# CROWN CASTLE INC. (CCI) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CROWN CASTLE INC.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1051470/000105147024000062/cci-20231231.htm
Accession: 0001051470-24-000062
Filing date: 2024-02-23
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CCI/
All MD&A years: /company/CCI/mda/
Previous year: /company/CCI/mda/fy2022/ (FY 2022)
Next year: /company/CCI/mda/fy2024/ (FY 2024)

Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations

General Overview

Overview

We own, operate and lease shared communications infrastructure. See "Item 1. Business" for a further discussion of our business, including our long-term strategy, our REIT status, certain key terms of our tenant contracts and growth trends in the demand for data. Site rental revenues represented 94% of our 2023 consolidated net revenues. The vast majority of our site rental revenues is of a recurring nature and has been contracted for in prior years.

Highlights of Business Fundamentals and Results

•We operate as a REIT for U.S. federal income tax purposes (see "Item 1. Business—REIT Status" and notes 2 and 9 to our consolidated financial statements)

•Potential growth resulting from the increasing demand for data

◦We expect existing and potential new tenant demand for our communications infrastructure will result from (1) new technologies, (2) increased usage of mobile entertainment, mobile internet, and machine-to-machine applications, (3) adoption of other emerging and embedded wireless devices (including smartphones, laptops, tablets, wearables and other devices), (4) increasing smartphone penetration, (5) wireless carrier focus on expanding both network quality and capacity, including the use of both towers and small cells, (6) the adoption of other bandwidth-intensive applications (such as cloud services and video communications), (7) the availability of additional spectrum and (8) increased government initiatives to support connectivity throughout the U.S.

◦We expect U.S. wireless carriers will continue to focus on improving network quality and expanding capacity (including through 5G initiatives) by utilizing a combination of towers and small cells. We believe our product offerings of towers and small cells provide a comprehensive solution to our wireless tenants' growing communications infrastructure needs.

◦We expect organizations will continue to increase the usage of high-bandwidth applications that will require the utilization of more fiber infrastructure and fiber solutions, such as those we provide.

◦Within our Fiber segment, we are able to generate growth and returns for our stockholders by deploying our fiber for both small cells and fiber solutions tenants.

◦Tenant additions on our existing communications infrastructure are achieved at a low incremental operating cost, delivering high incremental returns.

◦Substantially all of our communications infrastructure can accommodate additional tenancy, either as currently constructed or with appropriate modifications.

•Returning cash flows provided by operations to stockholders in the form of dividends (see also "Item 1. Business—Strategy")

◦During 2023, we paid common stock dividends totaling approximately $2.7 billion.

•Investing capital efficiently to grow long-term dividends per share

◦We had discretionary capital expenditures of $1.3 billion for the year ended December 31, 2023, predominately resulting from the construction of new communications infrastructure and improvements to existing communications infrastructure in order to support additional tenants.

◦We expect to continue to construct and acquire new communications infrastructure based on our tenants' needs and generate attractive long-term returns by adding additional tenants over time.

•Site rental revenues under long-term tenant contracts

◦Our wireless tenant contracts have initial terms generally between five to 15 years with contractual escalators and multiple renewal periods generally between five to ten years each, exercisable at the option of the tenant.

◦Our fiber solutions tenant contracts' initial terms generally vary between one to 20 years.

◦As of December 31, 2023, our weighted-average remaining term was approximately six years, exclusive of renewals exercisable at the tenants' option, currently representing approximately $39 billion of expected future cash inflows.

•Majority of our revenues from large wireless carriers

◦For the year ended December 31, 2023, approximately three-fourths of our site rental revenues were derived from T-Mobile, AT&T and Verizon Wireless. See "Item 1A. Risk Factors" and note 14 to our consolidated financial statements for a further discussion of our largest customers.

•Majority of land under our towers under long-term control

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◦For the year ended December 31, 2023, approximately 90% of our towers site rental gross margin and approximately 80% of our towers site rental gross margin was derived from towers located on land that we own or control for greater than 10 and 20 years, respectively. The aforementioned percentages include towers located on land that is owned, including through fee interests and perpetual easements, which represented approximately 40% of our towers site rental gross margin.

•Majority of our fiber assets are located in major metropolitan areas and are on public rights-of-way

•Minimal sustaining capital expenditure requirements

◦For the year ended December 31, 2023, sustaining capital expenditures represented approximately 1% of net revenues.

•Debt portfolio with long-dated maturities extended over multiple years, with the vast majority of such debt having a fixed rate (see note 7 to our consolidated financial statements and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a further discussion of our debt)

◦As of December 31, 2023, our outstanding debt had a weighted average interest rate of 3.9% and weighted average maturity of approximately eight years (assuming anticipated repayment dates on certain debt).

◦As of December 31, 2023, 92% of our debt has fixed rate coupons.

◦Our debt service coverage and leverage ratios are within their respective financial maintenance covenants. See "Item 7. MD&A—Liquidity and Capital Resources—Debt Covenants" for a further discussion of our debt covenants.

•During 2023, we refinanced and extended the maturities of certain of our debt (see note 7 to our consolidated financial statements and "Item 7. MD&A—Liquidity and Capital Resources—Financing Activities" for further discussion of our debt transactions)

•Significant cash flows from operations

◦Net cash provided by operating activities was $3.1 billion for the year ended December 31, 2023,

◦In addition to the positive impact of contractual escalators, we expect to grow our core business of providing access to our communications infrastructure as a result of future anticipated additional demand for our communications infrastructure.

•Full year 2023 results included certain impacts from the small cell and fiber solutions lease cancellations ("Sprint Cancellations") related to the previously disclosed T-Mobile and Sprint network consolidation. For 2023, these Sprint Cancellations resulted in $21 million of non-renewals that were offset by cash payments of $170 million to satisfy the remaining rental obligations. Additionally, $59 million in accelerated amortization of prepaid rent from the remaining deferred revenues was recognized for the year ended December 31, 2023.

•Restructuring Plan

◦In July 2023, we initiated a restructuring plan ("Plan") as part of our efforts to reduce costs to better align our operational needs with lower tower activity. The Plan includes reducing the total employee headcount by approximately 15%, discontinuing installation services as a Towers product offering while continuing to offer site development services on our towers, and consolidating office space. See note 16 to our consolidated financial statements and "Item 2. MD&A—Results of Operations" for further discussion of the Plan.

◦The actions announced in July 2023 associated with the Plan and related charges are expected to be substantially completed and recorded by June 30, 2024, while the payments are expected to be completed for the employee headcount reduction and office space consolidation in 2024 and 2032, respectively.

Common Stock Dividend

During each of the quarters in the year ended 2023, we paid a common stock dividend of $1.565 per share, totaling approximately $2.7 billion, which represents an increase of approximately 4.7% from the common stock dividends paid in the aggregate in the year ended 2022. We currently expect our common stock dividends over the next 12 months to be a cumulative amount of at least $6.26 per share, or an aggregate amount of approximately $2.7 billion. Over time, we expect to increase our dividend per share as we grow cash flows. Any future common stock dividends are subject to declaration by our board of directors. See notes 10 and 17 to our consolidated financial statements.

Outlook Highlights

The following are certain highlights of our outlook that impact our business fundamentals described above.

•We expect that, when compared to full year 2023, our full year 2024 site rental revenues growth will be positively impacted by tenant additions, as large wireless carriers and fiber solutions tenants continue to focus on meeting the increasing demand for data. We expect site rental revenues to decrease year over year due to the absence in 2024 of payments received in 2023 that T-Mobile paid to satisfy remaining rental obligations for certain canceled Sprint leases, net of estimated non-renewals, as a result of the T-Mobile US, Inc. and Sprint network consolidation and a decline in long-term deferred revenue amortization.

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•We expect to continue to invest a significant amount of our available capital in the form of discretionary capital expenditures for 2024 based on the anticipated returns on such discretionary investments.

◦We expect that our discretionary capital expenditures will increase as we accelerate the pace of small cell deployments.

•We also expect sustaining capital expenditures of approximately 1% of net revenues for full year 2024, consistent with historical annual levels.

•As part of the aforementioned Plan:

◦In 2024, we expect to realize $105 million in labor and facilities cost savings, of which $50 million is expected in selling, general and administrative, $40 million in services and other costs of operations and $15 million in site rental costs of operations. The 2024 costs savings are expect to be partially offset by a $40 million reduction in services and other gross margin due to the discontinuation of installation services. See "Item 1A. Risk Factors" for a discussion of risks related to our restructuring activities.

•In December 2023, we announced a strategic and operating review of our Fiber segment.

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Results of Operations

The following discussion of our results of operations for 2023 compared to 2022 should be read in conjunction with "Item 1. Business," "Item 7. MD&A—Liquidity and Capital Resources" and our consolidated financial statements. For a discussion of our results of operations and financial condition for 2022 compared to 2021 that is not included in this 2023 Form 10-K, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 24, 2023.

The following discussion of our results of operations is based on our consolidated financial statements prepared in accordance with GAAP, which requires us to make estimates and judgments that affect the reported amounts (see "Item 7. MD&A—Accounting and Reporting Matters—Critical Accounting Policies and Estimates" and note 2 to our consolidated financial statements). See "Item 7. MD&A—Accounting and Reporting Matters—Non-GAAP and Segment Financial Measures" for a discussion of our use of (1) segment site rental gross margin, (2) segment services and other gross margin, (3) segment operating profit (loss), including their respective definitions, and (4) Adjusted EBITDA, including its definition and a reconciliation to net income (loss).

Our operating segments consist of (1) Towers and (2) Fiber. See note 14 to our consolidated financial statements for further discussion of our operating segments.

Highlights of our results of operations for 2023, 2022 and 2021 are depicted below: 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,","","Percent Change"],["(In millions of dollars)","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Site rental revenues:"],["Towers site rental revenues","$","4,313","","","$","4,322","","","$","3,804","","","\u2014","%","","14","%"],["Fiber site rental revenues","2,219","","","1,967","","","1,915","","","13","%","","3","%"],["Total site rental revenues","6,532","","","6,289","","","5,719","","","4","%","","10","%"],["Site rental gross margin(a):"],["Towers site rental gross margin","3,370","","","3,404","","","2,915","","","(1)","%","","17","%"],["Fiber site rental gross margin","1,533","","","1,317","","","1,282","","","16","%","","3","%"],["Services and other gross margin(a):"],["Towers services and other gross margin","127","","","238","","","187","","","(47)","%","","27","%"],["Fiber services and other gross margin","16","","","3","","","3","","","433","%","","\u2014","%"],["Segment operating profit (loss)(a):"],["Towers operating profit (loss)","3,393","","","3,527","","","2,995","","","(4)","%","","18","%"],["Fiber operating profit (loss)","1,355","","","1,130","","","1,111","","","20","%","","2","%"],["Income (loss) from continuing operations","1,502","","","1,675","","","1,158","","","(10)","%","","45","%"],["Net income (loss)","1,502","","","1,675","","","1,096","","","(10)","%","","53","%"],["Adjusted EBITDA(b)","4,415","","","4,340","","","3,816","","","2","%","","14","%"]]
[[/GREPCENT_TABLE]]

(a)See "Item 7. MD&A—Accounting and Reporting Matters—Non-GAAP and Segment Financial Measures" and note 14 to our consolidated financial statements for our definitions of segment site rental gross margin, segment services and other gross margin and segment operating profit.

(b)See reconciliation of this non-GAAP financial measure to net income (loss) and definition included in "Item 7. MD&A—Accounting and Reporting Matters—Non-GAAP and Segment Financial Measures."

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2023 and 2022

Total site rental revenues for 2023 grew by $243 million, or 4%, from 2022. This increase was predominately comprised of the factors depicted in the chart below:

(In millions of dollars)

(a)Represents site rental revenues growth from tenant additions across our entire portfolio and renewals or extensions of tenant contracts, exclusive of the impacts from both straight-line accounting and amortization of prepaid rent in accordance with GAAP.

(b)Core leasing activity and non-renewals include $170 million and $21 million, respectively, of payments received from and non-renewals associated with Sprint Cancellations, respectively.

(c)Prepaid rent amortization includes amortization of upfront payments received from long-term tenants and other deferred credits, inclusive of $59 million of accelerated prepaid rent amortization associated with the Sprint Cancellations.

(d)Represents the contribution from recent acquisitions until the one-year anniversary of such acquisitions.

Towers site rental revenues and Towers site rental gross margin for 2023 were $4.3 billion and $3.4 billion, respectively, compared to $4.3 billion and $3.4 billion, respectively, from 2022. As a significant portion of our Towers site rental revenue growth was generated from long-term contracts, revenue increases under contractual cash escalators were substantially offset by a decline in the associated straight-line accounting adjustment. The $34 million decrease in Towers site rental gross margin was primarily due to higher Towers site rental costs of operations, including ground lease agreements that contain contingent payment provisions such as CPI-based escalations.

Fiber site rental revenues and Fiber site rental gross margin for 2023 were $2.2 billion and $1.5 billion, respectively, and increased by $252 million and $216 million, respectively, from 2022. Both Fiber site rental revenues and Fiber site rental gross margin were predominately impacted by $170 million of payments and $59 million of accelerated prepaid rent amortization, offset by $21 million of non-renewals, each related to the Sprint Cancellations.

Towers services and other gross margin was $127 million for 2023 and decreased by $111 million from $238 million from 2022, which is a reflection of the lower volume of activity from carriers' network enhancements and the volume and mix of services and other work. Our services and other offerings are of a variable nature as these revenues are not under long-term tenant contracts. See note 16 to our consolidated financial statements for a discussion of the Plan, which included discontinuing installation services as a Towers product offering.

Fiber services and other gross margin was $16 million for 2023 and increased by $13 million from $3 million from 2022 primarily as a result of site abandonment fees associated with the Sprint Cancellations.

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Selling, general and administrative expenses for 2023 were $759 million and increased by $9 million, or 1%, from $750 million from 2022. The increase in selling, general and administrative expenses was primarily related to (1) increased investment in information technology, (2) the strategic review previously announced in December 2023 and (3) certain other expenses, including facilities, returning to their pre-pandemic operations following our return to office in February 2022, partially offset by (4) a decrease in labor cost as a result of our aforementioned restructuring activities.

Towers operating profit (loss) for 2023 decreased by $134 million, or 4%, from 2022. The decrease in Towers operating profit (loss) was primarily related to the previously-mentioned decreases in both Towers site rental gross margin and Towers services and other gross margin.

Fiber operating profit (loss) for 2023 increased by $225 million, or 20%, from 2022. The increase in Fiber operating profit (loss) was primarily related to the previously-mentioned increase in Fiber site rental gross margin.

Depreciation, amortization and accretion was approximately $1.8 billion for 2023 and increased by $47 million, or 3%, from 2022. This increase predominately resulted from a corresponding increase in our gross property and equipment due to capital expenditures.

Restructuring charges in connection with the Plan were $85 million for 2023. The charges primarily consisted of $62 million related to cash payments that have been made in 2023 or are expected to be made in 2024 associated with employee severance and other one-time termination benefits and $16 million of remaining obligations under facility leases payable through 2032. Additionally, we also recorded non-cash charges of $1 million related to share-based compensation and $6 million for accelerated depreciation.

Interest expense and amortization of deferred financing costs, net were $850 million for 2023 and increased by $151 million, or 22%, from $699 million during 2022. The increase predominately resulted from an increase in the interest rates on the 2016 Term Loan A, 2016 Revolver and Commercial Paper Notes, as well as an increase in our outstanding indebtedness due to the financing of our discretionary capital expenditures. See note 7 to our consolidated financial statements, "Item 1A. Risk Factors" and "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a further discussion of our debt and interest rate increases.

As a result of repaying certain of our indebtedness in conjunction with our refinancing activities during 2022, we incurred losses on retirement of long-term obligations of $28 million. We did not incur any losses on retirement of long-term obligations during 2023. See note 7 to our consolidated financial statements.

The provisions for income taxes for 2023 and 2022 were $26 million and $16 million, respectively. For both 2023 and 2022, the effective tax rate differs from the federal statutory rate predominately due to our REIT status, including the dividends paid deduction. See "Item 1. Business—REIT Status," "Item 7. MD&A—Accounting and Reporting Matters—Critical Accounting Policies and Estimates" and note 9 to our consolidated financial statements.

Net income (loss) was $1.5 billion during 2023 compared to $1.7 billion during 2022. The decrease was related to the previously-mentioned decrease in Towers operating profit and previously-mentioned increases in expenses, including interest expense and amortization of deferred financing costs, net, restructuring charges and depreciation, amortization and accretion, while being partially offset by the previously-mentioned increase in Fiber operating profit.

Adjusted EBITDA increased by $75 million, or 2%, from 2022 to 2023. The increase was predominately related to the previously mentioned increase in Fiber operating profit (loss), partially offset by the previously-mentioned decrease in Towers services and other gross margin.

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Liquidity and Capital Resources

Overview

General. Our core business generates revenues under long-term tenant contracts (see "Item 1. Business—Overview" and "Item 7. MD&A—General Overview—Overview") from (1) the largest U.S. wireless carriers and (2) other towers and fiber solutions tenants. As a leading provider of shared communications infrastructure in the U.S., our strategy is to create long-term stockholder value via a combination of (1) growing cash flows generated from our portfolio of communications infrastructure, (2) returning a meaningful portion of our cash generated by operating activities to our stockholders in the form of dividends, and (3) investing capital efficiently to grow cash flows and long-term dividends per share. Our strategy is based, in part, on our belief that the U.S. is the most attractive market for shared communications infrastructure investment with the greatest long-term growth potential. We measure our efforts to create "long-term stockholder value" by the combined payment of dividends to stockholders and growth in our per share results. See "Item 1. Business—Strategy" for a further discussion of our strategy.

We have engaged, and expect to continue to engage, in discretionary investments that we believe will maximize long-term stockholder value. Our historical discretionary investments include (in no particular order): constructing communications infrastructure, acquiring communications infrastructure, acquiring land interests (which primarily relate to land assets under towers), improving and structurally enhancing our existing communications infrastructure, purchasing shares of our common stock, and purchasing, repaying, or redeeming our debt. We have recently spent, and expect to continue to spend, a significant percentage of our discretionary investments on the construction of small cells and fiber. We seek to fund our discretionary investments with both cash generated by operating activities and cash available from financing capacity, such as the use of our availability under our 2016 Revolver, issuances under our CP Program, debt financings and issuances of equity or equity-related securities, including under our 2021 ATM Program or any similar successor program.

We seek to maintain a capital structure that we believe drives long-term stockholder value and optimizes our weighted-average cost of capital. We target a leverage ratio of approximately five times Adjusted EBITDA, subject to various factors, such as the availability and cost of capital and the potential long-term return on our discretionary investments. We may choose to increase or decrease our leverage from this target for various periods of time. Our contractual debt maturities over the next 12 months, consist of (1) Commercial Paper Notes, of which we had $578 million outstanding as of February 20, 2024, (2) the 3.200% Senior Notes and (3) principal payments on certain outstanding debt. Amounts available under our CP Program may be repaid and re-issued from time to time and we intend to maintain available commitments under our 2016 Revolver in an amount at least equal to the amount of Commercial Paper Notes outstanding.

We operate as a REIT for U.S. federal income tax purposes. We expect to continue to pay minimal cash income taxes as a result of our REIT status and our NOLs. See "Item 1. Business—REIT Status," "Item 7. MD&A—General Overview" and note 9 to our consolidated financial statements.

Liquidity Position. The following is a summary of our capitalization and liquidity position as of December 31, 2023. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" and note 7 to our consolidated financial statements for additional information regarding our debt as well as note 10 to our consolidated financial statements for additional information regarding our 2021 ATM Program.

[[GREPCENT_TABLE]]
[["(In millions of dollars)"],["Cash and cash equivalents and restricted cash and cash equivalents(a)","$","281"],["Undrawn 2016 Revolver availability(b)","6,291"],["Total debt and other obligations (current and non-current)","22,921"],["Total equity","6,381"]]
[[/GREPCENT_TABLE]]

(a)Inclusive of $5 million included within "Other assets, net" on our consolidated balance sheet.

(b)Availability at any point in time is subject to certain restrictions based on the maintenance of financial covenants contained in our 2016 Credit Facility. At any point in time, we intend to maintain available commitments under our 2016 Revolver in an amount at least equal to the amount of outstanding Commercial Paper Notes. See note 7 to our consolidated financial statements.

Over the next 12 months:

•Our liquidity sources may include (1) cash on hand, (2) cash generated by our operating activities, (3) availability under our 2016 Revolver, (4) issuances under our CP Program, and (5) issuances of equity pursuant to our 2021 ATM Program or any similar successor program. Our liquidity uses over the next 12 months are expected to include (1) debt obligations of $835 million (consisting of the 3.200% Senior Notes and principal payments on certain outstanding debt), (2) cumulative common stock dividend payments expected to be at least $6.26 per share, or an aggregate amount of approximately $2.7 billion (see "Item 7. MD&A—General Overview—Common Stock Dividend"), (3) capital

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expenditures and (4) restructuring and related charges associated with the Plan described in note 16 to our consolidated financial statements. We may also purchase shares of our common stock. Additionally, amounts available under our CP Program may be repaid and re-issued from time to time and we intend to maintain available commitments under our 2016 Revolver in an amount at least equal to the amount of Commercial Paper Notes outstanding. During the next 12 months, while our liquidity uses are expected to exceed our cash generated by operating activities, we expect that our liquidity sources described above should be sufficient to cover our expected uses. Historically, from time to time, we have accessed the capital markets to issue debt and equity.

•See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a discussion of interest rate risk and note 7 to our consolidated financial statements for a tabular presentation of our debt maturities and a discussion of anticipated repayment dates.

Summary Cash Flows Information 

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["(In millions of dollars)","2023","","2022","","2021"],["Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents"],["Operating activities","$","3,126","","","$","2,878","","","$","2,789"],["Investing activities","(1,519)","","","(1,352)","","","(1,332)"],["Financing activities","(1,654)","","","(1,665)","","","(1,310)"],["Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents - continuing operations","(47)","","","(139)","","","147"],["Effect of exchange rate changes on cash","1","","","\u2014","","","\u2014"],["Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents- continuing operations","(46)","","","(139)","","","147"],["Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents - discontinued operations(a)","\u2014","","","\u2014","","","(62)"],["Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents","$","(46)","","","$","(139)","","","$","85"]]
[[/GREPCENT_TABLE]]

(a)See note 9 to our consolidated financial statements for further information.

Operating Activities

The increase in net cash provided by operating activities of $248 million for 2023 from 2022 was due primarily to a net increase from changes in working capital and growth in our core business, including $170 million of payments received from Sprint Cancellations. Changes in working capital contribute to variability in net cash provided by operating activities, largely due to the timing of advanced payments by us and advanced receipts from tenants. We expect to grow our net cash provided by operating activities in the future (exclusive of changes in working capital) if we realize expected growth in our core business.

Investing Activities

Net cash used for investing activities for 2023 increased by $167 million from 2022 primarily as a result of increased discretionary capital expenditures in our Fiber segment.

Our capital expenditures are categorized as discretionary or sustaining as described below.

•Discretionary capital expenditures are made with respect to activities which we believe exhibit sufficient potential to enhance long-term stockholder value. They primarily consist of expansion or development of communications infrastructure (including capital expenditures related to (1) enhancing communications infrastructure in order to add new tenants for the first time or support subsequent tenant equipment augmentations or (2) modifying the structure of a communications infrastructure asset to accommodate additional tenants) and construction of new communications infrastructure. Discretionary capital expenditures also include purchases of land interests (which primarily relate to land assets under towers as we seek to manage our interests in the land beneath our towers), certain technology-related investments necessary to support and scale future customer demand for our communications infrastructure, and other capital projects. The expansion or development of existing communications infrastructure to accommodate new leasing typically varies based on, among other factors: (1) the type of communications infrastructure, (2) the scope, volume, and mix of work performed on the communications infrastructure, (3) existing capacity prior to installation, or (4) changes in structural engineering regulations and standards. Currently, construction of new communications infrastructure is predominately comprised of the construction of small cells and fiber (including certain construction projects that may take 18 to 36 months to complete). Our decisions regarding discretionary capital expenditures are influenced by the availability and cost of capital and expected returns on alternative uses of cash, such as payments of dividends and investments.

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•Sustaining capital expenditures consist of those capital expenditures not otherwise categorized as discretionary capital expenditures, such as (1) maintenance capital expenditures on our communications infrastructure assets that enable our tenants' ongoing quiet enjoyment of the communications infrastructure and (2) ordinary corporate capital expenditures.

A summary of our capital expenditures for the last three years is as follows:

[[GREPCENT_TABLE]]
[["","For the Years Ended"],["","December 31, 2023","","December 31, 2022","","December 31, 2021"],["(In millions of dollars)","Towers","Fiber","Other","Total","","Towers","Fiber","Other","Total","","Towers","Fiber","Other","Total"],["Discretionary:"],["Communications infrastructure improvements and other capital projects(a)","$","122","","$","1,131","","$","24","","$","1,277","","","$","121","","$","1,017","","$","24","","$","1,162","","","$","138","","$","905","","$","33","","$","1,076"],["Purchases of land interests","64","","\u2014","","\u2014","","64","","","53","","\u2014","","\u2014","","53","","","64","","2","","\u2014","","66"],["Sustaining","8","","44","","31","","83","","","11","","41","","43","","95","","","19","","49","","19","","87"],["Total","$","194","","$","1,175","","$","55","","$","1,424","","","$","185","","$","1,058","","$","67","","$","1,310","","","$","221","","$","956","","$","52","","$","1,229"]]
[[/GREPCENT_TABLE]]

(a)Towers segment includes $32 million, $48 million and $65 million of capital expenditures incurred during the years ended December 31, 2023, 2022 and 2021, respectively, in connection with tenant installations and upgrades on our towers.

Capital expenditures increased from 2022 to 2023 and were primarily impacted by the previously-mentioned increased discretionary capital expenditures in our Fiber segment. See "Item 7. MD&A—General Overview—Outlook Highlights" for a discussion of our expectations surrounding 2024 capital expenditures.

Financing Activities

We seek to allocate cash generated by our operations in a manner that will enhance long-term stockholder value, which may include various financing activities such as (in no particular order): (1) paying dividends on our common stock (currently expected to total at least $6.26 per share over the next 12 months, or an aggregate amount of approximately $2.7 billion), (2) purchasing our common stock or (3) purchasing, repaying, or redeeming our debt. See "Item 7. MD&A—General Overview—Common Stock Dividend," "Item 7. MD&A—Liquidity and Capital Resources—Overview" and notes 7, 10 and 17 to our consolidated financial statements.

In 2023, our financing activities predominately related to the following:

•paying an aggregate of $2.7 billion in dividends on our common stock;

•issuing $1.5 billion aggregate principal amount of senior unsecured notes in December 2023, the net proceeds of which were used to repay a portion of the outstanding indebtedness under our CP Program and pay related fees and expenses;

•repaying in full the previously outstanding 3.150% Senior Notes on the contractual maturity date in July 2023;

•issuing $1.35 billion aggregate principal amount of senior unsecured notes in April 2023, the net proceeds of which were used to repay a portion of the outstanding indebtedness under the Revolver and pay related fees and expenses; and

•issuing $1.0 billion aggregate principal amount of senior unsecured notes in January 2023, the net proceeds of which were used to repay a portion of the outstanding indebtedness under the Revolver and pay related fees and expenses.

In 2022, our financing activities predominately related to the following:

•paying an aggregate of $2.6 billion in dividends on our common stock;

•issuing $750 million aggregate principal amount of senior unsecured notes in March 2022, the net proceeds of which were used to repay a portion of the outstanding indebtedness under our CP Program and pay related fees and expenses;

•prepaying in full the previously outstanding Tower Revenue Notes, Series 2018-1 in March 2022;

•redeeming in full the previously outstanding 3.849% Secured Notes in March 2022;

•entering into an amendment to the 2016 Credit Facility in July 2022 that provided for, among other things, (1) the extension of the maturity date from June 2026 to July 2027, (2) an increase to the aggregate commitments under the 2016 Revolver from $5.0 billion to $7.0 billion, (3) certain modifications to a specified sustainability metric and (4) the replacement of the LIBOR pricing benchmark with the Term SOFR pricing benchmark; and

•increasing the size of our CP Program in March 2022 to permit the issuance of Commercial Paper Notes in an aggregate principal amount not to exceed $2.0 billion at any time outstanding.

38

Incurrences, Purchases and Repayments of Debt. See note 7 to our consolidated financial statements, "Item 7. MD&A—General Overview" and "Item 7. MD&A—Liquidity and Capital Resources—Overview—Liquidity Position" for further discussion of our recent issuances, purchases, redemptions and repayments of debt.

Common Stock. See notes 10 and 17 to our consolidated financial statements for further information regarding our common stock as well as dividends declared and paid.

ATM Program. In March 2021, we established the 2021 ATM Program through which we may issue and sell shares of our common stock having an aggregate gross sales price of up to $750 million. Sales under the 2021 ATM Program, or any similar successor program, may be made by means of ordinary brokers' transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or, subject to our specific instructions, at negotiated prices. We intend to use the net proceeds from any sales under the 2021 ATM Program, or any similar successor program, for general corporate purposes, which may include (1) the funding of future acquisitions or investments or (2) the repayment or repurchase of any outstanding indebtedness. See also note 10 to our consolidated financial statements. As of February 20, 2024, we had $750 million of gross sales of common stock availability remaining on our 2021 ATM Program.

Credit Facility. See note 7 to our consolidated financial statements for further information regarding our 2016 Credit Facility. As of February 20, 2024, we did not have an outstanding balance under our 2016 Revolver and maintained $7.0 billion in undrawn availability. The proceeds from our 2016 Revolver may be used for general corporate purposes, which may include the financing of capital expenditures, acquisitions, the repayment or repurchase of any outstanding indebtedness and purchases of our common stock.

Commercial Paper Program. See note 7 to our consolidated financial statements for further information regarding our CP Program. As of February 20, 2024, there was $578 million outstanding under our CP Program. The proceeds from our Commercial Paper Notes may be used for general corporate purposes, which may include the financing of capital expenditures, acquisitions, the repayment or repurchase of any outstanding indebtedness and purchases of our common stock.

Restricted Cash and Cash Equivalents. Pursuant to the indentures governing certain of our operating companies' debt securities, all rental cash receipts of the issuers of these debt instruments and their subsidiaries are restricted and held by an indenture trustee. The restricted cash and cash equivalents in excess of required reserve balances is subsequently released to us in accordance with the terms of the indentures. See also note 2 to our consolidated financial statements.

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Material Cash Requirements

The following table summarizes our material cash requirements as of December 31, 2023. These material cash requirements relate primarily to our outstanding borrowings or lease obligations for land interests under our towers. The debt maturities reflect contractual maturity dates and do not consider the impact of the principal payments that will commence following the anticipated repayment dates of certain debt (see footnote (b)). 

[[GREPCENT_TABLE]]
[["(In millions of dollars)","Years Ending December 31,"],["Material Cash Requirements","2024","","2025","","2026","","2027","","2028","","Thereafter","","Totals"],["Debt and other long-term obligations(a)","$","835","","","$","599","","","$","2,777","","","$","3,918","","","$","2,628","","","$","12,335","","","$","23,092"],["Interest payments on debt and other long-term obligations(b)(c)","873","","","850","","","815","","","705","","","581","","","5,642","","","9,466"],["Lease obligations(d)","570","","","557","","","548","","","542","","","540","","","5,472","","","8,229"],["Total material cash requirements","$","2,278","","","$","2,006","","","$","4,140","","","$","5,165","","","$","3,749","","","$","23,449","","","$","40,787"]]
[[/GREPCENT_TABLE]]

(a)The impact of principal payments that will commence following the anticipated repayment dates of our Tower Revenue Notes, Series 2015-2 and 2018-2 (collectively, "Tower Revenue Notes") is not considered. The Tower Revenue Notes, Series 2015-2 and 2018-2 have principal amounts of $700 million and $750 million, with anticipated repayment dates in 2025 and 2028, respectively. See note 7 to our consolidated financial statements for our definition of and additional information regarding the Tower Revenue Notes.

(b)If the Tower Revenue Notes are not repaid in full by the applicable anticipated repayment dates, the applicable interest rate increases by approximately 5% per annum and monthly principal payments commence using the Excess Cash Flow (as defined in the indenture governing the applicable Tower Revenue Notes) of the issuers of the Tower Revenue Notes. The Tower Revenue Notes are presented based on their contractual maturity dates ranging from 2045 to 2048 and include the impact of an assumed 5% increase in interest rate that would occur following the anticipated repayment dates but exclude the impact of monthly principal payments that would commence using Excess Cash Flow of the issuers of the Tower Revenue Notes. The full year 2023 Excess Cash Flow of the issuers of the Tower Revenue Notes was approximately $993 million. We currently expect to refinance these notes on or prior to the respective anticipated repayment dates.

(c)Includes the unused commitment fees on our 2016 Credit Facility. Interest payments on the variable rate debt are based on estimated rates currently in effect. See note 7 to our consolidated financial statements for information regarding potential upward or downward adjustments to the interest rate spread and unused commitment fee percentage on our 2016 Credit Facility if we achieve specified annual sustainability targets or fail to meet annual sustainability thresholds. Each annual period presented assumes the downward adjustments in the interest rate spread and unused commitment fee percentage on our 2016 Credit Facility. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a discussion of our interest rate risk.

(d)Amounts relate primarily to lease obligations for the land on which our towers are located and are based on the assumption that payments will be made for certain renewal periods exercisable at our option that are reasonably certain to be exercised and excludes our contingent payments for operating leases (such as payments based on revenues derived from the communications infrastructure located on the leased asset) as such arrangements are excluded from our operating lease liability. See note 13 to our consolidated financial statements for further discussion of our operating lease obligations. See also the table below summarizing remaining terms to expiration.

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The following chart summarizes our rights to the land interests under our towers, including renewal terms exercisable at our option, as of December 31, 2023. As of December 31, 2023, the leases for land interests under our towers had an average remaining life of approximately 35 years, weighted based on towers site rental gross margin. See "Item 1A. Risk Factors" for a discussion of retaining the rights to land under our towers.

(a)Inclusive of land owned through fee interests and perpetual easements.

(b)For the three months ended December 31, 2023, without consideration of the term of the tenant contract.

Debt Covenants

Our 2016 Credit Agreement contains financial maintenance covenants. We are currently in compliance with these financial maintenance covenants and, based upon our current expectations, we believe we will continue to comply with our financial maintenance covenants. In addition, certain of our debt agreements contain restrictive covenants that place restrictions on us and may limit our ability to, among other things, incur additional debt and liens, purchase our securities, make capital expenditures, dispose of assets, undertake transactions with affiliates, make other investments, pay dividends or distribute excess cash flow. See note 7 to our consolidated financial statements for further discussion of our debt covenants. See also "Item 1A. Risk Factors" for a discussion of compliance with our debt covenants. The following are ratios applicable to the financial maintenance covenants under the 2016 Credit Agreement as of December 31, 2023.

[[GREPCENT_TABLE]]
[["Borrower / Issuer","Financial Maintenance Covenant(a)(b)","Covenant Level Requirement","As of December 31, 2023"],["CCI","Total Net Leverage Ratio","\u2264 6.50x","5.2x"],["CCI","Total Senior Secured Leverage Ratio","\u2264 3.50x","0.3x"],["CCI","Consolidated Interest Coverage Ratio(c)","N/A","N/A"]]
[[/GREPCENT_TABLE]]

(a)Failure to comply with the financial maintenance covenants would, absent a waiver, result in an event of default under the 2016 Credit Agreement.

(b)As defined in the 2016 Credit Agreement.

(c)Applicable solely to the extent that the senior unsecured debt rating by any two of S&P, Moody's and Fitch is lower than BBB-, Baa3 or BBB-, respectively. If applicable, the consolidated interest coverage ratio must be greater than or equal to 2.50.

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Accounting and Reporting Matters

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are those that we believe (1) are most important to the portrayal of our financial condition and results of operations or (2) require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. In many cases, the accounting treatment of a particular transaction is specifically prescribed by GAAP. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. Accordingly, actual results could differ materially from our estimates. The critical accounting policies and estimates for 2023 are not intended to be a comprehensive list of our accounting policies and estimates. See note 2 to our consolidated financial statements for a summary of our significant accounting policies.

Lease Accounting—Lessee. For our Towers segment, our lessee arrangements primarily consist of ground leases for land under our towers and are for an initial term generally between five to 15 years. We also enter into ground leases, such as term easements, in which we prepay the entire term. For our Fiber segment, our lessee arrangements primarily include leases of fiber assets to facilitate our small cells and fiber solutions. The majority of our lease agreements have certain termination rights that provide for cancellation after a notice period and multiple renewal options exercisable at our option. We include certain renewal option periods in the lease term when we determine that the options are reasonably certain to be exercised.

For both our Towers and Fiber segments, operating lease expense is recognized on a ratable basis, regardless of whether the payment terms require us to make payments annually, semi-annually, quarterly, monthly, or for the entire term in advance. Certain of our ground lease and fiber access agreements contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the change in consumer price index ("CPI")). If the payment terms include fixed escalators, upfront payments, or rent-free periods, the effect of such increases is recognized on a straight-line basis. When calculating straight-line ground lease and fiber access expenses, we consider all fixed elements of contractual escalation provisions, even if such escalation provisions contain a variable element in addition to a minimum. We calculate the straight-line expense over the contract's estimated lease term, including any renewal option periods that we deem reasonably certain to be exercised.

We recognize a right-of-use ("ROU") asset (and, as applicable, a corresponding lease liability) for each of our operating leases. ROU assets represent our right to use an underlying asset for the estimated lease term, and lease liabilities represent the present value of our future lease payments. In assessing our leases and determining our lease liability at lease commencement or upon modification, we are not able to readily determine the rate implicit for our lessee arrangements and thus use our incremental borrowing rate on a collateralized basis to determine the present value of our lease payments. Our ROU assets are measured as the balance of the lease liability plus any prepaid or accrued lease payments and any unamortized initial direct costs.

We review the carrying value of our ROU assets for impairment, similar to our other long-lived assets, whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We could record impairments in the future if there are changes in (1) long-term market conditions, (2) expected future operating results or (3) the utility of the assets that negatively impact the fair value of our ROU assets.

Revenue Recognition. 94% of our total revenue for 2023 consisted of site rental revenues, which are recognized on a ratable basis over the fixed, non-cancelable term of the relevant tenant contract, generally between five to 15 years for site rental revenues derived from wireless tenants and generally between one to 20 years for site rental revenues derived from fiber solutions tenants, regardless of whether the payments from the tenant are received in equal monthly amounts during the life of a tenant contract. Certain of our tenant contracts contain (1) fixed escalation clauses (such as fixed-dollar or fixed-percentage increases) or inflation-based escalation clauses (such as those tied to the change in CPI), (2) multiple renewal periods exercisable at the tenant's option and (3) only limited termination rights at the applicable tenant's option through the current term. If the payment terms call for fixed escalators, upfront payments, or rent-free periods, the revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the tenant contract. When calculating our straight-line rental revenues, we consider all fixed elements of tenant contractual escalation provisions, even if such escalation provisions contain a variable element (such as an escalator tied to an inflation-based index) in addition to a minimum. To the extent we acquire below-market tenant leases for contractual interests with tenants on the acquired communications infrastructure (for example with respect to small cells and fiber), we record the fair value as deferred credits and amortize such deferred credits to site rental revenues over their estimated lease term. Since we recognize revenue on a straight-line basis, a portion of the site rental revenues in a given period represents cash collected or contractually collectible in other periods. Our assets related to straight-line site rental revenues are recorded within "Current portion of deferred site rental receivables" and "Deferred site rental receivables" on the consolidated balance sheet. Amounts billed or received prior to being earned are deferred and reflected in "Deferred revenues"

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and "Other long-term liabilities" on the consolidated balance sheet. Amounts to which we have an unconditional right to payment, which are related to both satisfied or partially satisfied performance obligations, are recorded within "Receivables, net" on the consolidated balance sheet.

As part of our effort to provide comprehensive communications infrastructure solutions, as an ancillary business, we also offer certain services primarily relating to our Towers segment, which represented 6% of our total revenues for 2023. For the periods presented, services and other revenues consists predominately of (1) site development services relating to existing or new tenant equipment installations, including: site acquisition, architectural and engineering, or zoning and permitting (collectively, "site development services") and (2) tenant equipment installation or subsequent augmentations (collectively, "installation services"). See note 16 to our consolidated financial statements for a discussion of the Company's July 2023 restructuring plan, which included discontinuing installation services as a Towers product offering. Our services generally have a duration of one year or less. Upon contract commencement, we assess our services to tenants and identify performance obligations for each promise to provide a distinct service.

We may have multiple performance obligations for site development services, which primarily include: structural analysis, zoning, permitting and construction drawings. For each of the above performance obligations, services revenues are recognized at completion of the applicable performance obligation, which represents the point at which we believe we have transferred goods or services to the tenant. The revenue recognized is based on an allocation of the transaction price among the performance obligations in a respective contract based on estimated standalone selling price.

The transaction price for tower installation services consists of amounts for (1) permanent improvements to our towers that represent a lease component and (2) the performance of the service. Amounts under our tower installation services agreements that represent a lease component are recognized as site rental revenues on a ratable basis over the length of the associated estimated lease term. For the performance of the tower installation service, we have one performance obligation, which is satisfied at the time of the applicable installation or augmentation and recognized as services and other revenues.

Since performance obligations are typically satisfied prior to receiving payment from tenants, the unconditional right to payment is recorded within "Receivables, net" on our consolidated balance sheet.

Accounting for Acquisitions—General. The majority of our towers have been acquired directly or indirectly from the three largest wireless carriers (or their predecessors) through transactions consummated since 1999 while most of our fiber assets were acquired through transactions dating back to 2012, with the largest transactions occurring in 2017. We evaluate each of our acquisitions to determine if it should be accounted for as a business combination or as an acquisition of assets. For our business combinations, we allocate the purchase price to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. Any purchase price in excess of the net fair value of the assets acquired and liabilities assumed is allocated to goodwill. See "Item 7. MD&A—Accounting and Reporting Matters—Accounting for Acquisitions—Valuation" below.

The determination of the final purchase price allocation could extend over several quarters resulting in the use of preliminary estimates that are subject to adjustment until finalized. Such changes could have a significant impact on our consolidated financial statements.

Accounting for Acquisitions—Leases. With respect to business combinations that include towers that we lease and operate, such as the AT&T and T-Mobile leased and subleased towers (including those which T-Mobile assumed in its merger with Sprint), we evaluate such agreements to determine treatment as finance or operating leases. The evaluation of such agreements for finance or operating lease treatment previously included consideration of each of the lease classification criteria under ASC 840-10-25, namely (1) the transfer of ownership provisions, (2) the existence of bargain purchase options, (3) the length of the remaining lease term, and (4) the present value of the minimum lease payments. With respect to the AT&T and T-Mobile leased and subleased towers (including those which T-Mobile assumed in its merger with Sprint), we determined that the tower leases were finance leases and the underlying land leases were operating leases based upon the lease term criterion, after considering the fragmentation criteria applicable under ASC 840-10-25 to leases involving both land and buildings (i.e., towers). We determined that the fragmentation criteria was met, and the tower leases could be accounted for as finance leases apart from the land leases, which are accounted for as operating leases, since (1) the fair value of the land in the aforementioned business combinations was greater than 25% of the total fair value of the leased property at inception and (2) the tower lease expirations occur beyond 75% of the estimated economic life of the tower assets.

Accounting for Acquisitions—Valuation. As of December 31, 2023, our largest asset was property and equipment (which primarily consists of communications infrastructure) followed by goodwill, operating lease ROU assets and intangible assets. Our identifiable intangible assets predominately relate to the site rental contracts and tenant relationships intangible assets.

43

The fair value of the vast majority of our assets and liabilities is determined by using either:

(1)discounted cash flow valuation methods (for estimating identifiable intangibles such as site rental contracts and tenant relationships or operating lease right-of-use assets and lease liabilities acquired); or

(2)estimates of replacement costs (for tangible fixed assets such as communications infrastructure).

The purchase price allocation requires subjective estimates that, if incorrectly estimated, could be material to our consolidated financial statements, including the amount of depreciation, amortization and accretion expense. The most important estimates for measurement of tangible fixed assets are (1) the cost to replace the asset with a new asset and (2) the economic useful life after giving effect to age, quality, and condition. The most important estimates for measurement of intangible assets are (1) discount rates and (2) timing and amount of cash flows including estimates regarding tenant renewals and cancellations. The most important estimates for measurement of operating lease ROU assets and lease liabilities acquired are (1) present value of our future lease payments, including whether renewals or extensions should be measured, and (2) favorability or unfavorability to the current market terms. With respect to business combinations that include towers that we lease and operate, such as the AT&T and T-Mobile leased and subleased towers (including those which T-Mobile assumed in its merger with Sprint), we evaluate such agreements to determine treatment as finance or operating leases and identification of any bargain purchase options.

We record the fair value of obligations to perform certain asset retirement activities, including requirements, pursuant to our ground leases, leased facility and certain pole attachment agreements, to remove communications infrastructure or remediate the space upon which certain of our communications infrastructure resides. In determining the fair value of these asset retirement obligations we must make several subjective and highly judgmental estimates such as those related to: (1) timing of cash flows, (2) future costs, (3) discount rates and (4) the probability of enforcement to remove the towers or small cells or remediate the land. We do not record an obligation for asset retirement activities related to our fiber, as a settlement date is indeterminable and therefore a reasonable estimation of fair value cannot be made.

Accounting for Long-Lived Assets—Useful Lives. We are required to make subjective assessments as to the useful lives of our tangible and intangible assets for purposes of determining depreciation, amortization and accretion expense that, if incorrectly estimated, could be material to our consolidated financial statements. Depreciation expense for our property and equipment is computed using the straight-line method over the estimated useful lives of our various classes of tangible assets. A substantial portion of our property and equipment represents the cost of our communications infrastructure, the majority of which is depreciated with an estimated useful life equal to the shorter of 20 years or the term of the underlying ground lease (where applicable and including optional renewals).

The useful lives of our intangible assets are estimated based on the period over which the intangible asset is expected to benefit us and gives consideration to the expected useful life of other assets to which the useful life may relate. We review the expected useful lives of our intangible assets on an ongoing basis and adjust if necessary. Amortization expense for intangible assets is computed using the straight-line method over the estimated useful life of each of the intangible assets. The useful lives of site rental contracts and tenant relationships intangible assets are limited by the maximum depreciable life of the communications infrastructure (20 years), as a result of the interdependency of the communications infrastructure and the site rental contracts and tenant relationships. In contrast, the site rental contracts and tenant relationships are estimated to provide economic benefits for several decades because of the low rate of tenant cancellations and high rate of tenant retention experienced to date. Thus, while site rental contracts and tenant relationships intangible assets are valued based upon the fair value of the site rental contracts and tenant relationships which includes assumptions regarding both (1) tenants' exercise of optional renewals contained in the acquired leases and (2) renewals of the acquired leases past the contractual term including exercisable options, site rental contracts and tenant relationships intangible assets are amortized over a period not to exceed 20 years as a result of the useful life being limited by the depreciable life of the communications infrastructure.

Accounting for Long-Lived Assets—Impairment Evaluation. We review the carrying values of property and equipment, intangible assets, or other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

For purposes of our Towers segment, we utilize the following dual grouping policy for purposes of determining the unit of account for testing impairment of site rental contracts and tenant relationships intangible assets:

(1)we pool site rental contracts and tenant relationships intangible assets and property and equipment into portfolio groups; and

(2)we separately pool the site rental contracts and tenant relationships by significant tenant or by tenant grouping for individually insignificant tenants, as appropriate.

44

We first pool site rental contracts and tenant relationships intangible assets and property and equipment into portfolio groups for purposes of determining the unit of account for impairment testing, because we view communications infrastructure as portfolios and communications infrastructure in a given portfolio and its related tenant contracts are not largely independent of the other communications infrastructure in the portfolio. We re-evaluate the appropriateness of the pooled groups at least annually. This use of grouping is based in part on (1) our limitations regarding disposal of communications infrastructure, (2) the interdependencies of communications infrastructure portfolios, and (3) the manner in which communications infrastructure is traded in the marketplace. The vast majority of our site rental contracts and tenant relationships intangible assets and property and equipment are pooled into the U.S. owned communications infrastructure group. Secondly, and separately, we pool the site rental contracts and tenant relationships by significant tenant or by tenant grouping for individually insignificant tenants, as appropriate, for purposes of determining the unit of account for impairment testing because we associate the value ascribed to site rental contracts and tenant relationships intangible assets to the underlying contracts and related tenant relationships acquired.

For purposes of our Fiber segment, we consider major U.S. markets where we have made significant investments to be the most appropriate level for purposes of grouping our long-lived assets for potential impairment evaluation.

Our determination that an adverse event or change in circumstance has occurred that indicates that the carrying amounts may not be recoverable will generally involve (1) a deterioration in an asset's financial performance compared to historical results, (2) a shortfall in an asset's financial performance compared to forecasted results, or (3) changes affecting the utility and estimated future demands for the asset. When considering the utility of our assets, we consider events that would meaningfully impact (1) our communications infrastructure or (2) our tenant relationships. For example, consideration would be given to events that impact (1) the structural integrity and longevity of our communications infrastructure or (2) our ability to derive benefit from our existing tenant relationships, including events such as tenant's bankruptcy or insolvency or loss of a significant tenant. During 2023, there were no events or circumstances that caused us to review the carrying value of our intangible assets or property and equipment due in part to our assets performing consistently with or better than our expectations.

If the sum of the associated estimated future cash flows (undiscounted) from an asset group is less than its carrying amount, an impairment loss may be recognized. If the carrying value were to exceed the undiscounted cash flows, measurement of an impairment loss would be based on the fair value of the asset, which is based on an estimate of discounted future cash flows. The most important estimates for such calculations of undiscounted cash flows are (1) the expected additions of new tenants and equipment on our communications infrastructure and (2) estimates regarding tenant cancellations and renewals of tenant contracts. We could record impairments in the future if changes in long-term market conditions, expected future operating results or the utility of the assets results in changes for our impairment test calculations which negatively impact the fair value of our property and equipment and intangible assets, or if we changed our unit of account in the future.

Approximately 2% of our total towers currently have no tenants. We continue to pay operating expenses on these towers in anticipation of obtaining tenants on these towers in the future, primarily because of the demographics and continuing increase in demand for data in the areas around these individual towers. We estimate, based on current visibility, potential tenants on a majority of these towers. To the extent we do not believe there are long-term prospects of obtaining tenants on an individual asset and all other possible avenues for recovering the carrying value have been exhausted, including sale of the asset, we appropriately reduce the carrying value of such assets to fair value.

Accounting for Goodwill—Impairment Evaluation. We test goodwill for impairment on an annual basis, regardless of whether adverse events or changes in circumstances have occurred. The annual test begins with goodwill and all intangible assets being allocated to applicable reporting units. We then perform a qualitative assessment to determine whether it is "more likely than not" that the fair value of the reporting unit is less than its carrying amount. If we conclude that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, we would be required to perform a quantitative goodwill impairment test. The quantitative goodwill impairment test compares the estimated fair value of the reporting unit and the carrying value of the reporting unit. If the carrying amount of a reporting unit is greater than its fair value, an impairment loss shall be recognized in an amount equal to such excess, limited to the total amount of goodwill allocated to the reporting unit. Our reporting units are the same as our operating segments (Towers and Fiber). See note 14 to our consolidated financial statements. We performed our most recent annual goodwill impairment test as of October 1, 2023, which resulted in no impairments.

Deferred Income Taxes. We operate as a REIT for U.S. federal income tax purposes. Our REIT taxable income is generally not subject to federal and state income taxes as a result of the deduction for dividends paid and any usage of our remaining NOLs. Accordingly, the only provision or benefit for federal income taxes for the year ended December 31, 2023 relates to TRSs. Furthermore, as a result of the deduction for dividends paid, some or all of our NOLs related to our REIT may expire without utilization. See "Item 1. Business—REIT Status" for a discussion of the impact of our REIT status. 

45

Our TRSs will continue to be subject, as applicable, to federal and state income taxes and foreign taxes in the jurisdictions in which such assets and operations are located. Our ability to utilize our NOLs is dependent, in part, upon us having sufficient future earnings to utilize our NOLs before they expire. If market conditions change materially and we determine that we will be unable to generate sufficient taxable income in the future to utilize our NOLs, we would be required to record an additional valuation allowance, which would reduce our earnings. Such adjustments could cause a material effect on our results of operations for the period of the adjustment. The change in our valuation allowance has no effect on our cash flows. For a further discussion of our benefit (provision) for income taxes, see "Item 7. MD&A—Results of Operations" and note 9 to our consolidated financial statements.

Accounting Pronouncements

Recently Adopted Accounting Pronouncements. See note 2 to our consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted. See note 2 to our consolidated financial statements.

Non-GAAP and Segment Financial Measures

In addition to the non-GAAP measures used herein and as discussed in note 14 to our consolidated financial statements, we also provide (1) segment site rental gross margin, (2) segment services and other gross margin, and (3) segment operating profit (loss), which are key measures used by management to evaluate the performance of our operating segments. These segment measures are provided pursuant to GAAP requirements related to segment reporting.

We define segment site rental gross margin as segment site rental revenues less segment site rental costs of operations, excluding stock-based compensation expense, net and amortization of prepaid lease purchase price adjustments recorded in consolidated site rental costs of operations. We define segment services and other gross margin as segment services and other revenues less segment services and other costs of operations, excluding stock-based compensation expense, net recorded in consolidated services and other costs of operations. We define segment operating profit (loss) as segment site rental gross margin plus segment services and other gross margin, and segment other operating (income) expense, less segment selling, general and administrative expenses. All of these measurements of profit or loss are exclusive of depreciation, amortization and accretion, which are shown separately. Additionally, certain costs are shared across segments and are reflected in our segment measures through allocations that management believes to be reasonable.

We use earnings before interest, taxes, depreciation, amortization and accretion, as adjusted ("Adjusted EBITDA"), which is a non-GAAP financial measure, as an indicator of consolidated financial performance. Our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in the communications infrastructure sector or other REITs, and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income (loss), net income (loss), net cash provided by (used for) operating, investing and financing activities or other income statement or cash flow statement data prepared in accordance with GAAP and should be considered only as a supplement to net income (loss) computed in accordance with GAAP as a measure of our performance. There are material limitations to using a measure such as Adjusted EBITDA, including the difficulty associated with comparing results among more than one company, including our competitors, and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income (loss). Management compensates for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with their analysis of net income (loss).

46

We define Adjusted EBITDA as net income (loss) plus restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, net, (gains) losses on retirement of long-term obligations, net (gain) loss on interest rate swaps, (gains) losses on foreign currency swaps, impairment of available-for-sale securities, interest income, other (income) expense, (benefit) provision for income taxes, net (income) loss from discontinued operations, (gain) loss on sale of discontinued operations, cumulative effect of a change in accounting principle, stock-based compensation expense, net and net (gain) loss from disposal of discontinued operations, net of tax. The reconciliation of Adjusted EBITDA to our net income (loss) is set forth below:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["(In millions of dollars)","2023","","2022","","2021"],["Net income (loss)","$","1,502","","","$","1,675","","","$","1,096"],["Adjustments to increase (decrease) net income (loss):"],["Asset write-down charges","33","","","34","","","21"],["Acquisition and integration costs","1","","","2","","","1"],["Depreciation, amortization and accretion","1,754","","","1,707","","","1,644"],["Restructuring charges","85","","","\u2014","","","\u2014"],["Amortization of prepaid lease purchase price adjustments","16","","","16","","","18"],["Interest expense and amortization of deferred financing costs, net","850","","","699","","","657"],["(Gains) losses on retirement of long-term obligations","\u2014","","","28","","","145"],["Interest income","(15)","","","(3)","","","(1)"],["Other (income) expense","6","","","10","","","21"],["(Benefit) provision for income taxes","26","","","16","","","21"],["Stock-based compensation expense, net","157","","","156","","","131"],["Net (gain) loss from disposal of discontinued operations, net of tax","\u2014","","","\u2014","","","62"],["Adjusted EBITDA(a)","$","4,415","","","$","4,340","","","$","3,816"]]
[[/GREPCENT_TABLE]]

(a)The above reconciliation excludes the items included in our Adjusted EBITDA definition which are not applicable to the periods shown.

We believe Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance because:

•it is the primary measure used by our management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations;

•although specific definitions may vary, it is widely used by investors or other interested parties in evaluation of the communications infrastructure sector and other REITs to measure financial performance without regard to items such as depreciation, amortization and accretion, which can vary depending upon accounting methods and the book value of assets;

•we believe it helps investors and other interested parties meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors by removing the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results; and

•it is similar to the measure of current financial performance generally used in our debt covenant calculations.

Our management uses Adjusted EBITDA:

•as a performance goal in employee annual incentive compensation;

•as a measurement of financial performance because it assists us in comparing our financial performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our operating results;

•in presentations to our board of directors to enable it to have the same measurement of financial performance used by management;

•for planning purposes, including preparation of our annual operating budget;

•as a valuation measure in strategic analyses in connection with the purchase and sale of assets;

•in determining self-imposed limits on our debt levels, including the evaluation of our leverage ratio; and

•with respect to compliance with our debt covenants, which require us to maintain certain financial ratios that incorporate concepts such as, or similar to, Adjusted EBITDA.

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