X

Connect (X)

Tag Archives: Crown Castle International

Crown Castle to Convert to a REIT

Date(s): Sep. 9, 2013 7:00 AM

HOUSTON, Sept. 9, 2013 (GLOBE NEWSWIRE) — Crown Castle International Corp. (“Crown Castle”) (NYSE:CCI) today announced that it is commencing the steps necessary to reorganize Crown Castle to qualify as a Real Estate Investment Trust (“REIT”) for tax purposes. Crown Castle expects to elect REIT status beginning with the taxable year commencing January 1, 2014.

“We are delighted to announce this plan for conversion because we believe REIT status is the optimal structure for our business given the real estate nature of our assets,” stated Ben Moreland, Crown Castle’s President and Chief Executive Officer. “We believe a REIT structure will lower our weighted average cost of capital and provide additional opportunities for creating long-term shareholder value. Further, we expect our conversion to a REIT to have little to no effect on our operations, and we intend to continue our focus on maximizing long-term adjusted funds from operations per share through growth and disciplined capital allocation.”

Crown Castle’s determination as to the timing and amount of future dividend distributions will be based on a number of factors, including investment opportunities around its core business and its existing federal net operating losses of approximately $2.7 billion. Crown Castle does not expect to make any distribution (commonly referred to as a “purging” dividend) prior to its REIT conversion.

Crown Castle expects to operate in compliance with the REIT rules beginning January 1, 2014. Crown Castle also expects to take certain actions in 2014 in order to facilitate its compliance with the REIT rules by seeking adoption of certain charter provisions that implement certain standard REIT-related ownership and transfer restrictions. Implementation of these steps will be subject to shareholder approval and final board approval. The REIT election is subject to the completion of all necessary steps of the aforementioned conversion plan and final approval by the Crown Castle Board of Directors.

Crown Castle has received an opinion from each of Skadden, Arps, Slate, Meagher & Flom LLP and Cravath, Swaine & Moore LLP, which firms advised Crown Castle on its REIT conversion, that Crown Castle will qualify as a REIT as of January 1, 2014.

About Crown Castle

Crown Castle owns, operates and leases towers and other infrastructure for wireless communications. Crown Castle offers significant wireless communications coverage to 98 of the top 100 US markets and to substantially all of the Australian population. Crown Castle owns, operates and manages over 30,000 and approximately 1,700 wireless communication sites in the US and Australia, respectively. For more information on Crown Castle, please visit www.crowncastle.com.

Cautionary Language Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based on management’s current expectations.  Such statements include Crown Castle’s plans, projections and estimates regarding (i) its intention to convert to a REIT and the timing thereof, (ii) the potential advantages, benefits and impact of, and opportunities created by, converting to a REIT, (iii) its strategy and growth, (iv) its cost and allocation of capital, (v) its future earnings and profits, (vi) dividend plans and (vii) its intention to pursue certain steps and corporate actions in connection with its conversion to a REIT.  Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including prevailing market conditions and the following:

  • There are a number of implementation and operational complexities to address before Crown Castle expects to convert to a REIT, including completing internal reorganizations. Crown Castle can provide no assurance as to when the conversion to a REIT will be successful, if at all. If Crown Castle fails to elect REIT status for the taxable year commencing January 1, 2014, the next earliest date on which Crown Castle can elect REIT status would be for the taxable year commencing January 1, 2015. In addition, Crown Castle can provide no assurance that any proposed implementation of REIT-related ownership and transfer restrictions will be adopted.
  • REIT qualification involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended, to Crown Castle’s operations, as well as various factual determinations concerning matters and circumstances not entirely within Crown Castle’s control. Although, if Crown Castle converts to a REIT, Crown Castle plans to operate in a manner consistent with REIT qualification rules, Crown Castle cannot give assurance that it will so qualify or remain so qualified.
  • While Crown Castle currently intends to take the steps necessary to convert to a REIT, the REIT election decision is subject to final approval by the Crown Castle Board of Directors. Crown Castle can give no assurances that its Board of Directors will continue to pursue a conversion to a REIT, even if there are no impediments to such conversion.
  • Crown Castle has considered a variety of strategies, including alternative financing, capital and tax strategies, designed to maximize long-term shareholder value, but there can be no assurances that conversion to a REIT will be the most beneficial alternative considered.
  • Changes in legislation or the federal tax rules can adversely impact Crown Castle’s ability to convert to a REIT or the benefits of being a REIT.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. More information about potential risk factors that could affect Crown Castle and its results is included in Crown Castle’s filings with the Securities and Exchange Commission.  The term “including,” and any variation thereof, means “including, without limitation.”

Additional Information

Crown Castle expects to take certain steps and corporate actions in connection with the proposed REIT conversion, and, in connection therewith, it may seek shareholder approval.  If Crown Castle seeks shareholder approval, it will file a proxy statement with the Securities and Exchange Commission (“SEC”) to be used in connection with the related shareholder vote. INVESTORS ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) IF AND WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.  You will be able to obtain documents free of charge at the website maintained by the SEC at www.sec.gov.  In addition, you may obtain documents filed with the SEC by Crown Castle free of charge by contacting Investor Relations, Crown Castle International Corp., 1220 Augusta Drive, Suite 500, Houston, Texas 77057, (713) 570-3000, or you may visit the investor relations section of our website at http://investor.crowncastle.com for copies of any such document.

Crown Castle, its directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies from Crown Castle’s stockholders. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of proxies will be included in any related proxy statement.  Information about directors and executive officers of Crown Castle and their ownership of Crown Castle stock is set forth in the proxy statement for Crown Castle’s 2013 Annual Meeting of Stockholders.  Investors may obtain additional information regarding the interests of such participants by reading the proxy statement if and when it becomes available.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

CONTACT: Jay Brown, CFO
         Fiona McKone, VP - Corporate Finance
         Crown Castle International Corp.
         713-570-3050

Crown Castle See Big LTE Collo Growth in 2Q

With all four major U.S. carriers making major network upgrades, tower companies continue to be the beneficiaries in increased leasing activity. Crown Castle saw revenue from additional tenants double in the second quarter, reflecting the shift in activity to in-fill sites collocation on small cells as well as macrocells, Ben Moreland, Crown Castle president and CEO, told the second quarter earnings call.

“This densification activity is the expected second wave of the LTE network deployment and provides us with a longer runway of expected future growth as carriers strive to improve network quality and to add capacity through cell splitting in the face of continued growth in mobile technology demand, he said.

The cellular industry is seeing a faster adoption of smart phones, compared with the initial uptake of 3G phones, which Moreland said the tower company uses to gauge where the industry is in the technology cycle, as well as the long term growth trends.

“To gain a framework for LTE build-outs, it is useful to compare how the 4G subscriptions is trending compared with 3G subscriptions historically,” he said. “From 4Q 2010 to the 3Q 2012, the first eight quarters of LTE, we have seen subscriptions significantly outpace the initial eight quarters of 3G, which began 1Q 2003.” LTE user growth could top 180 million by the end of 2013 and 260 million by 2017, he added.

Site rental gross margin, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted funds from operations (AFFO) for the second quarter all exceeded Crown’s expectations, according to Jay Brown, Crown Castle’s chief financial officer.

“As a result of our strong results in the second quarter and the significant increase in new leasing activity, we have increased our full year 2013 outlook, which now suggests annual site rental revenue and AFFO per share growth of 17 percent and 35 percent, respectively,” Brown said. “In addition, we continued to invest in activities we believe will maximize long-term AFFO per share, including purchases of our common shares and the construction of small cell networks.”

During the second quarter of 2013, Crown Castle invested $101 million in revenue-generating capital expenditures, including $66 million on existing sites and $35 million on the construction of new sites, primarily small cell networks. Additionally, acquisitions accounted for $14.5 million in capital expenditures.

“CCI’s report is significant in our view in that it should set the tone for the other tower companies’ (AMT and SBAC) reports to follow. As we have written, we continue to believe the overall tone of these reports will reflect a bullish outlook regarding domestic wireless spending,” Jennifer Fritzsche, senior analyst, Wells Fargo, wrote in an equity research note.

 

Crown Castle Reports 2Q Results; Raises Outlook

HOUSTON, July 24, 2013 (GLOBE NEWSWIRE) — Crown Castle International Corp. (NYSE:CCI) today reported results for the quarter ended June 30, 2013.

“We had an excellent second quarter, producing AFFO per share of $1.04, up 41% over the same quarter last year,” stated Ben Moreland, Crown Castle’s President and Chief Executive Officer. “In addition, we saw a significant increase in leasing activity as all four major carriers in the US continued upgrading their networks for LTE and capacity enhancements. In fact, revenue from tenant additions approximately doubled in the second quarter of 2013, compared to the second quarter of 2012, reflecting the shift in activity towards network densification as carriers strive to improve network quality and to add capacity through cell-splitting to meet the increasing demand for mobile technology.”

CONSOLIDATED FINANCIAL RESULTS

Total revenue for the second quarter of 2013 increased 26% to $735 million from $586 million for the same period in 2012. Site rental revenue for the second quarter of 2013 increased $99 million, or 19%, to $617 million from $518 million for the same period in the prior year. Site rental gross margin, defined as site rental revenue less site rental cost of operations, increased $52 million, or 13%, to $438 million in the second quarter of 2013 from $386 million in the same period in 2012. Adjusted EBITDA for the second quarter of 2013 increased $66 million,or 17%,to $444 million from $379 million in the same period in 2012.

Funds from Operations (“FFO”) increased 41% to $276 million in the second quarter of 2013, compared to $195 million in the second quarter of 2012. FFO per share increased 40% to $0.94 in the second quarter of 2013, compared to $0.67 in the second quarter of 2012. Adjusted Funds from Operations (“AFFO”) increased 41% to $304 million in the second quarter of 2013, compared to $215 million in the second quarter of 2012. AFFO per share increased 41% to $1.04 in the second quarter of 2013, compared to $0.74 in the second quarter of 2012.

Income before income taxes for the second quarter of 2013 was $90 million, compared to $49 million for the same period in 2012. Net income attributable to CCIC stockholders for the second quarter of 2013 was $52 million, inclusive of the negative impact of the provision for income taxes of $37 million, compared to $116 million of net income, inclusive of a non-cash benefit for income taxes of $68 million, for the same period in 2012. Net income attributable to CCIC stockholders per common share was $0.18 for the second quarter of 2013, compared to $0.40 per common share in the second quarter of 2012.

Adjusted EBITDA in the second quarter of 2013 exceeded the high-end of second quarter Outlook (previously issued on April 24, 2013) by $13 million, primarily due to significantly higher than expected service gross margin contribution and $2 million of non-recurring site rental revenues which were not previously contemplated in the Outlook. In addition, AFFO exceeded the high-end of Outlook by $25 million, due to the aforementioned items in Adjusted EBITDA and higher than expected contributions related to reimbursements for wireless infrastructure expenditures necessary to accommodate carrier equipment which is directly related to the increase in leasing activity.

FINANCING AND INVESTING ACTIVITIES

“We had a terrific quarter exceeding our expectations for site rental gross margin, Adjusted EBITDA and AFFO,” stated Jay Brown, Crown Castle’s Chief Financial Officer.  “As a result of our strong results in the second quarter and the significant increase in new leasing activity, we have increased our full year 2013 Outlook, which now suggests annual site rental revenue and AFFO per share growth of 17% and 35%, respectively. In addition, we continued to invest in activities we believe will maximize long-term AFFO per share, including purchases of our common shares and the construction of small cell networks.”

During the second quarter of 2013, Crown Castle invested approximately $138 million in capital expenditures, comprised of $27 million of land purchases, $10 million of sustaining capital expenditures and $101 million of revenue generating capital expenditures (inclusive of $66 million on existing sites and$35 million on the construction of new sites, primarily small cell networks).

Further, during the second quarter of 2013, Crown Castle purchased 1.1 million of its common shares using $75 million in cash at an average price of $70 per share. Diluted common shares outstanding at June 30, 2013 were 291.8 million. Since January 2003, Crown Castle has spent $2.8 billion to purchase 101.8 million of its common shares and potential shares, at an average price of $27.45 per share.

Additionally, during the second quarter, Crown Castle refinanced its existing $1.58 billion Term Loan B and effectively lowered the rate on the loan by 75 basis points, saving approximately $12 million in annual interest expense.  The maturity and terms of the loan remained unchanged.

Also during the second quarter, Crown Castle started preparing in earnest for an anticipated future REIT conversion. Crown Castle engaged accounting and legal advisers to assist in this effort. Crown Castle expects to convert to a REIT no later than the utilization of its remaining net operating losses (currently approximately $2.7 billion).

OUTLOOK

This Outlook section contains forward-looking statements, and actual results may differ materially. Information regarding potential risks which could cause actual results to differ from the forward-looking statements herein is set forth below and in Crown Castle’s filings with the Securities and Exchange Commission (“SEC”).

As reflected in the table below, Crown Castle has increased the midpoint of its full year 2013 Outlook (previously issued on April 24, 2013) for site rental gross margin by $6 million, Adjusted EBITDA by $28 million, and AFFO by $61 million.

The following Outlook is based on current expectations and assumptions and assumes a US dollar to Australian dollar exchange rate of 0.91 US dollars and 0.96 US dollars to 1.0 Australian dollar for third quarter and full year 2013 Outlook, respectively. As a result, Crown Castle has decreased its expected contribution from its Australian operations for full year 2013 Outlook by approximately $8 million for site rental revenue and $6 million for Adjusted EBITDA and AFFO.

The following table sets forth Crown Castle’s current Outlook for third quarter 2013 and full year 2013:

(in millions, except per share amounts) Third Quarter 2013 Full Year 2013
Site rental revenues $617 to $622 $2,471 to $2,481
Site rental cost of operations $179 to $184 $711 to $721
Site rental gross margin $437 to $442 $1,755 to $1,765
Adjusted EBITDA $436 to $441 $1,750 to $1,760
Interest expense and amortization of deferred financing costs(a) $138 to $143 $581 to $591
FFO $270 to $275 $1,022 to $1,032
AFFO $299 to $304 $1,187 to $1,197
AFFO per share(b) $1.02 to $1.04 $4.07 to $4.10
Net income (loss) $28 to $68 $116 to $212
Net income (loss) per share – diluted(b) $0.10 to $0.23 $0.40 to $0.73
(a)  See the reconciliation of “Components of interest expense and amortization of deferred financing costs” herein for a discussion of non-cash interest expense.
(b)  Based on 291.8 million diluted shares outstanding as of June 30, 2013.

CONFERENCE CALL DETAILS

Crown Castle has scheduled a conference call for Thursday, July 25, 2013, at 10:30 a.m. Eastern Time. The conference call may be accessed by dialing 480-629-9722 and asking for the Crown Castle call at least 30 minutes prior to the start time. The conference call may also be accessed live over the Internet at http://investor.crowncastle.com. Any supplemental materials for the call will be posted on the Crown Castle website at http://investor.crowncastle.com.

A telephonic replay of the conference call will be available from 12:30 p.m. Eastern Time on Thursday, July 25, 2013, through 11:59 p.m. Eastern Time on August 1, 2013, and may be accessed by dialing 303-590-3030 using access code 4627804. An audio archive will also be available on the company’s website at http://investor.crowncastle.com shortly after the call and will be accessible for approximately 90 days.

Crown Castle owns, operates and leases towers and other infrastructure for wireless communications. Crown Castle offers significant wireless communications coverage to 98 of the top 100 US markets and to substantially all of the Australian population. Crown Castle owns, operates and manages over 30,000 and approximately 1,700 wireless communication sites in the US and Australia, respectively.  For more information on Crown Castle, please visit www.crowncastle.com.

Non-GAAP Financial Measures and Other Calculations

This press release includes presentations of Adjusted EBITDA, Funds from Operations and Adjusted Funds from Operations, which are non-GAAP financial measures. These non-GAAP financial measures are not intended as alternative measures of operating results or cash flow from operations (as determined in accordance with Generally Accepted Accounting Principles (“GAAP”)). Each of the amounts included in the calculation of Adjusted EBITDA, FFO, and AFFO are computed in accordance with GAAP, with the exception of: (1) sustaining capital expenditures, which is not defined under GAAP and (2) our adjustment to the income tax provision in calculations of FFO and AFFO.

Our measures of Adjusted EBITDA, FFO and AFFO may not be comparable to similarly titled measures of other companies, including other companies in the tower sector or those reported by REITs. FFO and AFFO presented are not necessarily indicative of the operating results that would have been achieved had we converted to a REIT, nor are they necessarily indicative of future financial position or operating results. Our FFO and AFFO may not be comparable to those reported in accordance with National Association of Real Estate Investment Trusts, including as a result of our adjustment to the income tax provision to reflect our estimate of the cash taxes had we been a REIT.

Adjusted EBITDA, FFO and AFFO are presented as additional information because management believes these measures are useful indicators of the financial performance of our core businesses. In addition, Adjusted EBITDA is a measure of current financial performance used in our debt covenant calculations.

Adjusted EBITDA. Crown Castle defines Adjusted EBITDA as net income (loss) plus restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, gains (losses) on retirement of long-term obligations, net gain (loss) on interest rate swaps, impairment of available-for-sale securities, interest income, other income (expense), benefit (provision) for income taxes, cumulative effect of change in accounting principle, income (loss) from discontinued operations and stock-based compensation expense.

Funds from Operations. Crown Castle defines Funds from Operations as net income plus adjusted tax provision plus real estate depreciation, amortization and accretion.

Adjusted Funds from Operations. Crown Castle defines Adjusted Funds from Operations as Funds from Operations before straight-line revenue, straight-line expense, stock-based compensation expense, non-real estate related depreciation, amortization and accretion, amortization of deferred financing costs, debt discounts, and interest rate swaps, other (income) and expense, gain (loss) on retirement of long-term obligations, net gain (loss) on interest rate swaps, acquisition and integration costs, asset write-down charges and less capital improvement capital expenditures and corporate capital expenditures.

Sustaining capital expenditures. Crown Castle defines sustaining capital expenditures as either (1) corporate related capital improvements, such as information technology equipment and office equipment or (2) capital improvements to tower sites that enable our customers’ ongoing quiet enjoyment of the tower.

1Q Signals Start of Phase 2 of LTE – Moreland

The next wave of tower leasing, network densification, has taken root, Ben Moreland, CEO, president and director of Crown Castle International, told the company’s first quarter earnings call.

With all four major U.S. wireless carriers engaged in major network upgrades, Crown experienced a significant amount of activity in the first quarter, logging more than 75 percent of the 2013 leasing activity into its application pipeline.

Application volume by revenue in the first quarter grew at twice the pace of last year, and 60 percent of that number was from new tenants collocating on towers they were not previously on.

“This is a trend we have been anticipating for some time, as some of the carriers are nearing completion of their LTE nationwide build out,” Moreland said. “We have been expecting to see in-fill sites, or densification, as a second wave of LTE network deployment, providing us with a longer runway of expected future growth as the carriers strive to maintain network quality and reliability through cell splitting in the face of exponential growth in mobile technology demand.”

Given the location of 74 percent of Crown’s sites in the top 100 markets, the company expects to benefit from the majority of network densification through new leases. Overall, LTE deployment should be the gift that keeps on giving to the tower industry into the future, Ted Abrams, Abrams Wireless, told AGL Bulletin.

“Working with clients deploying LTE, and those responding to major carrier requests, I see strong indications that LTE deployments are only just beginning. Evidence indicates demand growth for wireless network infrastructure — assets that support and connect small cells and macros – continuing for many years to come,” Abrams said.

 

Crown Castle’s T-Mobile Tower Buy a Win-Win

Crown Castle International’s purchase of T-Mobile USA ’s 7,200 towers for $2.4 billion in cash late in September not only helps fund the carrier’s LTE build out, but it also reinforces its position as the largest U.S. tower company with 30,000 towers and small cell operations in over 50 markets. Both of which are good news for the tower industry.

“T-Mobile is working aggressively to make our 4G network stronger, faster and more dependable for consumers, and this transaction will support our ongoing $4 billion network modernization initiative that is the cornerstone of this effort,” said John Legere, T-Mobile’s recently hired CEO, in a prepared release.

The urban locations of T-Mobile’s towers ­­– 83 percent of them are in the top 100 markets and 72 percent are located in the top 50 markets – were a good fit for Crown Castle.

“Consistent with our focus on the top 100 U.S. markets, the T-Mobile assets are expected to provide significant growth driven by the continued demand for wireless data services, particularly in the most densely populated areas in the United States,” Ben Moreland, Crown Castle’s president and CEO, said in a prepared release.

According to RBC Capital Markets Analyst Jonathan Atkin, T-Mobile’s financial stability was the key result from the tower sale. “In our view, the tower deal will have little operational impact on Deutsche Telekom or Crown Castle, and serves mainly to provide Deutsche Telekom with financial flexibility for pursuing its U.S. LTE build,” Atkin writes.

Crown Castle estimates that the T-Mobile towers will produce $125 million to $130 million in adjusted funds from operations before financing costs in 2013, and have sufficient capacity to accommodate at least one additional tenant per tower without significant incremental capital.  T-Mobile has committed to maintain its communications facilities on the towers for a minimum of 10 years with annual rent escalation provisions tied to the consumer price index.  Further, T-Mobile’s rent includes the rights, subject to certain limitations, to complete its current network modernization on these sites.

Crown Castle announced on Wednesday that it is offering $1.65 billion in senior debt to finance the T-Mobile tower transaction. It will also use cash on hand and funds from its revolving credit facility.