美國電塔 (AMT) 2007 Q4 法說會逐字稿

Good morning. My name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the American Tower Company fourth 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, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Dennis. Good morning and thank you for joining American Tower's conference call regarding our preliminary fourth quarter and full year 2007 financial information. We will begin with comments from Brad Singer, our Chief Financial Officer, who will then turn things over to Jim Taiclet, our Chairman and Chief Executive Officer. After these comments, we will, of course, open the call up for questions.

However, before I turn the call over to Brad, I would like to remind you that this call will contain forward-looking statements. These statements involve a number of risks and uncertainties. And examples of these statements include statements regarding our full year 2008 outlook, the evaluation of our potential tax-related adjustments to our financial statements, the timing of our filing Form 10-K for the year ended December 31st, 2007 and any other statements or 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 our Form 10-Q for the quarter ended September 30th, 2007 and any 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.

And now I'd like to turn things over to Brad.

Thanks, Michael. Before we get started on our results, I would like to highlight that we are reporting only selected financial information for the fourth quarter and full year ended December 31st, 2007. In today's press release, we announced that the company this the process of evaluating the impact of certain non-cash tax-related items on its financial statement, including potential adjustments to its deferred tax assets and liabilities.

A significant portion of the evaluation was undertaken primarily as a result of the settlement of the Verestar bankruptcy proceeding and related litigation, which was approved by the Bankruptcy Court in the fourth quarter. As a result, we are unable at this time to provide complete financial results for the quarter and full year ended December 31st, 2007, and accordingly, all financial information presented on this call remains subject to the completion of our analysis and the completion of our year-end audit. However, we believe that the financial information released today would not be affected by the potential non-cash tax related adjustments and that the adjustments will not have an impact on our historical revenues, adjusted EBITDA, cash flows from operations or pretax income from continuing operations.

The company intends to report its complete financial results and file a Form 10-K for the year ended December 31st, 2007 as soon as practical. While we anticipate that we will be able to file the Form 10-K within the 15 day period permitted, due toi the complexity of the analysis and depending on the final outcome of our evaluation, we may need up to four weeks to prepare and file the Form 10-K.

American Tower successfully completed the year, delivering strong operating performance while continuing to invest in its ongoing operations. We ended 2007 with record levels of revenue, gross margin and free cash flow and in a strong financial position. For 2007, our top line revenue growth, gross margin and free cash flow met or exceeded our expectations, marking the sixth consecutive year that American Tower has met or exceeded the tower revenue, gross margin, or operating profit, outlook that was provided at the beginning of the year.

Our fourth quarter total revenues increased 12% to more than $378 million and 11% for the full year compared to 2006. Our performance was driven primarily by organic revenue growth in our rental management division, which increased 12% to over $370 million for the fourth quarter. Our tower gross margins increased 14% to $284 million, for the quarter. In the fourth quarter, we achieved our largest quarterly commenced new business in our history, which was over $125 million of annualized revenue, which excludes any escalators. Please note that our fourth quarter revenues included approximately $3.5 million of positive non recurring items that were not included in our previously disclosed outlook related to non-cash straight line revenue adjustments and a cash settlement from one of our customers. Our expenses included $1.5 million of non recurring negative items resulting in unforecasted positive contribution to gross margin of $2 million.

For the full year 2007, our results are approximately $23 million and $24 million above our initial 2007 tower revenue and gross margin midpoint outlook provided to investors in late 2006. Our total selling, general and administrative expenses was $46 million including $11 million of non-cash stock based compensation expense. Our SG&A expense also includes approximately $3.2 million of costs associated with the historic stock option review and related matters which includes $1.5 million of net expense related to the anticipated settlement of the class action lawsuit. Excluding stock based compensation expense, our fourth quarter Tower and gross service margins less SG&A increased 16% to over $253 million.

For the full year, 2007, our tower and service gross margins less SG&A grew 13% to 980 million. Our operating income for the quarter increased 38% to $101 million from the prior year. In the fourth quarter, capital expenditures totaled 47.4 million. During the quarter we successfully completed the construction of 66 towers, and two in building installations with momentum through a solid pipeline of domestic and international new builds, new tower builds going into 2008. The average unlevered day one return on new towers and new building projects was approximately 15% with strong prospects for additional tenants likely to further increase our future returns on invested capital. In addition to our construction activities, we acquired 181 towers during the quarter, for approximately $23 million.

For the year, we built 152 towers and completed the installation of 17 in building sites which was below our original expectations. In combination with the 293 towers we acquired during the year, we added a total of 462 towers and in building units to our portfolio during 2007 which produced initial returns of approximately 13%. We also increased our land purchase activity, acquiring $13 million of land in the fourth quarter and over $44 million for the year. With our strong revenue growth and disciplined capital spending and cost control we produced approximately $540 million of free cash flow for 2007. We define free cash flow as cash provided by operations less all capital expenditures. Please note that the free cash flow calculations include $111 million of discretionary capital spending on construction of new towers and in building sites, land purchases and capital to redevelop existing sites for additional tenant demand.

We are refining our 2008 outlook. We continue to anticipate levels of commenced new business to be higher than 2007 levels. We are raising our initial 2008 revenue guidance by approximately 12.5 million at the midpoint of our outlook. We expect incremental tower revenues to increase by approximately 120 to 140 million,off set by an approximate 25 million decrease in the non-cash straight line revenue. As we discussed in our last earnings call, the decrease in straight line revenue is the normalized decline that would have occurred in 2006 and 2007 without the multiple ten year extensions which were signed with our national carriers and that we previously disclosed relating to increased straight line revenue in 2006 and slightly increased straight-line revenue year over year in 2007. On a cash basis we anticipate tower revenues increasing approximately 8 to 10% and 6.5 to 8% on a GAAP basis, inclusive of the straight line effect. We anticipate converting approximately 80 to 90% of incremental tower revenues to gross margin.

In addition to typical inflationary levels of increase in SG&A ,we expect an increase of $4 million related to our international expansion efforts. Based on the strong levels of customer demand, we anticipate 2008 tower and service gross margin less SG&A excluding non-cash comp to increase 95 to $120 million for 2007, excluding the reduction in straight line revenue of approximately $25 million, and $14 million in cost incurred related to the historic option review in 2007. We have increased our capital spending expectation for 2008. As a result of several initiatives, focused on our tower construction pipeline, we now anticipate that we will build between 300 to 400 new towers in 2008. In addition, we expect to increase our land acquisition activities and are targeting investing 40 to $60 million. We anticipate redevelopment efforts will be greater, primarily driven by activity in our international markets.

As a result, we increased our outlook for total capital spending to between 185 and $215 million. If we are successful in executing our build plan and land purchase initiatives, our capital spending may increase beyond our current outlook. Our financial position remains solid due to the strength of our operations and fundamentals of the wireless industry. During the fourth quarter, we repurchased approximately 8.9 million of our shares pursuant to our stock option purchase program for approximately 385 million with an additional 4.3 million shares or 164 million subsequent to the end of 2007. As a result, we are repurchased over the past year and-a-half a total of 2.2 billion, representing over 57 million shares.

We will update investors on future share repurchase plans when we complete the review of the non-cash tax related items and file the appropriate documents with the SEC. We remain committed to returning capital to our shareholders if we do not have a productive investment opportunity in our core tower business. With spring training beginning last week, we look forward to 2008 as the Red Sox begin to work hard on defending their world series title and we continue to produce industry leading results.

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

Thanks, Brad. In light of the excellent operations results that Brad just reviewed, I would like to first highlight for our investors in the call and express my deep appreciation to our managers and employees in both the U.S. and our international markets. These are the talented and energetic people who make the sales calls, climb the towers, draft the lease documents, make the ledger entries and do the many, many other critical tasks that enable our company to deliver this kind of performance. Our company, our whole organization is poised for a strong year of growth in 2008.

As reflected in our updated guidance we anticipate 2008 will be one of our strongest years of commenced new business. Importantly, we believe this growth will also have the most diverse and evenly proportioned spread of sources that we have experienced in the company's history. In the U.S., we expect meaningful contributions from all four national carrier legacy networks. Both Leap Wireless and MetroPCS as they roll out their Auction 66 spectrum and from a portion of the initial planned WiMAX deployments by Clearwire and Sprint. Moreover, we anticipate an active year in both Mexico and Brazil from a number of carriers including [Claradevo and Oie] , all of which have secured additional licenses in Brazil.

In sum, we feel good about the scale and scope of our new business in 2008. There are also a number of trends evident in wireless that we believe will support strong demand for tower space well into the future. These trends reinforce two continuing themes, the ever-growing importance of mobility in telecommunications and the industry's drive toward greater bandwidth and speed. As to the growing role of mobility there's mounting evidence. In 2007, wireless minutes were well in excess of wired minutes and the trend lines continued to diverge.

The country's two largest telecommunications companies, AT&T and Verizon, have publicly stated their dedication to wireless services, and have recently taken some notable steps. These include AT&T's successful launch of the apple iPhone and its purchase of 700 megahertz spectrum in advance of the current auction, and Verizon's announcement of LTE as its directional technology choice for the future. Even while wireless penetration and usage rates continue to grow, it is evident that it's critical that wireless carriers of all type seek to protect and grow their revenue base. Consequently, carriers continue to invest in marketing, hand sets and network quality to keep their existing customers and they're striving to keep churn to a minimum.

Yet another example of these types of innovations is the premium unlimited usage plans recently unveiled by three U.S. national carriers. Ongoing network investment will be required to offer these types of plans with competitive signal quality and coverage. So while mobility is becoming more and more important, a second theme is the advancement of all the elements necessary to take us from a 2.5G to a 3G to a 4G world in U.S. telecommunications. Just as it took a wide range of industry players to bring the wired Internet from dial-up speed to today's multi megabit speeds, it will take a broad array of technology, hardware and software companies to develop widespread mobile data services in the three plus Mega bit per second range.

Major investments in technology, hardware and software are all necessary to advance wireless speeds and bandwidth towards today's wired high speed internet offerings that are available through cable modems and DSL. We are now seeing the leading players in the technology hardware and software industries making major commitments to investing in wireless products and services.

To mention just a few prominent meant examples, on the technology front is Intel, with its WiMAX challenge to the 4G aspirations of Qualcomm and the GSM consortium. With respect to hand set hardware, Apple's entry with the iPhone is a landmark event that could encourage additional consumer product leaders to focus on wireless devices. Regarding software, Google's recent activism in the wireless space should facilitate bringing not only its own resources to the industry, but that of independent application writers as well. While technology hardware and software are all essential to advancing toward 4G, the capacity and motivation of the wireless carriers to invest in their networks to deliver the requisite speed and bandwidth are crucial. Carrier economics will drive these investments, and as voice service matures, wireless carriers are likely to increasingly took toward high speed data services for future revenue growth.

Verizon and AT&T both appear to be committed to an LTE upgrade path over the next few years and Sprint and Clearwire are already doing trials and deploying higher speed WiMAX markets. Prices for 700 mHz spectrum in the current SEC auction are exceeding expectations, indicating that this spectrum is a valuable enabler for a widely-offered high speed next-generation service. For tower companies, the deployment of 4G networks would lengthen and strengthen the demand for tower space. Both 3G and 4G networks drive augmentations of existing cell sites and they drive new cell sites required for the more dense networks that ultimately will be necessary to deliver these types of services. So the most important strategic and investment question

for American Tower is, will the wireless industry move toward deploying high speed services for broad consumption in the U.S. over the next five to eight years? We believe the answer is yes. We see the major pieces coming together. Carrier financial strength and business motivation, sufficient spectrum availability, enabling technologies from inside and outside the current OEMs, consumer friendly hand sets and bandwidth hungry software applications such as music and social networking. Consequently, our company's strategy remains steady, seek to add quality assets to our portfolio, both in the U.S. which will remain the strong center of gravity in our company and in select international markets.

Continually improving the operational performance of our assets by maximizing revenue growth and maintaining disciplined cost and CapEx control. Finally, maintain financial flexibility with reasonable leverage and a diversity of financial instruments and tenors. Our strategy we believe enables our company to prosper in a range of economic and capital market scenarios. We're confident that our business will perform well in 2008 underpinning our increased guidance for the year, and we also expect that our strong balance sheet will provide the access to capital to invest in our business, and once our full financial statements are completed, readdress our historical practice of returning excess capital to shareholders. Thank, everyone, for joining is in the call today, and at this time, Brad and I would be happy to take your

(OPERATOR INSTRUCTIONS). We'll pause for just a moment to compile the Q&A roster. Your first question will come from the line of Ric Prentiss with Raymond James.

Yeah, good morning, guys.

Hey, Ric. Start with a couple for Brad.

Couple questions for you. On the guidance, can you kind of update us as far as what gave you the comfort to take the guidance up? Was it the leasing activity that you talked about, seeing some pretty strong stuff in fourth quarter? Was it the 180 towers that you guys have bought since the end of the quarter? And also, on that 95 to $120 million number you threw out there, was that on cash EBITDA, as far as year-over-year growth? I was trying to compare that to what the last guidance you gave for '08 was.

Let me take them in order. What gave us the confidence to increase the revenue midpoint was a combination of both things. It was primarily due to new business. We had a strong fourth quarter, the best in our history in terms of what was signed. It's based on the pipeline of what we have signed and how we're running and then the acquisition was also a portion not quite as much as the new business. But that's -- it did contribute to it. And so it's all those things that really plays into taking the numbers up. But we feel that based on where we are today, that those numbers are very justifiable and is an appropriate outlook.

With respect to -- it's not adjusted EBITDA, it is gross margin less SG&A and adding back non-cash comp which could be construed as a proxy for adjusted EBITDA but not by name. What we had last time was really what we -- to make it cash based is we only did -- we took it as a GAAP number, so-to-speak, by factoring in the $25 million decrease. Here we just took everything down to a cash level. That's the numbers I guided to.

So that 95 to $120 million excludes the $25 million non-cash straight line item?

And adds back and also deducts, though, the $14 million in stock option review costs, apples-to-apples, since we have none in 2008, we should take it out of our gross margin less SG&A adding back non-cash comp number in 2007.

Okay. Another question for you. With the review of the tax asset and liabilities, any expected change to your net operating losses or can you just kind of update us as far as how large is your NOLs right now and when do you think that will carry you through as far as not being a significant cash taxpayer.

This is not a tax issue so-to-speak as it impacts our tax NOLs. This is a GAAP issue in terms of how they're accounted for. I want to differentiate that the actual NOL itself that we would be utilizing on our tax returns, we don't anticipate a change in, as the work stands today. And so what you're really dealing with is how is it accounted for.

And your NOLs should carry you through -- how much do you have left.

We have about a billion seven of NOLs and that should carry us through this decade and maybe a year or two beyond.

And then the final question for you is I think Jim in your comments you mentioned update to the stock buyback would be after the year end audit. How is that -- why the delay and kind of updating your thoughts on the buyback program?

We would rather just get the financial statements out so we can implement a 10B5. program. To do it the opposite way would not enable you to do a 10B5. Plus, we want to have good statements out there before we make any announcements on equity.

Kind of the program method that you guys have used as far as doing the program in the past?

That's correct. Because what happens is our natural blackout periods, Ric, begin prior to when you end the quarter.

Great.

So we have a March 31st and then we have natural blackout. You need to sign those programs up and put them in place in order to be able to be active fryer the blackout.

Makes sense. Great, thanks, guys.

Next question will come from the line of Michael Rollins with Citi Investment Research.

Good morning. Just a couple questions. First, if there's an update in terms of specifically what's going on in the ground in India and Latin America in terms of the relative investments you're making there versus the U.S. And the second part of the question would be, if you look at the acquisition opportunities, because of your balance sheet and the market environment we're in, and also given your outlook for how you feel the future is going to play out in terms of cycle location demand, is this the time to really accelerate the M&A activity, where it's building out more of a portfolio in Latin America, U.S. and you've talked about India in the past.

Hi Mike, it's Jim. You've already heard Brad talk about raising our expectation of tower builds so the most sort of controllable activity in our most mature markets, U.S., Mexico and Brazil, we're already moving ahead with a higher build plan. So that's the first point. Second point, I just want to start by reiterating that we expect the U.S. tower domestic operation to remain the center of gravity for the company for the foreseeable future and it's 87% of our revenue base today. To complement and further diversify that existing revenue base, we're evaluating a range of investment opportunities on a number of dimensions you guys have heard us talk about before, country attributes, asset quality, growth prospects and you can be assured that the historical discipline that we applied when looking at investments in the past, we're also applying them today as we actively evaluate through international markets. And so we don't have an announceable transaction today, Mike, but that's the consistent theme of how we're approaching this.

Where the opportunities I think you named two of the top on our list and I'll even start with Latin America. We have existing operations. We have customers that are common in those two countries, in Mexico and Brazil and additional countries so we've got a very strong focus on adding potential countries in Latin America and expanding in the market as we already talked about. India, we've got a team on the ground. They're assessing the opportunities today. You haven't seen us act in some of the auction situations. That's been purposeful on our part. We've been able to see them and we decided not to participate. So just what we ask is give us some time. We will either make a revenue generating investment in the near to mid-future or decelerate some of our SG&A investment in looking at these things. We don't have anything today, Mike but that's the consistent way we're looking at it and everything is on a risk adjusted return.

Can you give us more description as to where the 180 towers were that you acquired? Was that U.S.? Ask was that Latin America?

That was primarily Latin America, kind of consistent with how our dollars were spent this year, 30% of our acquisitions were U.S. based, in dollar terms, and 70% were international. The returns that we averaged were roughly between 13.5 and 14% initial returns unlevered on that money.

Thank you very much.

Sure, Mike.

Your next question will come from the line of Jonathan Atkin with RBC Capital Markets.

Yes, had a question about tower cash flow margins sequentially. I think the trend might have been down a bit from 3Q to 4Q. Wondering what drove that. And then with respect to just activity on the ground in Mexico and Brazil, can you comment on the activity of the kind of the legacy carriers and then you mentioned new license build-outs, can you give us a little bit more operational color for each country?

Sure, John. It's Brad. I'll start and I'll turn over the Latin America question to Jim. The reason for the sequential decline was, if you remember last quarter, we had one-time items that were fairly substantial. So we had a $4 million one-time gain in revenue and we had a $2.5 million one-time benefit in expense. So those didn't exist this quarter. That was a fairly significant one-time that causes margins to go up when you reduce expenses and you increase revenue.

In the fourth quarter, we also had just an operational, even when you strip out the one-time items, it was a heavy quarter for R and M as we do certain year end projects that are finally done and we also had a little bit of uptick in non-cash ground lease expense related to some of the buyouts that we have been doing or extending of leases, because we do extend a lot of our leases, if they have 20 years to go, we extend that sometimes another 20 years, and so you have to then increase your straight line over that period of time. Those were the major drivers in terms of the sequential gross margin.

Jonathan, it's Jim. When it comes to Mexico and Brazil, we're going to see a lot of activity from our existing carriers Lusacell combined now with Unifone, in Mexico, also sort of a run rate level of business from Telecel and Telefonica and NEXTEL international too. And then there was a few new WiMAX and fixed wireless players in Mexico, probably modest but beneficial nonetheless, MVS, Axcel, and TelMex, the wired phone company is actually getting into some fixed wireless projects as well. In Brazil, Claro and Vivo, which are American Mobil and Telefonica affiliates respectively, both acquired additional spectrum that gives them nationwide coverage so they'll be doing some buildouts there. Oy acquired a new license in Sao Paolo state and also there's a new carrier called Unicell that's gearing up to do a roll-out in Sao Paolo, also. So those are the sources of much of the new business this coming year in Mexico and Brazil.

And then of the 70% of new tower builds that are international, what's been the rough mix respectively as well maybe for '07 between Mexico and Brazil of that 70%, in other words.

That was acquisitions would have been that 70%, not new builds.

Okay.

Coincidentally, it's about one-third U.S., two-thirds international. So it's not far off. That's what we anticipate in 2008.

And of the international, is it split evenly between Mexico and Brazil or is it weighted more towards one country?

Brazil is higher this year than last year.

Okay. And then finally, you talked about the lease extensions and combined with ground lease repurchases, is there any way to kind of give us a flavor for during the preceding fourth quarters, what portion of your ground leases have either been extended or purchased?

We will have that in our investor presentation. So that's I think the best place to cover the specificity of it.

Great.

Our whole goal is really to extend out anything we have, even though it's a small subset of our ground leases, anything in the next ten years should be dealt with by the end of this year and we've made substantial progress. 11 through 15 we're concentrating pretty hard on.

Next question will come from the line of David Janazzo with Merrill Lynch.

Good morning. In the release you mentioned looking at a range of economic and capital market scenarios. Obviously you're going to need to get the financials out. With your strategy of the prudent financial leverage and the diversifying of the capital structure, can you discuss that, some of those scenarios that you're seeing, particularly capital markets and how that's going to weigh on your considerations?

Sure. We financed ourselves in three primary markets, which is the securitization market, the bank market and that's relationship bank, not the term B more broad investor market and then the typical corporate debt markets which are bonds. The securitization market is very challenging, very volatile with very few new issues and spreads that have gapped us dramatically and well beyond any historic levels that's been seen. That market may take time to ultimately settle out, and it may never settle back to where it was, since that was really, where the securitization market was at historically tight levels. So that puts us toward the bank market and the bond market.

Both are open to us. I think the key is to be selective especially in the bond market because that is -- there's opportunities we can use our credit, our good credit ratings to issue but you don't want to do it in a period which may have a lot of volatility. So you just wait your time and move forward. The bank market we also have very good relationships with all our banks. That's a market that is again open. There's a finite amount of capital in the bank market. I don't think our current facility is asset as that finite amount of capital. But again, you can go up but you can only go up so much. That's how I would portray it.

I think we've got access to the capital markets in 2008 to do the things that we like to do.

Okay. Thanks.

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

Thanks. This is just a quick follow-up to the last question. Remind us of what your availability under the revolver is right now.

Sure. I think at the year end we had 875 million or $825 million outstanding. It was a $1.25 billion revolver, so got a little over $425 million in there, little less actually, because letters of credit that count against it. And so that's where we ended the year.

That's 825 million that's available right now?

No, that's drawn.

That's drawn.

At a $1.25 billion facility.

One last point of clarification. I think you mentioned in your guidance that you are assuming about $9 million of expenses in your SG&A for international business development.

That is correct.

Have you previously disclosed what that was? I'm just wondering if that changed with the update to your guidance?

I'd should not have. Maybe $1 million. It's below $1 million that changed from our November budget.

In the past we didn't break it out. It was five-ish million I think the number was in 2007. We just wanted to give you visibility to that.

Okay. One last question. You said the buyback that you currently have is substantially complete. Are you actually going to complete that even if you haven't completed your tax review or is that actually on hold?

Well, we've completed 2.2 billion as of $2.25 billion. And our typical practice is we don't discuss timing of our share repurchases because we do them under 10B5. We don't really veer from that practice because a a lot of our plans are usually under automatic execution.

Okay. Thank you.

Your next question will come from the line of David Barden with Banc of America.

Hey, guys. Thanks for taking the question. Maybe just two real quick ones. Brad, just in terms of the expectation for the four weeks for the 10-K, obviously we made estimates before about getting restatements done and the time it takes and so I was just wondering, just if you could kind of give us some comfort level on your estimate for that four weeks would be appreciated.

Is that the quick question?

That's the quick one.

In terms of the timetable of where we expect to file statements, unlike the -- the reason the last time this got delayed or last time we made estimates was during the stock option review. That was a different type of issue, different type of review. This is an isolated issue. We've done a ton of work over the last few weeks to get our hands around it and nearing completion of that and then it's working to evaluate the materiality of it and what do you do, you would be on the shorter end of that timetable if you don't think it's material and if you do think it's material you'd be more towards the longer end, hopefully even inside of that. I think because of that, it gives us a decent amount of confidence. That estimate was created with our auditors when we've reviewed where we are in this process and I think we feel that's a pretty good number. It's nothing is certain in life, but we do feel pretty good that that timetable is a pretty good timetable.

Okay. Good. Thanks. And just the second question, again, more on this related theme of credit market, et cetera, looking back from three months ago to today, the capital budget is way up. Obviously you've shared some good reasons why you want to spend that money. But it is a very kind of sharp increase just over a handful of months. Obviously you guys continue to remain at the very low end of the leverage range. Borrowing costs are way up.

We were kind of expecting a buyback announcement but obviously that's going to come in a few weeks, presumably. But I guess as I sit here, I just wonder if given the overall more conservative nature of American Tower when it comes to the balance sheet, is it prudent to kind of just think about you guys pulling in your horns a little bit from the standpoint of leverage and getting too aggressive on stock buybacks in the current climate or am I reading into much into kind of the recipe of things that we're seeing come together this quarter?

I think you're reading too much into it would be my initial statement. If you look at our money that we put to work on -- that we raised guidance, we're raising the number of new builds, we'll also buy a little bit more land. Our returns, acquisitions and new builds are about the same. It's 13% unlevered. That's day one. They do grow when you add more tenants. Pretty good numbers. Our credit costs, while higher than they were three months or six months ago, they're not that much higher. Our bonds trade above par. That's a 7% bond. So implicit as of Friday it was a below 7% rate.

Our bank, when you swap out debt, LIBOR you get 3% LIBOR and it's plus 75 basis points under 4% money. If we were to raise new facilities it would cost more but not dramatically more because LIBOR has come down. All those things you have to take into account. The securitization market is not accommodating right now. It may not be for quite a long period of time. We don't feel we're capital constrained from that. You have to be thoughtful about when you enter the market. That's the key. If we have good returns and we're putting money into these productive assets, that makes a lot of sense. Our shares, it's clearly better to buy more at lower prices than at higher prices. Our shares have come down more than our borrowing costs have gone up, so again, that's a pretty good recipe for putting money to work, and that's how I portray it.

Are you at all incrementally more gun shy about moving the leverage back up into the middle of the range to take advantage of the fact that the stock is down harder?

I think it's a relative discussion of share price. Where we have moved over the last three quarters is up towards kind of the 4.5-ish range on a LCM basis. Even if we held it there, because we generate close to $600 million of cash flow, even after all these projects we highlighted, you still have -- see what your EBITDA grows, if it grows 100 or I'm sorry our gross margin less SG&A adding back non-cash comp, you get another $500 million or $600 million. Even to hold it steady, you're at a $1.2 billion. So even moving up or down, you have a lot of capacity.

Great.

David, my initial comments include the point that we feel very confident about the strategy we've had in taking it forward. So there's nothing again in the economy or the financial markets that are taking us off of the strategy that we've been talking about with you guys for the last couple of years.

Great. Good to hear. Thanks, guys.

Your next question will come from the line of Richard Choe with Bear Stearns.

Just wanted to get a little more color on your WiMAX comments for guidance. Is this, given what the current players are building or plan to build, is it the contract set you see in the pipeline and how could that change if there's a dramatic change in build from Sprint and Clearwire?

Richard, it's really two parts. I think you nailed both of them in your question. Which is the contracts we have signed which are money good and then it's what our anticipated based on talking to our customers that they're planning to spend and really market specifically identified working with us. So could those change? They could. Are they material to our guidance? Not particularly. And so that's how I would portray that in terms of the impact, whether WiMAX comes to fruition in markets that they've discussed with us or they don't.

Great. Thank you.

Your next question will come from the line of John Marchetti with Morgan Stanley.

Thank you very much. Wondering if you could talk a little bit about the M&A environment in the U.S. I know that you acquired a lot of titles in 4Q outside, wondering if maybe there are some sizable opportunities still left in the states or if it's now pretty much down to mom and pop. Just following on to one of the previous questions, you talked a little bit about the costs of borrowing coming down faster. Or not rising as fast. Wondering if that's still the same for M&A. Are you seeing the costs of M&A now down more than the cost of borrowing have increased? Thanks.

John, it's Jim Taiclet. The major sources remaining of titles in the U.S., we've talked about in the past, they're T-Mobile, AT&T, public tower companies. There's no public indication that any of those are available or on the market at this point in time. That takes you down to really, if you want to call them mom and pop, multiple hundred tower type businesses down to the tens and twenties. They're almost always quote for sale. Have we seen prices diminish dramatically over the last couple of quarters? Not necessarily. We're being prudent. We look at the opportunities. We apply our risk adjusted return based on if quality of the assets and we move or we don't move. You didn't hear us talk about major numbers of acquisitions in the U.S. in the fourth quarter. That's probably an indicator for you.

The only thing I would add is on the small private company side, what we have seen is several deals pulled because they could not get the value they were asking. Which is I think as the market starts getting a little bit softer on the private market side, it's something you always see. That's like the precursor to it.

Thank you.

Your next question will come from the line of Jonathan Chaplin with JPMorgan.

Thanks. Just a follow up on an earlier question. If Clearwire were to accelerate their build back to the initial 30 million pops that they had targeted from the 6 million that they're targeting now, I'm wondering what that would mean for your guidance, if it would even be material? I'm assuming the discussions you're having with them at the moment are only on 6 million they're now targeting for this year. Wondering if you have a preliminary estimate of what the unlimited plans could do to demand over time. Thank you.

Sure, Jonathan. It's Jim. If Clearwire were to sort of reinvigorate its build plan, the lead time of doing that, getting people to float into markets, do site acquisition, conjunction with us, et cetera, would lead to sort of back end of the year lease signings and maybe some commencement. So it wouldn't move us past the top end of our guidance even if they re-engaged us in a 30 million pop build out. It would be helpful. We'd love to see it.

Second question, the unlimited plans from some of the major carriers that have been rolled out, they're at the high end, which is a good thing, meaning if you're going to charge people $99 a month you're going for the quality subscriber. They're going to expect quality network service. Again, it should support their CapEx budgets to deliver that service over the next few years. Will it be a dramatic spike? Doubtful. But will it lengthen and strengthen what these major carriers are going to invest in their networks to compete with each other? Yes.

Great. Thank you.

Your next question will come from the line of Shaun Parvez with Cowen and Company.

Two quick questions. Can you comment on '08 free cash flow guidance? I notice you didn't update that. Since you had updated revenue and gross margins I'm wondering why they don't seem to flow through to free cash flow.

The reason for that is when we do free cash flow we usually incorporate our estimate of interest expense related to any share repurchases. So you have all the elements if you want to assume from our last outlook the interest expense. Prior to any announcements, if we do announce another share repurchase, then you can have all the building blocks and you can just move up the cash from operations based on the increase in our guidance and decreases by the CapEx that we put in there. Is that helpful?

Yes, yes, yes. That is helpful. One other question I have is given your accelerating rate of ground lease acquisitions, can you tell us what percent of your towers are now on land that you own and where that number might be in a year or two?

The percent is right around 16 or 17% and that's all domestic. So it's higher on the -- if you put that percentage over the domestic portfolio because we don't buy the land in Mexico and Brazil currently as that -- as land costs are passed through to our customers. That percentage is probably a little bit understated relative, if you see our peers because they don't have 13% of their portfolio internationally.

Got you.

And that's how I portray it. Was there a second part to that question?

And where you might see that number in a year or two.

Again, the very range of what it costs us per piece of land really varies on what we're paying ground rent. So if you can assume let's say you pay $100,000 a site, that's going to move somewhere between 400 600 sites into the portfolio on top of what we have, and we have roughly, a little bit over -- almost 23,000 sites.

Got you. Got you. Great. Thank you very much.

At this time I think we're going to end the call.

Thank you very much, sir. Ladies and gentlemen this does conclude the American Tower company fourth quarter 2007 earnings conference call. You may now disconnect.

Thanks a lot everyone. Really appreciate everyone time's time.

Have a greet week, everybody.

Thank you all, you may now disconnect.