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CROWN CASTLE INTERNATIONAL CORP.

(CCI)
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Crown Castle International REIT : expects 20% core tower leasing surge in 2022

10/25/2021 EST

U.S. carriers are not slowing down on 5G network deployments, driving Crown Castle to expect a 20% surge in core leasing tower activity next year compared to 2021 - a year that's already seen high levels.

According to Crown Castle, the 2022 expectation is 50% higher than the company's trailing 5-year average.

"The amount of leasing activity we're seeing in the business is just unprecedented, 50% above our historical 5-year average in terms of core activity is just remarkable," said Crown Castle President and CEO Jay Brown during the tower company's third quarter earnings call. "A business that rarely has inflection points, to see that kind of uplift in activity is just really unique."

It's been two decades since Crown Castle has seen the kind of activity levels happening now, he added. It's largely driven by all three major carriers rolling out 5G, as well as Dish Network entering the mix in building a new nationwide 5G network from the ground up - the latter contributing to the most colocation activity in Crown Castle's history.

"Among Verizon, AT&T and T-Mobile, all three of them are at a place where they're deploying network at scale, both new sites as well as upgrading existing sites to 5G," Brown said. "So that's a very healthy dynamic to have all of the existing carriers spending at a pretty healthy rate."

RELATED: SBA: Dish, Verizon very busy in Q2

Core leasing is a new metric Crown Castle decided to break out for investors in Q3 to provide more details around future expectations, saying it gives a better indication of activity for the current period by excluding rent changes that relate to activity in prior periods.

It's worth noting that there's a lag time between booking a tower and when revenue shows up on financials, which CFO Daniel Schlanger said happens once a lease is active meaning the site is up and running and spectrum can be deployed.

"When we look at 2022, we're really excited by how that's going because as Jay [Brown] had mentioned, the increase in activity is flowing through both in 2021, which has a 30% increase in core leasing tower activity over 2020 and then again, in 2022, where we're increasing again by 20%," Schlanger said, adding that "those are huge numbers when you're talking about our business."

RELATED: Labor, supply chain pinch not impacting Crown Castle's outlook

For 2022 Crown Castle expects $340 million in core leasing at the mid-point of its range, including $160 million for towers. While that coincides with the 20% increase over 2021, its fiber and small cell business core leasing is expected to decline versus this year. Crown Castle expects $30 million in core leasing from small cells next year compared to an expected $45 million this year, and $150 million for fiber services compared to $165 million this year.

Overall, for the full year 2022 the company expects organic 5.5% annual growth for towers, 3% growth for its fiber business and 5% growth for small cells, contributing to site rental revenues between $245 million and $285 million.

Executives see Crown Castle's small cell and fiber businesses playing a key role as carrier dollars start to shift from macro sites to densification in the coming years.

The company has about 40,000 U.S. macro sites and 80,000 route miles of fiber focused on top markets. The company expects to deploy around 5,000 small cells in 2022, the same number it rolled out in 2021 when it cut the forecast in half. In total Crown Castle has 80,000 small cells online (55K) or committed in its backlog (about 25K).

RELATED: Crown Castle cuts small cell outlook in half for 2021, 2022

It booked more than 15,000 small cells in 2021 (by and large through a new deal with Verizon in January), which won't start to come online likely until 2023, according to Brown.

"While we expect the densification phase of buildout will drive additional leasing on our tower assets for years to come, we believe small cells will play an even greater role as the coverage area of cell sites will continue to shrink due to the density of people, and therefore, the density of wireless data demand," he said.

Operators like Verizon have stated that they're initially targeting existing macro sites to deploy new spectrum like C-band in the 3.7 GHz range.

Talking about carriers in general, Brown said Crown Castle expects to see more small cell nodes both in terms of committed and put online in 2023 and beyond, once they've completed initial 5G spectrum overlays on macro sites.

"The carriers are focused at the moment on macro sites and building those out, but…we're also having significant conversations with them about the requirements that they're going to have around cell site density," he said. "And we think that will drive a lot of activity towards small cells."

RELATED: American Tower: Macro call right one for C-band

Analysts at Wells Fargo said even though Crown Castle had indicated a slowdown of activity into 2022, the growth projections for fiber and small cells still came below the firm's expectations "with questions remaining on how materially small cell activity could ramp up in 2023 and beyond as carriers focus efforts on macro towers."

The firm continues to see risks versus rewards as better for Crown Castle peers SBA and American Tower because they can benefit from the high levels of leasing on macro towers without the small cell and fiber business overhang, wrote Wells Fargo analysts led by Eric Luebchow.

American Tower reports Q3 earnings on October 28 and SBA on November 1.

"We continue to believe small cells will be part of the carriers' wireless networks in a 5G world, but CCI's strategy of acquiring fiber assets ahead of the demand really materializing has hindered the company's growth," wrote Wells Fargo in an October 21 note to investors.

Earnings tidbits:

  • In Q3 Crown Castle said it's on track for 12% growth in AFFO per share for 2021. It expects to be on the high-end of its long-term growth target in 2022 with 8% AFFO growth driven by the double-digit core leasing bump.
  • Annualized common stock dividend increased by around 11% to $5.88 per share.
  • Q3 site rental revenues grew 8% to $1.45 billion, adjusted EBITDA grew 11% to $976 million and AFFO per share grew 13% year over year to $1.77.
  • Capital spending of $282 million in Q3 included $217 million attributed to fiber and $42 million to towers.

Disclaimer

Crown Castle International Corporation published this content on 25 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 November 2021 20:47:06 UTC.


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Financials (USD)
Sales 2021 6 315 M - -
Net income 2021 1 125 M - -
Net Debt 2021 20 108 M - -
P/E ratio 2021 70,5x
Yield 2021 2,98%
Capitalization 79 175 M 79 175 M -
EV / Sales 2021 15,7x
EV / Sales 2022 14,9x
Nbr of Employees 4 900
Free-Float -
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Technical analysis trends CROWN CASTLE INTERNATIONAL CORP.
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Mean consensus OUTPERFORM
Number of Analysts 19
Last Close Price 183,19 $
Average target price 195,00 $
Spread / Average Target 6,45%
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Managers and Directors
Jay A. Brown Chief Financial Officer, Treasurer & Senior VP
Daniel K. Schlanger Chief Financial Officer & Executive Vice President
J. Landis Martin Independent Director
Robert P. Bartolo Independent Director
Langenfeld Cynthia Christy Independent Director
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