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Crown Castle’s Fiber Segment Authors Its Q2 2018 Growth Story

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Segment-wise performance

In the second quarter, Crown Castle’s (CCI) site rental revenue grew by $300 million to $1.33 billion, of which its fiber business accounted for $247 million and its tower business comprised $53 million. During Q2 2018, the company’s fiber revenue increased ~164% YoY (year-over-year) to $398 million, and the fiber business’s contribution to total site rental revenue increased YoY to 34% from 17%. Meanwhile, its tower revenue grew 7.4% YoY to $771 million, with its total site rental revenue contribution falling YoY to 66% from 83%.

Accelerated 5G (fifth-generation) deployments by domestic wireless network carriers such as T-Mobile (TMUS), Verizon Communications (VZ), and AT&T (T), and the mobile industry’s continuous evolution, are driving demand for communication sites, primarily for small cells.

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Expanding its fiber business through acquisitions

Crown Castle has been quick to respond to current needs. The company is focused on new technology and is geared toward transforming itself from a tower company into a fiber provider for small-cell networks.

Crown Castle has been expanding its capabilities in the space through acquisitions. To bolster its presence in the fast-growing 5G world, it started with NextG Networks in 2012, and hasn’t looked back since then, continuing with a series of buyouts including that of Sunesys in 2015 and Fibernet, Wilcon Holdings, and LTS Group Holdings (or Lightower) in 2017. 

These acquisitions gave Crown Castle over 60,000 route miles of fiber located mainly in the top 25 metro markets. Additionally, in H1 2018, the company spent $532 million on construction activities and improving its fiber communications infrastructure, which suggests it is highly optimistic about small-cell demand. In total, the company has invested ~$13 billion in expanding fiber networks through acquisitions and construction activities. Crown Castle makes up 9.3% of the Real Estate Select Sector SPDR ETF (XLRE).

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