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yalax/iStock via Getty ImagesCrown Castle (CCI) is becoming an interesting investment as a confluence of improved organic growth, reduced headwinds, and attractive valuation makes it potentially the most opportunistic it has been in a decade. However, there is simultaneously a massive unknown in the form of the terrestrial versus satellite debate. Scenario outcomes of this debate range from obsolescence of towers to getting a 4th major tower customer, making it the pivotal factor for the future of CCI.
We shall begin by discussing:
CCI’s strong 2Q26. Positive growth inflection. Opportunistic valuation. Then we will show that the market does not care about any of these factors as the satellite harbinger looms overhead.
If and when one can get a clear idea of where the satellite versus terrestrial debate will conclude, there could be tremendous opportunity in CCI stock.
CCI's Strong Quarter And Growth CCI had a strong quarter with upped AFFO guidance and an upward inflection in organic growth. A central point of their conference call was that 2026 was the trough of organic growth and that they see strong acceleration in the short, mid, and long term. Factors creating the upward inflection in growth are:
MLAs with visibility into near-term contractual growth. AT&T 600 megahertz spectrum closing. Mobile data usage is expected to double over 5 years. As more spectrum gets deployed and data usage increases, tower tenants will want more equipment installed on towers, which will come with increased rent to CCI.
Analyst consensus estimates show a very strong outlook for Crown Castle with AFFO/share expected to rise from $4.36 in 2025 to $6.05 in 2030.
S&P Global Market Intelligence
That growth rate is quite opportunistic relative to what is now a fairly cheap valuation.
CCI is trading at 16.7X 2026 AFFO.
Tower REITs have traditionally traded at AFFO multiples in the mid-20s and occasionally in the 30s.
We believe the now cheap valuation is the result of fear related to satellites as a potential competitor to macro towers. This can be clearly seen in the CCI trading action since the Space Exploration Technologies (SPCX) IPO.
CCI is down 18% even though the CCI-specific news has been positive in this period.
SA
SpaceX’s Starlink was already a potential threat to towers; the IPO merely made it front of mind for investors. In perception, it went from a potential future threat to being a highly visible part of one of the largest companies in the world.
On July 21st, SPCX launched an additional 24 satellites into its mega-constellation already consisting of over 10,000 low earth orbit satellites.
Starlink is unequivocally huge and powerful, but its impact on towers remains completely unknown.
The Pivotal Unknown I am not an engineer and do not have a full grasp on the subtleties in transmission that make satellites better or worse than a tower network. Thus, I can merely relay what I have heard from others who are more directly in the field.
The basic framework seems to be that satellites are great at covering massive areas inexpensively and reliably but perhaps less effective in highly congested areas.
Bears on the tower REITs worry that Starlink could be effective enough to disrupt the traditional cell carriers, which make up CCI’s tenant base.
Bulls believe Starlink or peer satellite companies could become a 4th major carrier and that they would use macro towers to supplement their satellites. Specifically, they would put equipment on macro towers in major population centers where towers tend to outperform and use satellites in rural areas. Thus, Starlink or peers could actually benefit the tower REIT industry in the form of an additional revenue source.
Christian Hillabrant is knowledgeable on the subject but also biased due to his role as CEO of CCI. He discussed satellites versus terrestrial networks at length on the 2Q26 call:
“Let me summarize the key reasons why we believe that terrestrial networks will continue to be an essential for mobile phone service based on reports available on the WIA website and analysis from sell-side research. First, satellite services generally require a clear line of sight to the sky and provide weaker indoor coverage, which is significant given approximately 90% of mobile usage occurs indoors or in vehicles. Because satellite signals travel hundreds of miles farther than the terrestrial connections, their signal strength is approximately 10,000x weaker, challenging performance in dense environments where buildings, obstructions and interference can further degrade the signal. To compensate for the weaker signal, phones must operate at higher transmit power levels, increasing battery consumption. Second, satellite operators have access to significantly less spectrum. Direct-to-device satellite services generally have access to only tens of megahertz of spectrum, while each major U.S. wireless carrier controls hundreds of megahertz. Third, a typical satellite beam covers approximately 100 square miles to 600 square miles versus roughly 3 square miles to 20 square miles for a terrestrial cell site, requiring substantially more users to share the same spectrum resources. This means that for every megahertz of spectrum, terrestrial cell sites can support 30x more users. More importantly, as satellite operators seek to improve capacity, mobility and indoor performance, we believe terrestrial infrastructure will become an increasingly important complement to satellite networks.”
I think there is merit to his analysis that satellites could be complementary to macro towers rather than a substitute. However, it remains a major unknown.
The return outlook of CCI as an investment is heavily impacted by what happens in this debate. We see 3 main branches of scenarios to consider:
Satellites do not materially enter the cell carrier business. Satellites compete and at least partially replace demand for towers. Satellites become carriers and use macro towers to complement their network. CCI is opportunistic in scenarios 1 and 3 but would likely underperform in scenario 2.
Scenario 1 would just be business as usual for tower REITs. This seems to be what the consensus AFFO estimates out to 2030 are penciling in. CCI’s 16.7X AFFO multiple is just too cheap relative to the AFFO/share growth rate, which would make it a strong investment.
Scenario 2 risks major damage in the form of CCI losing one or more of their 3 major tenants. If Starlink competes as a cell carrier and captures substantial market share, there is potential for Verizon, AT&T, or T-Mobile to go out of business, and CCI could lose massive amounts of rental revenue.
Scenario 3 would be Starlink or a peer competing in a more balanced way, taking some market share but not killing the existing ecosystem. A potential 4th tenant in this scenario would potentially add back the revenues that were previously lost when Sprint got absorbed.
I’m not going to pretend to know how this will all shake out. Instead, I’ll be focusing on data points that could serve as early indicators. Here is what we will be watching to potentially happen:
Starlink or peers signing leases with macro towers (good sign for CCI). The extent to which Starlink attempts to become a major cell carrier. Financial health of Verizon, AT&T, or T-Mobile deteriorating. Customer adoption of satellite-based cell service. Customer reviews of the quality of satellite-based cell service. How We Are Playing It Tower REITs are potentially quite opportunistic given high-growth relative to valuation, but given the unknown, they are also risky. We currently are underweight relative to the REIT index but hold a small position in American Tower (AMT). AMT and CCI are similar investments, but we give a slight edge to AMT for its ownership of CoreSite, through which it has access to strong data center growth.
As more information rolls in and we get greater clarity on the satellite versus terrestrial debate, we will be watching and trading accordingly.