Crown Castle Inc. (CCI) Earnings Call Transcript & Summary

Well, good morning, and welcome back to Citi's AppsEconomy Conference. For those of you I haven't had a chance to meet in person, I'm Mike Rollins, and I cover the communications services and infrastructure stocks for Citi. Just a few housekeeping items to get out of the way. We do have disclosures available to the right of your video player or under the Citi Disclosures tab if you're viewing this via Velocity. And for those of you joining us today, if you'd like to ask a question during the session, please enter it into the question box, it will come directly to me, and we'll do our best to integrate it into the discussion. With that out of the way, I'd like to welcome back Dan Schlanger, EVP and CFO of Crown Castle. Dan, welcome. Great to see you.

Yes. Thanks, Mike. Thanks for having us, and I appreciate the time at the conference.

Great. Well, I know it's been already a busy morning and probably a busy few days for Crown, so I'm sure we'll get to some of today's announcements. But as is tradition with the conference, it's the beginning of the year, you've actually already put out your 2022 guidance, maybe just a refresher of the operating and strategic priorities for Crown for this year.

Yes, Mike. We generally have the same priorities going into most years. We want to continue to deliver the lowest -- the highest risk-adjusted return we possibly can to our shareholders, while providing very good service to our customers, and allowing them to have access to our shared infrastructure assets such that they can reduce the overall implementation and operating cost of their networks by sharing in the shared economic model that we provide for them. And as long as we keep that model intact and provide a lower cost alternative, we think we can drive incremental utilization across the asset base that we have, which drives significant returns over time. And what we've done, and as you said, we gave guidance already for 2022, which is I think we'll get into more, but an increase over 2021 both in terms of activity and cash flow growth. But what we're trying to drive is the continuation of that model for as long as possible, which has led us to invest in not only towers but also a small cell and fiber business that we think will give us the opportunity to take advantage of the overall investments in the network that we believe are coming in support of 5G and the supply of -- the satisfaction of the increasing data demand in the U.S. And like I said, as long as we continue to deliver good service and keep our overall cost lower than what the alternatives are for our customers, we think we have a significant long runway of growth ahead of us.

Great. Well, given the announcement today, as we get into it, I thought we'd introduce the first live survey question. And for our audience, it's confidential, we're not tracking individual responses. And if you don't see the window pop up, if you see where the disclosures are, if you scroll down, the question window should show up. And the first survey we're just going to ask is, how do you view today's announcement of the long-term agreement with T-Mobile for Crown Castle? Is it a net positive? A net neutral? Or a net negative? And so we'll share that with the audience. Dan, why don't we get into that discussion, though, of what you announced today and what it means for Crown Castle.

Sure. If I were answering that question, I think it is a significant net positive for Crown Castle. This is a deal we've been working on with T-Mobile for a long time. And as I think most investors understand and T-Mobile has been very public about, they are focused on trying to consolidate the network between T-Mobile and Sprint and come up with network synergies. And they were focused primarily on the tower side. And as we had talked about a lot on the dual residency, where Sprint and T-Mobile were both on a tower. And what we did was -- what we believe we did was come to terms and an agreement that is good for both us and T-Mobile on the tower side. We have been able to push a little bit of the churn out from where we had big churn events in 2023 and 2028. Now we have one churn event in 2025 that is the majority of the churn. And then we returned back to our normal 1% to 2% churn rates going forward after 2025. So we think we came up with what was a reasonable compromise where we pushed some churn out, pulled some churn in and lowered the overall amount and T-Mobile gets what they want out of synergies, and we get what we want out of kind of putting this behind us having only one real significant churn event and then moving back to the tower model as we've all come to understand it with very low churn base escalator that is very consistent with our historical 3% escalators. And then the monetization of additional activity through additional revenues over the course of the life of the contract, that really hasn't changed the economic trade that we have with T-Mobile or our customers in general. So on the tower side, we think it's a really good deal and a win-win for both us and T-Mobile. But we were also, in conjunction with that, because of our unique portfolio where we have towers, small cells and fiber assets in the major markets throughout the U.S., we were also able to get, as part of the discussion, the largest small cell order in our history with a commitment from T-Mobile to add 35,000 small cells to Crown Castle over the next 5 years. And it's -- that is a really substantial number. In the history before 2021, Crown Castle had booked about 70,000 small cells. Over the last 12 months, between the 15,000 that we booked with Verizon and the 35,000 that we had booked with T-Mobile as of the announcement we made today, that 70% of our total volume up to date having been booked in the last 12 months. We view that as a significant turn in the overall activity levels in the small cell business and gives us a lot of confidence that the strategy that we have pursued over the last 10, 12 years is coming to fruition in a way that will provide significant value for our shareholders. And as I talked about in the very first question you asked, we see this as a continuation of the growth profile that we have in the business, that over the next several years our customers are very focused on towers and they have been in 2021. As we've discussed, it's the highest level of tower activity in terms of applications we've ever had. And we see 2022 in our guidance, having increased levels of activity from there. And during that time, we view this as a -- this period is a very productive period for Crown Castle in our tower business, and we'll be able to drive, as we put in our guidance, 8% AFFO growth going into 2022 after driving double-digit AFFO growth, what we believe will be double-digit AFFO growth in 2021. So all kind of at the high end or above our long-term 7% to 8% growth target. And we believe that we can continue that growth over an even longer period of time because of all the investments we've made in small cells and fiber. And with this deal with T-Mobile, I think a lot of that is coming true is that not only are we getting 35,000 nodes, but the majority of those are going to be colocated on existing fiber, which means that we're going to get incrementally higher returns. And it's a proof point that not only is the volume coming, but the economic basis of our strategy is coming through as well. So I think even though we negotiated these 2 things at the same time, there were separate really thought processes. 1, tower business, we knew churn was coming. We think we did a really good job maximizing the NPV of the cash flows on our tower business with T-Mobile. But we also were able to secure the small cell business which we think is a really good sign overall for the strategy.

And let's see what the survey results reveal. So 71% said net positive in terms of the view, 29% net neutral. So as I think about when I read the agreement, one question that came to my mind is, so you're settling on the churn, you got this 12-year extension. You got the small cells. What were the things in this that Crown might have had to give up to get T-Mobile to the table on this? Is there a risk that whatever slope of organic cash growth you could have experienced over the next few years from T-Mobile upgrading its network, is there a risk that, that could slow down that cash organic growth to get the better term? To get the specificity of the churn? And to get the small cells?

Yes. I think it's probably best to let T-Mobile talk about what they think they got out of this deal. But I mentioned it before, there are 2 periods of major tower churn, 2023 and 2028 for us with T-Mobile. What I think we gave was we -- in exchange, we're pushing a little bit of churn from '23 to '25. We allowed T-Mobile to pull in some of the '28 churn into 2025. And I believe that with their focus on network synergies, that was important to them. And like you mentioned, there's never a deal that you can make between 2 sophisticated parties where 1 side of the of the agreement got all of the benefit and the other side didn't at all. That's not a deal anymore. So they obviously got something they were interested in or they wouldn't have signed a deal. And I believe that had something to do with it. It was ability to pull in some of the later 2028 churn and allow them to get synergies faster. But what we look at when we -- overall, from these types of deals, especially on the tower side, is how do we maximize the net present value of the cash flows. And we think we've done that through this agreement. Beyond that, what is important to us is kind of just preserving the overall economic value of towers, both through a base escalator, like I mentioned before that is consistent with historical base escalators, and then the ability to continue to monetize additional activity on the towers consistent with what we would have done otherwise. Those are all really important to us, and we believe we've met those goals as part of this agreement.

And as you take a step back and you look at the agreements that you have with all the national carriers in the U.S., how does that stack up in terms of the positioning of long-term deals? Or duration of deals with your customers? And what that means for the visibility of future organic growth for Crown Castle?

Yes, it's a great question, and it's something we think about a lot. And as I mentioned in the opening remarks, one of our driving concepts is try to drive the highest risk-adjusted return we possibly can. And that has led us to focus on the U.S., which we believe is both the best market for wireless infrastructure ownership because of the growth in the data demand, the population growth and the amount of spending that goes on in the network in the U.S. versus the rest of the world. We also believe the U.S. is the lowest risk because we are a U.S.-based company. We don't have any FX risk. We don't have any legal or country risk. These are all things that we believe are really important because our assets are extremely long-lived assets. So we want to drive the risk down, which we believe we've done by investing in the U.S., staying true to the wireless infrastructure that we believe drives the highest returns over the longest period of time. But another way to think about that highest risk-adjusted return is, exactly what we talked about is we have significant agreements with our customers now that we believe give us visibility into the growth that we have without sacrificing the amount of growth that we would have had otherwise. So we believe that it's both beneficial for us and our customers to come up with those agreements because they want visibility into what their cost structure looks like over a period of time, and we want visibility in what our revenue stream looks like over a period of time. And we believe we've achieved that for both us and our customers with these agreements, lowered the risk because we have more visibility over both the short term and long term on the tower side. And believe that we can continue to drive that 7% to 8% AFFO or dividend per share growth over time. And that's something that's really important to us is that, that 7% to 8% remains intact. And that with this deal, we think we can drive our dividend per share at 7% to 8%. Other than in 2025, we think that that's because of that big churn number with our tower side as a result of this deal, we're likely going to be lower than our 7% to 8% in 2025. But that's a discrete onetime event. Other than that, we think we preserve that 7% to 8% growth rate. And like I said before, because the small cell business is actually coming into fruition right now, where we are seeing both an increase in the amount and return of that business. We believe with this transaction, this agreement we have with T-Mobile, that we have a runway for taking advantage of the opportunities that are afforded to us via 5G investments, however those investments occur, whether they're on towers or small cells. And like I said before, one of the things that gets us most excited about the last 12 months and what's happened in the small cell business is our customers are clearly laser-focused on getting their networks deployed over towers right now. They've been very vocal about it. They've been very public about it, that '21 and '22 are focused a lot on towers. And even in the midst of that, they recognize that small cells are so important that we've got 50,000 small cell orders as well. And they know at some point that small cells are going to be required to serve the demand that is coming on the network and the towers are going to continue to be really important, which is what we're seeing now. About having access for us to both of those vectors of growth is really important, and we believe elongates the time that we can drive those high risk-adjusted returns. And that's really what we're most excited about is we've lowered the risk, locked in really good returns on the tower side and then given us significant upside that we do not believe is really appreciated and how big the small cell market can be over time for us.

I want to drill down a little more on the small cell conversation in some of the points you were just describing. But before we do, I figure we'll introduce our next survey question, just give a little leading indicator to where the conversation is going to go. So you've given guidance already for 2022. And if I remember correctly, the midpoint of your tower organic growth guidance is about 6% [ net ]. And so given you've provided '22, investors, looking forward, I figured we'd ask them what they think for 2023. And so what do you expect for Crown in 2023, excluding T-Mobile churn for organic growth. And the choices are going to be -- the questions are going to be, where are we here, less than or equal to 3%? 3% to 5%? 5% to 7%? 7% to 9%? Or over 9%? So we'll let that marinate for a couple of minutes, see what our clients think about your future organic growth. And while we do that, on the small cell point, can you remind us what your installation expectation is within the '22 guidance? And then unpack a little bit, there are 2 things driving it, I think, the ability to get the approvals and get the installations and then customer demand. So now with the enlarged backlog position, where does that number from '22 potentially go on average over the next few years?

Yes. When we gave guidance, embedded in that guidance is our expectation that we will put 5,000 small cells on air in 2022, much like our guidance for 2021. The majority of -- getting to your question around what is driving that, whether it's demand or permissions, zoning and permitting. The majority of what drives our timing is actually the demand because the zoning and permitting is relatively consistent in that building a greenfield small cell system takes about 18 to 36 months. So if we were to get new builds right now, we would expect to put them on air 1.5 years to 3 years from now. And as long as that stays relatively consistent, the driver of any difference between 1 year and the next is really demand, not the timing of that. And we believe that what will happen is with this agreement and with the Verizon agreement that we have, there's not going to be a significant change to 2022. But going into 2023 and beyond, we believe we will have a significant increase in the amount of small cells that we put on air. And we have been at around 10,000 small cells on air. We think we can get to that. And then above that over time, given the amount of demand that we see in the market and the fact that we are getting the majority of that third-party demand. We -- when we look out, we don't see anybody who has anywhere close to 50,000 nodes in their entirety of their business, that's a third-party provider. And we've signed that much in the last 12 months. We just think that, that positions us really well to continue to be the supplier of choice going forward in the small cell business. And that with this -- with these agreements we have in place now, we will be able to get back to and above the 10,000 nodes per year in '23 and beyond. But we also think it's just the first wave of what we think will be a continued investment in small cells over a long period of time.

As you see Verizon and T-Mobile accelerate some of these small cell deployments and doing more of it on existing structures, is there are a possible FOMO developing? A fear of missing out where whether it's an AT&T or a DISH or even T-Mobile and Verizon looking at each other and having to keep building where others are at to maintain or compete on the level of service and capacity in the markets that you're serving with your small cells.

If you look at the history of the tower business as a proxy for the question you just asked, there have been times where one of our customers has put a lot of resources, both time and people, against improving the quality of their network by going on more and more towers. And what we've seen is that generally has spurred a reaction from the other customers to then go do the same thing on their own network, which is a very good outcome for us and our tower peers that drives high activity levels as our customers, the carriers, compete on network quality. And we've actually seen that, in my opinion, over the course of the last year or so as the mid-band spectrum, whether that's the 2.5 gigahertz spectrum that T-Mobile has access to with the Sprint merger or the C-band spectrum that Verizon and AT&T have access to, that they're trying to deploy those as quickly as possible and they are trying to compete on network quality. And that is driving a continued increased activity level for the tower industry overall. I would say that although the small cell industry is too nascent to have seen exactly that pattern, that it would stand to reason that, that type of pattern would hold because all we're talking about is not the infrastructure, whether it's towers or small cells, but the quality of the network overall. And as I mentioned before, with so much focus on towers, but understanding that small cells are so important that we -- we've booked these significant number of nodes with AT&T -- with T-Mobile and Verizon, that I would think that it could spur a similar type of reaction, as you pointed out, among all of the carriers as they see that network quality will ultimately suffer in comparison if they're not performing on small cells like other companies are or at the pace that other companies are. So I think it stands to reason that there is a competitive response. We just haven't been in the business long enough. The business hasn't been around long enough to have seen it yet. But we went from a 15,000 order being our biggest order in early 2021 to a 35,000 order being our biggest order in early 2022. I think that's a pretty good sign that things have a reasonable chance to follow the same pattern that towers has seen over time.

And let's go to our live survey results. So we have basically 40% of respondents ended up in the 3% to 5% bucket for 2023. 50% ended up 5% to 7%, which is sort of wrapping around the current '22 guidance midpoint. And 10%, 7% to 9%. So no one was below 3, no one was above 9. So one of the questions that we're getting from investors is as the tower companies, including Crown, have talked about the favorable activity levels that they're seeing, you now have a new agreement with T-Mobile. Does it stand to reason that organic leasing ex T-Mobile churn should get better over the next few years, even into '23? Is it stay flat? As you think about the way investors reacted to the survey, how would you kind of share your thoughts on what would be reasonable or logical to anticipate?

I think the first point that I would make in responding to what you just mentioned is that there's no reason to talk about ex T-Mobile churn in 2023 anymore because that's not happening until 2025. So we've actually pushed that out in a way that I think is very conducive to a positive view of where Crown Castle is in 2022. Beyond that, what I would say is we're not going to get into 2023 guidance because we gave 2022 guidance just now, and we're just beginning in 2022. But what's really great about the tower business is the longevity of the growth and the returns that it generates. And as long as we stack really good years over on top of each other over and over again, that's what generates significant shareholder value creation for tower investors. And what we're seeing in 2021 and 2022 is tower growth that's in that mid-single digit 6% range. And because of the investments that are required for the implementation of 5G, we believe that we are on the very early stage -- in the very early stages of that investment cycle that could be a decade-long or so. And as long as we continue to have reasonable tower activity and really good tower activity of that kind of mid-single digit, 5% to 6% range over long periods of time, we think that's really the driver of significant value creation. And one of the best things about that is that we're likely not going to see huge upswings to where we get -- from a dividend per share growth, we've given more concrete guidance around that 7% to 8% year-over-year, we're not going to see that grow 20% one year and then 0% the next year to average out. We actually think we'll maintain that 7% to 8% over -- each year over time, again, except for 2025 now because of the stability of that growth. And that's really one of the things that we think is so attractive is we're giving that long-term stable growth profile while investing in an asset that we think is a huge driver of future value creation. And all of the signs that we are seeing are pointing to that value creation coming true. And that's where we would focus. It's not can we see these really big outsized growth years, but how long can we maintain a very good growth profile in one of the best businesses around in the tower business while augmenting that with the small cell growth that we see is coming.

And if I recall, in '22, the churn, I think, as you mentioned, was between 1% and 2%. You've already provided guidance on this. I had thought there might have been a little bit of T-Mobile churn that might have been in there. Is that something that's still in there? Or does that provide because of the way things are getting pushed? Maybe some positive optionality for cash leasing growth for 2022?

Yes. So the gross amount of growth, I don't think it changes very much. The churn, we had actually called out that there was a little bit of churn in there, in the neighborhood of $20 million associated with the T-Mobile and Sprint consolidation. We'll get into more of that in the specifics of what our guidance is going to be when we give -- when we provide earnings and an update to our guidance in a few weeks. So we'll get more specific around that. But generally speaking, like I said, $20 million would be within that 1% to 2% range that we were talking about before, that the real churn is going to be in 2025, but we'll give specifics around it in a few weeks.

Are there any other facets of the deal? We just -- we talked a lot about it over the last 20-plus minutes. Are there any other facets of the transaction that you want to share or that we didn't cover?

There's one other point that we released an 8-K in association with this deal that has all these points in it, but there are 2 other points I would make. One, there's going to be a significant increase to our straight-line site rental revenue of about $250 million as a result of this transaction, both because of the extension of the term and all of the new leasing that we see associated with this deal. So that's one thing. The other thing is there's also a little bit of small cell churn that we are going to recognize as part of the transaction that happens in 2023, which is in relation to the same thing that I think we would say about the tower churn is that Sprint and T-Mobile are coming together, and T-Mobile is trying to optimize the network as it stands today. So they'll likely churn off in the neighborhood of 5,000 small cells in 2023, we -- just as part of that consolidation. What is good is that that's kind of a discrete event again. That consolidation can only happen once. We're going to get done with that. And then they're going to add 35,000 as the next step of small cell deployments. So we think this is all very positive, but I wanted to be clear that there is some small cell churn in 2023. Overall, as I think about what I've heard from investors over the last several years in relation to our strategy is, what's happening with the small cell business? When is there going to be a significant inflection in the revenue and node growth of the small cell business? Because you keep talking about all of these things that need to happen or will happen in the future. And when are you going to see the returns in that business reflect the same type of growth and returns that we've seen in towers that is due to lease-up on existing assets? Those are the 2 places that we've gotten some of the pushback. And as I think about what happened over the last 12 months, we've, I think, addressed the when are we going to see a significant increase in the amount of small cells being deployed. So the revenue side, I think we've kind of addressed and the timing. And then we've also addressed the return side with how much of the 35,000 from T-Mobile will likely be on colocated assets. So I think as we get -- as we've heard the pushback of those 2 real major points, we believe we've addressed that pushback and believe that we've shown that this small cell business is very similar to the tower business, and therefore, we really have reduced the risk of that strategy and increased the return of that strategy at the same time. And on top of that, we are in one of the best tower business -- tower cycles that we've seen because of the implementation of 5G and the deployment of mid-band and other spectrum that our customers have access to. And when you add all that together, I think that's really the major point that we say. It's not just that we have an agreement, it's that the agreement is an overall proof point of the unique portfolio of assets that we have brought to our customers' benefit.

And one other follow-up to that. So you mentioned already in 2025 that there's risk to that 7% to 8% dividend growth because of that episodic tower churn that you highlighted in the 8-K. You mentioned there's the small cell churn piece in 2023, could that get in the way of 7% to 8% dividend growth goal for 2023 or for 2024, depending on the timing of how it all unwinds itself?

No. We still believe that we will be able to deliver dividend per share growth of 7% to 8% in each year other than 2025.

And maybe taking a step back. So you have small cells, you have fiber, you have towers. It feels like you have a lot of ingredients as people are contemplating what the edge is going to look like. And so how are you seeing the development of this edge compute and workload opportunity and the role that Crown wants to play within that?

I think the edge compute opportunity that you speak about is really an extension, in our view, of the strategy that we have pursued with small cells, where we looked at the overall radio access network about 10, 12 years ago, 15 years ago, and determined in our view that there was going to be a strain on the ability of the network to keep up with the amount of demand and the density of that demand if we only use towers. And that we needed to densify as an industry, needed to densify and distribute that radio access network beyond towers and on to small cells in order to withstand all of the data demand that was coming. And we invested a little bit at the time, 10 years ago or so, got more comfortable with it, invested more, got more comfortable with it and then built it into the $15-plus billion investment that we have today in small cells and fiber. But we had to get comfortable that those were -- the returns that we thought were going to happen were happening, that the overall industry demand was happening and the small cells were going to be required. And about 5 to 10 years ago, we started thinking what other parts of the network do we think will undergo a similar transition of densification and distribution? And one of the places that we thought that, that could be a reasonable outcome would be in the compute and storage of data. So instead of having data compute and storage housed in very centralized locations, say, in Northern Virginia, we thought that there would at least be a reasonable shot that the storage and compute of data would be densified and distributed throughout the network, much farther than had been in the past. And so we made an investment in a company called Vapor IO about 5 years ago. Much like we did in small companies, 10, 12 years ago in small cells to test the theory. And as we continue to invest more in Vapor IO, as they've grown and deployed significant amounts of edge data centers across the U.S., we have learned a lot about what that potential distribution and densification of data compute and storage looks like. And as we've learned that, we've become more and more comfortable that, yes, this does make sense that edge computing is a good part of the network that could drive significant opportunity for us as the owner of assets that allow for edge data centers to work. Those assets being locations where they can be housed like tower sites or small cell hubs, the network understanding of the traffic, which we have through our tower and small cell sites and our relationships with the carriers and everybody else who wants access to mobile customers. And the connectivity of fiber to make sure that the data can be shared as quickly as it needs to be to support the potential use cases that need significantly low latency access to information. And as we continue to learn more and more, we get -- we are more and more excited that edge data centers could be a very good opportunity for us, and we're well positioned to get them. But we know through our understanding and our study and learnings is that in order for those edge data centers to become valuable, there needs to be a use case for them. And in order for a use case to be developed, we believe that a 5G network needs to be deployed. Because without a 5G network that can allow for seamless, ubiquitous, low-latency, high-speed transmission of data, wireless data, there's really no reason for that edge data center because you won't need the low latency at that point. So we believe that the first wave of investment will be in a 5G wireless radio access part of the network, which is what we've invested in through towers and small cells and fiber. And then that investment also leads us down the path of -- in the future once those use cases are more understood and edge data centers get more understood that we are the best positioned to where those edge data centers will go precisely because we have all that infrastructure already in place. So we're just -- we're continuing to invest in the edge data centers. We believe we have the best offering to attract those edge data centers to our sites and our fiber, which we think is a huge advantage is to have all of that in one place and to have it on a national scale. And we think that we will benefit from edge data centers in the future. We're just a few years from knowing what that looks like and how it's going to play out.

We're receiving a number of questions on the T-Mobile agreement and specifically on the small cell side. So let me see if I can summarize a few of these. So some of the questions are regarding how you would anticipate T-Mobile might use these small cells. Is it for 2.5 spectrum? Millimeter wave spectrum? So is there a sense of how they're going to get used? And also on the return side, so do these -- does the agreement fit in the historical return targets for small cells that Crown has outlined?

On the first part of that question, I think it's not for us to speak to how T-Mobile is going to deploy their network. I would let them speak to how they're going to use both towers and small cells to meet the demands that they see coming. What I would say though is T-Mobile has access to a large swath of spectrum throughout the spectrum bands. And our belief is that small cells are going to be utilized for all spectrum bands over time because they aren't for one specific purpose, they are for the purpose of extending the reach of the network and extending the amount of data the network can handle and extending the amount of devices that can be added to the network. And we think it's going to be -- the network is going to develop to where all bands will ultimately reside on small cells, just like they do on towers. How T-Mobile is specifically going to use that is going to be up to them. And I believe that there's a lot of flexibility that they will have as a result of this agreement. But what we have -- we've come up with is an agreement that, as I mentioned earlier, we believe the majority of those small cells will be on existing fiber. And therefore, the returns will be consistent with how we've underwritten our small cell investments for incremental colocated nodes. So what we've talked about historically is that anchor build nodes are 6% to 7% yields. And then when we get 2 tenants on a similar -- on a same system, that those yields go to, overall, for the system go to low double digits, call it 10% to 12%. But in order to get there you have to have 20-plus percent returns on the increment. We believe that these small cells will be consistent with our underwriting assumptions.

And then we have a few questions about developments in 2022. So the 2 developments that our audience is focused on is when will DISH have a material impact on your revenues? And just any thoughts on how that might look going forward? And is Auction 110 a separate [ amendment ]? So is that a separate monetization opportunity from C-band and CBRS?

On the first point, as we mentioned when we gave guidance for 2022, there is incrementally more new leasing activity from DISH in 2022. There was very little in 2021. So there is some in our 2022 guidance. And it's something that I think is very consistent with how DISH has talked about the deployment of their network as they are moving very quickly to get their spectrum on to towers and out into the world because they have both requirements to maintain the licensing of the spectrum, but also a business model that they're pursuing to compete very well with the existing carriers. And in order to do so, they need a network that performs on par with those carriers. And they're working really hard to put more -- to put antennas on towers they can get the spectrum deployed. And we are seeing the results of that, both in terms of activity and the new leasing activity going into 2022. And I talked so much, I forgot the second part of your question.

That's auction 110.

Oh, 110, yes.

On whether that spectrum is separate.

Again, I would let our customers speak more to how they're going to deploy their own specific spectrum. But I would say it's technically possible for a single antenna to carry that Auction 110 spectrum in the C-band spectrum. But even if it's technically possible, that comes with spectral inefficiency. Meaning, when doing so, that spectrum can no longer carry the maximum amount of data that it would be physically able to do if deployed via separate antennas. And as we think about the overall environment in the network architecture, that spectrum is the scarcest resource. And to utilize your scarcest resource less efficiently than it could be utilized is not the best allocation of that resource. And so although they may want to, in the early years, utilize a combined antenna. I would say, over time, that's not a very good use of a scarce resource because then they're not carrying as much data as they could otherwise, and that's not going to make their network as efficient as it could be. So the way we see it is that even with a short-term potential for a dual-band antenna that, long term, that is not how the industry has evolved. We've gotten to increasing spectral efficiency over time because that's the only way we're going to withstand all of the demand that is coming.

Yes. And before we get to our rapid fire, are there any other items of note that investors should be mindful of as we're getting through the early part of 2022?

I think that we've talked about most of them, but continuing to drive the highest risk-adjusted return, continuing to focus on the U.S. business with the wireless infrastructure that we have, and continue to drive the 7% to 8% dividend per share growth over time is something that we're really focused on. And because we have these proof points that have come over the last 12 months, we think we're in a better position to drive all of those things. And we're able to do so, and not something that we've hit yet, within the confines of maintaining our investment-grade rating, and we do not believe that we will have to access the equity markets in 2022 to do so. So we think that everything is lined up really well. We've managed the risk of our balance sheet. We've managed the potential upside so that we can continue to invest in our business and drive significant growth without access to the equity markets, and drive that highest risk-adjusted return over time and really take advantage of this huge investment in 5G infrastructure that's going to be required to deliver the customer experience that everybody is looking for as part of the new wave of generational upgrade of the wireless network.

Are you ready for our rapid fire, 3 questions within 3 minutes?

Absolutely.

All right. First question, why should investors buy your equity?

I think I just hit that one. Highest risk-adjusted return, 7% to 8% growth in the dividend per share at a time where the investment in 5G is going to continue and accelerate, and we are the best positioned company in the U.S. to take advantage of all of that growth.

Second question, is inflation a net opportunity? Net neutral? Or net risk for your business model and financial performance?

I would say it's net neutral. The revenues that we have are generally increasing at a fixed 3% escalator. And the biggest cost, which is the ground rent under our towers is also increasing at a fixed escalator, so we don't have a huge impact from inflation.

And since this now is the AppsEconomy conference, what applications can fundamentally change demand and data consumption as you look out over the next few years?

I think there are several that can and we believe that they will. We believe that Internet of Things, pervasive sensing, telehealth, real-time health care, autonomous driving, Metaverse, any type of application that people are going to want to have more connections, more often at lower latency and higher speeds, which we think is generally the way the industry and our economy has gone over the last 25 years, that all of those will add to significant data demand growth. And like I said before, Crown Castle is the best position to take advantage of any way that, that ultimately ends up happening.

Again, it's great to see you. Thank you for joining us today.

Thanks very much, Mike. Really appreciate it, and I appreciate the time at the conference and good luck with the rest of it.

Thank you.