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

I am started here with the next session. So really pleased to have Kris Henson from Crown Castle here with us today kind of continuing its nice -- we've actually -- we've included a lot of tower companies on the same day of the presentation. Yesterday was data center today. Today's Tower Day. So is nice to continue that conversation and kind of the same questions and a narrative that I know a lot of investors want to hear. So I'm going to open well, first of all, Chris, thank you.

Thank you.

Thank you for coming. And just for the audience, I will allow about 5 minutes at the end if you have any questions. They will walk around with a microphone, just raise your hand when I mentioned that it will make time for you as well, please. So back to my point, I'm going to open the same way I did with Mark earlier, where investors are, I think, very focused on trying to determine when we're going to see growth inflection positive in the tower industry. And the way I think that Crown Castle has talked about it is this being a low point for growth, right, this year because of a number of headwinds. So can you take us from that low point in growth? And what factors are going to drive accelerating growth?

Sure. So as you mentioned, our organic growth forecast for 2026 is 3.6%, excluding addition Sprint, and we do expect that to be a low point. I think that we'll get better from there going forward. When we initially put out our guidance at the beginning of the year, talked about how we expected activity to be a little back-end loaded as we go through 2026 as well. And when we think about what drives that, there are several things for Crown. One thing specifically, which is a little easier at the point too is we have long-term contracts with our customers to provide pretty good line of sight into activity for us going forward. And so that gives us confidence that things will pick up and be better from here but there are also some positive tailwinds as well that we see as the spectrum acquisitions. So AT&T, in particular, acquiring the 600 from EchoStar. And then also as we look at spectrum auctions going out in late this year, early next as well as sort of longer term up to kind of 800 megahertz of spectrum that the SEC has talked about actioning off. I think all of that has historically provided support for our business, and we would view that as a positive in this case as well.

Okay. And then just breaking down the piece part in. So you mentioned the AT&T 600 megahertz, how impactful could the deployment of 600 for Crown Castle?

Yes, we don't go into too much detail the way you can frame it broadly.

I know your not going to sell by cell site, but can broadly frame what historic deployments of the cool spectrum meant for Crown Castle so we can get some.

Yes. I mean having low-band spectrum is tends to be larger equipment and also AT&T, they spent a fair bit of money on this. And I think it's something that they are likely to want to deploy. And that activity and the equipment that is required is something that I expect to be a positive for towers and a positive for us specifically.

Okay. I guess historically, when deployed similar low-band spectrum, like how many -- like what percentage of your towers was that deployed on historically?

I mean it depends a lot on the specific plans carrier by carrier, but you generally would see when spectrum is made available, new spectrum of any kind, it tends to be impactful. Obviously depends on where we are in the cycle and what the individual plans are for the customer. And again, I would certainly expect this one to be positive for us.

Okay. That's clear. In the CBN expectations, you probably don't get that cleared until, say, 2029, 2030. When do you think you'd expect to start seeing activity though related to C-band?

Yes. It always takes a little bit of time after one of the actions. Obviously, there's a planning process that happens with each of our customers as they think about how to deploy spectrum that they acquire. And when you think about the tower space, we are a little farther out at the end of the value chain as well. So if you think about going from everything from equipment down to actually getting the equipment on the tower. So it takes a little while to work through that planning process. This is an area where we do our best to make sure that we build and maintain good relationships with the customers so that we can be involved at points where it's most helpful for them as well and try to make sure that we can engage in a way where we make the process seamless for them and also hopefully add a little bit of value along the way. And there was some discussion in 2Q kind of broadly across tower companies and also from the builders like MasTec and Dycom about what are more carriers actually slowing activity in the first part of the year. And I think some of the comments pointed to, that it might have been related to just a reductions that wanted more carrier. And that would suggest it's a temporary slowdown, right? There also been some some thought, though, that maybe carriers are achieving densification more on owned fiber and with small cells, and that might be driving part of the slowdown.

So can you address that in Crown's position or view on this and how that might be contributing to your comment about better activity in the second half of the year?

Sure. There are a couple of things. I mean, I think, of course, we've seen our activity. We called out the 26 as a low point. So we certainly nothing to point out for a specific customer, but we've seen lower activity in 2026 and we did in '25 and expect it to go up from here. I think there are a lot of things that come into play, and it's a combination of things that go on in the market and also situations with individual customers and where they are in their planning processes. One of the things that you didn't mention that I was just going to talk to is with more spectrum being made available and even with the spectrum that was purchased from EchoStar. I think it makes sense for our customers to make sure that they're optimizing around what's available and factoring all that into plans. And so it's not uncommon when you see spectrum acquisitions or actions for that to take a second to work its way through the planning process and then also for us to ultimately see it in activity levels on the tower side. And by that, you mean when carriers acquire spectrum, they might actually pause their original plans to rework or to work in the new spectrum and that could cause some dip in short-term activities. Is that your they could, certainly. Yes. I think if something was made available, it makes sense for them to optimize around what they have. And sometimes, I have measured that, that factors into some of the planning.

Okay. So I used the call with management team a week or 2 ago, and thank you guys again for doing that. in the call with Large to address us talk about LEO-based service and what's required, not required on a terrestrial basis, okay? And one comment made on the call was we still have a lot of DISH equipment hanging from our towers. And if you can also remind us how much revenue historically you got from from DISH just so we have that number. But the comment was we'd be very open to talking to any LEO operator who wanted to utilize the equipment maybe for faster time to market. and better coverage, more reliable network than you could ever achieve through a femto cell based terrestrial build. So I guess, first of all, how much revenue were you receiving from DISH EchoStar? And then, I guess, how for an advance of wanted to deploy a network would somebody have to like approach you and start having those negotiations about utilizing equipment?

Sure. So in terms of DISH, first of all, we talked about the churn as we went into this year. We have no revenue from DISH in 2026, and the churn is a little bit in excess of $200 million. And so as far as the equipment goes, certainly, if it's something that folks are interested in, that would be great. It's still going to take a little bit of time, I think, if someone were to want to try to deploy it in order to go down that path.

I'm sorry, I might have missed it, but historically, how far in advance of doing a new component of a build kind of 4G or 5G, we you start having those discussions with the wireless operator. First, if we could or lead time.

For something that would be a larger deployment. I mean you might start hating conversations sort of a year out or so.

Okay.

And then we typically would have some lead time in the range of, call it, 6 to 9 months or so when decisions are made for particular sites and when we would start seeing revenue.

Okay. And historically, we all thought about things like application volumes, a memo request, as being good leading indicators of the business, at least for pipeline. Are you seeing any changes in these metrics that would suggest or support acceleration leasing activity back to your point about 26% being being low point for growth on services.

Yes. Yes, exactly. Yes. We've talked about this a little bit. I think we made some changes to our services business going back to 2023. We exited construction services at that time.

Are you doing more consulting engineering now with what you're doing on the services side versus production.

Yes. So we're not going out and doing structural modifications or hanging things on the tower instead we're focused on things like design work, structural analysis permitting, that sort of thing. And when we made the decision to exit the business, we looked at what our capabilities were and ultimately what value we're adding and how profitable it was. And it's a competitive business and one where, at the end of the day, we weren't even necessarily winning a lot of business on our own sites. So it was something where we -- we looked at it and we said, look, we're not adding value here. We're not making money on it, so we will exit. With what we have kept as well, that is a very high-margin business for us. So our margins are in the ballpark of 50% on the services business that we do. Focusing on preconstruction, and I think it was actually as high as 53% in the second quarter. So we are focused in on the work where we do uniquely add value, and we generate very strong margins as a result. We don't we don't necessarily have an arrangement where we win all business on our sites with all customers, though. And at the end of the day, win rate becomes a factor even on the services that we do provide when you look at the services margin numbers that we report. And when we go back and look at how even after we try to adjust for exiting the construction services business, when we look at what we have done in services and then what follows on the leasing side, it's just not something that has been a reliable indicator as we -- so is the correlation lower now than not doing construction -- because I would have thought that if you were doing more of the -- more of the engineering and more of the analysis piece that even be a better lead indicator. I don't know that it has gotten lower. But at the end of the day, the activity given that if the win rate fluctuates as an example, that's something that can drive a change in the services margin, but not on the leasing side. And so as I said, it's just -- we found those 2 to relatively disconnected. They were somewhat disconnected when we had construction services as well but it's a new problem. But I definitely don't think that you can draw a straight line from where services is or where it is trending and to where leasing is going to go in the near term.

Okay. Perfect. Have you seen any change or shift in carrier conversations related to -- there's been a lot of discussion from the carriers about AI changes the kind of the downlink uplink requirements and somewhat kind of reconfiguration or thoughts around network engineering, if you have those conversations today?

I mean I think that it's something that is not having an impact today what we see come through the numbers. But I do think it's something that we're certainly excited about you had mentioned down like Uli. I think if we look at some of the potential use cases, you're looking at uplink capacity needing to be 3x what it is today. Obviously, that takes spectrum. And that, at the end of the day is something would be positive for us. I do think that, well, I wouldn't characterize any of this as something that in the near term is factoring into anything that you've seen in our forecast, certainly for this year that it is an area where I think we're optimistic, and I think it looks very promising long term. It's hard for me to imagine that if you look at just the capital that's going into the data center space and the AI space, looking to compute that isn't eventually going to come to where people are on their device. And that obviously will make some of the changes, like we talked about with UpLink, but just also in terms of mobile data consumption. It's hard to imagine that this isn't going to be a favorable thing.

Yes. We would agree. That goes back to the first question, kind of predict how you get from where you are today to the bridging for faster growth, right, the next few years. I'm curious to hear from you, in particular, just about since Crown Castle is now pure U.S. tower company and the other small cellular pieces now are going from the business. How has that changed your conversations with customers or haven't changed the conversation?

I think that it's changed the way that we approach customers. So if we take a big step back, I think we went through a strategic review process, which culminated in the selling our fiber and small cell business that transaction closed in May. But we saw a lot of value in operating as a pure-play U.S. tower company. At a corporate level, we've been very focused on both organizing and structuring the business in a way that makes sense of towers only business but there has been a lot of benefits that have come from just being able to focus on doing a couple of key activities and having a couple of key capabilities that we do really well and having a great set of assets. And so as we have focused on that as a corporation, I think we've shown a lot of progress in driving efficiencies through the business. We had a restructuring that we announced in the first quarter, and we have continued to make progress on the cost side as we've gone through the course of this year and expect to continue to make more progress as we go forward. On the commercial side, since I've been in this role, I think a lot of what I've been focused on is trying to do the same thing with our commercial strategy and make some tweaks on the margins to make sure that we are aligned in a way that's going to be easier for our customers to interact with us to basically decrease the number of handoffs and touch points as we are sort of making sure that we're organized appropriately as a tower only business. But I also think that just being able to focus on what we best is good. We're making sure that we're aligned and organized in a way that makes sense. And then I spent a lot of time going out trying to make sure that we are building and maintaining good relationships with the customers and having the right kinds of conversations. So I think all of that has been helpful and the focus that you've seen driven results on the cost side are also being on the commercial side as well.

And what do customers tell you on how they want to purchase tower capacity, optimize their network kind of basically an interface with Crown Castle. In other tower companies, my view is historically, it was a very contraditional sales and relationship approach, right? Every person to person. Are they telling you now they want to self-provision more or they want to be more online? Or how do they want to interact with a tower company like Crown Castle?

I mean I still view this very much as a relationship business. And I think there are certain things that we offer that are really big parts of our value proposition that don't have a lot to do with that. If I were to sort of prioritize things and location is extremely important in this business. And we have 40,000 towers, 70-plus percent and they're located in the 100 largest basic trading areas in the U.S. and we've got a good footprint and a good asset base. And obviously, that drives a lot of business for us. But a lot of the things that we do when we think about the relationships that we have, we do want to be able to find ways to create alignment and generate value for our customers and then hopefully keep a little bit of that for ourselves as well. But we do try to find ways that we can sort of help out and things that they look for, I think, our reliability and consistency nobody likes to be surprised. And so on the operations side, just making sure that we can provide accurate estimates of how long things will take and that we do what we say we're going to do are really important. And so that's what we strive for.

So the relationship manager part of the business is important, maybe not an area for where efficiency there. But something that was talked about a lot at least a couple of years ago is even those things like maintenance, right, which is also very human capital-intensive today. The idea that you can utilize digital twins and drones and other technology to do some of that work? How much is Crown Capital integrating some of that technology to help to reduce cost?

Yes. So that -- what we mentioned specifically is stuff that we are doing. And I think that we're always looking for ways to improve our systems and integrate technology. And also to the extent that there are duplicate costs or things like that, that we can look at. It's always nice if you can do do something good for your customer.

Yes. No, I understand. So another growth era we've talked about, and it's not new, we talked about in in 2016 or '17 are edge data centers, right? Is that something that you're thinking about and talking about? And if you are, how big is the opportunity?

So yes, it's a short answer, but I be clear about how we're thinking about it. So we actually have a customer that we have talked about, available infrastructure who is looking to build out a nationwide network of Neo cloud data centers. They are a customer of ours. We're very much in early stages of that. And I would say that we're in a sort of trial phase on the concept of sort of going into kind of this edge space. But when we think about that area. I don't view it as sort of a new business for us really or at least not something new that we are doing. We have 40,000 units of distributed real estate and we have power and fiber availability on virtually all those sites. What we do is we lease space. And so whether it's vertical space or horizontal space, we're a real estate company, and we lease based on our assets. And so as we look at things like the Edge applications, this is just a continuation of kind of using the assets that we already have and using the capabilities that we already have. We're not looking at spending a lot of CapEx on the new king of buying or building data centers. We're not looking at operating something that we're not operating today. We're just trying to take the assets and capabilities we have today and apply them in ways that allow us to maximize the amount of revenue we generate from the assets that we have.

Have you surveyed your report following determined how many towers would be suitable for such data centers based on space and power availability?