On Feb 11, 2014, we upgraded our recommendation on
Crown Castle International
) to Outperform from Neutral.
Why the Upgrade?
An extensive tower portfolio, successful integration of T-Mobile
business, expansion of Small Cell business, increased usage of
smartphones, and aggressive deployment of 4GLTE networks are
likely to spur growth moving ahead. Moreover, the proposed
launch of Verizon's VoLTE service and continuous acquisitions of
towers globally may further drive growth for the company.
Higher usage of smartphones and tablets and increased deployment
of 4G LTE networks have propelled demand for tower requirement by
large carriers. Moreover, the acquisition of NextG Networks Inc.
(which comprises 7,000 Distributed Antenna Systems) and the
purchase of 7,200 wireless towers from
) have positioned Crown Castle as the largest wireless tower
operator in the U.S.
Furthermore, the company has entered into a definitive
agreement with telecom giant
) to acquire exclusive rights of 9,700 wireless towers of the
latter for a total consideration of $4.85 billion.
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As transporting equipment from one tower to another is
cumbersome, carriers normally renew contracts upon expiration.
This implies that a high percentage of Crown Castle's revenue is
Recently, the company has converted its tower business into a
Real Estate Investment Trust (REIT). An REIT status will benefit
the company in terms of tax savings and enhance long-term
shareholders wealth. Moreover, it will minimize the weighted
average cost of capital (WACC). Following the conversion, Crown
Castle will distribute 90% of its earnings through dividends
every year, reducing tax.
Crown Castle currently carries a Zacks Rank #1 (Strong Buy).
Stocks That Warrant a Look
Other stocks in this sector like
Arris Enterprises, Inc.
SBA Communications Corp.
) are set to gain from the robust growth of LTE deployment in the
upcoming days. Arris carries a Zacks Rank #1 (Strong Buy) while
the other two carries a Zacks Rank #2 (Buy).