Crown Castle CEO Ben Moreland said he is going to refrain from giving detailed assessments of the buildout plans of the tower and infrastructure company's carrier customers, and that he has been asked by carriers not get too specific on Crown's earnings calls.
Speaking yesterday on Crown Castle's third-quarter earnings call, Moreland noted that the company used to "really refrain from speaking with really any specificity around carrier deployment plans" and that "over the last couple of years, we've sort of relaxed that standard, and probably spoken a little bit too much occasionally around specific carrier deployment plans."
Indeed, the comments from Moreland and his counterparts at SBA Communications and American Tower, the other publicly-traded U.S.-based tower companies, have provided insights into carriers' network spending levels.
"And as a result, I've been asked by a few of our friends and customers if we would refrain from talking about their specific plans, and let them do their own talking about their deployment plans," Moreland said, according to a Seeking Alpha transcript. "And I think that's a perfectly reasonable request, and frankly a pretty good reminder of the way we used to do things."
It's unclear which carriers asked Moreland to stop speaking about their deployment plans, and Crown Castle representatives did not respond to a request for comment on the matter.
In recent quarters, executives from tower companies have noted that Verizon Wireless (NYSE: VZ) and T-Mobile US (NYSE:TMUS) have been consistently spending, while AT&T (NYSE: T) has been spending at lower historical levels and Sprint (NYSE: S) is poised to increase its spending through its network densification project.
"As management remains tight lipped about specific carrier initiatives, we believe that questions around the pace of a potentially improving demand environment are likely to linger," Barclays analyst Amir Rozwadowski said in a research note. "While our own checks suggest that the largest culprit of the tempered spending activity in 2015 -- AT&T-- should return to more 'normalized' wireless spending in 2016, visibility on when that demand improvement is likely to occur is likely to remain limited for at least the near term."
Overall, Moreland said he is optimistic about the company's growth prospects. He noted that "there is a long runway of investments that need to be made in the U.S. by wireless carriers, and a consumer base that will support it."
"Today, our portfolio of approximately 40,000 towers and 15,000 small cell nodes supported by 16,000 miles of fiber makes us the only company that can deliver at scale and provide comprehensive wireless solutions across the U.S. for carriers," he said. "Our towers are well located, with three-quarters of our portfolio in the top 100 markets, and have a long runway for additional organic growth with only two tenants per tower on average, suggesting a significant amount of leasing opportunity is yet to come."
Year-to-date, excluding Crown's Sunesys acquisition, Moreland said small cell site rental revenue has grown by around 30 percent. "While towers will continue to be the most efficient and cost-effective way for carriers to deploy their networks, we expect carriers to make investments in small cells to enhance their macro network by bringing cell sites closer to mobile subscribers, supplementing wireless coverage and capacity provided by a tower at a height of 100 to 150 feet that covers an eighth to a half a mile, with small cells deployed at a height of 20 to 30 feet on a traffic light that may cover a city block," he added. "We believe small cells represent the natural progression of network densification and cell splitting by the carriers as they contend with consumer demand for mobile data."
Wells Fargo analysts Jennifer Fritzsche, Caleb Stein and Eric Luebchow said in a research note that Crown expects small cells to make up $55 million of the total $170 million in site leasing revenue growth in 2016. "The runway for small cells appears to be long, and we look for CCI to leverage its fiber assets to provide solutions in the coming quarters," they said.
Evercore ISI analysts Jonathan Schildkraut and Justin Ages noted that they have raised concerns in the past about tower companies being able to get multiple tenants using small cells. They have other concerns, including the possibility that small cell vendors can win large contracts.
"Other issues also have led us to remain somewhat cautious as to the comparability to the traditional macro-site model including: (a) the size of the competitive field for these projects (e.g., the potential Mobilitie win for S's small cell plans noted above is a prime example of our concern), (b) long-term pricing power of small cell providers (i.e., unlike macrosites, small cells are not "mini-monopolies"), and (c) carrier push back on capital contributions (this would meaningful change the return dynamics of the business)," they added.
Yet Rozwadowski said that "we gained comfort from stable demand trends in macro site leasing. Despite rapid growth in small cell sites, it doesn't appear to be effecting macro investment as macro site leasing is continued to grow into next year."
Rozwadowski added that Crown "did not provide carrier specific color as it relates to deployment plans but," but said that he expects "more normalized spending levels from the four largest carriers in 2016. We believe we are in the early innings of the small cell growth phase and see further momentum from the expansion of this business."
- see this Seeking Alpha transcript
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