Crown Castle International had “great financial results” in the third quarter that “exceeded expectations.” The company expects continued strong leasing activity in the fourth quarter and into 2018. “The Q3 results and 2018 outlook demonstrate how strong our business is performing today and our expectation that those positive trends will continue into 2018,” said Jay Brown, Crown Castle’s CEO.
“[CCI’s] increase in 2018 U.S. new leasing activity, we believe, bodes well for the other towercos,” said Jennifer Fritzsche, senior analyst, Wells Fargo. “CCI’s 2018 guide does not include any contribution from FirstNet build, which we believe offers upside as states finalize and begin deployments.”
Those trends include growth across the board in towers, small cells and fiber optics. In the third quarter, CCI saw $41 million in organic contribution to site rental revenues from 8 percent growth from new leasing activity and contracted tenant escalations, less 3 percent from tenant non-renewals.
“We are seeing each of the carriers work on increasing both the capacity of the network and speed of the networks,” Brown said. “So we are seeing a combination of collocations where the network densified through cell splitting as well as amendments of existing installations to provide additional spectrum bands and/or additional capacity. So it’s similar to what we seen in the past just frankly more of it.”
There was some bad news. Site rental revenues were offset by higher repair and maintenance expenses associated with hurricanes Harvey, Irma and Maria, driven by having tower crews on hand, preparation for the storms, inspections, debris removal and responding to customers following the storms.
But there was even good news about the storm’s impact on the towers, which did not suffer “significant damage.”
“I would like to thank all of our employees who worked tirelessly to help get our customers assets back online. During some very stressful times, they went above and beyond the call of duty,” said Dan Schlanger, Crown Castle CFO.
Tower, Small Cell, Fiber Optic Leasing Activity to be Up Next Year
The forecast for 2018 and beyond is for more growth. CCI’s guidance includes new leasing activity of $205 million, compared with $172 million in 2017. That breaks down to $110 million for towers, which is up from $105 million in 2017; $55 million for small cells, up from $40 million in 2017; and $45 million for fiber solutions, up from $25 million in 2017. Annual escalator revenue of $85 million will be offset by $85 million in churn.
“CCI’s strategy of offering communication infrastructure solutions across macro towers, small cells, and fiber assets is beginning to take hold,” Fritzsche said. “We look for growth to ramp – particularly in small cells and fiber segments – once CCI closes on its Lightower acquisition.”
Fiber, Small Cells, Towers All Work Together
Serving the fiber optic needs of the large enterprises, health care providers, educational institutions and carriers enhances the breadth of CCI’s small cells. Brown described 70 percent of small cell builds as anchored builds where new fiber had to be laid down to backhaul the small cell, leaving 30 percent to be classified as collocations.
“We have built upon our expertise in wireless, including small cells and fiber, in 23 of the top 25 markets, pro forma for the pending Lightower Fiber Networks acquisition,” Brown said. “Our win rates for small cells continue to be half of the total activities in the market, which is consistent to the last few quarters at least maybe the last year or so.”
Brown described CCI’s interest in Vapor IO, a microdata center company, which it purchased in June, as a “trial small investment.” CCI is on a learning curve when it comes to mobile edge computing and is not ready to make a commitment, he added.
“I would describe mobile edge computing as one of the areas that we believe has the potential to provide upsides to our revenue cash flow growth as well as returns and extends the runway of growth from the infrastructure over a long period of time,” he said. “We are keeping our eye on it and positioning ourselves to benefit from it.”
Quotes in this article courtesy www.seekingalpha.com