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

MLAs and you've got different arrangements with various of your customers, but broadly speaking, the MLAs in place present -- and the timing around perhaps the rollout. Does that present an opportunity or a [indiscernible]?

So I mean, generally, we have been more in the M&A front. At any point in time, you might be in or out of an MLA depending on the contract. But yes, we think our MLA is structured in a way that generally benefit us as people occupy new dollars or want to make amendments on existing towers, but it's particularly depending on the client and what specific commercial parameters we've negotiated with them.

Actually, if there's any questions, feel free to just make yourself visible, we should have time for several. But as you think about margin expansion from this point forward, I can imagine a number of drivers, ground these buyouts, which I think you talked about on your most recent call, transformation initiatives and just operating leverage as you grow revenues, but what's the -- what are your ambitions there? And what are the most important drivers to keep in mind?

Yes. So we were for aggressive ambitions there, that we have been executing on and feel confident we'll do well. And on that front over the next few years, that's in our control. At the beginning of this year, we reduced our workforce by 20% on the tower side. Last year, we started a set of initiatives to modernize our IT infrastructure. We've deployed 2 operations systems this year, and next year, we'll deploy customer life cycle management and HRS system. The year after that, we will deploy an ERP system. All of those implementations will serve to both improve our efficiency, productivity, cycle time, number of people needed to get things done. So I think that -- and also how much we spend on operating costs for integrated platform. So Mark [indiscernible], our CIO, is leading that. So excited about what that would do. We also have put in place a transformation program that is covering all facets of the company from headcount, non-headcount expenses and have a lot of initiatives that we are executing on to drive further expense or margin improvement there. The other big program we have is [indiscernible]. We have 70% of the ground underneath our 40,000 towers. 70% of the towers have landlords and so we have stepped up our initiative to buy ground leases out. Power is becoming important as I said. So we're pushing that more aggressively. So I think that will when you can buy leases out well above your cost of capital, we think that's advantageous for our shareholders. So we're pushing on all 3 fronts. And I think we've said we'll be able to improve our margins by 200 basis points from where we've guided to this year to 2030. So we are pushing aggressively on that.

Questions. Maybe talk about satellites use cases or maybe just more broadly non-big 3 use cases and demand and what you've been seeing this year and what you think the future might bring.

Yes. So let's talk about satellites. So I think many of you have read all kinds of research reports that have come out in this space. I think our summary -- having looked at those too [indiscernible] own research. Our summary is that satellite is actually an opportunity for us. SpaceX is a good example. But if they really want to be comparable from a service provider similar to MNOs I think that because of issues with the in-building coverage or in-vehicle coverage even, I think that they will have to use macro towers, especially to target urban and suburban areas with higher population densities. They probably also need more spectrum her time. But we think that it'd be tough to get to where most of the people live with just satellite infrastructure as coated products. So we actually think it's an opportunity for us over time.

Capital allocation, maybe just take us through that. You have a really high dividend yield compared to even some of the carriers and kind of how does that affect your thinking.

Yes. So I mean our dividend is at $4.25 a share. The yield is very attractive right now. Our capital allocation strategy rests on a few planks. First is leverage ratio. We want to be at 6% to 6.5% investment grade, very focused and committed on that. The last quarter that we reported, our leverage was 6.3%. We want to pay out dividends at a 75% to 80% coverage ratio of our AFFO. Obviously, we are above that now, but over time, as you will see our AFFO grow, we should be able to grow our dividend at some point. And then we'll keep focused on what we can do to further enhance shareholder value, but also keeping in mind our leverage targets.

[indiscernible] mentioned that 5 million out now, but look in like IRA and how they are like a change of your operating model [indiscernible]. And then the second practice is connectivity between your towers by with its compute and AI RAN, how that connects between the towers as well as to bring back to all the data centers, how would that -- what needs to change to enable that?

Sure. So your first question, if I understand it right, with the AI RAN. So from the carriers perspective, there are several objectives. One is can we improve our efficiency with respect to spectrum utilization with AI and on the way to doing the 6G standard, they're now calling it the 6G AI standards. So they want to put that in the standard with the equipment providers [indiscernible] how can we optimize that? I think the other part of the 6G standard, which was supposed to be with 5G is how many -- so today compared to the number of people that live in the U.S., you want to support 10, 20, 100x number of nonhuman subscribers and do the standards accommodate that. So that's another area of focus. Your question on network topology, generally about 40,000 towers are connected by fiber. Where does that fiber go? So usually, it's any of the fiber providers that you would think of telephone companies, cable companies, specialized fiber providers that fiber usually connects back to some Internet access points. So it could go through a junction point. This is a business that I've been in a long time, but to an Internet access point and then for it can be routed anywhere. So once you have that fiber infrastructure coming into a tower, it has plenty of capacity to handle large bandwidth loads. You can put a lot of wavelengths or light through 1 strand of fiber. So I don't think that will be a constraint per se. But that does -- to your point, that does become very important, especially with some of these inference loads and depending on what people want to do as a hedge.

I think that was the last question. I appreciate your time.

All right. Thank you.