Q1 2021 Crown Castle International Corp Earnings Call

Please standby.

Good day, everyone and welcome to the Crown Castle Q1, 2021 earnings call. Today's call is being recorded at this time I'd like to turn the conference over to Ben Lowe. Please go ahead.

Great. Thank you Vicky and good morning, everyone. Thank you for joining us today as we discuss our first quarter 2021 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 on the investors section of our website at Crown Castle Dot com that will be referenced throughout the call. This morning.

This conference call will contain forward looking statements, which are subject to certain risks uncertainties and <expletive>umptions and actual results may vary materially from those expected.

Information about potential factors, which could affect our results is available on the press release and the risk factors sections of the company's SEC filings.

Our statements are made as of today April 20, <unk> 2021, and we <expletive>ume no obligations to update any forward looking statements.

In addition, today's call includes discussions of certain non-GAAP financial measures table.

Tables reconciling these non-GAAP financial measures are available in the supplemental information package in the investors section of the company's website at Crown Castle Dot com.

Before I turn the call over to Jay I want to mention that we will take as many questions as possible. Following our prepared remarks today, but we plan to limit the call to 60 minutes. This morning.

So with that let me turn the call over to Jay.

Thanks, Dan and good morning, everyone. Thanks for joining us on the call as you saw from our first quarter results and increased full year outlook. Our consistent execution is delivering outstanding results as we support our customers growth initiatives with their deployment of nationwide <unk> in the U S.

Following a period of building excitement in anticipation we have seen a significant increase in activity as our customers have started to upgrade their networks to five G at scale.

We expect this elevated level of activity to result in a year of outsized growth for Crown Castle as we now anticipate a 11% growth in SSO per share for the full year 2021.

Meaningfully above our long term annual target of 7% to 8%.

Beyond 2021, I believe our strategy and unmatched portfolio of more than 40000 towers and approximately 80000 small cells on air or committed in backlog and 80000 route miles of fiber concentrated in the top U S markets has positioned crown castle to generate growth in cash flows and dividends per share per year.

Years to come.

Our strategy is to deliver the highest risk adjusted returns for our shareholders by growing our dividend and investing in <expletive>ets that will drive future growth.

That focus has led us to invest in towers small cells and fiber <expletive>ets that are all foundational for the development of <unk> networks in the U S.

We believe the series of strategic agreements that we have announced in recent months further highlights the synergistic value our shared infrastructure provides to our customers.

Building on the momentum from our recent 15 year agreement with dish to support our nationwide fiber Buildout and our recent long term <unk> <unk> small cell agreement with Verizon to support their network deployment.

We are excited to once again expand our strategic relationship with Verizon through our recent long term tower leasing agreement.

We believe this agreement will deliver significant value for both parties as it establishes turns for leasing additional capacity on existing tower sites with our structure.

That is intended to make it easier to expedite the deployment of C band equipment over the next several years.

The agreement also resulted in an increase in the average remaining current contracted lease term under our Verizon site leases to approximately 10 years.

Dan will discuss the expected financial impact of this agreement later on the call.

Turning back to our focus on generating superior long term returns one of our core principles of our strategy is to remain U S. Only because we believe it represents the best market for wireless infrastructure ownership since it has the most attractive growth profile and the lowest risk and.

And we believe this dynamic of higher growth and lower risk will continue into the future, which is why we expect our U S based strategy to drive significant returns for our shareholders.

Starting with the higher growth, we see in the U S. The demand for our shared infrastructure offering across towers small cells and fiber is tied to the robust demand for mobile data in the U S.

Which continues to increase by more than 30% annually.

Because the outlook is so compelling the U S wireless market continues to attract a disproportionate amount of global capital investment.

This is likely due in part to the fact that the durability and scale of wireless data growth in the U S has repeatedly outperformed expectations.

I remember fielding questions from investors and analysts nearly a decade ago trying to understand why we were not expanding our tower business and the less established international markets that offer the promise of outsized growth to compensate for the outsized risk.

Core set of <expletive>umptions underpinning that line of questioning included are viewed by many that it was inevitable that U S growth rates would flow.

Leading to a desire to augment that growth by investing in international wireless market that hopefully would develop the same key set of fundamentals over time that has made the U S market so successful for decades.

We didn't buy into that argument at the time and sitting here today on the doorsteps of five G. We reached a similar conclusion that the U S is still among the highest growth markets for wireless infrastructure.

Importantly in a shared infrastructure business with long term investment horizons, we have benefited from the superior growth rates, while avoiding the risks <expletive>ociated with investment opportunities and less established international wireless market.

These risks can have a meaningful impact on long term returns and many have materialized in recent years, including the outsized churn due to less favorable industry dynamics relative to the U S.

Sustained foreign currency devaluation and that results in revenue churn and disruptive social or governmental environments in less developed countries.

Because we believe the U S has both greater potential for growth and lower risk. We are focused on growing cash flows on our 40000 towers by providing access to existing and new customers that are building <unk> wireless network.

We are investing in new small cell on fiber <expletive>ets that our customers need for their wireless networks, which we believe increases our ability to capitalize on the <unk> growth trends in the U S and we are developing new capabilities and offerings that will leverage our existing <expletive>ets to drive innovation and.

And we believe will further extend our growth opportunity such as <unk> and edge computing.

I believe that Crown castle offers shareholders and unmatched opportunity to benefit from the launch of <unk> wireless networks in the U S.

In the near to medium term, we expect to deliver outsized <unk> per share growth of 11%. This year as we translate this increasing <unk> activity and the very attractive bottom line growth.

We expect to once again deliver the highest tower revenue growth rate in the U S. Among our public tower appears in 2021 and.

And our customers are affirming the value, we bring with our comprehensive portfolio of shared wireless infrastructure <expletive>ets by entering into long term agreements to access those <expletive>ets.

Longer term, we believe Crown castle provides an exciting opportunity for shareholders to potentially compound double digit total returns over a long period of time with a high quality dividend that currently yields 3% and that we expect to be able to grow 7% to 8% annually.

What I consider the durability of the underlying demand trends, we see in the U S that provides significant visibility into the future growth for our business the.

The deliberate decisions, we have made to reduce the risks <expletive>ociated with our strategy and our history of steady execution I believe that Crown castle stands out as a unique investment that will generate compelling returns over time.

And with that I'll turn the call over to Dan.

Thanks, Jay good morning, everyone.

As Jay mentioned, we are excited to see our customers beginning to deploy <unk> at scale.

We have seen a significant increase in activity levels, leading to solid first quarter results that exceeded our expectations and support our increased full year guidance.

Turning to slide four of our earnings presentation, you can see our strong top line results were driven by more than 6% growth in organic contribution to site rental revenues.

This growth included more than 9% growth from new leasing activity and contracted escalators net of approximately 3% from nonrenewals.

We also generated a $23 million increase in contribution from services when compared to the first quarter 2020.

Culminating in 10% growth in adjusted EBITDA, and 20% growth in <unk> per share on a year over year basis.

Turning to slide five we increased our full year <unk> guidance by $40 million.

<unk>, a $25 million increase on expected services contribution as a result of higher than expected tower activity levels.

And a $30 million reduction to interest expense following our successful recent refinancing activities partially.

Offset by $15 million of additional labor related costs <expletive>ociated with the higher activity levels.

Additionally, as Jay discussed we entered into a long term tower leasing agreement with Verizon that resulted in increasing the average current lease term of our Verizon tower site leases to approximately 10 years and adding straight line revenue of approximately $140 million in 2021.

Taking these changes into account, we now expect our adjusted EBITDA to be $150 million higher than our previously provided 2021 outlook.

Our expectation for site rental revenue growth is increased to approximately 7% inclusive of the expected organic contribution to site rental revenues of 6% which remains unchanged.

Our expectation for growth organic growth across towers small cells and fiber solutions also remain consistent with approximately 6% growth.

From towers, approximately 15% growth from small cells.

And approximately 3% growth from fiber solutions.

Focusing on investment activities during the first quarter capital expenditures totaled $302 million, including $17 million of sustaining capital expenditures $49 million of discretionary capital expenditures for our tower segment and.

$225 million of.

A discretionary capital expenditures for our fiber segment.

Our full year expectation for capital expenditures remains unchanged at approximately one 5 billion.

Or less than $1 billion after customer cash flow contributions.

And we continue to expect to fund our discretionary investments this year with free cash flow and incremental borrowings.

Turning to the balance sheet. We finished the first quarter at approximately five five times net debt to EBITDA.

And expect to exit 2021 at our target leverage of approximately five times based on the anticipated growth in cash flows through the balance of the year.

As Jay discussed in addition to driving significant dividend growth a key part of our strategy is to reduce the overall risk profile of the business to further enhance the value created for shareholders over time.

Along with focusing on what we believe is the highest growth and lowest risk market in the world for wireless infrastructure ownership, we have methodically reduced the risk profile of our balance sheet with the same goal of maximizing long term shareholder value.

With that in mind, we were able to opportunistically access the bond market during the first quarter to refinance upcoming maturities reduce our debt cost and extend our maturity profile.

Looking back five years to when we achieved our initial investment grade credit rating and inclusive of our recent refinancing transaction.

We have increased our debt mature average debt maturity to nearly 10 years from just over five years rich.

We reduced our average borrowing cost to three 1% from three 8%.

<unk> increased our mix of fixed rate debt to more than 90% from just under 70%.

And reduced our reliance on secured debt to just 15% from nearly 50%.

With limited upcoming debt maturities in the near term and more than $4 billion of Undrawn capacity on our revolving credit facility. We believe the balance sheet is positioned well to support our growth initiatives.

Turning back to the growth side of the value equation and to wrap things up.

We are excited about the increasing level of activity, we are seeing as our customers begin to deploy <unk> at scale.

Our customers continue to recognize the differentiated value our comprehensive shared infrastructure offerings offering brings leading them to sign significant long term agreements with us.

We expect to once again generate industry, leading U S tower revenue growth this year, and we expect to generate 11% growth in <unk> per share in 2021, which provides a very attractive total return opportunity when combined with the current 3% dividend yield importantly.

Importantly, we are generating nice returns, while making strategic investments in new small cell and fiber <expletive>ets that we believe will add to our long term growth opportunity and.

And with that Vicky I'd like to open the call to questions.

Thank you to ask a question. Please press the star key followed by the digit one on your Touchtone phone also make sure. Your mute button. This turned off till I your signal to reach our equipment again net of star one to ask a question.

And we will take our first question of day from Simon Flannery with Morgan Stanley. Please go ahead.

Great. Thank you very much.

Thanks for all the color Jay.

Perhaps you could dive into the services business. What are you seeing going on there that led you to write to increase fee guidance and then how do you see that translating time wise into higher leasing trends and any comments on the U S M&A environment. Thanks.

Good morning Simon.

Good morning, we're obviously very very encouraged by the activity that we're seeing among the carriers were not surprised by the urgency that our customers are showing.

In deploying <unk> the level of commitment that they showed during the C. Band auction was really a clear sign that they are going to invest heavily in <unk> and so the activity. We're seeing I think just flows from that we're seeing that turn into actions as they are deploying significant amounts of <unk> networks and we're re.

Encouraged by the activity that we're seeing.

When we think about that debt activity translating towards revenue growth.

We obviously saw a big step up towards the end of last year and that's continued into this first quarter and as we as it relates to the services activity. Obviously most of that activity is either in the nature of Preconstruction work that we're doing for carriers and then some portion of that carries over to work that we're doing is we actually install them on the site. So.

The elevated activity that we saw the step up we think sort of continues through the balance of this year and is a direct result of the overall <unk>.

Encouraging level of activity that we're seeing from the carriers.

Yeah, and the second part was just on the M&A environment in the U S.

I think what we're seeing across the board Simon I think I think you understand is that there is a lot of it.

Money Thats interested in infrastructure right now.

And that's reflecting itself in the M&A environment, both for towers and fiber <expletive>ets, while we've been focused on and been clear about is that we think that theres not a lot of the of additional M&A, we're going to pursue in the U S. For fiber, we think most of those <expletive>ets that we wanted we have purchased there may be some others out there.

That meet the criteria we've looked at being.

High capacity dense metro fiber, but not a lot. So we anticipate most of our our capital will go to organic growth in our business through this all cell and fiber business.

Okay. Thank you.

We will now go to Michael Rollins with Citi.

Thanks. Good morning curious first just start with the Verizon agreement and extension can you frame.

What types of activities.

And upgrades that Verizon has made two within this agreement an extension and what might be opportunities that fall outside the scope of this agreement just to think about.

Whats kind of pre determined universes.

Net other activities you could pursue with Verizon to further grow your revenue over time, and then just a quick follow up on.

On a net debt leverage can you just give us an update on what the target.

Range is.

And.

To the extent that the leverage I think in the GAAP.

Did at five five times in the first quarter, just how you see that progressing.

Over the next couple of years. Thanks.

Sure Mike Good morning.

Obviously really excited about the Verizon agreement that we announced on the tower side I think it provides significant value and certainty to horizon as well as to ourselves and I think the significance of that agreement is obviously evidenced by the impact that it has on our 2021.

Outlook in the step up that we've put into that outlook last night on the press release.

This really went through the same thought process that we've gone through over the last several years as we've done large large transactions with the carriers on the MLA side.

And and has similar components to it we're trying to meet the customers' needs, particularly with regards to certainty of price and then lowering or are reducing the amount of time that it takes to go through the paper portion of of getting them onto our sites. So it's designed to facilitate their ability to go back to sites that they're already on.

On and speed up that process of them being able to do upgrades and obviously they've been specific about the desire to do that with regards to the C band.

And then on our side of it we're trying to make sure that we price the economics of that transaction appropriately and I think we've seen over multiple of those kinds of transactions with customers multiple customers and multiple transactions over time.

The ability to do that well to both get the right economics on the site and then provide our customers with the right access and speed to get there. So we did something similar has a lot of components to things that we've done in the past.

And thought about it in a similar way we get the 10 year extension on the leases that they're already on.

Which moves the maturity out from about four years to about 10 years on those on those sites and then over the next several years gives them an opportunity on those sites that they're already on to upgrade to.

To upgrade their equipment to handle new new new.

New spectrum bands and to get that where they want it to be from a <unk> standpoint, we still maintain the upside on new leasing and other activities <expletive>ociated with that and then once we get past. This initial push into <unk>. Then obviously the opportunity is there for us to see to see greater growth over time so.

Cited about the agreement there and excited about what it means in terms of total activity and as I said before in the prepared remarks, I think right on the doorsteps of seeing <unk> deployments at scale enables us to be able to be responsive to horizon's desires to get there.

Yes, Mike It's Dan I'll take the second question on leverage.

Our target still remains 4% to five times, we believe we will stay in that five times as we continue to invest in our small cell on fiber business, which should be for several years.

We're as you pointed out at five five times at the end of Q1, we believe that with the growth in EBITDA that we see coming through the rest of the year that we will end the year close to that five times, maybe slightly above it but pretty close to that five time net debt leverage target.

And feel really good about that position we're in because we are able to invest in the growth of our business.

While relying on cash flows and incremental borrowing capacity and not not equity to fund that growth.

Okay.

Thanks.

We'll take the next question from Matt <unk> with Deutsche Bank.

Hey, guys. Thank you for taking the questions.

One on small cells and then one on services on the small cell side.

Revenues were flat sequentially I think year on year growth slowed into the high single digits. So can you give any color in terms of the drivers there and then how.

We should think about the outlook for the rest of the year, if you're reiterating the 15% growth guide.

And then on services. If you can give any more color in terms of what drove the strength in margin this quarter.

Just trying to get a sense of what the cadence.

All services contribution will look like.

In the next couple of quarters over the course of the year.

Sure good morning on.

On small cells I would point to is we've as we've tried to do in our outlook look at the full year, so a little bit of timing changes kind of which is naturally going to happen as we go through the construction phase of small cells is going to have some quarter to quarter movements that may not.

May not tie out exactly to the full year outlook, but as we look at the full year outlook still think small cell growth year over year is in the 15% range that mid teens that we've talked about for a long time.

We think on the fiber solutions side will be around 3% for the full year and then towers right there at around 6% as we as we previously expected. So I don't see anything that in terms of those numbers in the quarter that are indicative of anything happening in the underlying business that I would point to I think it's just the timing differences quarter to <unk>.

And as we look at the full year I think that's more indicative of the actual activity what we're seeing from the carriers on how we expect those businesses to perform.

On the on the services side and the cadence there look we're at a level of elevated activity. So we probably had a better first quarter in terms of services than we would in many years, where we we often talk about years being back in heavily backend loaded to the second half or even towards the fourth quarter and we saw a step up on.

On activity going into the end of last year and that level of elevated activity just carried right into the first quarter. So we saw a real nice contribution from services in the in the first quarter and.

And expect basically our full year <expletive>umption to be pretty similar to where we were previously with that with that adjustment for the first quarter.

And Matt It's Dan just on the question on margins specifically.

It's the mix of business Jay talked about earlier, having a mix between pre construction and construction as part of our services business. The pre construction is a little bit higher margin and Thats, what we had a little bit higher mix of within the quarter and that drove the higher overall margins.

Great. Thanks, guys.

And we'll go to Colby <unk> with Cowen.

Great. Thank you.

Is it still pretty bullishly about what youre seeing from an activity perspective.

I guess, a little surprising then that you did in Asia organic tower growth and given that you gave your guidance all the way.

Back in October of 2020.

Are you already seeing or had the conviction that you would see this acceleration in demand.

Therefore, it's already built into the guidance. It just seems like given how early you gave your guidance.

How quickly the demand is kind of ramp that you wouldn't have necessarily included that.

And then secondly.

As it relates to the Verizon.

MLA you talked about.

Looking at easier to deploy and I guess one of the bigger question is people are trying to get a sense on investors are trying to get a sense on is whether or not the agreement includes just some.

Standardized pricing.

Make it easier for them to move quicker.

Whether or not there's actually some type of financial benefit where you allow them to go to X amount of sites over X amount of period.

Shorter than that 10 year period.

Can you kind of move quickly and if thats. The case that would <expletive>ume that there is some type of cash benefit yes, we didn't really see the <unk> change for that in particular, so again any color you can give on that would be helpful. Thank you.

Hello, Good morning, Colby Thanks for the questions on the first question around organic organic tower growth.

A couple of things I would I would I would put in front of you on on that one is theres a theres a pretty good lead time or lag time from the time that we see revenues start to turn on.

Start to get the applications from our customers to when we actually see the revenue start to turn on Thats about six to nine months.

So the increased level of activity that we've been talking about for 2021.

It's something we did see all the way back into the fourth quarter of 2020, we started to see the applications step up then and that an informed our increase in the in the overall activity.

I was sort of curious to this point the other day and just looked back to kind of our organic revenue growth over the last 2017 through 2020 and the organic revenue growth in 'twenty. One that's on our outlook as the step up of a little over 25% of that average over those over those previous four years. So it's a meaningful increase in the activity and we bake that in.

Into our outlook.

When we gave 2021.

So what we're seeing now in terms of that activity is pretty consistent with what we had expected.

But it's always good to see it materialize in and not just be expectations as where we were back in the October October timeframe.

The other thing that I would I would mention about this is as we as we look at this activity were encouraged and think that theres the opportunity for it to stay at this level of elevated activity for a period of time so.

I think in the business oftentimes people start to look for inflection points are at points, where it's going to be the highest and then expect it to kind of fall off and are our prior experience would tell us that those inflection points are relatively rare.

You see the carrier step up level of activities and hold at a plus or minus a certain amount for a long period of time. So we look at that activity really encouraged by what we're seeing and not and frankly not surprised.

To the broader point on as we look at revenue growth in activity the way that we create value for shareholders is by stacking years of good growth one on top of another and.

What is happening in the business right now is a tremendous tremendous year of growth of growing that <unk> at 11% year over year on a per share basis, and just stacking another year of great growth on top of what was a good base and our goal is to consistently deliver that growth like we've talked about over the long.

Term, 7% to 8% and what we're seeing at the topline certainly indicates our ability to achieve that longer term that longer term that longer term goal.

On your second question around the Verizon MLA.

We tried to stay away from getting too specific about the terms of the agreements that we do with our customers.

I'll, let them speak to how they think about their deployment plans and why they structured certain agreements with us, but I would I would tell you that there are components of both parts of your question in the in the agreement.

Certainly does include certainty of pricing for them.

And.

If depending on levels of activity then it will drive an answer for us in terms of topline growth over a long period of time. So it does provide pricing with them and then there's also a component of committed activity.

Tenant, where we have certainty of some revenues <expletive>ociated with activity as they deploy as they deploy C band over the over the next several years. So there's components of both of those in the agreement and as we go forward.

We'll see more tonnes consolidated rather than specific to a customer relationship the contribution of cash revenues.

On what Dan spoke to in terms of the impact of the the GAAP financial statements this year and years to come.

Presumably the reason then that the <unk> is not benefiting from that committed activity. Then is that it's not actually starting necessarily in 2021, but it's on future point is that fair.

No I don't think that's fair I think I would look at some of the activity that we would have <expletive>umed would occur in 2021. When we gave the outlook would be <expletive>ociated with all of our customers. So some component of that activity was already embedded in our guidance and maybe it's under a different construct now as a result of this agreement, but I wouldn't necessarily change our.

View of activity for the year and therefore, the cash flow.

The only thing Colby as day on the only thing I would add to that is I just wanted to put a little bit of context around it that our growth in the tower business of around 6% as double of that what are where our closest peers have guided to for 2021. So.

We feel really good about that and this deal that we signed with Verizon. The one we signed with dish all went into our understanding of what was going to drive that 6% growth that is almost double what our peers are saying so.

I think looking for us to increase above what is already a really good number probably is too much than can happen as Jay pointed in any one year for the tower business and we're just excited that we're able to provide as much growth as we are right now on driving the type of returns that we are for our shareholders.

Got it thank you.

Next to Chris <unk> with J P. Morgan.

Hey, guys. Thanks.

First Jay to your comment on leverage remaining at five times should we expect accelerating capex next year to keep that leverage at five times, because it seems otherwise it would be falling below that pretty quickly.

And then second dish announced yesterday, it will be using the AWS cloud no big surprise, but can you give us thoughts on how that may impact crown over time on site leasing revenue as well it has a impact on the opportunity in.

On the edge computing thanks.

Yes, Phil Thanks for the questions on on around Capex. We spent some time I think over the last couple of quarters talking about our expectation for this year's Capex.

Which on a net basis is down about $400 million from the levels that we saw in 2019.

That was largely related to the fiber acquisitions that we made those companies had committed to a number of.

Large enterprise and government build outs that were built specifically for kind of those kind of activities enterprise and government broadband services and post those acquisitions. We just haven't signed up those kind of agreements that at any kind of scale like those those those prior companies had done.

And as a result of that and our strategic focus around small cells. The capex has come down as we built out those really long lead time contracts. Many times. They were three to five years of of Buildout and commitment. So those are basically rolled off and and now as we think about capital spending.

Ending.

Strategically focused on what we believe is the long term value driver of the business around small cells and.

And the opportunity to kind of build these networks for <unk>.

Carriers as they as they build the <unk> networks.

I don't want to get too much into what we think in 'twenty, two and beyond with giving guidance. This year debt, our net capex will be a little less than $1 billion.

For the longer term the driver of Capex will be what are the opportunities mostly around small cells and.

And those will go through the same rigorous process that we put all of our capex processes through of understanding what the return is we look to see a 6% to 7% initial yield on invested capital and then we want to make sure that we believe there's good opportunity for additional lease up beyond that.

That can drive that yield into the double digits and.

And higher returns on capital over time, as we see more lease up so.

In the future, we'll just have to evaluate what the opportunities are and then we'll give you an update on on on Capex as we get later in the year.

In October we would plan to give our 2022 outlook as we as we typically do.

With regards to dish.

Beg off most of that.

Dish and Amazon speak to how they are agreements between the two of them are going to drive activity, but obviously additions made a significant commitment to us recently in terms of the deployment of their network and our operating team is incredibly busy and focused on delivering for them based on their expectations. The team has done.

Great job out of the gate.

And I believe delivering for them what they what they had hoped and we are ready to support dish in any way possible.

As they as they work on building out their <unk> network.

Your last question around edge computing, we think today a lot of this a lot of the edge computing activity is around traffic management and potentially reducing costs, but as in the wireless networks move into <unk> I think the opportunity is going to expand well beyond well beyond that really delivering solutions to.

<unk> and.

And increasing the applications as innovation occurs and we think tower sites are uniquely positioned to be able to provide the real estate the connectivity.

As well as power that enables edge computing so.

A foundation of long term innovation and our combination.

Fiber and really uniquely position us to be able to capture that I.

I know, we highlighted that component of both fiber and towers in the disagreement it was something that was really important to them as they designed and decided to anchor their network around our around our sights on I think I think it's another example of kind of the combination of our <expletive>ets sets us up for opportunities for growth that are frankly beyond.

And what we put into our forecast when we talk about being able to grow the dividend, 7% to 8% over a long period of time things like edge computing and <unk> are really not in our forecast. So we view that as unmodified upside and opportunity and believe the type of <expletive>ets, we've acquired and where those <expletive>ets are located really.

US the optionality to benefit from that over the long term.

Thanks Jay.

Well now go to John Atkin with RBC.

Thanks, very much question just on balance sheet any kind of thoughts on additional debt refi activities that you would.

Contemplate and then.

On the small cells.

It does seem as I think you alluded to in the script and elsewhere that you have some structural advantages as we get to the infill and Densification part of C band and other mid band frequencies I, just wondered if youre starting to see that in the pipeline yes.

So revenues might be a little ways off but.

Are there active discussions at this point or is that.

More on the come and then finally, one of the <unk> license fees.

Earlier this morning about supply chain constraints that they're seeing on.

The other hand, another one put out a press release talking about how second quarter Theyre already kind of starting to deploy C band.

And as you kind of consider all of those data points from our carriers are saying I wondered how that affects your expectation.

Around second half <unk>.

Type of ramp you might see thank you.

Sure John I'll take the first one on the on the balance sheet on debt refinancing activities, we're always looking at our balance sheet.

Identify opportunities for us too.

We mentioned in the script.

Reduce our borrowing cost extend our maturities.

We won't get specifically into what we're going to do right now, but the interest rate environment does remain attractive and we'll continue to look at that versus whatever the economic.

Trade is in the debt.

Early premium we would have to pay to take out any of that future debt.

As part of our normal ongoing every day operations within our finance Department.

On our rules.

Find out what we're going to do or we will figure out what we will do over time.

And let everybody know when it happens.

On your second question around small cells, we believe that we do have a structural advantage around the <expletive>ets that we've acquired as Dan mentioned in his earlier comments.

We were intentional about acquiring high capacity dense urban fiber.

And as we've seen kind of in the later stages of <unk> and now as we enter into <unk>. There is a disproportionate amount of traffic in dense urban and suburban areas in the United States and in order to solve that increased traffic.

Small cells are absolutely necessary. They are a critical component of their network.

And I think the locations that we've acquired fiber in and where we've built fiber.

And then where we started to build small cells sets us up really nicely as we get into <unk> and we start to see network densification and that fiber that we have existing I think we will see additional co location on driving up the yields on our returns.

Of those <expletive>ets and.

As as has happened in prior cycles of going from two to two and a half and then to <unk> and then <unk> and now into <unk>.

Would expect there will be innovation that will further drive demand.

Ireland traffic demand and that increased traffic again in the air as to kind of the benefit of those those <expletive>ets. So we think we've got great <expletive>ets in the right location and think that we're going to see.

A really strong tailwind in the business over a long period of time and you are right to point out the impact directly to site rental revenues is not going to happen overnight it'll happen over time, but the conversations on the discussions that we're having with carriers and the activity and I would point to the Verizon commitment of 15000 small cells.

We talked about on the last quarter. Those are all early indications that these <expletive>ets are of of the critical nature necessary to deploy wireless carrier networks, and we're really excited about where we're positioned.

On your last question around C band spectrum and constraints on supply chain et cetera, we haven't seen anything at this point that would suggest to us that the numbers that we have out there are not going to be achievable.

If we start to see something obviously, we'll update you on on our expectations, but.

Normally in the business sort of a quarter to quarter changes and timing are not that impactful to our overall results as I spoke to earlier in terms of the lead time and the commitment of revenues, we have a pretty long lead time. So we have a lot of visibility into into what we'll do in 2021 and feel good.

About where the where the forecast as and if that changes.

We'll update you, but I think I think the supply chain will resolve themselves over time and don't expect that to have an impact in terms of our growth and then Jay.

Thank you for that and just a quick follow up so last September we had American tower announced their MLA with T mobile and <unk>.

Philosophically can you maybe just remind us how you might want to.

Think about that structure are on agreement or any kind of an MLA that would address the sprint and T. Mobile churn I appreciate that you've put out and kind of the exploration schedule on the supplement which is quite helpful, but any any thoughts.

<unk> philosophically on on.

Willingness to enter into some sort of an MLA that captures all of that.

Sure.

So we did thanks for mentioning the disclosure we did add some additional disclosure to the supplement we've gotten questions. We thought it would be helpful to give you a little more granularity.

It's not intended to be a forecast. So that's what's in the supplement is not our forecast of actual churn, but just the actual numbers that you can separate locations, where the legacy sprint and T. Mobile we're on the same sites and sites where.

Obviously sprint was with Standalone on a site and not co located with T mobile.

We're always open to considering a new structure or an agreement with a customer, but there's there's not any need per se to do that.

We were intentional on number of years ago about extending the term. So if you look back on that disclosure. We've got a lot of term remaining on those on those leases and and.

It's provided a lot of which was the goal when we did it of extending those front leases. We were trying to make sure that we had a lot of flexibility through the if there was consolidation so pleased about where we are there.

I would look at what we've done historically, we're always open to as I mentioned earlier of working with the carriers to help them facilitate what they need.

And whether thats, achieving synergies are increasing speed of deployment of network.

We're happy to work with carriers on that basis and at the same time, making sure we maintain and protect the economics on both the agreements that we have in place as well as the economics of the sites and driving the right return on the on the <expletive>et. So we'll hold that imbalances as we usually do and.

And make sure we do the right thing for both shareholders and for our and for our customers I would just point out that this which I think is helpful. As we think about entering.

2023 and beyond.

Next next big date of 2028, where we have some exposure to lease.

Leases potentially being terminated from from the T Mobile acquisition.

In past carrier consolidations we've.

We've been able to grow <unk> and dividend right through those those periods of time and the other reality is that consolidations have actually led to increased spending.

So we've had this view for a long period of time that ultimately the combination of T mobile and sprint will be a good thing for the tower industry and net net we'll end up with more more activity on more leasing.

Then we would have otherwise and.

So I certainly expect that at some point in time, we will see some benefit to T. Mobile have some synergies of taking down some sites, but I think the overall investment and activity that they will do in with regards to <unk> will far exceed the deducts that we may see from from from synergies that they tried to achieve in taking down some site. So net.

Back to the earlier comments, so really good about the activity we are going to see in <unk> and we will work through the consolidation when the time comes in several years from now.

Thanks Jay.

Yes.

Okay.

We will take our next question from Ric Prentiss with Raymond James.

Thanks, Good morning, guys and congrats to Baylor on E&C double a total loan.

Good morning, Rick how are you doing that with a lot of fun.

That was great.

For the supplement on the sprint stuff that was helpful as well I want to follow up on something Nick asked you.

About the pacing.

Are we looking still at about 50000 small cell nodes on air at <unk>, and you're still thinking kind of 10.

On a year is a good pacing number for us to look out over the next couple of years.

We do we think that the activity. We think we'll end this year with about 60000 give or take.

Notes on air and.

I think thats, a pretty good forecast for the time going forward as.

As we look out over a longer period of time.

I think that the demand for small cells is going to be well in excess of what we've seen thus far.

So I think our view would be over a longer period of time that that activity will increase beyond those levels, but in the near term I think that thats, a pretty good pretty good gauge the carriers and the activity in the discussions.

And their public comments around the necessity of small cells I think really sets the environment for the opportunity for us to capture a larger portion of it but as you know there is a long lead time for that so we get lots of visibility as we go from commitment.

Commitments are the carriers to go on certain sites to when we're actually turning them on so as we go through the process certainly update you on on our view and Rick as Dan. Let me just add one thing to that we get a lot of questions around why 10000 is there some sort of structural cap to how many we can put on air.

And I would just like to.

Be clear.

10000 is just a result of the bookings we have and the time it takes to get those bookings on air which is typically between 18 and 36 months.

We don't see the 18 to 36 months changing all that much but if we got a lot more bookings we could put a lot more on air than just 10000 in a year. So 10 thousands of good a good point to look at for the next few years, just because of our next couple of years because of where we are with the bookings that we've had recently.

But as Jay pointed out there is nothing that would stop us with greater bookings to speed up that deployment and we would anticipate that to be the case as the necessity of small cells continues to get clearer for the deployment of <unk> and networks overall.

Yes. This is sort of a nice things without a visible business anything cash from the Verizon contract yet as far as putting that onto a timeline I know you had the 15000, but I was kind of uncertain time.

No nothing more specific than what we've previously mentioned.

Okay, and then on fiber, 3% net growth can you help us understand how is that business doing growth and churn wise is it still kind of dull.

Double digit close to double digit churn and better than double digit growth.

Yes, we're still churn is around 9%.

And then so top growth to be in the 12% plus range.

Netting to that 3% that we expect for full year 'twenty one.

Okay last one from me Jay has talked about on a couple of times about Cvr's. What do you think the opportunities and Cvs will be that youre not in guidance on it sounded like.

Is it increased power to put it on towers is it in building systems that you would likely get involved with help us all day about where you see opportunity might be coming in <unk>.

Yes, I think it's all of the above.

I think there is opportunity in building that we have seen and we will see.

We've done a number of trials on that front and with some success.

So I think theres an opportunity to expand.

The density of the network for the wireless carriers into buildings to reach places that are very difficult to do from from the outside so I think theres opportunities. There I think theres also going to be some opportunities in the macro environment in certain settings, where <unk> may be used by a content provider.

Or others, who want access to spectrum, so being able to use some of the unlicensed spectrum components of <unk>.

Is an opportunity to do that in.

And more macro environment I think there are probably also some opportunities around campus specific activities, whether that's universities or other locations, where someone controls a large portion of land and has a discrete user use for CBRE.

That could be interesting as a share provider. So I think there are a number of opportunities and it's not and it's not in guidance, yet because it's not large enough to.

Beyond to be beyond a rounding error, but I certainly think over time.

As as we see <unk> developed the need for this to be for wireless opportunities to be ubiquitous I think will drive uses for <unk> and I think the other component of it is obviously everyone is trying to figure out how to get more spectrum into the hands of <unk>.

The wireless operators and <unk> is another way to do that and I think that spectrum will be utilized over time and I think we stand to benefit from that as that spectrum is deployed.

So it's nice to see the FCC put more spectrum auctions on the block two.

Agree.

Hey, guys.

Thanks, Rick Thanks, Rick.

Okay. The next question from Nick del Deo with Moffett Nathanson.

Hey, good morning, Thanks for taking my questions.

First I noticed that both the number of ground leases extended and the number of ground leases acquired in the quarter were probably the lowest in many years and they've been trending down for some time.

I'm wondering if you can just talk a bit about the state of the market for land acquisitions and extensions and how much headroom. You think you have left to push on that front.

Sure. Good morning, Nick This is Ben a focus of ours for about 15, 18 years, something like that where we've we've been specifically focused on extending the maturity of our of our ground leases. When we started that activity I think we're in the neighborhood of about 17 or 18 years of remaining term on average and we had.

In the neighborhood of about 20% or a little less than 20% of the land that was owned.

And we've increased over the over the last 15 to 18 years, we've increased the percentage of land owned.

About a third little over a third of our overall overall ground leases and in addition to that we've taken the average maturity.

Longer than 30 years. So there has been a concerted effort for us to get well ahead of any date, which a landlord would have a termination right or gain leverage from a financial standpoint over what those those extension terms would be and the team has just done a phenomenal job over a long period of time.

Insistently, improving the quality of the <expletive>ets and reducing the risk, albeit.

Relatively small on an individual tower basis cumulatively I think I would put that in the category as Dan was talking about balance sheet risk. That's another risk that we've methodically eliminated in the business and and really excited about where we are today, it's an ongoing activity as long as we're in the business, we're going to continue to be.

There. So we are constantly working on buying out land that makes sense that we can.

We can acquire at the appropriate multiple.

And at the same time working on extending ground leases and some component of the ground leases I think we will always be in that in that maintenance mode, where were extending and working to to extend it. So some of the activity coming down. It's just the result of terrific execution over a long period of time and the natural evolution of once we get 80 to 100 years on the ground lease.

We acquire it then that comes off the board and there is no longer any work to do on that site. So it will probably in terms of quantity or number continue to come down over time, and we'll continue to kind of make the right financial decision around buying or extending the leases.

Do you see a practical limit as to where you can take the ownership.

Yes.

There are owners of these ground leases that I think will want to hold the property forever. So there is a there is an absolute component, where we're going to always have ground leases as a component of the business. Some portion of our ground leases are also on on things like government land.

Obviously, those will remain in the hands of government entities, we won't be able to acquire that so yes. There is a natural limitation, we're not really close to it yet.

There is the just the practical aspects of it where people love to own the land and believes that Crown castle will be there to pay the ground lease for a long period of time. So it's a good good stream of income that they want to continue to hold the lease and we're happy to be unless the if that's the right financial relationship to remain in as long as we have term uncertainty.

Price.

Okay.

Maybe one on the small cell front.

I'm sure you guys had pretty good intelligence for where where the carriers self building small cells and in some cases, maybe why they went.

In house versus using a vendor like you know what are the factors that you've been observing is most correlated to carriers choosing to deploy on their own for particular builds versus leasing.

Proximity of their own wireline <expletive>ets or some local market attributed or or something else.

Sure I think there's probably two factors you mentioned one of them proximity to existing plant that they have is certainly a reason why they would self perform and use their existing plant to do it.

The other reason frankly is that there are places where we're not interested in putting the capital because we don't see the lease up opportunity. So.

There are limited.

<unk> of providers of third party capital building these small cells.

Obviously ourselves and then inside of the digital colony portfolio.

They are delivering that is on.

As our offering to customers, but beyond that there just arent anybody there isn't anybody else who is doing that at scale.

We're selective in terms of the opportunities in places, where we want to invest the capital and put the capital its got to not only meet that kind of initial return, but we've also got to be comfortable that theres going to be big demand over time for other carriers to need it and in places, where we would look at it and evaluate the nodes is not meeting the return threshold.

<unk> by virtue of either the cost to build them or the lack of certainty of lease up then those would be locations, where we would p<expletive> and decide not to invest the capital and the carrier would self perform so its combination of those two would lead to the vast majority of the reasons why they would self perform we've talked about this some in the past but.

Our view of the number of small cells that is going to be needed in the market aligns pretty closely with a number of the comments that the carriers have made where they've indicated there is going to be more than 1 million small cells in the U S. We certainly don't anticipate building all of those.

So I think as long as as long as the business around and were building small cell nodes I think we're going to continue to see the wireless carriers self perform and our opportunity for value creation is to be rigorous and disciplined in our approach to evaluating those markets that have the best potential for lease up and then making sure that we're really thoughtful about which.

Ones, we pick and then how we build those sites on cost and on time and and those are those are sort of the value opportunities that we're looking for and then there'll be lots of small cells I think that will exist in the U S that are that are going to be self performed by the carriers and I would look at that as overall activity is just a trajectory that I think.

It aligns well with our strategy.

Okay. Thanks Jay.

You bet.

And we'll know better David Barden with Bank of America.

Hey, guys. Thanks, so much for taking the questions.

So I guess Jay.

Just on a collective level.

Is there anything that youre seeing from the operators from a geographic.

Search freeing perspective that would lead you to believe.

There is an appetite among the carriers collectively to one C band.

To to deploy 80 sooner rather than later.

Some of the spectrum outside of the first phase a block clearing meeting.

There is a lot of opportunity for the carriers to deploy beyond the first 45 markets.

Should they choose to do so.

If you had any color as to whether you have some insight into whether that may or may not be happening and then the second.

Question would be again with respect to the idea that the carriers are mostly looking at C band as a macro deployments start primarily because.

The ear and backhaul that they have on existing sites.

Are you seeing or expecting that.

Kind of incumbent tower carriers.

Can it be gaining a lion's share of the demand here or are you seeing.

The kind of interlopers.

<unk>.

Tower companies the Uniti settlement of the World are they are they getting super normal share.

Super normal part of the conversation at the margin as we think about this new deployment. Thank you.

But more on Dave on your on your first question I'm going to I'm going to mostly back off and let the carriers.

Okay.

How they are thinking about C band deployment.

It's probably just a little too specific for us to make those those kind of comments or.

<unk>.

We are obviously as I mentioned in my earlier comments, we're seeing a lot of C band activity is driving a lot of leasing activity and I think over time the driver of our business as I mentioned before kind of stacking years of growth and it's going to take multiple years for C band to be deployed and we think it's going to be great for us for an extended.

Period of time, but specificity beyond that I'll, let the let the carriers speak to kind of their own their own plans and initiatives.

On on the second component of your question around where does the activity go.

History, I think is a really helpful.

Indicative indication of where the carriers are going to deploy this <unk> network and how they'll think about the C band spectrum. It is always most cost effective to deploy the spectrum on on locations, where they have existing infrastructure they've already got connectivity there they've already got power they've got the basic infrastructure there to be able to add additional spectrum bands.

So at least initially I think the vast vast majority of the activity will end up on on sites, where they are already located on so the existing owners of towers, where these carriers are co located on those sites I think we will see the preponderance of activity for some extended period of time.

As it gets built out and then as the spectrum begins to be used then step two is the densification activity.

And then that activity is likely to go frankly again on existing sites, where the carrier is not yet co located.

The opportunity for new and upcoming tower companies is generally pretty limited the places that are outside the core areas where the big.

At least the three public tower companies on their <expletive>ets.

Places, where new housing developments the extension of suburbia sprawl, those kind of areas those.

Those companies that you mentioned are often building towers in those locations.

And.

Putting their capital up to meet that need but that's that's.

Sort of second third kind of level of activity I think the vast majority of the activity.

Early days than even maybe even in the medium term is on existing sites.

Great. Thanks, Jay I appreciate it.

Operator.

Yes.

Yeah.

Okay. Thank you our last question will come from brand and net power with Keybanc capital markets.

Alright, great. Thank you for squeezing me in I wanted to go back to all these questions on the cash component under the agreement with Verizon.

I think thats generally referred to it in the industry is as you see and I am curious historically speaking how long is the contracted committed new leasing portion of the contract lasted.

When you signed these agreements previously how does it trend over time and can you help us think about the value you ascribed to use the relative to the term extension that would be great. And then second question on T. Mobile churn. The disclosure is super helpful. Can you provide what the churn was this quarter and then Oliver.

The $700 million yourself co location and other sprint sites that you have what would be a good number.

You look out over time for you to retain.

Thanks.

But yes on the first question Brandon I'm going to beg off that question.

A little more specificity than we would get into on our customer contracts is as I mentioned.

Colby earlier Theres, a component of that that's related to giving them.

Knowledge of what the actual pricing is going to be for new activity. There is a commitment on their part in terms of activity on existing sites and then there's obviously the extension of the existing sites to 10 years and we will.

Price, we price that and negotiated that with the economics of the sites in mind and the right returns, but beyond that I think thats, just too specific and not in our best interest or that of our customers to get into that level of detail.

On the on the second part of the question around spent sprint churn in the quarter was negligible.

Longer term and what you should <expletive>ume frankly, it's really early as we laid out that schedule.

We have our first meaningful amount of churn not until 2023.

And then after that I think in each year, it's less than $20 million all the way out to 2028, which is the bulk year of that.

Thereafter Thats included in the table. So we're a long way away from kind of needing to have that conversation and too early to predict ultimately what the outcome is a big picture is as I mentioned, a few minutes ago I think the net investment by T. Mobile in building out <unk> will far exceed any of that.

Synergies that they that they achieve I think thats consistent with the public comments that they've made in their desire to build out <unk> networks and when we get to the place where we have a better a better view, whether that's because of the contract or just because of the activity that we're seeing will certainly come back and take just the disclosure and turn that into more of a.

A forecasted view of what we actually think we will start to impact the numbers, but.

It's a long way out and and at this point not really ready to provide a specific forecast on on timing or amount.

Got it thank you for the question.

You bet. Thanks Brandon.

Date, everybody joining this morning, and I just want to end the call by thanking our team who has done a tremendous job delivering for our customers over the last year in navigating through COVID-19. They continue to perform exceptionally well so to the team. Thanks for listening. This morning really appreciate all the work youre doing for customers and for shareholders.

Thanks, everyone for joining the call. This morning, we look forward to catching up next quarter.

Thank you very much and that does conclude our conference for today I'd like to thank everyone for your participation and you may now disconnect.

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