Crown Castle posted good fourth quarter 2023 results, but it’s the tower company’s search for a new CEO and the fate of its fiber business that are top of mind. Thursday’s earnings conference call did little to move the needle on either of those areas.
Site rental revenues grew 4%, or $243 million, from 2022 to 2023. Net income for the full year 2023 was $1.5 billion compared to $1.7 billion for the full year 2022 and included $85 million of charges related to a restructuring plan that was announced in July 2023.
The company said its full year 2024 outlook remains unchanged from its previous guidance. Capital expenditures are expected to be between $1.5 billion to $1.6 billion, including about $1.4 billion in the fiber segment and $180 million in the tower segment.
Management shakeups
There’s been a lot of turnover at Crown. Following pressure from activist investor Elliott Investment Management, Crown bid farewell to Jay Brown, who held the CEO position for about seven years before announcing his departure in December. Brown had been with Crown for nearly 25 years in various capacities.
Shortly thereafter, the company appointed a Fiber Review Committee to conduct a comprehensive review of its fiber business, which Elliott had identified as something that needed to be done.
In the meantime, board member Tony Melone took the reigns as interim CEO. Melone, who retired as CTO of Verizon in 2010, brings a wealth of experience from the wireless carrier side of the business.
Presumably, that’s not all he’s brought. Ed Chan, former SVP and chief technology officer at Verizon, joined Crown Castle as EVP and chief information officer on January 16, 2024, a Crown Castle spokesperson confirmed to Fierce. The appointment previously was reported by Light Reading.
As for the morale at Crown Castle, Melone said he’s been meeting with Crown employees and generally finds they’re in good spirits. “Obviously, change is unsettling for people but the employees want to just get down to work,” serving customers and driving the business forward, he said during Thursday’s conference call.
Besides Brown’s departure, the company announced in October that CFO Dan Schlanger would be leaving the company at the end of March, but on Wednesday, the company announced that Schlanger will remain as CFO for an unspecified amount of time.
Other leadership announcements include Mike Kavanagh as COO for Towers and Chris Levendos remaining in his role as COO of the Fiber segment.
There are changes at the board level as well. Last week, Crown Castle appointed Bradley Singer to its board of directors. Singer previously was CFO of rival American Tower, which he left in 2008 for a position as CFO of Discovery Communications.
Other new board members, which were announced last year, include Jason Genrich, senior portfolio manager at Elliott, and Sunit Patel, former EVP of Merger & Integration at T-Mobile.
Asked about the order of operations – like whether it’s to find a CEO to create and execute the fiber plan or the other way around – Melone said it’s too early to speculate on how it will play out. “I think the two will naturally come together and provide us clarity in terms of how we move forward,” he said.
There’s also the question as to whether Crown Castle could divest its fiber solutions while retaining the small cell business or offload both of them.
Melone said “it would be pure speculation on my part” to answer that. All options are on the table, and he would not dismiss any option or suggest one option is more likely than another.
What others are saying
Before Crown’s earnings call, New Street Research (NSR) analysts issued a report saying they generally have favored American Tower and SBA Communications over CCI for much of the last decade. Their view is that while small cells and fiber may be OK businesses, the returns will be lower in both than for towers overall.
“The change in management doesn’t guarantee a change in strategy,” NSR wrote. “The strategy isn’t wrong just because outsiders haven’t seen the evidence that it is right. If a new team comes in and changes the strategy, we won’t be surprised. But if they stick to the strategy, it will be fascinating,” both for Crown Castle and the rest of the group.
Prior to Thursday’s conference call, analysts at TD Cowen pointed to capex commentary from U.S. carriers, and AT&T’s comments in particular.
“I think we're all conscious of the fact that we've invested at record levels and need to make sure that we're driving returns on those record levels of investments. And to me, that kind of lines up for a very sustainable outlook as we move into next year,” said AT&T CEO John Stankey during Wednesday’s earnings call, according to a Seeking Alpha transcript.
While it would seem widely known by now that carriers are downshifting their 5G spend as part of the next phase of deployment, the fear among some investors is the deceleration in spending will last for a prolonged period.
Still, for Cowen, “the most important focus is obviously the potentially game-changing fiber strategic review.” A deal may involve a consortium of buyers and take time. However, a successful sale could be game-changing as it allows Crown to escape the “capital box” of heavy capex and leverage, the analysts said.