10-QPeriod: Q2 FY2007

CROWN CASTLE INC. Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 8, 2007For Securities:CCI

Summary

Crown Castle International Corp. (CCI) reported its financial results for the quarterly period ended June 30, 2007. The company experienced significant revenue growth, primarily driven by the acquisition of Global Signal Inc. (Global Signal) in January 2007. This strategic merger substantially expanded CCI's tower portfolio, particularly in the U.S., and contributed significantly to the reported increase in net revenues and site rental revenues. Despite the revenue surge, the company incurred a net loss for the quarter, impacted by substantial depreciation and amortization expenses related to the acquisition, along with increased interest expenses from newly acquired and issued debt. The company's operational focus remains on its core tower leasing business, which constitutes the vast majority of its revenue. While integration costs associated with the Global Signal merger were notable, management anticipates potential cost savings and synergistic opportunities. CCI's liquidity remains a key consideration, with substantial long-term debt and a significant portion of its assets now tied to the enlarged tower infrastructure. The company is actively managing its debt structure and exploring opportunities to optimize its capital resources.

Key Highlights

  • 1Net revenues increased significantly by 76.9% for the three months ended June 30, 2007, compared to the prior year, largely due to the Global Signal merger.
  • 2Site rental revenues, the primary revenue driver, grew by 90.6% year-over-year for the quarter, reflecting the expanded tower portfolio post-acquisition.
  • 3The company reported a net loss of $32.7 million for the quarter, compared to a loss of $13.3 million in the prior year, impacted by increased operating expenses and interest.
  • 4Depreciation, amortization, and accretion expenses more than doubled year-over-year, driven by the fair value adjustments and asset additions from the Global Signal acquisition.
  • 5Total long-term debt increased substantially to $5.99 billion as of June 30, 2007, primarily due to debt assumed from Global Signal and new credit facilities.
  • 6The company is actively managing its debt through interest rate swaps to hedge against future interest rate fluctuations.
  • 7CCI is reassessing its 'Emerging Businesses' segment (Modeo) and plans to discontinue its reporting, following a spectrum lease agreement and expected asset write-offs.

Frequently Asked Questions

The primary driver of the substantial revenue increase was the completion of the Global Signal merger on January 12, 2007. This acquisition significantly expanded Crown Castle's tower portfolio, particularly in the U.S., leading to a surge in site rental revenues.

The net loss was primarily influenced by increased operating expenses, most notably a significant rise in depreciation, amortization, and accretion. These expenses are largely attributable to the fair value adjustments and the addition of new assets from the Global Signal acquisition. Additionally, higher interest expenses due to increased debt levels also contributed to the net loss.

The acquisition of Global Signal significantly increased Crown Castle's long-term debt. The company assumed approximately $1.8 billion in debt from Global Signal and also entered into new credit facilities. As of June 30, 2007, total long-term debt stood at nearly $6 billion. The company is actively managing this debt, including the use of interest rate swaps to hedge against interest rate volatility.

Crown Castle is reassessing its 'Emerging Businesses' segment, which primarily consists of the Modeo business. Following a spectrum lease agreement and expected asset write-offs, the company plans to discontinue reporting this segment separately starting in the third quarter of 2007, indicating a strategic shift away from this part of the business.