Crown Castle reported its fourth quarter 2019 earnings this week, and analysts were frustrated trying to decipher the company’s restatement of its financials. But, bottom line, analysts found its small cells and tower businesses should increase over the year now that the T-Mobile and Sprint merger has solidified.
On its earnings call, Crown Castle CEO Jay Brown said uncertainty around the outcome of the pending merger between T-Mobile and Sprint caused a decrease in activity during late 2019 and early 2020. “However, we believe this slowdown will ultimately prove temporary and short-lived as we anticipate a significant increase in industry activity in second half of this year as clarity around the merger drives a ramp in 5G investments,” said Brown, according to a Seeking Alpha transcript.
Wells Fargo analyst Jennifer Fritzsche noted that of the three public tower companies, Crown Castle was the only one that included accelerated leasing contribution in its 2020 outlook. “With a large macro portfolio and 50% share in the small cell space, we believe CCI’s infrastructure will continue to benefit from 4G and future 5G spend,” wrote Fritzsche.
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Cowen analysts led by Colby Synesael said Crown Castle’s updated guidance now implies 2020 tower organic growth of about 6%, while implied organic growth for small cells remains mid-teens and fiber remains about 3%. “However, management did note that it expects its performance to be more back-end loaded, particularly for its services business, due to the drop-off in activity, which the company began to see in 4Q19 related to the pending T-Mobile/Sprint deal,” wrote Synesael.
But Crown Castle's Brown bragged that 2019 represented the highest level of tower leasing activity for the company in more than a decade. He said the company deployed about 10,000 small cell nodes in 2019. “We expect to deploy another 10,000 small cell nodes this year as we continue to respond to the significant increase in demand from our customers while, at the same time, navigating ongoing hurdles that remain challenging with many municipalities and utilities,” said Brown. “We finished 2019 with more than 40,000 small cells on air and another approximately 30,000 in our construction pipeline.”
MoffettNathanson analyst Craig Moffett said Crown Castle has benefitted from an uptick in tower leasing over the past couple of years. “Like its peers, the company experienced a slowdown in leasing in Q4 2019 related to T-Mobile and Sprint pulling back as they waited for a resolution to their proposed merger,” wrote Moffett.
Moffett also said Crown Castle’s tower growth guidance puts it in the same zone as American Tower’s and SBA’s. “Still, the bottom line is that Q4 results were soft, in large part due to a known factor (the T-Mobile pause and its knock-on effects to leasing and services), and the 2020 outlook remained unchanged on an apples-to-apples basis.”