In the second quarter, Crown Castle International saw site rental revenue growth of 35 percent, or $300 million, year over year, but only $49 million of that was organic. Site rental revenues were increased by acquisitions, which totaled $231 million and $20 million came from straight-lined revenues, according to press release distributed after the market closed on Wednesday.
The Organic site rental revenues represent 5.6 percent growth, comprised of 8 percent growth from new leasing activity and contracted tenant escalations, minus 2.5 percent churn.
“No business model is entirely predictable, but tower leasing comes as close to being ‘locked in’ as one could realistically hope. Tower investors wake up each morning, brush their teeth, shower, and collect 1/365th of (domestic) annual gross growth of 6 percent to 8 percent,” wrote Nick Del Deo, MoffettNathanson senior analyst. “There’s obviously more to it than that – churn, guidance changes, sister businesses like international towers or fiber, carrier consolidation risk, and so on – but that’s a fair way to describe the business.”
Matthew Niknam with Deutsche Bank Research noted that Crown Castles site rental revenue and adjusted EBITDA were 1 percent ahead of estimates by his firm and Wall Street, as well as Crown Castle’s guidance, possibly due to AT&T lease extensions.
“Relative to expectations, upside in both stemmed from $9 million in additional straight-line revenues, tied to “term extensions associated with leasing activity,” Niknam wrote. “While the drivers of this are unclear, we note that the weighted average current term remaining for leases with AT&T increased to 6 years, from 5 years last quarter.”
Capital expenditures during the quarter were $393 million, comprised of $10 million of land purchases, $26 million of sustaining capital expenditures, $356 million of revenue generating capital expenditures and $1 million of integration capital expenditures.
The Q2 earnings call will take place tomorrow, providing more details.