美國電塔 (AMT) 2008 Q2 法說會逐字稿

Good morning. My name is Julie and I will be your conference operator today. At this time, I would like to welcome everyone to the American Tower second quarter 2008 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). Thank you.

I would now like to turn the call over to Mr. Michael Powell, Vice President of Investor Relations. Sir, you may begin your conference.

Thank you, Julie. Good morning and thank you for joining American Tower's conference call regarding our second quarter 2008 financial results. We will begin with comments from Jean Bua, our Interim Chief Financial Officer, and Jim Taiclet, our Chairman, President and Chief Executive Officer. After these comments, of course, we will open up the call for your questions.

I would like to remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include statements regarding our 2008 outlook, our stock repurchase program, our international business development initiative 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 our Form 10-Q for the quarter ended March 31st, 2008 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.

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

Thank you, Michael and good morning, everyone. American Tower continued its track record of consistently delivering strong revenue, adjusted EBITDA and free cash flow growth in the second quarter. In our core Rental and Management division, both our revenue and gross margin increased 10% to $384 million, and $296 million, respectively, from the second quarter in 2007. Our Rental and Management revenues and gross margins included a decrease of approximately $5 million of non-cash straight line revenue compared to the prior year, and approximately $2 million on a sequential basis from the first quarter.

Adjusted to exclude the non-cash straight line elements, tower revenue increased 11% and gross margin increased 13% from the second quarter of 2007. Our level of new business continued to be strong with annualized levels of signed new business of approximately $97 million during the second quarter. Signed new business was incrementally stronger in the second quarter compared to the first quarter of 2008, with the US at comparable levels in both quarters, but with stronger performance in the second quarter from our Mexico and Brazil operations.

Our total selling, general, administrative and development expense was $41.8 million, including $13.6 million of stock-based compensation expense. Our selling, general, administrative and development expense also included a one-time expense reduction of approximately $3.1 million, and approximately $600,000 of additional costs associated with the stock option review and related matters. Our adjusted EBITDA increased 13% to $272.3 million, and our adjusted EBITDA margin increased nearly 200 basis points to a record level of over 69%. Adjusting to exclude non-cash straight line revenue and expense, adjusted EBITDA increased approximately 16%.

Our operating income for the quarter increased approximately $62 million from the second quarter of 2007 to $155 million. Of the increase, approximately $31 million was attributable to the change in our estimate of the useful life of our towers and related intangible assets that we instituted in the first quarter of 2008. Our net income for the second quarter was $158.8 million, which includes approximately $106.1 million related to the company's losses associated with its investment in a former subsidiary, Veristar.

Our capital expenditures totaled $52.7 million. During the quarter, we completed the construction of 66 towers and four in-building installations. Separately, we acquired eight new towers in the quarter. The average unlevered day one return on the 78 new sites that we acquired and built in the quarter was over 12%, with strong prospects for additional tenants further increasing our future returns on invested capital.

We also had higher than historic levels of redevelopment CapEx during the quarter due to incremental investment related to one of our international customers, as well as the expansion of several of our in-building systems to accommodate additional tenants.

Capital spending on land acquisitions totaled $11 million in the quarter and we also spent approximately $4 million to prepay ground leases that were extended as part of our land management program. Please note, the prepayment of ground leases, even for the prepayment of 99 year leases, is not treated as capital spending in our financials. Instead it flows through as a reduction of cash provided by operating activities.

We are narrowing the range of our outlook for capital spending for the full year 2008 to $200 million to $225 million, which includes the construction of 300 to 400 new towers and in-building sites in our existing markets and approximately 200 towers during 2008 in India.

Our strong operating performance produced approximately $124 million of free cash flow for the quarter. We define free cash flow as cash provided by operating activities less all capital expenditures. Please note that the free cash flow calculations include approximately $28 million of discretionary capital spending on new site construction, land acquisitions and prepayment of long-term ground leases as well as $19 million for the redevelopment of existing sites.

As indicated in our press release, we are increasing our 2008 outlook for the year. This is primarily driven by outperformance in the second quarter and its effect on run rates in the second half of the year. At the midpoint of our 2008 outlook, we anticipate tower revenues of $1.545 billion, with tower gross margins of $1.196 billion, and adjusted EBITDA of $1.088 billion.

We continue to anticipate levels of commenced new business for the full year 2008 to be above 2007 levels, but spread more evenly throughout the year compared to 2007 which was much more back end loaded.

Our financial position remains solid due to the strength of our operations and expectations for the continuing solid growth trajectory of the company. Due to strong operating performance, and the level of share repurchases, we ended the quarter at the low end of our targeted range of four to six times net debt to adjusted EBITDA.

Regarding our share repurchase activity during the second quarter, we repurchased approximately 2.7 million shares for $115 million. We increased the pacing of our share repurchase activity, subsequent to the end of the second quarter and have repurchased 2.5 million shares during the period of July 1st to July 25th. We intend to finance our share repurchases with our excess cash flow, our existing credit facilities and incremental borrowings.

We believe that our relatively low leverage, our diversified sources of financing, no significant maturities until 2012, total liquidity as of June 30th of approximately $750 million our continued strong operating performance have provided significant financial cushion for our capital requirements. These factors, in combination with our diversified sources of financing, will allow us to access the capital markets on an opportunistic basis over time. We will continue to thoughtfully seek to enhance our financial flexibility with additional sources of liquidity at appropriate costs.

With that, I will turn the call over to Jim.

Thanks, Jean and good morning, everybody. As highlighted by our second quarter results, the tower industry continues to perform well, even in an uncertain general economic environment. In fact, American Tower outperformed our own internal expectations for both tower revenue growth and adjusted EBITDA, and our confidence in our anticipated performance for the second half of this year led us to raise our 2008 guidance for tower revenue and adjusted EBITDA by $7.5 million $6 million respectively at the midpoint.

We believe that our sector's strong current and anticipated performance is driven by a number of factors. First, we primarily serve wireless carriers, the vast majority of which are growing in revenue, delivering strong profitability and are financially solid versus the potentially more stressed consumer segment.

Second, the technology deployment and network development plans of these carriers are multi-year, highly complex endeavors. Given the strong financial health of the bulk of our customer base, our recent experience is that they are continuing on with their technology migration plans from 2.5 to 3G, while continuing to invest in network quality.

Third, wireless industry competitiveness remains very high in the US, Mexico, Brazil and India. In all these markets, subscriber growth continues, minutes-of-voice-use are still expanding at an even faster rate and carriers are aggressively rolling out new data applications and devices. Notably, AT&T Mobility recently announced that its second quarter year-over-year growth in data revenues increased by over 50%, even before the launch of the much anticipated 3G iPhone. Of course, all these trends require ongoing network investment, lengthening and strengthening the demand for tower space.

And fourth, government policies in all of our served markets, especially with respect to spectrum availability, further support continuing need for sustained and substantial carrier investment in wireless infrastructure. Currently, carriers such as T-Mobile USA, Leap Wireless and MetroPCS are still in the midst of rolling out new territories and services based on the AWS spectrum they acquired a couple of years ago.

Down the road we can look forward to the expected utilization of recently auctioned 700 megahertz spectrum by carriers such as Verizon and AT&T for even faster 4G deployment.

As a result of all these factors, we have great confidence in the tower sector's ability to continue to achieve strong organic revenue growth, even if today's uncertain economic environment and somewhat turbulent capital markets continue.

The tower industry also enjoys some important attributes that help mitigate it from potential down side risks. These attributes include long-term non-cancelable contracts, annual escalators, and stable operating costs with extremely small exposure to volatile commodities such as oil.

In sum, we view the tower sector as a resilient growth industry in a range of economic and capital market environments over time. We also believe that American Tower is the most resilient growth company in this resilient growth industry.

A number of quantitative and qualitative attributes contribute to American Tower's industry leadership. First, we feel we have the highest asset quality with the most efficient investment history, leading to greater than 10% return on invested capital versus our peer group of slightly greater than 7%. We also have the higher per tower revenue, EBITDA and free cash flow in the industry due to our customer relationships and our operational capabilities. We also enjoy 69% adjusted EBITDA margins, as Jean mentioned. That's over 1,000 basis points higher than our industry peers.

Due to our longer initial contract lengths with our customers, American Tower leads the industry with over $8.5 billion worth of non-cancelable lease backlog which is nearly six years of backlog at the current revenue run rate. American Tower, finally, has also the strongest balance sheet in the sector, and the highest credit rating of BB plus. Our weighted average maturity of our debt is approximately 5.5 years, compared to approximately three years at our peer group company.

We believe that being the most resilient growth company in a resilient growth industry enables American Tower to offer something that many investors might find important over the course of the business and economic cycle, and that is consistency. Our track record is not just one of delivering consistently strong operating results, but also one of strategic consistency. Over the past number of years, we have, for example, maintained a consistent financial leverage target range and drawn on a variety of financial instruments and tenors. As a result, today we have substantial liquidity and face no significant near term refinancing deadline.

We've also focused on building scale and growing our company, both organically and through a targeted, disciplined approach to mergers and acquisitions, moving proactively when asset quality price equation was attractive to us and withholding our capital when it's not. We've also consistently returned that excess capital to shareholders through our share repurchase program, not in an unpredictable on again, off again, stock buyback quarter-to-quarter, but since the fourth quarter of 2005, American Tower has consistently repurchased and in total of over $2.4 billion worth of our common stock. In a word, it's been consistent.

Before we move on to your questions, let's spend a few more minutes on the topic of growth at American Tower. As I noted earlier, we believe that our organic growth prospects are very solid. It's combination of strong ongoing wireless industry demand for tower space, the quality of our 23,000-plus site portfolio and the efforts of our management team and team members across the company in delivering excellent cycle times and customer service.

Additive to our drivers of organic growth, is the further potential to add high quality assets to our portfolio and at the right price. As you know, American Tower has a successful legacy in this regard, including the SpectraSite merger in the US and international country launches in Mexico and Brazil early in this decade.

Over the past couple of years, we've been in the process of institutionalizing a capability to seek out, examine and make decisions on investment opportunities, both domestically and internationally. From a resource point of view, we've invested in small teams of very capable people to conduct this investment discovery and evaluation process in Latin America, Asia-Pacific and the Europe, Africa, Middle East regions. In addition, we have our ongoing effort in the US.

I must say that we've reviewed many opportunities using a consistent investigative and analytical process that we decided not to do because they didn't meet our investment criteria and therefore we didn't act on them. On the other hand, we've made affirmative decisions on a few of these recently. These include the launch of our India business. As many of you know, given recent tower asset transaction valuations there, we opted to initially enter India through a build-to-suit agreement and follow-on agreements with customers, thereby enabling us to establish a base of assets on a cost basis versus an acquisition price basis.

We recognize that it may take more time using this approach to achieve the scale we would like, but believe that the sheer size of the overall opportunity in India will enable us to achieve our objectives there. And I'm happy to report that our first towers are up and operational in India.

Through our growth initiative evaluation process, we also continue to extend our core product tower line. In the US, we recently decided to offer our customers outdoor distributed antenna systems, known as DAS. These networks nicely complement our 20,000 owned towers, 2,000 managed rooftop sites, and our industry leading indoor DAS product. While outdoor is a niche solution, this product has attributes which at times do fit the needs of our customers. Outdoor DAS is not considered a substitute for towers by any means, but as carriers deploy or augment networks in situations where tower based cell sites are not available, or if they're just infeasible due to time line considerations, carriers may then consider the alternative of roof top locations or outdoor DAS to fill in the gaps or add some capacity in the tower based network.

As we work closely with our customers to deploy their networks, our goal is to offer a comprehensive solution of sites to fit their needs. And today, with American Tower, this includes tower sites, indoor and outdoor DAS and roof top managed sites, along with select site services to help customers get on the air quickly and efficiently.

Besides DAS, we continue to find other ways to make our tower sites more attractive to our customers and we recently rolled out another new product offering which provides a shared backup power source at many sites located in storm vulnerable areas in the US. Knowing our customers' desire to have the most reliable coverage all the time, even during crisis situations, the provision of shared backup power infrastructure such as generators, in this case, should help their ability to remain operable while keeping their costs in line.

Outdoor DAS, shared generators, and our India geography are all in the early stages and will not materially increase ATC's revenue and adjusted EBITDA growth in 2008, but our goal is to grow these projects, and hopefully a number of others, over the next few years to meaningfully augment the organic growth of our existing asset base.

Finally, I'd like to take a moment to expand a bit on Jean's earlier summary of our share repurchase rate during the past few months. Earlier this year, we adopted a framework to enhance the efficiency of our share repurchase program. Very simply, it's in the form of a pricing grid designed to take advantage of the natural volatility of the stock market. We buy relatively more shares on days when the market price of the AMTC stock eases and less on days when it advances. Shortly after we implemented this second quarter grid, our share price advanced and we stayed in that higher range throughout most of the quarter. Good news.

But in the second quarter we then repurchased fewer shares through our buyback program than we had projected originally. Therefore, as of July 1st, we implemented a new pricing grid based on our recent share price experience. As Jean noted earlier, based on this new grid we have purchased almost as many shares in the month of July as we did in the entire second quarter.

The repurchase rate for the remainder of the quarter may fluctuate depending on the behavior of the overall market and AMT shares specifically, but I did want to communicate that we did adjust the pricing grid to maintain our target leverage range and you can expect that we will continue to be cognizant of this issue under normalized circumstances in the future, absent, perhaps, a major transaction or some unanticipated market dislocation.

So thanks to everyone for joining the call today, and I'd like to leave you with three words that summarize today's discussion -- growth, resilience, and consistency. In closing, all of here in Boston are looking forward to our revenge against the Yankees in August, and watching the intending collapse of the Rays. Operator, we'll take some questions now.

(OPERATOR INSTRUCTIONS). We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Michael Rollins with Citi Investment.

Hi, good morning. I was wondering if you could talk a little bit more about the size of maybe the acquisition opportunities that could be left in the US. You know, as you think about inevitably the capital structure and the options for which you can deploy cash, if you could size that part of the market for us, that would be great. Then, could you also give us a sense of what kind of opportunities for incremental investment lie in Latin America in a little bit more detail. That would be great. Thanks.

Sure, Mike. Good morning, it's Jim.

First of all, let's talk about the US. The alternatives that I'll list may or may not be available now or in the near future but we can definitely talk about the universe for a few minutes. First and foremost, is our peer company and one we have a lot of respect for, Crown Castle, very similar size to American Tower in many respects. It's our peer and probably the only peer of such size in the industry today - obviously, a merger candidate, if you will, theoretically.

SBA is the second public company in the peer group versus American Tower and Crown Castle, 23,000, 24,000 sites. We're talking about a smaller number. SBA's been doing some acquisitions lately and bulking up a bit, so maybe 7,000, 8,000 tower range by the time it's all rolled in, again, a very well managed, high quality company in the public market.

And then you get down to a couple of somewhat sizable privately owned tower companies that are out there, like Global Tower Partners, but now you're down into the 2,000 to 3,000 tower range. Then it goes down from there, Mike. Even some of those candidates in the 500 tower range lately have been acquired.

There's a fairly limited number of third party tower companies of any kind of scale that's available, but of course there are also the carrier owned tower portfolios that are still owned by those companies. The biggest one we believe is AT&T, probably about 8,000 towers, most of those legacy AT&T wireless sites. T-Mobile, which publicly announced an auction that was then discontinued for about 6,000 tower sites. And, of course, recently Sprint sites were sold. So, 3500, but they're off the market now.

So again, a fairly limited universe of US tower acquisition opportunities but they could range from a couple hundred million dollars to Crown Castle is valued at upwards of $15 billion, $16 billion. So a wide range, not a lot of candidates, and nothing that I can say today is imminent or available to our knowledge among the group.

In Latin America there's a very broad range of opportunities for us, Mike. First of all, in the existing markets we have, you may recall that this year we acquired about 250 towers, 200 or so in Mexico and about 50 in Brazil from Nextel International. That already occurred in the first quarter. So periodically, we do get those types of opportunities to acquire tranches of existing carrier towers in Mexico and Brazil.

We're also building in Brazil specifically this year at a higher rate than we ever have before. There's a lot of opportunity down there, with companies like Oi and Claro and Unicel that are either expanding their territories or new to the market.

Finally in Latin America, we're very eager to open up adjacent geographies. Countries like Peru, Columbia, Argentina, Chile are candidates for these kind of things. In addition to being close to operations we already have, they also have common customers with our current operations. We're going to keep trying to figure out ways to work with our customers to enter some new geographies in Latin America, and that's a very high priority to us. Each of could be between 300 and 1,000 over the first couple of years, depending on how many countries we could get into.

That's really the landscape in the Western hemisphere, Mike. And, of course you know we're doing prospecting in Asia, Europe, Africa, Middle East as well.

Just to follow up quickly, could you just review the criteria that you use in terms of valuation. Do you look at a certain level of accretion on certain metrics to your business? Or are there other factors that you consider as you're weighing whether to participate or not in bidding and in ultimately the price you choose to bid for, for those assets?

Mike, the way I describe our decision making process is one of price - quality equation. So the quality of the towers has to, in our view, justify the price being asked. We look at it from two or three different directions. One would be a standard discounted cash flow model over a number of years. We compare that to tower cash flow and EBITDA and free cash flow multiples in the current time frame. And then we also add in the growth factor -- how much of the tower's probably already loaded with the revenue that's available in that territory and how much conversely growth is there for the future.

So there are a number of factors that go into this. I think we've got a very sophisticated methodology and extremely experienced people at doing these things. So there's no one dimensional answer, Mike, but it's a confluence of a number of factors and numerous analyses that get us to a decision point.

Thanks very much.

Sure.

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

Good morning, guys. Don't count the Rays out yet.

Hi, Rick.

Couple questions for you. First, on the stock buyback, you mentioned how you would fund that with excess cash flow generated, your credit facility, and borrowing capacity. Can you update us as far as what the debt markets are looking like, what kind of rates you're seeing out there? Would you look at a securitization if that market opened back up? Just what your thoughts are on the credit markets right now.

Ric, I think based on our moderate leverage, our numerous types of markets we've already participated in and therefore have existing investment banking and banking relationships, at some level all markets are open to us and I'll go through each of them as far as size and maybe the interest rates we could be looking at.

We haven't agreed or initiated any transactions yet so this is more of a conceptual discussion here today. But we could start with the bank market. We've tapped our relationship bank market earlier this year, as you may know, $325 million facility. We may need to go to a broader bank group if we went to the credit markets again. But we've demonstrated the ability to do that, too.

The revolver which we're using today to fund a portion of our share repurchases, we have some swaps that keep us at about 4% or slightly below on the credit facility that we borrow against today. So extremely attractive, very nice job by our finance team in lining that up over the last couple of years. So we do think the debt markets are available but potentially not at great amounts of capital. But the pricing's pretty attractive.

Secondly, we could speak to the bond market. Our BB plus rating and stability of the company has led us to get essentially investment grade covenants on the most recent bonds that we did, 10 year bonds. We feel that's an open market for us and the question would be timing. We could probably do between $250 million and $500 million, we think, in a bond if we were to go to that market, Ric and 7 to 7 3/4 type of a range of coupon. Again, that's why the timing's so important. We have nothing to announce, nothing imminent there right now, but we do feel it's open to us for the kind of ranges that we would be interested in.

Securitization, probably a little bit less attractive right now, based on the tranches and the pricing of interest against those. So if you would want to keep your size to the AAA tranche it would probably be a reasonable sort of an interest rate and set-up cost that you'd be dealing with, but if that was where you were headed, again, you're probably looking at $200 million to $250 million in a financing. Is it really worth to go through all of the set-up cost to get financing of that size in that market today. That would be a question you'd have to answer.

Finally, there's a convertible bond market that's still also open. It's something we keep in mind and not something we've used, though, in the last couple of years. Really, Ric, there's four avenues open to us, and I think that's the benefit of maintaining a diverse capital structure and one where you're not hanging way out over your skis on leverage and things are closed off to you and times could be a little rough.

Another follow-up question for you. Crown Castle the other day, when they reported their second quarter numbers, surprised us with the amount of ramp-up they had done in the land program, both buying land and extending leases. It looks like they've hired a team and are really going at it aggressively. You guys have got it in your guidance, still at a nice level. Any thoughts about ability to ramp that up or accelerate that pace?

Yeah, Ric, I think we're very comfortable with the land purchase rate that we're involved with right now. And, just like I said before, when you talk about tower quality versus price, we look at land the same way, too. So we don't buy land just to buy it. We buy land to protect the asset ultimately, but also to get a good return in the near and medium term, as well. So we're buying land between probably 10 and 15 times our annual land cost. If you don't have the escalator in outer years, of course your returns are going to improve from that and you have that protection factor.

So we feel we're in the right zone as far as returns, as far as protecting the land that we would like to get access to permanently. And that's appropriate for us, we feel. And again, just like buying towers, buying land should have a quality - price equation against it.

Just to add onto Jim's comments, two points. One, the returns that we have been seeing in land purchases, anywhere from the mid-teens to the upper 20s. And at this point, our leases have an average maturity of about 20 years on them.

Great. And one final question on your guidance. What's in the guidance as far as WiMAX assumptions from Clearwire and Sprint? It's looking like they'll get their deal closed probably in fourth quarter, maybe November time frame. Anything in your guidance right now?

Ric, we had no change to our original Clearwire assumptions, which were fairly modest for 2008. They did a lot with us, in fact, in 2007. But we knew their deployment plan and that it would be smaller in this current year. We haven't modified that due to the transaction because, as you said, it probably won't get approved until close to late in the year. There may be an effect in '09 but that will depend on the financing and the build-out plan of the new entity -- which we're looking forward to, by the way, we think it will be a positive.

As far as the Nextel WiMAX program, we did have budgeted some amendments which we understood was, again, the roll-out plan for trial markets, pretty limited actually, from Sprint Nextel. That's still what we're working under and they're still doing some of that. Neither of those were big impact items in the budget for American Tower for 2008.

Sounds like it could be a good '09, then. Good luck, guys.

Thanks, Rick.

Next question comes from the line of Jonathan Atkin with RBC Capital Markets.

Yes, good morning. I wondered if you could talk about your thoughts on India, maybe give a little more color, anything you learned over the past several months since you decided to go ahead with build-to-suits. And then with regard to just the recent M&A activity domestically, any thoughts on those transactions? You obviously decided not to participate. Any thoughts on what that means for the industry?

Sure, let me go ahead and speak to India first, John. We've spent, as you know, I've personally been spending a fair amount of time over there in the last year or so. One of the things that you cannot miss, especially when you visit, is that it's a fast growing economy. There's over 1 billion people. It's a country on the move into the modern era and it's bypassing essentially the wired telecom network phase and going right to wireless telecom network to really be, I think, the major communications infrastructure for people and for businesses in India.

So fundamentally it's a very good telecom market, high growth. In fact, we think it's the highest growth wireless market in the world right now. That's the first point.

The second point is that it's very competitive from a wireless carrier point of view and the government actually encourages this. So, unlike even the US or Mexico where yes you have maybe four to seven national competitors, there are many, many competitors, both on a national and regional basis in India, and it's in an aggressive phase of development and competition. So while there are some big joint ventures and some major carriers that have decided to move forward with their own tower ventures of one sort or another, there's still a very large and very active emerging part of the market, plus some existing carriers, that want to focus on their core business and do want to lease and have third parties build their towers for them.

So we think there's plenty of opportunity for the tower business on a third party basis, as we feel we can offer.

The third observation that I would give you is that there is a need for a leader in the co-location part of our business to drive that method of network deployment in India. We're going to try to be that leader and with the assets that we deploy, we are going to strive to have the highest co-location rates in that country.

So we think it's a great opportunity and a great market to be in, but given the turbulence and some of the loftiness, I guess I'd say, in the Indian stock market, some of which has calmed down, a lot of that translated into the telecom sector and specifically the towers. So we felt the tower valuations over the previous six to 12 months were outside of our price quality parameters. Therefore, again, you did not see us act in these major transactions but rather we decided that if we can go in and build a tower for 75,000 to 85,000 in India, we can have a much better shot at getting the returns on those towers.

So at the end of the day, John, our decision was great market, lots of opportunity for a company like American Tower with our business model, we don't want to pay the high entry price. Let's get in on a cost basis, grow our way into it and then see how the acquisition and merger opportunities may or may not come down the road. You know, frankly, I would rather have call it -- this is not a projection number, just an example -- I would rather have 2,000 towers with 2.5 tenants per tower than 20,000 towers with 1.05 tenants per tower. We're going to strive to have really good assets with a really good lease-up rate and we'll grow into it.

And on the domestic M&A situation?

Sure, you sort of answered our question already, John. You can assume that a company in a leadership position such as ours is provided notification of any assets that may be coming available of this type. We apply this discipline. And I do like to use the word institutionalize because we have a repeatable process of seeking and evaluating acquisition opportunities with consistent people who know what they're doing. And therefore, we feel this repeatable process can be applied to opportunities in the US like the transactions that are recently closed -- or been announced, I should say -- all the way over to India or other regions of the world.

So we went through our process, you might suspect, and it may have included some of these tower assets that traded. And you didn't see us in the announcements and that must mean that if we did take a look at them, our price versus quality equation didn't work for us.

Finally, on outdoor DAS, you spent more time in your prepared remarks than you have I think compared to years ago. And can you refresh us on what the current scope of your outdoor DAS business is in terms of number of markets or number of notes or what-not? And if you decided to grow that organically, how rapidly could that scale, given, I imagine a lot of the headcount that you would have to either outsource or add?

John, let me just put it in context and I'll use our indoor DAS business to provide that context. Between originally SpectraSite pre-merger and now the last three or four years with us, we've worked hard at this. We think it's another nice niche product and we've successfully grown it to about 2% of our tower revenue. Okay? And we're the industry leader in it. We have about, I think 160, 170 malls, casinos, hotels, et cetera, out there.

Outdoor DAS is just in the launch phase. Could it get to 2% of revenue over a three to five year period? Sure it could. We would like it to be able to do that.

Remember, when you're talking about AMP, $1.5 billion roughly of tower revenue, we've got 2% of that, it's $30 million, and we convert it 80% or 90% to EBITDA, it's a nice $20 million, $25 million EBITDA contribution. That would be a win for us. Would it get bigger than that? I'm not sure.

Great. Thank you.

And we're just ramping it up, John, the answer to the other half of your question.

Got you. Thank you.

You bet.

Your next question comes from the line of Clay Moran with Stanford Group.

Good morning. I have two questions. First, another question on your view of acquisitions. You talked about price quality equation, you also had talked about the benefits of scale. Just wondering if scale plays into quality, such that would you, all things being equal, enter markets where you have less scale today, more aggressively? And would you pay more for a sizable portfolio to gain scale? And then the second question is just operationally, if you adjust for a straight line revenue and for some of the new tower builds, which I would assume those are one tenant towers, what's the same tower revenue growth look like now? Thanks.

Okay. Clay, I'll take the first one. Jean will talk about same tower revenue numbers. The way we look at acquisitions is the asset, the purchase price, the growth opportunity, a number of other factors, as you suggested. And then, based on the market, there could be a strategic premium to that, but I can also add that that is a modest type of strategic premium.

We've done transactions in the past which were strategic, like SpectraSite, and that was done at 16 times tower cash flow and 18 times pro forma EBITDA. That would be a significant strategic premium, I think, from an analytical standpoint. But it was a strategic deal for us. So, yes, we would consider a strategic premium above and beyond our analytical answers, but it would not be a surprise to, I think, anyone if we were to do that because the size would be modest.

And would you prioritize your market opportunities, based on where your smallest to where you're currently the biggest? In other words, would India be the priority?

The priority is to add a number of projects over the next three to five years, Clay, and they could be domestic, they could be in India, they could be in a developed market, even, somewhere in Europe, Africa, Middle East or other parts of Asia, where we can get the returns we want in a reasonable amount of time with manageable risk. So there is no, again, easy sort of one sentence explanation as to how we make investment decisions. But I think that if you look at our track record, you could use the term thoughtful, disciplined and the ones that we did pull the trigger on I think have very outstanding results. Mexico, Brazil, SpectraSite are examples of that.

So it's a multi-faceted, thoughtful approach that's based on returns and the risk to get those and the contribution to the company. Okay? So Jean, I'll turn it over to you for the tower growth.

Sure. On the second quarter year-over-year same tower growth, without the effect of straight line, our growth was about 11% which was nearly all organic, a little less than 2% came from new assets. With including straight line, our growth was about 10% and most of that was organic also.

Okay. Thank you.

It was 8% on the straight line basis.

So 8% straight line, 10%, about, if you exclude straight line?

On a same tower basis, yes.

Okay. Thank you.

Your next question comes from the line of Simon Flannery with Morgan Stanley.

Okay. Thank you very much. Good morning. Can you talk a little bit about the trends between first half and second half? I think you made some comment that you wouldn't see the back half loading that you saw in 2007. Is that more an effect of '07 or is there something, some difference between the first half and second half in terms of customer behavior that you're expecting? And if you could update us also on the CFO search. Thanks.

Sure. For our guidance for the year, the 2007, especially in the fourth quarter, the fourth quarter of 2007 was tremendously strong for commenced business. Through the first half of the year, we've seen commenced business be strong and in the second quarter it was very strong. We're still anticipating the same levels as we had guided to originally in the second half of the year for commenced business. We just have adjusted the guidance for the effect of the timing on our run rates and the impact of that on the full year.

So basically, Simon, we see '08 as a level loaded year. Through the four quarters in '07 just had a ramp-up through the third and especially the fourth.

So consistent with what we've seen in Q2?

Well, we're not sure. We're saying that Q3 will be higher than Q2, like Q2 was higher than Q1, but we think it's more of a level loaded year across the four quarters in '08.

Okay.

All right? In regards to the CFO search, our public statement was that we would initiate a comprehensive search of talent, both inside and outside the company. That's getting ginned up now since we've completed our second quarter close, we've now had our earnings call here and we just finished a Board meeting over the last couple of days. So we'll be formally moving forward with that internal, external assessment and we'll let you, as investors, know how it comes out.

Any time line on that?

It's going to depend on the kind of talent we find and how long it takes to get an assessment of everyone. So I can't give you a specific time line but we are going to be expeditious about getting to it.

Thanks a lot.

At this point we'll take one more question.

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

Thanks, guys, for taking the question, just snuck it in. Two, if I could, guys. First, on tower build completions, could you talk us through the second half. Are we still looking for 300 to 400 new builds based on the first half run rate being well below that? And then the second, maybe Jim if I could just follow up real quick on the DAS opportunity, I think which has come up on the radar screen since guys like Metro and Leap have been using players like next G, are you out there in the market trying to compete head to head with those kinds of guys in the metropolitan builds and take share?

And are you going to be on the opposite side of the desk, fighting for some municipal rights of way and things like that? Or are you guys taking a much more gradual approach or going where other players aren't? If you could elaborate a little bit on what the game plan is in that neighborhood, it would be helpful. Thanks.

To address the first part of your question for CapEx for the remainder of the year, for new builds we are anticipating 300 to 400 for the remaining of the year -- for the full year, I'm sorry. That includes 200 towers that we are are planning to build in India, and it also includes towers that we're building in our Latin American region.

Okay. So it includes all -- including the US and all foreign. Okay.

Okay. I'll go ahead and move on to the DAS question there, David. Once we decide to move into a product line, you'll see us compete vigorously when we've made that decision. So I think our most potent weapon is to add the final component of a comprehensive network planning program to what we do today.

So, as you know, we've got very strong relationships with all the carriers, the emerging carriers as well as the existing national majors. We can now go to them with the capability of offering not only the tower portfolio that we have of 20,000 sites in the US, the 160 plus indoor DAS, the 2,000 roof tops that we've got on our book to market, and now also the final piece of the puzzle, which is outdoor DAS. So we've got a team dedicated to getting the rights of way. We're out getting our licenses and, in fact, have a number of those already under our belt, across the states. We're in municipalities getting full attachment rights, as we speak, and we're looking at some acquisitions as well.

So we're going to compete vigorously at this. We already have started and we just think it's another piece of the puzzle, although a niche piece, a small piece, that will help us drive growth with our overall customer relationships.

Great. Thanks, guys.

And Dave, just to clarify on the earlier part of your question. This is Michael. It's 300 to 400 in our existing markets,so that was US, Mexico and Brazil. India is in addition to that. So, in reality, we're guiding to about 500 to 600 tower builds for the full year.

Thanks helpful, thanks, guys.

All right. Okay. Thanks for joining us, everybody and appreciate your interest and questions today. Have a great week.

This concludes today's American Tower second quarter 2008 earnings conference call. You may now disconnect.