Small cells represented just eight percent of Crown Castle’s (NYSE: CCI) consolidated 2Q23 revenue of $1.3 billion. Still, the company sees upside demand for small cells over the next several years. Jay Brown, Crown Castle President and CEO, in comments at this week’s Goldman Sachs 2023 Communacopia+Technology Conference, acknowledged that the mobile network operators’ initial 5G build out touched about 50 percent of CCI’s towers, mainly in metro and suburban areas.
With the 2021-22 capex surge having peaked, Brown suggests that MNOs, over the next decade, will expand their network coverage and capacity with both macrocells on towers outside of major centers, and importantly, with small cells in high density urban markets. “What drives the need in small cells is that macro tower sites can’t solve all of the need and can’t solve all of the constraints that occur inside of the network,” he points out. “The places in the network where [MNOs are] not necessarily looking for geographic coverage, but they’re looking for capacity in the network, those are the places where small cells are used.”
CCI reported in its 2Q23 earnings results that its infrastructure assets included over 40,000 towers, approximately 85,000 fiber route miles and 120,000 small cells, with 60,000 already deployed and another 60,000 on order, all in the U.S., predominantly in major metro markets.
These small cells are deployed as nodes on CCI’s fiber routes in locations designated by the MNO, under a shared infrastructure business model similar to towers. The company expects to deploy 10,000 small cells in 2023, up from about 5,000 in 2022, and an acceleration in 2024 and 2025 given the size of the order backlog. CCI plans to spend about $1 billion in 2023 discretionary capex for its Fiber/Small Cell segment.
“Our split of small cells [deployments] will be important to that answer of how much is colocation versus how much are anchor builds and then the volume of small cells into the future. If our long-term view is correct, that small cells are going to continue to be an integral part of the network for the wireless carriers, that need is going to grow as data traffic grows.”
CCI is projecting long term tower revenue growth of about five percent annually. In time, it expects MNOs will slow the rate of macrocell deployments and shift investments to small cells as network constraints arise. Such constraints are most likely in dense urban and suburban areas, the so-called NFL cities. Those top 30 U.S. cities make up the vast majority of CCI’s infrastructure investment and where it sees MNO small cells activity. “That’s where the people are … as data traffic per user grows, that’s where you’re going to feel the constraint in the network,” Brown says.
Brown believes that CCI is winning about 50 percent of the MNO small cell RFP’s. But he says that CCI prefers to own the small cell and fiber infrastructure in locations where there is multiple MNO small cell colocation potential, a model which the company believes gives it the best return on investment. Colocations tend to occur in the dense urban and suburban areas where CCI has invested the majority of its capital.
“To the extent that that’s not going to occur, [or] we think the likelihood of that is less, then we’re going to decline to put our capital in those locations,” Brown emphasizes. “So, we are selecting the places where we think there’s the highest probability of good returns and the best use of our capital, driving the highest returns for that use of capital.”
By John Celentano, Inside Towers Business Editor
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