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Focus on Fiber Cuts Our Moat Rating for Crown Castle

Crown's fiber networks and small cell infrastructure don't benefit from the same competitive advantages as its traditional cellphone towers.

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Matthew Dolgin: In March, we cut our moat rating to none from narrow for Crown Castle. Our move was prompted by the firm's greater emphasis on fiber, which was accentuated by the acquisition of Lightower at the end of last year. We expect fiber, which accounted for only about 20% of companywide revenue in 2017, to comprise about 30% in 2018 and to continue trending higher.

Whereas we generally think towers--which make up the other part of Crown's business--benefit from an efficient scale and switching costs, we don't currently see similar competitive advantages in fiber, which is already in high supply, or in the emerging small-cell infrastructure that Crown sets up on the fiber.

Matthew Dolgin does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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