We upgrade our recommendation on
Crown Castle International Corp.
) to Outperform following its recent acquisition of 7,200 wireless
towers of T-Mobile USA. Significant growth of wireless broadband,
higher usage of smartphones and tablets together with increased
deployment of 4G LTE networks are long-term positives for the
wireless tower industry. Crown Castle continues to report robust
results over the last couple of years, improving its core site
rental revenue, gross margin, adjusted EBITDA, and recurring cash
We believe future financials will be driven by substantial
demand for more tower space to facilitate high-speed wireless
networks. In this respect, the newly acquired T-Mobile wireless
towers will enable Crown Castle to improve both its top and bottom
line. After the acquisition of T-Mobile towers, Crown Castle will
become the largest wireless tower operator in the U.S., outpacing
American Tower Corp.
), with more than 30,000 towers and an extensive network of small
cells. Our long-term view regarding wireless tower industry remains
intriguing and we believe Crown Castle is well positioned to
successfully capitalize on these opportunities.
Wireless services are advancing rapidly in terms of additional
features and capabilities. Much of the infrastructure and
upgrades require effective site management of cell towers and
equipment. CrownCastle effectively addresses this opportunity as
95% of its quarterly revenue is currently derived from wireless
service providers. The company accumulates most of its revenue from
long-term (typically 5-10 year) tower leases. It has become
imperative for carriers to improve network quality, and coverage,
in order to minimize customer churn. Increased wireless coverage,
by using more tower space, is one of the major initiatives that
carriers take to improve transmission quality.
AMER TOWER CORP (AMT): Free Stock Analysis
CROWN CASTLE (CCI): Free Stock Analysis Report
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