2020 as uncertainty surrounded the merger between T-Mobile and Sprint caused a decrease in activity.
“However, we believe this slowdown will ultimately prove temporary and short-lived as we anticipate a significant increase in industry activity in second half of this year as clarity around the merger drives a ramp in 5G investments,” Brown said.
There is reason for optimism in the next decade as new spectrum is deployed on towers. For example, Dish Networks will be looking to deploy nearly 100 megahertz of spectrum over the next several years as it becomes the fourth facilities-based nationwide carrier. Additionally, the FCC is auctioned off a massive amount of spectrum in the high band and has plans to sell more spectrum the mid band for use in 5G.
“Spectrum auctions on the horizon will bode well for the future tower and small cell demand,” Brown said. “With our unmatched asset base and expertise operating in the best market in the world for communications infrastructure ownership I believe Crown Castle is in a great position to capture these substantial long-term opportunities…”
AFFO per share in 2020 is expected to increase 8 percent in 2020, supported by similar levels of growth in tower and fiber segments that were seen in 2019.
Quotes courtesy The Motley Fool