Crown Castle a Towering Buy

We maintain our Buy rating and the same valuation target Crown Castle International Corporation (CCI - Analyst Report), a leading operator of wireless communications towers in the USA and Australia, following impressive financial results of its second quarter fiscal 2008, better than our estimates.

We believe recent weakness in the stock price is related to general global equity market weakness. Overall performance of the company will be driven by substantial demand for more tower space to facilitate high-speed data services, in particular 3G mobile technologies. The merger with Global Signal has provided better-than-expected cost synergies.

Although a substantial level of debt remains concerning, management guided that its recurring cash flow per share will increase by 25% during fiscal 2008. Our long-term view regarding the wireless tower industry remains positive and we believe the company is well-positioned to capitalize on emerging telecom network deployment opportunities.

Since Crown Castle is currently losing money with regard to net income, the stock is difficult to value on the basis of its P/E ratio. With respect to other selected valuation metrics, the stock is trading at a significant discount compared to its peers. According to our view, the wireless tower industry is likely to witness portentous growth over the next couple of years and, therefore, we believe the current valuation of Crown Castle does not adequately reflect its true valuation potential.

In considering massive ongoing wireless data deployments, we maintain our six-month target price of $45 which is based on a 2008 estimated EV/EBITDA multiple of 22.1x, still at a discount to the peer group average.

Nalak Das contributed to this report.

Read the full analyst report on CCI

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