Crown Castle laid off hundreds of people this week, but the company said its business continues to perform well.
The layoffs impacted around 250 employees, according to sources familiar with the matter, refuting anonymous sources that had pegged the number around 400.
Crown Castle has approximately 5,000 employees, according to its website, with around 100 offices nationwide.
Crown Castle released the following statement in response to FierceWireless:
“Our business continues to perform well during this period of unprecedented uncertainty, and we are focused on taking the appropriate steps to deliver on our long-term goals. To keep our business healthy and growing, we continuously assess market-level strategies and how to adapt for the future, including making difficult decisions that impact our team. We are deeply appreciative of the contributions of our teammates whose employment at Crown Castle has ended. We remain confident in our company’s ability to deliver solid results as we build communications infrastructure that serves our customers and communities.”
The company declined to comment further as to what segment of the business the job cuts impacted or if they were concentrated in a specific region.
Execs reiterate belief in fiber, small cell business
Crown Castle over the summer became the target of activist investor Elliot Management, which slammed the tower REIT’s fiber strategy and had an unfavorable view of returns on investments in small cells, but executives this week reiterated confidence in the business.
Sources said the job cuts action was taken as a normal course business decision.
The activist hedge fund just divested its stake in AT&T after targeting the carrier last fall and penning an open letter that criticized most of AT&T’s operations.
This week during investor conferences, Crown Castle executives touted the inclusion, in addition to towers, of fiber and small cell infrastructure in its asset mix, reiterating their belief in the strength of the businesses.
Crown Castle on Monday was the first of the three big public tower companies to sign an infrastructure deal with Dish Network as it works to build out a new nationwide 5G network. The deal includes up to 20,000 tower sites, as well as fiber backhaul services.
CFO Dan Schlanger, speaking at New Street Research 2020 Conference earlier this week, said Dish was the first proof point that having a combination of solutions “helps us in winning business in the market,” according to a SeekingAlpha transcript.
He also disagreed that small cells don’t bring attractive returns on investment, instead saying internal analysis and results to date “have shown extremely good returns on small cells.”
A new small cell build from scratch for an anchor tenant delivers around 6-7% returns, according to Schlanger. With a second tenant that moves higher into low double-digits returns between 10% and 12%, which Crown believes clears the company’s initial capital cost for the build.
“So only with two tenants, which we define in the neighborhood of 4 to 6 nodes per miles, that’s going to make us money as the infrastructure developer,” Schlanger said. “Those are great returns.”
Once Crown goes to a third tenant, the return on investment is very similar between towers and small cells. And there’s nothing that would lead Crown against the viewpoint “of small cells generating significant value over long-term for our shareholders,” Schlanger said, with the expectation of 5G driving increasing needs for small cells long-term.
Crown Castle has seen a consistent demand level of about 10,000 small cells per year so far.
The company has 80,000 miles of route fiber and about 70,000 small cell nodes on air or in development.
“I think now what would be helpful is if we saw some additional volumes, just [to] say that there is really significant progress being made in terms of the acceleration we were talking about earlier.”
In 2021 Crown Castle expects to see an increase in the mix of colocated small cells on existing fiber versus new builds coming out of its pipeline, from the usual 20-30% up to 40%. That wasn’t part of the strategy, and rather a result of when bookings occurred and Schlanger suggested isn’t indicative of a long-term trend.
“That’s part of our business model, is that colocation comes with lower capital but higher margins and higher returns and maintains good growth for our business,” he said.
“It’s a proof point in our opinion that colocation can, does and will happen.”