Tower Company Profile: Crown Castle (CCI)
Founded in 1994 and headquartered in Houston, Crown Castle International (CCI) is the largest cell tower company (aka wireless infrastructure operator) in the U.S. It owns approximately 40,000 cell towers in the U.S., providing coverage to 98 of the top 100 markets. Crown Castle also serves most of Australia, where it owns and operates over 1,700 cell sites.
CCI receives most of its revenue from leasing space on its towers to wireless carriers, and has an average tenant base of ~2.5 tenants per tower. Approximately 84% of its revenue coming from the Big Four: Verizon (14%), AT&T (25%), Sprint (23%) and T-Mobile (23%). Ninety-six percent of its revenue comes from domestic carriers and 4% from international carriers. Crown also owns more than 2,300 third party leases, acquired from one of the third party lease buyout companies, and over 10,000 Distributed Antenna System (DAS) nodes, over 8,500 of which were procured when CCI acquired NextG in 2012. These DAS assets from NextG are expected to provide for significant growth, as they currently average only 1.25 tenants per network, and have the capacity for more. CCI is now the largest operator of DAS in the U.S.
In the fourth quarter of 2013, Crown Castle’s site rental revenue was up 14% from 2012 Q4, 3% which came from the 9,700 towers it purchased from AT&T (see below). New leasing activity (including new licenses plus amendments to existing leases) more than doubled, which is likely a result of infrastructure densification – a strategy deployed by carriers to augment existing consumer demand for fast and reliable data speeds. Crown invested $182 million in capital expenditures, including $24 million on its land lease purchase program (e.g., lease buyouts).
During 2013, Crown extended over 1,000 land leases and bought an additional 800. It now controls the land beneath ~70% of its towers for more than 20 years, with an average term of 29 years remaining on its land leases. The vast majority of its tenant leases have fixed escalators of 3-4%.
Crown Castle continues to invest significantly in small cell deployment, specifically in outdoor urban centers.
Property Owners with AT&T Leases
On October 20, 2013, Crown Castle announced it’s acquisition of 9,700 towers from AT&T. Under this agreement, it has exclusive rights to lease and operate the AT&T towers for a weighted average of 28 years. Crown will also buy 600 towers outright, with the option to purchase the remaining 9,100. The ground leases, belonging to AT&T, have a 2% lease escalation rate, which is lower than the typical escalation rate between tower companies and carriers. The towers have an average tenant base of 1.6, signifying that the future collocation potential is high.
After the acquisition is complete, approximately 28% of all towers in the Crown Castle portfolio will have less than 20 years remaining on their ground lease until expiration. Prior to the AT&T acquisition, Crown reported lower percentages for their portfolio, so this suggests that the AT&T portfolio has significantly higher numbers of towers with less than 20 years remaining until expiration.
Crown Castle is expected to take over any lease negotiations to extend or buy AT&T ground leases from property owners. Our history with Crown Castle has indicated that they are more aggressive in trying to acquire the long term rights under their towers than other tower owners might be, so we fully expect that landowners with AT&T tower ground leases will soon start to receive new inquiries from Crown Castle to purchase their leases. Since industry standards trend toward valuing leases higher the closer they are to expiration, we also expect to see Crown diligently negotiating lease extensions in advance of the lease expirations.
If you have an AT&T tower lease, we advise you to wait until Crown contacts you. In other words, do not sell the lease to a third party buyout company at this time, yet do expect them to be calling. At the end of the day, you will almost certainly be better off waiting until Crown itself contacts you. If you have any questions regarding your cell site lease, contact Steel in the Air.
Property Owners with T-Mobile Leases
On September 28, 2012, Crown Castle announced that it would purchase 7,200 towers from T-Mobile, giving it exclusive rights to lease and operate the towers for about 28 years, with the option to fully acquire them at the end of the lease.
The interesting aspect here is that half of T-Mobile’s 7,200 towers were originally designed to be single tenant towers, meant to accommodate T-Mobile’s equipment only. The T-Mobile tower portfolio had an average of 1.6 tenants per tower, significantly lower than Crown’s previous average number of tenants.
For landowners with T-Mobile tower ground leases, this deal puts you in a better situation. Crown will certainly be more aggressive about purchasing or extending the underlying ground leases than T-Mobile was. Any of the 7,200 ground lessors who have not already sold their T-Mobile ground leases are in a better bargaining position now. If you’d like to prepare yourself for a level playing field, contact Steel in the Air. We provide fair, true market values of cellular leases, and can make sure you are one step ahead of the game.
Here are four proposals that landowners typically receive from Crown Castle:
- Crown Castle Proposed Cell Tower Lease: Crown Castle contacts a landowner to enter into a lease to erect a tower on the property.
- Crown Castle Lease Buyout: Crown Castle offers to purchase the ground rights under their existing tower through a perpetual or fixed term easement.
- Crown Castle Ground Lease Extension: Crown Castle proposes to extend their ground lease for 30-50 years. They typically offer a nominal signing bonus and will sometimes offer to increase the rent going forward. By asking for an expansion along with the offer to extend or buyout the lease, Crown hopes the landowner will not question whether the expansion has value in and of itself – in which case their rent costs would rise.
- Crown Castle Lease Expansions or Consent Requests: Crown Castle contacts their existing landowners to request the right to expand their lease footprint or to receive consent to sublease space on the tower to a wireless provider.
Please contact us to discuss any questions you might have about a proposal you have received from Crown Castle, or to prepare yourself for proposals you are likely to receive in the near future. The initial discussion is free and once we talk to you and understand your needs, we can advise you as to what the costs would be should you choose to retain our services. Unlike our competitors, we offer the flexibility of either a fixed fee consulting service or a contingency based service.