Crown Castle Weathering the Storm

It’s been quite a year for Crown Castle (NYSE: CCI). Activist investor Elliott Management bought a big stake then called for management changes and an evaluation of whether the company should stay in the fiber/small cells business. This prompted former CEO Jay Brown to retire, Inside Towers reported (Brown Resignation Represents Strategic Shift for Crown Castle). The CCI Board is searching for a new CEO while it conducts a strategic review of the target fiber/small cells business. Through the turmoil, the company performed in line with its guidance and, for the most part, is conducting business as usual.

The company reported full-year 2023 consolidated site leasing and services revenues of $6.98 billion, down one percent on a year-over-year basis. Site rental revenues were up four percent YoY but site services were down by 36 percent, reflecting the slowdown of its national mobile network operator tenants. Adjusted EBITDA grew by two percent to $4.4 billion while AFFO increased by over two percent to $3.3 billion. Capital expenditures were $1.4 billion, up from $1.3 billion in 2022. 

CCI’s flagship tower business is relatively stable. The base of 40,034 towers at the end of 2023 was down by just 15 sites that were sold or decommissioned during the year. The company showed that it operates approximately 90,000 fiber route miles from which it provides fiber solutions for carriers and Enterprises, and which supports its small cell nodes. 

The company says it has 115,000 small cell nodes that are either installed or under contract. CCI had previously indicated that it would install 10,000 small cells in 2023. A total of 8,000 small cells were activated with 2,000 additional nodes completed and expected to begin billing in the first quarter of 2024. 

From a backlog of about 50,000 small cells, CCI says it will deploy another 14,000 small cells in 2024. Interestingly, it pointed out that about 60 percent of the nodes it installs today are colocation sites, meaning two, or sometimes three, MNOs share one small cell node. In just a few years, CCI says its small cell business has gone from majority anchor builds for one MNO tenant to a majority of multiple MNO colocation nodes. 

In the company’s 4Q23 earnings call, interim CEO Tony Melone indicated that the strategic review of its fiber/small cells business is underway and at this junction, all options are still on the table.

With master lease agreements in place with the big three national MNOs, CCI says it has roughly 75 percent of organic revenue contracted through 2027. Its business remains concentrated with the MNOs, however. In 2023, T-Mobile accounted for 36 percent while AT&T and Verizon were each 19 percent, and the 26 percent distributed among all other wireless service provider tenants.

Full year 2024 consolidated site rental billings growth, excluding the impact of Sprint cancellations, is expected to be five percent, including 4.5 percent from towers, 13 percent from small cells, and three percent from fiber solutions.

The full year 2024 outlook for discretionary capital expenditures is $1.5 to $1.6 billion, including approximately $1.4 billion in the fiber segment and $180 million in the towers segment. 

By John Celentano, Inside Towers Business Editor

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