Good morning and welcome to the Crown Castle Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ben Lowe, Senior Vice President. Please go ahead.

Thank you, Kate and good morning everyone. Thank you for joining us today as we discuss our fourth quarter 2022 results. With me on the call this morning are Jay Brown, Crown Castle’s Chief Executive Officer; and Dan Schlanger, Crown Castle’s Chief Financial Officer. To aid the discussion, we have posted supplemental materials in the Investors section of our website at crowncastle.com that will be referenced throughout the call this morning. This conference call will contain forward-looking statements, which are subject to certain risks, uncertainties and assumptions and the actual results may vary materially from those expected. Information about potential factors which could affect our results is available in the press release and the Risk Factors sections of the company’s SEC filings. Our statements are made as of today, January 26, 2023 and we assume no obligation to update any forward-looking statements. In addition, today’s call includes discussions of certain non-GAAP financial measures. Tables reconciling these non-GAAP financial measures are available in the supplemental information package in the Investors section of the company’s website at crowncastle.com. So with that, let me turn the call over to Jay.

Thanks, Ben, and thank you everyone for joining us on the call this morning. As you saw from our results, 2022 was another successful year for Crown Castle and the positive trends across our business remain intact. With fourth quarter 2022 results coming in as we expected and no changes to our 2023 outlook, I plan to keep my prepared remarks brief before handing it over to Dan to talk through the numbers in a bit more detail. As I reflect on 2022, I am proud of what our team accomplished. We led the industry again with nearly 6.5% organic tower revenue growth as our customers upgraded existing tower sites with additional spectrum and added equipment to thousands of tower sites they were not previously on to support nationwide deployment of 5G. And we deployed 5,000 small cells to support initial network densification efforts while growing our fiber solutions revenue by 2%. The positive operating trends in 2022 exceeded our initial expectations for the year and offset the impact of the rapid increase in interest rates, demonstrating the resilience of our business model and strategy. As a result, we were able to deliver strong bottom-line growth that supported more than 9% dividend per share growth. As we discussed when we initially provided guidance in October, we believe that a positive operating momentum will carry into 2023, driving another year of expected strong growth with 5% organic growth in towers and a doubling of our small cell deployments to 10,000 nodes. With respect to tower leasing trends, the established national wireless operators are deploying mid-band spectrum in earnest as a part of the initial phase of their 5G build-out. To-date, only about half of our sites across our top three customers have been upgraded with mid-band spectrum, providing a significant opportunity for additional revenue growth as additional sites are upgraded over time before their focus will likely shift to more infill with new co-locations. Adding to the substantial long-term growth opportunity, we continue to support DISH with their nationwide build-out of a new wireless network. And I believe we are in a great position to continue to capture an outsized share of that opportunity. Turning to small cells, we expect to double the rate of small cell deployments this year to 10,000 nodes with over half co-located on existing fiber to meet the growing demand from our customers as 5G networks will require small cells at scale. With approximately 60,000 nodes on air and another 60,000 contracted in our backlog, I believe 2023 will represent the first year in a sustained acceleration of growth for our small cell business. We also continue to see opportunities to add to the returns we are generating from small cells by leveraging the same shared fiber assets to pursue profitable fiber solutions growth and we expect to return to 3% growth as we exit 2023. Looking at the bigger picture beyond this year and why I am so excited about our growth opportunity, we are still in the early innings with 5G as the industry is only a couple of years into what we expect will be a decade-long growth opportunity. Our customers are seeing significantly higher levels of monthly data consumption as consumers upgrade to 5G, providing the need for significant network investment for years to come to keep pace with this persistent growth in mobile data demand. As we have seen in our industry throughout its history, generational upgrades to the wireless network occur in phases with an initial push to provide nationwide coverage followed by periods of continued network augmentation and densification that has led to long periods of sustained growth. We believe we are in the initial phase of the 5G build-out with many phases to follow over the coming years. Consistent with their past practice, we believe our customers will first deploy their spectrum on the majority of their existing sites as they are currently doing before shifting their focus to cell site densification to get the most out of their spectrum assets by reusing it over shorter and shorter distances. The nature of wireless networks requires that cell site densification will continue as the density of data demand grows and we expect 5G densification to require both towers and small cells at scale to fill in the network. With that view in mind, we have invested more than $40 billion of capital to date in towers and more recently, small cells and fiber that are mission-critical for wireless networks to capture as much of this growth opportunity as possible. Importantly, we are already generating a 10% return on our total invested capital with the opportunity to increase that return over time as we add customers to our tower and fiber assets and grow our cash flow. As a result, I believe Crown Castle is an excellent investment that will generate compelling returns by providing investors with access to the most exposure to the development of next-generation networks in the U.S. with our comprehensive offering of towers, small cells and fiber, providing the opportunity to benefit from the best growth and lowest risk market, an attractive total return profile with a current yield of 4% and a long-term annual dividend per share growth target of 7% to 8% and the development of attractive new assets that we believe will extend our runway of growth and create shareholder value. And with that, I will turn the call over to Dan.

Thanks, Jay and good morning everyone. We generated another year of solid growth in 2022 and we expect the strong operating trends across our business to continue as we see a long runway of 5G investment in the U.S. The elevated leasing activity across our customers contributed to another year of industry-leading tower revenue growth in 2022 of nearly 6.5% and to 9% growth in our annual dividends per share. Before discussing the 2022 results and 2023 outlook, I want to draw your attention to some enhancements we made this quarter to the disclosure in our supplemental information package. In response to feedback we have heard from our investors, we provided organic billings growth detail by line of business for towers, small cells and fiber solutions to help investors better understand the composition of organic growth trends. This enhanced disclosure includes historical organic growth information going back to 2019. In addition to expanding our disclosure, we also reorganized the supplemental information package, in many cases, by line of business to make it easier for readers to follow. We hope you find this additional information and the new layout to be helpful. Now turning to the full year 2022 financial results on slide four of our earnings presentation, site rental revenues increased 10%, adjusted EBITDA growth was 14% and AFFO increased by 6% for the year. The 10% growth in site rental revenues included 5% growth in organic contribution to site rental billings, consisting of nearly 6.5% growth from towers, more than 5% growth in small cells and 2% growth in fiber solutions. Turning to page five, our full year 2023 outlook remains unchanged and includes site rental revenue growth of 4%, adjusted EBITDA growth of 3% and AFFO growth of 4%. We also expect organic billings growth of approximately 4% when adjusted for the impact of the previously disclosed Sprint cancellations. The 4% consolidated organic growth consists of 5% growth in towers, 8% growth in small cells and flat revenue in fiber solutions. As we discussed last quarter, we expect the rationalization of a portion of Sprint’s legacy network to result in some movements in our financial results that are not typical for our business. Our expectations for non-renewals and accelerated payments associated with this network rationalization activity are unchanged with approximately $30 million of new non-renewals and $160 million to $170 million of accelerated payments during 2023. We expect the majority of the non-renewals to occur in the first quarter and therefore impact year-over-year billings growth in each quarter this year. We expect the accelerated payments associated with this decommissioning activity and related services work to be concentrated in the second quarter. As a result, we expect the second quarter to represent the high watermark for adjusted EBITDA and AFFO in 2023. Turning to financing activities, we finished 2022 with leverage in line with our target of approximately 5x net debt to adjusted EBITDA. For full year 2023, our discretionary CapEx outlook is also unchanged with gross CapEx of $1.4 billion to $1.5 billion or approximately $1 billion net of expected prepaid rent. Based on our current backlog of small cells that includes a significant mix of co-location nodes, which have higher returns and require less capital relative to anchor builds, we expect to be able to finance our discretionary capital with debt while we are maintaining our investment grade credit profile. Earlier this month, we added to our strong balance sheet position when we issued $1 billion in senior unsecured notes with a 5% coupon to term out borrowings under our revolving credit facility. Following this financing transaction, we have more than 85% fixed-rate debt, a weighted average maturity of over 8 years, limited maturities through 2024 and approximately $5.5 billion in available liquidity under our revolving credit facility. So to wrap up, we are excited about the strength of our business and our ability to execute on our strategy to deliver the highest risk-adjusted returns for our shareholders by growing our dividend over the long term and investing in assets that will help drive future growth. We have delivered 9% compound annual and dividend per share growth since we established our 7% to 8% dividend per share growth target in 2017. And I believe that we are positioned well to return to 7% to 8% dividend per share growth as we move beyond the Sprint decommissioning impacts in 2025. With that, Kate, I’d like to open the call to questions.

The first question is from Michael Rollins of Citi. Please go ahead.

Thanks and good morning. I also want to express my gratitude for the additional disclosures, which are very helpful. I have two topics to discuss. First, could you provide more details on the small cell leasing you experienced during the fourth quarter? Additionally, considering the typical 18 to 36-month cycle you mentioned for installing a small cell for your customers, what opportunities do you see to accelerate the deployment pace of 10,000 units into 2024 and 2025? Thank you.

You bet. Good morning, Mike. Thanks for the comments. On the first question around leasing, as you noted and I made a mention of this in my prepared remarks, we did increase the total number of nodes on air and under contract by 5,000 during the fourth quarter. So we didn’t sign any large deals with customers, but this is just ongoing activity that represents additional commitment for nodes beyond the large commitments that we previously announced. And to my comments around cell site densification, we believe we are going to continue to see this throughout the 5G cycle of upgrades and deployments and beyond as the carriers move past touching the sites, the tower sites that they are on and starting to look at densification of their network. And I think the activity that we saw in the fourth quarter is representative of exactly those longer-term plans, which ties really closely to your second question around the backlog and the timeline. I think we see and have visibility to what they are going to need in their network, particularly in small cells, 24 to 36 months in advance of when these nodes will actually be put on air. And as I mentioned in my comments, we think the acceleration that we are seeing in 2023, doubling the number of nodes that we expect to put on air from 2022 to 10,000, we think that’s the start of an acceleration of growth and deployment of small cells. So I am not really ready to give guidance on how many we will put on in ‘24 and ‘25. But given the backlog and the timing, we do think this is the start of an acceleration of growth in that business.

Thanks.

The next question is from David Barden of Bank of America. Please go ahead.

Hi, guys. Good morning. Thanks so much for taking the questions. I guess along related lines, so two questions on this small cell topic, I guess, Jay, one is you have got these large scale relationships on small cells and as you say, visibility on these next 2 to 3 years. There are some carriers that you don’t have these relationships with. And I was wondering if you could elaborate a little bit on why you think that is? Is that because counterparty plans aren’t as evolved? They might be like less evolved in terms of the total size of their network build and not ready for densification or is it the other way around, which is that they have chosen to go the self-perform route and is that impacting the market opportunity that you foresee? I guess the second question would be related to with respect to what you do have in the backlog, how do we think about how you are budgeting for the upfront CapEx contribution portion of that? Is it a constant drumbeat that’s already known? Is it going to be on a case-by-case basis? Obviously, relevant to the cash flows and how we think about the runoff of prepaid rent amortization over the coming years? Thank you so much.

Good morning, Dave. Regarding your first question about our agreements with carriers, over time, we expect to establish large-scale agreements in which carriers will provide us access to whole or multiple markets. These agreements are likely to be variable, so we do not anticipate them occurring every quarter or even annually. The frequency will depend on how carriers assess their networks and identify gaps that need addressing. Such large agreements can hold significant value, especially for securing resources concentrated in select markets. Additionally, we will continue to see the type of arrangements we saw in the fourth quarter, where carriers provide us business in smaller, less extensive contracts. Both large-scale and smaller contracts will remain part of our business landscape, and neither should be viewed as a trend on its own. Carriers will engage with us in both ways, and looking long term, our disciplined approach to capital allocation, along with our assessment of where small cells are necessary, will guide our capital investments. This means carriers may seek other providers willing to invest at lower return thresholds than we are comfortable with or choose to perform the work themselves. We have noticed that carriers generally self-perform in areas where we wouldn’t invest. This trend is likely to persist and is more a reflection of our return criteria rather than an overall business indication. For your second question about our backlog and carrier capital expenditure contributions, the agreements are structured around pricing that correlates with the cost of deploying nodes. Thus, carrier contributions will align with the deployment costs in specific markets. In areas where deployment costs are higher, the capital contributions from carriers will be greater, and in lower-cost areas, they will be less. At this stage, beyond the CapEx guidance provided for fiscal year 2023, we will not offer predictions for 2024 and 2025. However, as we present outlooks for each year, we will provide details on our backlog, anticipated launches, total CapEx projections for the year, and the portion that will be offset by carrier contributions.

And then, Jay, just to follow up real quick on how the mechanics work. So the CapEx comes in during the 24 to 36-month period, you recognize that contribution CapEx, but you don’t start amortizing that contribution until after the lease begins. And so there is a window between when you have the money and when you start amortizing it through the income statement. Is that correct?

You’ve explained it accurately. We will receive cash as we progress with deploying the nodes and incurring capital expenditures. Once we complete the necessary operational work to deliver the node to the carrier, we will start to recognize it in the income statement. At that time, we will amortize it over the lease term. One additional point that might be useful is that the estimated timeline to build, which we mention as 24 to 36 months, reflects our average. Some nodes may take longer, but the construction phase is relatively short and occurs in the latter part of that overall timeline. Most costs incurred before construction are soft costs, making up a smaller proportion of the total capital expenditures. Therefore, you shouldn't expect, for example, that within a 36-month span for constructing a node, we would have significant capital expenditures in the first 12 months alongside receiving carrier contributions. The majority of spending will occur in the later stages of the process, with cash received also happening later. Consequently, the interval between receiving cash and recording the node will not typically extend to 36 months.

Alright. That’s helpful, thank you so much, Dan.

The next question is from Simon Flannery of Morgan Stanley. Please go ahead.

Thank you very much, Jay, for providing insights on the phases of densification. That was helpful. Could you clarify the transition as Verizon and T-Mobile conclude their 5G builds? Is it typical to experience a pause and reassess on the macro side, or do they immediately move into cell site densification? What insights do you have regarding the carriers' plans, especially in urban and suburban areas where antennas have already been installed? Additionally, do you have any updated thoughts on mergers and acquisitions? It has been a while since you pursued any significant inorganic growth, but there are always opportunities in the market, so I would appreciate your latest perspective on that.

Sure. Regarding your first question, I prefer not to comment specifically on Verizon and T-Mobile; they can share their long-term network plans. As I mentioned earlier, we estimate that about half of our sites have been upgraded for mid-band spectrum at this stage. All carriers are working to address the remaining sites, which will take some time to complete. We are 2 to 3 years into this effort, and it has taken approximately that long to upgrade half the sites with mid-band spectrum. In addition, we anticipate that other spectrum bands will also be deployed for 5G across existing sites, alongside the completion of the mid-band upgrades across the rest of the sites. Each carrier approaches capital deployment and budgeting differently. However, over the long term in the tower business, these differences tend to balance out, resulting in relatively stable overall capital expenditures. We expect a similar trend during the 5G rollout. So far, as I pointed out, 5G deployment activity resembles what we observed during the rollouts of 2.5G, 3G, and 4G, where carriers focus on upgrading existing sites before shifting their attention to additional infill sites. One distinction with 5G is the increasing need for both towers and small cells for these infill solutions, and we are beginning to see momentum in that area. Overall, we are optimistic about our future growth prospects, expecting over 5% organic growth in our tower business this year, with a sustained potential for continued growth at that level.

And on the M&A?

Yes. Regarding M&A, we remain committed to deploying capital at high returns that can enhance our dividends and extend our growth potential. Based on the available opportunities and pricing we have observed, we have determined that our best strategy is to invest in assets we are developing. We approach acquisitions with the same mindset as capital expenditures, evaluating the top alternative uses of capital. So far, we believe the most effective way to utilize our capital has been through the deployment of fiber and small cells. We will continue to explore acquisition opportunities and would consider any asset that meets our return expectations regarding dividend growth and an extended growth rate. We are genuinely enthusiastic about the chance to keep investing in small cells.

The next question is from Philip Cusick of JPMorgan. Please go ahead.

Hi, guys. Thanks. How are you?

Good morning.

Thank you for your time. I would like to follow up on the small cell topic. How many do you think will be upgraded considering that about half are completed today? Is there any change in the small cell expansion strategy regarding overlay versus new 5G locations? Additionally, when do you anticipate that infill will begin to increase? Thank you.

Yes. On the tower side, I think we will see the second half of the other half of the towers be upgraded to mid-band spectrum. It took about 2 to 3 years to do the first half. So I think that’s probably a reasonable assumption that it will take that long to do the second half of the assets roughly on the tower side. I think the announcements that we’ve made previously with small cell commitments to be constructed are already a combination of overlaying on nodes that they were previously on with other technologies and upgrading those two technologies as well as infilling sites along the same fiber, increasing the number of nodes per mile, if you will, in a given geography. We’re already seeing infill and densification on that front. We’ve talked about in the two large announcements that we made with the T-Mobile nodes, the committed T-Mobile nodes that the vast majority of those were co-located on existing fiber. So those largely represent upgrades and densification and then a mix of about 50-50 on the Verizon nodes, a combination of upgrades, co-location on existing fiber. And then the other component would be where we’re building new sites and new locations. So I think, we will continue to see a mix as we said in our comments. For 2023, we think the vast majority of the nodes that will turn on air will be on existing fiber.

Thanks, guys. And one more if I can. On services, talk about the current pace, is this sort of a normal level, do you think or are there particular projects driving the strength? Thank you.

No, it’s a pretty normal pace, Phil. And the only thing I would point out is something I said in my prepared remarks that the second quarter will likely be the high watermark because we have some decommissioning work that comes with services activity that will hit in the second quarter, but a relatively normal pace where we are today.

That’s helpful. Thank you.

The next question is from Ric Prentiss of Raymond James. Please go ahead.

Thanks. Good morning, everybody.

Good morning, Ric.

First, echo Mike’s comments. Thanks so much for the extra detail on the segments, but also hope you and the team are okay with all the weather issues in Houston.

We’re doing well, came through the storm well, but there were a lot of damages in the city.

Great to hear you’re okay. I want to follow-up on the small cell side, obviously, a comment today. I think previously you had said the $30 million Sprint cancellation churn item was maybe $20 million small cells, $10 million fiber. How many more should we expect that $20 million equates to? And then was it a total of 5,000 nodes, they were going to turn off over a multiple year period, is that still the case?

Yes, you are correct. We mentioned that we expect about $40 million of churn in our fiber segment, which is roughly evenly divided between small cells and fiber solutions for calendar year 2023. As you pointed out, we anticipate around 5,000 nodes to churn, with about half of those occurring in 2023. The remaining churn will take place in 2024 and beyond.

Okay. It seems there is a normal level of churn within small cell. Should we consider that a 1% to 2% normal level of churn for small cell in our long-term forecast?

Yes, I think that’s probably accurate, around 1% to 2%. Honestly, up until now, we haven't experienced much churn in that business, except for the consolidation of Sprint into T-Mobile. Churn has been almost nonexistent or very low apart from that situation. However, I think in the long term, it will likely stabilize like towers. So if you are considering your long-term model, assuming a churn rate of 1% to 2% seems reasonable.

Great. And final question for me, you mentioned small cells, look for profitable fiber solution items. T-Mobile has talked about their high-speed Internet project they might move beyond fixed wireless access and consider buying capacity of fiber from other people. Is that a type of profitable business in the areas where you’ve been deploying fiber and small cells that the T-Mobile might be an interesting return case?

It’s possible. A good portion of our fiber business is leases that we have with the carriers where they use our fiber. So depending on the locations that T-Mobile were to desire, then our assets could be very attractive for that. But it’s a case-by-case, location-by-location analysis that would have to be done.

Okay, fair enough. Thanks. Stay well.

You too.

The next question is from Brandon Nispel of KeyBanc Capital Markets. Please go ahead.

Hi, guys. Thanks for taking the questions. And appreciate the disclosures as well. I was hoping you could talk us through the run rate in terms of tower core leasing throughout ‘23. Is first half any stronger than second half? And maybe the other way to ask the question is, as you look at the backlog of new lease applications that you’re receiving today, are those trending up or down at this point? Thanks.

Yes, the run rate for tower leasing is expected to be relatively stable throughout the year. There might be a slight bias towards the first half, but it's not significant enough to notably affect the overall numbers. This suggests that the applications are also stable. So, if you're looking to model or assess the activity levels and leasing for 2023, it would be fair to consider it consistent quarter-to-quarter.

Your second question on the trends we’re seeing in the backlog, no change in what we’re seeing from what we talked about in October, so seeing good demand across all three of our business lines, towers, small cells and fiber solutions. The pipeline, you heard my comments in my prepared remarks, but we think by the back half of this year, we’re going to exit 2023 with fiber solutions back at kind of a 3% growth area. And tower leasing, as Dan just mentioned, we think that’s going to be really similar across the year. So not back half loaded, but level loaded across the year. And then small cells, we obviously had a good fourth quarter in ‘22. And we will see what builds over the course of ‘23 and update you as we get orders on that front.

Thank you.

The next question is from Greg Williams of Cowen. Please go ahead.

Great. Thanks. Just wanted to touch on the M&A comments you mentioned, and you choose to build rather than buy per se. Does that imply that private fiber multiples just remain stubbornly high? And are they coming down to any degree? And do you foresee them coming down in the next few quarters? Second question is just actually on cable. We’ve been fairly dismissive that they are going to be touching the towers per se, but more on CBRS deployment on their own air strands, but there is possible conversations of cable getting more aggressive and a more macro facilities-based network and just wanted to see here if you had any updates on conversations with cable? Thanks.

Sure. To address your first question, it's likely related to our targeted strategy regarding the assets we choose to acquire rather than just the price. For us to find a fiber asset acquisition appealing, it must be located in densely populated urban regions, have a high fiber strand count, and display potential for significant lease-up for small cells. Over the last five years, we haven't pursued fiber acquisitions mainly because we haven't encountered any options that meet these specific criteria, rather than due to pricing issues. We haven't spotted opportunities to acquire assets that would foster long-term growth from wireless carriers through small cell deployment. We will remain disciplined in our approach and believe that most of the fiber we accumulate over time will result from our own construction efforts, as there aren’t many available assets on the market that align with our acquisition criteria. Regarding your second question, I think there is significant long-term potential in cable to enhance our growth rates, and I anticipate leasing activity from cable operators. While we may see some macro leasing, I expect that we will witness a greater impact on our small cell business, reflecting where they typically deploy infrastructure based on population density and user distribution. Thus, we are more likely to gain from the cable operators’ network deployments in small cells over a longer period than in macro sites, although macro sites will still benefit from cable.

The next question is from Nick Del Deo of SVB MoffettNathanson. Please go ahead.

Hey. Good morning guys. Jay, you noted that about half the sites on your towers have been upgraded with mid-band 5G spectrum, very interesting statistics. So, thanks for sharing that. I guess do you see any meaningful differences in that percentage between more urban towers versus suburban towers versus more rural towers, or is it reasonably consistent across the board? And I guess maybe to build on some of the previous comments you have made, what does your work suggest with respect to how high that number needs to get before carrier starts to pivot more noticeably towards co-locations?

On the location point, I wouldn’t distinguish much between central business districts and densely populated suburban areas. When considering usage on a per-subscriber basis, while there are some differences over time, consumers tend to use services similarly in both contexts. This is reflected in the network. As carriers start to deploy their initial phase, we see a mixture of dense suburban markets and the densest parts of central business districts. We expect leasing to occur in both types of areas initially, but it’s less likely to happen early on in more rural applications. Regarding how far carriers need to extend before starting infill, it largely depends on their capital allocation and the necessity for geographic coverage. Additionally, they look at traffic growth and network gaps that require infill to enhance service. There’s no overarching answer as it varies by market. In some markets, as early as 2 or 3 years ago when 5G launched, plans for infill sites were already in place based on anticipated population usage and customer base. This foresight generated demand for small cells even before devices were available and usage began to rise. In other regions, however, we haven’t seen such anticipation yet. Therefore, it’s not a broad question with a simple answer. It’s fundamentally driven by underlying data usage, which is why I frequently mention data usage trends in my remarks. This long-term perspective is crucial for understanding the demand for our infrastructure, and we believe the macro trend remains strong and will continue, necessitating both macro sites and small cells for infill purposes.

Okay. That’s helpful. And then maybe one more if I can. Just thinking back, it’s been a little over 2 years since you struck your deal with DISH. It was a new and unique structure on the tower side and had a fiber component to it. Now that it’s been in force for some time, I was just wondering if you could comment on your satisfaction with that novel structure you chose and the degree to which it’s accomplishing and what you hope to accomplish?

Well, first, we are doing everything we can to help DISH get launched, and we have got teams of people that are very focused on that. DISH has been working hard to get their nationwide network deployed. And I hope that they would say about us, we have been a good partner to help them get there. I know our teams are focused on it 24/7, 365. So, it’s been a good partnership with them, and we are happy to have them as a customer. It has accomplished what we expected. We expected that the fact that we got them locked up first would mean that our network would benefit from them designing their network around our existing assets. We have seen that play out. We believe we have gotten an outsized share of the overall opportunity as they deploy the network. And I think the nature of our agreement with them, we have the opportunity to continue to get an outsized share of their network deployment. So, I think in that respect, it has accomplished exactly what we had hoped. And as we said at the time, and I think this has played out, our visibility to that network with the combination of providing fiber as a part of their backbone as well as providing tower sites has deepened that relationship and deepened our understanding of how they are thinking about the deployment of the network and probably led to us being able to capture more opportunities than we would have had if we were towers only.

Okay. That’s great. Thank you, Jay.

The next question is from Jonathan Atkin of RBC Capital Markets. Please go ahead.

Thanks. So, you mentioned half of your tower sites have been upgraded with mid-band. And I think it’s implicit in the answer to one of the earlier questions, but do you expect that to get to 100%, or is there an end state that’s maybe a little less than 100% in terms of portion of sites that have 5G mid-band?

Hey. Good morning Jon. I don’t know that it will get all the way to exactly 100%, but we would expect, over time, it will get pretty close to about 100% of the network will be upgraded, yes.

Did you provide a breakdown between colocation and amendments for the towers, and if not, can you share that figure? Also, what do you forecast that mix will look like in your tower portfolio by the end of this year?

Yes. Consistent with my comments around the vast majority of the activity is on sites that they are already on. The vast majority of the total activity that we are seeing from the carriers is amendments to existing sites where they are adding additional equipment. And therefore, we are getting rent added to the leases that we already had. We are seeing some first-time installations on sites as a part of their desire to infill. But the vast majority of the activity that we are seeing would be from amendments.

So, no pivot from 3Q into 4Q in terms of that mix shift? I know it’s majority amendments, but no noticeable change?

No, we haven’t seen any change since the middle of last year. As we sit here today in early 2023, our expectations remain the same as they were when we outlined them in October of last year.

In the fiber business, there are numerous non-mobile tenants and a variety of products such as wavelengths, Ethernet, fiber, and managed services. Considering the growth in this area and the revenue mix it represents, could you provide more insights into the different demand drivers you're observing, and which products may be gaining more traction in terms of services compared to others?

Yes. The primary factor is the increase in overall data traffic occurring in the market. Our focus is primarily on large enterprises, universities, and hospitals. In these sectors, the key driver of our revenue growth is data traffic and the transfer of data between their facilities, locations, and offices. That is the most significant aspect.

Lastly, just any update on Edge? And it’s been a number of years since you announced the Vapor IO investments and any kind of updates on your thoughts as it pertains to the sorts of opportunities and traction, gains thus far?

We remain positive about the long-term potential of Edge. Our assets are well-suited to take advantage of this opportunity. For Edge to be effective, connectivity and power are essential. Our hub sites for small cells and towers are perfect for aggregating mobile network traffic at the Edge. We believe this opportunity will grow as 5G technology advances. We've mentioned several times that the initial benefits related to Edge will likely come from the deployment of small cells, which is currently seeing significant activity. The next phase will involve further opportunities around Edge. We are confident in this potential and are strategically positioned to seize it when it arises, particularly as applications requiring increased data and computing power increasingly rely on the edge of mobile networks, both in industrial and consumer sectors.

Thank you.

And the final question is from Jonathan Chaplin of New Street Research.

Thanks for taking the question guys. Just a quick housekeeping question first on small cells. So, it’s a backlog of 60,000, and it takes 24 months to 36 months to go through the construction process. Does that suggest like a very material acceleration from the 10,000 that you are going to do this year in ‘24 and ‘25? Like you are going to get through 60,000 over the course of the next 3 years?

Yes. We didn’t provide specific guidance on when we will get that done. But as I mentioned in my comments, we think that ‘23 is the start of an acceleration of growth in small cells. So, it does imply that there will be an acceleration beyond the 10,000 nodes per year that we expect to do in calendar year ‘23.

But I would caution you not to expect that just because we have those in our backlog right now, all of them will be built in 24 months or 36 months. It’s an average. So, I wouldn’t assume that after 2023, there are 50,000 left, meaning we would have to complete 25,000 in each of ‘24 and ‘25. That’s not how the business operates. It’s an average, and it takes time to even reach that average as we work with our customers to determine the actual locations for the small cell nodes. As Jay mentioned, we believe there can be an acceleration, but I would advise against expecting it to reach 25,000 nodes each year in ‘24 and ‘25.

Can you give me just a little bit more color on why it isn’t sort of complete within 3 years? Is it the carriers are really looking sort of 4 years or 5 years out in terms of what they are contracting for small cells today?

Sure. When we did the two agreements with Verizon and T-Mobile, where they made large commitments, those were multiyear commitments. So, the expectation was that they would identify the nodes while we had ideas on what markets they were going to use. The actual location of the node goes through an identification process over time. And so we do not expect in that backlog while it’s committed, contractually committed and the rent will be there, it doesn’t speak to. As Dan was saying, that’s why you can’t take the backlog and say, okay, all of that backlog will be completed in 24 months or 36 months.

Okay. Got it. And then is there a way to contextualize what DISH is contributing to growth at the moment? And have they reached a steady state with you at this point, or do you think that their contribution could still accelerate for you?

Well, I think we will continue to see the benefit of DISH deploying their network, but being really specific with the number of sites and their percentage contribution, we do our very best to stay away from giving that level of specificity among any of our customers in their network and just let them speak to the number of sites and where they are in their deployment cycle.

Okay. For my final question, you discussed the three phases of network deployment. The first phase involves a lot of site amendments, and then the next major phase involves moving to fewer sites but generating 4x or 5x the revenue per site. As you progress through these phases over the multiyear period, does the revenue growth remain similar across the first, second, and third phases, or is it primarily driven by the first phase due to the larger number of sites involved?

Our experience indicates that revenue growth across various phases remains relatively stable and similar. Regarding our long-term expectations for growth and organic growth in towers, we believe it may stay slightly above the 5% mark, which we can sustain for a while. This also aligns with our long-term goal of increasing the dividend by 7% to 8%. We see a sustained opportunity for growth driven by this top line potential. As carriers progress through different deployment phases, we find good prospects for leasing both towers and small cells, which further extends our growth trajectory. Given the current environment, we are really optimistic about our position and the top line growth we are experiencing, as well as the steady demand from our customers to enhance their networks and request additional leases on our assets across all three of our business sectors.

Great. Thanks very much guys.

You bet. Well, thanks everybody for joining. Kate thanks for your help on the call this morning. I do want to thank our team as we wrap up 2022. I realize everyone is already really focused on what we are able to deliver in 2023, but I did want to take the opportunity to congratulate our team for a job well done in 2022, navigating to a great outcome through some pretty difficult challenges over the course of the year. You all did a great job for our customers, and I know they appreciate it. So, thank you to the team and excited about what we will do in ‘23, and look forward to talking to everyone next quarter.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.