Crown Castle Maintains Buy Rec

We maintain our Buy rating and the same valuation target for Crown Castle, Inc. (CCI - Analyst Report), a leading operator of wireless communications towers in the U.S. and Australia, following better-than-expected financial results for the first quarter 2009.

The company improved several investment parameters, including site rental revenue, gross margin, adjusted EBITDA and recurring cash flow.

Total revenue for the quarter was $402.9 million, up 8.7% year-over-year and up 2.8% sequentially. Adjusted EBITDA in the first quarter was $242.4 million, up 15% over the prior-year quarter. Recurring cash flow reached $131.8 million, up 12% compared to the year-ago quarter.

On a GAAP basis, net income during the first quarter was $5.4 million or an income of $0.02 per diluted share, compared to a net loss of $18.4 million or a loss of $0.07 per diluted share in the prior-year quarter. However, adjusted EPS (excluding significant items) in the first quarter 2009 was a gain of $0.03 compared to a loss of $0.05 in the year-ago quarter.

Massive growth of mobile data and voice traffic together with prudent cost management solidified impressive performance. Financial results are expected to be driven by substantial demand for more tower space to facilitate high-speed 3G wireless networks.

Our long-term views regarding the wireless tower industry remains positive and we believe Crown Castle is well positioned to successfully grow its business.