美國電塔 (AMT) 2003 Q3 法說會逐字稿

My name is Christy, and I will be your conference facilitator. At this time I would like to welcome everyone to the SpectraSite Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question press star, then the number 2 on your telephone keypad. ¶ Thank you. Mr. Steven Lily, you may begin your conference.

Thanks, Christy. Good morning and welcome to SpectraSite's third quarter conference call. Before we begin, I'd like to introduce other members of the management team present on the call today. Steve Clark, Chief Executive Officer. Tim Blitz, Chief Operating Officer, and Dave Tomick, Chief Financial Officer.

Please be reminded during this call we may make forward-looking statements regarding future events and future financial performance of the company. These statements are subject to risks and uncertainties, including those detailed in the company's filings with the SEC. Actual results or developments may differ materially from those in forward-looking statements and as a result of various factors. We have based these forward-looking statements on information currently available and would like to remind you that we undertake no obligation to update or revise any forward-looking statement made as part of this call.

Today's call will also include discussion of certain non-GAAP financial measures including adjusted EBITDA and free cash flow. Tables reconciling such non-GAAP financials to comparable GAAP financial measures are available as part of the company's press release issued prior to this call, the company's Form 8-K and Form 10-Q filed with the SEC and under the Investor Relations section of the company's website, www.spectrasite.com. Now I'd like to turn the call over to Steve Clark.

Thanks, Steven. Good morning everyone. Thanks for being with us today.

The third quarter was a landmark quarter for SpectraSite. We generated over $40 million in adjusted EBITDA, we generated over $30 million in free cash flow, and we achieved positive net earnings per share. From a credit perspective our total net leverage level declined to approximately 3.5 times and our total cash interest coverage increased to approximately 4.5 times. All in all the third quarter was another solid quarter of operations for SpectraSite.

Aside from our operating results, we've also been active in the capital market since our second quarter call. First, in early October, we completed a very successful secondary offering of 10.35 million shares of common stock. As part of the secondary offering SpectraSite began trading on the New York Stock Exchange on October 3rd under the ticket symbol SSI. Also in October we completed an amendment to our senior credit facility under which we reduced the interest rate spread on our term loan by a full percentage point, translating into annual cash interest savings of 2.5 million dollars per year.

As I look forward toward the fourth quarter of this year and the year ahead, I believe SpectraSite is extremely well positioned, from an operational and a financial standpoint. Though our tendency is still to be a bit conservative in our outlook what is certain is that we have great people, great assets, and a great capital structure, all of which should serve SpectraSite's investors well going forward.

With that, I'd like to turn the call over to Dave Tomick, Chief Financial Officer, to discuss the quarter's financial highlights and our guidance for 2004.

Thanks Steve and good morning. During the third quarter, we had total site operations revenue of $79.5 million as compared to total site operations revenue of $69.3 million during the third quarter of 2002. Net of the contribution from the SBC towers we sold in February of this year.

Our third quarter site operations revenue represents a year-over-year growth of 15% from the prior year's third quarter. Again, net of the contribution from the SBC towers told in February.

Adjusted EBITDA for the quarter was 41.9 million as compared to adjusted EBITDA of 37.2 million during the second quarter of this year, and adjusted EBITDA of 33.1 million during the prior year's third quarter net of the contribution of the 545 SBC towers. Our third quarter adjusted EBITDA of 41.9 million represents a sequential growth rate of 13% from the second quarter of 2003, and a year-over-year growth rate of 26% from the third quarter of 2002. Our third quarter adjusted EBITDA margin increased to 50% from 43.5% during the prior year's third quarter.

Before I go on, I'd like to take a minute to be clear about our definition of adjusted EBITDA to avoid any confusion when people are comparing results between SpectraSite and other companies. The company's definition of adjusted EBITDA is based on recent regulations adopted by the SEC and prepared in response to the SEC's review of our S-1 filing in conjunction with our recent stock offering. Our new definition of adjusted EBITDA is defined as net income or loss before depreciation, amortization, and accretion, interest, income tax expense or benefit, and if applicable, before discontinued operations and cumulative effect of change in accounting principle. Our definition of adjusted EBITDA is different from the traditional definition of EBITDA many companies are still using, which is operating income plus depreciation, amortization, non-cash charges, and non-recurring items. For public reporting purposes our definition of adjusted EBITDA includes the quarter to quarter impact of other income and other expense item.

Let me give you an example. During the third quarter of this year our adjusted EBITDA was 41.9 million. This number includes 1.1 million of other income. As a result, utilizing the traditional definition of EBITDA during the third quarter of this year, it would have resulted in EBITDA of 40.8 million, which is 1.1 million dollars lower than we reported publicly. Conversely, during the second quarter of this year, our adjusted EBITDA was 37.2 million dollars. This number includes 1.8 million of other expense. As a result, utilizing the traditional definition of EBITDA during the second quarter of this year would have resulted in EBITDA of $39 million, which is 1.8 million higher than the SEC-endorsed definition.

As you can see from this explanation, since other income and other expenses includes items such as miscellaneous income or expense, quarterly mark to market of interest rate, hedge agreement, write-down of assets, non-recurring fees associated with certain financial transactions and certain other reconciling items it is difficult to predict the impact other income or other expense will have on a quarter to quarter basis. Hopefully this is clear to all of you, and if not we would be happy to address it either later or off-line following the call.

Going back to our results for the quarter, free cash flow defined as net cash provided by operating activities less purchases of property and equipment was 30.4 million during the third quarter, as compared to 12.7 million during the second quarter, and 13.3 million during the prior year's third quarter. As we have said before, we believe free cash flow and free cash flow per share are meaningful metrics to investors in the tower sector.

Our account receivable as of September 30 was again quite low at $8.5 million, net of reserves. We believe our ability to manage AR effectively improves our financial flexibility and operating performance. Going forward you can expect AR collections to continue to be a primary focus for the company.

As many of you know driving down SG&A has been a key focus of ours since the middle of 2001. Our expectation has been the full year SG&A would approximate $52 million, equating to $13 million per quarter, and we believe we are on pace to achieve that goal. While our third quarter SG&A of 13.2 million represents an increase of 600,000 from from our second quarter SG&A level of 12.6 million, the increase related primarily to timing difference between the second and third quarters. Had these timing differences not occurred our SG&A would have been relatively flat quarter to quarter which is why we are still comfortable that we are on track to achieve our SG&A goal for the year.

During the third quarter, we consummated the second installment of the remaining towers to be acquired under the SBC purchase contract when we closed on five towers on August 15th. The SBC agreement requires SpectraSite to sublease of maximum of 600 towers from a pre-defined pool of 906 towers by end of the third quarter 2004. In amounts not to exceed 100 towers in any given quarter. As of the end of the third quarter we have closed on 59 of the 600 towers. Should we close on fewer than 100 towers in any given quarter, as we did in the second and third quarters of this year, the difference between the number of towers we actually close and the maximum of 100 is accrued to the last closing date, which is August 16, 2004.

The five SBC towers subleased during the third quarter, were acquired for a total of $1.4 million, at an average adjusted EBITDA multiple of 11.3 times. Although the sublease price within each traunch of towers will vary on a per-tower basis and as a cash flow multiple, we continue to expect the average sublease price for the 600 towers to be approximately $260,000 per tower and to be in the range of 14 to 18 times adjusted EBITDA.

From a balance sheet standpoint, at September 30th, we had $56 million of cash on hand and a total of $640 million in long-term debt comprised of $440 million of bank debt and $200 million of high-yield. During the quarter we made a voluntary pre-payment of $40 million under our senior credit facility from cash on hand. In addition to our outstanding term loans we also have an unused $200 million revolver as part of our credit facility. Our outstanding bank death does not begin amortizing until 2006 and our high-yield debt matures on May 15, 2010.

Our net debt to annualized adjust EBITDA was 3.5 times at end of third quarter and after giving effect to our recent bank amendment our annualized adjusted EBITDA to annualized cash interest expense was 4.5 times. As we have said before, given our low total leverage and our high cash interest coverage we believe we have the greatest amount of financial flexibility among the publicly traded tower companies.

We're now going to shift to the 2004 guidance this we included in yesterday's release. Our 2004 outlook includes assumptions relating to the existing business without regard to the possible tower closings under our contract with SBC. We believe we will close on approximately 55 SBC towers during the fourth quarter of 2003, but we are unable to predict how many of these towers will close during 2004.

Without giving effect to possible SBC tower closings during 2004, we expect site leasing and licensing revenues to be between 336 million and 341 million dollars. And broadcast service revenues to be between 10 and $12 million.

We expect site operations costs before depreciation, amortization, and accretion expense to be between 108 and $111 million, and in broadcast service costs of operations before depreciation, amortization, and accretion expense to be between $9 and $11 million. We expect 2004 SG&A to be between 49 and $52 million.

Our 2004 cash interest expense is expected to approximate 37 million to 41 million. Cash interest consisted of the following items. Cash interest expense associated with our $200 million 8.25 senior notes, cash interest associated with $440 million of term loans outstanding under our senior credit facility and commitment fees associated with our $200 million revolving credit facility.

From a capex perspective during 2004 we expect to spend approximately 15 million to $20 million in capital expenditures related to tower upgrades, information technology purchases, and other general corporate requirements. We also expect to spend between 10 and 20 million in discretionary capital expenditures relating to our in-building initiative and purchase of ground rights under certain towers.

At September 30 we had approximately $640 million of outstanding debt and approximately $56 million of cash on hand. Based on the assumptions outlined within our guidance we do not expect to require borrowing under our $200 million unused revolving credit facility during 2004.

With regard to our agreement with SBC to sublease additional towers, as of September 30, 2003, we have closed on 59 towers out of a maximum of 600. During the fourth quarter of 2003, as I mentioned before, we expect to close on approximately 55 SBC towers.

During 2004, assuming terms of the contract are met, and SB C makes towers available, we will close on a maximum of 100 towers per quarter until the third quarter at which time we will close on the remaining towers. On average, each SBC tower on which we expect to close will cost approximately $260,000, will have monthly revenues of approximately $2400, and will have monthly cost of operations before depreciation and amortization and accretion expenses, of approximately $1,050. The 2004 tower closing dates are February 16, May 17, and August 16.

Now I'd like to turn the call back over to Steve Clark for additional comments before we open the call to Q and A.

Thanks, Dave.

I'd like first to provide a bit of background on the assumptions underlying our guidance. No doubt there are current indicators which could combine to create accelerating growth for the tower industry. In addition to continued growth in subscribers and strong growth in minute of use per subscriber, these factors include wireless number portability, the likely deferral of carrier consolidation, and most important, the fact that for the first time since 2001, all six of the national carriers will have active cell-flight development programs in 2004. While these positive factors may produce an outstanding year for the tower industry, our guidance is based on current lease application activity which leads us to expect that the wireless industry will likely deploy 10 to 15% more new antenna sites in 2004 than in 2003. At the same time, the GSM overlay's, which have been a significant contributor to tower revenue growth in 2002 and 2003 are winding down.

Consequently our outlook for to '04 is based on revenue growth levels similar to those experienced in 2003. We expect 2004 will be a solid year for SpectraSite and for the entire tower sector but it's still a little early to predicate guidance on a more highly optimistic set of assumptions.

The big six carriers have healthy balance sheets. The four publicly traded nationwide carriers are sitting on aggregate cash balances of more than $10 billion and have a combined net leverage ratio of less than 2.5 times.

As we enter the fourth quarter holiday shopping period we believe wireless devices will be one of the most popular gifts of the season. Camera phones, video phones, quad-band phones capable of working in the U.S. and Europe, are providing subscribers with greater functionality than ever before. And as wireless functionality increases, so, too, will subscribers' expectation of network quality. We believe our customers are well positioned to meet the challenges and opportunities that lie ahead.

Our mission at SpectraSite is to work as closely as possible with our key customers to find and fill the coverage and capacity gaps that exist in their networks. Helping our customers deploy high quality networks capable of attracting and retaining loyal subscribers is an endeavor to be played out over several quarters and even over the next several years. While we recognize that we are unable to control when and how carriers spend their capital dollars, based on the trends we see developing across the wireless industry today, there is no other tower portfolio we would rather own and operate.

With that, operator, we would like to open the call to questions.

At this time I would like to remind everyone if you would like to ask a question press star, then the number 1, on your telephone keypad. We'll pause for just a moment to compile the Q and A roster. Your first question comes from Jim Ballen of Bear Stearns.

The question I want to ask is about your priorities in terms of use of free cash flow since you don't have any debt amortization that you have to make for a few years. Can you talk a little bit about about SBC, whether or not you're expecting SBC to step up their effort next year in terms of making towers available to be acquired, and also, you know, can you talk a little bit about a prior priortization of pre-paying your bank debt versus buying the land under your towers or possibly making other tower acquisitions or getting into the tower building business? If you could just talk about what's the most important thing for you. Thanks.

Jim this, is Steve. You know, I think in answer to the first part of your question, we believe SBC has, indeed, stepped up their efforts, and are very focused on trying to qualify as many towers as possible.

Having said that, I wouldn't say we're in the dark, but we're certainly unable to, with any precision, you know, with what little knowledge we have about all of that, come to any conclusion about how many towers we think we're going to close. And I think that, in turn, makes it very difficult for us or for the board to spend much time worrying about prioritizing you know, the -- after the SBC, because there's a pretty significant difference in the cash that we might spend across the ranges.

I mean, clearly the choice in terms of what to do with, you know, incremental free cash flow I think everybody understands, and I think what we as a company have decided is until we get real clarity on the SBC remaining obligation, which is really not until probably by the end of the third quarter of next year, that's the point in time that we'll have the facts with which we can then begin to meaningful look at the options.

Well, we saw in this quarter that you decided to use, you know, most of your free cash flow to prepay bank debt. I guess the availability on your revolver stays in place, so you maintain the financial flexibility. Is there something, you know, assuming that the numbers are not big coming out of SBC that, we could see you do going forward, or do you just -- well, I'll leave it at that.

No, I think you should not expect that with will continue on each quarter that we know the results of the SBC closes, if they're small, that we're going to turn and and prepay the -- I don't think that's a predefined assumption at all. I do think that -- one other issue that you mentioned in your first multi-part question had to do with purchasing ground rights underlying the towers. We have approved a pilot program, you know, we're obviously of the three publicly held tower companies, we're the one that owns the least, by far of, the towers. We only own a single-digit percentage of the ground underneath the towers. So that's a big opportunity for us to, certainly at the right price, to be able to improve our operating costs and subsequently to improve cash flow. I think we're very optimistic about that, and if the pilot program is successful, that is an area that we would expect to expend free cash flow on. But we just started the pilot program.

Okay. Thanks a lot, Steve.

Your next question comes from Rick Prentice of Raymond James. Yes, good morning, guys. Couple of questions for you. First, I agree, I think the demand side of the leasing activity looks pretty exciting for next year if it does materialize. The question is on the pricing side. Can you talk a little bit about what the pricing environment is out there for the rents and has there been any impact and discussions on the escalators and the second question is, given the visibility that we enjoy in this business, when will you know if it's really materializing to being a stronger year in the rental side than what your current conservative outlook suggests?

Rick this, is Tim. I think you asked that same question last quarter, and I think our answer is almost the same. The pricing has been fluctuating within a very tight range for almost two-and-a-half years, and we have seen no significant differences in the last 90 days, or as we enter the fourth quarter, so we're very pleased with that. As it relates to when we'll know, I would -- you know, carriers have to finalize their budgets, and they have to get through the Christmas holiday season, and they tend to look through the first quarter results as well to set up their year. So generally early into the mid-second quarter we'll know. I mean, we will obviously have converted what pipeline we see coming into the market right now, which is robust, and I think I said down in Florida, PCIA, we're starting to see applications at a refusal that we haven't seen for 12 to 18 months, a long time. So I'd say middle of the second quarter we'll know for sure if they're going to follow through with a robust build.

Follow-up question for Dave. On your cash interest guidance of 37 to 41 are there any other assumed pay-downs in the facility out there given that you don't have any planned SBC transaction or traunches in '04, and do you have a leverage ratio which you think you don't want to go below?

The answer to the first part of the question is no, there are no assumed pay-downs in that cash interest number.

Okay.

No, I don't think we have a set number. I think I said, you know, a number of times when we were on the road, I mean, people have said, what is the proper leverage ratio in this business, a lot of people are starting to say we're under-leveraged for this business. You know, I don't know today clearly, you know, at 4 times -- four-plus times cash interest coverage we're pretty comfortable, and could withstand just about anything. I think, though, as Steve said, we want to maintain maximum flexibility until we get through the SBC obligation. When that's over I think we will take a look at the overall balance sheet and start to contemplate our option.

Sounds good, guys. Good luck.

Your next question comes from Matt Zachara of Thomas Weisel Partners.

Three questions. If you could review for us percent of contracts on straight line versus a formula so we can understand how much we might see out of the price escalators next year. Secondly, will the bank deal let you buy back any stock and is that part of the mix of things you might consider, and also, I think for Dave, if heed define other income and how repeatable is it, get a little bit better sense here, that would be helpful.

This is Steve. The straight line versus basically the -- the portion of our revenue which is straight line for GAAP purposes is the -- predominantly Nextel-related leases, and the big piece, which is predominantly not straight line, is that associated with the SBC transaction so. If you look at it from a standpoint of current run rate it's about 60%, I think, straight line, and 40% not.

Okay.

In terms of, you know, buying back stock, that's certainly -- you know, if you go down the laundry list of alternatives of what to do with excess cash, that's one that makes the list. Having said that, we just went through the effort to complete a secondary in order to put some meaningful liquidity into the stock, so I think the likelihood that we would serve shareholders well by turning around and reducing liquidity makes it probably, on a priority base, fall toward, without much thinking at all, towards the bottom of the list

Will the bank deal let you buy back stock if you want to?

It currently does not. If that was something that we were contemplating, I think you would, you know, and somewhere down the road, as you're getting closer to maybe when you're looking at amortization of basic deals, maybe you redo the bank deals. The current agreement does not allow buy back of stock.

And the last one, about other income. Trying to understand how repeatable that million dollars was.

Do you want to know -- it can vary quarter to quarter. Let me give you some examples of what it is.

Okay.

You know, you de-commission a tower, it runs through that line. The expenses we had related to the stock offering we recently did runs through that line. Those are expense side.

On the income side, what I would say is in most case, the other income and expense line netted will be, first of all, almost always non-cash, most of the time, and I would think that most of the time will be an expense rather than income. Can't say for certain, but I think that's that's true, and I think that's true for the sector. The reason it was unusual this year that we had income was we owned from probably four or five years ago 3.3 million shares of Ubiquitell stock. We sold the stock for about $5 million, which is why it was unusual, I would think, or not be ordinary that we would have other income coming into the definition. It will typically be expensed and typically be non-cash.

Maybe stepping back, if it's somewhat variable, and not really related to operations, I guess, why include it in EBITDA? Is that a fair question?

Because as we went through the SEC review process, it was strongly suggested to us that we include it in EBITDA.

Okay. Thank you very -- that's fine. Anything else to add? I'm sorry.

No. Steven?

Ned this, is Steven. I was just going to add -- and I think that's why Dave went through on his section of the call, the reason why we are reporting EBITDA the way we ever, but yet I think the way most people are thinking about is still, the way you are, sort of revenues less direct it cost less SG&A, and you get back to more of an apples to apples number with more people.

Thank you very much.

Your next question comes from Frederick Bellson of Merrill Lynch.

Good morning. Previously you would -- you had identified several sites where rent was due from Verizon based on reciprocal agreements between Cingular and Verizon. Have you recognized any of this revenue that you were pursuing from these swap agreements, specifically in the third quarter?

There were certainly some swap agreements that were in place that we, on a quarterly basis, and it's been going on since the agreement, where we would convert them to revenue for us, it would be a very small portion any given quarter as we resolve those when we find them. Not significant, but it happens every quarter.

So you have included some of that into the third quarter?

I would have to go back and see how many. I'm sure there was a couple, I would think.

Thank you very much.

Your next question comes from Anthony Corman of Deutsche Banc.

Two questions. First, a clarification on the guidance, and I'm wondering if the guidance that you laid out does include the 55 closings on SBC that you're expecting in the fourth quarter of this year or whether it includes no additional closings that have happened past the third quarter at all.

Anthony, it's Dave. Yes, does it include those 55.

Okay. So it's really just anything going forward after the fourth quarter, and then any changes that we might see to the guidance in the future might be reflect to adjust the fact that you may close on more or fewer of those towers in the fourth quarter?

That's right.

Second, with respect to the bank facility, if you, I guess, look at the math, I guess, they're about 541 towers that you didn't close on, and I guess if you do close on 55 that would be about 486 towers, and I guess at that number you mentioned of around 260,000, that's 125 million or so, just rounding. Is that -- and I guess your mention of not drawing any additional amounts on the credit facility, you know, assuming that that is the number that you wound up closing on, I guess by whatever the date is, August 15th of '04, are you still comfortable that that -- would you not have any additional bank borrowings, or was that just assuming same-state operational drawings as opposed to drawing to finish the SBC closings?

Basically we still would say we do not expect to draw on the revolver. Keep in mind, there's $56 million of cash on hand, we are in a positive free cash flow situation. So if you look at the EBITDA we are throwing out there for next year, and take out the capex I talked about, the cash interest expense I talked about, you'd still be in a position where you're pretty close, where you could do it off that number alone, then the $56 million, I think, provides the cushion that would allow you to do it.

Perfect. Thank you.

Your next question comes from Garon Ken of Sincati Advisers.

Follow-up question on SBC acquisitions. Hello?

We're here.

Hi, guys. I've got a quit question on the SBC tower acquisitions. I'm trying to understand exactly what your obligations are for 2004. And looking at the numbers, it seems as though you plan on purchasing 55 more in fourth quarter '03, and you stand on 59 as of September 30th. So it seems as though that means there are 114 short of 200, which is, I guess, 100 for a quarter this year, and also if you look at 100 per quarter next year, that seems to suggest that you still have to own 286 in 2004. Is that math correct, and is that the obligation that you have to SBC?

No, the original obligation was for a maximum of 600 towers, and there were three scheduled closings in 2003 and three scheduled closings in 2004. So the subset to the obligation is that we had an obligation to close no more than 100 towers in any of the first five closings.

Okay.

And anything that was less than 100 accrued to the 6th closing. So if you look at the three closings in 2003, we have closed 59 towers in the first two closings and expect to close 55 more in the third closing. So we will have closed, obviously, a total of 114 out of a maximum of 300 in 2003. So 186 of those accrue to the 6th closing.

Okay.

In addition to the 300 that we could close in closings 4, 5, and 6 in 2004. So going into 2004, just to recap, if we close 55 towers in the fourth quarter of 2003 there will be 486 towers remaining to potentially be closed under the contract.

Okay. Potentially, but not mandatorily?

That's correct, because those towers all have to meet certain criteria, and the reason we're unable to project how many will actually close is it's not at all clear -- first of all, it's in SBC's hands at this point to clear the issue that would prevent the towers from being presented for closing. As I said earlier we think they're fully engaged and working hard, and have no reason to think that they won't be successful, but it might be 0 in the first quarter closing, 0 in the second quarter closing, and 486 in the August closing, or any other combination. So to make some assumption as to when those towers are going to close and how many and bake that into guidance was, obviously, an exercise of proving that we were wrong. There's no way to guess correctly what it's going to be.

Thank you very much for that explanation.

Sure.

Your next question comes from Sam Martine of Cobalt Capital.

My question has been answered. Thanks.

Again, if you would like to ask a question please press star, then the number 1 on your telephone keypad. Your next question comes from Mark Duressi of Raymond James.

Two questions. One is follow-up on the SBC transaction, not to belabor the point. Steve, can you kind of talk about what are some of the criteria that may not have been met or SBC is not presenting to you in order to make those towers acceptable to you, and is it possible that if they don't actually go through that process, that you might not buy any towers next year? That's the first question. The second question, as you look out to 2004, can you give us a sense for some metric to help us understand maybe, you know, what percentage of your leases or what percentage of your site revenues are up for renewal next year? Thank you.

Sure, Mark. This is Steve again. You know, the SBC -- let's kind of step back a second. The SBC transaction was announced in August of 2001, and it was a -- you know, originally, the acquisition of 3900 towers. So if you think back to any other large tower transaction that any of the tower companies have done with the carriers, you know, you tend to close the towers first that are clean of any issues, which would prevent them from being closed. And it's the same set of issues as you would have in any other tower transaction.

For example, if the landlord who owns the ground underlying a tower has in his original contract the right of consent to change the lessee, we have to get -- somebody has to get that guy's consent. And if he says no, then you go through a dance of saying, well, would you give me consent if I gave you $500, or $1,000, or $10,000, or whatever, and that's the way these things get finally cleared if they can be cleared. There are environmental issues sometimes that have to be cleared, there are uncertain title ownership issues.

I mean, all the sort of normal due diligence issues that have to be cleared, we have, not to belabor the point, but we have spent a lot of time, our obligation was to try to clear all those issues through the end of 2001, which we have done, and then SBC picked up the ball and it's now in their court.

The only other nonconventional due diligence issue is that some of the towers are held in partnerships between SBC and other carriers. And these 55 towers that we expect to close were one of those partnerships that we believe SBC will clear up the partnership consents and present to us for closing.

Mark this, is Tim. On the renewal, we have our first big traunch of the Nextel towers coming up for renewal next year. About 800 of those staggered throughout the course of the year, and another couple hundred leases, so just short of 1,000 leases coming up for renewal, somewhere between 5 and 6 percent of the total leases.

Thank you.

Your next question comes from Evan Marlo of Hyperion.

First, some clarification on your capex guides for 2004, did I hear you say it was going to be 15 to 20 million not including 10 to 20 million for your in building program?

Yes, the second -- there's really two components. One is what we call the organic capital, some people call it maintenance capital. The capital to continue to run the business to tower improvements, augmentation, capital associated with running the corporate office, et cetera. The discretionary capital, if you will, we have a range of between $10 and $20 million tied to our in building and the ground rights purchasing program that Steve alluded to. So depending upon how successful both of those programs are, it would fall in that range.

So total capex next year probably 25 to 40?

Yes.

Great. Second question is, on the other income line, you said that you had a gain of $5 million from the sale are Ubiquitell stock. Two questions on that. Number one is, there more stuff like that that is showing up in your balance sheet, and where I would look for it, and number two, how did you end up with all that Ubiquitell stock?

This is Dave, I'll take it. First of all, the proceeds from the sale, I should have been clear on this, I apologize, the proceeds of the sale were just a tad under $5 million, I think the gain was about 3.8 million. We had invested a long time ago, probably in --

early 2000.

-- early 2000, late '99, when Ubiquitell was getting started, we got into it, actually starting to do some of their tower build work, at the time they were looking for funds, equity capital as well, so we invested at the same time we were doing the build-to-suit work. To the best of my knowledge there is not any more of that that you can look for.

So the cash and equivalents is truly -- was that where that was being carried in the balance sheet?

No, I think it was being carried in other assets, but there's nothing else to look for.

Great. Thank you very much, guys.

You're welcome.

And there are no further questions at this time.

Great. Thank you, operator, and thank you all for participating.

Thank you for participating in today's SpectraSite Third Quarter Earnings Conference Call. You may now disconnect.