Key Factors Affecting Crown Castle’s Growth in 2018
Mergers and acquisitions in the telecom sector
The telecommunication industry, evolving at a rapid pace, thrives on technology. Rumors of mergers and acquisitions are common in the sector. Also, the FCC (US Federal Communications Commission), set up under the Trump administration, is considered to be merger-friendly and may lead to more industry consolidation.
The news of the possibility of a merger between T-Mobile (TMUS) and Sprint (S) has triggered fear among wireless carriers. Consolidation among major service providers would also mean fewer tenants for wireless real estate owners. Crown Castle (CCI), which has a concentrated customer portfolio merger, could see lower revenue and reduced demand.
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A new era
To move into the 5G (fifth-generation) era, Crown Castle will likely need to make fundamental infrastructure changes. However, it could benefit from demand for small cells and fibers. Crown Castle has underwritten fiber investments on the basis of current applications and future technology development such as 5G, as well as autonomous vehicles, augmented or virtual reality, and Internet of Things applications.
Mobile data demand
Every two years, mobile data demand is expected to double across towers and small cells. Like in the wireless industry, 20% annual growth in wired data traffic is driving demand across dense metro fiber assets.
Crown Castle provides differentiated fiber solutions to large customers such as healthcare providers and educational institutions to cater to this increasing demand, which could enhance its position in small cells by increasing fiber asset opportunities.
Crown Castle has over 40,000 towers, 50,000 small cells on air, and ~60,000 route miles of high-capacity fiber. These assets could help it capture long-term trends and benefit from increasing reliance on dense-tower and small-cell networks.
Peers American Tower (AMT), SBA Communications (SBAC), and CenturyLink (CTL) could also benefit from the increasing demand for mobile data. Together, American Tower and Crown Castle make up 14% of the PowerShares Active US Real Estate ETF (PSR).