美國電塔 (AMT) 2006 Q4 法說會逐字稿

Good morning, my name is Lisa and I'll be your conference operator today. At this time I would like to welcome everyone to the American Tower fourth quarter 2006 earnings call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [OPERATOR INSTRUCTIONS] Thank you.

I will now turn the call over to Mr. Powell. Sir, you may begin your conference.

Thank you, Lisa. Good morning, everyone and thank you for joining American Tower's conference call regarding our fourth quarter and full-year 2006 results.

We'll begin with comments from Brad Singer, our Chief Financial Officer, and Jim Taiclet, our Chairman and Chief Executive Officer. Then we'll turn things over to Q&A.

However, before we begin, I'd like to remind you that this call will contain forward-looking statements that involves a number of risks and uncertainties. Examples of these statements include but are not limited to statements regarding our first quarter and full-year 2007 outlook, our stock repurchase program, future financing activities, and any other statements regarding our goals, beliefs, strategies, objectives, plans, or current expectations and any other statements regarding matters that are not historical facts.

You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Those factors include the risk factors set forth in this morning's press release and those set forth in our Form 10-Q for the quarter ended September 30, 2006 and our other filings with the SEC.

We urge you to consider these factors and remind you that we undertake no obligations to update the information contained on this call, including these forward-looking statements to reflect subsequently occurring events or circumstances. Our earnings release, which includes information required by Regulation G was furnished this morning to the SEC on a Form 8-K and is also posted on our Web site.

Now I'd like to turn things over to Brad Singer.

Thanks, Michael.

American Tower successfully completed the year delivering strong operating performance while continuing to invest in its ongoing operations. We ended 2006 with record levels of revenue, a just EBITDA and free cash flow and in a strong financial position.

For the fourth quarter our top line revenue growth, gross margin, adjusted EBITDA and free cash flow met or exceeded our expectations, marking the fifth consecutive year that American Tower's met or exceeded its tower revenue, gross margin or operating profit outlook that was given at the beginning of the year.

Our fourth quarter total revenues increased 10% to more than $337 million and 12% for the full-year compared to 2005 on a pro forma basis. Substantially all of American Tower's performance was derived from organic revenue growth.

In our core Rental and Management division, our revenues and gross margins increased 9% and 12% to over $331 million and approximately $250 million respectively from the fourth quarter in 2005.

Our total selling, general, and administrative expense was $44 million, including $10 million of non-cash stock-based compensation expense. Our SG&A expense also includes over $6.6 million of additional costs associated with the stock option review and related matters.

Including these costs, our adjusted EBITDA increased 12% to $218.5 million and excluding the costs [related] to the stock option review and related matters, our adjusted EBITDA increased over 15% from the fourth quarter 2005 and 23% for the full-year 2006 excluding these costs compared to 2005 on a pro forma basis.

Our income from operations for the quarter almost doubled to $73 million from the prior year and we are pleased to announce the third straight quarter with positive net income with earnings of $18 million for the fourth quarter. In the fourth quarter our capital expenditures totaled $36 million.

During the quarter, we successfully completed the construction of 64 towers and three in-building installations. The average unlevered day one return on new towers and in-building projects was almost 13% with strong prospects for additional tenants further increasing our future returns on invested capital.

For the year we completed 213 towers and 22 in-building sites. In addition to our construction activities we acquired 41 high return towers and six in-building sites during the quarter and a total of 90 for the year.

In total we added 325 towers and in-building units to our portfolio during 2006 which produced initial returns of approximately 14%. We also increased our land repurchase activity, acquiring over $5 million of land in the fourth quarter and over $12 million for the year.

With our strong revenue growth and disciplined capital spending and cost control, we produced almost $500 million of free cash flow for 2006, an increase of over 60% over 2005. We define free cash flow as cash provided by operations less all capital expenditures.

Please note that the free cash flow calculations include the cost related to our stock option review and related matters and $57 million of discretionary capital spending on new construction of high return towers and in-building [sites].

As indicated in our press release, we are refining our 2007 outlook. At the midpoint of our 2007 outlook, we anticipate tower revenues of $1.405 billion, tower gross margins of $1.075 billion and adjusted EBITDA of $974 million.

We continue to anticipate 2007 levels of commenced new business slightly below 2006 levels without significant commence leasing activity from the AWS auction licensees.

We continue to expect the level of signed new business to be at or above 2006 levels as we look forward to the AWS auction licensees securing sites for deployment in late '07 and into '08. As a result, we anticipate tower revenue growth ranging from 8 to 10% and tower gross margins increasing 9 to 12%.

We expect a slight increase in expenses as we continue our initiative to improve customer service and quality of our infrastructure, but still anticipate delivering near 90% of incremental tower revenue to gross margin in our tower ops. We anticipate similar levels of capital expenditures relating to improvements in augmentation in 2007.

We expect comparable levels of new build capital expenditures with the construction of approximately 200 new towers and 25 new in-building systems. We also anticipate to increase our land acquisition activities and are target investing $30 million.

Our financial position continues to improve due to the strength of our operations and the continuing solid fundamentals of the wireless business. We received upgrades recently from two of the credit rating agencies and currently enjoy corporate ratings one notch below investment grade from all three of the credit rating agencies.

As we look forward to the future, we anticipate completing our initial $750 million share repurchase plan near the end of February. Given the strength of our financial position, operating performance and outlook, our board of directors has authorized an additional $1.5 billion share repurchase program to be completed over the next 12 months.

We intend to finance the new share repurchase plan with cash generated from operations, our existing credit facilities, and new financings. Last Friday we closed an additional $550 million of new bank facilities on the same terms of our existing facilities, provide us with over $800 million in current liquidity pro forma for the anticipated for repurchases of the 5% convertible notes at the close of business today assuming all notes are tendered.

We have also been working over the past six months towards the securitization of the majority of the towers in our SpectraSite portfolio. We anticipate raising additional capital through securitization during the first half of this year.

As we look beyond the securitization, we would anticipate continuing to rationalize our balance sheet through a combination of longer term debt, incremental credit facilities and through additional securitizations of our tower assets. With spring training beginning this week, we look forward to 2007 as we continue to deliver on our promises and the Red Sox fulfill theirs.

I will now turn things over to our Chairman and CEO of American Tower, Jim Taiclet.

Thanks, Brad.

Our fourth quarter and full-year financial performance was a direct result of the tremendous dedication of our managers and employees across the United States and in Mexico and Brazil. Our teams in key functional areas such as sales, colocation processing, and operations delivered analyzed revenue growth of over $120 million in the fourth quarter of 2006 versus the fourth quarter of 2005 while also delivering industry-leading EBITDA margins.

Our people have developed the institutional capability to deliver these kinds of revenue growth and productivity results based on the Company's commitment to customer service and to continuous improvement in our operational execution.

Over the past couple of years, we've been developing our Six Sigma based continuous improvement program, which is now deployed throughout the Company. For example, in 2006, every single employee in the U.S. had completed an entry-level Six Sigma training program.

In addition, there are currently 16 ongoing operational process improvement projects in the U.S., Mexico, and Brazil with over 10% of our employees participating on these projects. Given the enthusiasm I see among our employees every day, I'm confident that the momentum we have on operational improvement will continue to build into 2007.

The dedication to our corporate strategy throughout the Company also contributed to our success in 2006 and gives us optimism for 2007. Over the past year we made solid progress on all three pillars of American Tower strategy.

The first pillar to aggressively seek to add high quality assets to our site portfolio. In early 2006 we completed the integration of the SpectraSite merger, the transformational transaction that initiated the wave of consolidation in the tower industry.

We believe that this transaction provided us with a first mover advantage in the consolidation of the industry. The key differentiator of the American Tower-SpectraSite combination from the mergers and acquisitions that followed was that it took two of the leading tower portfolios at the time in terms of asset quality and brought them together.

Both American Tower and SpectraSite had both [filled] a substantial proportion of total towers expressly for colocation. Towers that typically had solid capacity, sufficient ground space, and favorable ground lease terms including little or no revenue share.

In addition, a significant portion of American Tower and SpectraSite acquired towers in the U.S. had been purchased from legacy 800-megahertz band [inaudible] carriers, those being the original A and B band and ESMR licensees. Again, versus [paging] and PCS towers, towers from original A and B band [inaudible] licensees and other 800-megahertz band carriers tend to have attractive characteristics as well as highly credit worthy tenants.

American Tower and SpectraSite brought together substantial tower portfolios acquired from the likes of AT&T, SPC, Verizon, Nextel and Alltel. We believe that these portfolios, combined with our respective built for colocation towers, provide us with a very high quality set of tower assets that will serve us well for the long run.

Another strategic benefit of the SpectraSite merger was the in-building distributor antenna business. We have found in our discussions with customers that if consistent signal strength becomes more important to them that the in-building systems that we offer in major malls and casinos are very complementary to our tower sites.

As a result, we have an additional set of in-building systems along with the towers that we built in the U.S. last year. We'll continue to look for opportunities to grow our in-building facilities [to] our existing rights to build out malls while also seeking other attractive locations with high customer traffic density.

American Tower also reinforced its commitment to our international markets in Mexico and Brazil in 2006. We bought 177 towers and acquired an additional 84 towers during the year in those two countries, ending the year with a total of over 2200 sites in Mexico and over 630 sites in Brazil.

In addition, we continue to evaluate additional markets for potential entry by the Company, but have no transactions to announce at this time.

The second pillar of our strategy is to achieve the highest possible investment returns on our assets through continuous improvement in our operational execution and maintaining our cost discipline in acquiring and building assets.

In addition to the Six Sigma program that I mentioned earlier, we continue to refine our three overarching operational processes. Our [inaudible] definition and deployment program, our talent management system, and our quarterly operational review process.

In addition, we utilized customer and employee surveys to identify specific areas for operational opportunity. For example, to increase the throughput capacity and speed of our structural engineering activities, we recently acquired [SIMON] Engineering, an industry leader in tower structural analysis.

The third pillar of our strategy is to optimize our balance sheet to benefit our shareholders while maintaining the financial flexibility to pursue strategic opportunity. Our specific goals are to manage sufficient -- maintain sufficient leverage to return meaningful capital to our shareholders, tightly manage our cost of borrowing, and ladder our maturity schedule to minimize refinancing risk.

Today you heard Brad describe three actions that we believe contribute to these goals. Our expanded credit facilities provide us additional liquidity and flexibility at low cost. Our intention to securitize the majority of our SpectraSite assets will enable us to take advantage of this attractive financial instrument to add additional leverage to these assets.

This additional borrowing capacity will contribute to retiring American Tower legacy debt instruments with near-term maturities as well as to help our ability to fund our new expanded share repurchase program.

We plan to complete that $1.5 billion repurchase program no later than February 2008. Moreover, our recent credit ratings upgrades opens the door to a wider range of potential debt instruments as we continue to develop our capital structure.

In closing, you can be assured that we'll be aggressively pursuing all three elements of our strategy through 2007. Strategically, we will continue to seek opportunities to add high quality assets to our existing portfolios, including new in-building installations and tower construction.

Operationally, we will strive to get the most growth possible out of our assets by further advancing our colocation process quality and cycle time. And on the financial front, we will continue to pursue opportunities to manage financing costs, increase our financial flexibility, and return value to our shareholders.

We'd be pleased now to answer your questions. So you can go ahead and open it up, Lisa.

[OPERATOR INSTRUCTIONS] Your first question comes from Vance Edelson.

Okay. Thanks a lot.

Could you, you know, with the increase in the share buyback, could you just walk us through how you value your own shares as you decide to spend $1.5 billion on that? How do you go about doing that? Thanks.

Sure, Vance. It's Brad, I'll start and Jim can add in.

I think first and foremost, when we deploy capital, we like to deploy it into our core tower business and create value for our shareholders by making investments in tower [inaudible]. Given that we have the opportunities we haven't found to deploy our excess capital and we have a target leverage structure of somewhere between four and six times trending towards the midpoint of that, we have excess capital.

And so what we are doing here is returning excess capital to shareholders. And that's how I would encourage you to view that rather than as a valuation exercise. It does play a component in it, but this is really capital we are repatriating to the owners of this company.

Okay. Terrific. And thanks for the updated full-year guidance.

Any feel for how the top line ramps throughout the year whether it's seasonality or the Auction 66 spending in the second half? Should we be looking for acceleration throughout the year?

I think in terms of -- as you think of the year, we think year will be more typical of historic revenue patterns which would probably be that the first and fourth quarter are slower than the second and third quarter. But we may enjoy a little bit of pick up in the fourth quarter if the AWS auctionee winners actually start their commencing leases towards the end of the year.

All right. Great.

And lastly, Jim, any thoughts on the 700-megahertz auction and how it might add to your top line? Any early thoughts there?

Well it is early in the game there, Vance, in that auction, but we feel that our customers value spectrum highly, especially when it's got the propagation characteristics of the 700-megahertz band. So it'll be probably a combination of existing carriers and potentially new that bid on that spectrum and we'll have to see how it plays out.

But the history has been when new spectrum comes available, that prompts either existing carriers to put new services out utilizing it or for new carriers to enable to break into the market. So we're looking forward to that auction.

Okay. Thanks, guys.

Your next question comes from Rick Prentiss.

Yes, good morning, guys.

Rick.

A couple questions for you.

First, I wanted to look at your first pillar and your third pillar of your strategy. You talked about your first pillar looking at acquiring other assets in the portfolio. You mentioned looking at additional [inaudible] markets, possibly.

How does that relate back to that optimizing of the balance sheet and Brad's four to six leverage? What we've seen with the $1.5 billion buyback, does that take us to that five times leverage and anything you do as far as acquisitions might of take you over that or just how you think of those two pillars together?

Sure, Rick. I'll address the first part of it and turn it over to Brad for the capital structure side of it.

Our strategy is to do what we've done over the last two or three years, which has been to actively seek out tower assets, whether they're large sets or small sets, where we feel that the entry point as far as cost and the attributes of the towers as far as performance makes sense for us.

And so you saw us, again, with the SpectraSite merger take the biggest leap into that pond. But we've also invested in Mexico and Brazil incrementally and in the U.S., as well.

So our strategy's been consistent for years. And we want to make sure that when the opportunities do arise and we can put that combination together and get a transaction that we like that we're not prohibited or boxed in from doing that by our capital structure.

So with that, I'll turn it over to Brad.

Yes, Rick, I think with the [inaudible] share repurchase that was announced, we believe we still have flexibility to pursue other opportunities. Depending on the opportunities, we would then see how does that play out with future capital structure moves.

But we do -- the size that we have developed here does enable us to maintain the flexibility and be active in pursuing opportunities.

Great.

And then in terms of M&A pricing, what are you seeing in the U.S. as far as where prices have kind of been over the last couple months?

Well, Rick, you haven't seen us do a lot of acquisitions, especially in auction mode in the U.S. The prices of the transactions that did happen are publicized for the most part.

But we've got risk adjusted returns in the U.S. and internationally by country that we need to meet and we haven't in some of those cases and so you don't see us act.

Okay.

And then, Brad you mentioned the securitization on the SpectraSite side. You've already started working on that.

How far through the process are you when you say first half of '07? Have you already done a month or two on that? And where could leverage go on the SpectraSite side of things?

Hey, Rick, I want to be careful just to refer to our public comments on this. But what I did say is we've been working on it for the past six months and so when we set our timetables the first half of 2007, we think that that's a pretty good timetable.

Okay. And what kind of levels could you put on to that asset or that portfolio?

I think when we raise the capital, that will be determined at that time.

All right. One final quick one for you.

How good is the visibility, Jim? As you look out there and you've been involved in the business for quite a few years, how does the visibility feel this year compared to what you've seen in other years as far as leasing?

Yes, I feel we've got a pretty good view of our major customers whether they're the embedded carriers or the merging ones. We've got close communication with them at a lot of levels, Rick.

We feel very good about our guidance as we've demonstrated over the last few years. Our guidance tends to be very close to the way things actually play out so we feel that our process and our relationships support exactly what we put out there for this year, as well.

Great. Thanks. Good luck, guys.

Your next question comes from Marge Duva.

Hi. This is Marje Soova on behalf of Jason Armstrong from Goldman Sachs.

Just wanted to see if you could give us your updated thoughts and criteria for international acquisitions including the willingness to take a controlling versus a minority position.

Sure, Marje, it's Jim.

We'll be flexible on structure if we can find the right transaction. But again, our history has been that having operational control of our international entities, we feel has benefited the Company.

Our criteria's going to vary from a return standpoint by the country. And we've talked on a few calls before about how we evaluate countries.

But very briefly, it's assessing county attributes and risk, understanding where the wireless market is in its life cycle in that country and then determining the specific transaction and credit worthiness of the customers that we might be dealing with in that country. And so taking all three of those factors into account we come up with the risk adjusted return and it's going to vary by country.

Okay. Thank you.

Sure.

Your next question comes from Jonathan Atkin.

Yes. Good morning. Two questions.

One, I was wondering why you didn't issue quarterly guidance as was the case last year?

And then secondly, your Cap Ex guidance for the year seems to be far more weighted towards ground repurchases. Just wondering what's going on there? Is it becoming easier to repurchase more ground quickly or what are some of the factors there?

John, it's Brad. I'll answer your question.

With regard to quarterly guidance, what we determined was it's difficult to estimate the timing of some of the one-time items such as [back bowing] revenues or certain charges. And then expenses related to financing activities and refinancing activities whether it's interest expense or charges and even gains from stock sales.

Things that happen along those lines it's easier to estimate that over the course of a year and that's why we gave annual guidance. And so I think it's that straightforward.

With regard to the Cap Ex question, we've had some good success with some pretty good pricing on our capital on our ground lease repurchase program and so we keep expanding it. And I think we would -- that number that we're targeting at $30 million, we would do more than that if we could find the right opportunities at the right price. And if we can't find those opportunities, we'll do less.

But that's the target what we set for this year and the team has been successful, especially as the year went on for 2006.

What kind of cap rate are you seeing then on the ground?

We've averaged on a current run rate, so it does have some ground lease appreciation in there, but about 10 times.

Great. Thank you.

Your next question comes from Michael Rollins.

Hi. Good morning.

Hey, Mike.

Just curious if you could expand a little bit more. As you look at investing in the U.S. versus Latin America, I mean clearly there hasn't been a lot of builds here for you guys over the last year.

Is there an opportunity as you look at the three pillars to try to take up growth in the U.S. beyond the in-building sites that you guys have done? Thanks.

Sure, Mike. We're open to serving our customer base wherever they need a wireless signal process. And so we are obviously a leader in tower sites, we've looked at outdoor [inaudible], it doesn't work, the economics don't seem to work for our customers yet, but we'll continue to look at that.

We are the leader in the indoor distributing antenna space, as we've talked about. And we've even bid on projects such as the New York subway system which may or may not ever come to fruition.

So we're wide open to work with our customers in almost any venue where we can get our risk adjusted returns, Mike. And we keep abreast of technologies that will enable us to do that.

Okay. Thanks.

You bet.

Your next question comes from Jim Ballan.

Thanks a lot. I want to follow-up on one of Rick's questions.

It seems to me that the buyback still gives you room. I mean you're certainly trending toward the middle of your four to six range, but it would give you room to make significant acquisitions as well during the years.

And if you don't make those acquisitions during the year, could you see an increase in the buyback or the completion of the buyback in less than 12 months?

Jim, I'll take it. It's Jim Taiclet.

There are a few things going on. First of all, we always like to make sure that our financing program fully supports our purchase projections. So that's a factor. And as we advance our financing strategy over the year, then we may have more flexibility during the course of that time.

The second thing you've noted yourself is that we want to keep our options open strategically and if we have something that we want to pursue during the course of the year, we'll be able to do that and the $1.5 billion program. And if we don't see something of size, we could consider accelerating the program or not depending on our financing structure.

So we want to keep a lot of degrees of freedom here. And one of those degrees of freedom would be to accelerate potentially a share repurchase program if the conditions are right.

Okay. Great. Thanks.

The other thing I wanted to ask about is can you give me an idea of how much of the fourth quarter growth or the incremental business that you got in the fourth quarter came from other -- from carriers other than the big four? Or I know you guys like to talk about the big five to include Alltel.

I mean how much of that came from sort of the major carriers and who were the others and how much were from those?

In terms of the new business, for the most part it was about 55% from the big five so we will keep the big five for the quarter and then you had 26% was the other U.S. carriers. You know, the other wireless service providers. And then the rest were made up of the [inaudible] broadcasters government and then our international group.

Got it.

And is it -- are you expecting sort of similar breakout for this year in the guidance?

Based on our budgets, it's somewhat comparable. I think the national carriers will probably be closer to 60%, maybe a little bit north of that.

Okay. Good. One last if I may.

You talked about how this year is going to be kind of a typical year. I mean a typical year we usually think about the first sort of four to six weeks of the year being a little bit slow as the capital budgets work their way down to the regions at the carriers. Is that, I mean have you seen a little bit of slow down in the -- or I should say did you see a little bit of slow down in the early part of this quarter and are you seeing that start to accelerate?

I think for the major carriers, Jim, there was a little of that, but not as much as in prior years. So there's, again, a maturity in their programming in keeping their plans on track through year-end and into the new year.

As far as emerging in smaller carriers, we didn't see much of that at all. I would say it was a modest sort of slow down out of the gate overall very modest.

Okay. Great. Thanks a lot, gentlemen.

Your next question comes from Brett [inaudible].

Hey, thanks for taking the question, guys.

My first question has to do with your cost of capital and your balance sheet in general. You've been talking for a while about targeted leverage being in a range of four to six times EBITDA. In terms of getting to that are you thinking about interest coverage levels, which is the way most of your peers tend to talk about it or are you thinking more about all in weighted average cost of capital?

And then you've been talking about this range for such a long time, I'm wondering if because your borrowing costs have been coming down you now have the ability to maybe scale up a little bit more in the balance sheet. Or maybe another way of asking it is, what would have to happen for you to get comfortable with a targeted leverage level being towards the higher end of that range or a higher range overall?

Hey, Brett. It's Brad. I'll answer your questions.

We still think of it in terms of overall leverage coverage rather than interest coverage. If we could lock interest rates in for multi-year basis, call it, 20 or 30 years interest coverage may be more appropriate.

But since interest rates change and credit spreads change, I think it's most appropriate, even though the interest coverage is a very relevant statistic and very meaningful, it, to use the overall leverage ratios and that's how we think of it.

And we do revisit our leverage targets the way we determine our cost of capital is, again, over a long period of time. And it's how you can establish your cost of capital that's durable rather than just in any point -- single point in time in the market. So if you have a more favorable debt market, it might be lower this year or next year, but can you institutionalize that over a multi-year basis.

And that really is the key is establishing something long-term that meets the long-term nature of our assets rather than short-term. And that's how we arrive at our -- what is our target leverage and what we think is the optimal weighted average cost of capital for this industry.

Could that move up over time? It could. But that is also a function of as the industry matures and as ratings improve and as we keep performing.

Okay. Well, thanks. Just two quick follow-ups on this. Actually two different questions.

You said that the land pricing is attractive. Also if you maybe could be a little more specific about what land pricing looks like or what type of returns you're getting out of the gate on land.

And the second question is, at the SG&A level are you still incurring any costs associated with the options investigation in 2007?

Brett, in terms, I think I mentioned we average about 10 times is what the return was day one on the land repurchases so you're basically getting a 10% day one, and then it does increase over time because you have an escalator of typically of 3%. So maybe call it an all in, like, 13% return on the land.

Those, we're fairly selective in our opportunities. We want it to be strategic as well as just a good investment, which means that the land under towers that have a decent amount of cash flow, also.

And we think it's a good use of money and it also provides us with more flexibility in terms of putting tenants on those towers. So you're also, a lot of times, getting more ground space or easing your way of doing business.

I hope that answers your question.

Yes. And then on the SG&A?

We are still incurring costs, I think have trended down. Third quarter looks like the top tick. Fourth quarter to come down.

I would anticipate even though we can't guaranty the first quarter should trend down again over time since the restatements for the vast majority are done. All the legal work, I mean, all the accounting work that was related to that, but we still have ongoing legal fees and so we will be incurring costs throughout the year, they're just difficult to estimate but I think the trend is on a decline level even though it is unpredictable.

Okay. Great. Thanks.

Your next question comes from Anthony Klarman.

Thank you. Couple of questions.

First, on the capital structure side. For a while, I guess you guys had gone out of your way to avoid the securitization market and I think you were sort of evaluating lots of alternatives.

You had originally done a refinance of SpectraSite bonds and it looks like you were kind of just going to do that in the secured market. What changed your stance or your viewpoint with respect to looking, again, at the securitization market? Was it something in the financing or pricing that [were] the flexibility that was available in that market?

And then second question along those similar lines. You've now got corporate debt on the American Tower side that's, you know, I think your longest dated bond is due in about five-and-a-half years or so.

What can we expect with respect to refinancing the rest of the AMT side, and might a securitization be the vehicle that also is what you look to refinance that side of the capital structure with?

Hey, Anthony.

I think we've been fairly consistent saying we thought the securitization of assets is a fairly attractive financing mechanism. And the way we always thought of it is part of a balance sheet rather than the entire way you finance a balance sheet.

And there's nothing wrong with financing your balance sheet all through securitization, but given the maturity or the tenor of the instrument, you probably would want to mix that in with longer term debt. And so as you think of securitization as part of a capital structure that would replace kind of your typical bank financing, at least on the SpectraSite side.

You then have, you try to mix in there a longer term set of securities to finance the rest of your capital structure. And that would be more at the holding company level.

And so that's what you should expect out of us over time is that you have a mixture of shorter term debt with longer term debt, and I think Jim mentioned, it's kind of a laddering of maturity which give you good financial flexibility, has a much more locked-in cost of capital because you've locked in credit spread as well as interest rates and both those things should enable us to perform and have flexibility over a much longer period of time.

So that would maybe seem to indicate that a securitization may not be the appropriate vehicle for the American Tower side of the restricted group just given that you do have corporate debt at the holdco in [that] entity?

Yes, I think the balance sheets have a way of being reconstituted, but we have, our plan right now is just as we've articulated, which is to raise capital at the -- through a securitization of the SpectraSite side. And American Tower we will probably, in all probability looking to do longer term capital as an overall company.

One more balance sheet question and then I'll have an operational one.

If you look at what the market, the capital market seem to be willing to bear it is a number well in excess of six times. I think one of your competitors is doing a bank deal right now for something over eight times leverage.

How do you sort of marry the appetite of what the capital market seem to be willing to bear in terms of tower risk versus the level of aggressiveness you're willing to pursue? It would seem like there are opportunities right now to be taking more capital from the capital markets [either] acquisitions or buybacks or strategic things or land purchases than you're actually taking.

Look, I think it's a good observation that there is money that the markets are in a fairly favorable position. And once again, as we look at it, is we're trying to establish a long-term capital structure rather than at any point in time.

And so most of the available capital comes in, I won't say a short-term, but a shorter term duration. And you can mix it, but you can't get to quite the levels that we're looking for right now. And we do believe that opportunities will be there in the future for us to access the capital markets but also to deploy capital into our core business.

And right now, while we have not executed on any opportunities in the past year in any size, that doesn't mean over the next three to five years that we don't want to -- we want to maintain our flexibility to be able to take advantage of those opportunities whether domestic or international.

Last question.

On the domestic front, if you look at your builds, I guess if you exclude in-building, a lot of them have been internationally focused the past couple of years because that's where you've seen the greatest sort of day one cash on cash return.

You look at the buildout of Auction 66 the upcoming 700-megahertz auction, it would seem that the national carriers, if in fact they do sort of meet the expectations of developing 3G, are going to have a lot of incremental demand. Might we see the new build strategy shift a bit and be more focused on the U.S. over the course of the next couple of years?

Hey, Anthony, it's Jim.

I'd say probably not a significant shift towards tower construction in the U.S. And that's because we're serving most of the demand from our current customers and emerging customers, as well through colocation.

And when you have a fairly developed tower industry like we have in the U.S., most of those new cell sites are going to find a home on an existing structure, whether it's a tower rooftop, et cetera and that, we think will continue to be the trend.

Could there be incrementally more builds over the next few years? Potentially, but I don't think it's going to significantly change.

Thank you.

Thanks, Anthony.

Your next question comes from David Barden.

Hello, this is Marcus Shaw for David Barden. How's it going, guys?

Good, Marcus.

I just had a couple of questions.

Number one, there's a note stating that Michael Gearon's leaving the Company. I was just wondering what we can read into that, if anything, about the acceleration or deceleration of the international business and I guess how long Hal's kind of been involved? I mean I know he's been involved with the process, but at what levels he's been involved with things that you guys have looked at to date.

Sure. Michael's desire to move on from American Towers is fully personal. He's got some other endeavors he's been involved with.

He's been in this industry for upwards of 14, 15 years. This company since 1998. And so his personal decision is not going to affect our desire or our momentum in looking at new markets nor our development of Mexico and Brazil.

We're very fortunate to have Hal Hess and a full team of people that have been working on our existing and our new markets together for the past five or so years. So our in-country management's fairly stable, we believe, and Hal himself worked with Michael even before the American Tower acquisition of Gearon and Company in 1998.

So there's a very long history there with Hal. He's been the CFO of international all through this last four or five years in addition to taking a General Counsel roll up here. So it's going to be a very smooth transition for him back to international.

Got you. And just another question.

[Inaudible] [Castle] recently stated that they're expecting some faster growth as they can realize some growth potentials in the global signal portfolio, and [they] implies that they may be looking to take market share. Do you guys have any plans out there on a competitive front in terms of practically pre-empting any kind of potential market share?

Our strategy and operations, again, very consistent, I think, Marcus. We've been focused on cycle time in that we believe that in those relatively few situations where there is a competitive structure that the company with the best cycle time, best quality of process, and good relationships will win those ties, if you will.

And again, 75 or more percent of the time when a cell site is being sought by a carrier, if one tower's in that search ring, likely that there's not going to be another. But again, we focused our competitive effort and our investment on cycle time improvement, which we think is the differentiator when there are competing situations.

Got you. And sorry, just one last question here.

I know you guys have talked about it at length, somewhat about the ABS opportunities, but do you have any idea in terms of how you would roll this out whether it will it will be staged or in kind of one lump issue?

[Inaudible] feel like Rick. You want to ask the question several different ways. I'd just refer to our public statements. And we just have to be careful around any potential capital raising activity.

So you should anticipate in the first half of 2007 you'll see more details when it does occur. I apologize. I'm not trying to be evasive.

Your last question comes from Clay Moran.

Good morning.

Did you consider a cash dividend with this latest stock buyback review? And can you give us or update us on your thoughts regarding a cash dividend? Thanks.

Hey, Clay. I think we look all [inaudible] ways to redistribute capital. It's been in the past when we've discussed share repurchases versus dividends is we've gone with the share repurchases as the vehicle.

And that's for a couple reasons. One's financial flexibility and the second's also from a long-term tax perspective. So I think those are the two reasons why we've chosen the vehicle we've chosen.

That doesn't rule out in the future that we would ever be a dividend payer, we won't be a dividend payer. But in the near-term, that's how we've addressed it.

Okay.

Well, thanks, everyone for being on the call. We appreciate it.

Have a great day, everybody. Bye now.

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