Crown Castle International’s first quarter results reflected a robust 5G leasing environment, positioning the comm-infra firm for double-digit growth in both AFFO per share and dividends per share for the full year 2021, according to Jay Brown, Crown Castle’s CEO.
“We have seen a significant increase in activity as our customers have started to upgrade their networks to 5G at scale,” Brown said during Crown’s first quarter 2021 earnings call. “We expect this elevated level of activity to result in a year of outsized growth for Crown Castle, as we now anticipate 11 percent growth in AFFO per share for the full-year 2021, meaningfully above our long-term annual target of 7 percent to 8 percent.
Site rental revenues in the quarter grew 5 percent, or $59 million, year over year, including an $82 million organic contribution and a $24 million decrease in straight-lined revenues. Organic leasing growth represented a 6.3 percent gain, minus 3.1 percent in churn.
Brown believes Crown’s portfolio of tower, small cell and fiber assets will benefit from a decade-long investment cycle as customers develop next-generation wireless networks.
“We believe our ability to offer towers, small cells and fiber solutions, which are all integral components of communications networks and are shared among multiple tenants, provides us the best opportunity to generate significant growth while delivering high returns for our shareholders,” he said. “Based on the expected growth in data traffic and wireless carrier network investment, we believe the United Sates represents the highest growth and lowest risk market in the world for communications infrastructure ownership, and we are pursuing that opportunity with our comprehensive offering.”
Crown Castle entered into a series of strategic agreements in recent months that highlights the role of its shared infrastructure in the next generation of wireless, including a 15-year agreement with Dish Network to support its nationwide 5G buildout and long-term 5G small cell and tower agreements with Verizon.
“We believe this [tower] agreement will deliver significant value for both parties, as it establishes terms for leasing additional capacity on existing tower sites, with a structure that is intended to make it easier to expedite the deployment of C-band equipment over the next several years,” Brown said. “The agreement also resulted in an increase in the average remaining current contracted lease term under our Verizon site leases to approximately 10 years.”
The Analyst Point of View
Nick Del Deo, senior analyst, MoffettNathanson, noted that 2021 “appears as though it will be broadly similar to 2020 from a domestic leasing perspective” for the tower space. He listed the numerous drivers at work in the wireless world, but said the awaited spurt in tower growth will not take effect this year.
“The list of drivers that are poised to bolster 2022 (and 2023) growth, include T-Mobile’s 2.5 GHz deployment; C-band deployments; and Dish Network’s entry into the market,” Del Deo wrote. “T-Mobile is moving full steam ahead to press its upper mid-band spectrum advantage, with a target of 200 million POPs covered by its 2.5 GHz holdings by year-end. On the C-band front, Verizon has made clear that it plans to move as expeditiously as possible to put its $45 billion investment to work, with several thousand sites expected to be on-air by year-end; the MLAs it announced a few days ago with Crown Castle and SBA are consistent with this goal (AT&T won’t be moving as aggressively). And Dish Network is under the gun to get moving on its rollout, with work expected to pick up in the second half of 2021; earlier today, it announced its first market, Las Vegas, and a plan to rely on AWS’s cloud infrastructure.”