In their third quarter 2023 earnings call, Crown Castle International Corp. (NYSE:CCI) expressed confidence in their full-year outlook, while also indicating a commitment to maintaining their dividend in 2024. The company anticipates a temporary dip in AFFO (Adjusted Funds From Operations) in the first half of 2024, due to non-recurring Sprint cancellations and lower contributions from services, before bouncing back in the latter half of the year.
Key takeaways from the call:
- Crown Castle expects organic revenue growth of 4.5% for towers, 13% for small cells, and 3% for fiber solutions in 2024, driven by increased demand for their assets due to 5G network densification.
- The company is implementing restructuring plans to reduce costs and improve customer experience, aiming to achieve $105 million of annual run rate savings.
- Crown Castle plans to centralize approximately 1,000 employee positions by Q3 2024.
- The company expects to deploy a record 14,000 small cell nodes in 2024 and plans to invest approximately $1.2 billion in discretionary capital expenditures, primarily in their fiber segment.
- Crown Castle is actively searching for a replacement for their departing CFO, Dan Schlanger.
Despite certain headwinds, Crown Castle remains optimistic about their differentiated strategy and core capabilities driving sustainable long-term value. The company also anticipates attractive revenue growth trends in 2024, with consolidated organic growth accelerating to 5%, driven by increased demand for small cell and fiber assets.
CEO Jay Brown highlighted the company's ability to invest capital and drive long-term returns during periods of disruption. He emphasized the importance of growing revenues on existing assets, seeking opportunities for new assets, and finding ways to lower the cost of capital.
Despite a potential decline in site rental revenues, adjusted EBITDA, and AFFO in 2024, Crown Castle is confident in its strong organic growth in each business segment to offset these losses. The company ended the quarter with approximately $5 billion of availability under its revolving credit facility and $750 million of debt maturities occurring through 2024.
Looking ahead, Crown Castle expects a 3% net growth by the end of the year, driven by increased activity in core leasing and a reduction in churn. The company aims to maintain its dividend in 2024 and believes the gap between dividend payout and cash generation will decrease in 2025.
The company also discussed the increasing need for small cells as carriers densify their 5G networks. They expect the total addressable market and demand for small cells to continue to grow. The CFO mentioned that the higher costs in 2024 are due to ground lease escalations, increasing labor costs, and the absence of one-time savings.
Finally, Brown discussed the company's plans for tower leasing in 2024, stating that about 85% of the tower leasing activity for the year is already contracted. He expects continued activity in tower leasing as carriers invest in additional equipment for 5G. Crown Castle estimates $155 million of churn in 2024, with tower churn expected to be in the low end of 1% to 2% range, small cells churn at 1%, and fiber churn decreasing from 10% in 2023 to around 9% in 2024.
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