On Jan 14, we maintained our Neutral recommendation on
Crown Castle International Inc.
) as the company started operating as a Real Estate Investment
Trust (REIT) on Jan 1, 2014.
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Why the Reiteration?
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 T-Mobile USA have made
Crown Castle the largest wireless tower operator in the U.S.
Furthermore, the company has entered into a definitive agreement
with telecom giant AT&T Inc. to acquire exclusive rights of
9,700 wireless towers of the latter for a total consideration of
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
recurring. Moreover, the company's decision to operate as a REIT
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.
However, a highly leveraged balance sheet and the ongoing merger
deals with large telecom carriers may act as headwinds for the
company going forward. Moreover, Crown Castle is currently
trading at a 52-week high price range.
Crown Castle carries a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks in this sector like
American Tower Corporation
SBA Communications Corp.
) are set to gain from the robust growth of LTE deployment in the