Crown Castle Mulls Vending Australian Subsidiary - Analyst Blog

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Crown Castle International Corp. ( CCI ), the largest provider of shared wireless infrastructure in the U.S., recently announced that the company is considering several options to sell its stake in Australian subsidiary CCAL. Crown Castle owns a 77.6% stake in CCAL and an intercompany loan of approximately $248 (AS$306) million due from CCAL as of Dec 31, 2014. CCAL is the largest wireless tower operator in Australia with a portfolio comprising 1,800 sites across the nation.

CCAL is projected to generated 4-5% of Crown Castle's fiscal 2015 adjusted EBITDA. However, this division has become a non-core business for the company as management is presently emphasizing on its U.S. operations and also intends to reduce its overall debt burden. Importantly, CCAL is likely to lose its tax shelter associated with depreciation in the near-future. As a result, Crown Castle needs to pay increased taxes pertaining to its CCAL business, going forward.

Crown Castle currently operates in 100 of the top U.S. markets with a portfolio of over 40,000 towers and 14,000 small cell nodes supported by around 7,000 miles of fiber backhaul. Notably, the U.S. telecom behemoths like Verizon Communications Inc. ( VZ ), AT&T Inc. ( T ) and T-Mobile US Inc. ( TMUS ) are its major customers. In 2014, Crown Castle's site rental revenues and adjusted EBITDA rose 22% and 19%, respectively from the year-ago quarter.

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. Crown Castle effectively addresses this opportunity as 95% of its revenues come from wireless service providers. 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%.

It has become imperative for wireless carriers to improve network quality and coverage, in order to reduce customer churn. Increased wireless coverage, by using more tower space, is one of the major initiatives that carriers take up to enhance transmission quality.

Since moving equipment from one tower to another is cumbersome, carriers normally renew lease contracts upon expiration, which implies that a high percentage of Crown Castle's revenues are recurring. Crown Castle currently carries a Zacks Rank #3 (Hold).

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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 Nasdaq, Inc.

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

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