Crown Castle expects its small cell business to double in next 2 years

small cells
Crown Castle said it is doubling down on its small cell bet as demand ramps up from carriers.

Crown Castle said its deployment of small cells will double over the next two years as carriers scramble to densify their networks in advance of 5G.

The venerable tower company said that in the first quarter it generated $450.2 million in funds from operations, or $1.24 per share, beating analysts’ estimates of $1.23 per share, according to Zacks Investment Research. Crown Castle posted revenue of $1.02 billion, outpacing analysts’ forecasts of $1.01 billion.

The earnings report is likely to assuage the fears of investors that have become increasingly concerned in recent months that the tower industry may struggle with waning carrier capex and potential consolidation among service providers. And Crown Castle said it is doubling down on its small cell bet as demand ramps up from carriers.

“Our tower business continues to see steady levels of activity in the short term,” Crown Castle CEO Jay Brown said in a press release. “Over the longer term, we believe there is an extended runway of growth driven by positive industry developments, including the deployment of FirstNet and spectrum from the recently completed incentive auction. In our small cells business, our contracted pipeline has reached record levels, with nearly 25,000 nodes expected to be installed over the next 18 to 24 months, reflecting the confidence our customers have in our ability to assist in deploying their wireless networks. Once completed, this pipeline will double the number of small cell nodes we have installed to date.”

All four major wireless network operators in the U.S. are looking to small cells to improve coverage and increase capacity in advance of 5G buildouts. The antennas, which can be as small as a lunchbox, can be placed on “street furniture” such as lampposts or traffic lights as well as on the sides of buildings or other private property.

But the small-cell market has been stymied by zoning and permitting headaches including hurdles regarding rights-of-way. Meanwhile, some municipalities are fighting small cell deployments based on concerns over aesthetics, rights-of-way issues and other concerns.

The market appears to be steadily gaining steam, however. T-Mobile CTO Neville Ray said Monday that the operator has deployed roughly 15,000 small cells, for instance, with another 25,000 “contracted” for deployment.

“Small cells have been the biggest growth engine for Crown Castle in recent periods, with recent deals aimed at expanding its fiber footprint to meet carrier densification needs,” Matthew Niknam of Deutsche Bank wrote in a note to investors. Crown Castle has deployed roughly 5,000 to 6,000 nodes per year, according to Niknam, and is ramping up to roll out around 10,000 per year. “So, our initial take is that Crown Castle is re-investing to increase its leadership position in a rapidly growing market, which each of its carrier customers remains intently focused on.”