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Industry Honors Mobile Infrastructure Hall of Fame Inductees

By J. Sharpe Smith, Senior Editor

Ray

Six weeks ago, few people knew there even was a Mobile Infrastructure Hall of Fame. But as WIA President and CEO Jonathan Adelstein took the stage for the first induction ceremony in a crowded room of 500 of the industry’s leaders, it felt like there has always been one. Or at least there was a pent-up demand for one.

“Today, these five honorees come from companies with a combined market cap of around $200 billion. They employ nearly 100,000 people and growing. And they’re driving the innovation economy with wireless broadband few dreamed possible in the flip phone era,” Adelstein said. “These five leaders are inducted tonight because of their foresight, their vision, and their tenacity. Each faced down challenges — and overcame them all.”

Gathering the top wireless CEOs and others at a ballroom in Washington D.C. on a Wednesday night in mid-November to honor its best had another altruistic goal. It raised $500 thousand for the WIA Foundation in support of training, education and apprenticeships.

Bernstein

“Tonight, the [inductees] lend us their presence because each believes — with us — that another challenge lies ahead for the wireless industry. To build world-class 5G networks — we need a world-class 5G workforce. Together, we’re taking steps to meet that challenge — building a workforce that’s worthy of this great industry,” Adelstein said.

The evening was attended by such notables as FCC Chairman Ajit Pai, Commissioners Michael O’Rielly and Brendan Carr, U.S. Sen. Steve Daines, and other guests from the FCC, Congress and the Administration.

The inaugural class of Hall of Fame inductees included: Neville Ray, CTO, T-Mobile; Steven Bernstein, founder, former CEO and current board member of SBA Communications; Steven Dodge, founder, former CEO, American Tower; John Kelly, former CEO, Crown Castle; and Jose Mas, CEO, MasTec Network Solutions.

Dodge

John Legere, president and CEO of T-Mobile, lent his star power and sense of humor in a heartfelt tribute to Ray, who has 25 years of wireless experience and has led the carrier through the LTE roll out, from the zero POPs in 2012 to 324 million POPs today. The first 200 million POPs were built in six months. He also pushed new technology into the field, including Wi-Fi calling, VoLTE, License Assisted Access and 4X4 MIMO and 256 QAM.

“Neville Ray is truly a genius,” Legere said. “This is a guy that gets things done. You give him the goal and the resources, and you just know that it will be done. You get out of the way.”  He joked that Ray’s budget of $50 billion also played a key role in the success. “Give the guy some cash and he makes it happen.” Ray later clarified that he only got $40 billion.

Jeffrey Stoops, president and CEO, SBA Communications, praised Bernstein’s decision-making ability and leadership qualities.

“He can quickly and incisively distill complex issues down to straightforward decisions has been a critical part of our success,” Stoops said. “More importantly, it’s his entrepreneurial spirit and his values, including honestly, integrity, fair play, quality, customer service and hard work, that Steve instilled in SBA that remains a driver of our continued growth and success.”

Kelly

Jim Taiclet, chairman, president and CEO, American Tower, said Dodge has been a “true trailblazer” for the tower industry, and has served as innovator throughout his 40-year career, which included banking, media and telecom.

“He founded and took public three pioneering companies. The first was American Cable Systems, which he grew into an industry leading position and sold to Continental Cable. Then he went on to American Radio Systems, which was sold to CBS, and then American Tower Corporation. The only flaw in Steve’s plan was an apparent lack of creativity with company names.”

Ben Moreland, former CEO of Crown Castle, introduced Kelly as the “most wonderful person” he has ever known. Kelly served as a mentor to Moreland and “set a high bar as a humble leader and a really nice guy,” Moreland said. Kelly was CEO of Crown from 2001 to 2008 and remained on the board for a number of years afterward.

“He inspires people to be the best they can be,” Moreland said. “He instilled a very customer-centric focus that required us to always think about a win-win situation with the carriers.”

Mas

After Mas became CEO of MasTec, the company grew to 22,000 professionals nationwide, quadrupled its revenues, increased earnings six-fold, and reached a ranking of 428 in the Fortune 500, O’Rielly said in his introduction.

Additionally, Mas diversified MasTec beyond telecom construction into renewable energy, oil & gas and electric transmission, among others.

“Mr. Mas is not just as successful businessman. He is a long-time leader in the Miami-Dade United Way’s Toqueville Society, which donated $15 million to improve lives last year. Most recently Mas and his brother Jorge joined a consortium with David Beckham to raise $25 million to bring a new Major League Soccer team to Miami,” O’Reilly said.

Headwinds Buffet Strong Growth at CCI

By J. Sharpe Smith —

November 4, 2014 — Crown Castle International’s President and CEO Ben Moreland had good news about the health of tower leasing, saying the long-term industry fundamentals are sound during the company’s third quarter earnings call.

“Looking ahead to 2015, we expect leasing activity from new tenant installations and amendments to existing leases to remain robust and similar to our expectations for 2014, as all four major wireless carriers continue to upgrade their networks to meet consumer demand,” he said.

But the news was not all good. CCI’s growth for 2015 will be slowed by $65 million of non-renewals from the final year of the Sprint iDEN decommissioning, as well as $40 million from network rationalization of Metro PCS, Leap and Clearwire legacy networks.

Although Moreland said continued strong gross leasing activity would drive double-digit organic growth in the next year, the effects of the rationalization are now expected to last beyond next year, resulting in organic growth of 6 percent to 7 percent.

Wall Street reacted badly to the news about the decommissioning headwinds sending the stock down several points. Analysts were all over the place; some upgraded CCI and others downgraded it. RBC Capital Markets trimmed its price target from $90 to $83 for CCI based on lower site rental revenue and AFFO growth forecasts, according to Analyst Jonathan Atkin. On the other hand, Goldman’s Brett Feldman upgraded CCI, lauding its “attractive combination of dividend yield and dividend growth.”

Wells Fargo Senior Analyst Jennifer Fritzsche was on the fence. “We remain on the sidelines given the more muted 2015 outlook, and reiterate our Market Perform rating on CCI shares,” she wrote.

Crown Castle chose the earnings call to announce an increase in its dividend from $1.40 per share to $3.20 per share, a 134-percent increase. The move was seen as a response to activist investor Corvex Management’s call for the tower company to “correct its capital allocation plan” if it wants to bid on the Verizon towers. Moreland said the timing was right to give back more to shareholders.

“We acknowledge that our organic growth rate in the future is likely to be lower than in the past, partly because of the law of large numbers and the headwinds associated with the carrier consolidation on non-renewals we expect over the next three to four years,” Moreland said. “Thus, we believe a larger component of our shareholders’ total return appropriately should come from the current distribution of our very high-quality contracted revenues, primarily serving the four national U.S. carriers.”

The dividend will be paid with 75 percent of CCI’s AFFO, leaving 25 percent to fund organic growth, according to the company. Moreland said future organic growth opportunities will not require a lot of capital to pursue.

“Opinions among shareholders and the investment banks were split between support for distributing a high percentage of our AFFO in the form of dividends and desire for us to maintain a lower payout and continue to retain more flexibility to purchase shares opportunistically,” Moreland said. “We have sized the dividend to retain 25 percent of AFFO, which we believe is necessary to pursue all of our organic growth plans and sustain the business appropriately.”

Moreland did not make any announcements on a possible Verizon tower bid, but said additional acquisitions are on the table. “We will continue to seek external growth through further acquisition opportunities when such acquisitions cover the cost of the new capital and allow us to increase the dividend over time,” he said.

Crown Castle See Big LTE Collo Growth in 2Q

With all four major U.S. carriers making major network upgrades, tower companies continue to be the beneficiaries in increased leasing activity. Crown Castle saw revenue from additional tenants double in the second quarter, reflecting the shift in activity to in-fill sites collocation on small cells as well as macrocells, Ben Moreland, Crown Castle president and CEO, told the second quarter earnings call.

“This densification activity is the expected second wave of the LTE network deployment and provides us with a longer runway of expected future growth as carriers strive to improve network quality and to add capacity through cell splitting in the face of continued growth in mobile technology demand, he said.

The cellular industry is seeing a faster adoption of smart phones, compared with the initial uptake of 3G phones, which Moreland said the tower company uses to gauge where the industry is in the technology cycle, as well as the long term growth trends.

“To gain a framework for LTE build-outs, it is useful to compare how the 4G subscriptions is trending compared with 3G subscriptions historically,” he said. “From 4Q 2010 to the 3Q 2012, the first eight quarters of LTE, we have seen subscriptions significantly outpace the initial eight quarters of 3G, which began 1Q 2003.” LTE user growth could top 180 million by the end of 2013 and 260 million by 2017, he added.

Site rental gross margin, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted funds from operations (AFFO) for the second quarter all exceeded Crown’s expectations, according to Jay Brown, Crown Castle’s chief financial officer.

“As a result of our strong results in the second quarter and the significant increase in new leasing activity, we have increased our full year 2013 outlook, which now suggests annual site rental revenue and AFFO per share growth of 17 percent and 35 percent, respectively,” Brown said. “In addition, we continued to invest in activities we believe will maximize long-term AFFO per share, including purchases of our common shares and the construction of small cell networks.”

During the second quarter of 2013, Crown Castle invested $101 million in revenue-generating capital expenditures, including $66 million on existing sites and $35 million on the construction of new sites, primarily small cell networks. Additionally, acquisitions accounted for $14.5 million in capital expenditures.

“CCI’s report is significant in our view in that it should set the tone for the other tower companies’ (AMT and SBAC) reports to follow. As we have written, we continue to believe the overall tone of these reports will reflect a bullish outlook regarding domestic wireless spending,” Jennifer Fritzsche, senior analyst, Wells Fargo, wrote in an equity research note.

 

1Q Signals Start of Phase 2 of LTE – Moreland

The next wave of tower leasing, network densification, has taken root, Ben Moreland, CEO, president and director of Crown Castle International, told the company’s first quarter earnings call.

With all four major U.S. wireless carriers engaged in major network upgrades, Crown experienced a significant amount of activity in the first quarter, logging more than 75 percent of the 2013 leasing activity into its application pipeline.

Application volume by revenue in the first quarter grew at twice the pace of last year, and 60 percent of that number was from new tenants collocating on towers they were not previously on.

“This is a trend we have been anticipating for some time, as some of the carriers are nearing completion of their LTE nationwide build out,” Moreland said. “We have been expecting to see in-fill sites, or densification, as a second wave of LTE network deployment, providing us with a longer runway of expected future growth as the carriers strive to maintain network quality and reliability through cell splitting in the face of exponential growth in mobile technology demand.”

Given the location of 74 percent of Crown’s sites in the top 100 markets, the company expects to benefit from the majority of network densification through new leases. Overall, LTE deployment should be the gift that keeps on giving to the tower industry into the future, Ted Abrams, Abrams Wireless, told AGL Bulletin.

“Working with clients deploying LTE, and those responding to major carrier requests, I see strong indications that LTE deployments are only just beginning. Evidence indicates demand growth for wireless network infrastructure — assets that support and connect small cells and macros – continuing for many years to come,” Abrams said.

 

Crown Castle’s T-Mobile Tower Buy a Win-Win

Crown Castle International’s purchase of T-Mobile USA ’s 7,200 towers for $2.4 billion in cash late in September not only helps fund the carrier’s LTE build out, but it also reinforces its position as the largest U.S. tower company with 30,000 towers and small cell operations in over 50 markets. Both of which are good news for the tower industry.

“T-Mobile is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort,” said John Legere, T-Mobile’s recently hired CEO, in a prepared release.

The urban locations of T-Mobile’s towers ­­– 83 percent of them are in the top 100 markets and 72 percent are located in the top 50 markets – were a good fit for Crown Castle.

“Consistent with our focus on the top 100 U.S. markets, the T-Mobile assets are expected to provide significant growth driven by the continued demand for wireless data services, particularly in the most densely populated areas in the United States,” Ben Moreland, Crown Castle’s president and CEO, said in a prepared release.

According to RBC Capital Markets Analyst Jonathan Atkin, T-Mobile’s financial stability was the key result from the tower sale. “In our view, the tower deal will have little operational impact on Deutsche Telekom or Crown Castle, and serves mainly to provide Deutsche Telekom with financial flexibility for pursuing its U.S. LTE build,” Atkin writes.

Crown Castle estimates that the T-Mobile towers will produce $125 million to $130 million in adjusted funds from operations before financing costs in 2013, and have sufficient capacity to accommodate at least one additional tenant per tower without significant incremental capital.  T-Mobile has committed to maintain its communications facilities on the towers for a minimum of 10 years with annual rent escalation provisions tied to the consumer price index.  Further, T-Mobile’s rent includes the rights, subject to certain limitations, to complete its current network modernization on these sites.

Crown Castle announced on Wednesday that it is offering $1.65 billion in senior debt to finance the T-Mobile tower transaction. It will also use cash on hand and funds from its revolving credit facility.