Crown Castle Shares Upbeat 2023 Outlook

Dan Schlanger, Crown Castle (NYSE: CCI) CFO, at the recent Citi Communications, Media & Entertainment Conference, shared CCI’s 2023 strategic and operating priorities, commenting, “We have a pretty consistent set of priorities. We want to lease up the assets we already own, and we want to build assets that we think we can lease-up over time.” With mobile data demand escalating, CCI is helping MNO tenants identify where additional infrastructure will be needed to meet that demand in 2023 and beyond.

  • Portfolio synergy advantage

At the end of 3Q22, CCI reported a diverse portfolio of 40,114 towers, 85,000 fiber route-miles and 115,000 small cells on-air and under contract; all in the U.S. CCI’s mix of towers and fiber was instrumental in landing a 15-year agreement with DISH Network. DISH wanted one provider for both towers and fiber so that it could rapidly deploy new cell sites utilizing CCI’s towers and fiber predominantly in urban areas. With the MLA in place and access to 20,000 towers, DISH has incentives to go on as many CCI sites as they can. Once DISH is on a tower, CCI expects long term amendment growth from that site. 

CCI projects its 2023 site leasing revenues to grow 4 percent, compared to a 10 percent jump in 2022 from 2021. Longer term, CCI sees annual leasing revenue growing at 5-6 percent. The company believes the industry is in the middle of a 10-year upgrade cycle as MNOs activate more spectrum and compete with each other on network quality.

  • Tower lease amendments and colocations

CCI derives revenue growth from its existing assets through amendments to established leases and new colocations. MNO new spectrum activations start with amendments because MNOs know what they have on existing sites and amendments allow for faster deployments. Collocating on a new site involves more network engineering, making colocations more expensive. For instance, Verizon deployed C-band spectrum from existing sites but now needs to infill coverage with new sites where C-band does not yet reach.

For 2023, CCI expects install/de-install churn to be 1-2 percent of run-rate revenue but at the low end of that range. The company is planning for most of T-Mobile’s deconsolidation churn to hit in 2025, impacting $200 million of revenue with annual churn settling down to the 1-2 percent range afterwards.

With mobile data consumption doubling every two to three years, MNOs must make significant investments in RAN equipment for mobility and fixed wireless on existing towers and for new small cells. CCI is agnostic as to how MNOs meet that demand but expects to benefit financially from that activity, noting its MLAs do not have a financial cap.

The small cell booking-to-install cycle takes 18 to 36 months to acquire and engineer the sites, construct them, then get them on-air. In the past 18 months, CCI signed contracts for 50,000 small cell nodes – 15,000 with Verizon and 35,000 with T-Mobile. Though building for other MNOs, Verizon and T-Mobile account for most of CCI’s 60,000 node backlog. The company is doubling node installations to 10,000 in 2023, with expectations to build more than 10,000 a year by 2024-2025, as part of the next 5G deployment phase.

  • Fiber and small cell capex

Most of CCI’s small cell capex goes to fiber – not the fiber itself, but the cost of digging up the street, burying the fiber and restoring the street. Colocating a second small cell node on that fiber route requires significantly less capex because there is no need to dig up the street again. With colocations, CCI’s ROI rises from 6-7 percent with the first installation to over 20 percent with incremental installs. Most of the 10,000 nodes CCI will build in 2023 are colocations, basically doubling the revenue for only 10 percent more cost.

By John Celentano, Inside Towers Business Editor

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