Crown Castle Raises Guidance

Yesterday, Crown Castle International Corp. (CCI - Analyst Report), a leading wireless tower operator in the U.S. and Australia , raised its third quarter fiscal 2009 financial outlook. Management stated that its Site rental revenue and Adjusted EBITDA will beat the company’s prior estimate. Earlier, Crown Castle predicted that the Site rental revenue during the third quarter will approximate within a range of $385 million-$390 million. Adjusted EBITDA is forecasted in the $246 million-$251 million range. The company will report third quarter 2009 financial results on Nov 3. 

We believe the primary reason for this upward revision of financial estimate is the increasing deployments of 3G/4G high-speed mobile voice, data, and video technology. It has become imperative for carriers to improve network quality, and coverage, in order to minimize customer churn. Increased wireless coverage, by using more tower space, is one of the major initiatives that carriers take to improve transmission quality. Since moving equipment from one tower to another is cumbersome, mobile service providers normally renew these contracts upon expiration.
 
Crown Castle offers significant wireless communications coverage to 91 of the top 100 U.S. markets and to substantially all of the Australian population. The company owns, operates and manages over 22,000 and approximately 1,600 wireless communication sites in the U.S. and Australia , respectively. The company accounts for most of its revenue from long-term (typically 5-10 year) tower leases with the major wireless carriers. Almost 95% of its quarterly revenue is now derived from wireless service providers. 

Yesterday, Crown Castle  also priced its public offering of $500 million in senior unsecured notes due 2019 with coupon of 7.125%.The notes will be issued at a price equal to 99.5% of their face value. Net proceeds from the debt will be a total of  $489 million. The company expects to use the money to repay debt and for other general expenses.
 
Moody's Investors Service (MCO) gave the notes a speculative, or junk bond, rating of 'B1' and affirmed Crown Castle ’s junk bond 'Ba2' corporate family rating and probability of default rating. However, Moody’s upgraded the company’s short-term liquidity rating to 'SGL-1' from 'SGL-2' in light of the new debt. The new rating implies speculative investments, indicating  very good cash flow and resources with Crown Castle.