AT&T inks ‘streamlined’ tower, small cell deal with Crown Castle

AT&T said it signed a new, long-term leasing deal with Crown Castle that covers macro cell towers and small cells. Although the companies did not release details or terms of the agreement, AT&T indicated it will allow the company to more quickly build out 5G network technology and its 700 MHz spectrum for FirstNet.

“This agreement marks a significant milestone in our relationship with Crown Castle,” Susan Johnson, head of AT&T’s global connections and supply chain, said in a release from the companies. “It establishes a market-based framework and simplifies the lease management and administration process. This will allow us to streamline network projects to better serve our customers.”

Johnson’s comments about a market-based framework and a simplified lease management and administration process are notable considering AT&T in recent years has made a very public and concerted effort to reduce the rates that it pays for tower leasing.

Indeed, AT&T’s Tom Keathley—who retired last yearsaid in 2016 that AT&T was “frustrated” with the real estate rental model that tower companies have developed over the years. “There is a fair amount of frustration certainly with AT&T certainly with those business practices,” Keathley said at the time. “I would even say it may not be sustainable going into the future. In fact, we’re looking at that pretty heavily. We have a task force already assigned with the task to look at that business model. I don’t have anything to report on that yet, but the frustration is very real.”

Shortly after Keathley’s comments, FierceWireless revealed that the carrier was sending letters to tower owners asking for reduced rates, which the carrier said was part of a new program that involved asking for “fair” early termination rights, the ability to modify or upgrade tower equipment at no extra cost, reduced or eliminated price increases, and “rents reduced to competitive rates.”

Then, late last year, Verizon and AT&T announced a joint venture with Tillman Infrastructure to build and share hundreds of cell towers, a move that was seen as an attempt by the companies to threaten established tower companies like Crown Castle.

However, since the terms of AT&T’s new agreement with Crown Castle aren’t being released, it’s difficult to determine which of the companies hold the upper hand in the deal.

Nonetheless, AT&T’s new deal with Crown Castle also comes just months after the company said it expects to spend up to $25 billion this year in capital expenses, a figure notably higher than most Wall Street estimates. AT&T said the increase—from around $21.6 billion in 2017—is partly due to the recently passed tax reform as well as its FirstNet network build-out efforts.

"We believe this announcement is a net positive for the towercos, particularly CCI," wrote the analysts at Wells Fargo in reaction to AT&T's new deal with Crown Castle. "It marks the first announcement (that we know of) that AT&T is planning to deploy FirstNet and small cells in earnest. Recall, CCI bought AT&T's ~9,700 towers portfolio back in October 2013. We have long thought CCI stands to uniquely benefit from providing a more holistic approach to carriers' network builds by offering macro tower AND small cell solutions in the U.S. While details remain somewhat unknown, we expect this to add tailwinds to CCI's organic growth (some in 2018 but likely more in 2019), and be a big focus when CCI reports Q1 2018 results on 4/18 after market close."

Crown Castle has been a vocal proponent of small cells; the company said in January that it has far built out 50,000 small cell nodes, and that it currently owns 60,000 route miles of fiber for small cell backhaul, including in 23 of the top 25 markets in the U.S.

Crown Castle’s small cell support stands in contrast to the relatively tepid outlook that American Tower and SBA Communications have offered on small cells.

Article updated April 11 with commentary from Wells Fargo.