Real Estate Crown Castle International (NYSE: CCI)

Important disclosures appear on the last page of this report.

Krause Fund Research Fall 2020

Real Estate

Recommendation: Buy

Analysts Justin Buresh [email protected]

Ryan Fuell [email protected]

Ben Tinsman [email protected]

Brad Forbes [email protected]

Company Overview Crown Castle International is a well-established telecommunication REIT. They own a large portfolio of telecommunication infrastructure including 40,000 4G LTE cell towers and nearly 70,000 smaller short-range towers that support 80,000 miles of sub-ground fiber. Through long term lease contracts, typically ranging from 5-15 years, CCI provides tenants access to their shared infrastructure networks. As demand for more network space and faster internet speeds continue to grow, CCI has been rapidly expanding their small fiber networks and heavily investing in new 5G capabilities. Stock Performance Highlights 52-week High $180.00 52 weeks Low $114.18 Beta Value 0.79

Share Highlights Market Capitalization $69.189 b Shares Outstanding 416 m FFO (2019) $5.57 P/FFO Ratio 28.8 Dividend Yield 2.87% Dividend Payout Ratio 82.4%

Company Performance Highlights ROA 1.4% ROE 3.818% Sales (2019) $5.763 b Sales (2020E) $6.431 b

Financial Ratios Current Ratio (2019) 0.627 Debt to Equity 80%

Crown Castle International (NYSE: CCI)

November 10, 2020

Current Price $160.42 Target Price $189-$195

CCI Expects Significant Growth in Response to 5G Expansion

Recommendation: We recommend a buy rating for Crown Castle International due to increasing demand in the telecommunications industry in regard to 5G releases and technology advancements.

Thesis Drivers: • Due to growing demand for data consumption, wirelesscarriers will likely have to continue upgrading and enhancing theirnetworks.• Transition into higher bandwidth networks will increase thedemand for small cell/fiber solutions in large cities across the U.S.• As many products become interconnected through the web,new uses for wireless networks and new technologies willincrease the demand for telecommunication infrastructure.• CCI’s low volatility, increasing FFO, and high dividendpayout ratio is attractive to investors with limited downside.

Risks: • With uncertainty surrounding the pandemic and cases risingacross the country, economic factors such as decreases in GDPspending and increases in unemployment could slow downconsumers ability and desire to upgrade to 5G devices.• T-Mobile and Sprint merger could threaten CCI’s futuretenant site rental revenue.

One Year Stock Performance

Source: Yahoo Finance 1

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Executive Summary Technology advancements towards 5G and the increased demand for network infrastructure put Crown Castle in a strong position for future growth. Through continuing long-term investments, CCI has developed an industry-leading portfolio of telecommunication infrastructure. CCI’s proven ability to secure long-term lease contracts with a retention rate between 97-99% is very promising for stable future revenue growth. With these factors in consideration, we feel that CCI will be a key driver in the telecommunication industry moving forward. As a result, we anticipate organic growth, increased return on investment, and attractive dividend payments. Economic Analysis Real Gross Domestic Product (GDP) Real Gross Domestic Product represents the value of goods and services produced in the United States while adjusting for inflation. While the performance of CCI is not totally reliant on increasing GDP, Crown Castle still benefits from increasing economic health. An annual increase of 33.1% from quarter two to quarter three represents an excellent comeback from the dramatic fall in Q2 2020, boding well for CCI’s future.2

Currently, the positive consensus from the new Pfizer COVID-19 vaccine indicates that economic activity should continue a strong resurgence heading into next year.3 As displayed on the chart below, we predict real GDP to continue increasing as the market gets back on its feet from the pandemic before eventually stabilizing around 2-3% annual growth near the end of 2021.

Source: Bureau of Economic Analysis2 (excluding predictions) Unemployment Rate The unemployment rate measures the percentage of unemployed people in the labor force. To be considered unemployed, you must be actively seeking work, and at least 16 years of age and older.5 Similar to GDP, CCI’s performance is not reliant on low unemployment rates, but decreasing rates are beneficial to some degree. As people return to work, whether it be in the office or from home, telecommunication infrastructure experiences more traffic through their networks.7

When the pandemic struck back in the spring, unemployment rates skyrocketed to a crippling 14.7%. As economic activity has resumed and businesses are reopening, these rates have steadily been improving and were at 6.9% in October.5 Although there is some uncertainty surrounding the pandemic, we expect these rates to gradually approve. In the next 6 months, we estimate unemployment dropping to around 6% followed by a recovery to pre-pandemic rates of 4% in 2022.

Source: St. Louis Fed Interest Rates Historically, in a normal economic environment, REITs have an inverse relationship with U.S treasury yields.7 Since CCI operates under a REIT status, they are entitled to significant tax advantages if they redistribute 90% of the company’s income as dividends. Because these companies are motivated to maintain their tax-exempt status, they typically offer high yielding dividend payments. The drawback to this is it makes REITs sensitive to other high yielding assets such as treasury rates.8 The inverse relationship can be observed in the chart below.

Source: Net Advantage Industry Survey7

Since the end of 2018, 10-year treasury yields have been dropping and this downward progression was heavily influenced by the pandemic. As of November, the 10-year treasury rates have been trading in the range of .75-.95%.9 This low-interest rate environment is beneficial for CCI, but we anticipate treasury rates recovering in the future. In a 6-month horizon, we estimate 10-year rates being right at or slightly above 1%. Looking further ahead, our 3-year estimate is around 1.5-2%. Regardless of these estimates, CCIs dividend yield of 2.87% looks attractive to investors in comparison.

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Inflation Rate The inflation rate is a broad economic measure that represents the upward price movement of goods and services.10 Inflation is an important factor to monitor for CCI for two main factors. Firstly, land generally appreciates in value as inflation rises. Since CCI is extremely capital intensive, deflationary periods can lead to a loss in value on their land. Secondly, many lease and rental agreements have inflation provisions built into the contract11. As a result, real estate generally outperforms in an inflationary environment due to most rental contracts being adjusted to higher prices.7

Throughout history, inflation has been on a consistent upward trend of about 2%. Similarly to other economic factors, the pandemic caused some abnormalities in this rate and caused it to decrease by about 1.25%. As we’ve moved past the worst part of the pandemic, these rates have been steadily returning back to normal levels. In the most recent report, inflation was listed at 1.71%.12 We estimate that this rate will gradually increase closer to the 2% level and will stay there consistently long term. Capital Markets Outlook Historically, REITs have done well in various environments with a low correlation to broad market indexes and inflation protection. We remain positive on data centers and cell tower operators as the tsunami of data storage and consumption continues while the build-out of 5G wireless technology begins to accelerate. Due to an increased reliance on technology during the COVID-19 pandemic, we believe that reliance on quality cell service will be more important than ever. Additionally, Telecommunication REITs have a low threat for new entrants. Since it is such a capital-intensive industry, building and operating the infrastructure required is very costly for new companies entering the market. If the demand for 5G is very high like we predict in the coming years, existing companies such as Crown Castle do not have to worry about new companies stealing market share. Industry Analysis Industry Overview The real estate sector comprises of two different industries: Equity Real Estate Investment Trusts (REITs) and Real Estate Management and Development companies. REITs make up a large majority of the real estate sector. Of the 31 real estate companies in the S&P 500 index, 30 of them are REITs.4 Unlike traditional real estate investments, REITs manage income-producing real estate that is traded on public stock exchanges. There are multiple classifications of REITs including diversified, industrial, hotel and resort, office, health care, residential, and specialized among others. Crown Castle fits under the specialized category, specifically as a telecommunication REIT.

Source: Statista6

Porter’s Five Forces Analysis Threat of Entry: Low CCI and competitors have had to continually invest vast amounts of capital in order to develop their infrastructure portfolio. Maintaining, acquiring, and developing telecommunication infrastructure is very costly, and in order to enter the competitive space, prospective companies would need an immense amount of capital. The space is heavily dominated by a few key players and we anticipate it to stay this way in the future. Power of Suppliers: Moderate CCI’s business requires suppliers in various areas including architecture & engineering, general contractors, materials & equipment, and indirect services.18 If CCI experiences issues with any of their suppliers, it could affect their ability to expand their infrastructure network rapidly and cost-effectively. Although there are substitutes for these suppliers, maintaining strong relationships with them is beneficial for CCI. Power of Buyers: Moderate After the T-Mobile and Sprint merger, a majority of CCI’s revenue was consolidated into three companies. CCI has maintained long-existing relationships with these companies, but failure to renew contracts with any of them would be very costly. On the other hand, buyers to some degree are at the mercy of these companies in terms of dictating price since cell tower coverage is directly tied to location.13 In many cases, these companies will operate all of the telecommunication infrastructure in a county leaving the customers little room for negotiation. Threat of Substitutes: Low Telecommunication REITs operate in a very unique and specialized industry. CCI and others have become well established and are trusted in their ability to provide telecommunication infrastructure. Cell towers and small cells

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have become heavily relied upon for wireless capability and due to limited options, the threat of substitutes is very low. Threat of Existing Competition: High Although the industry is concentrated into a few key players, there still is still a high level of competition. This primarily derives from these companies wanting to acquire and expand their infrastructure, be in high data frequency areas, and wanting to provide superior service. Heavy concentration on these areas has made this specialized space very competitive. Competitive Landscape REITs, especially telecommunication REITs, have a high barrier to entry because of high capital demands to enter the market. The industry has performed relatively well during the pandemic as its average stock price growth has performed at a rate of 8.7 times greater than the S&P 500 since the beginning of this year (as of November 1, 2020). There are only three true publicly traded cell tower telecommunication REITs: Crown Castle, American Tower, and SBA Communications. American Tower Corporation is by far the industry leader in terms of market cap as it is more than double that of CCI, the second-highest market cap in the industry. However, American Tower has more than 75% of its towers in overseas markets. As shown in the chart below, CCI and American Tower are very comparable in terms of macro cell towers in the United States with each owning roughly 40% of towers in the U.S. Source: Hoya Capital Real Estate13

Debt Comparison Companies classified as REITs have certain standards they must follow in regard to dividends and taxes. To qualify as a REIT, the company must distribute at least 90% of its taxable income in the form of dividends to investors. In return, they are not subject to corporate tax because they have passed along all of their income.20 As a result, these companies frequently rely on debt for capital expenditures and to expand their operations. A very important factor to consider for these companies is their ability to pay back their debt and how much debt they have.

Looking at the chart below, CCI’s ability to pay off debt is better than SBA communication but worse than American Tower. Similarly, CCI has taken on a smaller percentage of debt compared to SBA but more than AMT. All three of these companies have less than ideal credit ratings. When looking into these types of companies, it is important to understand that there is a credit risk associated with them.

Source: Hoya Capital Real Estate13

Performance Out of the three main telecommunication REITs, they have all been experiencing different levels of growth. In terms of EBITDA growth and FFO growth per share, CCI is underperforming its two largest competitors with 2019 rates of 5.2% and 3.8% respectively. It is important to note that CCI is the only one of these companies that only have infrastructure in the United States, so this does limit their growth potential. We believe that these higher growth rates are a big reason behind why AMT and SBA are trading at a premium relative to CCI’s price.

Source: Hoya Capital Real Estate13

Company Analysis Company Overview Crown Castle owns large portfolios of communication infrastructure throughout the US which includes 40,000 cell towers and 80,000 route miles of fiber that support 70,000 small cells. Through long term contracts, CCI provides tenants access to their shared communication infrastructure, which are primarily used as cellular towers for large companies like AT&T, Version, and T-Mobile. These contracts range between 5-15 years with renewals built into it, and these lengths help establish a long-term relationship with tenants, with retention rates normally between 97-99% each year.11With 5G on the rise and requiring a shorter signal than 4G, more cell towers will

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need to be constructed, giving CCI a great opportunity for further expansion and growth. Corporate Strategy CCI’s main focus is to increase their long-term shareholder value. CCI’s strategy for doing so is to grow its cash flows from existing communication infrastructure, to give investors meaningful returns through dividend yields and operational income, and to effectively invest capital to grow future cash flows and long-term dividend yields. Some of these investments to increase long-term shareholder wealth include constructing and acquiring cellular infrastructure, improving existing infrastructure, and acquiring new land.11 Improving current 4G LTE towers by converting them into 5G and constructing new towers altogether is a long-term investment aimed at improving shareholder value. Increasing their number of towers and being 5G compatible will improve current cash flows because they will be able to provide newer technology and more capacity to tenants. Life Cycle The CEO of CCI stated in the most recent earnings report that tower and fiber investments are at completely different stages of maturity. Over the course of 20 years, CCI has been investing in large amounts of capital in its 40,000 towers and is now experiencing excellent returns with a current yield of 10.4%. The large tower business segment is in a mature state and provides little growth without getting involved in large acquisitions as only a few companies own most of the United States large cell towers. The fiber/small network business segment has been growing rapidly in recent years with plenty of room for further growth. CCI has invested approximately $14.2 billion into fiber and small cell investments with 90% of that investment occurring within the past five years. The current yield of 7.6% is very encouraging considering the relative youth of this segment.14

Source: Crown Castle Earnings Presentation14

Current Product Line

CCI’s product line consists of their towers and their fiber and small cells. Between towers and fiber, site rental revenues were 88% of CCI’s 2019 consolidated revenue. About 67% of the site rental revenue came from tower rentals. Through their towers, CCI provides an efficient and cost-effective way of providing coverage and capacity for wireless networks. Monthly rent payment depends on different factors including the number of tenants sharing the tower, the region of the US the tower is located in, and the amount of capacity granted to the tenant.11

Source: CCI 10-K Statement11

This chart depicts that more than 50% of CCI’s towers have two or more tenants per tower. This benefits the company because it allows them to spread costs across multiple tenants resulting in a higher yield on investment. Multiple tower tenants may be ideal for CCI, but 42% of their towers still have only one tenant. This indicates that one tenant towers are still profitable, and the business model does not need to be adjusted in favor of multiple tenant towers. CCI also generates revenue from its service segment. This comes from site development and installation services, but it is insignificant in comparison to site rental revenue.

CCI also provides fiber and small cells to its customers. These two products made up about 33% of site rental revenue in 2019. The fiber is typically attached to utility or light poles on public right of ways and its uses include offloading data traffic from towers and improving density and capacity in high demand areas.11 CCI typically collects payment for the fiber through recurring monthly payments but it can also be upfront. Payment is determined by the cost of initial construction, fiber requirements, and equipment required at the site. 5G Transforming into New Product CCI is constantly enhancing and upgrading existing products but 5G is the next big product in the telecommunications sector. 5G comes with many benefits and some drawbacks, such as an increase in connectivity, speed, and latency. However, it will require more towers to be constructed and installed to bring coverage levels up to 4G level. This could reduce the short-term yield on investments as there will be high upfront costs. If CCI can organically invest in these 5G towers while gradually increasing their yield on investments like they were able to do with 4G, there is a lot of potential value and growth.15

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Marketing CCI already possesses contractual agreements with tenants on existing infrastructure so their goal is to obtain newer contracts prior to construction of any more infrastructure. They achieve this by having unique offerings, maintaining healthy and long-term tenant relationships, and containing the expertise to become a trusted provider in their industry.11

Due to AT&T, T-Mobile/Sprint, and Verizon making up 75% of site rental revenue, these are CCIs largest customers. After the T-Mobile and Sprint merger, site rental revenues are now dominated by three major companies instead of four. Dependency on these three tenants is a risk factor for the company as losing any of these tenants could potentially result in a severe loss.

Source: CCI 10-K Statement11

Analysis of Recent Earnings CCI moving forward views their small cell and fiber networks as a key driver for growth. There is a 30-40% anticipated annual growth in data demand on existing 4G networks as well as a lot of additional demand expected to come from 5G. AFFO per share rose from the previous year and they have raised their forward growth expectations for this metric. 2019 AFFO per share was $5.68 and their 2020 mid-year outlook is $6.12. This metric provides insight on operating performance and a rising percentage indicates more operating profit available for stakeholders. This is important for CCIs ability to pay high yielding dividends. Managerial guidance suggests this could be at 7-8% in the future. Production and Distribution With regards to their towers, CCI targets basic trading area (BTA) for their distribution. These BTA’s, specifically metropolitan areas, are parts of the country that are specifically designated for allocating high-frequency cellular licenses to mobile providers.22

Source: CCI Earnings Supplemental Information Package20

The chart displays a high concentration of towers in these highly populated areas. CCI takes this same approach when distributing their fiber. They aim to locate their fiber and small cells not just in metropolitan areas, but in specific places where many people will constantly be flowing through. These places typically include highways and other areas of transportation.11

Competition There are three main competitors for CCI regarding companies that acquire, own, and operate their own telecommunication infrastructure. These three competitors are AMT, SBAC, and EQIX. AMT remains the industry leader with a market cap nearly 2 times greater than the closest company. AMT owns property in every continent. They are the premier company for leasing communication infrastructure but lacks other products/services. AMT is primarily focused on overseas markets, where around 75% of their towers are leased, leaving CCI to obtain a dominant share of tower portfolios in the US. The industry has continued to perform well even during the pandemic with its average stock price growth performing at a rate 3.5 times greater than the S&P 500 since the beginning of the year. Catalysts for Change and Growth Due to the growing demand for data consumption, wireless carriers will likely have to continue upgrading and enhancing their networks including towers and small cells. This drive for more data comes from a variety of things including mobile entertainment, mobile internet usage, machine to machine technologies, and they transition to high bandwidth networks.11

New uses for wireless networks or new technologies could increase the demand for telecommunication infrastructure. Many new products are interconnected through the “internet of things”. If this trend continues to progress many new products would require wireless connection increasing the demand for more cell towers. A transition into higher bandwidth networks would increase the demand for more small cells and fiber.11 This could help CCI expand into new locations and focus on increasing their capacity in existing networks.

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The T-Mobile and Sprint merger consolidated the industry into 3 major companies of similar size. There is uncertainty on what will happen, but post-merger, T-Mobile could increase network spending consistent with AT&T and Verizon. This would increase revenue for providers like CCI. Additionally, with this merger, 5G rollouts could ramp up resulting in higher investments in 5G infrastructure.20

Valuation Analysis Overview Our target price range is primarily derived from our discounted cash flow (DCF), economic profit (EP), and relative valuation models. We didn’t include our dividend discount model (DDM) results in this range because REITs typically put FFO into consideration over EPS when estimating dividends. We felt that using FFO was more appropriate when constructing the model, but it resulted in some discrepancies in our target price. When constructing our models, we incorporated various economic, industry, and company-specific assumptions. Some of these factors have a larger impact on the target price than others. We will discuss the implications of these variables later in the analysis. Revenue Decomposition Our revenue growth predictions are the foundation for our forecasts and models. Small percent changes in these growth rates have a lot of impact on our financial statements, key driver estimates, and implied prices generated from our models. We forecasted our revenue by breaking it down into its two main operating segments: tower revenue and small-fiber network revenue. Due to the rollout of 5G infrastructure, we applied higher growth rates in the early years of our forecasts and had them decreasing over time as they approach the steady state period in 2025. Between the two segments, we anticipate the small fiber network segment to grow at higher rates. This is largely due to the fact that 5G networks require a high density of nodes to increase processing speed and to meet capacity needs. In order to meet this demand, CCI will have to rapidly expand its small cell network. We believe this segment will be a large driver for future revenue growth. A big uncertainty surrounding revenue is from the recent T-Mobile and Sprint merger. We elected to combine their revenue and to keep it growing consistently in the future due to conflicting costs and benefits. As mentioned earlier, CCI has more than one tenant on a lot of their infrastructure and this allows them to get higher yields off of their investments. Losing a large tenant will have an effect on this revenue, but with a much larger conglomerate, we expect them to upgrade their networks quickly. This merger was a strategic move to rise to the top of the wireless industry. With 5G technology coming into play, we think they are going to heavily invest in order to expand

their network, and this will make up for the lost revenue on the shared infrastructure. Continuing Value A key assumption of our models was our continuing value growth rate. In our economic analysis, we estimated that the real GDP growth rate will be around 2-3% in the long-term. Since the continuing value calculation is such a large portion of the implied price, we erred on the side of caution and used a conservative value of 2%. We don’t expect the demand for telecommunication infrastructure to decrease in the foreseeable future and believe that CCI will be able to grow similarly to the broad economy. WACC The weighted average cost of capital (WACC) value has a major impact on our DCF and EP models. All of our free cash flow and economic profit values are discounted with this rate so changes in the value can fluctuate the price significantly. We calculated CCI’s WACC to be 4.52%. This value was calculated using a cost of equity of 5% and an after-tax cost of debt of 3.2% with market weights of 73.34% and 26.66% respectively. Cost of Equity As mentioned above, our model calculated our cost of equity to be 5%. For the beta, we wanted to capture a wide range of company and market performance and took an average of a 2, 2.5, 3, 3.5, 4, 4.5, and 5-year monthly beta resulting in .79.16 CCI’s relatively low volatility compared to the market is beneficial for investors because they do not experience major price swings. For the equity risk premium, we used Professor Aswath Damodaran’s forward-looking implied risk premium of 5.35%.17 With the pandemic drastically affecting the economy, we felt that a forward-looking ERP captured market return more effectively than a historical rate. Cost of debt Our after-tax cost of debt was calculated using a yield to maturity on a corporate bond maturing in 2050 of 3.27%. We felt that using a long-term bond effectively captured the interest rate they will pay on their debt in our forecast horizon. From there we applied our marginal tax rate of 2.16% giving us our after-tax cost of debt of 3.2%. DCF and EP Model The DCF and EP models are largely driven by our value driver calculations of free cash flow (FCF), return on invested capital (ROIC), and economic profit (EP). We believe these models to be the most accurate because it takes the firm’s capital structure and our growth forecasts into consideration. These models generated an implied price of $189.83 and we directly implemented this value as the base of our target price range.

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Dividend Discount Model Our dividend discount model returned an implied price of $257.18, but we think it is unreliable because it required us to make forward-looking dividend assumptions outside of managerial guidance. Additionally, we felt that FFO was a better representative for CCI compared to EPS, but if we were to use EPS instead our implied price was $154.60. Due to this large discrepancy and the uncertainty surrounding dividend payout percentages we did not incorporate this price into our target price range. Relative Valuation Model In our relative valuation, we compared CCI to American Tower (AMT), SBA Communications (SBA), and Equinix (EQIX). All three of these companies have similar operations and are telecommunication REITs. The metric we used to compare was a price to FFO ratio. FFO is a widely used metric that measures REITs profitability and their ability to pay dividends, and we felt it was the most appropriate unit of measurement. When comparing, our 2020 price was $203.04, and our 2021 price was $205.51. Since we had a limited number of comparable firms, we didn’t think this model was as reliable as the DCF and EP, but we did take it into account when giving our ceiling target price of $195. Sensitivity Analysis To observe how our key assumptions affected our DCF and EP implied price, we ran a sensitivity analysis on 10 key variables of our model. CV growth of NOPLAT vs WACC Both of these variables are directly used in the computation of our DCF and EP prices. CV growth of NOPLAT is a major factor in our continuing value, and the WACC is used for discounting all the values to the present time. As seen in the chart below, improvements in the weighted cost of capital and higher CV growth than anticipated can increase our implied price drastically. Depreciation Rate vs. Capital Expenditure Rate These two variables were two crucial aspects of our forecasted financial statements. CCI has a significant amount of land and infrastructure so depreciation expense and new capital expenditures are an important part of their business. For the depreciation rate, we took an average of past depreciation expense as a percentage of total PPE. For capital expenditures, we used managerial guidance of 2% of total revenue. The chart

below depicts how increases or decreases in these rates affect our implied price.

Equity Risk Premium vs Risk-Free Rate Both of these variables are important structural assumptions for our models. Treasury rates and market performance is constantly changing, and this chart illustrates how small changes in both variables can sway our price in either direction.

Cost of Service Revenue vs. Cost of Site Rental Revenue These two operating expense items are very crucial when measuring CCI’s net income and profitability. In our base scenario, we used an average of historical percentages of total revenue and assumed that they would stay the same moving forward. The chart below indicates how our implied price changes as their margins improve or become worse over time on these segments.

Pre-tax Cost of Debt vs General and Administrative Expense We conducted a sensitivity analysis on these two variables because they both required some important assumptions. For the pretax cost of debt, we used a long-term corporate bond, but this might not be a perfect representation of all of CCI’s outstanding debt. For general and administrative expenses, we had no good way of predicting the fixed and variable aspects of it, so we applied a historical average as a percentage of sales. The chart below represents the changes in our implied price as these variables are adjusted upward or downward.

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1) Crown Castle International Corp (CCI) Stock Historical Prices & Data. (2020, November 12). Retrieved November 12, 2020, from https://finance.yahoo.com/quote/CCI/history?p=CCI

2) U.S. Economy at a Glance. (2020, October 29). Retrieved November 14, 2020, from https://www.bea.gov/news

3) Pfizer and BioNTech Announce Vaccine Candidate Against COVID-19 Achieved Success in First Interim Analysis from Phase 3 Study. (2020, November 9). Retrieved November 14, 2020, from https://www.pfizer.com/news/press-release/press-release-detail/pfizer-and-biontech-announce-vaccine-candidate-against

4) FactSet Research Systems Universal Screening. (n.d.). Retrieved from https://my.apps.factset.com/universalscreening/#/screen/reportGrid.\

5) Unemployment Rate. (2020, November 06). Retrieved November 14, 2020, from https://fred.stlouisfed.org/series/UNRATE

6) Market capitalization of real estate investment trusts (REITs) in the United States from 1975 to 2019. (2020, January). Retrieved from https://www.statista.com/statistics/916665/market-cap-reits-usa/.

7) Kuiper, C., & Young, J. Y. (2020, September). Industry Surveys: Real Estate Investment Trusts. Retrieved from 7) https://www-capitaliq-com.proxy.lib.uiowa.edu/CIQDotNet/Research/InvestmentResearch.aspx?listObjectId=100887255&researchContributorId=247&SandP=1&focusId=2&pagemode=13.

8) Drawbacks on REITS - Morningstar Inc. (n.d.). Retrieved November 14, 2020, from http://news.morningstar.com/classroom2/course.asp?docId=145579&page=8

9) Daily Treasury Yield Curve Rates. (2020, November 10). Retrieved November 14, 2020, from https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield

10) Overview of BLS Statistics on Inflation and Prices. (2019, June 05). Retrieved November 14, 2020, from https://www.bls.gov/bls/inflation.htm

11) Crown Castle International Annual 10-K Statement. (2019, December 31). Retrieved November 14, 2020, from https://investor.crowncastle.com/static-files/b32b0926-2aaa-472a-b7a0-0169edf70d01

12) 10-Year Breakeven Inflation Rate. (2020, November 10). Retrieved November 14, 2020, from https://fred.stlouisfed.org/series/T10YIE

13) Hoya Capital Real Estate. (2020, April 09). Cell Tower REITs: Stay-At-Home Winners. Retrieved November 14, 2020, from https://seekingalpha.com/article/4336778-cell-tower-reits-stay-home-winners

14) Second Quarter 2020 Earnings Conference Call. (2020, July 30). Retrieved from https://investor.crowncastle.com/static-files/511e10fa-db85-4b17-b1c0-dbc319ff3e77

15) Viens, A. (2019, August 23). The Future of 5G: Comparing 3 Generations of Wireless Technology. Retrieved November 14, 2020, from https://www.visualcapitalist.com/the-future-of-5g-comparing-3-generations-of-wireless-technology/

16) Bloomberg L.P. Monthly Beta Graph for Crown Castle International. 06/30/15 - 06/30/20. Retrieved October 12, 2020 from Bloomberg terminal.

17) Damodaran, A. (n.d.). Damodaran Online. Retrieved November 17, 2020, from http://pages.stern.nyu.edu/~adamodar/

18) Suppliers: Crown Castle. (n.d.). Retrieved November 17, 2020, from https://www.crowncastle.com/suppliers

19) Best, R. (2020, August 28). The Basics of Reinvesting REIT Dividends. Retrieved November 17, 2020, from https://www.investopedia.com/articles/investing/012816/basics-reinvesting-reit-dividends.asp

20) Crown Castle International. (2020, June 30). Supplemental Information Package and Non-GAAP Reconciliations (Rep.). Retrieved November 16, 2020, from Crown Castle International website: https://investor.crowncastle.com/static-files/631d1b88-df2b-4551-bbde-37d1151cbba2

21) EconoTimes. (2020, February 14). 5G and the T-Mobile/Sprint Merger How They Are Related and How It Impacts You. Retrieved November 17, 2020, from https://www.econotimes.com/5G-and-the-T-Mobile-Sprint-Merger-How-They-Are-Related-and-How-It-Impacts-You-1574946

22) Gartner_Inc. (n.d.). Definition of Basic Trading Area (BTA) - Gartner Information Technology Glossary. Retrieved November 17, 2020, from https://www.gartner.com/en/information-technology/glossary/bta-basic-trading-area

Works Cited

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Important Disclaimer This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

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Crown Castle InternationalRevenue Decomposition

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E

Revenue 4356 5423 5763 6431 7296 8142 8859 9427 9805Total Revenue growth 11.08% 24.51% 6.27% 11.58% 13.46% 11.60% 8.80% 6.41% 4.00%Revenue by segment Site rental 3,669 4,716 5,093 5564 6369 7116 7714 8226 8553% of revenue 84.2% 87.0% 88.4% 86.5% 87.3% 87.4% 87.1% 87.3% 87.2%Growth % 13.5% 28.5% 8.0% 9.2% 14.5% 11.7% 8.4% 6.6% 4.0%Service Revenue 686 707 670 866 928 1026 1146 1202 1251% of revenue 15.8% 13.0% 11.6% 13.5% 12.7% 12.6% 12.9% 12.7% 12.8%Growth % 0% 3% -5% 29% 7% 11% 12% 5% 4%

Revenue by tenant Sprint 697 759 807 0 0 0 0 0 0% of revenue 16.0% 14.0% 14.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%AT&T 1089 1193 1268 1479 1629 1828 2002 2117 2206% of revenue 25.0% 22.0% 22.0% 23.0% 22.3% 22.4% 22.6% 22.5% 22.5%Verizon 871 976 1037 1200 1330 1490 1630 1726 1797% of revenue 20.0% 18.0% 18.0% 18.7% 18.2% 18.3% 18.4% 18.3% 18.3%T-Mobile 958 1030 1210 2272 2513 2844 3092 3277 3418% of revenue 22.0% 19.0% 21.0% 35.3% 34.4% 34.9% 34.9% 34.8% 34.9%Other 740.45 1464.21 1440.75 1479 1824 1981 2136 2308 2383% of revenue 17.0% 27.0% 25.0% 23.0% 25.0% 24.3% 24.1% 24.5% 24.3%

Revenue by business segment Tower Revenue 3536 3807 4042 4365 4715 5045 5297 5509 5729% of revenue 81% 70% 70% 68% 65% 62% 60% 58% 58%growth % 3% 8% 6% 8.00% 8% 7% 5% 4% 4%# of towers 40,000 40,000 40,000 43200 46656 49921.92 52418 54515 56695Revenue per tower (millions) 0.088 0.095 0.101 0.101 0.101 0.101 0.101 0.101 0.101

Fiber Revenue 820 1616 1721 2065 2582 3098 3562 3919 4075% of revenue 19% 30% 30% 32% 35% 38% 40% 42% 42%growth % 68% 97% 6% 20% 25% 20% 15% 10% 4%miles of fiber 60,000 65,000 80,000 102,949 127,763 145,782 171,808 190,028 196,761 Revenue per mile of fiber (thousands) 0.0137 0.0249 0.0215 0.0201 0.0202 0.0212 0.0207 0.0206 0.0207

11

Crown Castle InternationalIncome StatementData retreived from: FactSet Data Reported: In MillionsFiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025ENet revenues 4356 5423 5763 6431 7296 8142 8859 9427 9805

Site rental 3669 4716 5093 5564 6369 7116 7714 8226 8553Network services and other 686 707 670 866 928 1026 1146 1202 1251

Total operating expenses (3312) (3991) (4204) (4316) (4783) (5249) (5668) (6028) (6314)Site rental (1144) (1410) (1462) (1622) (1840) (2054) (2234) (2378) (2473)Network services and other (420) (437) (524) (616) (699) (780) (849) (903) (939)General and administrative (427) (563) (614) (648) (735) (820) (892) (949) (987)Asset write-down charges (17) (26) (19) 0 0 0 0 0 0Acquisition and integration costs (61) (27) (13) (7) (3) 0 0 0 0Depreciation, amortization and accretion (1242) (1528) (1572) (1424) (1506) (1595) (1692) (1798) (1915)

Operating income / loss 1044 1432 1559 2115 2513 2894 3192 3400 3491Interest expense and amortization of deferred financing costs (591) (642) (683) (593) (765) (855) (879) (1011) (1044)Gains / losses on retirement of long-term obligations (4) (106) (2) 0 0 0 0 0 0Interest income 19 5 6 2 17 24 14 29 19Other income / expense 2 1 1 2 2 2 2 3 3

Other income / expense excluding gains / losses on foreign currency swaps 0 0 0 0 0 0 0 0 0Income / loss from continuing operations before income taxes 471 690 881 1525 1768 2066 2330 2421 2468Benefit / provision for income taxes (26) (19) (21) (33) (38) (45) (50) (52) (53)Income / loss from continuing operations 445 671 860 1492 1730 2021 2280 2369 2415Income / loss from discontinued operations, net of tax 0 0 0 0 0 0 0 0 0Net income / loss 445 671 860 1492 1730 2021 2280 2369 2415Net income / loss attributable to the noncontrolling interest 0 0 0 0 0 0 0 0 0Net income / loss attributable to CCIC stockholders 445 671 860 1492 1730 2021 2280 2369 2415 Dividends on preferred stock (58) (113) (113) (113) (113) (113) (113) (113) (113)Net income / loss attributable to CCIC common stockholders 386 558 747 1379 1617 1908 2167 2256 2302 Per shareShares Outstanding 382 413 416 414 414 416 418 422 427FFO per share 4.27 5.05 5.57 6.76 7.54 8.43 9.22 9.60 9.87Earnings per share 1.01 1.35 1.80 3.33 3.90 4.59 5.18 5.34 5.39Dividends per share 3.95 4.31 4.60 5.69 6.34 7.09 7.76 8.08 8.30

12

Crown Castle InternationalBalance SheetData retreived from: FactSet Data reported in: MillionsFiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025ETotal assets 32,230 32,785 38,457 44,133 47,445 48,713 53,226 54,530 53,812

Total current assets 1,134 1,229 1,204 3,350 4,395 3,259 5,290 4,026 623Cash and cash equivalents 314 277 196 2,193 3,095 1,816 3,728 2,400 -1,059Restricted cash 121 131 137 137 137 137 138 138 138Receivables, net 398 501 596 578 665 751 821 882 915Deferred income tax assets 0 0 0 0 0 0 0 0 0Prepaid expenses, deferred site rental receivables and other current assets, net 301 320 275 442 497 554 603 607 629

Prepaid expenses 162 172 107 229 254 274 289 303 314Other current assets 139 148 168 213 244 280 314 304 315

Deferred site rental receivables 1,300 1,366 1,424 2,045 2,286 2,507 2,690 2,801 2,865Property and equipment, net of accumulated depreciation 12,933 13,676 14,666 16,218 17,870 19,628 21,498 23,484 25,594Operating lease right-of-use assets 0 0 6,133 6,782 7,473 8,208 8,990 9,820 10,703Goodwill 10,021 10,078 10,078 10,078 10,078 10,078 10,078 10,078 10,078Other intangible assets, net 5,962 5,516 4,836 4,409 3,982 3,555 3,128 2,744 2,360Deferred income tax assets 0 0 0 0 0 0 0 0 0Long-term prepaid rent and other assets, net 879 920 116 1,251 1,361 1,478 1,553 1,577 1,589

Total liabilities and equity 32,230 32,785 38,457 44,133 47,445 48,713 53,226 54,530 53,812Total liabilities 19,890 20,751 27,968 34,443 38,585 40,713 46,126 48,405 48,753Total current liabilities 1,292 1,417 1,920 2,074 3,737 3,313 6,149 5,932 3,780

Accounts payable and other accrued liabilities 720 812 864 873 998 1,121 1,241 1,349 1,420Accounts payable 249 313 334 326 373 419 463 502 529Accrued interest 132 148 169 154 177 200 224 247 259Other accrued liabilities 339 351 361 393 449 503 554 599 632

Deferred revenues 457 498 657 618 698 789 861 927 974Current maturities of debt and other obligations 115 107 100 253 1,675 1,000 3,604 3,172 857Current portion of operating lease liabilities 0 0 299 331 366 403 443 485 529Debt and other long-term obligations 16,044 16,575 18,021 23,121 24,450 25,854 27,288 28,739 30,250Operating lease liabilities 0 0 5,511 6,094 6,739 7,426 8,156 8,933 9,758Other long-term liabilities 2,554 2,759 2,516 3,154 3,659 4,120 4,534 4,801 4,964

Total equity 12,339 12,034 10,489 9,690 8,860 8,000 7,100 6,125 5,059Total CCIC stockholders' equity 12,339 12,034 10,489 9,690 8,860 8,000 7,100 6,125 5,059

Common stock 16,848 17,771 17,859 18,039 18,220 18,400 18,581 18,761 18,941Accumulated other comprehensive income / loss -4 -5 -5 -5 -5 -5 -5 -5 -5Dividends / distributions in excess of earnings -4,505 -5,732 -7,365 -8,344 -9,355 -10,395 -11,476 -12,631 -13,877Noncontrolling interest from discontinued operations 0 0 0 0 0 0 0 0 0

13

Crown Castle InternationalHistorical Cash Flow StatementData retreived from: Factset Data reported in: Millions Fiscal Years Ending Dec. 31 2017 2018 2019

Net cash provided by / used for operating activities 2044.2 2502.0 2,698.0Net income / loss from continuing operations 444.5 671.0 860.0Adjustments to reconcile net income / loss from continuing operations to net cash provided by / used for operating activities 1599.6 1831.0 1,838.0Depreciation, amortization and accretion 1242.4 1528.0 1,572.0Gains / losses on retirement of long-term obligations 3.5 106.0 2.0Amortization of deferred financing costs and other non-cash interest 9.4 7.0 1.0Stock-based compensation expense 91.6 103.0 117.0Asset write-down charges 17.3 26.0 19.0Deferred income tax benefit / provision 14.9 2.0 2.0Income / expense from forward-starting interest rate swaps - - -Other non-cash adjustments, net (1.3) 2.0 (2.0)Gains / losses on settled swaps 0.3 0.0 -Other non-cash adjustments, net excluding gains / losses on settled swaps (1.6) 2.0 (2.0)Changes in assets and liabilities, excluding the effects of acquisitions 221.8 57.0 127.0Increase / decrease in liabilities 176.2 276.0 294.0

Increase / decrease in accrued interest 34.8 16.0 21.0Increase / decrease in accounts payable (34.1) 37.0 19.0Increase / decrease in deferred revenues, deferred ground lease payables, other accrued liabilities and other liabilities 175.5 223.0 254.0

Decrease / increase in assets 45.6 (219.0) (167.0)Decrease / increase in receivables 60.9 (105.0) (96.0)Decrease / increase in prepaid expenses, deferred site rental receivables, long-term prepaid rent, restricted cash and other assets (15.3) (114.0) (71.0)

Net cash provided by / used for investing activities (10494.0) (1795.0) (2,081.0)Capital expenditures (1228.1) (1741.0) (2,057.0)Payments for acquisitions of businesses, net of cash acquired (9260.1) (42.0) (17.0)Receipts from foreign currency swaps (0.3) 0.0 -Other investing activities, net (5.5) (12.0) (7.0)

Net cash provided by / used for financing activities 8195.2 (733.0) (692.0)Proceeds from issuance of long-term debt 3092.3 2742.0 1,894.0Purchases of preferred stock - - -Principal payments on debt and other long-term obligations (118.9) (105.0) (86.0)Purchases and redemptions of long-term debt 0.0 (2346.0) (12.0)Borrowings under revolving credit facility 2820.0 1820.0 2,110.0Payments under revolving credit facility (1840.0) (1725.0) (2,660.0)Net borrowings / repayments under commercial paper program - - 155.0Payments for financing costs (29.2) (31.0) (24.0)Payments for forward-starting interest rate swap settlements - - -Net increase / decrease in restricted cash 3.8 - -Net proceeds from issuance of capital stock 4221.3 841.0 0.0Net proceeds from issuance of preferred stock 1607.8 0.0 0.0Purchases of capital stock (23.3) (34.0) (44.0)Dividends / distributions paid on common stock (1508.7) (1782.0) (1,912.0)Dividends paid on preferred stock (29.9) (113.0) (113.0)

Cash, cash equivalents, and restricted cash at beginning of period (254.7) (26.0) (75.0)Net cash provided by / used for operating activities 0.0 - -Net cash provided by / used for investing activities 0.0 0.0 -Net increase / decrease in cash and cash equivalents - discontinued operations 0.0 0.0 -Cash, cash equivalents, restricted cash and restricted cash equivalents, period increase / decrease, excluding exchange rate effect (254.7) (26.0) (75.0)Effect of exchange rate changes 1.2 (1.0) 0.0Net increase / decrease in cash and cash equivalents (253.5) (27.0) (75.0)Cash, cash equivalents, and restricted cash at beginning of period 567.6 440.0 413.0Cash and cash equivalents at end of period 314.1 413.0 338.0

14

Crown Castle InternationalForecasted Cash Flow Statement

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E 2025E

Net Income 1379 1617 1908 2167 2256 2302Operating ActvitiesDepreciation and amortization 1424 1506 1595 1692 1798 1915Receivables, net 18 -87 -86 -70 -61 -33Prepaid expenses, deferred site rental receivables and other current assets, net -167 -55 -57 -49 -4 -22Deferred site rental receivables -621 -241 -221 -183 -110 -64Site rental contracts and customer relationships, net 0 0 0 0 0 0Long-term prepaid rent and other assets, net -1135 -110 -118 -74 -25 -12Accounts payable and other accrued liabilities 9 126 123 120 107 71Deferred revenues -39 80 91 72 66 47Other long-term liabilities 638 506 461 413 267 164Net cash provided (used) from operating activities 126 1724 1789 1921 2039 2065Investing ActivitiesCapital expenditures -2976 -3158 -3353 -3562 -3784 -4025Restricted cash -0.16 -0.16 -0.16 -0.16 -0.17 -0.17Operating lease right-of-use assets -649 -691 -735 -782 -831 -883Other intangible assets, net 427 427 427 427 384 384Other intangible assets, net excluding site rental contracts and customer relationships, net 0 0 0 0 0 0Current portion of operating lease liabilities 32 35 37 40 42 45Operating lease liabilities 583 645 686 731 777 825Net cash provided from investing activities -2583 -2741 -2938 -3147 -3412 -3654Financing Activities Current maturities of debt and other obligations 153 1422 -675 2604 -432 -2315Debt and other long-term obligations 5100 1328 1404 1434 1451 1511Common stock issuance 180 180 180 180 180 180Dividend distributions -2359 -2627 -2948 -3247 -3411 -3548Net cash provided from financing activities 3075 303 -2038 971 -2211 -4172Reconciled cash balance 1997 902 -1279 1912 -1329 -3459Beginning cash balance 196 2193 3095 1816 3728 2400End cash balance 2193 3095 1816 3728 2400 -1059

15

Crown Castle InternationalCommon Size Income Statement

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025ENet revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Site rental 84.24% 86.96% 88.37% 86.53% 87.29% 87.40% 87.07% 87.25% 87.24%Network services and other 15.76% 13.04% 11.63% 13.47% 12.71% 12.60% 12.93% 12.75% 12.76%

Total operating expenses -76.03% -73.59% -72.95% -67.11% -65.55% -64.46% -63.97% -63.94% -64.40%Site rental -26.26% -26.00% -25.37% -25.22% -25.22% -25.22% -25.22% -25.22% -25.22%Network services and other -9.64% -8.06% -9.09% -9.58% -9.58% -9.58% -9.58% -9.58% -9.58%General and administrative -9.80% -10.38% -10.65% -10.07% -10.07% -10.07% -10.07% -10.07% -10.07%Asset write-down charges -0.40% -0.48% -0.33% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Acquisition and integration costs -1.41% -0.50% -0.23% -0.10% -0.04% 0.00% 0.00% 0.00% 0.00%Depreciation, amortization and accretion -28.52% -28.18% -27.28% -22.14% -20.64% -19.59% -19.10% -19.07% -19.53%

Operating income / loss 23.97% 26.41% 27.05% 32.89% 34.45% 35.54% 36.03% 36.06% 35.60%Interest expense and amortization of deferred financing costs -13.56% -11.84% -11.85% -9.22% -10.48% -10.50% -9.92% -10.72% -10.65%Gains / losses on retirement of long-term obligations -0.08% -1.95% -0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Interest income 0.43% 0.09% 0.10% 0.02% 0.24% 0.30% 0.16% 0.31% 0.19%Other income / expense 0.05% 0.02% 0.02% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03%

Other income / expense excluding gains / losses on foreign currency swaps 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Income / loss from continuing operations before income taxes 10.80% 12.72% 15.29% 23.72% 24.23% 25.37% 26.30% 25.68% 25.17%Benefit / provision for income taxes -0.60% -0.35% -0.36% -0.51% -0.52% -0.55% -0.57% -0.55% -0.54%Income / loss from continuing operations 10.21% 12.37% 14.92% 23.21% 23.71% 24.82% 25.73% 25.12% 24.63%Income / loss from discontinued operations, net of tax 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Net income / loss 10.21% 12.37% 14.92% 23.21% 23.71% 24.82% 25.73% 25.12% 24.63%Net income / loss attributable to the noncontrolling interest 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Net income / loss attributable to CCIC stockholders 10.21% 12.37% 14.92% 23.21% 23.71% 24.82% 25.73% 25.12% 24.63%Dividends on preferred stock -1.34% -2.08% -1.96% -1.76% -1.55% -1.39% -1.28% -1.20% -1.15%Net income / loss attributable to CCIC common stockholders 8.87% 10.29% 12.96% 21.45% 22.16% 23.43% 24.45% 23.93% 23.48%

16

Crown Castle InternationalCommon Size Balance Sheet% of salesFiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025ETotal assets 739.96% 604.55% 667.31% 686.31% 650.28% 598.26% 600.79% 578.42% 548.85%

Total current assets 26.03% 22.66% 20.89% 52.10% 60.24% 40.02% 59.71% 42.71% 6.35%Cash and cash equivalents 7.21% 5.11% 3.40% 34.11% 42.42% 22.31% 42.08% 25.45% -10.80%Restricted cash 2.78% 2.42% 2.38% 2.13% 1.88% 1.69% 1.55% 1.46% 1.41%Receivables, net 9.13% 9.24% 10.34% 8.99% 9.12% 9.23% 9.27% 9.35% 9.33%Deferred income tax assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Prepaid expenses, deferred site rental receivables and other current assets, net 6.91% 5.90% 4.77% 6.87% 6.81% 6.80% 6.81% 6.44% 6.41%

Prepaid expenses 3.73% 3.17% 1.86% 3.56% 3.48% 3.36% 3.26% 3.21% 3.20%Other current assets 3.18% 2.73% 2.92% 3.31% 3.34% 3.44% 3.55% 3.22% 3.21%

Deferred site rental receivables 29.85% 25.19% 24.71% 31.80% 31.34% 30.79% 30.37% 29.71% 29.22%Property and equipment, net of accumulated depreciation 296.93% 252.19% 254.49% 252.21% 244.93% 241.06% 242.65% 249.10% 261.05%Operating lease right-of-use assets 0.00% 0.00% 106.42% 105.47% 102.42% 100.81% 101.47% 104.17% 109.16%Goodwill 230.08% 185.84% 174.87% 156.72% 138.13% 123.77% 113.76% 106.90% 102.79%Other intangible assets, net 136.88% 101.71% 83.91% 68.56% 54.58% 43.66% 35.31% 29.11% 24.07%Site rental contracts and customer relationships, net 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Other intangible assets, net excluding site rental contracts and customer relationships, net 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Deferred income tax assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Long-term prepaid rent and other assets, net 20.19% 16.96% 2.01% 19.45% 18.65% 18.16% 17.53% 16.73% 16.21%

Total liabilities and equity 739.96% 604.55% 667.31% 686.31% 650.28% 598.26% 600.79% 578.42% 548.85%Total liabilities 456.66% 382.65% 485.30% 535.62% 528.85% 500.01% 520.66% 513.45% 497.25%Total current liabilities 29.66% 26.13% 33.32% 32.25% 51.22% 40.69% 69.40% 62.93% 38.55%

Accounts payable and other accrued liabilities 16.52% 14.97% 14.99% 13.57% 13.68% 13.77% 14.01% 14.31% 14.48%Accounts payable 5.71% 5.77% 5.80% 5.07% 5.11% 5.15% 5.22% 5.33% 5.39%Accrued interest 3.03% 2.73% 2.93% 2.39% 2.42% 2.45% 2.53% 2.62% 2.64%Other accrued liabilities 7.79% 6.47% 6.26% 6.11% 6.15% 6.17% 6.26% 6.36% 6.45%Deferred revenues 10.49% 9.18% 11.40% 9.61% 9.57% 9.69% 9.72% 9.83% 9.94%Current maturities of debt and other obligations 2.65% 1.97% 1.74% 3.93% 22.96% 12.28% 40.68% 33.65% 8.74%Current portion of operating lease liabilities 0.00% 0.00% 5.19% 5.14% 5.01% 4.95% 4.99% 5.14% 5.40%Debt and other long-term obligations 368.36% 305.64% 312.70% 359.56% 335.11% 317.52% 308.02% 304.85% 308.54%Operating lease liabilities 0.00% 0.00% 95.63% 94.77% 92.37% 91.20% 92.06% 94.76% 99.53%Other long-term liabilities 58.64% 50.88% 43.66% 49.04% 50.15% 50.60% 51.17% 50.92% 50.63%Deferred income tax liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Other long-term liabilities excluding deferred income tax liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Total equity 283.29% 221.91% 182.01% 150.69% 121.43% 98.25% 80.14% 64.97% 51.60%Total CCIC stockholders' equity 283.29% 221.91% 182.01% 150.69% 121.43% 98.25% 80.14% 64.97% 51.60%

Common stock 386.80% 327.70% 309.89% 280.53% 249.72% 225.98% 209.73% 199.00% 193.19%Accumulated other comprehensive income / loss -0.09% -0.09% -0.09% -0.08% -0.07% -0.06% -0.06% -0.05% -0.05%Dividends / distributions in excess of earnings -103.42% -105.70% -127.80% -129.76% -128.22% -127.67% -129.53% -133.98% -141.54%Noncontrolling interest from discontinued operations 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

17

Crown Castle International Value Driver Estimation

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E

NOPLAT: 1257 1659 1720 2286 2698 3094 3411 3641 3758Revenue 4356 5423 5763 6431 7296 8142 8859 9427 9805Implied Interest on operating lease 258 271 201 222 245 269 294 321 350Less:Site rental -1144 -1410 -1462 -1622 -1840 -2054 -2234 -2378 -2473Network services and other -420 -437 -524 -616 -699 -780 -849 -903 -939General and administrative -427 -563 -614 -648 -735 -820 -892 -949 -987Asset write-down charges -17 -26 -19 0 0 0 0 0 0Acquisition and integration costs -61 -27 -13 -7 -3 0 0 0 0Depreciation, amortization and accretion -1242 -1528 -1572 -1424 -1506 -1595 -1692 -1798 -1915EBITA 1302 1703 1760 2337 2758 3162 3486 3721 3841Adjusted taxes 46 44 40 51 60 68 75 80 83

Change in deferred taxes 0 0 0 0 0 0 0 0 0

Invested Capital (IC): 26626 26875 24205 27595 29362 31302 33355 35593 36238Total Current Assets 1013 1098 1067 1534 1746 1957 2133 2243 485

Cash and cash equivalents 314 277 196 514 584 651 709 754 -1059Receivables, net 398 501 596 578 665 751 821 882 915Prepaid expenses 162 172 107 229 254 274 289 303 314Other current assets 139 148 168 213 244 280 314 304 315

Total Current Liabilities 1177 1310 1521 1490 1696 1910 2102 2276 2394Accounts Payable 249 313 334 326 373 419 463 502 529Other Accrued liabilities 339 351 361 393 449 503 554 599 632Accrued Interest 132 148 169 154 177 200 224 247 259Deferred Revenue 457 498 657 618 698 789 861 927 974

Other Long Term Operating Assets 29344 29846 27175 30705 32972 35376 37858 40426 43112Deferred site rental receivables 1300 1366 1424 2045 2286 2507 2690 2801 2865Net PPE 12,933 13,676 14,666 16,218 17,870 19,628 21,498 23,484 25,594Other ingtangibles, net 5,962 5,516 4,836 4,409 3,982 3,555 3,128 2,744 2,360Present value of operating lease 8270 8368 6,133 6,782 7,473 8,208 8,990 9,820 10,703Long term prepaid rent 879 920 116 1,251 1,361 1,478 1,553 1,577 1,589

Other Long Term Operating Liabilities 2,554 2,759 2,516 3,154 3,659 4,120 4,534 4,801 4,964

Free Cash Flow (FCF):NOPLAT 1,257$ 1,659$ 1,720$ 2,286$ 2,698$ 3,094$ 3,411$ 3,641$ 3,758$ Change in IC 5,135$ 249$ (2,670)$ 3,390$ 1,767$ 1,940$ 2,053$ 2,237$ 646$ FCF (3,879)$ 1,410$ 4,390$ (1,104)$ 931$ 1,154$ 1,358$ 1,403$ 3,112$

Return on Invested Capital (ROIC):NOPLAT 1257 1659 1720 2286 2698 3094 3411 3641 3758Beg. IC 21491 26626 26875 24205 27595 29362 31302 33355 35593ROIC 5.85% 6.23% 6.40% 9.45% 9.78% 10.54% 10.90% 10.91% 10.56%

Economic Profit (EP):Beg. IC 21491 26626 26875 24205 27595 29362 31302 33355 35593x (ROIC - WACC) 1.33% 1.71% 1.88% 4.92% 5.26% 6.01% 6.37% 6.39% 6.04%EP 285 454 504 1192 1450 1766 1995 2132 2148

18

Crown Castle InternationalWeighted Average Cost of Capital (WACC) Estimation

Cost of Equity: ASSUMPTIONS:Risk-Free Rate 0.79% 10-year treasury October 27, 2020Beta 0.79 Average of 2, 2.5, 3, 3.5, 4, 4.5, and 5 year monthly betaEquity Risk Premium 5.35% Professor Damodaran implied ERP as of November 1stCost of Equity 5.00%

Cost of Debt:Risk-Free Rate 0.79% 10-year treasury October 27, 2020Implied Default Premium 2.48%Pre-Tax Cost of Debt 3.27% YTM on corporate bond maturing in 2050Marginal Tax Rate 2.16%After-Tax Cost of Debt 3.20%

Market Value of Common Equity: MV WeightsTotal Shares Outstanding 416Current Stock Price $160.42MV of Equity 66,734.72 73.34%

Market Value of Debt:Short-Term Debt 0Current Portion of LTD 100Long-Term Debt 18,021PV of Operating Leases 6,133MV of Total Debt 24,254.00 26.66%

Market Value of the Firm 90,988.72 100.00%

Estimated WACC 4.52%

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Crown Castle International

Key Inputs: CV Growth of NOPLAT 2.00% CV Year ROIC 10.56% WACC 4.52% Cost of Equity 5.00%


DCF Model:Free Cash Flow (FCF) -1104 931 1154 1358 1403 3112Continuing Value (CV) 120748PV of FCF -1056 852 1010 1138 1125 96790

Value of Operating Assets: 99859Non-Operating AdjustmentsRestricted Cash 137Debt -18121Pv of operating lease -6133Value of Equity 75742Shares Outstanding 416Intrinsic Value of Last FYE 182.07$ Implied Price as of Today 189.83$

EP Model:Economic Profit (EP) 1192 1450 1766 1995 2132 2148Continuing Value (CV) 85156PV of EP 1140 1327 1547 1671 1709 68259

Total PV of EP 75654Invested Capital (last FYE) 24205Value of Operating Assets: 99859Non-Operating AdjustmentsRestricted Cash 137.0Debt -18121PV of eoperating lease -6133Value of Equity 75742Shares Outstanding 416Intrinsic Value of Last FYE 182.07$ Implied Price as of Today 189.83$

20

Crown Castle InternationalDividend Discount Model (DDM) or Fundamental P/E Valuation Model


FFO per share 6.76$ 7.54$ 8.43$ 9.22$ 9.60$ 9.87$

Key Assumptions CV growth of EPS 2.00% CV Year ROE 12.62% Cost of Equity 5.00%

Future Cash Flows P/E Multiple (CV Year) 28.02 FFO (CV Year) 9.87$ Future Stock Price 276.55 Dividends Per Share 5.69 6.34 7.09 7.76 8.08 8.30 Discounted Cash Flows 5.42 5.75 6.12 6.38 6.33 216.65

Intrinsic Value as of Last FYE 246.66$ Implied Price as of Today 257.18$

21

Crown Castle InternationalRelative Valuation Models

FFO FFOTicker Company Price 2020E 2021E P/FFO 20 P/FFO 21AMT American Tower 231.65$ 8.26 9.13 28.04 25.37 SBA SBA Communications 295.02$ 9.23 10.24 31.96 28.81 EQIX Equinix 740.68$ 24.65 26.80 30.05 27.64

30.02 27.27

CCI Crown Castle International $160.42 $6.76 $7.54 23.7 21.3

Implied Relative Value: P/FFO (FFO/S 2020) 203.04$ P/FFO (FFO/S 2021) 205.51$

22

Crown Castle InternationalKey Management Ratios

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025ELiquidity Ratios:

Current Ratio (Current Assets/Current Liabilities) 0.88 0.87 0.63 1.62 1.18 0.98 0.86 0.68 0.16Quick Ratio (Current Assets-(Inventories+Prepayments)/Current Liabilities) 1133.75 1228.97 1203.97 3350.18 4395.26 3258.77 5289.80 4026.13 622.69Cash Ratio (Cash and Marketable Securities/Current Liabilities) 0.24 0.20 0.10 1.06 0.83 0.55 0.61 0.40 -0.28Operating Cash Flow Ratio (Operating Cash Flow/Total Debts) 0.13 0.15 0.15 0.00 0.00 0.00 0.00 0.00 0.00

Asset-Management Ratios:Accounts Receivable Turnover (Net Sales/Average Accounts Recievable) 7.61 8.37 7.21 7.27 8.01 7.82 7.63 7.47 7.32Total Asset Turnover (Nets Sales/Average Total Assets) 0.11 0.11 0.11 0.11 0.11 0.11 0.12 0.12 0.12Days Sales Outstanding (Accounts Recievable/(Net Sales/365)) 33.32 33.72 37.75 32.81 33.29 33.68 33.82 34.14 34.07

Financial Leverage Ratios:Debt Ratio (Total Liabilities/Total Assets) 0.62 0.63 0.73 0.78 0.81 0.84 0.87 0.89 0.91Debt to Equity Ratio (Long-Term Debt+Value of Leases/ Average Shareholders Equity) 0.81 0.68 0.80 1.15 1.32 1.53 1.81 2.17 2.70Long-Term Debt to Equity Ratio (Long-Term Debt/Average Shareholders Equity) 1.17 0.90 1.04 1.51 1.73 2.01 2.36 2.83 3.50Interest Coverage Ratio (EBIT/Annual Interest Expense) -1.77 -2.23 -2.28 -3.57 -3.29 -3.39 -3.63 -3.36 -3.34

Profitability Ratios:ROE (Net Income/Averager Shareholder's Equity) 2.23% 2.75% 3.82% 7.40% 9.32% 11.99% 15.10% 17.91% 21.59%ROA (Net Income/Average Total Assets) 1.00% 1.15% 1.44% 2.28% 2.38% 2.66% 2.88% 2.80% 2.83%Gross Margin (Gross Profit/Net Sales) 64.10% 65.94% 65.54% 65.20% 65.20% 65.20% 65.20% 65.20% 65.20%Operating Margin (Operating Income/Net Sales) 23.97% 26.41% 27.05% 32.89% 34.45% 35.54% 36.03% 36.06% 35.60%

Payout Policy Ratios:Dividend Payout Ratio (Dividend/FFO) 0.93 0.85 0.82 0.84 0.84 0.84 0.84 0.84 0.84Total Payout Ratio ((Divs. + Repurchases)/NI) 0.010 0.008 0.006 0.004 0.004 0.004 0.004 0.004 0.004EPS Ratio (Net Earnings/Number of Shares) 11.41 13.13 13.85 15.52 17.61 19.58 21.17 22.32 22.95

23

Fiscal year ending Dec 31st 2017 2018 2019 2020 2021 2022 2023 2024 2025Federal taxes 3 5 6Foreign taxes 6 7 8State taxes 2 5 5Pretax income 471 690 881Marginal tax rate 2.34% 2.46% 2.16% 2.16% 2.16% 2.16% 2.16% 2.16% 2.16%

Benefit/Provision from taxes 26.04 19.00 21.00 32.95 38.18 44.62 50.33 52.29 53.31 Tax shield on Interest expense and amortization of deferred financing costs 13.81 15.82 14.73 12.81 16.52 18.46 18.98 21.83 22.55 Tax shield on implied interest on operating lease 6.04 6.67 4.33 4.79 5.28 5.80 6.35 6.94 7.56 Tax shield from loss on retirement of long term obligations 0.08 2.61 0.04 - - - - - - Tax on interest income (0.44) (0.12) (0.13) (0.03) (0.37) (0.53) (0.31) (0.64) (0.41) Tax on other income and losses - - - - - - - - - Adjusted taxes 46 44 40 51 60 68 75 80 83

24

Crown Castle InternationalPresent Value of Operating Lease Obligations

Fiscal Years Ending Dec. 31 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Year 1 289.3 298.3 301.3 428.8 565.6 569.3 564.1 573.7 635.3 640.0Year 2 296.2 302.9 305.3 430.3 573.1 574.7 571.3 577.6 632.8 631.0Year 3 300.6 305.6 307.3 434.2 578.6 578.8 575.6 581.6 622.6 628.0Year 4 303.6 306.2 308.8 437.7 582.2 580.2 579.4 579.2 618.0 623.0Year 5 304.5 306.9 311.2 440.6 583.8 581.0 580.9 579.6 609.8 619.0Thereafter 3714.6 3659.9 3907.9 5761.4 7546.1 8067.1 7669.4 7741.7 7941.2 8054.0Total Minimum Payments 5208.9 5179.9 5441.8 7933.1 10429.3 10951.2 10540.7 10633.3 11059.6 11195.0Less: Cumulative Interest 1278.6 1253.1 1355.6 2021.2 2639.4 2881.5 2698.7 2734.9 2789.8 2827.0PV of Minimum Payments 3930.3 3926.8 4086.1 5911.8 7789.9 8069.7 7842.0 7898.4 8269.8 8368.0

Implied Interest in Year 1 Payment 128.6 128.5 133.7 193.4 254.9 264.0 256.6 258.4 270.6

Pre-Tax Cost of Debt 3.27% 3.27% 3.27% 3.27% 3.27% 3.27% 3.27% 3.27% 3.27% 3.27%Years Implied by Year 6 Payment 12.2 11.9 12.6 13.1 12.9 13.9 13.2 13.4 13.0 13.0Expected Obligation in Year 6 & Beyond 304.503 306.938 311.242 440.573 583.775 581.02 580.894 579.585 609.796 619

Present Value of Lease PaymentsPV of Year 1 280.2 288.9 291.7 415.3 547.7 551.3 546.2 555.5 615.2 619.7PV of Year 2 277.7 284.0 286.2 403.5 537.3 538.9 535.7 541.6 593.3 591.6PV of Year 3 272.9 277.5 279.0 394.3 525.3 525.5 522.6 528.0 565.3 570.2PV of Year 4 266.9 269.2 271.5 384.8 511.9 510.1 509.4 509.2 543.3 547.7PV of Year 5 259.2 261.3 265.0 375.1 497.0 494.6 494.5 493.4 519.1 527.0PV of 6 & beyond 2573.3 2546.0 2692.7 3938.9 5170.8 5449.2 5233.6 5270.7 5433.7 5511.8Capitalized PV of Payments 3930.3 3926.8 4086.1 5911.8 7789.9 8069.7 7842.0 7898.4 8269.8 8368.0

25

Crown Castle InternationalSensitivity Tables

189.83 3.92% 4.12% 4.32% 4.52% 4.72% 4.92% 5.12%1.25% 204.04 183.81 166.23 150.63 137.19 125.06 114.20 1.50% 222.94 199.41 179.23 161.53 146.44 132.94 120.95 1.75% 246.20 218.30 194.77 174.41 157.25 142.06 128.69 189.83 -22% -23% -24% -25% -26% -27% -28%

CV Growth of NOPLAT 2.00% 275.52 241.66 213.65 189.83 170.05 152.75 137.68 -8.1% 228.07 219.57 211.08 202.58 194.08 185.59 177.092.25% 313.61 271.25 237.10 208.65 185.43 165.43 148.23 -8.6% 223.82 215.32 206.83 198.33 189.83 181.34 172.842.50% 365.12 309.98 266.99 232.13 204.29 180.73 160.79 -9.1% 219.57 211.08 202.58 194.08 185.59 177.09 168.592.75% 438.63 362.85 306.39 262.22 227.93 199.57 176.01 Cost of service -9.6% 215.32 206.83 198.33 189.83 181.34 172.84 164.34

-10.1% 211.08 202.58 194.08 185.59 177.09 168.59 160.10-10.6% 206.83 198.33 189.83 181.34 172.84 164.34 155.85-11.1% 202.58 194.08 185.59 177.09 168.59 160.10 151.60

189.83 1.25% 1.50% 1.75% 2% 2.25% 2.50% 2.75%6.70% 213.69 212.63 211.57 210.51 209.45 208.39 207.33 6.90% 206.96 205.88 204.80 203.72 202.63 201.55 200.47 7.10% 200.14 199.03 197.93 196.82 195.72 194.62 193.51

Depreciation rate 7.30% 193.21 192.09 190.96 189.83 188.71 187.58 186.45 7.50% 186.19 185.04 183.89 182.74 181.59 180.45 179.30 7.70% 179.07 177.90 176.72 175.55 174.38 173.21 172.04 7.90% 171.84 170.65 169.45 168.26 167.06 165.87 164.67

189.83 -8.6% -9.1% -9.6% -10.1% -10.6% -11.1% -11.6%2.67% 215.62 211.08 206.55 202.01 197.48 192.94 188.412.87% 211.10 206.66 202.23 197.79 193.36 188.92 184.483.07% 206.77 202.43 198.09 193.75 189.41 185.07 180.73

189.83 0.64% 0.69% 0.74% 0.79% 0.84% 0.89% 0.94% Pre-tax cost of debt 3.27% 202.58 198.33 194.08 189.83 185.59 181.34 177.095.05% 223.64 218.79 214.10 209.55 205.14 200.86 196.71 3.47% 198.64 194.48 190.31 186.15 181.99 177.83 173.675.15% 216.08 211.47 207.00 202.66 198.46 194.38 190.42 3.67% 194.81 190.74 186.66 182.58 178.50 174.42 170.355.25% 208.88 204.49 200.23 196.10 192.09 188.19 184.41 3.87% 191.14 187.14 183.14 179.15 175.15 171.15 167.16

Equity Risk Premium 5.35% 202.03 197.84 193.78 189.83 186.00 182.28 178.66 5.45% 195.49 191.50 187.62 183.85 180.19 176.62 173.16 5.55% 189.25 185.44 181.73 178.12 174.62 171.21 167.88 5.65% 183.29 179.65 176.10 172.65 169.29 166.01 162.83

Rf rate

Cost of site rental

General and Administrative Expense

WACC

Capital expenditure growth rate

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Documents

Real Estate Crown Castle International (NYSE: CCI)