Crown Castle International Inc.
) reported robust financial results for the second quarter of 2012,
beating the Zacks Consensus Estimates. The solid performance was
mainly driven by higher usage of smartphones and tablets together
with increased deployment of 4G/LTE networks.
To curtail customer churn, it has become essential for the
carriers to boost network quality and coverage. Increased wireless
coverage, by using more tower space, is one of the major
initiatives that carriers take to improve transmission quality.
Since moving equipments from one tower to another is cumbersome,
carriers normally renew these contracts upon expiration, which
implies that a high percentage of Crown Castle's revenue is
recurring. Top-line growth is mainly achieved by increasing
occupancy levels at the existing towers, as well as through annual
price hikes of approximately 3% - 5%.
Crown Castle has completed the acquisition of privately held
NextG Networks Inc., which is the largest provider of outdoor
Distributed Antenna Systems (DAS). At present, NextG has more than
7,000 DAS in operation coupled with another 1,500 nodes in the
pipeline. The company also enjoys transmission rights over 4,600
miles of optic fiber cable. The proposed acquisition will enhance
Crown Castle's DAS network with more than 10,000 nodes spread
across 26 U.S metropolitan cities.
On the flip side, highly leveraged balance sheet coupled with
stiff competition from other tower companies will act as headwinds
for Crown Castle going forward. Moreover, the company generates its
revenue from top four carriers in the U.S. like
), Verizon Wireless,
), and T-Mobile. Therefore, loss of any carriers will heavily
impair the company's top-line growth. We, thus, maintain our
long-term Neutral recommendation on Crown Castle.
Currently, CrownCastle holds a Zacks#2 Rank, implying a
short-term Buy rating.
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