Despite increased revenues, tower companies Crown Castle International Corp. and SBA Communications Corp. reported first-quarter financials in the red, although Crown managed to shave its losses.
Crown reported site rental and broadcast transmission revenue of $219.4 million, up 18.6 percent, or $34.4 million, from last year’s first-quarter revenue. Of that, U.S. site rental revenue accounted for $120.7 million, up 11.9 percent from last year, and U.K. site rental and broadcast transmission revenue accounted for $19.3 million, up 27.1 percent from last year.
Net cash from operating activities stood at $26.9 million, well up from $5.9 million last year. Free cash flow, which Crown defines as net cash from operating activities less capital expenditures, totaled $7.5 million, also well up from a use of cash of $46.9 million in the first quarter of 2003.
Nevertheless, Crown recorded a net loss of $65 million, or 34 cents per share, for the quarter, improved from last year’s first-quarter net loss of $69 million, or 38 cents per share.
“During the first quarter, our core business continued to produce strong growth,” said John Kelly, Crown’s president and chief executive officer. “Thus far during 2004, we have experienced a 25-percent increase in U.S. leasing compared to last year’s volume, and we are encouraged by the leasing activity in the U.K. and Australia.”
Meanwhile, SBA posted revenues of $57.3 million, up from $51.7 million in last year’s first quarter. Of that, site leasing revenue made up $33.9 million, and site development revenues were $23.4 million, both up from last year. Net loss was $47.9 million, or 86 cents per share, up from last year’s first-quarter $33.8 million, or 66-cent-per-share, loss. SBA attributed that increase to its refinancing activities. EBITDA was $17.2 million compared with $15.1 million last year.
Along with its first-quarter results, SBA announced its decision to sell its services business in the western United States. SBA has stood by its services division while other public tower companies divested theirs in an effort to focus on the core tower ownership model. The company last year sold its entire western tower portfolio, so this marks its complete exit of that region.
SBA also raised its financial guidance for full-year 2004. The company now expects total revenues for the year to be between $208 million and $222 million, with $138 million to $142 million from site leasing and $70 million to $80 million from site development.
Shares of both Crown and SBA were trading down at $14.55 and $3.70, respectively, at press time, following the earnings releases. American Tower Corp. was trading at $13.44 per share, and SpectraSite Inc. was at $38.11 per share.
American Tower and SpectraSite earlier released their first-quarter results, also reflecting solid growth in the tower industry. This year is likely to reflect an improvement in the sector, as carriers are predicted to continue to spend on bolstering network quality. Estimates from tower companies on the number of cell sites likely to be deployed by carriers this year range from 14,000 to 17,000 compared with the approximately 15,000 that were deployed last year.
Beyond that, pending changes in the wireless industry, most notably the upcoming merger of Cingular Wireless L.L.C. and AT&T Wireless Services Inc., could impact the future of the tower sector. Tower players remain adamant that carrier consolidation will not negatively affect them, and in fact, the tower sector may even benefit from carrier consolidation, according to Jonathan Atkin, an analyst at RBC Capital Market.
RBC believes that in light of the upcoming Cingular-AWS deal, Cingular could terminate its network-sharing agreement with T-Mobile USA Inc. If that were the case, RBC believes T-Mobile would build its own network in the California/Nevada region, which could mean the deployment of 4,500 to 6,500 new sites, commencing as early as 2005. According to RBC, T-Mobile would likely collocate the new sites on existing towers to avoid difficult zoning roadblocks, which would benefit all the public tower companies except for SBA because it does not have a western portfolio.
