美國電塔 (AMT) 2009 Q2 法說會逐字稿

Good morning. Good morning, my name is Nakesha and I will be your conference operator. At this time I'd like to welcome everyone to the American Tower second quarter 2009 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions).

I will now turn the call over to Mr. Michael Powell, Vice President of investor relations. Sir, you may begin your conference.

Thank you, Nakesha. Good morning, everyone, and thank you for joining American Tower's conference call regarding our second quarter 2009 financial results. Please note that we've posted a brief presentation to accompany this morning's call on our website, which is www.americantower.com. If you haven't done so already you may want to download this presentation, as we will refer to it at various times during our prepared remarks. The agenda for this morning's call will be as follows. I will provide an introduction and highlight certain key metrics from our second quarter 2009 financial results. Following this Tom Bartlett, our Chief Financial Officer, will go over our second quarter results in detail and provide additional color on our 2009 outlook. And finally, he will turn things over to Jim Taiclet, our Chairman, President and Chief Executive Officer, who will then give closing remarks, including his current thoughts on key business trends. After these comments we will, of course, open up the call to your questions.

Before I begin I'd 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 2009 outlook, our soccer purchase program, foreign currency exchange rates, credit markets, 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 31, 2009 and in 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 on this call to reflect subsequent events or circumstances.

And with that I will begin the call and highlight some of our results. Please turn to slide four for a summary of our second quarter 2009 results compared against the same quarter in 2008. The Company reported total revenues of approximately $423 million, reflecting a 7.5% growth rate from the year-ago period. The Company's adjusted EBITDA for the quarter was approximately $287 million, which is a 5.5% increase from the prior-year period. Our operating income for the quarter increased 7.5% to approximately $166 million. And finally, our income from continuing operations was up 1.3% to approximately $51 million. Our income from continuing operations was negatively impacted by certain discreet items in the Company's tax provision, which resulted an effective tax rate for the quarter of approximately 50%. Please note that despite these discreet items we are still on plan for our outlook for income from continuing operation and we continue to project cash tax to be approximately $35 million to $40 million for the full-year 2009.

And with that I'll turn things over to Tom, who will discuss the results in more detail.

Thanks, Michael, and good morning, everyone. I'm pleased to report that American Tower continued its track record of consistently delivering strong revenue and cash flow growth during the second quarter of 2009. Please turn to slide five and let's review some of the highlights. Our core growth rate for tower remember knew, which excludes the impacts of foreign currency exchange rates fluctuations and straight-line lease accounting, was 9.5% relative to the second quarter of 2008. We also experienced nearly $11 million of sequential growth in our tower revenue from the first quarter of 2009, which reflects the impact of favorable exchange rate fluctuations, a welcomed change after experiencing large, negative impacts on our reported revenue from FX in the previous two quarters. We had strong free cash flow generation in the quarter of approximately $140 million, or about $0.34 per diluted share, which represents a 17% increase over the prior year and includes the impact of a 22% increase in CapEx.

As we seek to maximize returns on our invested capital we remain focused but disciplined as we evaluate growth opportunities. During the quarter, we completed the construction of 212 sites, which was approximately three times the number that we completed in the second quarter of 2008, and our development pipeline remains robust within the US and other markets. We closed the acquisition of XCEL Telecom in India, which added 1,657 towers to our portfolio. And subsequent to the end of the quarter, we purchased 230 sites in Brazil and we also redeployed over $60 million of our excess cash flow back to shareholders through our share repurchase program, which brings the total purchases over the past 12 months to nearly $0.5 billion.

Our balance sheet remains in a solid position, with net leverage at about 3.6 times, and nearly $870 million of available liquidity, which includes over $300 million of cash and cash equivalents and nearly $550 million of availability under our revolving credit facility. We also raised $300 million of 7.25% coupon notes due 2019 to extend out some of our 2012 maturities. Finally, we're reaffirming our previous, outlook with the exception of capital expenditures, which we are adjusting higher to reflect a greater pipeline of discretionary projects.

Turning to slide six you can see from the chart in the upper left-hand side of the slide that our top-line growth trends remain strong. In fact, our growth versus the year-ago period would have been 9.5% on a currency neutral basis, excluding the impacts of straight-line lease accounting. Put simply, the core top-line growth of our business on that base would have been approximately $13 million higher than our reported results. Additionally, I'd like to highlight that the vast majority of our growth was organic. At the same time, we are supplementing our same tower growth rates with new assets and we remain disciplined in seeking high-return growth opportunities that should drive additional shareholder value.

If you turn to slide seven you can see the same trends in adjusted EBITDA. Our core adjusted EBITDA growth was 8.2%, or about $7 million higher than our reported growth, and our adjusted EBITDA margin was 68%. I would also highlight that if we exclude the $3.1 million one-time item that we recorded in the second quarter of 2008 then our core adjusted EBITDA growth would have been in line with our core revenue growth of 9.5%. Also during the quarter we recorded additional bad debt expense to reserve for late payments we are experiencing, principally with one customer. While this customer's collections significantly improved in the second quarter and we expect them to improve again in the third quarter, we've applied our normal reserve policy to those older receivables to reflect the late payments. We remain committed to collecting these receivables and bringing the outstanding balances back to normal levels. To summarize, the core growth of our business is strong, even the current economic environment, and we anticipate continued strong cash flows.

As shown on slide eight we believe that our history of cost control remains intact. We continue to look for ways to improve efficiencies and leverage our scale to take cost out of the business. In fact, the current quarter's a great example, with rental and management segment expenses experiencing minimal increases, even on a currency neutral basis, while we've added approximately 2,700 new sites to our portfolio since the second quarter of 2008. Additionally, we're very mindful in keeping debt services costs under control as we manage our balance sheet. We demonstrated this in the second quarter as we were able to refinance our existing 7.5% notes to 2012 with new ten-year notes while maintaining the Company's average cost of debt of 5.7%. And finally, as profits continue to grow we're highly conscious of the value that we can create for our shareholders by minimizing our tax burden. With our capital investments, acquisitions and substantial tax shield, any practical adverse impact of taxes is well down the road. But I do want to highlight that we are analyzing and considering our options in advance to ensure that we'll be ready to undertake best course of action.

On slide nine you can see the trends in our CapEx. Our redevelopment CapEx continues to be lower in 2009 compared to the levels we experienced in 2008 and we expect this to continue for the remainder of 2009. Conversely, our discretionary CapEx have trended higher and we expect them to remain so for the balance of the year. This is purposeful as we have focused our development teams on finding high-return projects to invest in to grow the business. During the second quarter we spent approximately $36 million on new site development, completing the construction of 212 new sites with average day one unlevered returns of about 10% and strong prospects for growth as we add additional penance to those sites. In addition, we spent about $9 million on land purchases. I'd highlight that the Company's total return on invested capital as of the second quarter was approximately 10.5%.

Turning to slide 10, we've highlighted the trends of both cash provided by operating activities and our free cash flow. As shown on the right-hand side of the chart we generated nearly $140 million of free cash flow after interest, taxes, CapEx, excluding payments for acquisitions, representing an increase of about 12% from the year-ago period. We put all of that free cash flow to work in the second quarter, with a net $92 million spent on acquisitions and over$60 million spent on share repurchases.

Turning to slide11 I'd like to spend a few minutes discussing our progress and goals for international expansion as it complements our core US-based business. First, our Latin American operations, which accounts for 14% of our tower segment revenue, continued to benefit from strong wireless trends. The recent spectrum auction in Brazil and the long-anticipated auction in Mexico should provide our customers with the spectrum necessary to roll out 3G, driving strong demand for tower space. To address this demand we have significantly increased the size of our portfolio in Brazil, primarily through new site construction, and we believe that our operations in Mexico will benefit, as well, upon the completion of their auctions. Beyond Mexico and Brazil we continue to actively seek out new opportunities for expansion in Latin America.

Turning to our newest market, India now accounts for 1% of our tower segment revenue. As the fastest growing wireless market in the world, India continues to provide us with compelling opportunities for expansion. Since our initial build-to-suit agreement, which we entered into late 2008, we have completed the construction of over 200 sites and closed on the acquisition of XCEL Telecom. With improved scale and broader customer relationships our local team remains focused on expanding our portfolio through new site construction and acquisition, while also seeking to maximize the utilization of our existing portfolio. As illustrated in the pie chart on the left-hand side of the slide the US continues to generate the substantial majority of our tower segment revenue. We expect that our expansion into higher-growth international markets will serve to complement our future growth in the US and further diversify our sources of revenue.

Turning to slide 12, we ended the quarter with approximately $870 million of liquidity and a net leverage ratio of approximately 3.6 times. As is illustrated on the chart on the right-hand side of the slide, you can see that we've maintained our leverage within a band of three to five times for this entire period. In light of the macroeconomic environment, our desire to achieve an optimal weighted-average cost of capital and ensuring we maintain the flexibility to pursue acquisition opportunities and redeploy capital to shareholders, we have determined that this would be the range where we should maintain the balance sheet going forward. Consequently, we have reset our target net leverage ratio from the previous four to six times to a range of three to five times.

Finally, on slide 13 we've highlighted our 2009 outlook for revenue, adjusted EBITDA and cash provided by operating activities, which we are reaffirming. Our outlook reflects the foreign currency exchange rates that we experienced in the first half of 2009 and an assumption that we will experience average exchange rates 13.75 Mexican pesos to the dollar and two Brazilian reals to the US dollar during the second half of the year. Additionally, our outlook reflects the impact of the XCEL transaction and the 230 sites that we acquired in Brazil subsequent to the end of the quarter. At the mid point of our outlook and excluding the impact of FX and straight-line lease accounting the core growth of our rental and management segment revenue and adjusted EBITDA for the full year are now expected to be approximately 10%. This growth rate is slightly higher than our previous expectations for the full year and are also slightly higher than the growth rate that we experienced in the second quarter, primarily due to our recent acquisition in India. In addition, we adjusting our outlook for CapEx upwards a bit to reflect our expectation of higher levels of discretionary spending on land purchases for tower development.

In summary, we continue to believe that the fundamentals of our business are strong, and we are actively seeking ways to further redeploy our cash towards high-return investments to drive additional shareholder value over time. Also, on our investment pipeline we remain committed to redeploying our excess cash to investors through our share repurchase program approved by our board. We believe that our capital structure complements us well and will be a source of strength for the Company and its shareholders going forward.

Jim?

Thanks, Tom, and good morning, everyone. You just heard Tom provide a comprehensive review of our recent performance and I'm hopeful that you are finding the associated charts helpful. As a reminder, these are available on our website if you'd like to refer to them after the call. I'd like to spend my time with you today reiterating our aspirations for American Tower and describing our thinking behind some of the key decisions designed to help realize these aspirations. From our investor's perspective we aspire to be a Company that you believe consistently delivers strong performance, and that makes key decisions that inspire confidence in your eyes of strong growth prospects over a long-time horizon.

As Tom outlined in his remarks, our recent performance in revenue, adjusted EBITDA and cash from operations has demonstrated continued growth, even in a difficult economic and financial market environment. And for the full-year 2009 we today reaffirm our financial guidance. As indicated in this morning's press release, before accounting adjustments for straight line and foreign exchange and as Tom mentioned, our core growth at the mid point of guidance for full-year 2009 is expected to be 10% for revenue and above 10% for adjusted EBITDA, double-digit growth in a really tough year.

While we're very pleased with the performance of the business during the first half of 2009 and for the past number of years, the decisions we are making today will influence our ability to continue to deliver sustained growth over the years to come. Before specifying some of these key strategic operational and financial decisions and how we approach them it's important to first lay out for you our fundamental assumptions regrading the macro economy, the domestic and international wireless industry and the financial markets. Even under some of the more pessimistic economic forecasts the US GDP does not begin to recover until early to mid 2010 and that US unemployment may see 10% and potentially not decline until late 2010, it's our view that the wireless industry will continue to perform relatively well.

Industry trends in the US are still moving in a positive direction. Domestic subscribers, minutes of voice use and data penetration are increasing across the board. Some specific recent developments of note include the substantial increase of AT&T Mobility iPhone contracts in the second quarter, with 2.4 million activations, and AT&T also reporting that integrated device users generate nearly double the ARPU of non-integrated device subscribers. In Verizon Wireless data revenue was up 33% and data ARPU was up 23% in the second quarter over prior year. Clear is now actively planning its launch of the country's first mobile 4G speed service, including working closely with our teams in its launch markets to select tower sites for installation of equipment. Given the spectrum depth of Clear and its backing by Sprint Nextel and other members of its ownership consortium we anticipate a successful launch of their 4G product. In addition, Metro PCS, Leap Wireless and Sprint Nextel with its Boost product, as well as its recently announced acquisition of Virgin Mobile, are continuing to add subscribers to their unlimited voice offerings.

Outside of US we're hopeful that long-awaited Mexico spectrum auctions are getting closer to fruition. So until there is more clarity on the timing of the auctions leasing activity may be a bit slower than the norm in Mexico. In Brazil we still see a substantial business opportunity now and in the future. Our recent acquisition of 230 Towers in Brazil reflects our confidence in future growth in that country. India's wireless growth, as Tom suggested, remains extremely robust and with the closing of our acquisition of the nearly 1,700 towers of XCEL Communications we've established a viable platform of future revenue and asset growth in this key market.

Taking all this together, our perspective is that our wireless carrier customers across our US and international markets will continue to invest in their networks. This is our fundamental industry assumption as we work through the latter half of '09 and conduct our strategic and operational decision-making processes that'll affect our future. As to the state of the capital markets, we appreciate on one hand that there's been a meaningful recovery in the market for corporate debt, as evidenced by our recent issuance of $300 million worth of bonds at the holding company level. On the other hand, a number of factors have changed in the credit markets that lead us to believe that a strong balance sheet will be an important competitive advantage over the next number of years. First, in the corporate bond market credit quality is being rewarded with lower cost of debt. Second, the availability of bank credit is constrained versus the 2006-2007 timeframe, and here also, credit quality has become a far more important factor. Third, the securitization market for commercial mortgage-backed securities has contracted considerably. It appears to be able to support only the highest-rated asset tranches at reduced leverage multiples.

Given the massive disruptions in the financial markets in late 2008 and the ongoing recession, we believe that all three of the conditions mentioned, a quality-oriented bond market, constrained bank lending and a (inaudible) securitization and financing will prevail for some time. Nevertheless, we at American Tower remain quite confident that we can effectively and efficiently secure financing for our Company, both now and down the road, given our strong cash generation, relatively low financial leverage and solid standing in the capital markets. So these of our fundamental assumptions of the near- term business environment; a relatively unsettled climate until some level of recovery in 2010, a wireless industry that continues to be successful and grow in spite of these recessionary conditions, and challenging capital markets, though open to companies with strong credit quality, such as American Tower. These assumptions in turn influence our process of decision making in a number of key areas and I'll offer a few by way of example with you today before we take questions.

On the strategic dimension, we're committed to making go no go decisions on a number of opportunities to grow our asset base in both the US and select international markets. First and foremost, each growth initiative is based on the tower leasing business model; that is build or buy communications infrastructure asset that can be leased to multiple customers. We also intend to expand our return on invested capital over time. So when conducting valuations of assets to acquire or in making a determination to build more towers or other assets, we believe we can estimate the revenue growth opportunity and cost and CapEx requirements quite well given our experience. So in our process, it almost always comes down to entry price, and that's where we'll always remain highly disciplined when it comes to purchase price or build cost, because at the end of the day that initial decision on entry price will make or break your return on investment. As noted, we have a number of assessments of assets to purchase and new markets to consider entering at any given time, including now, and using the decision criteria I've been describing, we've acted on just such an opportunity in the acquisition of Towers in Brazil that we announced today.

With respect to India, our decision process culminated in the XCEL acquisition. We're highly confident that with this platform in place we can build additional sites in India so that in a reasonable amount of time the revenue contribution from India can reach the magnitude of our current Brazil or Mexico business, so on the order of 5% to 10% of Company revenue over a few years. If we find an additional acquisition or venture opportunity that meets our strict return criteria, we'd consider an additional transaction there and we're still very open to such opportunities in India. Finally, in the broader context of our strategic decision-making process we do not expect our collective international revenue contribution to exceed 25% to 30% of total revenues. This was roughly the international portion of our revenues prior to the merger with SpectraSite.

On the financial front we made the decision as a Company to adjust our target leverage ratio to three to five times adjusted EBITDA. There are a number of factors that entered into this decision. First is our assumption set regarding the expected state of the capital markets, a state that further rewards companies with a strong financial position that can successfully weather the complete range of business and credit cycles. Second is our most recent round of calculations regarding most efficient cost of capital for the Company, which we believe to be in the three to five times range. And the third factor is the growing magnitude of our adjusted EBITDA and cash from operations, so using a modified ratio of three to five times along with an increasing base of adjusted EBITDA, we believe that we'll be able to finance our ongoing operations, our anticipated growth initiatives and our share repurchase program. In addition, should a compelling strategic opportunity present itself, that would necessitate going outside the leverage range, we would entertain doing just that. Of course, the opportunity would have to be at the entry price required to achieve the targeted return, but we would not shy away from increasing leverage to conduct such a transaction.

Finally I'll complete my remarks by highlighting the elements of our decision to increase our rate of share repurchase that was taken a little over halfway through Q2. First, during that timeframe we obtained more solid visibility to our own Company's access to capital, along with the overall reduction of uncertainty in the broader debt markets. We also updated our expectation of cash requirements and funding availability for the strategic initiatives moving through our investment committee pipeline. As noted in our press release, as of July 24th we'd purchased approximately $38 million of AMT stock subsequent to the end of the second quarter and we'll reassess our repurchase rate on an ongoing basis, taking our cash needs from anticipated growth investments and our access to capital into account along the way. Again, our goals as a management team are to keep delivering strong performance in the near term while making strategic operational and financial decisions that will set the stage for continued growth with excellent returns and margins over the long term. With each key decision we take into account not only immediate effects by a five-year to ten-year time horizon, as well.

So thanks for joining us on the call today,we hope you're all having an enjoyable summer and looking forward to the home stretch of the baseball season, when the Red Sox will surely overtake the Yankees as they run out gas in August and September. Tom and I will be happy to take your questions now.

(Operator Instructions). Your first question's from the line of Jonathan Atkin with RBC Capital Markets.

Yes, good morning. I wondered if you could maybe just amplify a little bit your views on the regulatory environment in Latin America and in India as pertains to spectrum and any other events that might foster additional network buildout?

Sure, Jon, it's Jim. First of all, in Latin America Brazil's already out of the gate and I'd say in all three countries you mentioned there's governments in place that see the benefit of a competitive wireless market with as much spectrum depth for the carriers as possible to deliver new services to their people. In Brazil, they're well on their way to providing that spectrum. It's being utilized by a number of carriers. Spectrum auctions have also increased the availability of wireless service in the northeast part of the country, which is somewhat less developed than the Sol Paulo and Rio areas, so I think it's a government that wants people to get service and to get it with a choice of vendors.

Mexico is a little more concentrated as far as carrier market share as you know with Telcel at 70+% market share and I think the government there is trying to work its way through to creating a competitive environment for the additional carriers to be more competitive, frankly, and it's getting there. [Topatel] has now set standards for an auction that now has to wind its way through a few more regulatory agencies for final approval, and we hope that either late this year or early next year that that auction will be launched. But again, I think the government wants its citizenry to have first-class wireless communication capabilities with multiple choices. And in fact, in both these countries and in India -- which I'll get to here in a second -- wireless is essentially leapfrogging what little wireline infrastructure those countries have, so there's a real government interest, I think, in all three places to get people communication service on a competitive basis.

In India I would emphasize the government is very active in trying to accomplish just that. Not only do they release spectrum as soon as they think they reasonably can, but they do it in a way that encourages more carriers rather than less to get into the market and that's happening right now. So I would say the regulatory environment in all three places is moving in the right direction. Mexico may be at a little bit slower pace than the other two. but again, over a five to ten-year time horizon, which is how we look at things, at the end of the day we think there's going to be high penetration in all these countries and wireless will be the predominant way of communicating in those countries and we're going to be a big part of it.

Great, thank you very much.

Sure.

Your next question's from the line of David Barden with Banc of America.

Hey, guys, it's actually Steven Douglas calling in for David. Two questions, if I could. There've been some recent reports (inaudible) in discussion to buy some larger tower portfolios there. I know you generally don't address this kind of speculation, but I was wondering if you could just remind us of some of the dynamics of the Indian tower market and how the economics differ from the US? And I guess number two, the SG&A was up pretty significantly year over year even stripping out some of the one-time stuff and I was wondering if you had anything there? Thanks.

Maybe I can cover the SG&A then Jim can cover the discussions on India. With regard to SG&A it's actually quite simple. As you know, we acquired XCEL Telecom in the second quarter and the SG&A will reflect some of the increase as a result of the new businesses and new towers that we built on. And in addition it includes the bad debt expense that I did talk about. And on a year-over-year basis, remember in the second quarter of '08 we had a $3.1 million reversal in that particular quarter so the variance on a Q-over-Q basis looks a little bit higher than on a normal basis.

Right. And overall, Steven, on the core run rate of SG&A it's within about 1% of last year if you take all of the one-time things and the acquisitions out.

Okay.

Then on the India question, the dynamics there are terrific, it's the fastest wireless growth market in the world. There's over a billion people, very few of which have wireline or wireless service right now. I think they're at about 20 or so percent penetration and there's a long way to go in that country and it'll take years to get it done and we want to be, again, part of that. As far as the economics, they actually are fairly similar at the tower level basis to the US where if you do a build-to-suit tower the returns are going look the same, but how you get there is different. The build-to cost in India in the ground base tower, we've gotten down to $60,000 a site. In the US it's about $225,000 a site.

That lower build cost -- or entry cost, as I talked about earlier in the call, supports a lower revenue base and then the cost of operations is actually lower, as well,, and that's how you can would, your way through to similar economics with the US. So your first tenant's going to get you the mid to high single-digit return on the tower, your second tenant's going to get you to the mid teens, and the third and fourth are the home runs. So, we like the foundation of the business there. We've got enough scale to build on now with the XCEL acquisition and we're going to profitably grow our way into the country as a complement to our US business.

All right, thanks, guys.

Yes.

Your next question's from the line of Jason Armstrong with Goldman Sachs.

This is Scott Malat sitting in for Jason. I had a question on just municipalities in the US and some concerns that budget short falls could lead communities to rethink the approvals of new towers and maybe be more lenient in order to bring funds. Can you take us though any of this, is there any evidence of this and in your experience how do you think about prospects for this? And then one other follow-up question on India. I know there's a lot given its 1% of revenues, but just as you look at competition in India it seemed to make sense to look at a suburban or rural versus an urban tower. That seemed to make sense in terms of limiting competitions. In other words, as you look through recent potential targets in India it does look like some of the potential opportunities have a bit more urban towers. Can you help us think about this factor again when you evaluate the opportunities to just how is important -- how important is it to have urban versus suburban and rural makeup? Thanks so much.

Yes, Scott. In the US zoning, we don't really see being materially affected by the economy at all. Zoning is -- it's not only local, it's sub-local, it's neighborhood level and the fact there's a recession going on or not does not necessarily impact people's views of their very neighborhood-like environment. So I don't really see a decline in zoning barriers into new towers yet. On the India front, we've purposely done a very quantitative differentiation among states in the country, cities and areas within states to maximize our ability to build towers and acquire towers that won't have direct competitors nearby. That's been the core of our entry strategy there. And as we grow, that'll continue to be our theme, and along with acquisitions we may or may not do could be municipal sites or urban sites, but our focus of our build-to-suit programs and even of our acquisitions it's going to be kind of a hit them where they ain't strategy and get to places where we can lease up the tower with three or four or five carriers at the end of the day, hopefully.

All right. Thanks.

Your next question's from the line of Chris Larsen with Piper Jaffray.

Thanks and good morning. Fist, question for Tom. You addressed this, but I just wanted to clarify, should we expect your share repurchases to be a little bit more in line with the free cash flow generation since essentially you're right on top of your target leverage? Secondly, have you gotten any more specifications from the carriers? Particularly Verizon and Metro PCS seem to be moving close on real spending on LTE and I wondered, are you getting a sense for what that mean in terms of revenues? And then lastly, for Jim, just some thoughts on Boston's pen -- their bullpen, especially last night, they gave up a three-run lead in the ninth and as such, is the higher offer for Ron Halliday justified and do you still feel that they'll be ahead of the Sox if they don't get Halliday at the end of the year?

Chris, before we get into the Sox questions let me adjust your -- now I totally forget what your question was. (LAUGHTER)

The share repurchase in line with --

Share, repurchase, yes. As you know, we don't provide guidance, if you will, on our share repurchase program. I think as Jim and I both mentioned, we'll continue to evaluate the pipeline that we have. As Jim also mentioned, we've been pretty aggressive even in the first half of July and -- or first half of July in terms of our repurchases so -- in the third quarter. So I think that we'll continue along the same path, we'll to evaluate the pipeline. As I mentioned, we're very comfortable with the range that we're in right now, and we'll see at the end of the third quarter.

On the LTE front these are very early days. We're doing trials with Verizon already on some of our towers. They're trying, as all of the carriers are, trying to figure out what's the most effective way to deploy this. The best way at LTE at this stage in its development is it's going to help lengthen and strengthen our revenue growth at American Tower and really for the tower industry that revenue growth opportunity over the next few years. And initially it's be some amendments, some may be small, some may be more robust, but it 'll ramp up over a period of two, three, four years, and it'll be a meaningful source of continued growth for the tower industry. Then finally on the baseball question, with specific deals and counterparties we don't talk about specific trades, but (LAUGHTER) all I know is it's an aging team in pinstripes that may not make it all the way through a long season.

Excellent. Thank you.

All right, guy.

Your next question's from the line of Batya Levi with UBS.

Okay, thanks a lot. I just had two questions, maybe one more follow up on India. The press is suggesting that you may consider to finance a potential deal, maybe with Aircell, with equity. I was wondering to you could give more color on how would you think of issuing stock versus increasing your leverage higher than the new target range you laid out? Second question, on the tower lease up, can you talk a little more about the pace you're expecting for the second half? Sprint just lowered its CapEx target for 2009, T-Mobile appears to be spending a bit less, but on the contrary you have higher iPhone usage and more activity from Clearwire, so should we expect things to accelerate a bit in the second half versus the first half? Thanks.

Sure. In India -- again, we don't comment on individual transactions and we definitely don't comment on rumors generated in the Indian press, however it's great to have good currency. Our equity's a good currency. Our ability to access the capital markets at reasonable cost is a very good currency for us. So again, when it comes to a transaction and we like the entry price and the prospects of growth, we'll be able to get it done with either cash or stock and we'll have both at our disposal. Secondly, the pace of lease up in the US, second half should be at or above what the first half was for this year. And there are a lot of moving parts, as you said, but there's a lot of underlying trends that are going to require continued investment in networks and so that's how we think it'll play out.

And I might just add to Jim's comment that with the acquisition and with the development that we've had in new sites in the first half of the year we should see the benefits starting to kick in really in the second half of the year.

Thanks. And maybe just one follow up on the Brazilian tower acquisition, can you give us a sense of the economics there, how many tenants per tower you've got and what are some of the revenue and margins versus the rest of the portfolio there?

Well, we're just getting into closing on that portfolio, but as I said earlier, when we use a risk-adjusted return criteria of mid-teens for a country like Brazil, taking into account its sovereign debt rate, et cetera, you can be assured that our analysis is that we're going to attain that in the first two or three years of us managing those towers. The purchase price for a portfolio like that in a country like Brazil's a couple hundred thousand dollars. It costs $125,000 to build and you can then infer that there's a pretty good rate co-lo rate already on those sites as well.

Okay, thanks a lot.

Sure.

Your next question's from the line of Gray Powell with Wells Fargo.

Good morning, everyone. Thanks for taking the questions,, I just had a few. Kind of just at a big picture level, how much can you supplement your organic free cash flow per share growth by reinvesting in your business, whether it's buying back shares or buying -- or building towers?

I think the way you need to think about that is that if you take a look at our existing run rates, we've been very consistent in terms of lease ups on our existing portfolio. We're complementing that with, obviously,new builds and we've actually, as I mentioned, increased our CapEx target for the year to reflect that we have even a stronger pipeline of new opportunities or increasing our overall site development up to the 900 to 1,000, if you will, for the year. So I would say that you would continue to see growth coming from the new builds. We have, as we mentioned before, a day one return on investment in those new builds of at least 10%, and with the continued lease-up rates and that, we really see strong growth coming from the future. I think we should be rather bullish in terms of the incrementally cash flow yield that'll be coming from the new builds.

I would just add to that, Gray, that the big pieces of getting to free cash flow per share we feel very good about every element. One is revenue and EBITDA growth, which on a core basis for us this year is going to be 10%, so that's a great starting with a really strong business. And then when you go beyond that and say, well, gee, how do I get the free cash flow from there, you need to look at maintenance and augmentation CapEx, which for us is very controllable, all right? Then interest costs, which, again, shouldn't dramatically increase over the next few years because of our strong balance sheet. So then we have that cash from operations, stable CapEx, stable interest costs and then we can redeploy that excess cash, as Tom has been talking about, whether it's in new investments that'll add to the EBITDA line or it's repurchasing shares that'll take the share count down. We feel really good to have all those levers at our disposal because of the operation of the business and the stability of our interest costs over time.

Okay, that makes sense. And then just more of a detail question and I definitely realize that that revenue guidance is unchanged, can you just walk us through the moving parts? How much the XCEL Telecom deal adds to fiscal 2009 and then the hit associated with taking a more conservative foreign exchange rate assumption? And by my math it actually looks like you left yourself a bit of a cushion there, do you think you could just walk us through that?

Yes, Gray, just a couple thoughts there. I think with regards to the FX it's probably doubled from what we originally thought in terms of the impact of FX in the year and who knows what the ending peso rate or real rate's going to be but hopefully there's a little cushion there. And with regards to ExCEl, I think the way to think about, while it's a terrific foundation for to us to grow our business in India it still represents less than 1% of our revenue. It will, obviously, help, no doubt about it, in 2009, but it still represents relatively a significant piece. I think what we're really excited about is the opportunity for development, not just in India but also in Brazil and the United States and Mexico and I think the new bills and the incremental CapEx that we're putting in those markets is going to give us some strong growth, for not only 2009 but many years to come.

Okay, and then just last question, I know you touched on this already, can you talk about leasing demand trends in Mexico and Brazil and organic revenue growth there on a local currency basis relative to what you're seeing in the US?

Sure, Both are still growing organically. Mexico, as I said in my remarks, is scaled back a little bit in anticipation of the spectrum auctions. The carriers don't know who's going to get what spectrum or not and I think they're [husbanding] their plans a little bit until they have that knowledge. But in Brazil we've been seeing organic growth rates at or above the standard US over the last couple of years, and we've had the opportunity to build a lot of towers with solid anchor tenants and really good day-one returns. So they're both into positive territories regards to organic growth. Brazil is proceeding at pace and I think Mexico's going to step up its pace after the auction gets announced and spectrum is awarded.

Okay, so Brazil's above the US and Mexico's it's maybe in line or slightly lower, but you expect it to improve?

[If I had to guess[ I'd say Brazil at or above US standard levels of growth and Mexico slightly below at the moment but should get back up to equal or greater.

Okay. Thank you very much. Really appreciate it.

Sure.

Thanks, Greg.

Your next question's from the line of [Ric Racey] with Raymond James.

Yes, good morning, guys. How you doing?

Good morning.

We might not forget the little team down in Tampa, also, as we go through all of the baseball stories. Also, apologize if these have been asked, trying to still clone myself but it hasn't worked yet. In Latin America, you mentioned you bought towers in Brazil, did you mention who they came from and what the price was? And on the bad debt, about $5 million charged in the quarter, did you mention which carrier that was from? Was that from Mexico?

Yes. Hey, Rick, on Brazil we haven't specified the counterparties, it's a regional carrier in Brazil and priced around $200,000 a tower with a nice co-lo rate against that, so that's the answer there. Tom?

Yes, and with regards to the bad debt we did not mention who the customer was. We've talked about it candidly in the past being an international customer and I'll leave it at that. But as I said, we really are excited about the fact that the payments have been picked significantly in the second quarter and the first quarter and we would expect them to continually pick up in the third and the fourth quarter.

Okay. And then on the tax item, you mentioned in the press release that there were some discreet items that had caused book taxes to 50% in the quarter but you expect back down to the low 40% for the year. Was there any more color on that all, so can you update us open what kind of cash taxes you saw and what your NOL position is?

On the 50% ETR we just closed out our 2004-2005 audit so upon closing out that audit in terms of agreeing with the IRS and certain discreet items, that's really what kicked up the rate in the second quarter and that's why we would expect for the full year to be in the low 40s, if you will, in terms of the ETR that you should be thinking about for the full year. The sec -- what was second or the third question you had?

Cash taxes and NOLs.

Yes, cash taxes is around 12 -- 10%, 12%. We would expect that to continue. I think the cash taxes for 2009 will be consistent with 2008. And the NOLs right now are about $2 billion all in, so we would expect them to be able to take care of us -- or our tax provision, if you will -- cash taxes through 2012 kind of a timeframe.

Okay. And so just to close on the taxes item, so the 50% ETR for the quarter and low 40's for the year really had no affect on cash taxes, because --?

No it did not. That's exactly right.

Yes, that's the accounting calculation, Ric. You're right on the money there.

Okay. And then the final question is, Jim, I think you just mentioned interest expense not go up appreciably, kind of stable over the next few years, but is there an opportunity maybe to bring down some interest rate, given the low leverage, investment grade just (inaudible) the balance sheet structure?.

There could be, we'll work our way through over the next couple of years. We've got a very nice securitization in place, it's not due until 2014. I think it's 5.61% blended interest rate there so I think that'll be a little tough to beat. On the bond side, we're definitely going to try to work that cost down.

Thanks, guys.

You bet.

Nakesha , this is Michael, I think we have time for one

Okay. Your final question is from the line of Simon Flannery with Morgan Stanley.

Hi, it's Sean in on behalf of Simon. I just -- what level of leasing activity do you expect from Sprint for the rest of the year and into 2010, and do you believe that after the close of the outsourcing agreement with Ericsson that Sprint will pick up activity?

Sure, Sean, we had announced a couple of calls ago that we had Sprint Nextel in the 2009 guidance for almost no incremental new business and we haven't changed through the course of the year. So while Sprint Nextel isn't spending CapEx, we anticipated that and didn't include it in our planning.

Okay. Then on the Ericsson?

To us, I think it's irrelevant. It's a matter of insourcing or outsourcing heads and maintenance functions for the network, which really don't affect leasing or decisions to expand or invest in the network.

Okay. Thanks.

Sure.

And that will be it. Do you have any concluding remarks?

No, just thanks, again, for everybody joining the call. We're going to get back to work and try to keep growing this business on your behalf and we appreciate you joining us this morning. Thanks.

This concludes today's conference, you may now disconnect.