Jay A. Brown
President, Chief Executive Officer and Director at Crown Castle
Thanks, Kris, and good morning, everyone. Thanks for joining us. Before I begin, I'd like to welcome Kris. We're very excited to have him here on the Crown Castle team. Turning to our earnings release, I wanted to provide some context for the wireless industry environment that led us to reduce our outlook for 2023, and Dan is going to speak to the specifics of the changes. Across each U.S. wireless generation, the deployment of new spectrum, followed by cell site densification has increased network capacity and enabled exponential mobile data demand growth.
For us, this has played out with an initial surge in tower activity to build out the latest-generation network, followed by a consistent level of activity over a long period of time to support our customers. As a part of the most recent upgrade to 5G, the U.S. wireless carriers spent more than $100 billion to acquire spectrum from 2020 to 2022. Our customers moved quickly to deploy their newly-acquired spectrum, driving record tower level activity and dividend per share growth of almost 11% per year over that same period. I believe this initial surge in tower activity has ended. In the second quarter, we saw tower activity levels slow significantly. As a result, we are decreasing our 2023 outlook, primarily as a result of lower tower services margins.
Importantly, our tower organic revenue growth outlook remains at 5% despite this lower level of activity. The resilience of our tower revenues is the result of our decision to pursue holistic long-term agreements with each of our major customers. In each of these agreements, our strategy has been to maximize the economic value while simultaneously providing visibility and stability in our long-term cash flows. To illustrate this point, slide 4 shows our organic tower revenue growth since 2013. Over this period, we've consistently worked with our customers to provide them with enhanced flexibility to move quickly and deploying their networks while increasing our level of contracted activity. Due to our focus on reducing risk and generating resilient organic growth, we've contracted 75% of our expected annual tower organic growth of 5% through 2027, while also delivering record tower growth in 2021 and 2022 during the initial phases of 5G rollout.
In addition to the benefits we've captured from our long-term customer agreements, we've complemented our portfolio of towers with fiber and small cells, making us uniquely positioned to capitalize on the long-term growth in data demand regardless of how carriers deploy spectrum and densify their networks. Our current backlog of 60,000 small cells provides a line of sight to doubling our on-air nodes over the next several years, which we expect will drive double-digit small cell revenue growth beginning in 2024.
To provide additional visibility on how our fiber solutions and small cell businesses are progressing, we have updated our analysis across the five markets we have previously highlighted since 2021 as highlighted on slide 10. We continue to generate solid returns from the benefits of co-locating additional customers on our existing fiber assets, offsetting the churn related to the legacy Sprint rationalization. Phoenix, which was not impacted by Sprint churn, is a good illustration of what we can achieve with our fiber strategy as we add nodes to existing fiber. There, we have seen our yield expand from 9% a year ago to over 11% today as we roughly doubled our nodes on air from 1,400 to 2,800 nodes. Los Angeles and Philadelphia also illustrate the benefit of our shared infrastructure model. Here, with the combination of small cells and enterprise fiber, we see yields of 8% to 9%, with the potential to grow yields as we have done in Phoenix and Orlando as we add small cells. Overall, I'm encouraged by these results, particularly as we accelerate small cell deployments. With 60,000 nodes in our backlog, the majority of which are co-location nodes, we have line of sight to attractive incremental returns and double-digit small cell revenue growth.
Zooming back out to the consolidated level, we're consistently looking to deliver the highest risk-adjusted returns for our shareholders. Our strategy has delivered growth and driven improvements on both the risk and the return side of the equation. Several years ago, it became clear to us that small cells would become an important component of the wireless carrier network densification required to support data growth. We saw an acceleration in small cells towards the back half of the 4G era, as the vast majority of the 60,000 nodes we have on air today are 4G nodes that were deployed because towers alone could not support the continued rise in mobile traffic.
Now, as we've passed the initial 5G surge in tower activity, we are seeing our customers accelerate the selection and identification of new small cell locations to densify portions of their networks that have experienced the most traffic. The results of our early move into establishing a leading portfolio is reflected in our double-digit small cell organic revenue growth in 2024 and provide the platform for continued growth throughout the 5G era. With our diversified asset base, we have positioned ourselves to benefit from carrier activity on towers and small cells.
Additionally, we have reduced our risk by increasing the resiliency of our business through our long-term customer agreements and improving the strength of our balance sheet. As a result of these actions, despite a significant reduction in tower activity in the back half of 2023, we continue to expect 5% organic tower revenue growth, 10,000 small cell node deployments, and 3% fiber solutions growth by the end of this year. This resilient underlying growth across our business underpins our expectation of returning to our long-term annual dividend per share growth target of 7% to 8% beyond 2025.
And with that, I'll turn the call over to Dan.
