During Crown Castle’s Q3 2020 earnings call, which took place today, the company continued to take additional actions in response to its engagement with activist hedge fund investor Elliott Management. Elliott has a $1bn economic interest in Crown Castle. Specifically, Crown Castle made the following actions and updates on its Q3 2020 earnings call:

Dividend – Q3 2020 Increase

Crown Castle increased its annualized common stock dividend by 11% to $5.32 per share. This equates to a 3.3% dividend yield on the closing stock price, on the day of the conference call. Recall that Elliott Management is targeting a $7.00 dividend per share in 2021. Thereafter, Elliott wants to grow the dividend to an $8.00+ dividend per share by 2023.

Operations – Q3 2020 Update

Small Cells

As of Q3 2020, Crown Castle had ~48k small cells on-air. The company’s goal is to have 50k small cells on-air by the end of 2020. Furthermore, the company has 20k small cells in backlog. This backlog should support similar small cell growth of 10k or greater in 2021. By the end of 2021, Crown Castle expects to have 60k small cells on-air.

In recent years, anchor builds have accounted for 70% to 80% of Crown Castle’s small cell leasing. Whereby colocation makes up the remaining 20% to 30% of the activity. Based on Crown Castle’s small cell backlog / pipeline that the company expects to put on-air in 2021, the contribution from colocation will increase to ~40% of the activity, reducing the capital intensity in that business, relative to recent years.

Due to this reduced capital intensity, combined with the completion of several large fiber expansion projects (inherited through acquisitions) in 2020, Crown Castle expects its discretionary capital expenditures to be $400m lower in 2021 when compared to 2019.

Return on Invested Capital (ROIC) for Crown Castle

Separately, Crown Castle updated its disclosure for segment cash yields on invested capital. This gives investors, including Elliott, a better view into returns being generated on Crown Castle’s Tower and Fiber (including Small Cells) segments.

In Q3 2020, Return on Invested Capital was 10.7% for Crown Castle’s Tower segment and 7.8% for its fiber segment. As a comparison, in Q2 2020 Return on Invested Capital was 10.4% (30 bps lower) for Crown Castle’s Tower segment and 7.6% (20 bps lower) for its fiber segment.

Board of Directors – Q3 2020 Changes

Crown Castle announced that, as part of its previously disclosed Board refreshment plan, its Board of Directors has appointed two new directors, effective November 6, 2020.

  • Tammy K. Jones: CEO of Basis Investment Group, a multi-strategy commercial real estate investment manager
  • Matthew Thornton, III: former Chief Operating Officer of FedEx Freight

Crown Castle also intends to add a third director with previous experience in the fiber industry.

Crown Castle operates 40.1k towers, 80k route miles of fiber supporting more than 70k small cell networks. The company’s infrastructure is entirely based in the United States.

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G. Adam has over 7 years of experience in research and writing for Towers.


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