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Tickers in this Article: AMT, CCI
We downgrade our recommendation on Crown Castle International Corp. (CCI) to Neutral based on its extremely high level of current valuation. The stock price has soared nearly 62% in the last year. The company posted solid financial results for the third quarter of 2012. Management has raised 2012 adjusted EBITDA guidance. Massive growth of mobile broadband, higher usage of smartphones and tablets together with increased deployment of 4G LTE networks are the long-term positives for the wireless tower industry. We believe future financials of the company will be driven by substantial demand for more tower space to facilitate high-speed wireless networks. Our long-term view regarding wireless tower industry remains intriguing and we believe Crown Castle is well positioned to capitalize on these opportunities.    

Wireless services are advancing rapidly in terms of additional features and capabilities.  Much of the infrastructure and upgrades require effective site management of cell towers and equipment. Crown Castle effectively addresses this opportunity as 95% of its quarterly revenue is currently derived from wireless service providers. The company accumulates most of its revenue from long-term (typically 5-10 year) tower leases. Growing popularity of smart-phone devices is further expected to propel demand for wireless data and video services through web surfing.

The newly acquired T-Mobile wireless towers will enable Crown Castle to improve both its top and bottom line. Crown Castle has completed the acquisition of 7,200 wireless towers of T-Mobile USA for a total consideration of $2.4 billion. With this acquisition, Crown Castle has become the largest wireless tower operator in the U.S. outpacing its closest competitor American Tower Corp. (AMT).

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