Crown Castle Inc. (NYSE:CCI) Citi’s 2023 Communications, Media & Entertainment Conference January 5, 2023 4:30 PM ET
Company Participants
Dan Schlanger – CFO
Conference Call Participants
Michael Rollins – Citi
Michael Rollins
Well, good afternoon. And for those joining via the audio stream will come back to Citi’s 2023 Communications, Media — Communication, Media and Entertainment Conference. For those of you who I haven’t met, I’m Mike Rollins, I cover Communication Services and Infrastructure for Citi.
Before we get started, I’d like to mention that we do have disclosures available at the registration desk and on the Citi Velocity page from which you’re streaming the audio. We will work to incorporate your questions into today’s discussion. So for those of us around the room, you have microphones and if you push the button, the light will go on and we’ll get to your question. If you are streaming this connection, there is a question box on the page that you’re on, and you can just submit your questions at any point and we’re going to continue the tradition of using live surveys during our time together. They are completely anonymous. We’re just collecting responses and it could be accessed with the QR codes, any information that are on the placards here on the table as well as they’ll come up on the live streaming screen and you can enter in your responses.
So with all of those details out-of-the way, I would like to welcome back Dan Schlanger, CFO of Crown Castle. Dan, it’s great to so you. Thanks for being here.
Dan Schlanger
Thanks for having us, Mike. It’s great to be here.
Question-and-Answer Session
Q – Michael Rollins
So we like to start the year in the same way. I think, just thinking about your strategic and operating priorities as you look out to 2023. And as you look out to the coming year are there any notable changes from what your priorities were over the past year.
Dan Schlanger
The answer to the second question is, not really. We have a pretty consistent set of priorities. We want to lease-up the assets we already own and we want to build assets that we think we can lease-up overtime. We think that we’ve set ourselves up very well on both fronts that the — the data demand growth in the US drives demand for our business. And whether that’s our tower business, our small-cell business, as long as data demand is growing we think we have a very good place in the world that we continue to drive lease-up on the existing assets that we have and have the ability to project out where we think additional assets will be valuable overtime in the network to allow for that future demand to be serviced with additional infrastructure.
And because we have a very healthy demand growth, a healthy set of customers that are competing well on network quality and consumers that are upgrading phones and looking for a better wireless experience, we think that creates a very good mix of dynamics that allows for us to see good growth in our business, both in 2023 and beyond.
Michael Rollins
We’re going to insert our first survey question into here. Get this going, but we’ll talk about a few things before we get back to this. So the first question for our audience is, what do you expect Crown’s organic tower growth to be in 2023 excluding T-Mobile churn? Help remind per your prior guidance and actually, I think this came up this time a year ago where you pushed out that T-Mobile churn to 2025. So this is just an organic number without that. And the choices are less than or equal to 4%, 4% to 5%, 5% to 6%, 6% to 7% or over 7%. So we’ll see as those responses come back in, encourage everyone —
Daniel Schlanger
I’ll have to answer?
Michael Rollins
We’ll get to — yes, very much so. And if you’d like to actually be a part of the survey —
Daniel Schlanger
No. I’ll answer verbally when you ask.
Michael Rollins
Okay. We’re going to come back to this in a moment. But just one question before we get there, which is, as you look at the portfolio of what you have, towers, small cells, fiber infrastructure, how do you view the synergies of these assets growing faster together versus if they were simply stand-alone portfolios or separate portfolios.
Daniel Schlanger
We think we’re — the significant benefit for having everything under one place is that, we can have a conversation with our customers that’s beyond a specific asset and more geared towards where they have a network issue that they need to address, and we can help them address it.
So if they have a spot in their network that requires coverage, we don’t just go to them and say, “Oh, yes, we own the tower, you can use ours if you want”. We can talk to them about how do you best want to address that spot. And not only today, but five years from now or 10 years from now, and we can have a conversation that extends beyond selling a product and more towards selling a solution.
I think if you think about that as your own personal way of going about the world, it’s much better when somebody can help you solve a problem than it is somebody saying, “Hey, if you want this thing, you can own it”. And we believe that develops a tighter relationships with our customers so that we can have better back and forth, better communication and a better relationship. But it also allows us to have a better insight into where we think infrastructure will be needed.
And you saw some of that with our conversations with DISH and the agreement that we signed with DISH a few years ago around their tower business primarily, but it included a fiber aspect to it. And the reason that was important was because DISH is trying to build an all-digital fiber-connected network of towers and other infrastructure assets. But they are very much in a go-as-fast-as-you-can type of mode, and they started from almost zero because they didn’t have a lot of network experience to begin with. So they wanted the ability to go to one provider and get both towers and fiber at the same time so that they could have less to manage themselves.
And just that in and of itself that they thought it was important to go to one provider and wanted fiber to be included in a predominantly tower MLA was an important validation of why we think having different capabilities together will help, because it allowed us to have the first mover advantage with DISH, and we believe put us in a position of being able to generate more than our fair share of new leasing from DISH as they’re building out the first days of their network.
And those are all really important because as it goes around our company, but you can’t get amendments on towers you don’t have. So we wanted many towers with DISH as we can get so that as they grow their network and want to add more equipment, they’re going to go to the places they already have equipment, and that’s going to help our growth in the future.
So not only does it help us in the near term that we get lots of growth, but we believe we set ourselves up for long-term growth. So again, back to our priorities, lease-up the assets you have and invest in assets that are going to lease up over time. Having fiber was an important aspect of getting both those new leases and the future lease-up that we will see over time. And that’s the type of relationship that we believe is spawn by having a conglomeration of assets as opposed to just one thing that we can go sell, “Hey, if you want a pen, you want it to be blue”.
Michael Rollins
Thinking just a little bit more about DISH for a moment. When you announced that opportunity, I think there was a thought of time and the opportunity for Crown Castle to maybe take more than its fair share. How is that playing out in terms of the DISH opportunity?
Daniel Schlanger
From what we can piece together from publicly available information, we believe we have taken more than our fair share. It seems like we have generated more growth out of DISH than what our competitors have been able to generate and we believe our agreement with DISH is a reason for that.
Like I said, we’re a first mover, we also believe, as they have said that they wanted to anchor a lot of their locations around Crown Castle sites because we had that agreement in place. And it incentivized them to go on as many sites as they could on our system. We gave them access on up to 20,000 sites. And there’s an incentive for them to go on a lot of those. We want them on a lot of them as well for all the reasons that I just articulated.
And we believe that structure and their desire to utilize our asset base as their anchor of their build really has allowed us to take advantage of more than our fair share. I do also believe that the location of our assets has helped with that. We are skewed a little bit more to the urban areas than our peers are. But I think the majority of what we’ve gotten over our fair share would be because we move first with DISH, and we’re able to make that agreement come to fruition.
Michael Rollins
After you had that announcement, just to stick on this for just a couple of more minutes. After you had that announcement, I recall the next quarter you increased the amount of committed revenue that’s in the backlog. And which, I think, established what you expected to be the minimum over the term of the agreement. Is a lot of that now in the revenue? Or is a lot of that still on the come in terms of the opportunities to monetize that relationship?
Daniel Schlanger
Yes. That number, obviously, is the total amount of the revenue that we see over the course of the life of the contract, and that contract is 15 years. So a lot of that still is yet to come. But we have recognized revenue with DISH as they build out their network and gone on sites. And we’ve seen them be very active. We’ve been very impressed by the speed at which they were able to build as an organization to deploy a nationwide network. They have been a very fair and demanding customer. They have made us go as fast as we can and pushed us really hard, and we think that’s good for everybody. And so, we’ve both recognized activity and there’s a lot of activity yet to come.
Michael Rollins
So I’ll share the survey results, then we could talk a little bit more zooming out on just the broader organic growth opportunity for the domestic business. So 25% thought growth — organic growth, domestic 2023, of course, all domestic for towers is less than or equal to 4%. 63% between 4% and 5% and 13% between 5% and 6%. It sound like you wanted to get in on the survey and share your answer.
Daniel Schlanger
Well, we’ve given guidance, so I have an answer. What we’ve said that we think we’re going to grow in 2023 is around 5%. So I’m interested in the split, whether people chose 4% to 5% or 5% to 6% based on if they thought it was 5%, which way did they go. But my guess is, most people would be centered around that 5% because generally, when we’ve given guidance, we’re in the – they were in the ballpark, we have a pretty good sense for what the growth is going to be.
What we’re excited about though is, we have over the course of the last few years been a little higher than that. It’s been 6% or so or a little bit more, and we’ve led our industry in the amount of growth in the U.S. tower market. We’re excited that we’re able to stay in our long — what we think for the foreseeable future, we will grow about 5% to 6% at revenue for towers. And being in that range, we think is really indicative of what I started with that there’s a good set of dynamics underlying our growth in the U.S. with lots of demand and growth in that demand, good competitive tension among our customers and lots of demand from our consumer — from the consumer in the U.S. of wanting a better mobile experience.
And all of that is pointing to us being able to sustain a 5% revenue growth over time. And our business is such that adding year-over-year of good growth generates really strong returns for our shareholders for a long period of time. And we’re excited about where we are. We think we’re still in the middle of an upgrade cycle that will continue for years to come as our customers continue to roll out more spectrum on towers and continue to compete with each other on network quality, those are all really positive dynamics for us.
Michael Rollins
And when you think about that 5% to 6% longer-term annual opportunity, and you have agreements with a range of your large customers, how much visibility is there? Is it very high right now already because of the established agreements? Is there a certain amount of flex that’s involved? How should we think about that visibility?
Daniel Schlanger
We feel very good about that 5% to 6%, partly because we have the agreements in place with our customers. And those agreements, in essence, provide a level of growth that we know about, but it doesn’t cap the amount of growth. There isn’t like, okay, that’s the most you could ever get. So we actually feel really good about that 5% to 6% over a period of time in the foreseeable future and the ability that if things go really well, we could do better.
That’s part of the way the tower business has been for a long time is — I think you’ve heard me say this before. I think our investors in many cases overestimate the amount of growth we have in any one year and significantly underestimate the amount of growth we have over a decade, because people look out and say, oh, you can’t grow that much over a long period of time. We’re going to run out of voice minutes. They’re going to — everybody is going to have a phone and they’re all going to call as many people they can. You’re never going to need another tower again. And then you’re going to run out of data minutes. And then it’s going to be — well, now it’s unlimited so there’s not going to be a huge amount of incentive to invest and continue to build the network. There was always a reason to believe that the demand growth was going to tail off. And we’ve never seen that in our business. We always see that we as consumers continue to consume more data. And that leads to significantly more growth over a longer period of time than most investors would think. And I think if we had gone back 10 years ago and said, do you think we would be at the level of revenue and amendment activity that we are in 2023. As we ask that question in 2013, everybody was said no way, as we hadn’t even gone into really the 4G upgrade cycle that we’ve seen and now we’re in 5G. I just think that the ability for our business to add 5% to 6% growth over and over and over again turns out to be a really good thing over 10 years and more.
Michael Rollins
So the next survey question is going to preview where we’re going, but we won’t get there just yet. So the next question that I’m going to ask our audience to help with is, when will small cell bookings and installs accelerate? 2023, 2024, 2025 are difficult to estimate. So we’ll see what they come back with.
But while they’re thinking about the answer, DISH is new [co-lo] (ph) for you. But for the other major carriers you have in the U.S., as they’re finishing the mid-band builds, are you starting to see the pipeline and interest in co-location and densification increase or change?
Daniel Schlanger
Yes. To us, it’s really unimportant whether it’s co-location versus an amendment, because what we get is incremental revenue on an asset that we already own. What we’re seeing is a general consistent trend or a trend that is generally consistent with what has happened in the past in the tower business is, our customers when faced with the desire to deploy a lot of spectrum over large [indiscernible] area, they start with amendments for the most part, because they know what is on the tower, what the propagation characteristics are, what the traffic patterns are and they already have the network set up to see where one tower overlaps with another, and so it goes faster and easier for them to go with amendments first. And then they move into co-locations which are putting assets on — or putting antennas on assets we already own, but they are not on yet. That takes more network engineering, because it adds another point of presence, and they have to [shift] (ph) their network around a little bit, and it takes a little bit longer to figure those out and it’s a little more expensive.
So they go first amendment into co-locations and that’s kind of how they generally move through an upgrade cycle. And we’re seeing much of the same thing now. I think that we’ve heard some of our customers publicly say good things of that nature, too. We kind of — we’ve gotten a lot of C-band out, now we need to infill. That infill, in many cases, means adding in some places they don’t already have covered with a new band, in this case, C-band. So yes, we’re seeing that. That’s a natural transition that we are seeing.
Michael Rollins
And in terms of churn, churn recently has been running from what I recall at the lower end of the annual 1% to 2% ex kind of major consolidation churn. And given all the agreements in place and the visibility you have, again, keeping T-Mobile out of this equation, should it stay at the lower end now going forward, at this like one-ish percent type level?
Daniel Schlanger
I think we’ll be within 1% to 2%, but on the lower end of the 1% to 2%. Yes. I think there will always be certain years that something happens and it pops up. So I don’t want to say it will always be at the one-ish percent, but 1% to 2% is a good range and the lower end is generally what we’ve seen when there hasn’t been consolidation churn within the tower business.
But like we’ve said, the — you kind of excluded the T-Mobile churn, I want to just hit it for a second. What we’ve done is, we’ve signed an agreement with T-Mobile where the deconsolidation churn for the most part hits in 2025. So we consolidated what was churn across a long period of time and pushed it into 2025, and that’s around $200 million of run rate revenue that will churn in 2025. And what we’ve said is, past that there will be some churn, but it will be within that 1% to 2% normal course for us. So like I said, I think that normally will be around the low end of 1%, but there might be some times when it might pop up a little bit depending on a specific year.
Michael Rollins
Okay. Got it. And so as we are just closing out the discussion on the domestic business, are there — there are certain things that are in these agreements already and there’s probably things that are going to emerge in the future that may not be covered by the agreements and could be an opportunity for further monetization. Are there certain things that we should all just be thinking about and looking for whether it’s — I mean, just throw out a few things randomly like a massive [MIMO] (ph), taking antennas from three sectors to maybe six sectors in certain markets which could accommodate certain types of capacity for things, including like fixed wireless, things that — are the — those things or other things that you would imagine that we should just be aware of that could really be an interesting source of incremental monetization that’s not covered by these base agreements.
Daniel Schlanger
I wouldn’t say that there’s anything on a — when you’re talking about structural basis. But what I would say is, the compounding effect of data demand growing at 30% a year is hard to imagine when you sit today. What that means is, over the next two to three years, the incremental amount of data will be equal to the total amount of data that is moving over to the network right now. So 30% growth means every two to three you double.
The ability to keep up with that is going to require amount of investment in additional antennas, additional tower sites, additional small cells. I think it’s hard to think through how much that will be because the increments have been small over time, and now we’re getting to a point where the network is actually really big, and we’re still going to have to double. And how that gets done, the true architecture of that, I believe is less important to us than the fact that we as an industry need to figure out how to accommodate all of the consumer demand that is coming.
And we believe at Crown Castle that we are best positioned to benefit from that demand because whether it is going from three sectors to six because we have fixed wireless or whether there’s massive MIMO or whether it ultimately — I know you didn’t do this on purpose, but when it ultimately moves to small cells, we’re somewhat agnostic as we benefit from it all. And our — like I said, our MLAs don’t have like a cap to them and say, well, forever and ever, this is the most we’ll ever make. It actually allows us to have — if certain things are done, we can make more money. And I think that just the compounding effect of 30% demand growth year-over-year really result — it gets back to the same thing I said earlier, really results in over a 10-year period, a lot more activity than what most people can think of when you start that 10-year period.
Michael Rollins
So it’s a good pivot into the small cell discussion. So we have the results of the survey back and 13%, 2023 when small cell bookings and installs can accelerate. 2024 is about quarter of the audience. And 2025 is about 38% and difficult to estimate was almost quarter of our audience as well. So as a dispersion, what are you seeing? Can you review for us with what you’re seeing in the small cell business? You had some activity in 2022 and how the conversations may be evolving with these carriers, somewhat to what we’re just talking about earlier, now that they’re getting through this mid-band cycle and this amendment cycle, talk about the small cell opportunity.
Daniel Schlanger
I would have bifurcated your question into bookings versus installs, because I think the difficulty is that, bookings to installs can take 18 to 36 months. And we’ve already seen the bookings acceleration. Over the course of the last 18 months, we have signed 50,000 additional small cell nodes, 15,000 with Verizon and 35,000 in T-Mobil. That was equal to about 70% of the total bookings we would have in the history of the company added together. That is an acceleration.
So we believe that the bookings acceleration has occurred and now we’re starting to get into the position where the installation acceleration is occurring starting in 2023, where we’re doubling the number of nodes we believe will put on here from 5,000 in 2022 to 10,000 in 2023. We don’t believe that we were capped there. We think that there’s ability to grow past 2023 at 10,000 or more. So we believe we’ve already seen that acceleration in bookings and that 2023 is the start of the acceleration of installation, but we believe that we can accelerate even more beyond. And what that leaves us is a question, I think, that is underlying what your survey was, which is, when there’s the next acceleration going to happen.
And what I think that kind of ignores is that, the acceleration we’re seeing today happened during the period that our customers, particularly Verizon and T-Mobile, were very busy deploying mid-band spectrum on towers. And even though they were very busy on towers, they knew that over the course of the next to three — two to five 5 years, they needed small cells as the next leg of their network deployment and needed to get started on those small cells over the last 18 months to give us time to start citing them, building them and delivering them.
And what’s good about that is, like I said, even in the midst of being so focused on getting as many towers hit as possible with that mid-band spectrum, they knew small cells were coming. And there’s no way that they gave us all of the small cell business that they’re going to have over the next three to five years. That’s not the way companies act. Nor do we think that they give us all of what they’ll outsource. It’s just the first tranche of what we think is a growth engine for us and the industry, because like I said, we — as we look out and think through how much data demand is growing and how much network capacity has to grow to withstand that demand, that dynamic can’t be — serviced only with towers has to go to small cells, and that growth in small cells will drive significant growth in both additional bookings and installations and additional new build and co-locations for Crown Castle.
And when we go back to our operational priorities of lease up the assets you have and build assets that will be leased up, that’s exactly what we’re seeing in the small cell business right now. The question of when we see that next round, we’ve already seen the first round of 50,000. When we see the next round, I think it’s difficult to predict because we have a hard time predicting when our customers will prioritize specifically building out small cells over all the other things that they might have in terms of capital allocation priorities.
We’re ready, able and willing to provide the small cells as they come up. We have no internal capacity constraints that we have come across. We think we can ramp up more than 10,000 per year. And we think we can deliver more than 10,000 per year. So we will push as hard as we can to get as much on air as possible as quickly as we can and then get more bookings as quickly as we can as well, which will likely come from our customers looking out again three years out and saying, okay, what do we need in terms of network quality, in terms of coverage, in terms of capacity and our small cell is going to be a solution, and we believe the answer will be yes.
Michael Rollins
And just a couple of clarifications. First is, the 10,000 for 2023. Remind us, is that exclusive of some of that episodic churn that is coming through the system?
Daniel Schlanger
Yes. So it’s exclusive of about 5,000 nodes of churn that is a result of the consolidation of T-Mobile and Sprint networks. So we think about on a net basis, we’ll add 5,000 nodes in 2023, but that will be 10,000 additional nodes and 5,000 churn.
The reason that we keep quoting the 10,000 as a doubling is, the churn, as you said, is episodic. It’s because they can bind and they were on similar sites and they wanted to get rid of those. And going forward, the even realizing synergies, T-Mobile made a decision that they needed 35,000 additional small cells. So we want to talk about the overall gross level of activity as a way of showing that the growth in the business is still continuing, even though we see this episodic churn event from the consolidation in the industry.
Michael Rollins
And another — just a clarification question. You mentioned Verizon’s customer, T-Mobile as a customer. Is AT&T a significant small cell customer today?
Daniel Schlanger
Yes, we’re building small cells for everybody. But obviously those two — our total backlog is a little more than 60,000. So obviously, those two orders we got for 15,000 from Verizon and 35,000 from T-Mobile is the majority of our backlog.
Michael Rollins
And remind me how many are on air today?
Daniel Schlanger
About 50 — little more than 55,000.
Michael Rollins
So that gets you to 115 minus five for T-Mobile. So 110 is kind of the addressable opportunity at the moment?
Daniel Schlanger
Yes.
Michael Rollins
I’m going to throw out the third and final survey question, and we’ll come to this in a couple of minutes. Do you expect annual dividend per share growth for Crown Castle to return to the annual target rate of 7% to 8% after 2025. And it’s just a choice of yes or no. So we’ll come back to that in a moment.
Fiber Solutions, is there — which is — so you have a small cell business, you have fiber solutions. Is there a significant macro sensitivities to that business. So if the U.S. goes into a recession, is that something that investors should be mindful of in terms of the possible slowdown or churn in that business? Or is it fairly durable relative to changes in the economic backdrop?
Daniel Schlanger
What we’ve seen in the context of our business has been that the macro environment hasn’t had a tremendous impact on our level of growth. We’ve generally been able to grow around 3% on the revenue line for fiber solutions through some varying macroeconomic cycles.
I think that’s because we’ve targeted what customer base we go after, which is more of a large-scale enterprise, government entity, financial service provider that have longer time frames that they had planned to. And the short-term implications of a recession and hopefully, what would ultimately be a mild one if it were to happen, I don’t think impact the decision of those companies to invest in the movement of data across their business. So we have not seen tremendous impacts from macroeconomic situations on our Fiber Solutions business historically nor would we assume there would be significant one’s going forward. However, I would say, of course, we’re subject to macroeconomic events.
Like any other business, if companies pull back and want to save money, then they’re going to pull back and want to save money. I think the difference is that, we really are selling — the core value we’re selling is the network itself. And it’s hard to pull back on the network when your business is still operating because people are still generating more demand and more data and they want to move it around, they want it to go faster. And we are helping supply the underlying infrastructure to make that happen. So we don’t — again, we don’t see a huge impact from a slowdown, although we might see some if there is a recession in 2023 or beyond.
Michael Rollins
And one other question on small cells, just to pivot back to that for a moment. The CapEx for that business is sensitive to the level of co-location on the fiber relative to new nodes. How does that look in 2023 relative to what the experience has been over the last couple of years?
Daniel Schlanger
To give a little explanation to that, when we build a small cell system, the initial build, we generate a 6% to 7% yield on invested capital. The majority of the capital that we spend is to build the fiber of the small cell. And it’s not the cost of the fiber itself. It’s the cost of digging up the street, bearing the fiber and putting the street back together.
So when we add a second customer to an already existing system where we don’t have to dig up the street and burry in a fiber, there’s significantly less capital in those co-location type of builds than there are in the anchor builds that we do. And therefore, the returns are much higher in co-location. So when we add a second tenant, the entire system goes from 6% to 7% to low double-digit yields, which means the incremental yields are 20-plus percent. And that’s because we’ve just — the amount of capital we spend on a co-location is much lower.
As we look out into 2023, the 10,000 nodes we are going to build are majority co-location. So we are going to double the number of installations we perform from 2022 to 2023, while adding about — only about 10% more capital. And that shows the power of co-location. So double the activity and only add 10% of the cost. That will result in higher yields on — obviously, on that capital because we’ll get the same revenue generally for doubling the revenue and only getting 10% more cost. That’s the business model we’re in. That’s how — build good assets, lease them up over time, it results in good returns.
Michael Rollins
Are you ready to hear what our audience thinks about your dividend?
Daniel Schlanger
I’m ready.
Michael Rollins
Okay. So over 80%, 83% said yes. It would return back to the annual target rate of 7% to 8% after 2025 and 17% said no. Your answer on this question?
Daniel Schlanger
Yes. So what we’ve said, again, our target is to grow our dividend 7% to 8% a year. The reason that we focus on the dividend is because that is the return we’re giving to investors for all of the investments they’ve made prior to that date. And we want everybody to understand that we are focused on giving them their money back and a return on their money and growing it at 7% to 8%.
Over the next two years, ’24 and ’25, we don’t think we’re going to get to that 7% to 8% because of episodic reasons, either a significant rise in interest expense and then the Sprint churn in 2025. So we believe we’ll be under our 7% to 8% growth over the next two years. But as we [indiscernible] 2026 and beyond, there is nothing we’ve seen that is systemic in our business that would lead us to believe that the growth rate would be any lower than 7% to 8%. And we’re very excited about the long-term growth in this business because not only is tower is a great business model that continues to grow for all the reasons we’ve discussed. But we have all of these new investments in small cells that we think will lease up and drive significant growth in our business, and that’s a great place to be.
Because as good as the tower business is, nothing grows forever for all the time. You always need to be thinking about what’s next for your business, and we think we found something that’s really attractive that has the same customer base, the same underlying business drivers, the same contract structures and the same basic value creation, while delivering the same value to our customers, which is lower their cost of implementation and operation by sharing the cost of that implementation across multiple customers.
That seems like a great business model for us is to have every way of attacking the growth in infrastructure in the U.S., and we think we’re primed to do so.
Michael Rollins
Is there a risk that it could be below zero that the dividend could actually get trimmed over the next couple of years between now and getting back to your — the aspirations after 2025?
Daniel Schlanger
Yes, it’s actually not my decision on what the dividend does, that’s a Board decision, so I can’t promise what they’ll do, but we don’t see anything that would lead us to believe that cutting the dividend is in the cards either.
Michael Rollins
And maybe finally, just in terms of capital allocation, net debt leverage, is there any room over time to bring that up? You’ve been around that 5 times level for a while, any opportunity to move it? Or conversely, do you feel like it’s more prudent to actually bring it down?
Daniel Schlanger
We believe our business can withstand more than 5 times debt-to-EBITDA leverage and still operate very well. What limits us is, in essence, Moody’s has a rating on us that says, if we get above 5 times and the way we talk about it, they would say that, that would potentially lead to a downgrade. That’s recently shifted a little bit because they have recently put us on an outlook of positive. So we’re not sure how that’s going to end up. We’ll see. If they were to move their targets, I think we would move where our leverage is, if they went up, we would probably move our leverage, because we believe that maintaining investment-grade rating is really important, but that we believe that having more debt is totally sustainable and lowers our overall cost of capital, which is really important in a business that spends money like ours does as the cost of capital matters a lot.
So we want the lowest cost of capital, which we think is the debt market and we think we can withstand more leverage. And our business model is sustainable, predictable and growth. And we think that, that leads to a better leverage profile.
Michael Rollins
And if you get that flexibility to take that leverage up what would be the priorities in terms of how to use that extra financial flexibility for [indiscernible]
Daniel Schlanger
Whatever drives the most long-term dividend per share growth, and we believe that is investment in new assets. That generate the types of returns that we talk about with things like towers and small cells that we’re investing in currently, which are generating, like I said, up to 15% returns. Those are sizable over and above our cost of capital returns, and we will continue to want to invest in our business. If that changes and those returns either come down or the repurchase of our stock would be more beneficial to the long-term dividend per share growth, then we would shift our priorities, but that’s not what we’ve seen to date.
Michael Rollins
[indiscernible] ask you about the buybacks, because there was a time where Crown was more focused on buybacks. So is that something that is more of a discussion? Or at this point, it’s just too premature.
Daniel Schlanger
Yes, it’s never premature. We are always discussing it. But we’ve — when we’ve modeled out our business, we see that continuing to invest in the assets drives the best outcome over the long term. And that’s what we’ll continue to focus on.
Michael Rollins
And thank you for your time.
Daniel Schlanger
Thanks, Mike.
Michael Rollins
Thanks.
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