Crown Castle(US:CCI)2023-05-23 20:39Summary of Crown Castle Inc. Conference Call Company Overview - Company: Crown Castle Inc. (NYSE: CCI) - Industry: Telecommunications Infrastructure Key Points and Arguments Business Performance and Growth - The core tower business is expected to grow at a rate of 5% to 6% annually, with a projected growth of around 5% for 2023, which is on the lower end of the historical range [3] - Despite a lower activity level in 2023 compared to 2022, the current activity is approximately 50% higher than the average of the previous five years [3][4] - The company has seen a 6.5% growth in 2022, indicating a strong performance prior to the current year [3] 5G Deployment and Infrastructure - About 50% of Crown Castle's towers have been upgraded with 5G technology, indicating progress in the deployment cycle [6][9] - The company is currently in the amendment cycle of 5G deployment, transitioning into the densification cycle [8][12] - The demand for wireless data in the U.S. is growing at a rate of 20% to 30% per year, necessitating more antennas on towers [11] Revenue and Customer Contributions - Core leasing activity revenue is projected to be between $135 million and $145 million for the year, with a more balanced split between the first and second halves of the year [19][21] - DISH Network contributes approximately 3% to the tower business revenue, with a structured contract designed to incentivize DISH's use of Crown Castle's towers [22][25] - The company has not seen significant churn from DISH, and the minimum use fee structure ensures stable revenue [27] Churn and Contractual Structure - Churn in the tower business is typically between 1% to 2% annually, with current rates on the low end of that range [34][38] - The company has a 3% escalator built into its contracts, allowing for growth despite churn [38] Services Revenue - Services revenue is tied to activity levels, with pre-construction services having higher margins compared to construction services [42][43] - The company anticipates steady services revenue as activity levels remain consistent [45] Small Cell Growth - Crown Castle has about 60,000 small cell nodes on-air and in the pipeline, with plans to double the number of nodes deployed from 5,000 in 2022 to 10,000 in 2023 [58][59] - The growth in small cells is driven by contracts with Verizon and T-Mobile, with a mix of anchor builds and co-location expected [62][64] Financial Outlook - The company has guided for AFFO (Adjusted Funds from Operations) per share growth of 7% to 8% over time, but anticipates minimal dividend growth in 2024 and 2025 due to interest rate headwinds and Sprint churn [69][71] - The expected headwinds amount to approximately $350 million to $370 million, impacting dividend growth for the next couple of years [71] Strategic Insights - Crown Castle's strategy includes offering bundled services of towers, small cells, and fiber to meet customer needs more effectively [50][52] - The company emphasizes the importance of fiber in supporting small cell operations, as it is a critical component for network connectivity [53][54] Additional Important Information - The company has not built many new sites recently due to unattractive economics, focusing instead on existing infrastructure [17][18] - The relationship between activity levels and churn suggests that lower activity may lead to lower churn rates [40]