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Q3 Exceeds Expectations for Crown Castle

October 27, 2016 —

By J. Sharpe Smith

Senior Editor
AGL eDigest

J. Sharpe SmithExceeding its expectations, Crown Castle International (CCI) has reported $812 million in site rental revenues in the third quarter 2016, a 6 percent increase over last year.

“Crown completed another great quarter of financial results that exceeded our expectations,” said Jay Brown, Crown Castle’s CEO, during the earnings call. “The leasing environment continues at a healthy pace in both towers and small cells, allowing us to once again increase our full year outlook for 2016.”

The towerco also increased its dividend by 7 percent, reflecting that it expects continued growth into next year. Additionally, site rental revenue of $3.33 billion is projected for 2017, up 3.1 percent year over year.

“We believe the healthy leasing environment will continue into 2017, including $15 million in growth from small cells and similar growth in towers as compared with 2016,” Brown said.

While leasing revenue will see a drag from the amortization of prepaid leasing next year, Crown will continue to see steady progress from wireless carriers on its macro towers and outsized growth from its small cells segment, according to Wells Fargo Senior Analyst Jennifer Fritzsche.

“While we remain on the sidelines for now, we do believe we are approaching a point where headlines could go in CCI’s favor (note: if AT&T comes back it should be most positive for CCI of the three tower companies given its exposure to the AT&T portfolio),” Fritzsche wrote.

Brown highlighted the towerco’s small cell investments, noting that, to date, the company has invested $2.6 billion including $1 billion in NextG Networks and $1 billion in Sunesys.

“These investments have resulted in that business now generating more than $400 million per year of site rental revenues and a recurring yield of 6 percent to 7 percent,” said. According to Wells Fargo statistics, small cells represented 12.6 percent of Q3 rental revenue, or $102 million.

Brown also provided color on how small cells have expanded since 2013 in Chicago when they inhabited only the central business district (300 tenant nodes on 100 miles of fiber) to today where they have expanded to cover the surrounding suburbs (1,150 tenant nodes on 200 miles of fiber).

“Chicago is representative of what we are seeing throughout major U.S. metro markets, which is why we remain so bullish on the opportunities we see in small cells,” he said.