Crown Castle operates 40.1k towers, 80k route miles of fiber supporting more than 70k small cells. The company’s infrastructure is entirely based in the United States and it derives 40% of its revenue from carriers.
AT&T, Verizon and T-Mobile – Three Major Wireless Carriers in the United States
Recent industry developments among the three major carriers will help to accelerate the deployment of 5G in the United States. AT&T, Verizon, and T-Mobile, are in strong positions to leverage their scale and valuable spectrum assets. Ultimately, this will promote more investment across the industry to build robust 5G networks.
Crown Castle to Partner with Carriers
Crown Castle’s long-term visibility for the investment that the carriers will make related to 5G, has improved in 2020. Each carriers’ plans are becoming more real and more specific in terms of sites they are targeting and how those sites will be deployed for 5G networks. Particularly, specificity for 5G deployments is increasing in terms of what equipment and how much of it needs to be added to a specific tower site.
Additionally, Crown Castle is continuing to build-out small cell nodes. This will become increasingly important as AT&T, Verizon, and T-Mobile move further along in their 5G deployment plans. Specifically, Crown Castle will help these carriers densify for and deploy high-band, millimeter wave spectrum.
Wireless Carriers – Capital Expenditures
AT&T, Verizon and T-Mobile are characterized by having more network needs than they have capital to spend on fulfilling those needs. Therefore, carriers have prioritized where they spend their capital. In large part, carriers have made capital expenditures on their wireless business. In aggregate, this figure has remained ~$30 billion annually for a number of years.
T-Mobile and Sprint – Accelerating Innovation and Increasing Competition in the U.S. Wireless Industry
The United States wireless industry has gone through tremendous consolidation over time. From eight national carriers, then six national carriers, to four national carriers and now only three. However, the driver of demand for digital infrastructure is not predicated on the number of carriers in the market. Rather, the driver of demand is how much data usage exists and how much spectrum is available. Consequently, the combination of data usage and spectrum availability drives the need for digital infrastructure. Crown Castle partners with the wireless carriers to deploy the appropriate digital infrastructure.
T-Mobile and Sprint Combination – Crown Castle to Benefit
T-Mobile and Sprint’s merger will not have negative implications for macro towers because that would suggest a lessening of the need for data usage, spectrum, and thus digital infrastructure. Instead, the industry will benefit from the greater need and demand for digital infrastructure in the coming years. T-Mobile’s capital spending during 2020 and 2021 will transition from largely being focused on 4G/LTE to be majority 5G-based. This will begin a new decade-long investment cycle.
Heightened spending from T-Mobile will offset the anticipated decommissioning, which T-Mobile will do on 35,000 of their sites. Specifically, T-Mobile is doing this in order to right-size their network infrastructure, following the Sprint acquisition.
T-Mobile has stated publicly that they will spend more money as a combined entity, with Sprint, than they would have as separate entities. Additionally, T-Mobile will push very hard to deploy 5G, which will be positive both from a tower- and small cell-perspective. Having a strong third competitor in the United States wireless industry, will put upwards pressure on the investment plans of AT&T and Verizon. These carriers will need to deploy more spectrum, tower sites and small cells, with Crown Castle being an option. Deployment of additional spectrum on both tower sites and small cells, in order to meet the demand requirements 5G, is a significant positive driver to Crown Castle’s business.
DISH Network – Building the United States’ Greenfield 5G Network
For the first time in more than a decade, a new carrier, DISH Network is entering the United States wireless market, at scale. The company plans to deploy nearly 100 MHz of spectrum depth. This spectrum will be used to build a nationwide 5G network over the next several years. DISH will ultimately compete with the established carriers.
Crown Castle’s portfolio of 40k towers, 80k miles of metro fiber and 70k small cells place the company in a very favorable position to assist DISH, as the company builds out its network organically. Crown Castle’s towers are mainly located in urban areas, which is a focal point for carrier DISH’s initial build-out.
DISH’s expansion story is premised on building a 5G network with a virtual architecture. However, the architecture is not entirely virtualized, it can be considered more centralized. Therefore, more electronics equipment will be housed in centralized locations.
DISH will use this centralization to allocate the appropriate amount of network capacity, at the right times. Specifically, towards the edges of the network, such as Crown Castle’s towers. By implementing virtualization / centralization, DISH will lower the overall cost of building the network from a capital expenditure perspective. Additionally, DISH will lower the ongoing operating expenses of running the 5G network.
Overall, DISH’s “virtualization” plans do not reduce the amount of equipment that will need to be on towers. This is because the network still needs antennas that allow for the appropriate transmission of spectrum.