Q4 2020 Crown Castle International Corp Earnings Call
Okay.
Good day and welcome to the Crown Castle Q4, 'twenty and 'twenty earnings call. Today's conference is being recorded at this time I turn the conference over to Vice President of corporate Finance and Lowe. Please go ahead Sir.
Great. Thank you David and good morning, everyone.
Thank you for joining us today as we review our fourth quarter 'twenty and 'twenty results with me on the call. This morning are Jay Brown Crown Castle's Chief Executive Officer, and Dan Schlanger Crown Castle's Chief Financial Officer.
To aid the discussion we have posted supplemental materials and the investors section of our web site at Crown Castle Dot Com, which we will refer to throughout the call. This morning.
This conference call will contain forward looking statements, which are subject to certain risks uncertainties and assumptions and actual results may vary materially from those expected.
Information about potential factors, which could affect our results is available and the press release and the risk factors sections of the company's SEC filings.
Our statements are made as of today January 28, 2021, and we assume no obligations to update any forward looking statements.
In addition, today's call includes discussions of certain non-GAAP financial measures tables reconciling. These non-GAAP financial measures are available in the supplemental information package and the investors section of the company's web site at Crown Castle Dot Com, So with that let me turn the call over to Jay.
Thanks, Ben and thank you everyone for joining us on the call. This morning as you saw from our announcements last night, we delivered another year of solid growth and 2020, we expect to generate double digit <unk> growth per share and 2021, and we secured our largest ever small cell can net net with a 15000 node award and 15000 node.
Award from Verizon and to support their fiber build out.
And Dan will discuss the results and our full year 2021 outlook and a bit more detail in a minute. So I want to focus my comments on two areas.
Our strategy to maximize long term shareholder value, while also delivering attractive near term returns and the recent positive developments that increased my confidence on our strategy and growth opportunity.
And I believe our strategy and unmatched portfolio of more than 40000 towers and approximately 80000 route miles of fiber concentrated in the top U S markets have positioned crown castle to generate growth and cash flows and dividends per share both in the near term and for years to come.
Despite the challenges presented last year, we continued to build on our long history of consistently delivering compelling growth through various market cycles, highlighting both the strength of our business model and the significant value creation opportunity our strategy provides shareholders.
One of the core principles of our long term strategy is to focus on the U S market because we believe it represents the fastest growing market for wireless network investment with the least amount of risk leading to superior long term returns.
The demand for our shared infrastructure, it's fundamentally tied to the insatiable demand for mobile data and the U S, which increased by 30% again last year.
Because of the growth outlook and market fundamentals are so compelling the U S. Wireless market continues to attract a disproportionate amount of capital investment.
This dynamic is again apparent with the C band spectrum auction with growth gross proceeds of more than $80 billion.
During my more than 20 years at Crown Castle large scale wireless spectrum auctions and the U S. Like this one has followed a consistent pattern.
First industry observers question, whether the capital required to secure the valuable spectrum will crowd out investment and wireless networks and second these questions are answered with long periods of sustained significant investment and.
Similar to the past the seemingly insatiable demand for day to drive the need for additional spectrum.
The only way the spectrum can meet the demand is for our customers to deploy it on towers and small cells I am confident that we will look back and the years to come and recognize how important. This auction was for the development of nationwide fiber Jeep and the U S.
In addition to deploying more spectrum cell site Densification and has always been a key tool the carriers have used to add network capacity, enabling our customers to get the most out of their spectrum assets by reusing spectrum over shorter and shorter distances.
The nature of wireless networks requires that cell site Densification will continue as the density of data demand growth.
Particularly given the higher spectrum bands that have been auctioned in recent years and that have shorter propagation characteristics.
Slide three illustrates this point.
The higher frequency spectrum bands are valuable because they provide our customers with the ability to significantly increase network capacity given how much more spectrum is available in those higher frequencies.
However, as you can also see on this slide the signal travel travels over shorter distances, requiring more cell sites.
As a result, we expect both the deployment of additional spectrum and this densification trend to drive significant demand for our tower and small cell assets for years to come.
To address the sizable and growing opportunity, we have invested nearly $40 billion of capital over the last couple of decades and shared infrastructure assets that we believe are mission critical for wireless networks.
Our tower investments began more than 20 years ago, when we built and acquired assets that we could share across multiple customers, providing a lower cost to each customer while generating attractive returns for our shareholders over time as we lease up those assets.
More recently as wireless network architecture evolve to require a network of cell site that is much denser and closer to the end users. We established the leading small cell business and the U S. With the same thought process in mind and provide a shared infrastructure solution that lowers the cost to each customer while generating.
Compelling returns for our shareholders over time as we lease up those assets.
We believe the addition of small cells and fiber to our strategy both complements our tower business and provides a substantial potential upside to our <unk> growth strategy.
To that point, we recently signed two strategic agreements.
In November we announced a 15 year agreement to lease this space on up to 20000 of our tower site. This strategic agreement established Crown Castle as dishes anchor per tower provider and includes certain fiber transport services to further support their nationwide fiber build out.
This agreement will contribute to our financial results over time that dish deployed on our tower sites and we expect to start and the back half of this year, we're excited to partner with dish to support their long long term infrastructure needs and look forward to working with them as they deployed nationwide <unk> network.
As we announced yesterday. We are also excited that we have expanded our strategic relationship with Verizon by signing a long term small cell agreement to support Horizons, <unk> ultra wide band and <unk> nationwide deployment.
Under this agreement Verizon has committed to lease 15000, new small cells, representing the largest small cell award and our history and demonstrating the value of sharing small cell and fiber infrastructure asset with multiple customers.
While we believe it is our ability to provide the full breadth of of wireless infrastructure assets that allowed us to secure the agreements with dish and Verizon highlighting the benefits of the unique portfolio. We have built over the last 20 years.
With our 40000 towers and 80000 route miles of high capacity fiber concentrated in the top U S markets. We believe we will continue to reap the rewards of our investments as our customers continue to rollout their nationwide fiber network.
As we noted in our press release late last year T mobile notified us that they were cancelling approximately 5700 small cells that we initially contracted with sprint.
The majority of the small cells were yet to be constructed and would have been located at the same locations as other T mobile small cells once completed.
The sprint cancellation resulted and T mobile and accelerating the payment of all contractual rent obligations for those small cells as well as the payment of capital cost we had already incurred.
In addition to receiving the future rent associated with the canceled nodes. The small cell locations are now again available for future customers and this development does not impact the long term growth opportunity for our small cell business. As a result, we finished 2020 with approximately 50000 small cells on air and we have <unk>.
<unk> increased our backlog of small cells committed or under construction to approximately 30000 and.
As I reflect on 2020, I am proud of how well our team delivered for our customers and our shareholders during a difficult operating environment.
Looking forward I'm excited about the growth opportunity as our customers embark on what is likely to be a decade long investment cycle to develop five G and what remains the best wireless market and the world our strategy.
<unk> remains unchanged as we focus on delivering the highest risk adjusted returns for our shareholders by growing our dividend and investing and assets. We will we believe will drive future growth.
And I believe Crown castle offers shareholders and unmatched opportunity to benefit from the launch of <unk> wireless networks.
And we provide a compelling total return opportunity with a high quality dividend yielding more than 3%.
We are delivering the highest tower revenue growth rate and the U S. Among our peers we.
We expect to generate double digit <unk> per share growth this year, even before <unk> spending occurs and earn it.
Our customers are affirming the value, we bring with our comprehensive portfolio of shared infrastructure assets by entering into long term agreements to access those assets and we are investing and new infrastructure assets that we expect will extend the opportunity to grow dividends per share 7% to 8% per year.
I believe this combination is as compelling for future value creation as we've ever seen at Crown Castle and with that I'll turn the call over to Dan.
Thanks, Jay and good morning, everyone.
As Jay mentioned, our 2020 financial results add to our long history of consistently delivering attractive growth.
Specifically, we increased dividends per share by 8%, which reflects our commitment to return capital to shareholders and demonstrates our ability to grow through various market cycles.
We delivered approximately 6% growth and organic contribution to site rental revenue.
And we continued to improve our financial flexibility as we lowered our weighted average borrowing cost extended the average maturity of our debt and reduced our leverage.
Before I walk through the financial results in more detail I wanted to briefly discuss the non typical items described in our earnings release yesterday that impacted fourth quarter and full year 2020 results.
The sprint cancellation, Jay mentioned generate the biggest of these impacts including an increase to other operating income partially offset by a related increase in operating expense and the write off of capital already spent on the construction of the canceled nodes.
Additionally, we implemented a reduction in staffing primarily and our fiber segment that resulted and associated severance costs and the fourth quarter.
The fourth quarter and full year 2020 net benefit of these non typical items, which were not contemplated in our prior full year 2020 outlook on both adjusted EBITDA and <unk> is approximately $286 million.
We do not anticipate the non typical items will have a material impact on our 2021 outlook, which remains consistent with the outlook we provided in October.
To make the financial figures and this earnings presentation more comparable.
Full year 2020 results and growth figures for full year 2021 had been adjusted to exclude the impact of these non typical items.
Turning to slide four of the presentation full year 2020 results were consistent with our prior expectations with site rental revenues and adjusted EBITDA increasing 4%.
While <unk> increased 9% when compared to full year 2019.
And 4% growth and site rental revenues included approximately 6% growth and the organic contribution to site rental revenues consisting of approximately 5% growth from towers, and 16% growth from small cells and 3% growth from fiber solutions.
Focusing on investment activity during the year, we deployed approximately $1 5 billion.
So our discretionary investments and 2020, including $1 2 billion for fiber and approximately $320 million per towers.
These investments were balanced with approximately $2 1 billion paid and common stock dividends or $4 93 per <unk>.
<unk> per share representing 8% growth when compared to dividends paid during 19th 2019.
Now turning to slide five.
Our full year 2021 outlook remains unchanged with 4% growth and site rental revenues, 5% growth and adjusted EBITDA and 12% growth and <unk>.
And on slide six the expected, 4% growth and site rental revenues includes approximately 6% growth and the organic contribution to site rental revenues consisting of approximately 6% growth from towers, and 15% growth from small cells and 3% growth from fiber solutions.
As a reminder, this has publicly stated they expect to begin their network deployment. Later this year. So our outlook does not include a material contribution from dishes buildup.
Likewise, our recent agreement with Verizon is not expected to have a material impact on 2021 results.
As it relates to the balance sheet. We finished the year with approximately four times debt to EBITDA on a last quarter annualized basis, which includes the net benefit from the non typical items discussed earlier.
Adjusting to include those items as one time impacts that are not annualized our leverage would have been approximately five times.
During 2020, we improved our balance sheet flexibility by extending the weighted average maturity by nearly two years, reducing our average borrowing cost by 40 basis points and reducing our leverage to our target of approximately five times.
Looking forward our expectation for 2021 capital expenditures remains unchanged at approximately $1 5 billion.
We expect we will be able to once again fund this discretionary capital with free cash flow and incremental borrowings consistent with our investment grade credit profile.
As I wrap up we are excited about the positive demand trends and the U S wireless market and the opportunity, we see to translate that demand and a double digit growth and <unk> per share this year.
Looking further out we believe our focus on the U S market and our ability to offer a broad portfolio of towers small cells and fiber solutions, which are all integral components of communications networks provides us the best opportunity to deliver superior long term risk adjusted returns for our shareholders.
Before we open the call to questions I want to also mention that we were recently informed by the SEC that they have concluded the previously disclosed investigation and that they do not currently intend to pursue and enforcement action.
And that David I'd like to open the call to questions.
Thank you a question and answer session will be conducted electronically if you'd like to ask a question. Please do so by pressing the star key followed by the digit one on your Touchtone telephone have using a speaker phone. Please be sure. Your mute function is turned off to allow your signal to reach our equipment once again.
Star one to ask a question and we will take our first question from Mike Rollins with Citi.
Thanks, and good morning, and just curious if you could spend some time discussing more of the small cloud global launch and so in terms of how to think about the economics for this larger small sales versus maybe some wobbles that you signed with <unk>.
Much like the other.
Infrastructure and versus infrastructure.
And how that will flow through the P&L over the next two years.
Yes, Thanks, Mike Good morning.
A few things I would mention about this and obviously, we're careful about the commercial terms under which we negotiate with the customers, but I think there are a few things that we can speak to related to it.
First is the returns that we would expect to gain from this agreement are consistent with the long term approach that we've taken with deploying small cells. So initial yields of 6% to 7%.
And where to be the anchor deployment and then if they were to be a co location and on existing infrastructure. It would take those returns into the yields on invested capital into the low double double digits. So from a return standpoint really consistent with the with what we've seen historically, we don't know the exact.
Locations that these.
These nodes that they've committed to will ultimately land in.
I can't be more specific than that in terms of what the returns will look like we'll have to let some time pass and see as they identify the locations and then we'll update that obviously as we go.
I do think broadly this was the Verizon agreement is a real affirmation of our small cell strategy and they believe there is real value and a third party, providing the infrastructure to them and I think we're in a great position to do that so we're focused on making sure we deliver for them and and help them get there.
<unk> launched in this agreement is really it's the floor. It's the beginning of what we think is a big start towards <unk> and I think we will see more.
More of this as time passes as we as we work to build out. These these <unk> networks, but this is this is the early days and and the start of son.
And pretty exciting that we're doing with Verizon.
Thanks.
And next we'll go to Simon Flannery with Morgan Stanley.
Alright, thanks, very much just following up on that and you've got 30000 and backlog now and any ability to think about taking that 10000 per year and install rate higher anything that may be under short term and Roche and worse, we might see some action at the FCC to help on identical items and.
And on C band and presumably the carriers now know what market say, one and do you think you'll see much in terms of pre positioning.
During 'twenty, one or is it fairly.
Most of the activity is going to be and 22 at this point.
Yes, and thanks for the questions. Obviously, we are trying everything we can to increase the speed at which we deploy small cells, it's a very difficult and challenging.
Activity to get through the process of working with local communities, making sure. The way. We design. These is consistent with the aesthetic that they would want and their particular communities and so.
I don't really have any update to the timeline that we're typically seeing is as we deploy these it's generally kind of two to three years from the from the time that we identify a location to where were ultimately able to build them, but there are a lot of work that we're doing and trying to figure out ways to do that faster for our customers and obviously, it's to the benefit of their networks to be able to get.
I'm out there faster, but there's also a component to this that as we've talked about similar to towers is a very high barriers to entry at the local community level and so the careful work that we have to do with those communities to make sure we're sensitive to the aesthetics that they want.
And as well as building needs with it within the parameters that they desire and their community is critically important and something we're really focused on making sure we balance those those desires for speed as well as as well as doing things the right way.
The question on the FCC and and the support that we've seen from the regulatory agency. There over time I think we will continue obviously, it's a big push of the current administration to have broadband for all.
And they have been very supportive and their public comments about the need and necessity for fiber to be deployed in the U S and to lead the world and fiber deployments. So I think the operating environment, and which were both co locating on existing assets as well as making investments into future assets I think the environment that we see.
From a regulatory standpoint will be pretty similar to what we've seen over the last over the last several years.
On your last question around C band and the impact on 2021.
Obviously, the auction is just drawing to a conclusion now and I.
We will see.
Later in this year.
Carriers start to speak about what their actual deployment deployment plans for that spectrum will be as.
As we think about the outlook that we've provided we really didn't include any impact from C band and I think given the calendar, it's probably unlikely that that would contribute to our financial results and calendar 2021, but as we get into the year and and and the auction and get them completely wrapped up and and carriers can speak to the spec.
From physicians that they gained I think we'll be able to provide more clarity at that point probably later this year as we think about 2022 and beyond.
Great. Thanks Waqar.
Next we'll go to Matt Mcmahon with Deutsche Bank.
Hey, guys. Thank.
Thank you for taking the question.
Just two if I could one on the reduction in staffing and any more color you can provide in terms of what drove this and yes, maybe.
Where we should think about future cost savings and be recognized and then secondly, maybe a little bit related to this in terms of day fiber business. If you would.
Could talk to any change in standard in terms of the day to day, our strategic outlook for the business with a new COO for fiber now in place.
Sure. Thanks, Matt on your first question around the reduction in force that was focused primarily in the fiber and on the network side.
We're always focused on trying to operate the business as efficiently as possible and and.
And those efforts, we found some opportunities to gain some synergies and.
And so we did that and the and the fourth quarter of last year.
Obviously, there were a number of employees that were affected by that and had done a great job for us and I wish them all the best and their next next endeavors.
As I think about strategically around small cells and the and the fiber business and what we're what we're seeing there are a lot of positive developments obviously the.
Sure.
Completion of the agreement with Verizon.
And as a really positive development, we're going to be working hard for them to help them get their network on air and the beginning of the launch of <unk> creates another opportunity for cell site Densification and then the work that we've talked about over the last several years around <unk> I think the carriers are going to continue to densify their <unk> networks. In addition to the <unk>.
Investment that they've made.
And that they've made that they're going to make on the <unk> side I think we'll continue to see <unk> sites deployed and.
And over over time there.
Great to have our new COO and placed Crystal then does he has been with the company for a number of years I think he will do a terrific job on and operating on an operating basis and operating that business efficiently and he is off to ease off to a great start he has been and the role since December the first and and doing a great job and book.
Forward to the work he'll he'll do ahead.
Thank you.
Next we'll go to Colby <unk>.
Science sale with colored.
Two if I may.
Obviously, a lot and.
Good day, and the cadence and T mobile churn or I guess, the legacy sprint churn over the next several years.
Some of your peers have started to get color on what that might look like even beyond 2021, and I think you guys had actually mentioned.
And it could start to see some of that come through in 2023 can you give us just a little bit more on the on the quantification of what that could look like in 2023 and then.
Understanding that the next day chunk, if you will it come in 2028, just curious if thats correct and again, just trying to get and better sense and quantification and then my second question and I'll, just 362 million and <unk>.
It was recognized as it relates to the.
Sprint small cell contract cancellation.
And the total contract value does that $3 62.
Thank you.
Sure Colby and good morning, I'll take the first question and then Dan can speak to some of the specifics on the on the cancellation.
Big Picture Colby I would go back to some other things that we've talked about in the past and I know you're referencing some of the materials that are available and our supplement which I would encourage investors to take a look at it and we breakdown details.
And by customer by year.
Picture, there's five years' weighted average remaining.
On the T mobile and legacy sprint contracts and there is about on a consolidated basis. There is about 5% of our revenues that are overlapping sites sites, where both sprint and then legacy legacy sprint and T mobile and our co located on and we view that as kind of a book and of what the potential impact around churn could.
At this point there are no specifics of what their plans are that we have to share so being specific about what will exactly happen and 23 of 28.
We're not prepared to speak to that because we don't we don't know.
Broadly, though I think and this is where your question is going broadly we're always open to working with our customers on structures that meet their needs without compromising our own economics under those lease agreements, we were really intentional several years ago with both sprint and T mobile about extending the agree.
<unk> that we had tower agreements that we had with them over multiple years and that's why we sit here today with five year weighted average life remaining obviously that gives us significant ability to navigate through the work that they're going to do around finding synergies and their network and I think they will find synergies and the network and we will we'll be impacted to some degree by.
That but I think it's also.
Also true that we have grown through past events of churn past events of consolidation and.
And I'm comfortable that we'll be able to do the same so as we we talked about our long term goal of being able to grow the dividend, 7% to 8% per year.
We think about that and the context of a multitude of different opportunities and risks at the top line and on balance I think we'll be able to navigate through the one that you are raising here without any without any significant challenges to our long term growth rate and and target of dividends per share.
Yeah and Colby.
Dan I will take the second question you asked around the $362 million.
That is a payment for the future rent that we would expect to and we would have expected to have received on all of the nodes that were canceled as well as the capital that had been spent to date on those nodes. So I think the short answer is it's all of the future value of the contract that we got paid late last year.
And just a real quick follow up too.
And your spodumene assuming.
Regardless and to take share and or not and that cracker and thinking that the next big chunk of legacy sprint.
Leases up for renewal and in 2000, and 2023 and and the next one and then 2028.
Yes Colby.
Yes, there is an agreement that expires that has some sort of amount coming on in 2023, and and an excellent as 2028, but as Jay mentioned.
That's going to be a part of how T mobile and thinks about their network and just because of the agreement comes up doesn't necessarily mean that it's churn and that year. So we're going to be working through that with T mobile.
As Jay mentioned, we have a good relationship with them and happy to talk to them about how they want to manage those sites and connection with the entirety of their network, which is where we will head over the course of the next several years with them.
Thank you.
And next we'll go to Brett Feldman with Goldman Sachs.
Alright, Thanks, So yeah, as you pointed out correctly and Gary.
And virtually all of the spectrum and that's going to be deployed from here to support <unk> networks and that frequency is much higher and what we've seen and use and the correct networks and so it makes sense at the current.
Site density was insufficient to fully utilize that and so the question and I have and what about the tower and inventory tower's historical locations are optimized around the frequency bands carriers are using so and you've seen it and emerging opportunities and may be more meaningfully engage and your tower construction business from your own and used because it's been a.
While sales of materially flow.
Out of your portfolio and then are there any other infrastructure categories that might become increasingly interactive and basketball and net carriers look at and degree of density.
Yes.
And Buildout indoor system is weighted to make better use of these high frequencies and maybe looking at the economics around with us. Thank you.
Thanks, Brad and good morning.
Obviously, the deployment of this spectrum and acquisition and the spectrum by the carriers is going to need both macro site and small cells and similar to the past deployments I think probably and the early days, we will see that more weighted towards the macro site.
But.
Where you went with your question around the build of additional asset the opportunity to build additional towers and the U S is really really limited and I don't think anything about this spectrum auction is going to change that so I would not expect that youre going to see either our own allocation of capital or frankly investment across our industry broadly.
And whether thats the large the large players public players and the space or even the smaller players in this space I don't think youre going to see a significant increase and the amount of tower build that happened in the country. It is very very difficult to co locate.
To build new assets, New tower assets in the top 100, <unk> hundred 50 markets and the U S that is basically blanketed with an emphasis with the tower infrastructure. That's there today the opportunity to densify is really going to come with fiber and small cells and it's why we made the investment many years ago.
<unk> got ourselves into the space and started to learn how to build it how to deploy it and get the right kind of assets for where the world was headed we.
We saw this densification and coming and the need for it and realize that macro towers wouldn't be able to entirely meet that need and so we began to invest and the complementary assets of small cells and fiber that are going to make this densification densification and possible. So I think youll see co locations on towers tower is going to see.
Great amount of growth.
From from the deployment of the spectrum bands and then I think youre really going to see the reason why we originally made these investments and have continued to make the investments as densification happens I think that will happen and great amounts on on fiber and small cells.
Or are there other areas and infrastructure that are interesting to us.
You spoke to and building there are some small number of and building systems that we are doing we find venues to be attractive when they meet our rigorous approach to allocating capital if they exceed our returns and we think there is co location. There some of those makes sense, but frankly in terms of the scale of investment, it's really relatively small compared to what we see.
And the more public right of way opportunities to do infill and site densification with small cells and fiber complementary complementing the tower portfolios that are out there. So I don't see anything on the horizon currently that would cause us to deviate from our plan of the primary investment.
<unk> and front of us our small cell related.
If I could just ask a quick follow up questions and thanks for all that color and the customer.
Customers your carrier customers have generally been able to use all of the spectrum bands and the whole licenses for offload their macro tower locations.
Are you expecting that any site that they occupy today will eventually will be upgraded to use and the mid band to acquire and you think it is going to be ABB, a subset of your towers that are and the right geographic location and to help with those frequencies.
I think if we took a long view and not kind of I don't think Youre asking this question over the next two to three years, because I would differ on that on that answer, but if I think about long term 10 years 15 years 20 years out and the top 100 markets I think virtually all of the spectrum bands that the carriers have today.
And we'll be operating all of those all of those spectrum bands over time, the carriers will upgrade their equipment, they will add additional lines and antennas and and ultimately be broadcasting all of the spectrum bands that they have.
On the vast vast majority of the macro tower sites that they're on and then I think based on the amount of usage that ultimately happens youll see them be targeted in terms of the deployment and densification inside of those markets to supplement and extend and expand the network capacity by utilizing fiber and small cell.
<unk> to make those macro site is efficient.
As they possibly can that generally happens over over a period of time. So if we go back and history and watch and look at how the carriers have deployed network you can almost look at the kind of the top urban markets. The most densely populated and those will those will see the benefit of this kind of activity <unk>.
And then over time, you would see that expand out to the more suburbia and as well as to other markets that maybe are not quite as densely populated. So I think it's a long game and and probably focused at least initially on the on the top on the top markets.
Thank you.
You bet.
Next we'll go to Rick Prentiss with Raymond James.
Hey, guys.
Good morning, Rick.
Couple of questions.
Almost small cell side, given the horizon contracted and the sprints cancellation, how should we think about your pace of adding small cell nodes each year over the next several years is 10000 and silk where the good number knowing that you don't have all the details and utilizing it.
Yes, Rick our assumption as we gave the guide and we talk about our 7% to 8% per year growth and dividends per share is based on the level of activity Thats pretty similar to what we're seeing today.
Obviously over time.
Our long term view would be that theres going to be a demand and a need for a greater number of small cells and that which would increase our pace, but for the near term and as we think about our 7% to 8% per year guide for growth and the dividends per share Thats based on activity that's relatively similar to what we're seeing today.
Is that seven and 10000, just trying to scale and and our model taking through the growth rates.
Yeah, it's about 10000.
Per year, Okay sure, Okay, and then on Verizon.
Other aspects of all and given what we.
Sprint services.
I think more will take or pay contract as an MLA styles and on track and how should we think about not getting into too much and the specifics, but just from the commitment level for Verizon.
So as I as I mentioned earlier.
Try to avoid getting into too much detail around the commercial the key commercial terms of the agreement.
The commitment there is similar to what we would've seen historically from a tower standpoint, where the carriers, making a commitment to us of a certain number of sites and obviously, we're making a commitment to Verizon and to extend the capital to deploy those small cells for them. So as we get into the agreement and time pass.
And then we will be identifying together the appropriate site that that meet our rigorous return thresholds and there may be other locations that they have and interest to build small cells that really don't clear our investment hurdles and and.
I'll end up finding building it themselves or finding another third party to provide those but we'll really just have to go through a passage of time and and see ultimately how that comes out but the commitment is 15000 and small cells over over a long period of time, they're making a 10 year commitment to us in terms of rent on those 15000 site.
And the rent will commence once we once we install and build the small.
Small cells and as I mentioned earlier and one of the answers to the questions. The returns are really consistent with the returns that we've talked about historically, if we end up anchor buildings, a portion of those as well as the economics around what co location and will look like.
Russell lawful technology question that we seem to get for the 10 years at least as far as what's out there we can rob incoming questions about satellites Lowe with orbit satellites, what the impact is from.
Satellites on the wireless companies the tower companies specific Spacex Starlink also anoro and ASC and science to can you talk a little bit about how you view where satellites positioned us for the future world.
Sure.
The dynamics and physics of the way these wireless networks work in the places, where we operate infrastructure towers and small cells and fiber I really don't see any opportunity for satellite to be to be a meaningful component of the network frankly, I think it will be a very very small component if any at all.
Over time, the ability to transfer day to quickly as well.
The time it takes to move the data from from Earth to even a low orbit satellite is going to create just too much latency and the network to be a viable competitor to the terrestrial based infrastructure that makes up the vast majority of the infrastructure and the market today I think there are places, though particularly really rule Lowe.
<unk>, where some of the low orbit satellite opportunities could be really interesting of a way of the <unk>.
Delivering broadband to places that just economically don't make sense to build terrestrial networks too and then the other place where I think there will be opportunity over time is and disaster recovery situations, where you have.
And this happened and Puerto Rico, a couple of years ago, and other places where there is a targeted area that that needs to be covered and I think you may see some solutions people have talked about balloons and they talked about satellite I really think those are short term solutions, except in rural locations, but could be helpful and a disaster recovery.
Situation.
There is a small area of the terrestrial network that's been removed as a result of a natural disaster could be interesting and those locations, but beyond that I really don't see any meaningful portion of the wireless networks that are going to be handled that way and I think you can point to obviously, we can point to the agreements that our customers are signing if you would.
Look at what this just committed to us on for the deployment of their network as well as the behavior of our customers I don't think our contracts speak to the fact that they believe this is this terrestrial based infrastructure and towers and small cells is the way that network is going to be deployed over and over the long period of time.
And so as law of physics or loss levels.
I haven't changed.
Exactly thanks, and I'll stay well.
Thanks, Rick.
Next we'll go to Tim long with Barclays.
Two questions if I could.
First on and network services side, I think last quarter, there was talk of a little bit more.
Activity coming up it looked like it was down a little bit and the quarter.
And it's a lumpy business could you just kind of give us a sense, if there's anything specific to that and how we should think about that.
Rolling over the next few quarters.
And then the second one maybe just a little higher level I wanted to go back to the C band.
Could talk a little bit about your expectations given the price tag.
Sure.
This spectrum reportedly is much higher than anyone thought.
Do you think at any point this changes the dynamics for your businesses, maybe four build versus lease on small cells or fiber or any change potentially to the to the cadence and what you would expect and maybe touching the towers given the impact on on telco fundamentals. Thank you.
Yeah, Tim It's Dan I'll take the first question on services.
The revenue we saw in the fourth quarter was very much in line with what we expected out of services and.
And and the gross margin was as well once you take out the impact of the non typical items. We've been discussing so I think it would be fair to say that the activity levels are consistent with what we would've expected.
And as is typically the case going into the first quarter. There is seasonality to it. So we would expect a downtick going into Q1 and.
The services business and also some incremental costs that we see that generally happened and the first quarter around property taxes and employee expenses things like that but nothing that I would say is indicative of a change and our expectation around activity, that's happening and the tower business going forward.
Now to your second question, Tim and I spoke to some of this and the prepared remarks, but there's a there's a long history of what happens.
And the U S. After large spectrum auctions and that leads to a significant demand for our tower infrastructure and believe this will be similar for our for our fiber and small cells and this is the dynamic that will be beneficial to our industry and particularly to our to our company and we expect that to be the exact.
Same thing case and once the C band spectrum is in the hands of carriers and their and Theyre ready to deploy it more.
More spectrum is obviously needed much has been written on this topic. The FCC has talked about at the carriers have talked about it.
Net more spectrum is absolutely needed in order to meet to meet this 30 plus percent annual demand of.
Growth in wireless and wireless data and the significant investment that the carriers are making today and that spectrum can only meet that growing demand and generate for generate returns for our customers. Once it's actually actually deployed so.
Spectrum goes first and then the operators then deploy that spectrum and that goes really well for the infrastructure providers.
To the extent as you were alluding to that the size of the check raises questions about the capacity for.
For future investment going forward I think it further highlights the value proposition that we offer as a shared infrastructure provider.
Offering capital and essence to the wireless carriers across our towers and small cells and it's cheaper for them to deploy that spectrum that they acquire across the shared asset because we're willing to take the risk that we will be able to get multiple users and thereby reduce the cost of the carriers of deploying that spectrum.
Across the market. So I think it feeds right into our value proposition and and and it's one of the most encourage and things that happens and our infrastructure business.
The spectrum is in the hands of the operators were able to come alongside the operators and provide a shared infrastructure solution to help them get it deployed and I think the C. Band auction is just another example of how the run rate the runway of growth is extended and the business and should lead to great things and our industry and for.
Our business.
Okay. Thank you very much.
And next we'll go to a feel Phil Cusick with JP Morgan.
Hey, guys. Thanks.
Just a little bit of a follow up on a couple of days and ask first on book with small cell pace with sprint canceling five or 6000 sites can you maintain that 10000 pace this year that seems pretty optimistic and.
And again for next year, if those horizon.
Backlog numbers, there and probably take five years three to five years to get in and then on the services side you gave us some good good read what are you seeing from the municipal approvals at this point. Thank you.
You bet good morning, Phil on pacing, we mentioned and the release and in our comments that about 1000 of the canceled nodes were expected to be put on air and 2021.
So we'll go through the year and see kind of where we ended up and I think in and around as I mentioned before in and around that 10000 small cells deployed per year is what our expectation and so we would expect to fill up those those 1000 and another way.
And and.
And then in years beyond that again, our best view at the moment is that we will be at that pace of about 10000 per year and if that if that changes then we'll go through the process of updating that but that's our expectation based on what we see today.
In terms of what we're seeing from the Union municipalities.
And I've made this comment in my prepared remarks about a credit to our team for how they've navigated through difficulties.
Would be and example of how difficult the operating environment has been obviously all of US working and an office environment have gone through the process of working from home and what that means.
And that's a little more challenging when you are working with municipalities and gaining the rights to get construction permits and zoning permit and and our teams have.
And I have done a terrific job this calendar year and working with the municipalities.
The processes have had to change without slowing down our ability to deploy the infrastructure. That's so critical for our customers. So.
It has absolutely changed and the and the operating environment in terms of how do the blocking and tackling of gaining a zoning permit how does that happen. It's absolutely change, but our team has done a terrific job of navigating through that and getting to the place where our ability to deliver for customers was unaffected.
Can I follow up on the small cell side, you mentioned filling those styles and a.
A different way and maybe again in 'twenty two what's the conversation level like pool with cash.
Carriers.
You have more sort of and.
Major backlog discussions that things that arent signed yet and the backlog.
But maybe to the tune and with this Verizon deal.
So I think what I'd speak to it is we're constantly having conversations about the network and the opportunity for us to provide the infrastructure to them. Both both on the tower site and on the small cell site and the dynamics that are in the market today in terms of the spectrum deployment and the growing demand for data.
The obvious need for the carriers to continue to invest and their network to meet that growing demand for data are leading to conversations that give us confidence that we'll be in and around that that pacing of about 10000 small cells per year.
Okay. Thanks, guys.
One other thing just that might bring up in terms of making parallels to the history and and passage of time of small cells and towers.
If you think back over the last the last 20 years.
<unk> business.
The commitments that have been made by the carriers and that had been announced when they commit to a number of.
Of new installations or new sites with us.
Those commitments help establish protocols that enable us both sides of the agreement to work collectively and easily through the deployment cycles and and the establishment of a number like in the case of the Verizon and commitment of 15000 and small cells. It enables both parties the setup and ease.
And doing business together.
Frankly, just make it easier for us to go through the process of deploying infrastructure for them. The same thing has been true on the tower side, but if you zoom out and think about the last 20 years.
Same thing was true on the tower side the carriers over time have made commitments to us for a certain number of new site that they will co locate on or that we will build for them, but those are a fraction of the overall tower activity that they ultimately did with US I think the same thing is true on the small cell site, so commitments by the carriers.
Our helpful. I think theyre helpful data points for investors to look at and to see that that theres commitments by the carriers towards future deployment, but our expectation is that this is more of the start of the floor of the activity and that the business will follow more of the pattern of the history of the tower business.
And.
It establishes the ability for the companies to do business relatively easily.
But ultimately the amount of sites that get deployed will be far in excess of.
The site that just show up on on commitments that are talked about and and Grand scale and that's the nature of the type of business that we're doing where this is really a local business. So working with the local market that each of the carriers to ensure that we're providing and infrastructure solution that meets their need at the local market area is really how we <unk>.
<unk> with our with our with our customers and some of these agreements like the like the one with Verizon and enable that to happen more easily.
Thanks Jay.
And next we'll go to David Barden with Bank of America.
Hey, guys. Thanks for taking the questions.
Two if I could so we've talked a lot about.
The capacity limitations from small cell build in terms of incremental nodes. If you look at the glide path of revenue growth in 2000 and from first quarter.
18% to the jumping off point and the 13% range for fourth quarter.
And what other levers that you can pull if you can't pull the volume lever too.
And yet to the kind of 15% growth target that you guys talk about it.
That bottleneck in terms of deployment actually media and a damage for you guys to lever in terms of initial yields.
Talk about that and then the second.
Question was involved and the tunnel work on dish and what they might be dealing with all the win and you beat me to death and the things that has come up and that is that.
And the steam generation is a multi day and intended to have much broader range and.
Normal and expectations intention is moving to exploit a pretty diverse spectrum portfolio.
See any line of site to the possibility that as the carriers are kind of forced through the C band process and we visit.
And we one of the towers to kind of come back and maybe economize on their footprint on a tower.
Thanks.
You bet and good morning, Dave.
I think.
My comments around the pacing, probably still hold and I'm not sure there's much more to add there in terms of we think we're going to be building about 10000 per year. The places, where we could increase the pace of that of that building.
Largely be around gaining municipality approvals permit.
And I don't see anything and the current environment that would suggest the pace at which we're doing that with increased or decreased meaningfully from the from the current operating environment, but we're going to continue to work at it and and see opportunities and if to the extent that we get kind of a breakthrough there and and that changes we'll obviously.
Let you know the other thing I would I would just mentioned about this and.
Is that the amount of revenue that is added site rental revenue that comes online from small cells is is based on the return profile of the systems that we're building or that carriers are deploying on so there can be pretty significant variance in terms of what those revenues look like.
On a per node basis based on the environment in which we're putting those nodes into and what's the underlying costs associated with that deployment as we think about pricing small cells much more on a return basis, rather than just a price per node.
<unk> by what our what our returns are so that may be part of what causes.
Kind of do the math to think about it.
And that's probably that.
One of the places that I would point to is maybe a little bit of a different and the way that we think and US we're operating the business and your second question around ditch and the antennas and and how did the how did the how did the carriers.
Economize their network.
I think the carriers will continue to use technology.
<unk> reduced the amount of cell sites that are ultimately needed her and tenants are lines that are ultimately needed on infrastructure, it's a way of reducing their deployment costs for deploying site and we've seen that happen over a long period of time I know theres been a number of studies that have talked about how the use of next generation and tenants over time.
The increase.
The the ability for the carriers to cover a particular location from both talked about mimo antennas and the benefits of those of reducing some of the deployment costs and I would expect the carriers will continue to be really thoughtful about how they allocate the capital and use technology to reduce the cost of those those deployment.
And ultimately that adheres to our benefit and sales reduced the actual cost to deploy it enables <unk> to be more capital for them too.
To deploy additional site. So it's synergistic in terms of the Densification and processes. They use technology to reduce the cost they're able to put more of that capital into densify their network, which obviously and aerostar benefit.
And Jay if I could just follow up on your earlier comment so is it is.
And <unk> large numbers and simply going to grind down the weighted growth and small cells.
I would look at Big picture, we spent some time talking about topline topline growth and the business, but we're much more focused around at the bottom line. What do we think we can deliver for shareholders and that that growth and dividends of 7% to 8% per year per share. We think we can do that over a long.
Period of time, obviously, the law of large numbers is at play and our business because it's a fixed asset that's put in the ground and then upon which we start to add co location and growth and when we have one tenant on them and add the second tenant the revenue growth by 100%.
And then when we add the third tenant and the growth rate on that individual asset is much lower than it was when we added just second second tenants. So absolutely. The path that has been followed by towers will be followed by small cells, where that where the growth rate comes down but growth rates don't ultimately drive the value and our business. It's about the return on the.
Invested capital that ultimately and years to the benefit of shareholders. So are our focus around where we're investing the capital and where we see the growth opportunities are about expanding those returns across that investment and that investment base and the assets that we own. So yes at the topline it will it will come.
And over time.
But that doesn't necessarily per.
Well to the growth and the returns that we ultimately achieved by the through the asset investments that we've made and David. This is Dan Let me just add one thing Jay mentioned this earlier, we believe that over time, we're going to see more demand and this and so you can say that at a constant level of 10000, a year the growth rate would go down because of the law of large numbers, but it is not our anticipation that <unk>.
10 years from now we're going to be putting 10000 nodes per year on air.
We anticipate that number will be significantly higher so the transition Jay is talking about like what happened with towers from a the higher growth rates were lower growth rate will happen and it will just take a really long time, because we think that we're at the very beginning of the <unk> investment cycle and that this is a decades long investment that is going to be required to meet the demands that are coming.
And a lot of that is going to go to small cells and and we're just now seeing the beginnings of that.
Okay. Thank you guys can comment.
You bet.
Next we'll go to John Atkin with RBC.
Thanks, very much so a couple of questions on dish and you talked about second half.
Activity and I, just wondered about from a revenue recognition standpoint.
Do you see that commensurate with completion of site construction or is the timing and dictated more by.
Higher level MLA considerations.
John it's going to show up and our and our revenue as they deploy the site as we identified the location and then they deploy those sites.
And then the revenue will start to run through our site rental revenues. So the impact we would expect will be relatively limited on our 2021 financials and then we'll just have to see as we give guidance for 'twenty two we'll update that as we get as we get further along but the impact to the site rental revenue specifically will be tied to the actual deployment schedule.
Yes, John we tried to talk about this the last time, we had a discussion around dish but.
It's a little odd that we have a contracted payment that we have with dish and that's going to come we won't recognize that until we identify those sites because you have to have a lease which is a single site before we can start recognizing site rental revenues on a leased so.
We have contracted payments, but what will happen and run through the income statement will be very much associated with the activity that we see from dish on a site by site basis.
Thank you.
<unk> sales with the lives and I just wondered the hub.
Does that commitment to incorporate.
And small cells that were already in your sales pipeline from that customer or is it additive.
It's additive so there are small cells and the pipeline that are doing with them that would not be included in that 15000 and commitment.
And then lastly on head count and theirs.
Site, a lot of job openings on your web site and a lot of them seem to be kind of field, where they did goals related to <unk>.
<unk> and network and so forth and so I just wanted to get a sense as to kind of what the trajectory is to expect and are we seeing kind of a realignment and the type of role.
And within that segment or what explains kind of PDL.
<unk> and you saw but also the profit and you seem to have quite a lot of openings and net pricing and segments.
Sure.
From a from a big picture standpoint, and as you think about building your model and where our financial results are.
The operating expenses that we've disclosed would be our view for 2021 and I don't frankly see based on the comments that I was making around pacing I don't really see any change to that.
We're constantly making sure we have the right talent and place and depending on the markets that we're operating in and where we are deploying activities for customers.
And the need to make sure we have the right resources and those markets for that for that kind of activity. So I wouldn't point to anything relative to your question that I think changes the financial outcome or the economics of the business.
Thank you very much.
Scott.
And next we'll go to Walter Piecyk with light shed.
Thanks.
Hey, Jay I think a couple of years ago I wanted to conferences, we talked about kind of this.
Establishing your fiber position.
And waiting for this inflection point to really get the returns on the fiber business and we.
Talking about tens if not hundreds of thousands of small cell. So I'm just looking at this Verizon deal. It's four years from I think it is whatever it is 15000 sites.
The scale just didn't seem to be there and thats a full year commitment, but when do you think this inflection point is going to happen.
Well I think I would point to the Verizon agreement and again to some of my earlier comments I think it represents.
A significant investment on the case of <unk>.
By Verizon.
It's the largest and our company history in terms of the commitment by any by any customer to us so from a scale standpoint.
It would point to sort of a meaningful increase or inflection point as you described it from what we've seen historically I think and.
And I made these comments are a little bit earlier around thinking about the Verizon agreement and it's more of a more of a floor than a ceiling, but the agreement is also significant investment commitment of capital and our part and as you know when we invest for these multiple care as we invest make those investments we're thinking about.
Multiple carriers that are ultimately going to need these sites in order for us to make those those investments and we're not going to do all of the small cells and the market. So there are going to be locations markets, where frankly, the growth and small cells are not going to align with places where we think there will be multiple carriers and so were not going.
And do it all and the carriers need flexibility when they make commitments to be able to go out and build.
Where there they have need but in places where we don't think our returns are going to align with that and when that happens then they'll either use another third party or the or they'll build it and build it themselves. So I think there will be as Dan was speaking to a moment ago. I think there will continue to be growth over a long period of time and we will see.
Increasing numbers of small cells and I think the Verizon agreement is sort of.
Our first step towards the benefit thats going to come with with <unk> and and and the increased need for for small cells and I think youll see.
You are going to see I believe millions of small cells, ultimately and the U S market and we will get our share of those and places where we own the fiber, but theres also going to be lots of places where the carriers decide to do it themselves and.
Some of that will be because frankly, we don't see the opportunity to put capital to work at risk adjusted returns that makes sense for our shareholders.
So why don't you think horizon would have at the time, if I'm understanding and agreement correctly use the opportunity of and negotiation to also secure.
Small cell locations that are co locations on top of it sounds like all the 15 is going to be tied to capex and it would seem like.
And if youre going to do a four year agreement, especially that long period of time kind of like you would have a master lease agreement that you'd also secure.
Rights or commitments to doing some level of co lo with shouldnt seem to be the case here.
No. Please don't take my comments to be inferring that we're going to build all anchors anchor notes for them that that's not the case.
And the location and it hasnt been identified and I would expect that.
Portions of these will be co locations on existing systems. It makes their deployment faster and.
And I guess actually our initial point, where that's like the aggregate amount and some you will get additional tenants all of them, but some of it is the additional tenants.
And I was just trying to question and one more way.
And so I gave a law of large numbers and I realized that that small cell opportunity is massive.
And when it comes but if you only add agenda, a certain number of nodes every year by definition will have large numbers kicks and so.
Is there a timeframe when you would think that the 15000 or so nodes that you're activating per year, whether collocation or newbuild.
Inflect up to something more meaningful like 50000.
Well I think it's relative to the investment base and relative to the number of assets and markets that we own the business.
Just stepping back from it and it's a good question to say, okay. At what point do you ultimately get the return from the business and I think a couple of quarters ago, We went back and walk through kind of what we saw on the tower space. It took us it took us nearly all I think a little over 10 years just to get to the point, where we were clearing the cost of capital on the tower.
Syed.
From a from a return standpoint. This is a business that's marked by making sure we get the right locations early and then over time incrementally growing those returns and there is nothing that I see and the small cell business that would say.
Our yield today on invested on invested assets from a fiber standpoint is north of seven 7% today and basically right around where our blended cost of capital is and I don't see anything on the horizon that would suggest to me that we're going to market and see a significant increase in the yield and that capital what I do think well.
Happen over a long period of time through operating the business well, adding co locations is will incrementally increase that yield over a long period of time such that when we look back after 10 or 20 years, we looked at it and see the benefit of the investment that we're making which is really incumbent upon us and then as we think about where do we put.
The capital, we're trying to align that with the places that are most likely to need that lease up over a long period of time in the exact same way that we did it with towers and as we talked about a couple of quarters ago. As we took a deep dive into certain markets and we'll update that again and the mid year of 2021, and so we go down to the market level and to the.
Asset level, we can see it playing out exactly like that where in certain markets, where the investments are really new and early the yields on the invested capital and relatively low and markets, where we've been and for a long period of time and the assets have started to see the co location and the returns that you are asking about starting to start to come to fruition.
Big picture the entire pie of opportunity, we think directionally, it's going to increase over time and if you. If you asked and I really long view then yes, I think there is going to be a day when we're doing meaningfully more small cells and what we're doing and the calendar year, but then we'll have to we'll have to look at okay whats the appropriate cash.
<unk> base against that and as time passes and we'll update you on what that looks like and where the opportunity is.
Okay. Thank you.
You bet.
Next we'll go to Nick.
They'll deal with Moffett Nathan.
Good morning, guys, you've hit on everything substantive I wanted to ask.
As I thought maybe one one accounting question for Dan.
And maybe can you breakout how the $76 million and.
And incremental opex related to non typical items is with spread between the various line items.
Sure happy to it's about $25 million and cost of sales.
A $10 million that impacted service gross margin.
And around $40 million and G&A.
Okay, and the G&A, how much of that was segment level versus unallocated overhead.
And I would say about half and half segment, and how and allocated overhead.
Okay terrific. Thanks, Dan.
Sure.
And next we'll go to Spencer Kirk and with New Street Research.
Hey, guys. Thanks for squeezing me in.
Just another question.
It was a little bit curious Verizon and final.
<unk> small cell growth combined with some level of cancels.
Lots of you at the same time.
And the T mobile cancellation was there and opportunities for them to repurpose those 57 from get small cells.
And that sprint and contracted with you for other locations or was there another reason.
And that small cell contracts being cancelled and repackaged.
Yes, Spencer. Thanks, I think that's probably a question you should you should ask T. Mobile they gave us notice that they wanted to cancel the nodes at the end of late last year and and so.
We just work through it with them.
But in terms of their rationale or their reasoning for doing that.
Let them and let them speak to that.
Okay.
Understood and then just follow along.
Last few months you saw two large long term, we'll still be able to hold the cash and one with horizon.
My question is are these deals and any way a function of shifting your selling strategy, maybe from negotiating and sit on a site by site basis to taking a more holistic approach share portfolio.
I think I think they are different in one respect they are different because of the actual dynamics that are occurring and the market and the situations.
Customers are in with the with the asset and the case of dish they have no existing infrastructure or they're not on any meaningful number of tower sites and the market. So theyre deploying a nationwide network.
And it is helpful and cost effective for them to pick and anchor provider upon which they design their entire network around day.
They chose Crown Crown castle to do that we believe in part because of the quality of our tower assets as well as our ability to deliver fiber transport transport services to them and that means that they are anchoring or building designing their network around our site, we think that creates a significant opportunity for us.
Both.
In the near term years to come but also over the long term as they as they deploy that network I can't think of another example, and the last 15 years, where a carrier from scratch with looking at deploying a nationwide network. So I think the the basics the basic idea of having to deploy and network from scratch drives and.
Need to picker and anchor provider and then work closely with them and we're obviously pleased to be their partner and working hard to deliver on their expectations of getting their network network built.
And the case of Verizon and again I would point to some of the comments that I made before that whenever there is whenever there is a commitment of sides like this and obviously the largest one we've ever done with a carrier with Verizon This quarter that we're announcing this creates really an opportunity for us to work together through some of the operating protocols to make sure that.
We're able to work together, well and the commitment and size enables us to go do that work together as to how we're going to work together and we think it's a good it's a good start.
For the deployment of fiber small cells, but it's just to start and think there will be more to come.
And there will be some operating benefits of going through this for us and and then ultimately the returns.
As we both co locate those nodes on existing infrastructure, and then deploy capital to build anchor nodes for them and places, where we think there will be future returns.
Got it thanks, so much.
Net.
And next we'll go to Brendan net spell with Keybanc capital markets.
Great. Thanks for taking the questions and.
Curious if you could just comment on the <unk> network shutdowns and when possible churn and also had on your business almost one capsule once a day.
<unk> and our portfolio brokerage.
And what with some form funds.
Yes, Brandon and similar to history as the carriers transition from.
The current generation and whatever that is to the next generation of infrastructure. They go through a process of going through their network generally starting and the most urban densely populated areas converting those networks into the new generation in this case converting towards <unk> and.
And then over time moving themselves out from that core to more rural locations and the curious had been and the process of converting <unk> networks into <unk> networks for better part of the last decade, and I think as we build out <unk> that will be at least a decade long process would be our estimation and youll see the carriers continue to convert.
<unk> <unk>.
Legacy <unk> and to either <unk> or may be skipping, a generation and going directly to <unk>.
<unk> the sites upon which they were previously we would expect those will be largely repurposed into the next generation of communications infrastructure.
Yes.
Okay.
<unk> and the next question next we'll go to Tim Horan with Oppenheimer.
Thanks, guys and.
Jay do you think ultimately the mid band spectrum, you need about twice as much cell site.
Given the limitations on physics and.
Can you talk about what type of OXXO lift you would expect with the upgrade and <unk> cell site I know, there's many moving parts and tenants are smaller, but those mimo and maybe Eric and good point.
C ran with it.
Rough idea and bulk net.
Yes, ultimately the number of sites that will be needed will be a function of what's the growth rate.
Traffic and demand from a wireless standpoint, I think the table that we put into the presentation is helpful. Because it shows directionally the move and the need for investment towards site Densification, how much site Dystrophication ultimately happens I think will be a function of what's the growth rate and.
And data and under any scenario that you could you could come up with we feel really good about where we're positioned against that growth rate and think that we'll be able to continue to deliver on our long term target of 7% to 8% per rig per year growth and our and our dividends per share.
On your second question around <unk>, I think I would defer that to our customers and.
And I'll, let them speak to what they see as the revenue opportunity per user.
And as the spectrum bands get get deployed and built out.
Well I was referring a little bit more how much revenue you could get for cell site for upgrades roughly.
And tenants are a lot smaller and much less money than our 600 megahertz upgraded and the $3 five or any thoughts around how much more than just spent per site.
Sure Tim as they deploy the spectrum, sometimes we will see on a tower site based on traffic or usage or need that they have they will deploy a full installation and that that may be nine and tenants and lines or more.
And occasionally we will see it more in the form of and amendment, where they're swapping out antenna is increasing size of antennas and it's really a site by site decision and that the carriers are going to make so being really specific as to what the opportunity of dollars per site will ultimately be for us is probably more precise than we're able.
To be but directionally in terms of return on assets, both on the tower site and and on the small cell site I think the deployment of the spectrum bands and enables us to increase both our revenues and gross margin at the per site level and then most importantly increased our our yield on assets over time as we as we lease.
Up the assets.
Thank you.
Operator, maybe we can take take one more question. This morning before wrapping up absolutely and next we'll go to David Guarino with Green Street.
And thanks for squeezing me and I just wanted to talk I think with other questions answered asked and.
Could you guys give your view on T mobile's activity on the small cell leasing side over the next few years and the reason I ask and it just trying to understand the rationale for making a large upfront payment today, rather than just amending the contracts I think and elegant option.
Yes, David good morning.
We really don't like to speak to our customer's deployment plans.
Let them, we want to let them speak for themselves around why they make the decisions that they make around network investment and and view.
These sites that they canceled where locations where T. Mobile is going to have small cells and I believe they just they just thought they didnt need the sprint.
And the sprint co locations and the and those same locations, but beyond that I think that's really just a question for them to speak to the way that they were thinking about their network over over a longer period of time.
Okay. That's helpful and then on and the Verizon deal just circling back to that do you guys anticipate needing to make additional investments and fiber or with the agreements specifically for small cell nodes on top of the fiber you guys have already land and.
And then Dan to answer that question is there any change to your discretionary capex guidance for 'twenty, one and that you provided last quarter.
Sure.
On the first question there will be some places where we need to build some additional fiber for them.
As a part of the capital that we'll spend on their behalf to extend the network there'll be other places where they'll be able to co locate on fiber that we've already done already built or acquired.
And Ah and expanding out your question just broadly I would say it does not change our view around acquisitions.
Or the or our interest and those acquisitions I think from this point forward. The vast majority of what will happen in this space will really be organically built rather than rather than acquisitions, and I think our capital and investments will be focused more around those those organic builds rather than.
Rather than looking at acquisitions and the market, even though some capital will be extended.
And needed for the for the Verizon and deployment of small cells.
Alright, thank you.
You bet. Thanks, everyone for joining this morning, and and I just want to give a shout out to our team one more time. Thanks for all the work that you did in 2020 to deliver for the customers, obviously really challenging operating environment to you all did a terrific job delivering for them and providing great returns for our shareholders. So thanks to the team and thanks to everyone for joining the call. This morning.
Fox and.
And that does conclude today's conference. We thank you for your participation you may now disconnect.
Okay.
And.
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