Crown Castle International Corp. (CCI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Despite an extensive tower portfolio and accelerated 4G LTE network deployment, a highly leveraged balance sheet and the ongoing mergers between large telecom carriers may act as headwinds for Crown Castle going forward. Moreover, the stock is overvalued at current levels and is currently trading at a 52-week high price range. Crown Castle reported third-quarter 2014 financial results wherein both the top and the bottom line surpassed the Zacks Consensus Estimate. The company also raised its quarterly dividend buoyed by better-than-expected quarterly numbers. Hence, we upgrade our long-term recommendation on Crown Castle to Neutral from Underperform.

Overview:

Houston-based Crown Castle International Corp. (CCI) is a leading independent operator of wireless communication towers in the U.S. and Australia. In addition to leasing antenna space to wireless carriers, Crown Castle provides network design, radio frequency engineering and site development services. Crown Castle owns, operates and manages 24,700 wireless communications sites worldwide including 22,200 towers in the U.S., 1,600 in Australia and the rest 200 in Puerto Rico. In addition, the company manages 700 towers owned by third parties. In Jan 2007, Crown Castle completed the acquisition of Global Signal Inc. for a total consideration of approximately $4 billion. The Global Signal acquisition has given the necessary scale and geographic diversification to the merged entity to compete with big rivals in the industry. This acquisition has promulgated operational efficiency of Crown Castle with more pricing control.

On Sep 9, 2013, the board of directors of Crown Castle approved the steps needed to reorganize the company to qualify as a Real Estate Investment Trust (REIT) for tax purposes. Crown Castle became a REIT on Jan 1, 2014. A REIT has to pay at least 90% of its taxable income to shareholders in the form of dividends every year.

Crown Castle reports in two business segments:


Site Rental: This segment leases and licenses antenna spaces on Crown Castle controlled towers predominantly to wireless carriers under long-term contracts. Wireless carriers place their antennas and other equipment in the tower and also acquire lease access to Crown Castle's distributed antenna systems for the transmission of a variety of wireless signals related to voice, data, and video transmission. Site Rental segment generated 81.5% of the total revenue in the fourth quarter of 2013.

Network Services: This segment provides various services related to antenna installations & subsequent augmentation, network design & site selection, site acquisition, and site development. The segment generated the remaining 18.5% of total revenue in the fourth quarter of 2013.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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