Crown Castle Communications BUY Target Price $ 90

CCI : NYSE : US$73.77
Target: US$90.00

Crown Castle International operates and leases towers
and other wireless infrastructure, including distributed
antenna system (“DAS”) networks in the U.S. and rooftop
installations. The company leases space via long-term
contracts on towers that can accommodate multiple
customers for antennas and other equipment necessary
for the transmission of signals for wireless
communication devices. The company is headquartered
in Houston, TX.
All amounts in US$ unless otherwise noted.

Investment recommendation
Consistent with our expectations, Crown Castle delivered another “beatand-
raise” quarter with all key operating metrics above our estimates
and high end of guidance. With the solid Q4/13 report, the company also
increased its FY14 outlook, thanks to growing demand from carriers
that will drive both site rental and service businesses. We believe that
additional upside remains to the revised 2014 guidance as the company
leases up its recently-acquired tower portfolios and as incremental
growth drivers materialize throughout the year.
Investment highlights
 Strong Q4/13 results highlighted by service business – Crown Castle
reported strong Q4/13 results with site rental revenue, service
revenue, adj. EBITDA, FFO and AFFO all above our expectations
and the high end of guidance, adjusted for the two-week
contribution from AT&T towers ($18M site rental revenue, $9M
gross profit). We note that the service business came in
exceptionally strong, delivering 42% revenue growth y/y on
improving margins.
 FY14 guidance lifted on growing carrier demand – With the solid
Q4/13 performance, the company also increased FY2014 guidance
on site rental revenue, service revenue and adjusted EBITDA. The
revised guidance now assumes 30% organic growth in tower leasing
activity from the 25-30% growth reflected in prior guidance, a
change we view as a clear indication of increased level of confidence
by the management team. We note the lowered AFFO/share
includes new shares and financing cost to fund the AT&T towers.
 Upside remains to 2014 outlook – With the initial FY14 guidance,
followed by an increase in outlook only a quarter later, we believe
the management team is again taking a historically conservative
approach in managing investor expectations. We believe upside to
revised FY14 guidance exists from lease-up of T-Mobile and AT&T
towers, from the conservative assumptions on iDEN churn and from
new leases and spectrum deployment not covered by existing MLAs .


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