Crown Castle’s finance chief this week touted being the first to secure an infrastructure deal with Dish Network, echoing similar sentiments from financial analysts that Crown’s site locations for urban coverage were part of the appeal.
Crown Castle at this point is the only one of the three big public tower companies to have a Master Lease Agreement (MLA) with Dish. Announced last month, the 15-year MLA is for up to 20,000 tower sites and also includes fiber services.
CFO Daniel Schlanger, at a Barclays Global TMT Conference Wednesday, said that being the first was important and a differentiator. Specifically, he called out that in describing the agreement, Dish itself talks about Crown Castle as “being the anchor infrastructure partner on the tower side” - something it believes “is really meaningful.”
Dish’s plan for a nationwide 5G network greenfield build is something that the U.S. hasn’t seen for at least a decade or more, Schlanger noted.
“And to be in a position where we’re the anchor of it makes us feel like we’re really well positioned to get more than our fair share of growth moving forward,” he said. Schlanger’s made similar comments recently while talking up the fiber aspect of the deal.
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Three things about Crown Castle’s portfolio are particularly appealing: scope, urban skew, and holistic solution. “We think that’s what really led Dish to work with us first,” Schlanger said of the three components.
Crown Castle has 48,000 towers, 70% of which are in the top 100 markets in the U.S.
Analysts previously pointed to the higher proportion of urban sites as one of the reasons Dish would want to work with Crown during the initial phase of its buildout. Although down the line, peers American Tower and SBA Communications are still certain to see Dish on their infrastructure.
“CCI might see a higher mix of contribution from DISH sooner than the rest, but we believe over a 5-year period, each of the 3 towercos will have DISH included in its mix of U.S. tenants,” wrote Wells Fargo analysts in a Thursday note to investors.
MoffettNathanson analysts last week cited more sites located to serve urban markets as one reason Crown Castle also could be the first of its peers to see activity from C-band spectrum deployments once those get going. The C-band auction kicked off December 8 and had generated around $2.55 billion in gross proceeds as of day two.
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The rationale for Dish is that it’s expected to focus first on addressing dense areas where more people are. Dish needs to meet FCC buildout deadlines, including covering 50% of the U.S. population by June 2023 for some spectrum licenses.
Radios from Fujitsu won’t arrive in volume until the second half of next year, which is when Dish expects to have its first major 5G market running. That means a limited amount of new leasing activity for Crown Castle in 2021.
“We won't see a tremendous amount of activity and new revenue until then [2H 2021]. So there's a limited amount in 2021,” Schlanger said. “And we would expect it to ramp from there.”
Wells Fargo analysts wrote that they anticipate “DISH’s wireless ambitions to finally materialize in 2021,” but the form of the financial contribution is still a question.
“We suspect that early Dish activity will come from the fiber solutions segment and from services provided by the twoercos before ultimately converting to leasing revenue once sites are brought on air,” wrote the team led by senior analyst Eric Luebchow.
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As to the up to 20,000 sites, Crown Castle’s Schlanger said Dish is likely economically incentivized “to use as many of those as they can,” because MLA terms commit Dish to minimum contract payments owed to Crown that stay the same whether they use 20 or 20,000 sites – so the more Dish uses, the lower payment per tower.
“I think that just positions us yet again to be an outsized recipient of their work in the initial phase of their deployment,” he added.
Wells Fargo said they remain bullish on the tower sector going into next year, with SBA Communications as the firm’s top pick.
Over the next five years, the Wells Fargo estimates a 5% 5-year compound annual growth rate (CAGR) of aggregate U.S. leasing revenue for SBA, outpacing projections of 3.6% for American Tower and 3.8% for Crown Castle.
“Given AMT’s recent holistic MLA with T-Mobile and CCI’s with DISH (among other moving parts), we suspect SBAC is well positioned to outpace its tower peers’ growth rates in 2022 and beyond,” wrote the analysts.