Crown High on Fiber While AT&T Wants to Slash Costs to Towercos

Citi 2017 Internet, Media & Telecommunications Conference

Crown Castle focuses its energy on business opportunities in the U.S. because “North America is the best wireless market in the world.” That’s according to CFO Dan Schlanger, who spoke at the Citi 2017 Internet, Media & Telecommunications Conference in Las Vegas on Wednesday.

The U.S. is where carriers are spending the most money to deploy spectrum. The densification of networks “is where the market is going,” he said. “The returns for towers” is best for Crown in the U.S., he summed up.

Asked why acquiring small cell-focused companies is good for Crown Castle, Schlanger referenced the recently-announced FiberNet deal with hot markets like south Florida and Houston. “We want to own fiber. It’s a collocated asset that will generate returns for us.”  

In top 25 markets, fiber will support small cell deployment as its carrier customers densify their networks, according to the executive. “The returns will justify the purchase price” of $1.5B.

“We think our shared model will perform,” said Schlanger, citing mid-single digit returns for one tenant, which grows to teens with a second tenant and covers Crown’s capital costs.

Regarding tension between tower owners and carriers that cropped up in 2016, Schlanger said: “They have been more public about our relationship. We don’t see a change. We negotiate about things they want and we want.”

AT&T Chief Strategy Officer John Donovan, also speaking during the Citi Conference, boldly proclaimed the carrier will continue to try to shave the fees it pays to tower companies. “We have very few cost streams that grow faster than the revenue that they support for very long, so it’s a very high priority for us to get rents and leases” reduced substantially. “And we’ve done a great job making a dent in the last two years, but the dent has been in the growth rate, and we’ve not reached our objectives yet.”

The tower business, with its combination of long-term contracts and increasing demand for data that underlies amendments and contract escalators “leads to a combination of stability and growth,” Schlanger said. Crown has some $20B in revenue contracted with an average return of six years. Crown projects $70M in small cells, now “in the ground and getting leased up” in 2017.

January 5, 2017