Crown Castle Inc.

Good day and welcome to the Crown Castle Q4 2018 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Ben Lowe. Please go ahead, sir.

Great. Thank you, Brian, and good morning, everyone. Thank you for joining us today as we discuss our fourth quarter 2018 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 investor section of our website at crowncastle.com, which we'll refer to throughout the call this morning. This conference call will contain forward-looking statements which are subject to certain risks, uncertainties, and assumptions, and any 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 factor sections of the company's SEC filings. Our statements are made as of today, January 24th, 2019, and we assume no obligations 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 investor section of the company's website at crowncastle.com. So with that, let me turn the call over to Jay.

Thanks, Ben, and good morning, everyone. Thanks for joining us on the call. As you saw from our results, we capped off another year of growth with solid fourth quarter results. As I look forward, I am optimistic the positive trends we see in the market will drive demand for our communications infrastructure assets. And I believe Crown Castle is well positioned to take advantage of those trends and deliver growth and returns for shareholders for years to come. Through disciplined capital allocation and execution, we have established an unmatched portfolio of more than 40,000 towers and 65,000 route miles of high-capacity fiber in the top US markets, where we see the greatest long-term growth and opportunity. On this call, there are three important themes I want to discuss. First, 2018 was a successful year for Crown Castle. Secondly, our strategy of offering towers, small cells, and fiber solutions is delivering the results we expected. And third, I'm excited about the long runway of growth as 4G investment remains robust and the deployment of 5G infrastructure is just getting started. On the first point, we delivered 10% growth in dividends per share in 2018, supported by cash flow growth across both our tower and fiber assets. Tower leasing increased in the back half of the year as all of our major customers were actively investing in their networks by deploying new cell sites and additional spectrums. Further, highlighting the strong demand for our infrastructure, we deployed a record number of small cells during 2018. In addition to the great operational performance in small cells, we added significantly more small cell nodes to our backlog than we installed in 2018, meaning we have a larger contracted pipeline of small cells to build today than we did at this time last year. Importantly, our team delivered these results while integrating our recent fiber acquisitions. With the integration work substantially complete, I'm excited as I look ahead and see the potential growth opportunity as we focus on adding both small cell and fiber solutions customers to our 65,000 route miles of dense, high-capacity fiber. This brings me to my second point. Our unique strategy of offering towers, small cells, and fiber solutions which are all critical components of communication networks that can be shared across multiple customers, is delivering the results we expected. With the volume of data delivered by both wireless and wired networks growing rapidly, our customers are leasing access to our tower and fiber assets to increase the capacity of their networks and keep pace with that growth. Because we have the ability to share our assets across multiple customers, we can provide our customers with cost-effective assets assets to the critical infrastructure they need while generating significant value for our shareholders over time as we lease our assets and drive cash flow growth. Steady performance and consistent execution over the last two decades has proven that providing shared infrastructure assets in the U.S. is a great business. Over that timeframe, we've invested approximately $23 billion in tower assets. and continue to create tremendous value for our shareholders as we grow the cash flows and returns on those investments by adding tenants. Since 2001, we've increased site rental revenues in our tower business at a compound annual growth rate of approximately 14%, scaling the business from approximately $350 million in annual revenue in 2001 to more than $3 billion in 2018. In recent years, we've expanded our infrastructure offering beyond towers by investing approximately $13 billion to establish fiber footprints in prime locations across the top U.S. markets where we see the greatest long-term demand. Our fiber investments are already yielding 8% and have significant available capacity to add new small cell and fiber solutions. As you can see in our 2019 outlook, we are seeing increasing levels of demand for our fiber assets. Following a record year in 2018 in terms of the number of small cells we deployed, we expect to nearly double our production this year by deploying 10 to 15,000 nodes. In addition, we have approximately 20,000 additional nodes in the pipeline that we expect to deploy in 2020 and beyond. Since it typically takes about 18 to 24 months for contracted nodes to be put on air and start generating revenue, we have a line of sight into meaningful small-cell revenue growth beyond 2019. With respect to towers, we expect the higher new leasing activity we saw in the back half of 2018 to continue, resulting in a meaningful acceleration in tower new leasing in 2019 as compared to 2018. With higher levels of new leasing activity across towers and small cells and steady growth from our fiber solutions business, I'm excited about our opportunity to continue to translate revenue growth into anticipated long-term growth in dividends per share of 7% to 8% per year. Which brings me to my third and final point. I see a long runway of growth in front of Crown Castle as our customers continue to invest heavily in their 4G networks to keep pace with data demand growth from existing technologies, while the deployment of 5G is just getting started. According to the latest estimates from Cisco, mobile data traffic in the U.S. is expected to grow five-fold from 2017 through 2022. To put that growth into perspective, that means mobile data traffic in 2022 is expected to be equal to 12 times the volume of all Internet traffic in the US in 2005. While the sheer scale of the expected growth is staggering and should drive significant demand for our infrastructure assets, I get even more excited when I consider how early we are in the digital transformation of the US economy and the critical role mobile infrastructure will play. I think we're just scratching the surface when you consider mobile traffic is expected to account for just 6% of total IP traffic in the U.S. in 2022, up from 3% a couple of years ago. While we continue to underwrite our investments based on existing applications and existing technologies, we believe the network infrastructure needed to support the next generation services will dramatically increase the demand for our tower and fiber assets. The journey from first-generation mobile technology through 4G has changed the way we as consumers live and work. What I find really intriguing about 5G and some of the emerging technologies is that they have the potential to fundamentally alter the role of wireless networks, going from connecting over 300 million people in the U.S. to potentially connecting billions of devices in the future. Some of those emerging technologies include autonomous cars, augmented or virtual reality, and industrial applications that require networks to provide availability anywhere, at any time, and on any device. To meet those requirements at the speeds and latency that will be necessary, industry estimates predict that carriers will need to achieve a tenfold increase in network performance as measured by latency, reliability, and speed. From an infrastructure perspective, That will require the deployment of additional spectrum across more cell sites, both on towers and on small cells, for decades to come. And we believe Crown Castle is in a great position at the center of these megatrends with our unmatched portfolio of towers and high-capacity metro fiber assets. Given these long-term opportunities, we are investing in assets we believe will attract and generate long-term returns for shareholders. while paying a high-quality dividend that we expect to be able to grow somewhere between 7% and 8% on an annual basis. And with that, I'll turn the call over to Dan.