Crown Castle (CCI) Signs Small-Cell Lease Agreement With Verizon

Crown Castle International Corp. CCI has bagged a long-term agreement to lease 15,000 new small cells to Verizon Communications Inc. VZ to support the carrier’s 5G Ultra Wideband and 5G nationwide deployment.

Specifically, Verizon will rent out the small cells from Crown Castle over the next four years, with an initial term of 10 years. The agreement is a crucial component of the carrier’s 5G expansion plans and will enable it to advance the infrastructure needed to access 5G.

Notably, the company has been making efforts to extend its communication infrastructure footprint and is investing significantly in its fiber segment on the back of acquisitions, and construction of small cells and fiber. In fact, the company exited 2020 with approximately 50,000 small cells on air and the 5G small cell agreement with Verizon. It has considerably increased the backlog of small cells committed or under construction to roughly 30,000.

Also, its urban skew of tower sites and ability to offer a holistic network solution with towers and small cells provides it with a competitive edge over other tower companies. This had likely enabled the company to become the anchor infrastructure partner on the tower side for DISH Network DISH in November 2020, after it bagged a long-term lease agreement with the latter to rent out space on up to 20,000 of its communication towers.

However, customer concentration is high for Crown Castle, with the big three carriers accounting for a significant portion of its revenues. The loss of any of these customers, consolidation among them or reduction in network spending leads to a material impact on the company’s top line.

In fact, in December 2020, T-Mobile US, Inc. TMUS canceled approximately 5,700 small cells contracted between Sprint Corporation and Crown Castle, prior to the merger of the carriers. While the majority of the canceled small cells were not yet constructed, upon completion, it would result in site overlap as other T-Mobile small cells locations. The cancellation resulted in T-Mobile accelerating the payment of all contractual rental obligations associated with 5,700 small cells and the payment of capital costs incurred to date. This, in turn, impacted Crown Castle’s fourth-quarter and 2020 results.

Shares of this Zacks Rank #3 (Hold) company have inched up 0.3% over the past three months compared with the industry's growth of 7.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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