Research firm BTIG recently downgraded Crown Castle shares from buy to neutral, reports, FierceWireless, due to concern about the company’s foray into the small cell sector. BTIG cited zoning slowdowns at the municipality level and low rent rates as two causes for concern.
Some local municipalities have begun to crack down on zoning laws regarding small cell deployment, due to concern of companies deploying equipment within public rights of way and not receiving local zoning approvals. This has significantly slowed down the deployment process.
Tower companies charge lower rent rates for small cells because they require much less real estate. Although BTIG estimates that Crown Castle will increase small cell revenue by 23 percent, that is still only 15 percent of the company’s overall revenue.
“Despite these delays to the further densification of wireless networks, the proliferation of tens of thousands of small cells for each wireless operator is inevitable and will likely be a sustained investment program,” BTIG analyst Walter Piecyk wrote. Dealing with local push-back is not a new issue for the industry, although investors should recognize that the scale of deployment and the tactics of using right of way will raise new community concerns.”