USA: Crown Castle posts $40 million profit: Updated

Mobile broadband buildout aided Crown Castle International Corp.’s (CCI) first-quarter outlook as the independent tower company saw total revenue and site rental revenue both increase 12% year over year. The company posted a profit for the quarter of $40 million, compared to a net loss of $119 million for the same quarter 2010. Total revenue stood at $499 million. Of that amount, $456 million came from site rental revenue.
“We had a good first quarter, exceeding our outlook for site rental revenue, adjusted EBITDA and recurring cash flow,” said President and CEO Ben Moreland. “Site rental revenue grew 10%, adjusted for non-recurring items, and U.S. services revenues grew 14%, compared to the same period in 2010,” Moreland said. “We are benefiting from these mobile data deployments in our results, and I believe it is still early days in this next generation of wireless demand.”
The company expects to earn between $11 million and $40 million in the second quarter and between $70 million and $155 million for the year, in line with its first-quarter results. Going into 2012, however, Crown said it expects an uptick in leasing activity and a more diverse leasing base. Today, Crown said the majority of its leases come from Verizon Wireless and AT&T Mobility, “and a large number of relatively small” operators.
Crown bought back common stock during the quarter, investing about about 30% of its recurring cash flow in the effort. “Further, we continue to see attractive investment opportunities in our distributed antenna systems (DAS) business and believe this has the potential to be a meaningful component of our long-term organic revenue growth,” said CFO Jay Brown.
Crown reiterated its strategy to focus on the U.S. market during its first-quarter earnings conference call, noting that that the United States represents less than 5% of the world’s population it accounts for 20% of global data revenues, said Moreland. When tallying by data revenues, AT&T Mobility and Verizon Wireless are two of the top three largest mobile data carriers in the world.
“As the most dominant market, the U.S. is globally the most attractive market to capture growth in wireless services and ultimately drive our business,” Moreland said. Smartphones will consume more data than data cards by the end of the year, he noted.
Regarding any potential risk to Crown as AT&T tries to buy T-Mobile USA Inc., CFO Jay Brown said its revenue exposure is around 6% of total revenue, and in past acquisitions, there has been significantly less churn than the overlap. In other words, operators don’t completely shut down every tower overlaps once two companies are combined into one. Despite earlier speculation that T-Mobile USA Inc. could sell its tower portfolio, Crown said it was not considering that a possibility right now.
DAS is “a growing pipeline of opportunity” and the company expects to spend $50 million on DAS buildouts this year.
Concerning speculation that Sprint Nextel Corp. may sign network-sharing deals with other operators, Brown noted that while Crown would not comment on Sprint’s potential plans, Crown has capacity available on its sites and would be able to accommodate another operator efficiently.
Crown has purchased 94 million shares and potential shares of stock for $2.4 billion since 2003, accounting for about one-third of its stock, which it believes contributes to long-term shareholder value.
The company also is continuing with its land-purchase program, and today owns or controls for more than 20 years the land beneath its towers that represents 72% of its site rental gross margin. The average term remaining on ground leases is about 31 years.