CCI Crown Castle
Clean tower pure-play with contracted escalators, but slow growth and rate sensitivity make it expensive at 66.
The story
Crown Castle is now a pure-play US tower REIT (~40k towers) after selling its fiber and small-cell businesses, which explains the revenue drop from 6.99B to 4.26B and the margin expansion to 48%. Demand comes from 5G densification and carrier capex by AT&T, Verizon and T-Mobile under long contracts with ~3% escalators. That is partly offset by EchoStar/DISH churn and slow carrier spending. Sale proceeds pay down debt and fund buybacks, but leverage is still around 5-6x and the stock trades like a long-duration bond, so it is very sensitive to rates.
Escalators of about 3% plus some new leasing, minus EchoStar churn and lost interest income, give roughly 2% growth in year 1. Long run, a mature US-only tower base should grow at about inflation, kept well below the 5.28% risk-free rate. Tower capex is light (0.22B against 1.54B FFO), so AFFO/FFO is about 0.85. Beta is a bit below the 0.9 sector anchor because cash flows are contracted with investment-grade tenants. The price is well above the baseline because NI+D&A understates reported AFFO (about $4+/share once straight-line rent and stock comp are added back), and the market is pricing in buybacks funded by the sale proceeds.
Value drivers
| AFFO growth (Y1) | 2.0% |
| Terminal AFFO growth | 3.0% |
| AFFO / FFO ratio | 85.0% |
| Beta | 0.85 |
| Failure probability | 2.0% |
| Cost of equity | 9.1% |
Valuation bridge
| PV of AFFO (explicit) | 9.37B |
| PV of terminal value | 11.86B |
| Equity value | 20.80B |
| ÷ shares → per share | $48.89 |
Projected AFFO
| Yr | FFO | AFFO | Growth | PV |
|---|---|---|---|---|
| 1 | 1.57B | 1.34B | 2.0% | 1.23B |
| 2 | 1.61B | 1.37B | 2.1% | 1.15B |
| 3 | 1.64B | 1.40B | 2.2% | 1.08B |
| 4 | 1.68B | 1.43B | 2.3% | 1.01B |
| 5 | 1.72B | 1.46B | 2.4% | 946.99M |
| 6 | 1.77B | 1.50B | 2.6% | 890.17M |
| 7 | 1.81B | 1.54B | 2.7% | 837.66M |
| 8 | 1.86B | 1.58B | 2.8% | 789.11M |
| 9 | 1.92B | 1.63B | 2.9% | 744.17M |
| 10 | 1.98B | 1.68B | 3.0% | 702.55M |
Key risks
- EchoStar/DISH lease churn and carrier consolidation shrinking tenant count
- High rates: with leverage above 5x, refinancing costs rise and the trust's long-duration cash flows are discounted more heavily
- Lower carrier capex, satellite direct-to-device competition, and limited growth now that the trust is US-only and fiber is gone
Catalysts
- Buybacks and debt paydown from the fiber/small-cell sale proceeds, lifting AFFO per share
- Fed rate cuts that re-rate tower REIT multiples, plus a new leasing cycle tied to mid-band spectrum deployments