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Crown Castle sees small cell opportunity as big as cell towers in early 2000s

July 25, 2014 | By Phil Goldstein

Crown Castle CEO Ben Moreland said the tower company thinks that small cells represent a
similar growth opportunity to what the industry saw with regular cell towers in the early 2000s.
Small cells have long been heralded as the next big piece of the network infrastructure puzzle,
but in the U.S. they are only starting to take off in terms of large-scale deployments. Yet
Moreland said he is bullish on the opportunity.
"Due to the high operating leverage and significant demand we expect that the lease-up for small
cells will continue to drive meaningful increases in yield, we believe the runway of opportunities
in small cells is very similar to what we saw in towers back in the early 2000s," he said on the
company's second-quarter earnings conference call, according to a Seeking Alpha transcript.
Moreland added that "our scale and expertise position us to capitalize on this growing
opportunity and we expect to continue to make investments in this area."
Crown Castle CFO Jay Brown noted on the conference call that the firm is "continuing to see
very strong demand for our small cell networks. At the end of the second quarter, we had nearly
13,000 small cell nodes on air or under construction and over 6,000 miles of fiber. In addition,
we have executed contracts for over 3,500 new small cell nodes to build and we are at various
stages of preconstruction work, including design and permitting."
He also noted that site rental revenue from small cell networks was up around 26 percent yearover-year, and small cells generated 6 percent of Crown Castle's consolidated site rental revenues
in the quarter.
In December 2011 Crown Castle paid $1 billion to acquire distributed antennas systems (DAS)
and small cell provider NextG Networks, which gave it a boost in those markets.
Tier 1 U.S. wireless carriers have laid out their initial small cell rollouts. AT&T Mobility (NYSE:
T) has committed to deploying more than 40,000 low-power small cells by the end of 2015 as
part of its Project Velocity IP (VIP), a multibillion-dollar overhaul program for both its wireless
and wired networks.
Verizon Wireless (NYSE: VZ) has deployed a limited number of LTE small cells from AlcatelLucent (NYSE: ALU) and Ericsson (NASDAQ: ERIC).
And Sprint (NYSE: S) has deployed a small number of single-mode LTE picocells, and is
working with parent SoftBank to deploy tri-band "Sprint Spark small cells" within the next few
months. However, John Saw, Sprint's chief network office, said last month those Spark small
cells won't necessarily support all three Spark bands. Instead, he said they might be single-mode
2.5 GHz, single-mode 1900 MHz, or dual-mode 1900 MHz and 2.5GHz. He said tri-mode small
cells are expensive, and Sprint's 800 MHz already penetrates indoor environments.