May 24, 2017 —
When it comes to macro towers versus small cells, for large tower company leaders who spoke about it during the Wireless Infrastructure Show, there is no “versus.” For Steven Marshall of American Tower, for example, small cells deployed in urban areas outside of buildings are complementary to the macro overlay. Speaking in the session, “View from the Top,” the executive vice president of American Tower and president of its U.S. Tower Division, said outdoor small cells add capacity in dense urban areas where there is a lot of demand for data coverage. He said American Tower has not entered into the small cell market in any way, for lack of the right business model for the company.
Jay Brown, president and CEO of Crown Castle International, said his company has built more than 20,000 small cells, which he sees as complementary to the company’s macro towers. Most of those small cells are in the top 10 U.S. markets. Brown said more small cells are on the way, with Crown having another 20,000 under contract, mostly for construction in the top 20 U.S. markets.
“We’re finding those systems being built in relatively close proximity to existing macro sites,” Brown said. “We don’t perceive it at all as a threat to the macro sites because the macro sites continue to be the most cost-effective, efficient way for the carriers to deploy the network. So, if we were to take a near-term view or a really long-term view, our view is that macro sites are going to continue to be the most cost-efficient way for the carriers to deploy network infrastructure.”
Brown said that given the amount of data that consumers are using, it isn’t possible to place enough macro sites to reuse the spectrum in ways that fully meet that demand. “So, we describe it as an overlay-underlay strategy. Think about it as small cells being the lamp in the room and macro sites being the large overhead light. Large overhead lights do exactly what towers do: They provide broad coverage and cover large geographies. You also need lamps in a room to accentuate a room and improve coverage over a small area. That’s what they’re using small cells for. We see it as very complementary.”
In places where macro sites will meet the data demand and small cells are not needed, Brown said he didn’t believe small cells will be developed. This includes large portions of the country, where, in the long term, the networks will be run almost entirely by macro sites. He said he expects wireless carriers to use a combination of macro sites and small cells in dense urban areas.
Moreover, Brown said tower companies have long contractual terms on the macro sites. When a carrier signs on to a new tower, he noted, it commits to 10 to 15 years. “We’re seeing them commit to those 10 to 15 years and at the same time we’re working with them in the same neighborhood on small cells,” he said. “They don’t view them as anything other than complementary in order to accomplish their network goal. We believe that’s the way the network is going to continue to develop.”
Jeffrey Stoops, president and CEO of SBA Communications, said his company’s investor base has been keenly interested in the question of small cells versus macro sites since the dawn of small cells. He said that in all the years since the issue has ripened, he is unaware of a single macro site that has been taken down and replaced by small cells.
“You use macros to provide your basic coverage, and then you go back in where necessary and add small cells for capacity,” Stoops said “That’s how our customers think about it. That’s how engineers think about it. I feel more convinced than ever that it is a very complementary architecture and not competitive.”
Alexander L. Gellman, CEO and cofounder of Vertical Bridge, offered an alternative view, suggesting at least a slight amount of competition. He said small cells compete with macro sites on the margins. “I think about it as geography,” he said. ”There is certain geography where small cells make the most sense in terms of cost per megabit and density delivered. There are areas where small cells never will make sense, which is the vast majority of the land mass of the United States. But I believe the carriers will seek the lowest cost per megabit delivered, and ultimately, on the margin, there will be some competition between when do they deploy small cells or when do they deploy macros. The size of that geography will be a function of the relative cost of the two types of sites. I don’t believe you will see small cells replace macro sites. It won’t go that far, at least not for a long time. That’s never happened, anywhere.”
David Weisman, president and CEO of InSite Wireless Group, said the small cell application is complementary to macro sites. He said the competition probably is for the capital allocation dollar, exactly what the carriers are going to spend in a year. “The pie of allocation is but so large, and the carriers now are going to allocate X for macro, Y for DAS and Z for small cells,” he said.
Gellman said he has seen geography where one carrier will have a distributed antenna system, and another carrier will ask for a tower to be built in the same location. “That tells me ultimately there is some layer where there’s a choice, or that the carriers believe there’s a choice,” he said.
April 25, 2017
Crown Castle International reported steady levels of tower activity and record levels in the pipeline of its small cells business during the company’s first quarter 2017 earnings call.
Jay Brown, Crown Castle’s CEO, said the runway is positive for long-term growth driven by FirstNet and the incentive auction. Additionally, the company expects to install almost 25,000 nodes expected in the next two years, doubling the number of its installed base. Indeed, Crown is increasing its small cell rollout capabilities toward the goal of deploying 10,000 nodes per year.
Site rental revenues grew 7 percent, or $58 million, from first quarter 2016, including of $34 million in organic contribution to site rental revenues plus $40 million from acquisitions, less a $16 million reduction in straight-line revenues. Organic growth came in at 4 percent, comprised of 8 percent growth from new leasing activity and contracted tenant escalations, net of 4 percent churn.
Capital expenditures during the quarter were $262 million, including $21 million of land purchases, $16 million of sustaining CapEx and $225 million of revenue generating capital expenditures.
During the quarter, Crown Castle announced that it had agreed to purchase fiber provider Wilcon, and it also closed on its previously announced acquisition of FiberNet for approximately $1.5 billion.
February 2, 2017 — Crown Castle International has priced its previously announced public offering of 4.0 percent Senior Notes due 2027 in an aggregate principal amount of $500 million. The notes will have an interest rate of 4.0 percent per annum and will be issued at a price equal to 99.578 percent of their face value to yield 4.051 percent.
The net proceeds from the offering are expected to be approximately $493 million, after deducting the underwriting discount and other offering expenses payable by Crown Castle. Crown Castle intends to use net proceeds from the offering to repay a portion of the outstanding borrowings under Crown Castle’s senior unsecured revolving credit facility.
Barclays, J.P. Morgan, Mizuho Securities, RBC Capital Markets and TD Securities are the joint book-running managers of the offering.
The offering is being made pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission (“SEC”). The offering will be made only by means of a prospectus supplement and the accompanying base prospectus, copies of which may be obtained by contacting any joint book-running manager using the information provided below. An electronic copy of the prospectus supplement, together with the accompanying prospectus, is also available on the SEC’s website, www.sec.gov.
January 25, 2017 — Crown Castle International today reported results for the quarter and year ended December 31, 2016.
“Our strong fourth quarter and full year 2016 results and increased Outlook for 2017 demonstrates our continued focus on executing for our customers,” stated Jay Brown, Crown Castle’s Chief Executive Officer. “During 2016, we increased our dividends per share by 8percent, exceeding our long-term goal of 6 percent to 7 percent annual growth. With our recent acquisition of FiberNet, which closed in January, we now own approximately 40,000 towers and over 26,500 route miles of fiber in key metro markets throughout the US. We believe our extensive portfolio of shared wireless infrastructure positions us well to continue to serve our customers’ needs as they seek to upgrade and enhance network quality and capacity to meet increasing demand for wireless connectivity. We believe the expected substantial growth in demand for mobile data over the next several years provides us the opportunity to drive organic growth through higher utilization of our existing assets, while allowing us to deploy capital towards new assets that we expect will enhance long-term growth in our dividends per share.”
HIGHLIGHTS FROM THE QUARTER
Site rental revenues. Site rental revenues grew approximately 4 percent, or $32 million, from fourth quarter 2015 to fourth quarter 2016, inclusive of approximately $39 million in Organic Contribution to Site Rental Revenues plus $10 million in contributions from acquisitions and other items, less a $17 million reduction in straight-line revenues. The $39 million in Organic Contribution to Site Rental Revenues represents approximately 5 percent growth, comprised of approximately 8 percent growth from new leasing activity and contracted tenant escalations, net of approximately 3 percent from tenant non-renewals.
Capital expenditures. Capital expenditures during the quarter were approximately $260 million, comprised of approximately $17 million of land purchases, approximately $42 million of sustaining capital expenditures and approximately $201 million of revenue generating capital expenditures.
Common stock dividend. During the quarter, Crown Castle paid common stock dividends of approximately $343 million in the aggregate, or $0.95 per common share.
Share count. Per share results during fourth quarter and full year 2016 were impacted by 11.4 million shares of common stock issued in November 2016 in contemplation of funding the previously announced acquisition of FPL FiberNet Holdings, LLC and certain other subsidiaries of NextEra Energy, Inc. (collectively, “FiberNet”). The acquisition of FiberNet was completed on January 17, 2017 and did not contribute to results during 2016. The share issuance in November 2016 increased the weighted-average common share outstanding on a diluted basis for fourth quarter and full year 2016 by approximately 7 million shares and 2 million shares, respectively.
HIGHLIGHTS FROM THE YEAR
Site rental revenues. Site rental revenues grew approximately 7 percent, or $215 million, from full year 2015 to full year 2016, inclusive of approximately $189 million in Organic Contribution to Site Rental Revenues plus $90 million in contributions from acquisitions and other items, less a $64 million reduction in straight-line revenues. The $189 million in Organic Contribution to Site Rental Revenues represents approximately 6 percent growth, comprised of approximately 9 percent growth from new leasing activity and contracted tenant escalations, net of approximately 3 percent from tenant non-renewals.
Capital expenditures. Capital expenditures during the year were approximately $874 million, comprised of approximately $75 million of land purchases, approximately $90 million of sustaining capital expenditures and approximately $709 million of revenue generating capital expenditures.
Common stock dividend. During the year, Crown Castle paid common stock dividends of approximately $1.2 billion in the aggregate, or $3.605 per common share.
“In addition to generating strong results during 2016, we also enhanced our leading portfolio of wireless infrastructure with the acquisition of Tower Development Corporation and continued expansion of our small cell footprint, including announcing the acquisition of FiberNet and completing the integration of Sunesys,” stated Dan Schlanger, Crown Castle’s Chief Financial Officer. “During the year, we also made significant progress in increasing our financial flexibility by increasing the average maturity of our debt, lowering our average interest rate and achieving investment grade credit ratings, which reflect the quality and stability of our business and cash flows. With these accomplishments, together with our position as the leading wireless infrastructure provider in the US, we believe we are well-positioned to continue our track record of delivering on our goal of generating 6 percent to 7 percent long-term annual growth in dividends per share.”
December 22, 2016 —
The idea of a small cell as a standalone structure serving one carrier was replaced in 2016 by large networks of small cells connected by miles and miles of fiber that serve multiple carriers and, therefore, make them economically feasible.
While the tower business was good for Crown Castle International in 2016, the majority of its capex went to its small cell business, which comprised 16,500 miles of fiber. Although small cells accounted for $385 million, or 12 percent, of annualized site rental revenues, it is obvious Crown Castle sees a bright future in them.
“We are as excited as we have ever been by the opportunities in small cells,” Jay Brown, Crown Castle CEO, said during an earnings call. “Our small cell conversations with the carriers have increasingly become more positive with the passage of time and we are seeing the business model of small cells play out very similarly to that of towers.”
Crown Castle illustrated that the economics of small cells depended on collocating multiple carriers on a network of fiber infrastructure threaded through the cities. In Denver, it has 17 miles of fiber connecting 65 tenant nodes on 26 poles. The system it has in Las Vegas consists of 36 miles of fiber supporting 77 tenant nodes on 77 poles.
Small Cells Take Hold Indoors
CommScope showed Sprint how to add coverage to small and medium-size businesses with small cells in May, enabling a turnkey wireless solution for both employees and visitors as part of Sprint’s network densification plan.
The market is ideal for small cells, according to Rod Gatehouse, CommScope vice president, product line management and marketing for small cells. Gatehouse was formerly with Airvana, which CommScope acquired in late 2015.
The commercial deployments showed that it made sense to combine LTE small cells with Wi-Fi antennas. Based upon Qualcomm FSM small cell and Qualcomm VIVE Wi-Fi chipsets, the S1000 supports both 2.5 GHz TD-LTE and 802.11ac dual-band, dual-concurrent Wi-Fi, allowing Sprint to provide managed Wi-Fi hotspot services to enterprises such as retail and restaurant chains.
Nokia, Telfonica Replace DAS with Small Cells in Chile Shopping Center
In May, Nokia and Telefónica Chile completed a small cell development in a six-floor, 551,000-square-foot shopping center in Santiago, Chile, the largest retail development in South America.
Nokia replaced and upgraded the existing DAS with high-capacity, high-coverage Flexi Zone small cells network. Nokia’s Flexi Zone small cell technology provides a cost-effective alternative to DAS, offering faster data speeds and supporting a higher number of subscribers. Ease of deployment and the ability to upgrade 3G small cells to 4G LTE will allow Telefónica Chile to scale capacity as customer demand continues to evolve.