Crown Castle CEO Jay Brown caveated his interview at the South Wireless Summit Tuesday telling his audience it would be hard to find someone, “more bullish about wireless and the potential opportunity we have in front of us.”
He outlined the growth from 2007, when Steve Jobs first introduced the iPhone and how users consumed about 100 million MB of data. Last year that number jumped to 16 trillion MB and by 2021 it should be about 60-70 trillion MB. The “amount of growth likely ahead of us in the industry is greater than what we’ve seen thus far, cumulatively,” Brown emphasized.
Even incorporating a “haircut” to those estimates, the amount of investment in infrastructure likely to happen is “enormous” and “historically the amount of data traffic has actually been underestimated.”
In every business throughout the world he explained, margins are under “tremendous pressure.” The “uberization” of business is adding that pressure and wireless is on the leading edge of it.
Jay Brown tackled the debate of macro towers vs. small cells head on. Crown has been historically well positioned in terms of macro sites with around 40,000 in the U.S. However, over the last several years it started investing heavily in small cells and fiber. “We believe that the fiber infrastructure along with macro sites – the lines between those two assets are really going to become blurry over the next decade. I like to colloquially refer to it as ‘steel and glass’ and both of them are critical assets that the carriers are using to deploy infrastructure,” said Brown.
He believes Crown will continue to build macro sites in “a big way” and supplement that with fiber, something they’ve invested heavily in – over $4B in the last couple years.
Brown was adamant that is important to see fiber, small cells and macro towers as “complementary assets.” Brown said, “fiber is tower laid on its side and the goal in owning fiber is to put as many tenants across a given mile of fiber as we possibly can,” just as you would a 300 foot steel tower. “Small cells are not competitive to macro sites,” he continued. Still, he believes that macro sites continue to be the most cost effective way for carriers to deploy their network and that true cost efficiency equates to a combination of macro sites and small cells.
Small cells are helpful because they supplement the macro sites and allow them to reach their maximum capacity. He referenced a garden hose analogy – if you poke holes in a hose the water will not reach its end destination. You need to plug those metaphorical “holes” with small cells, restoring the hose (or the macro tower) to full capacity.
As technologies develop, Brown anticipates that carriers will first amend their existing sites. After that, he believes they’ll look for new installment opportunities to expand their geographic region.
He also outlined where Crown Castle’s cash flow growth of six to seven percent per year is coming from:
- ½ of the growth is from new antennas (new installs and amendments)
- ½ of the growth is coming from existing escalators that are in the business already in existing contracts
- On top of that about one percent of growth is from small cells that represent about ten percent of total capital
Brown noted that small cells are growing faster – 30-40 percent, year over year while macro towers are at about six to seven percent year over year. He called it “a sustainable level of growth over a long period of time.”
Crown’s investment in small cells began years ago at Disney World. The deployment was considered one of the first in the world. While there was not a lot of initial carrier pick up, it eventually had all four carriers and was enormously successful. Overall, uptake and returns turned around in 2010-2011. While the early days of small cells “were almost entirely venue oriented” they are now a necessity when it comes to hotspots within macro sites.
In terms of geography, Brown said Europe is “interesting” when it comes to comparable characteristics but not from a consumption standpoint. Crown Castle “will watch and look” but thus far there haven’t been any significant investment opportunities and its focus will remain in the U.S.
March 29, 2017
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