Small cells paid big dividends for Crown Castle in the fourth quarter as the tower company largely beat analysts’ expectations and upped its revenue outlook for 2017.
The company posted total quarterly revenue of $1.03 billion, up 9% year-over-year, as site rentals increased 4% to $817 million. Services revenue of $215 million far exceeded the $165 million projected by analysts at Wells Fargo Securities, and revenue for the year grew 7%, topping $3.2 billion.
The increased guidance for 2017 stems largely from Crown Castle’s recent $1.5 billion deal to acquire FPL FiberNet from NextEra Energy. FiberNet operates roughly 11,500 route miles of fiber installed and under construction in Florida and Texas, including approximately 6,000 route miles of fiber in top metro markets.
“With our recent acquisition of FiberNet, which closed in January, we now own approximately 40,000 towers and over 26,500 route miles of fiber in key metro markets throughout the U.S.,” Crown Castle CEO said in a press release announcing the quarterly results. “We believe our extensive portfolio of shared wireless infrastructure positions us well to continue to serve our customers’ needs as they seek to upgrade and enhance network quality and capacity to meet increasing demand for wireless connectivity.”
Indeed, fiber has increasingly become a crucial component for mobile network operators as they densify their networks and prepare to deploy 5G technologies and services. The importance of fiber has been underscored recently by a series of major acquisitions including Windstream’s pickup of EarthLink for $1.1 billion and CenturyLink’s buyout of Level for a whopping $34 billion.
Small cells accounted for 13% of Crown Castle’s site revenues during the fourth quarter, and MoffettNathanson said that figure will likely rise to 17% with the inclusion of FiberNet’s assets. Crown Castle’s fair—if not spectacular—quarter may give a little lift to an industry that has become “everyone’s punching bag,” as Cowen and Company observed last week.
“Small cells are now a legitimate contributor to the business,” MoffettNathanson analysts wrote in a note to investors. “Further acquisitions in the space, which most of our clients anticipate, would push that share higher … We would judge this quarter’s numbers to be mildly disappointing, but investors always focus more on the outlook than the quarter. A basically stable outlook is generally not exciting, but given the sharply negative sentiment across the space it may actually be taken as a relief.”