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Crown Castle (CCI) Planning to Expand Small-Cell Operations

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Leading wireless tower operator and real-estate investment trust Crown Castle International Corp. (CCI - Free Report) has decided to double its existing small-cell network within the next two years. According to a report by Guggenheim Equity Research, the company will spend around $1.2 billion to deploy 25,000 new small-cell nodes over the next 18-24 months. At present, small-cell networks are in high demand from wireless service providers to improve coverage and increase capacity.

Recently, Crown Castle acquired privately held Wilcon Holdings LLC., a premier service provider of dark fiber, which will augment the wireless tower operator’s small-cell backhaul. Management is gradually developing small-cell networks to supplement the macro site tower business. After the Wilcon acquisition, Crown Castle will attain ownership rights of over 28,000 route miles of fiber.

Crown Castle is a leading wireless communication tower operator in the U.S. It has approximately 40,000 towers and 29,000 route miles of fiber supporting small cells. More than 90% of its quarterly revenues come from wireless service providers like Verizon Communications Inc. VZ, AT&T Inc. T and T-Mobile US Inc. TMUS. It has acquired 9,700 wireless towers from AT&T and taken over 7,200 wireless towers of T-Mobile US.

Crown Castle’s ongoing efforts in repositioning itself from a tower company to a fiber provider (focused on small cell opportunity) appear impressive. In the last few years, the company has purchased three fiber operators – FPL FiberNet Holdings, LLC (in Jan 2017), Quanta Fiber (called Sunesys, in Apr 2015) and 24/7 Mid-Atlantic Network (in Sep 2014).

In accordance with the current market scenario, Crown Castle is pursuing small cell deployments for its wireless customers. The company is making this move in order to enhance its networks to meet robust demand for high-speed, high-capacity wireless services. Using small cells in unlicensed 3.5 GHz band will significantly reduce cost of operations for  wireless operators. The 3.5 GHz radio frequency is being considered in many parts of the world for the upcoming 5G wireless standard.

Price performance of Crown Castle

So far, 2017 has turned out highly successful for Crown Castle. Year to date, the stock price has surged 14.45%, outperforming the Zacks categorized REIT-Equity Trust industry’s gain of a mere 3.88%. Nevertheless, high customer concentration, foreign currency exchange rate risks, stiff competition, integration risks, rising operating expenses and a highly leveraged balance sheet are near-term concerns for the company. We believe that these are primarily responsible for the stock currently carrying a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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