DAS and Cell Towers a Good Match — Moreland

February 10, 2013

Talking about Crown Castle International’s closing on its purchase of NextG Networks in the fourth quarter 2012, it was obvious that Ben Moreland is sold on DAS.

“We are still in the early stages of DAS infrastructure similar to where we were with towers a decade ago. In fact, the opportunity we see feels a lot like the early tower days of the late 1990s,” the president and CEO told the fourth quarter earnings conference call.

In the fourth quarter, Crown Castle closed on its billion dollar purchase of NextG Networks, which has 7,000 nodes on the air and 1,500 more under construction. Based on existing and contracted networks under construction, Crown expects NextG to add $50 million of annualized run rate to its site rental gross margin.

“In fact I believe that this acquisition has the potential to deliver adjusted EBITDA of five to six times its current level in five years, based on the commitment we believe wireless carriers are making to utilizing small-cell site solutions,” Moreland said.

He noted a faster growth in DAS than Crown experienced in cell towers, which took a decade to gain an average of three tenants.

“Our existing DAS networks are tracking to reach [three tenants] much faster than what we saw in our traditional tower business and we have high expectations that NextG systems will perform similarly well,” Moreland said. “There are many parallels and similarities between DAS and our existing tower business and there are few differences.”

With DAS nodes accounting for only one third the rent of a tower, the NextG purchase is commensurate to 3,000 towers. But the business drivers for DAS are similar to towers.

“First, is DAS a necessary component of the wireless infrastructure solution? Second, does DAS have similar barriers to entry that our towers enjoy? Third, is DAS similar enough to our existing infrastructure business to leverage our expertise and relationships? The resounding answer to all three of these questions is a yes,” Moreland.

DAS and cell towers appears to be good marriage, and Ben Moreland is so happy he is blushing.