10-QPeriod: Q3 FY2003

CROWN CASTLE INC. Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 12, 2003For Securities:CCI

Summary

Crown Castle International Corp. (CCI) reported its third-quarter and nine-month results for the period ending September 30, 2003. The company experienced an increase in total revenues for both the three and nine-month periods compared to the previous year, primarily driven by growth in site rental and broadcast transmission revenues. Despite revenue growth, the company continued to report net losses, though the loss for the nine months narrowed slightly compared to the same period in 2002. Significant activities during the quarter included debt management, with the redemption of 10 5/8% Senior Discount Notes and the issuance of 4% Convertible Senior Notes, aimed at reducing interest expense and improving the company's capital structure. The company's operational performance shows a shift, with declining network services and other revenues in the US, offset by growth in site rentals. International operations, particularly in the UK (CCUK), showed notable revenue increases, partly due to new services like Freeview and amended agreements with Hutchison 3G. Management is focusing on optimizing capital allocation towards investments with acceptable internal rates of return, indicating a more cautious approach to capital expenditures. The company also continues to manage its joint ventures with Verizon Communications, with recent agreements clarifying ownership stakes and future options.

Key Highlights

  • 1Total revenues increased year-over-year for both the three-month and nine-month periods, reaching $235.6 million and $676.5 million respectively, driven by site rental and broadcast transmission.
  • 2The company reported a net loss for the nine months ended September 30, 2003, of $249.5 million, a slight improvement from $237.6 million in the prior year's comparable period.
  • 3Significant debt management activities occurred, including the redemption of $239.2 million in 10 5/8% Senior Discount Notes and the issuance of $230 million in 4% Convertible Senior Notes, expected to reduce annual interest expense.
  • 4Site rental and broadcast transmission revenues increased by 19.3% in the third quarter and 14.9% for the nine months, indicating strong performance in the core leasing business.
  • 5Network services and other revenues continued to decline, particularly in the US, as the company strategically reduced offerings in this segment.
  • 6International operations, especially CCUK, showed robust growth in site rental revenues due to new tenant additions and strategic agreements.
  • 7The company acquired full ownership of Crown Castle GT and increased its stake in Crown Atlantic through agreements with Verizon Communications, restructuring its joint venture arrangements.

Frequently Asked Questions

For the nine months ended September 30, 2003, Crown Castle International Corp. reported total revenues of $676.5 million, a slight increase from $673.6 million in the same period of 2002. Despite revenue growth, the company continued to incur net losses, with a loss of $249.5 million compared to $237.6 million in the prior year's period. Key activities included significant debt restructuring and changes in its joint venture arrangements.

Crown Castle International Corp. actively managed its debt by redeeming $239.2 million of its 10 5/8% Senior Discount Notes and issuing $230 million in 4% Convertible Senior Notes. This strategic move is expected to reduce annual interest expense by approximately $16.2 million and improve the company's capital structure. The redemption of the notes resulted in a one-time loss of $18.9 million.

The company's revenue mix continues to shift towards site rental and broadcast transmission, which saw a 19.3% increase in the third quarter and a 14.9% increase for the nine-month period. Conversely, network services and other revenues have declined, particularly in the US, as the company strategically reduced its offerings in this area. This indicates a focus on the core, more stable site leasing business.

The company finalized agreements with Verizon Communications regarding its joint ventures, Crown Castle Atlantic and Crown Castle GT. As a result, Crown Castle International Corp. now owns 100% of Crown Castle GT and maintains a 62.8% stake in Crown Atlantic. These transactions involved the exchange of equity interests, cash, and tower sites, and modified Verizon's future exit options.