Conference Transcript - CCI 2026-09-09

Mike Ng, Analyst — Goldman Sachs

Great. Hello, everybody. Welcome to the Crown Castle Fireside Chat at the Goldman Sachs Communicopia and Technology Conference. My name is Mike Ng, and I cover telecom services and infrastructure here at Goldman. I have the absolute privilege to introduce Chris Hillebrand, who's the president and CEO of Crown Castle. First and foremost, thank you so much for being out here today with us, Chris.

Chris Hillebrandt, CEO

Thank you, Michael. It's great to be here.

Mike Ng, Analyst — Goldman Sachs

I was thinking we could start off and talk about big-picture overall strategy. Earlier this year, in May, Crown Castle closed on its small sale and fiber business sale, making it the only publicly traded U.S. pure play tower company. Could you talk about your strategic priorities now following the portfolio transformation?

Chris Hillebrandt, CEO

It's obviously been a big year of change for Crown Castle. I'm coming up on my one-year anniversary here next week, and I have to pinch myself sometimes to realize how much has gone on in that short period of time. Upon successfully closing the fiber and small cell business, we are, as you stated, the only pure play U.S.-focused tower company publicly traded here in the U.S. And we are now moving into the next phase of focus for us, which is all about maximizing organic growth, finding ways to invest in the systems and processes that will allow us to be more efficient and serve our customers better. And so this is a journey, and we're now starting to see some acceleration of embracing that long-term strategy of serving our customers here.

Mike Ng, Analyst — Goldman Sachs

That's great. I was wondering if we could talk about carrier activity. What are you seeing from the market? Is it accelerating? Is it stabilizing? Is it slower?

Chris Hillebrandt, CEO

I think the year for us is unfolding very much as we anticipated. This is a slightly back half of the year loaded plan for us in leasing. And we're seeing a very traditional mix of amendments and first-time installs, as we would expect from prior years. Great.

Mike Ng, Analyst — Goldman Sachs

Are you seeing any pickup in amendment or co-location activity as a result of recent spectrum activity? And, you know, I'm thinking the AT&T 600 megahertz from DISH back in August, Verizon was a significant bidder in the AWS 3 designated entity auction in June. You know, have you seen anything yet? Do you expect to see some and over what time period?

Chris Hillebrandt, CEO

Yeah, we're sticking to the guidance that we provided earlier of a range of $60 million to $70 million in new leasing. The way to think about our business is really in three different time periods. There's the here and now, which is really dictated by the MLAs that we have in place with our customers, where we have visibility into the amendment-based activity and the new leasing that they will be required for this year's plan of record. Then kind of a midterm catalyst from our perspective is the recent Echo Star sale of the 600 megahertz to AT&T. If you'll recall, they were able to take advantage very quickly of the 3.45 gigahertz spectrum that they deployed, which was primarily software upgrades, albeit that will eventually lead with capacity to new radios being deployed as well. But the 600 megahertz is a new technology that AT&T isn't currently deploying. These antennas are quite large. I'm 6'3". They're quite a bit taller than I am. We saw the equipment out of Mobile World Congress this year. And so this will be a midterm catalyst. And then I think longer term, the 800 megahertz of 6G spectrum that's being made available, the first tranche will be the upper C band. This will really fuel the next 5 to 10 years of growth for Crown and the industry as a whole. So we're excited about where this is headed. In general, any time new spectrum has been made available, it's typically a good omen for the tower industry as a whole.

Mike Ng, Analyst — Goldman Sachs

Yeah. I mean, that's a great segue into the next question. Just, you know, as you think about that 800 megahertz, I think 160 megahertz of that is going to be available through the auction for the upper C-band next year in April. How do you frame the opportunity here? How long does it take for that spectrum to actually be deployed, cleared, and all the things that need to happen for it to be productive?

Chris Hillebrandt, CEO

Yeah. Maybe start by just acknowledging the leadership of Chairman Carr and making the Spectrum available for lobbying within the administration. The policy to actually have the 800 megahertz for 6G is very, very significant, given the most recent activity in the industry. Typically, when Spectrum will come to auction, there's a couple of things that, and once the auction is over, a couple of things come into play. One is many times the spectrum is encumbered by the existing legacy users. You'll need to go and typically relocate them off that spectrum. And then in the case of upper C-band, as an example, one of the things that we saw in the lower C-band in the time that this was originally deployed by both Verizon and AT&T, there was some issues with interference with some of the altimeters. The key takeaway, I think, for investors to understand, which is where there's a will, there's a way, and the carriers have almost always found a way to clear the spectrum faster by throwing a little bit of money at the problem, and then they've been able to design engineering solutions around the issues like the altimeter. So think two years max, but oftentimes it can be quite a bit faster based on the needs of the networks and the high rate of data growth across the industry.

Mike Ng, Analyst — Goldman Sachs

As you think about the remainder of the 800 megahertz of spectrum that is mandated for auction by 2034, what bands beyond upper C band do you think will be most likely auction candidates?

Chris Hillebrandt, CEO

We've heard the 2.7 gigahertz spectrum band as one possible option, also 7 gigahertz. I think one of the things for folks to keep in mind is with the application of spectrum at much higher bands, one of the things that we learned when Verizon put out, say, ultra-wideband, which was quite a bit higher in the spectrum scale, is that it really requires not only the initial deployment across the macro network that the operators have, but it requires a significant number of densification efforts. And so the total number of co-locations that Crown and others might see, the potential for building new sites, both macro towers and small cells, this is one of the things that really excites us about the bans being discussed currently by the government.

Mike Ng, Analyst — Goldman Sachs

Great. I was wondering if you could just expand on and share your thoughts as it relates to 6G. You know, what are the kind of near-term opportunities for continued 5G densification? And then what are the opportunities created by the transition to 6G, just as you think about your longer-term leasing outlook and, you know, technologies that may be enabled?

Chris Hillebrandt, CEO

Two or three just quick stories I'd share with you. one of which is recently had the opportunity to spend a lot of time on Capitol Hill, up at the FCC, even into the White House as part of the DISH proceedings, and I know we'll talk about that later. One of the key takeaways I heard for the first time in a long time where it didn't matter which party was the administration or the Democrats that we met with is the excitement around 6G, that the government sees this as an existential arms race, if you will, with China over who will get to 6G first and what that will unlock in terms of the use cases that are being discussed now as part of the 3GPP standards body that's focused in on 6G standards. So there's an enormous push by the government to both make the spectrum available and then to get the industry mobilized to go out and to deploy that. The second thing was we were at another analyst conference recently and we had the pleasure of sitting with the three CTOs for each of the operators. And what I've heard consistently is that based on the data rate growth, which has been like at a 30% kegger over the last five years, this is driving both the acquisition of additional spectrum, again, like you look at the AT&T, EchoStar, $23 billion invested in the spectrum, is that there's a need for the spectrum just to keep up with the growth that it is. And then in order to make sure that the companies remain profitable, it's about lowering the cost per bit. And so the big advantage of 5G over 4G was the ability to connect to a massive number of devices, but it also significantly lowered the cost per bit served. 6G will have a similar catalyst. What's new on top of that is that there's new, the melding of the AI and the networks, whereby if today 90% of the network traffic is on the download and only 10% of the upload, these CTOs were indicating that they expect that to be much closer to a 50-to-50 type of ratio, the net result of which is that new wearable devices, AI inference at the edge, these are new opportunities that 6G will represent. Robotics is another use case we've heard quite a bit of. So we're excited as an industry for where this is headed. The fact that Spectrum will be available, that both the regulatory agencies and the customers are looking to deploy this, we see this as a good long-term auger for the industry as a whole.

Mike Ng, Analyst — Goldman Sachs

Maybe just a business-related question. I was just wondering if you could talk a little bit about just leasing agreements. And philosophically, do you have a preference for more holistic agreements or a la carte agreements when you go through these customer renewals? Yeah.

Chris Hillebrandt, CEO

Well, I'd say we're in favor of whatever is in the best interest of our shareholders. And what I mean by that is a holistic MLA has some advantages in that it allows flexibility for our customers to deploy new technologies at a predetermined pricing regime. as they go through the amendment process. It also will stipulate pricing for new co-locations across our portfolio. So it's a useful tool for the carriers, and obviously it's predictable revenue growth for us. But in the case of where that's not the case, then it allows us to get the real value for the sites that we have. And I'll just remind you that Crown Castle, the vast majority of our portfolio sits in the top 100 markets, And so if you look historically at the type of growth patterns that have been there, typically Crown is amongst the earliest of the large tower companies to benefit from whole-scale technology changes just because of the quality of the portfolio that we do have across our 40,000 sites.

Mike Ng, Analyst — Goldman Sachs

Super interesting. Turning to services, last quarter, Crown talked about a bit of a pullback in services activity across the three major carriers. What's driving that, and what could reignite that carrier activity? And then is services a leading indicator to co-location or amendment activity down the road?

Chris Hillebrandt, CEO

Not necessarily, and I think part of what you need to understand is that even where Crown performs services today, it does not perform services across our entire portfolio, nor do any of the tower companies typically have a complete portfolio ownership. It's a very competitive environment. part of the decision that Crown has ahead of it as we look at our strategy long-term around services specifically is today we typically provide services in the front end of the process, think like leasing, zoning, permitting, A&E drawings, and engineering structural calculations. We picked these services because they were good margin services, but we do need to compete against others in the marketplace that might be willing to accept lower margins. Secondly is our customers have consistently asked us to consider going back to what Crown once did, which is a full-scope turnkey-based service approach where they just hand you the keys to the car and say, please deliver us back a site. In the past, we did this. We stepped away from this several years ago because it wasn't a great margin business for us. But the customer man is there. So for us, determining whether and how we can play more in services to the extent that it aligns with what a customer on that need is and it's good profitable business for Crown, I think we will continue to stay in this space. But certainly our core businesses are running out the space on our towers and building new towers. And so at the end of the day, it's one of those things where you really can't draw the comparison to whole-scale leasing trends and services only because it's a very large marketplace.

Mike Ng, Analyst — Goldman Sachs

Shifting gears a little bit, I wanted to ask about edge compute. Crown is in trial stages of edge data center applications. So what role could towers play at the edge? What do the trials entail? Do you have a view on the timeline? And, you know, how meaningful can this opportunity actually become?

Chris Hillebrandt, CEO

Yeah, I'd say we're, these are very early days. So caveat everything with the fact of, like, we're very much in the trial phase. And, you know, although we have, I think, over 100 sites deployed, these are still trials. And we hope to learn from this to understand, is this a scale opportunity that makes sense for us and our customers where we can provide value and ultimately lead to sustained revenue growth on a per tower basis? What's exciting about the edge compute is a couple things. One is we're not encumbering additional space on our towers, which is a finite resource. Instead, we're using the available ground space we have. And just to refresh everybody's memory, It's about having space, it's about having adequate power, and it's about having high-speed backhaul in the form of fiber, all of which we have. Now, these are not very large data centers. Think like under a half a megawatt, but potentially across a 40,000-site portfolio, many of the sites which already have shelters in place that can be retrofitted to provide this, this is something that we think looks promising. But it's early days still, And I think we need to conclude these trials and come up with what makes the best sense for Crown. But as an industry growth driver, it's exciting. Again, it's back to the AI usage of inference cases. It's robotics. It's private networks. As an example, in Houston, in the city of Houston now, there's drone flights that are being done by the city, by the fire and police department to get out to look at fires and events and large-scale concerts and the like. You can imagine today that's concentrated in a single location in the fire department, but this is something that can be easily distributed out. And so we think there's a lot of potential here, but it's still early days to give you a conclusive answer of how that will scale in time.

Mike Ng, Analyst — Goldman Sachs

Great. I wanted to ask about Starlink, which I think has been on the minds of many You know, having recently closed the sale of your small cell business, I feel like you're in a very unique position to comment on, you know, Starlink's planned femtocell build-out. Could you remind us, you know, why did you sell the small cell business? You know, share your views on the viability of a small cell build-out of terrestrial direct-to-consumer, you know, mobile services on, you know, from Starlink through a femtocell.

Chris Hillebrandt, CEO

Look, I spent half of my career designing, building, and operating networks, first for a Verizon predecessor and then a T-Mobile for many years. And so I have a pretty good sense of what it takes to be able to build a network at scale and the densest networks we have here in the U.S. Femtocells are a great tool if you are an otherwise very happy customer but maybe you don't have in-building coverage in your home or in your place of business. They're small. They typically cover a room, let's say, of this size or maybe the adjacent rooms. It is not a substitute for macro coverage. And so the fact that you would build a femto-based network would basically presuppose that every single person in America and their home has a femto cell, every place of business that you go to do business has a femto cell, and that you have one in your car. Because the reality is, for a satellite provider to provide terrestrial-based coverage, it just doesn't go in building with the spectrum and the distance of the satellites today. So what's exciting for us at Crown, and I think the industry, is that the narrative that was once out there that satellite was going to displace a whole bunch of rural sites that would be potentially at risk is now changed into a discussion about potential opportunity and whether Starlink or any other satellite company might go off and build a terrestrial network to provide competition is a potential positive catalyst for the industry. So do we fear our portfolio, which tends to be top 100 market-focused urban-suburban from satellite? The answer is no. Will FEMTOs be the ultimate solution or a negotiating potential for them? Remains to be seen. I think they'd love to get an MVNO, but whether they're an MVNO and they compete and they drive a new arms race of investment into new capability and coverage or they decide to build a terrestrial network, it's a net win for the industry as a whole.

Mike Ng, Analyst — Goldman Sachs

And could you just comment a little bit about the DISH proceedings and update us on where everything stands?

Chris Hillebrandt, CEO

Yeah, so Crown has been at the forefront leading and leaning in on shareholder interests with DISH. I think we were very disappointed when DISH ultimately decided to stop paying their contracts. Very early on, we took advantage of a contractual clause, and we were able to call forward the entire $3.5 billion sum into play and have worked tirelessly with the administration and we're very pleased, again, at Chairman Carr's decision to set aside $2.4 billion as escrow fund for a potential payout. Now we look at that as a potential floor for the industry is that there will be money made available to pay for the DISH obligations. We continue to pursue through the bankruptcy proceeding and are actually leading the Unsecured Creditors Committee in terms of making sure that they don't rush through this process as I think they once sought to do. And I think we're hopeful that the bankruptcy process, if anything, will actually maybe speed up the actual process to get to a conclusion to ultimately allow us to make our claim against the escrow fund and potentially against Echostar.

Mike Ng, Analyst — Goldman Sachs

Shifting gears to capital allocation, How are you weighing new tower builds, acquisitions of tower portfolios, and ground lease buyouts? Where do you see the most attractive returns and why?

Chris Hillebrandt, CEO

Yeah, so to be clear, our capital allocation priorities that I think I laid out very early on in my tenure have not changed at all. We remain committed to the dividend with a long-term payout of 75% to 80% of AFFO, and we'll grow into that over time as our revenues and EBITDA increases. We continue to have a goal to remain IG rated, to stay between six and six and a half times in our debt. You know, where we are spending capital, and I think it's somewhere between maybe $100 to $200 million, a small fraction of what it was when we had the fiber and small cell business, is primarily being focused in on both process and tool improvements, which will ultimately lead to efficiency and a lower long-term cost basis, combined with really ramping up our efforts to buy land underneath our towers. This is our largest individual cost, and therefore a good use of our capital to be able to lower that cost and improve profitability over time. Great.

Mike Ng, Analyst — Goldman Sachs

And I guess just on those ground lease buyouts, I think there's a fairly meaningful gap between Crown and some of the public peers that you have in terms of ground interests owned or controlled. How aggressive do you want to be in closing that gap? And maybe you could just characterize what the market is like for ground lease buyouts.

Chris Hillebrandt, CEO

So your point is well taken. We do have a gap to what best in class in this industry. I think it's somewhere between 10% and 11%. Our goal is to close that gap over time, but to do it in a very thoughtful and disciplined way, making sure that every deal that we're signing is accretive and meets our internal CapEx hurdle rates. this is something that having just gone through a similar exercise in my last role in Europe which is it's all about putting together a strong series of processes financial tools to be able to evaluate offers and then to just scale your ability to reach out to your customers on a regular basis. So again this is an area of focus for us at Crown. We think this is an area where eventually we'd like to think of ourselves is best in class.

Mike Ng, Analyst — Goldman Sachs

So beyond ground lease buyouts, I'm sure there are a lot of operational efficiency opportunities across the entire organization. Could you talk through some of the cost opportunities that you see and talk a little bit about your margin expansion outlook over the next few years?

Chris Hillebrandt, CEO

Yeah, so we've publicly stated that we will deliver 200 basis points of margin expansion based on the 26th year. It's being done through a number of different activities. Part of it will come from additional revenues that we're starting to see. Part of it will come from the ground lease buyouts that we just talked about. But then the systems and tools and processes play a huge role both in terms of driving reduced cycle time, which is good from a customer or satisfaction perspective. and we continue to believe that there's a large opportunity through the use of making our company an AI-native company through automation and tool improvement, of which we've launched two. We have another two coming up this year, is that we will ultimately be able to transform our cost basis in addition with the 200 basis points that we've laid out.

Mike Ng, Analyst — Goldman Sachs

As we kind of wrap up the session, You've often described Crown as a best-in-class tower operator. What does that mean to you, and what benchmarks should investors look to as proof of your continued positioning as best-in-class?

Chris Hillebrandt, CEO

Yeah, so we try to extensively benchmark ourselves against our competition, both here in the U.S. and globally, to define what is best-in-class. It could be everything around from a cycle time in terms of the time an amendment or a new lease is received until the time that we turn it out. We're looking at customer satisfaction in terms of measuring the customer experience and what our customers tell us that we can do better and better meet their needs. And then back to overall cost basis, you know, it's employees per tower, revenue per employee. I think each of these are measures that we're focused in on finding a way wherever we sit today to what best in class looks like within the industry, and then setting that as a target for us to be able to live on over time, many of which will be enabled by the investment we're making on the tools and the systems that we have. But I think we're confident that we'll continue to find opportunities to accelerate both the timetable and increase the scope as we get further down the path.

Mike Ng, Analyst — Goldman Sachs

Great. Well, Chris, that's a great way to wrap it up. Thank you so much for participating in our conference. It's been a privilege to have you on stage here.

Chris Hillebrandt, CEO

Thank you, Michael. It's been great. Thank you.

Mike Ng, Analyst — Goldman Sachs

Thank you, sir. All right.