While Small Cells Bolster Crown Castle, Tower Activity Will Rise in Mid-2017


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Stock Analysis: Amy Yong, Macquarie

Densification is an integral part of wireless carrier capex and strategy, says at least one Wall Street analyst. Macquarie Securities’ Amy Yong is bullish on Crown Castle for its first mover advantage in small cells.

Macquarie forecasts $15 million in incremental small cell rental revenues and consistent 6 to 7 percent dividend growth in 2017. Sprint plans to send a software update to many of its marquee phones called High Performance User Equipment (HPUE) which promises to extend the range of its cellular sites by up to 30 percent, Inside Towers reported.

At that announcement, Sprint discussed adding tens of thousands of small cells over the next few years, wrote Yong in a client report. “Laser-focused” network investing in small cells is the most efficient way of meeting consumer demand for faster speeds. “Most of its capex will be directed to small cells where it will be using millimeter/centimeter wave as well as its own spectrum for backhaul to reduce expenses associated with the technology,” according to Yong.  

Verizon, too, has discussed small cell densification to improve 4G LTE performance and prepare for 5G. In order to benefit from large bandwidths with lower propagation characteristics, increased speeds and low latency, small cells are needed to fill in gaps between macro sites.

Small cells are efficient because the cost of one site is up to 20 percent lower than that of a macro site “and although 3-4x the number of sites are needed to achieve the coverage of one macro site, small cells are meant for densification and complement macro site coverage,” writes Yong. She characterizes small cell execution as “tricky” given site-by-site build outs, municipality approvals and backhaul.

Tower activity will likely pick up as early as second-half of 2017 from the FirstNet contract, Macquarie believes; the winner (likely AT&T, in their view) will build out 20MHz of spectrum on a $6.6 billion year one budget. “FiberNet bulk ups Crown’s dense metro fiber by ~11.5k miles, ~6k of which are in top markets like Miami and Houston,” according to Yong.

December 26, 2016

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