美國電塔 (AMT) 2007 Q3 法說會逐字稿

Good morning. My name is Darlene, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Tower third quarter 2007 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 session. (OPERATOR INSTRUCTIONS)

I will now turn the call over to Mr. Michael Powell, Director of Investor Relations. You may begin your conference.

Thank you, Darlene. Good morning everyone, and thank you for joining American Tower's conference call regarding our third quarter 2007 results. As indicated, we will begin with comments from Brad Singer, our Chief Financial Officer. We will then turn things over to Jim Taiclet, our Chairman and Chief Executive Officer. As Darlene indicated, we will then open up the call for your questions.

However, before we begin and before I turn things over to Brad, I would like to remind you that this call will contain forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. Examples of these statements include statements regarding our full year 2007 and full year 2008 outlook, our stock repurchase program, future financing activities, 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. Such factors include the risk factors set forth in this morning's press release, and those set forth in the Form 10-Q for the quarter ended June 30, 2007, and our other filings with the SEC. We urge you to consider these factors, and remind you that we undertake no obligation to update the information contained in this call to reflect subsequently occurring events or circumstances.

With that, I will now turn things over to Brad.

Thanks, Michael. American Tower continues to demonstrate its ability to deliver consistently strong operating results during the third quarter. Our third quarter total revenues increased 10% to $367.6 million. In our core rental and management division, our revenues and gross margins increased 10% and 13%, to approximately $359 million and $278 million respectively in the third quarter 2006.

Our revenues included a one-time positive settlement of $4.3 million related to certain utility reimbursements, and our expenses included approximately a $3 million one-time positive item, as a result of reversal of certain expenses that had previously been accrued. As we had previously anticipated our third quarter leasing activity increased with over $100 million of annualized signed leases, the highest level in the past four quarters.

Our total selling, general and administrative and development expense was $49 million, including $15.3 million of noncash stock-based compensation expense. Our selling, general and administrative and development expense also included $6.1 million of costs associated with the stock option review and related matters. The stock option review costs increased to reflect a higher level activity for the quarter to complete several key legal deliverables. Including the positive-one-time items offset by the costs associated with the stock option related matters.

Our adjusted EBITDA increased 14% to $248.6 million, and our adjusted EBITDA margin was 67.6%. Our operating income for the quarter increased to $98.5 million, and our income from continuing operations was $60 million, including a 41.7 million tax benefit related to the realization of future usage of state net operating losses.

Our capital expenditures totaled over $39 million. During the quarter, we completed the construction of 42 towers and 6 in-building installations. The average unlevered day one return on new towers and in-building projects was approximately 11%, with strong prospects for additional tenants further increasing our future returns on invested capital. We anticipate completing 165 new sites, including in-building installation by the end of the year. In addition, we continue to increase our land repurchase activity from the prior year, acquiring over 10 million of land in the third quarter, with the anticipation of completing 40 million by the end of the year.

With our solid revenue growth, cost control and disciplined capital spend, we produced approximately $142.3 million of free cash flow for the quarter. We define free cash flow as cash provided by operations, less all capital expenditures. Please note that the free cash flow calculation includes approximately $6 million of costs related to our stock option review and related matters, as well as approximately $27 million of discretionary capital spending on new site construction, land acquisition, as well as capital improvements related to redevelopment augmentations at our current sites.

As indicated in our press release, we are refining our 2007 outlook and introducing our 2008 outlook. At the low end of our guidance we are raising our 2007 revenues, gross margins and adjusted EBITDA by approximately $10 million. As we look to 2008, we anticipate levels of commenced new business to be higher than 2007. We expect incremental tower revenues to increase by approximately 115 to $135 million, offset by approximately a $25 million decrease in noncash straight line revenue.

The decrease in straight line revenue is the normalized decline that would have occurred in 2006 and 2007 without the multiple tenure extension signed with our national carriers that we had previously disclosed, which increased straight line revenue in 2006, and slightly increased revenues year-over-year in 2007. On a cash basis we anticipate tower revenues increasing 8.5 to 10%, and 6 to 8% on any GAAP tower revenue, inclusive of the straight line effect.

We anticipate gross margins increasing approximately 85 to 90% on incremental revenues. In addition to typical inflationary levels of increases in SG&A, we expect a 4 to $5 million increase related to our international expansion effort. We expect 2008 EBITDA to increase between 74 and $104 million in the midpoint of our 2007 outlook, including the reduction in straight line revenue, or approximately $25 million, and excluding any costs related to potential expense related to the stock option review in 2008.

We expect slightly higher levels of capital expenditures relating to improvements in augmentation in 2007. We anticipate increasing the number of new towers that we will build to 250 to 350, based on several initiatives we have been working on. We also expect to increase our land acquisition activities and are targeting investing between 40 and $50 million. Total capital spending we estimate to be between 155 and $185 million. If we are successful in exceeding our preliminary ranges with our build and land initiatives, our capital spending may increase beyond our initial outlook.

Our financial position remains solid, due to the stress of our operations and fundamentals of the wireless industry. During the third quarter, we continue to process the recapitalizing of our balance sheet, to extend our maturities at a reasonable cost, while maintaining an appropriate level of financial flexibility. On October 1st, we successfully issued $500 million of 10-year notes that further extend our maturities, and create an investment grade covenant package. With the senior notes in place, we have established three diversified sources of debt funding, to enable the Company to appropriately balance the cost, duration and structure of financing, based on our long-term goals and capital market conditions.

During this third quarter, we repurchased 8.2 million of our shares for approximately $339 million, with an additional 2.9 million shares for $125 million subsequent to the end of the quarter. As a result, we have repurchased over the past year and a half $1.8 billion, representing 47 million shares, with $477 million remaining on our plan. We intend to finance the remaining share repurchase plan with cash on hand, cash generated from operations, our existing credit facilities, and new financing.

With the baseball season completed, and the Red Sox continuing to demonstrate their AMT-like consistency with another World Series victory. We will now turn things over to our Chairman and CEO of American Tower, Jim Taiclet.

Thanks Brad, and good morning to everyone on the call. As our third quarter results and increased full year guidance indicate, American Tower is delivering a strong second half performance for 2007 that we anticipated.

We expect that many of the drivers of tower demand will remain robust into 2008, leaving the anticipated sustained high levels of new business, as Brad discussed earlier. Today I will outline the sources of our expected new business for '08, describe the factors that should enable American Tower to capture a significant share of these new opportunities, list the initiatives that we will pursue to add additional assets to our Company, and close with a few remarks concerning our capital structure.

As many of you know, we conduct an exhaustive three-dimensional assessment of future demand each year, as part of our strategy and budgeting process. First, we discuss future siting and upgrade plans with senior leadership at our customers, to provide the top-down view. Second, we perform a market by market, customer by customer buildup, driven by our local sales and marketing teams, which provides a bottoms-up view. Finally, we validate our conclusions with our customers' public statements regarding capital spending initiatives, analyst reports, and our independent technology consultant's input.

Based on this process, we expect that the four U.S. incumbent national carriers will once again in aggregate be the largest source of new business for the tower industry in 2008. We anticipate that AT&T, Sprint, T-Mobile, and Verizon will add sites for quality of service and coverage, while continuing to augment selected sites with 3G service related equipment.

Also in the U.S., 2008 will be perhaps the most impactful year with respect to emerging and regional carriers. While incumbent regional carriers such as Alltel and U.S. Cellular will most likely continue on their typical annual build pace, we expect meaningful increases in new site deployments from MetroPCS and Leap Wireless. Both companies have made progress in planning and staffing for the deployment of their Auction 66 market, and by 2009, these two companies together are expected to have established the equivalent of a fifth national network. This result should play out, regardless of whether Metro and Leap merge or remain independent, as there is little overlap in the respective licenses.

In addition, we do expect the initial deployment of 4G WiMAX networks in 2008. While the timing of a more broad deployment of WiMAX will be more clearly refined with future developments of the efforts of Clearwire and Sprint, we are optimistic of the emergence of this new technology.

It is also important to note that with AT&T's recent purchase of the Aloha 700 megahertz spectrum, and its stated intent to participate in the upcoming 700 megahertz auction, that AT&T and other incumbent carriers may also be preparing for additional high speed deployments in the future. Moreover, there are additional sites that will be deployed from other sources, like governments and smaller emerging companies, including a company in the U.S. focused on ground to aircraft data service, and the Federal Aviation Administration's next generation of air traffic control system. We are positioned well to capture a substantial share of this new type of business.

In our Mexico and Brazil markets, we expect similar trends in network deployment, as both established carriers and some new market entrants work to improve network quality and to build out 3G and WiMAX networks. Given the solid prospects for leasing demand in 2008, the preparations that we have made over the past few years to contribute to American Tower capturing a significant share of the available opportunity.

First, the sources and qualities of our tower assets provide important strengths. As many of you are aware, the sources of our towers are a combination of sites built for colocation by ATC or acquired tower companies, and acquisitions from carriers that utilize 800 to 900 megahertz spectrums, such at Nextel, SBC and Alltel.

From both of these sources, the towers tend to have sufficient height, ample structural capacity, and sufficient ground space for multiple tenants. These attributes enable our operations teams to add additional tenants with less incremental capital expenditures and operating costs. Moreover, the more tenant-ready the site, the faster the timeline to get the customer on air, which is especially important for carriers engaged in new market launches. Also helpful to our marketing efforts and our colocation timelines is the fact that we effectively integrated the SpectraSite towers last year.

The timeliness of this acquisition enabled our Company to establish larger volume-based contract platforms with most of our major customers, and to apply our Six Sigma base continuous improvement program, to further reduce colocation timelines to benefit those customers. As we strive to maximize the performance of our existing assets, we are also highly active in seeking additional assets to add to our operating system at appropriate risk-adjusted rates of return.

In the U.S., we consistently assess tower portfolios that come available and acquire-- some possible tower acquisitions that are not necessarily in a formalized process. We believe that given our existing scale, quality of our customer relationships and contracts, operational track record, and proven ability to integrate significant portfolios, that American Tower is an advantaged buyer of these assets. However, we are also committed to price discipline, and the evaluation of domestic as well as international towers. Additionally in the U.S., we plan to expand our tower build program in 2008, and to continue to establish new in-building systems driven by customer demand.

Similarly, we plan to pursue aggressively new tower build opportunities in Brazil in 2008, and are in the process of evaluating potential midsized acquisition opportunities in Brazil and Mexico, too. As noted in our press release, we are planning to double new site construction across the Company, from approximately 165 in 2007, to a range of 250 to 350 in 2008. American Tower also remains dedicated to understanding the opportunities for international expansion outside our existing markets in the U.S., Mexico, and Brazil.

During the past couple of months, we have added two extremely talented and deeply experienced industry leaders to our senior management team. Amit Sharma, based in India, and Steve Marshall based in London. Amit joined American Tower from Motorola, where he had been responsible for business operations and development in India and Southeast Asia. Steve was CEO of National Grid Wireless, one of the largest tower companies in Europe, and has extensive global business development expertise as well.

Amit and Steve join Hal Hess, who has been integral to the development of our Latin America business, and Steven Moskowitz, who has very successfully led our U.S. business, in the continuing assessment of opportunities to add assets to our Company. Again using the disciplined approach that has served us well in the past.

Finally, I would like to take a moment to reaffirm the fundamentals of our approach to capital structure as we prepare to enter 2008. Our target leverage range remains 4 to 6 times adjusted EBITDA. We intend to complete the current $1.5 billion share repurchase program by February 2008, and during our scheduled February board meeting, we will determine the future shape and size of our capital repatriation program.

We also remain committed to diversification on our balance sheet, both in terms of the types of instruments employed in varying durations. The value of diversifying our financial sources has been apparent with the dislocation of several of the credit markets over the past few months. Consequently, we will continue to evaluate longer-term debt instruments that reflect the long-term nature of our assets and our customer contracts.

Our priorities are, first, to use our free cash flow and debt capacity to reinvest in the tower leasing business at attractive risk adjusted returns, and then to return the excess cash that may remain to our shareholders. Our fundamental strategy remains a focus on achieving scale in tower leasing in our served markets, driving return on assets through operational excellence, and maintaining financial diversity and flexibility to act on opportunities to grow the asset base.

To all of our investors on the call, thank you for your continued confidence in our management team. At this point, Brad and I will be pleased to take your questions. Thank you.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Vance Edelson with Morgan Stanley.

Okay, thanks a lot. Congrats on the quarter. Brad, you had mentioned that the key deliverables that contributed to the 6 million spent on the stock option review, and I think that amount was up from about 2 million last quarter, could you give us a feel directionally for which way that might head from here?

Sure. What I would say is unpredictable, but the third quarter was also unusually high. We would guess, and this is just an estimate, it may go above, it may go below, probably somewhere more in the 2 to $3 million range in the current quarter, than above 3 million.

Okay, that is helpful. Thanks. Can you comment on the 42 tower builds, it sounds like a number that is going accelerate into the new year. How easy is it finding locations? I can't imagine it is getting any easier, so how attractive are these locations, and do you typically have one or more anchor tenants when you pursue the build?

In terms of our new construction, we always have an anchor tenant when we pursue the build. That is why our initial returns are around what we disclosed this quarter with 11% Day 1, which rises clearly over time as you keep adding tenants. We have done a good job of cultivating relationships where we can take that anchor tenant, and make sure that the sites we find are attractive to other carriers and that is U.S., Mexico and Brazil. So it's all three areas in which we operate today. And we think that is the initiative that we have in place, will actually enable us to increase the size of our build plans, and we are hoping for 250 to 350 and it looks, and we feel that is a number you could use.

Okay, thanks. And, Jim, you mentioned you are an advantaged buyer of tower assets. I didn't see any mention of tower purchases during the quarter. Just from a housekeeping perspective, can you let us know if you bought any towers during the quarter, and maybe let us know how you think about the build versus buy decision, since you're leaning towards building more at this point, it seems?

There are a few dozen in primarily Brazil and Mexico, more or less one-off purchases, Vance, so the acquisitions were relatively small this quarter. What I was referring to beyond that, however, was both auction portfolios, and also tower assets that we can get into negotiated agreements with the counterparty on. So those would be more material obviously Tower can succeed in those, but again, the price discipline that we have committed to over the past few years in the service well is something that we are maintaining.

Okay. Thanks a lot.

Sure.

Your next question comes from the line of Ric Prentiss with Raymond James.

Hey, good morning, guys. Thought we would have a little more celebratory Red Sox comments from Brad than we got.

A was just a little under the weather from all that time spent at the parade.

There you go. Couple quick questions for you. First, Jim, on the guidance, you mentioned that you include the initial 4G WiMAX, but not the more broad. What do you mean by initial? Is that the full 100 million, 70 million at Sprint, 30 million POPs covered at Clearwater that was discussed?

Ric, within our range, there is a continuum of assumptions on how WiMAX may or may not work out in '08. Remember, this is at least a two-year deployment. We have not front loaded it in 2008.

With respect to Clearwire, I think we would characterize it as a fairly modest and kind of input to our budget next year, and Sprint 4G program much less so than even that, in our assumptions at the midpoint. So if there is an accelerated rollout or more clarity to the plans together or separately, that might offer a little bit towards the upper end of the range, or help us get there. But our midpoint I think you could characterize it as some Clearwire business and even less Sprint 4G business.

And I think, Ric, the one thing that to take note on is that with Sprint and their 4G, most of that is a minimum activity of adding additional equipment to existing sites, rather than new site development, such as Clearwire.

That is a fair point. Also, Brad, you made the point about your cash revenue basis would be about 8.5 to 10% year-over-year. We always like to look at cash EBITDA. Can you help us out a little bit? I know the 25 million changeout, obviously not effects cash. There is other straight line in the expense side. There is the stock option expense. How should we think of, if you will, a cash EBITDA number in '08 versus what would be a cash EBITDA number in '07? What would that increase look like?

I will talk to about midpoint of guidance for both just for simplicity. In 2007, we would have approximately the total cash difference of somewhere between 40 and $45 million, depending on what ultimately happens. In 2008, it's a dollar for dollar decline basically of about $25 million. We have about 20 million of difference between cash EBITDA, which would be lower than GAAP, or the EBITDA we reported as adjusted to the GAAP numbers.

Whereas in '07 it was 40 to 45 million delta?

That is right.

Okay.

And if you look at our 10-K in 2006, that was 35 million, so it went up slightly in 2007, because in the first quarter earnings call we discussed signing another 10-year lease. That is what increases the noncash component. It is a very large scale national multi-thousand year lease transaction.

Okay, and then when you did that, it also reduced, or increased cash EBITDA by the stock option expense, which was also noncash?

The stock option compensation or the stock option review cost, just to clarify?

The stock compensation.

The stock compensation is about 50 to $57 million, I believe, 2008. It is a comparable level in 2007. 2007 does have some one-time items in it that are about $10 million in one-time items, maybe slightly less. So those are the levels.

We assume another grant in 2008. That's why we increase it, given what the share price is and volatility and the average outstanding that adds about $10 million of sequential expense.

Got you. And then on the leverage, probably for both of you guys, Jim, you talked about how you are still comfortable with the 4 to 6 times. Brad, looks like you guys are still kind of hanging right at the 4 level.

What are your thoughts as far as where you would go within that range if the right opportunity presented itself, would you guys go beyond that range, or just kind of how formal and how fixed is the 4 to 6, and how should we think about your thought process there?

I think we are flexible in how we think about it. The 4 to 6 is as we move forward with some of the strategic initiatives we are trying to accomplish, we want to maintain flexibility. So if a prospective transaction comes forward and it's compelling, if we would think long and hard, where do we move in that range or beyond the range?

But we want to be thoughtful, because what you are doing, if you do take on incremental financial risk, you want to make sure you get the returns appropriate with that increased financial risk. And you have also given up flexibility for your next deal.

So moving up the range, beyond the range, those are all things we would think long and hard about. I think for the most part, or in general, we still will be within that range, and we look at it rather than quarterize, we do look at it LTM which we are about 4.2 or 4.3 times. That is where our leverage is today, and it has picked up over the past few quarters, and you will see it tick up this quarter in particular, as we continue to buy and complete the share repurchase program.

Jim, I don't know if you want to say anything?

I think that covers everything.

And then on the revenue, any, any impact on pricing that you are seeing out there? Have prices continued to kind of go up with escalators, or has there been any pressure pushback? a lot of people look at the equipment operators and see how they have been getting beaten up by the carriers. Talk a little bit about your pricing power, and what you are seeing as far as pricing trends.

Ric, as we have said in past calls, new site lease pricing for a new customer on an existing tower. has been stable to slightly up over the past few years, and that is related to the fact that their next best choice typically, will be to build their own tower nearby as a customer versus lease per month, so new lease pricing has been, you know, between flat and slightly up over the last years, because those factors in production of a new tower have been flat to slightly up over the past few years. Having said that, like for like equipment, initial pricing has been fairly stable or slightly up.

Final question, quick one, you mentioned you will review at the February Board meeting. Do we know the dates for that February Board meeting, just so we all have our eyes open?

Do you want to speak, or do you want to attend it?

Give me the conference call number and the password.

It is the first half of February, I don't have my calendar in front of me, but the first half of February.

Great. Good luck, guys.

Your next question comes from the line of Brett Feldman with Lehman Brothers.

Thanks for taking the question. Thanks for all the color on the nature of your guidance for 2008. I wanted to clarify something, you gave a little bit of insight as to how you were thinking about WiMAX, some of the variability there. With regards to Leap and Metro, because of some of the spectrum that they intend to use in 2008 have not been cleared yet, I was just wondering if you can give us a little more insight as to how you have thought about the potential amount of business you could be getting from those operators next year, and how it's factored into your guidance.

Brett, for tactical market by market, those discussions should probably go to the carriers. In our range, again, '08, '09, 2010 timeframe, that is when these all of these rollouts are going to be fulfilled. Our view is that there will be enough successful spectrum clearing of those two customers, and also with T-Mobile and their 3G rollout, that we can maintain a range of guidance with the inputs from those customers.

Okay. Then on a slightly different topic, considering how much flexibility have you in your capital structure right now, based on your own targeted leverage levels, obviously you may be able to put some of that to work on the investments you are looking at, both internationally and in the domestic market.

But if you sort of step back and say the size of those opportunities, relative to the size of your flexibility on your balance sheet, do you think it is reasonable to assume that you could continue repatriating some level of capital to shareholders, even if you were able to execute against more than one of those investment opportunities?

I think, Brett, it is facts and circumstances, in terms of what the opportunity is and how large it is. Philosophically, the most efficient way for us to build shareholder value is making good investments that are accretive to the shareholders. If we have capacity, and we want to maintain repatriation, we probably would, in all likelihood, do that. We do, as we have been very consistent, think that financial flexibility and having a good stability through good and bad markets will enable to us have better opportunities, not just through the good markets, but through the bad ones. And so we have been very straightforward in that is how we view our financial position.

Okay. Then with regard to your current buyback, you mentioned that the sources of the financing may include new debt, or I guess you just said new financing. Are you fully funded to complete the 1.5 billion? I think you did a $500 million debt deal several weeks ago that I think should get you there, but are you planning any incremental financing to meet your existing business plan?

We are more than fully funded by several hundred million just to execute on the 1.5 billion, you can do the simple math from where we ended up and you can see that what we have to repurchase, I think we have under 500 million left, and we had undrawn on our line of credit at the end of the quarter. Pro forma for what we have drawn is over 500 million, and that doesn't count any free cash flow that occurs during the quarter itself, or between now and February.

Great. Thanks for taking the question.

Your next question comes from the line of David Barden with Banc of America Securities.

Hi, guys. Thanks for taking the question. Handful of questions, first, Brad maybe on the sequential rental and management revenue, the increase, stripping out the 4 million one-timer was a little bit below the run rate we have seen in historical quarters. You are kind of guiding 4Q to a more traditional sequential revenue uptick. I was wondering if there is any timing issues in the quarter, and whether there was potential upside to 4Q as a follow-through on that?

Let's just take one at a time.

Okay, sure.

You usually have a litany. (laughter)

Not as many as Ric, though.

In the second quarter '07, we had 1.5 million of one-time items. So if you add that back into the sequential, it was a typical 7-ish million added between the second and third quarter. We did also have a $1 million left of straight line revenue between second and third quarter that you have to factor in. So all in, we think the third quarter is a pretty solid quarter in commencement. It is actually the highest new business commencement quarter we have had in the year, and we feel pretty good about the fourth quarter because of the amount of new business we signed this quarter going into the fourth quarter.

Perfect, good. Second question would just be on, you know, you look at Leap and Metro and being an incremental part of the tower leasing profile going forward. Also, the DAS carriers, the DAS providers are actually becoming higher profile in their role in the industry. Could you kind of talk about, you know, where the intersection between the DAS providers and the tower companies is in terms of the competitive environment evolving?

Yes, Distributed Antennae Systems is something that we have been assessing for a couple of years, and in fact, our major player in the in-building piece of that space, is the leader in the industry in that regard. It still remains a niche product. DAS is a niche solution under current economic conditions for carriers. So we participated in heavily in the in-building sites.

Outdoor, we are trying to understand the size and future of the market, and the best way for us to participate in that. So we are aware of the outdoor space. We are interested in it and we are weighing our options now. But at the end of the day, it will be a modest portion of network development for the next few years probably.

Okay. Interesting. And then the last question I guess would just be on India. Obviously you have been staffing up with the announcement today, and obviously Amit being hired previously. Are you getting any kind of sense that there is momentum in that market, or any kind of shift in priorities if that market doesn't seem to be developing on-track?

There are a lot of potential opportunities in that market. Internal to the Indian carriers, they are all trying to make decisions, and set direction on how they want to participate or not, in the infrastructure asset over time. So we need to man that market and participate in it with some very high quality people that can be at the right level in these conversations with the carriers, and that is what we have done in bringing on Amit and now Steve.

So we're participating literally at the highest levels of the carriers in those countries, in that country and others, in trying to help guide where this may play out and if it's in a place that we want to participate in the industry structure in that country, then we will be positioned to do that.

And I think just to keep it in context, the goal of our international initiative is diversification and growth over a period of time, over a period of a few years. It is not necessarily a wholesale change in the expected center of gravity of the company, which will I think for the foreseeable future will be in the U.S. and with a portion in Latin America, as you know.

So we want to make sure we are positioned for long-term growth opportunity. To do that, our learning in the last year and a half, is you have to be present in the key markets, with senior people that know the senior counterparts of the customers, and that's what Amit has been doing, and Steve will be helping with here shortly.

And any further sense on timing, Jim, like a drop dead date or any kind of--?

It is really unclear. There are JV discussions going on among certain carriers, and certain third parties like us. There are auctions being contemplated or launched in India and other countries, and there are smaller third parties that are trying to figure out what to do with their tower assets. So the timing has been flexible in the last year and a half we have been visiting, and now participating in the India market, and the clarity isn't quite there yet. Okay, great. Thanks, guys.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Clay Moran with Sanford Group.

Good morning. In the '08 guidance, the incremental tower cash flow margin is 89%, is there any reason why that is below the theoretical 90 to 95%?

Clay, we do have costs that do go up, and so whether it's land rent, whether it's real estate taxes or utility, compared to the maintenance, and so it was an inflationary factor in there and other things that we work on. I think 90% is probably a pretty good target in incremental. Okay, and some of your commentary implies that you are more inclined today than maybe since the SpectraSite deal to do a tower portfolio acquisition.

You know, you mentioned advantaged buyer. You also mentioned participating in auctions, which I don't think you have done in the recent past. Why are you more inclined to buy today than you have been in the recent past?

Clay I wouldn't necessarily say we are more inclined to buy. We have always been inclined to buy at appropriate asset pricing, and you saw us do the first major public tower company acquisition. You mentioned SpectraSite a couple of years ago, which I think was a ground-breaking emergence for the industry. We did it because we thought it was at the right risk-adjusted return.

We have done similar deals of much smaller size in Latin America over the past few years, and we have looked at everything that's come down the pike, auction or not, in fact, as I said, we have tried to ask questions when there weren't auctions going on about tower assets, and we act when we have the right combination of asset quality, counter party, and entry price. And we haven't seen it over the last year or so in a major way, and that is why you haven't seen us act. So our attitude hasn't changed. Our criteria hasn't changed.

One thing that we have understood is that you do need to have talent located external to the U.S. markets to be a viable evaluator, frankly. So that is the only adjustment we have made is to asset talent. Everything else is very consistent from the time that Brad and I have been managing the Company.

Okay. There was a question earlier about pricing, and the trends there. Can you give us what the average monthly rent is at this time?

We haven't disclosed that in the past, and, you know, we have given ranges. I think, you know, it is between 1500 and 2000, depending on the market per month in the U.S., Clay but again, the trend has been stable to up on new leases and the escalator has been about 3.5% consistently in the last few years.

Okay, thank you.

Sure.

Your last question comes from the line of Dave Coleman with RBC Capital Markets.

Thank you. Just a few quick questions. Brad, what are the cap rates that you are buying the underlying ground to ground lease purchases?

David, we have been buying them between 10 and 11 times, so you can take the inverse, so 9 to 10% on the run rates, and if you factor in the fact that they do increase 3 percentage, you know, a year, you can add that to the return rate.

Okay, and then the incremental revenues during the quarter from new leases versus lease amendments?

It is 75% new leases/25% amendment.

Okay, and then your 2008 guidance, are you including any impact from the cable operators putting their AWS Spectrum to work?

We are not.

Okay, and then the last question, you mentioned on new tower builds getting 11% ROIs. It is a few hundred basis points lower than I believe what you indicated in past quarters. Is there something going on with the pricing, or lease-up in Mexico and Brazil that would be leading to lower ROIs?

It was actually a mix, the 11% rather than the 13% we had last quarter was a mix issue. We had more U.S. ones, which generally have a little bit lower initial return, but have a greater in terms of getting that second tenant much quicker. So that is really what resulted in it. We anticipate all our towers will achieve our stated goals of returns, domestic and international.

Of the towers acquired during the third quarter, how many were in, I guess 48 towers built in the third quarter, how many were in the U.S. versus international?

It is about one-third U.S./two-thirds international, and the ones we acquired 51 towers during the quarter, and that was entirely international.

Okay, great. Thank you.

Okay. Well, thanks for everyone for joining the call this morning. Appreciate it, and have a great week! Bye, now.

Thank you.

This concludes today's conference call. You may now disconnect.