Speaking at the RBC Capital Markets’ Global Towers and Wireless Infrastructure Summit on Sept. 28, Dan Schlanger, chief financial officer of Crown Castle International, talked optimistically about macros, small cells, fiber-optic networks, new leasing opportunities and maintaining the wireless infrastructure giant’s 6 percent growth for 2022 and beyond.
According to Crown Castle, the company operates and leases more than 40,000 cell towers and about 80,000 route miles of fiber-optic cable supporting small cells and optical fiber services in every large U.S. market.
Schlanger said that he believes Crown Castle is in the early stages of a long-term 5G investment cycle that could last for a decade. However, he tempered his mostly optimistic outlook with cautions of future supply chain disruption, product shortages and other potential roadblocks to building infrastructure.
“Yes, we’re excited about where we are and optimistic about the future, “Schlanger said. “In 2021, our guidance is for our tower business to grow at about 6 percent on — at the revenue line, which is an industry-leading figure… . But beyond that, what we’re seeing is what we believe is kind of the first foray of our customers into investing in the 5G network at scale.”
Schlanger’s bright outlook is supported by what he sees as Crown Castle’s highest level of application activity in the company’s history. “We think that there’s no reason to believe that our new leasing activity on our tower business would be any less going into 2022,” he said.
“As our customers are providing and investing in our growth and our capabilities, we think that our business is uniquely positioned to take advantage of new opportunities,” Schlanger said. “And that’s because we’ve spent the last several years and almost a decade of building a small-cell and fiber network that we think will allow us to benefit no matter where the spend happens in the network.”
Schlanger said that growth in all of Crown Castle’s businesses starts with new leasing activity.
“When we’re looking at 2021, our new leasing activity for our tower business is between $150 million and $160 million; when we looked at the churn, I mean the escalator side of that, it’s just below 3 percent of our revenue is going to escalate,” he said. “So, we will have about a little under 3 percent growth from escalators, and the churn for 2021 is going to be on the lower end of our 1 percent to 2 percent long-term churn expectations for our tower business. When you add all those things together, that’s how we get to the kind of the 6 percent growth of revenue in 2021 for our tower business.”
Looking at 2022, Schlanger said that he sees no reason to believe that the new leasing activity portion of that trend will be any different.
“And that’s inclusive of everything that you would talk about in terms of what our agreements look like, what our activity looks like and how we’re going to monetize,” he said. “We feel good about what’s coming up and the ability for us to grow our business going into 2022.”
Schlanger tempered his outlook by cautioning about the possibility of future supply chain issues, equipment shortages and labor shortages.
“We have not yet seen any of those issues impact our business in any substantial way,” he said. “Therefore, I don’t think that those issues will have a significant impact on our ability to perform in 2022 — but obviously things could happen that would result in some downward pressure to the extent that we do see supply chain disruptions, either on the equipment or on labor side.”
The executive also said that there is a chance that Crown Castle overestimated its long-term investment cycle.
“Sometimes we make educated estimates of what we think our activity will be and what demand will look like moving forward, but it could be that we started really strong in 2021, and it slows down for a little bit, which, again, we don’t believe that is going to happen,” Schlanger said. “But we could be wrong about those activity levels and what our customers ultimately end up spending money on.”
Crown Castle’s chief financial officer also said that he feels comfortable about the company’s ability to be flexible to customers’ capital demands.
“They have a lot of demands for that capital, whether for paying off debt or increasing dividends or buying back stock or investing in their network or investing in the core of the network versus the radio access network part of it, where we provide how much they’ve invested in small cells versus towers and all those things we’re making, and what we think are very reasonable estimates,” Schlanger said. “The level of demand is always the thing that is most difficult for us to predict the timing on, even if we know that that demand is coming.”
Schlanger summed up by reiterating the strength of Crown Castle’s long-term 5G investment cycle.
“In order to meet the benefits of 5G, we believe that there is a lot of investment customers need to make to upgrade networks and add equipment to deploy more spectrum…” Schlanger said. “We feel good about our customers competing with each other on network quality, and their customers — consumers — have come to expect network quality and will ultimately make decisions to move to other networks if the quality isn’t there. Spending on the network itself typically has been a pretty high priority for our customers.”
Mike Harrington is a contributing editor.