Towers Have a Long Growth Runway – Crown’s Brown

September 17, 2013

Jay Brown, Crown Castle’s chief financial officer, told an audience at the Bank of America Merrill Lynch 2013 Media, Communications & Entertainment Conference, Sept. 11, in Houston that the recent market volatility surrounding tower company stocks is the result of investor misconceptions about the nature of the wireless infrastructure market.

Brown warned against putting too much stock in beliefs that the carriers are going to dramatically increase money infused into infrastructure build out or that build out is going to grind to a halt.

“We take a much longer-term view of how the carriers are spending capital on their networks,” he said. “The reality is there is a balanced conversation that carriers have around allocation of funds from dividends, deploying sites and upgrading sites. Our experience has been that carriers tend to spend capital on a relatively steady basis.”

To divine the future of towers, Brown suggested that the audience should follow the movement of spectrum.

“Carriers have deployed about 300 megahertz of spectrum that is in the hands of the carriers and being used by consumers,” he said. “That has driven, across the industry, about three tenants per tower. That is the case with Crown Castle.”

Another 200 megahertz of spectrum is in the hands of carriers that have not deployed it yet, including spectrum owned by DISH, LightSquared and some of the 2.5 GHz spectrum. Additionally, the FCC is working on reallocating another 500 megahertz to mobile.

“People are saying there is a need for a lot more wireless service, and they want to get spectrum into the hands of the carriers. I think ultimately it will get deployed, and they are going to need towers,” Brown said. “I am not inclined to say that any one of the big four carriers is nearing the end of their build outs. There is a very long runway of steady growth. Trying to predict any decreases or increases is very hard to do.”

When asked about whether the growth of small cells is a threat to the growth of towers, Brown responded that small cells are complementary to tower development.

“We are incredibly excited about [small cells]. Both of our acquisitions of NextG and NewPath have done very well. It has allowed us to invest a lot of capital in an area that is growing with lease up demand from the wireless operators,” he said. “For the most part those small cells are being constructed where macrocells can’t reach. They are filling in the network and providing extra coverage and capacity that macro-towers simply cannot, but that doesn’t mean there is less of a need for the macro-towers.”