01—Abstract
Summary
Summary of the 10-K filed March 30, 2000. Cited figures are marked; the original filing is the authoritative source.
Crown Castle International Corp. (CCI) reported a 10-K for fiscal 1999 positioning itself as a leading owner and operator of towers and transmission networks, with 7,488 towers at December 31, 1999 (5,319 in the U.S. and Puerto Rico, 2,071 in the U.K.).
Revenue grew sharply to $345.8 milliona in 1999 from $113.1 million in 1998, driven by the Bell Atlantic, BellSouth, Powertel and BBC/U.K. acquisitions, but the company remains deeply unprofitable: net loss was $96.8 million, net loss applicable to common stock was $125.6 million, and fixed charges exceeded earnings by $91.3 million. EBITDA rose to $139.8 million. The balance sheet is highly leveraged.
Total debt was $1.54 billionb and redeemable preferred stock was $423 million against stockholders' equity of $1.62 billion, a debt-plus-preferred-to-equity ratio of 1.21x. Much of the debt sits at subsidiaries, and the holding company depends on subsidiary distributions to service its own notes, which the filing flags as a structural risk. The company also has large committed cash outlays ahead: approximately $825 million for the GTE Wireless joint venture (about $224 million funded at the January 31, 2000 closing), roughly $135 million for the Cable & Wireless Optus Australian towers, and about $1.2 billion of new 2000 credit facilities.
For investors, the key issues are execution on these acquisitions and build-outs, the ability to refinance and service debt, and governance constraints from TdF (France Telecom affiliate), which holds significant governance rights and a draft UK regulatory undertaking may require it to sell its interest. Investors should weigh strong top-line growth and tower-lease economics against heavy leverage, negative fixed-charge coverage, and dependence on a few large customers and the BBC.
02—Key points
Key Highlights
- Portfolio of 7,488 towers at December 31, 1999, with over 2,700 U.S. towers expected from agreements in 2000 and about 705 Australian towers pending.
- 1999 revenue of $345.8 million, up from $113.1 million in 1998 (about 206%), with site rental and broadcast transmission revenue of $267.9 million.
- Net loss of $96.8 million in 1999; net loss applicable to common stock of $125.6 million, or $0.96 per share.
- EBITDA of $139.8 million in 1999, up from $37.1 million in 1998.
- Total debt of $1.54 billion and redeemable preferred stock of $423 million, against stockholders' equity of $1.62 billion (debt and preferred to equity ratio 1.21x).
- GTE Wireless joint venture requires approximately $825 million in total contributions; $223.9 million was funded at the January 31, 2000 initial closing, with the remainder expected through 2000 financed largely by the new $1.2 billion 2000 Credit Facility.
- TdF (France Telecom affiliate) holds substantial governance and economic rights, and a draft UK regulatory undertaking recommends it sell its interest in the company, creating potential ownership and control uncertainty.
03—Questions
Frequently Asked Questions
What is Crown Castle's core business and where does its revenue come from?
Crown Castle owns, leases and manages towers and broadcast transmission networks. In the U.S., the core business is leasing antenna space on towers to wireless carriers under multi-year leases, supplemented by network services such as site acquisition, design and construction. In the U.K., its primary business is operating television and radio broadcast transmission networks, with about 50% of U.K. revenue from the BBC in 1999.
Why is the company reporting large losses despite growing revenue and EBITDA?
Losses are driven mainly by depreciation and amortization of $130.1 million and interest expense of $110.9 million, which together outweigh operating income of $1.9 million and interest income. Much of the expansion was financed with debt, so interest costs rose sharply. Fixed charges exceeded earnings by $91.3 million in 1999.
What are the main risks to investors from the company's debt and holding company structure?
Crown Castle International Corp. is a holding company with no operations of its own and relies on subsidiary dividends to pay its notes. Subsidiary credit facilities and bond indentures restrict dividends, and the U.K. and Crown Atlantic subsidiaries are effectively precluded from paying dividends. The filing warns that the company may need to refinance debt on unfavorable terms or may be unable to do so at all.
How concentrated are the company's revenues and customers?
Revenue is concentrated in a few relationships. The BBC accounted for approximately 28% of consolidated revenue in 1999 (about 50% of U.K. revenue). Other key relationships include NTL (site-sharing), Bell Atlantic Mobile, BellSouth, GTE Wireless and Powertel. The filing states that no U.S. customer accounted for more than 10% of consolidated revenue in 1999.
What major transactions and capital commitments are pending that could affect future results?
The pending GTE Wireless joint venture (up to about 2,322 towers) requires roughly $825 million in contributions, with about $601 million remaining after the January 2000 closing. The Cable & Wireless Optus deal would add about 705 Australian towers for about $135 million, expected to close in Q2 2000. There is also a $1.2 billion 2000 Credit Facility, and the company plans to build about 1,170 towers in 2000 at an estimated cost of about $270 million. Completion is subject to conditions, and the company warns it may not close all transactions on current terms.
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