Crown Castle at Nareit REITweek: Strategic Shift to U.S. Towers

On Wednesday, 04 June 2025, Crown Castle International Corp (NYSE:CCI) presented its strategic vision at the Nareit REITweek: 2025 Investor Conference. The company announced its shift to becoming a pure-play U.S. tower company, following a planned divestiture of its fiber and small cell business. While this move aims to capitalize on growing wireless data demand, it also involves significant financial restructuring, including debt reduction and share repurchases.

Key Takeaways

• Crown Castle plans to divest its fiber and small cell business by the first half of 2026.
• The company aims for a 4.5% revenue growth in its tower business for 2025.
• Post-divestiture, Crown Castle will allocate $6 billion to debt reduction and $3 billion to share buybacks.
• The dividend payout ratio is set at 75-80% of AFFO, with approximately $400 million in free cash flow available.

Financial Results

• Tower business revenue growth: Projected at 4.5% in 2025, driven by increased wireless data demand.
• Dividend payout ratio: Adjusted to 75-80% of AFFO, ensuring a balance between shareholder returns and financial flexibility.
• Free cash flow: Approximately $400 million available after dividends.
• Debt reduction and share buybacks: $6 billion allocated to debt pay down and $3 billion for share repurchases from divestiture proceeds.
• Leverage range: Increased to 6-6.5x, providing greater financial flexibility.

Operational Updates

• Strategic shift: Transitioning to a U.S. pure-play tower company, focusing solely on the tower business.
• Divestiture timeline: Expected to close in the first half of 2026, streamlining operations to enhance efficiency.
• Tower portfolio: Comprises 40,000 towers across the United States, with consistent leasing activity.
• Contract durations: Long-term contracts, typically spanning ten to fifteen years, ensure stable revenue streams.

Future Outlook

• Revenue growth: Anticipated to continue, fueled by the increasing demand for wireless data.
• Capital allocation: Emphasis on share repurchases as the primary use of excess cash flow.
• Dividend growth: Expected to align with AFFO growth, enhancing shareholder value.
• Customer focus: Commitment to providing high-level service, facilitating equipment installations on towers.

Q&A Highlights

• Competitive landscape: No significant changes observed; low Earth orbit satellites are not considered a competitive threat.
• Capital allocation and flexibility: Simplified operations post-divestiture allow for increased focus on shareholder returns.
• Divestiture proceeds: After debt reduction, $2 billion will be available for further shareholder returns.

In conclusion, Crown Castle’s strategic pivot to a pure-play U.S. tower company is poised to enhance its financial performance and shareholder value. For a detailed account, please refer to the full transcript.

Full transcript - Nareit REITweek: 2025 Investor Conference:

Mike Rollins, Analyst, Citi Research: Well, good afternoon. I’m Mike Rollins, and I cover the communication services and infrastructure categories for Citi Research. It’s a pleasure to be back at NAREIT REIT week and to host today’s discussion with Crown Castle. Joining us today from the company is interim CEO, Dan Schlanger, and CFO, Sunit Patel. Dan and Sunit, great to see you.

How are you today?

Dan Schlanger, Interim CEO, Crown Castle: Great. Thanks. Thanks for doing this, Mike.

Mike Rollins, Analyst, Citi Research: Great. Well, thank you. Before we get officially underway, I just wanna mention that we have these disclosures up here. If you’d like to one? Yes.

Here here’s one for you, Dan. And if you would like any of these disclosures, please come up at any time for your copy. And also, if you need another copy, you can email me at michael.rollins@city.com, and we will get those for you.

Dan Schlanger, Interim CEO, Crown Castle: So with those You definitely want one of these.

Mike Rollins, Analyst, Citi Research: With those details out of the way, Dan, maybe to get us started. It’s been a busy number of months for the company. Can you give us an overview, an update on Crown Castle’s asset portfolio and strategy?

Dan Schlanger, Interim CEO, Crown Castle: Sure. Again, Mike, thanks for doing this. Appreciate you hosting us. So Crown Castle has been through a bit over the course of last nine months. We are a digital infrastructure company with the vast majority of our revenue and cash flow generated out of owning towers.

We own 40,000 towers across The United States. Our business model is that in each tower, we rent space out to large carriers for them to put antennas on and other equipment on to deliver a signal to your cell phone. The wireless part of your cell phone network is from your phone to that tower, and then it turns into a digital signal that gets sent through the Internet and workings via fiber optic cable. We also have a business that’s a different segment that we call a fiber segment that is a combination of small cells and fiber. Small cells are the exact same thing as towers, just shorter.

Towers are typically 50 to 300 feet tall. Small cells typically have an antenna on top of some sort of existing street furniture or architecture, whether that be a lamppost or a telephone utility pole or traffic light, something like that. The the height is important because in order for the signal to reach you with any with a minimal obstruction, those antennas need to be at height pointing down to you to carry the data to you. The great part about the tower business is that all we do basically is own that infrastructure. And our our customers, at this point, the large wireless carriers in The US, pay us for access to the space on the tower so they can put the equipment up that they need, that they own, that they also pay to operate to deliver the signal to you.

So we are basically a real estate company. The real estate just happens to be vertical as opposed to in a four walls. And within that real estate, just like any other company, when we have a single tenant, so think of it as Verizon has a set of antennas that go around at a single place on the tower, a vertical space of the tower is dedicated to Verizon, another would be dedicated to AT and T, another would be dedicated to T Mobile and so on, That with one customer on our tower, just like if you were to rent out a floor of an office building, you don’t make money, you need enough tenancy to make money. The first tenant on a tower, generally speaking, makes, you know, somewhere in the neighborhood of two to 3% returns for us. The second tenant gets into the high single digits and the third tenant gets into the mid to high teens on returns.

Our towers we have owned for the most part since the vast majority of them since the early two thousand tens and so those tenancy ratios are relatively high and the returns on our tower business are significantly in excess of our cost of capital at this point. The growth driver of our business is continued wireless demand, data data demand in The US. The demand growth in The US is in the neighborhood of 20 to 30% per year, and our customers need to add equipment to add capacity into the network to withstand that increase in demand, which puts us at growing in 2025. Our guidance is about four and a half percent, the revenue line for our tower business. As I mentioned, we also own small cells and fiber solutions.

That business we have announced a sale of, which is why we focused almost solely on the tower business. We are going to close that sale sometime in the first half of twenty twenty six, and we are going to pursue a strategy of being a pure play US tower only company. We will be the only public company that is focused only on The US. We believe that profile gives us a superior business model and a superior ability to deliver returns, especially on a risk adjusted basis. That 4.5% revenue growth translates into higher cash flow growth because there’s very little incremental operating cost to us of adding additional equipment to our towers.

As I mentioned before, our customers own the equipment, they pay for the electricity on it to run the equipment. We basically have a fixed cost structure of owning the tower, paying the ground rent under the tower, which is the vast majority of our cost structure, but that’s a fixed amount no matter how much revenue we have, so as we add revenue, we don’t add costs, so our flow through margins are extremely high. When you put all that together, we believe that 4.5% growth drives greater than 4.5% growth in cash flows, and we have set a future dividend policy of paying out somewhere between 7580% of our cash generation on a per share basis. That leaves 20% to 25% of our cash flows over to do whatever it is we think is appropriate to drive the best returns. Given that we are going to focus on being a U.

S. Tower company, what we believe will happen will be to utilize the majority of that cash flow to repurchase shares over time. With regard to the sale of our business, we will ultimately pay down debt and buy back stock with the proceeds to put us in a position of driving what we think are very good solid returns on a risk adjusted basis going forward and underpinned by very long contracts with the major wireless carriers in The US. We’re all investment grade rated, so we have a very long profile of very stable growing cash flows to drive very stable growing dividends. And that’s what we’re excited about.

The separation that I talked about has been long time in the making. We have some work to do to get it done, but we believe, like I said, it will close in the first half of twenty twenty six, which leaves us in a very good position and something we’re really excited about going forward.

Mike Rollins, Analyst, Citi Research: Thanks. It gives us a lot to dig into. We also will have an opportunity to take questions from our group today. So if you do have a question, just if you could please line up on the microphone just because this is getting webcasted, and we’ll get to your questions. So maybe just to dig in, you talked about the pivot of going from what could be called a domestic infrastructure provider to a domestic tower pure play.

Can you talk about the strategy and the opportunities to optimize your performance as a tower pure play going forward?

Sunit Patel, CFO, Crown Castle: So there are quite a few benefits. One is just strategic focus on one business as a management team versus three different businesses. Second is just optimizing the effort and overhead it takes to manage the business. These three businesses were very are very different. The tower business is highly profitable, low capital intensity, throws off a lot of cash.

The fiber business takes up a lot of capital for low digit single digit revenue growth. A lot of the assets that you deploy electronics that have short life. And then the small cell business is a high growth, early stage, still a lot of investment required. So totally different set of assets. So I think just managing one business will allow us to drive efficiencies in the short term shortly after the divestiture.

Secondly, over time, I think we can focus on the margin, more investments in platform systems to try and get more efficiency, productivity and also deliver a better customer experience. So I think those three things right there will help us drive, as Dan was saying, very high incremental margins without adding much cost at all to our business.

Mike Rollins, Analyst, Citi Research: And if you could discuss the management changes over the past eighteen months and how this new team may be looking at the business, the strategy, operations, capital allocation in a different way than maybe in the past?

Dan Schlanger, Interim CEO, Crown Castle: Well, in the past, we had had a capital allocation that was directed at, as Sunu said, three different businesses. Going forward, we are gonna be focused only on the tower business. And and what what that is and what’s really great about it is we have we have growth embedded in that tower business from the data demand we talked I talked about earlier. But also because in our contracts, we generally have escalators that increase our revenue in the neighborhood of in the high 2% to near 3% range per year, which doesn’t take any capital. And then the growth that we have generally doesn’t take a tremendous amount of from us either because we have capacity on our towers to add additional equipment.

Adding that additional equipment drains revenue. So the the capital allocation of the business gets significantly simpler going forward than it has been in the past when we were building assets and trying to drive additional growth on a different set of assets as Sunit had just discussed for small cell. Going forward, it’s it’s a relatively limited amount of capital we have to spend to get the growth on the tower business, which leaves us in the and I think a very good position of having free cash flow available after all capital and dividend payment to figure out what to do with. And as I said, because our focus is going to be on The US and the towers only, we believe that the highest and best use of that capital likely be to buy back shares. That’s a very clear message going forward.

And I’m in an interim role now. The board is in the in the process of looking for a a CEO. And I would would be I would imagine with a lot of certainty that the board is going to make sure that whoever is in that CEO position on a full time basis will buy into being a US pure play tower company that is focused on returning value to the shareholders through a dividend and share repurchase because those are the major strategic decisions that have already been taken in in having decided to sell the small cell and fiber business that we have we own now but won’t by the first half of next year. So the capital allocation at this point becomes more of how do you optimize that additional cash flow to drive the best risk adjusted return possible. And that’s something that there there are not a lot of different levers to pull in that situation.

So I I think the good part about our business is it’s relatively easy to understand, relatively easy to execute, which we believe actually drives a significant amount of value because the tower business is a very long term business and growing at four and a half percent this year, turning it into higher than four and a half percent at the cash flow line, that really is the focus of the business. How do you get the 4.5% to be as high as possible? The growth of revenue to be as high as possible? And how do you get that incremental revenue to turn into as much incremental cash flow as possible? I’m sure the board is going to screen the CEO to ensure that they are aligned with that outcome and the objectives of being a best in class operator of towers going forward.

Mike Rollins, Analyst, Citi Research: Maybe switching gears to the tower leasing environment. Is domestic leasing activity improving over what you saw last year? And are you seeing a difference in the mix between colocation and amendments?

Dan Schlanger, Interim CEO, Crown Castle: Yes. So our guidance for 2025 of 4.5% growth on the tower side is very similar to what we produced in 2024. So there’s not a significant increase in the amount of demand right now. And and we believe that the revenue growth of our business over the course of 2025 will be relatively level loaded. So there isn’t there isn’t a skew first half, back half.

It’s basically level loaded. And in terms of the comment about amendment versus colocation, just to back up for a second, our customers add capacity to their network by utilizing more spectrum, which is just the amount the the radio frequency they use to deliver wireless data to to a phone, by delivering that spectrum over equipment that sits on our tower at height, as I explained earlier. In our business, that happens in two phases generally. The first phase is they add that equipment to towers they already have equipment on, which is what we call an amendment because it amends an already existing lease on our tower. Those amendments tend to happen at the beginning of a cycle of an upgrade of generational upgrade.

As you’ve seen, five g has been deployed in The US. The beginning of that five g upgrade is usually a a tremendous amount of amendments, adding equipment to sites that already have equipment. Then there’s another phase of of deployment that our customers go through that we call colocations, could also be called first time installs, where they put equipment on towers they don’t already have equipment. And that is something that that is not amending an existing lease because there isn’t a lease on the tower, so that’s a first time install or colocation. I’m exactly sure why it’s called a colocation.

I think it’s a bit of a of a difficult term, So I’ll use first time install here. That second phase of deployment to densify the network by adding first time installations, we have not seen that pick up yet in the five g cycle. If you look at the cycle that happened for four g, which started in the 2010 period, there were the amendment cycle came, then it it dipped down in colocation years later. We’re in the kind of steady state of in between the two right now. And as we see activity change, we’ll talk about it, but that’s not something we’re seeing at this point.

Mike Rollins, Analyst, Citi Research: And how would you just rate the visibility of the business based on the carrier conversations you’re having and the outlook for leasing compared to historical periods?

Dan Schlanger, Interim CEO, Crown Castle: Yes. One of the great things about the tower business, we generally have contracts with our customers that are ten to fifteen years long. They generally have, as I said, the escalator plus some amount of additional revenue from the activity that our customers provide or or the activity they they generate to put equipment on our towers. And generally speaking, we have a pretty significant amount of visibility because it takes from the time that they request going on a tower to the time that we actually install that equipment somewhere between six and twelve months because of regulatory reasons. We have to go ask the bunch of different municipal governments for for the right to put additional equipment on these towers.

So let’s just call it nine months. That means in 2025, we have a significant amount of the 2025 revenue growth identified already. And we have a fair amount of 2026 identified because of the underlying base of revenue we have, plus the ability that we already know some of the contracts we’re signing now will bleed into 2026, which gives us a tremendous amount of visibility over a pretty long period of time about what our revenue is gonna be with the real variable being how much growth there will be in the revenue, not anything else. Because once it’s in the run rate, it stays for a very long period of time, which is what we’ve seen in our business over time is a very steady growth regardless of economic cycle or macroeconomic macroeconomic environment. So generally speaking, and that is true today as well, we have very good visibility into our growth into our revenue and the growth in that revenue over time.

Mike Rollins, Analyst, Citi Research: And maybe just getting to customer concentration, if you could discuss the exposure, let’s call it your big three carrier customers versus your exposure to recent customer over the last several years, EchoStar. And maybe just in terms of context of how much revenue EchoStar contributes a year and how much of the annual growth is contributed from this customer as well?

Dan Schlanger, Interim CEO, Crown Castle: Yes. So we have a contract with EchoStar that is a fifteen year contract that goes through 02/1936. So a long term contract. They are right now in the neighborhood of 5% of our total tower revenue. And we won’t I won’t get into the amount of growth that they provide that gets into too much of the economics of our agreement specifically.

But they are part of the growth of our business because we have structured that contract as an amount of money they pay us every month that escalates over time, very similar to our other contracts. The other three wireless carriers are in the neighborhood of 80% of our revenue and the other remaining percentage are small Internet wireless Internet service providers or governmental agencies that need to use our towers for communication purposes.

Mike Rollins, Analyst, Citi Research: And how does Crown differentiate itself versus your competitors, whether it’s geography, rents, service levels? And are there opportunities to enhance revenue performance with the refined focus on the tower portfolio?

Dan Schlanger, Interim CEO, Crown Castle: Yeah. Again, another great thing about the tower business is, generally speaking, there are not towers next to each other. Most municipalities don’t allow that. I would imagine wherever you live, your your city council has an ordinance that says if a tower exists, you can’t build another one. That means that I would not say there that that we go up against competition specifically.

I think we have we have complimentary assets that cover The US in a very positive way. There is obviously competition in places and throughout the country, but we are very good about what we believe is maximizing the revenue potential of the assets that we own. We do think there are some things that we can do to get better as we focus, as Sumit was talking about earlier, on providing the highest level of customer service we possibly can. We believe we can shift small amounts of revenue towards us when there are competing structures for our customers. Hopefully, can shift more our way than our fair share.

That would be great. And any little bit matters when we’re talking about 10 basis points of growth is important for a seven thousand five hundred year asset. So we’re we’re doing everything we can to increase the revenue growth rate of our business, making it as easy as possible on our customers, being as fast as we possibly can be in getting the like I talked about that from the time they say they want a piece of equipment on the tower until we put it on the tower, we want to shorten that time so they get the benefit of having more capacity being added to the network faster. We also believe that we can, as Susan was talking about, reduce our cost structure so that we can get more of that revenue drop to the bottom line. That really is the growth of the business going forward.

But I think that our reputation in the market is very good for being a very good partner for our customers, trying to solve their issues quickly and easily, and making sure that we tend to the to whatever it is they care about at the site as quickly as we possibly can.

Mike Rollins, Analyst, Citi Research: Are you seeing any changes in the competitive landscape, whether it’s the smaller independent tower players, startups, or even just the emerging satellite coverage that has become a source of advertisement for some of the carriers?

Dan Schlanger, Interim CEO, Crown Castle: The short answer is no. We don’t see a change in competitive environment. Low Earth orbit satellites do not compete with towers. We, as consumers, expect very quick connectivity. I would I would challenge you to say, okay.

Turn off the five g on your phone, go to 3 g, and see how long it takes to load things and how frustrated you get. Low earth orbit satellites have a long latency because the signal has to go to low earth orbit and come back, whereas the tower provides a, you know, quarter mile or half mile distance that the the radio wave has to travel. So the the the low Earth orbit satellites are are more expensive, slower, and more latency. Generally speaking, we all want faster and cheaper, not slower and more expensive. So it’s not a really competitive technology.

Where low Earth orbit satellites have a significant positive impact is where we don’t have networks already built. So think about very rural areas or remote areas in The US, or more importantly, for for the low Earth orbit companies, countries around the world that don’t have significant tower terrestrial networks built out. Those are really good for low Earth orbit satellites. Downtown New York City, Midtown New York City, it wouldn’t compete at all. So we don’t see low Earth orbit satellites as a competitive threat, and we haven’t seen the competitive environment change very much.

Mike Rollins, Analyst, Citi Research: And what are you seeing on the churn front in terms of the organic side of the business? And is that an opportunity where churn can stay lower for longer for Crown?

Sunit Patel, CFO, Crown Castle: After a period of the churn from Sprint, which this will be the last big year, I think incrementally we have $20,000,000 a year of churn from Sprint over the next number of years. But overall, we think we’ll be 1% to 2%. And I think that as you know, have intensified with wireless carriers more than anyone else in that sector, and they love to compete on price, coverage and speed. The latter two require more investment towers, which we see as a good thing for us over the next number of years. That could help our churn, but we think 1% to 2% is where we see things settling down.

Mike Rollins, Analyst, Citi Research: Just going remind our audience, if you have a question, just please come up to the mic and we’ll get to you. Maybe switching gears to capital allocation. So as part of the announcement to divest the fiber assets, you’re taking the target leverage range up to six to 6.5x. Can you talk about that decision and why that’s the right range for Crown Castle?

Sunit Patel, CFO, Crown Castle: So a lot of considerations went into that. As you know, was on the Board of Crown Castle until I stepped into the CFO role. I was a member of the Finance Committee, Audit Committee, the Fiber Review Committee. On the Finance Committee, we spent a lot of time with Dan and Chris on the corporate finance team to really think carefully about capital allocation. Allocation.

And I think that the conclusion of that is we achieved several things. We, one, significantly improved our financial flexibility. We took a big cut to the dividend down to $425,000,000 which has already been announced effective this quarter. We also said that we also lowered our dividend payout ratio. We said it would be 75% to 80% of AFFO, which means 20% to 25% of our AFFO is free cash flow.

There’s a bridge we included that shows about roughly $400,000,000 of free cash flow available, which gives us a lot of financial flexibility. So from a capital allocation perspective, that does several things. One, for our shareholders is the dividend level that’s set that does grow over time is AFFO growth. And then we also reiterate our commitment to be investment grade. So we think that this leverage ratio we talked about, given the fact that the underlying the tower only business is both stable and steady in terms of revenue growth rate for a long period of time, high amounts of cash flow that it generates, that we were very focused on risk adjusted return.

So keeping with investment grade delivers puts our shareholders in a position where the returns are both safer maybe than other comparable investments and pretty steady. We thought that was the right way to go. And we’re also paying down debt as part of the transaction, 8,500,000,000.0 of proceeds, so $6,000,000,000 of debt pay down. We also said we’d look to do about $3,000,000,000 of share buyback. So the balance is both keeping the balance sheet strong, but also delivering a lot of capital returns to our shareholders.

Mike Rollins, Analyst, Citi Research: You referenced some of the post close financial targets. Curious on timing. So can you walk us through how investors should think about timing to get to the close of the transaction? And then how quickly you can achieve the post divestiture financial objectives that you’ve outlined in some of the slides that you shared with the

Sunit Patel, CFO, Crown Castle: So currently, we’ve said that divestiture would occur in the first half of next year. The bridge that we provided assumes it occurs at the June, just for the sake of assumption, and shows you a rough twelve month forward look on that. I think the whenever the transaction closes, the debt pay down is fairly straightforward because we received proceeds at closing. Now we have debt maturities and other things to balance out, it shouldn’t be too long, meaning it should be around then.

Dan Schlanger, Interim CEO, Crown Castle: And then secondly, on the

Sunit Patel, CFO, Crown Castle: share buyback, we would look to announce a share buyback program upon the closing. Now the timing of exactly how that works, we’ll have to see depends on the shares and other things. But we do out of the $8,500,000,000 we’re allocating $6,000,000,000 to debt pay down that still gives us another 2,000,000,000 plus of proceeds available. So that’s how we’re thinking about it. So some of it depends on exact timing of close, what the interest rate environments look at the time look like at the time.

Mike Rollins, Analyst, Citi Research: Thanks. And so maybe one other question to kind of and we’ll get to maybe one question and the final one. So changes in the macro environment, changes in tariffs, how is that, if at all, impacting your business and impacting your customers?

Sunit Patel, CFO, Crown Castle: Well, one, I think this is one of the advantages of us being a U. S. Towers only company. It’s a simpler model. We don’t really spend much capital on things that are impacted by tariffs, so that’s the other advantage vis a vis other businesses in the telecom or each sector.

We’re not impacted by tariffs. Change in macro environment. I mean, think if you look at our history over the last fifteen, twenty years, we’ve grown every single year in the tower business, whether it was a financial crash, COVID, which I think just speaks to the resilience. I mean people’s cell phone is their lifeline. Some people might rank it above their gas supply electricity.

So I think it’s essentially a utility service that everyone needs, all of us do, every day, the time. So I think the macro environment has not impacted us historically nor do we expect it to so other than the interest rate environment, as I mentioned.

Mike Rollins, Analyst, Citi Research: And to wrap us up, Dan and Soon, anything else that you’d like our audience to know and walk out of here with?

Dan Schlanger, Interim CEO, Crown Castle: I don’t think there’s anything additional, but I just want to reiterate where we are. We’re excited about our path forward. We think it is a cleaner, simpler story focused on a fundamentally growing business in The US, which is wireless data demand from all of us as consumers translating into growth in our business, which we believe we can translate into cash flow growth, dividend per share growth and repurchases of shares to return money to our shareholders over time in a very attractive risk adjusted return basis. And it’s something that we’ve been working really hard towards over the course of the last year or so and we’re excited to have that opportunity in front of us by the beginning part of next year. Look forward to being able to talk about it and deliver on it going forward.

So thank you very much for attending.

Mike Rollins, Analyst, Citi Research: Thank you everyone.

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