Tower company Crown Castle: 5G still at the ‘conversation stage’

Crown Castle CEO Jay Brown (Crown Castle)
Jay Brown is Crown Castle's CEO. (Crown Castle)

Although a number of wireless carriers have promised to launch some form of 5G network technology as early as this year, that work mostly doesn’t appear to have trickled down into the results of tower and small cell provider Crown Castle. At least, not yet.

“We're at the conversation stage around 5G, so we don't believe hardly any of the activity that we're currently seeing is really 5G-related,” Crown Castle CEO Jay Brown said yesterday during the company’s quarterly conference call with analysts, according to a Seeking Alpha transcript of the event.

However, Brown cautioned that 5G is unlike any other G-related wireless industry upgrade.

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“In the 3G, 4G environment, if you try to compare that to 5G today, it's difficult to make the comparison,” Brown said. “Most of what happened when we went from 3G to 4G was around increasing some capacity in the network by adding additional cell sites, but most of the activity actually occurred on the sites where they're already existing, and we saw additional co-location on new tower sites. The densification that's, at least, envisaged in a 5G world requires not just macro sites but additional sites in the form of small cells that fill in and increase the overall capacity of the network.”

Added Brown: “And that's very different than anything we've ever seen in any of the technology moves from 1G to 2G, 3G, 4G.”

But Brown said of the industry’s overall move to 5G: “If 5G ultimately comes to fruition like we believe it will,” he said, it would likely represent a major opportunity for Crown Castle specifically, mainly because the company has been investing in fiber and small cells that Brown said will be a key component of any 5G network.

“We've positioned the company to benefit in the same way with small cells and fiber that we benefited over the last couple of decades from the macro tower investments that we made,” he said.

Nonetheless, Brown’s comments on 5G are noteworthy because both Verizon and AT&T have promised to offer commercial 5G services in a handful of cities this year—although neither company has offered much in the way of details.

Moreover, T-Mobile has promised to offer nationwide 5G services by 2020, and has said that its current 600 MHz buildout includes some 5G network elements.

Crown Castle’s executives aren’t the only ones maintaining a cautious line on 5G network spending. During Verizon’s quarterly conference call with investors this week, CEO Lowell McAdam explained that the company is not seeing “that sort of capital intensity that some were assuming” related to its 5G buildout efforts.

“We expected consolidated capital spending [in 2018] to be between $17 billion and $17.8 billion including the commercial launch of 5G,” explained Verizon CFO Matt Ellis during the same call, according to a Seeking Alpha transcript.

Crown Castle’s management, and other Wall Street analysts, also discussed several other notable items in relation to the release of the company’s fourth-quarter results:

  • Dish Network: Crown Castle’s Brown said that the company hasn’t included any work from Dish in its 2018 revenue expectations. But he added that Dish and any other company that owns spectrum may well move to deploy it over the coming years. “There is a meaningful amount of spectrum that's lying fallow in the hands of various potential users of wireless network. Some of those—some of that spectrum have periods of time that starts to come to fruition here in the next couple of years, where, in order to maintain the license, the spectrum has to be deployed and developed on towers. We think we'll benefit from the deployment of that spectrum as it's deployed in the coming years,” Brown said.
     
  • FirstNet: Brown said that Crown Castle also has not included any activity from AT&T’s FirstNet-related buildout in its 2018 expectations. “We obviously believe that FirstNet will ultimately be deployed, and we believe that will be positively impacting our growth characteristics once it does turn,” he said.
     
  • Small cells: Brown said Crown Castle has so far built out 50,000 small cell nodes, and that it currently owns 60,000 route miles of fiber, including in 23 of the top 25 markets in the U.S. Click here for more.
     
  • Crown Castle’s new customer agreements: During its fourth quarter, Crown Castle said it inked two new long-term customer agreements, though didn’t disclose those customers’ identities. “We believe the 2 customers were Sprint and Verizon, as weighted average remaining lease term increased to 7 years vs. 5 and 6 years, respectively, in Q3’17. Management did confirm that the pricing environment has not changed and the escalators remained the same,” wrote Wells Fargo analyst Jennifer Fritzsche in a note to investors this morning.

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