美國電塔 (AMT) 2010 Q2 法說會逐字稿

Good morning. I will be your operator. At this time, I would like to welcome everyone to the American Tower 2Q 2010 earnings call. All lines have been placed on mute to prevent background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you. Ms. Leah Stearns, you may begin.

Thank you and good morning. Thank you for joining American Tower's conference call regarding our second-quarter 2010 financial results. Please note that we have posted a brief presentation to accompany this morning's call on our website at www.americantower.com. If you haven't done so already you may want to download the presentation, as we will refer to it at various times throughout our prepared remarks. The agenda for this morning's call will be as follows. I will provide a brief introduction and highlight certain key metrics from second-quarter 2010 financial results. Following this Tom Bartlett, our Executive Vice President and Chief Financial Officer will go over our financial results and provide an additional overview of our expectations for 2010. And finally, Jim Taiclet, our Chairman, President and Chief Executive Officer, will give closing remarks, including his current thoughts on key industry trends.

After these comments we will open up the call for your questions. To maximize participation during the Q&A portion of the call we kindly ask that you limit your questions to no more than two parts. If you do have more than two questions, or if you think of additional questions, feel free to add yourself back to the queue, and we'll do our best to answer as many questions as possible in the allotted time before.

Before I begin I would like to remind that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include those regarding our 2010 outlook, our stock repurchase program, our pending acquisition of Essar Telecom Infrastructure Private Limit, 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, 2010, and in our other filings with the SEC. We urge to you consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances.

And with that I would like to begin the call with some highlights from our second-quarter 2010 results. Please turn to slide four of the presentation, which provides a summary of our second-quarter 2010 results compared against the year-ago period. We reported total revenues of approximately $470 million, reflecting growth of 11% from the year-ago period. Tom will provide additional color on the core growth of our Rental and Management segment, which excludes the impact of foreign currency fluctuation and straight-line lease accounting. Our adjusted EBITDA for the quarter was approximately $321 million, which is an 11.7% increase from the year-ago period. Additionally, our operating income for the quarter increased over 13% to nearly $189 million. Income from continuing operations included income from non-controlling -- including income from non-controlling interests was approximately $100 million, or $0.25 per basic and diluted common share attributable to American Tower Corporation.

During the quarter our effective tax rate was 23.3%, which reflects a year-over-year decline of over 17%, and was primarily the result of two items, including a foreign earnings and profits study, which created a 2.8% benefit related to the US taxable income that has been predicated on original earnings profit estimates, and a 13.3% benefit triggered by the reassessment of the realizability of certain acquired NOLs based on formal studies that were completed during the quarter. Both items were discrete to the quarter, and for full-year 2010 we currently anticipate our effective tax rate will be approximately 33%.

And now I'd like to turn the call over to Tom, who will discuss our results in more detail.

Thanks, Leah, and good morning, everyone. I'm pleased to report that our second-quarter 2010 results came in right on plan, as we continued to execute on our strategic priorities for the year. If you'll please turn to slide five I'd like to begin with some highlights from our Rental and Management segment. Overall, we reported Rental and Management segment revenue growth of 12.2%. Excluding the impact of foreign currency fluctuations and straight-line lease accounting, our core growth was 8.6% relative to the second quarter of 2009, with foreign exchange positively impacting our reported results by 1.4% and straight-line positively impacting our reported results by 2.2%. Additionally and as I highlighted on our last call, three discrete items will continue to impact our results during 2010. These items include the impact of broadcast analog churn, the completion of a customer take-or-pay agreement, and a customer settlement, which combined negatively impacted our reported revenue by about 1.7%. So excluding the impact of these items our core growth would have been over 10%.

In the US, core growth for tower revenue was 8.4% excluding the impact of these discrete items. During the quarter we continued to experience a strong leasing environment with signed new business up by approximately 10% and commence new business up approximately 25% relative to the same quarter of 2009. Our solid performance in the US was complimented by over a 21% core growth in revenues from our international markets. And finally, our results include a year-over-year increase of approximately $9.8 million in straight-line revenue, which reflect a contract extension with one of our major US customers from the beginning of 2010, which we highlighted for you during our first-quarter call. And the impact of a new agreement with our largest customer in Latin America, which contributed to the year-over-year increase and was the primary driver of the sequential increase in straight-line revenue for the quarter of about $5.3 million.

Turning to slide six, our reported adjusted EBITDA growth relative to the second quarter of 2009 was 11.7%, with core growth of 7.2% on a currency neutral basis and excluding the impacts of straight-line lease accounting. In addition, the impact of our discrete 2010 items, which I mentioned earlier, negatively impacted adjusted EBITDA growth by about 2.4%. So excluding these items adjusted EBITDA core growth would have been about 9.6%. During the quarter our adjusted EBITDA margin was 68%. Our adjusted EBITDA conversion rate was about 72%, which was a direct result of the following; some pass-through revenue and expense related to our international markets negatively impacted our conversion rate by over 10%, and additionally since the beginning of the second quarter of 2009 we've added over 4,100 new sites to our portfolio, which currently have gross margins of about 57% due to their average tenancy of approximately 1.3. As we continue to increase the utilization of these sites, we expect their margins will approach our legacy portfolio levels.

Excluding the impact of both pass-through revenue and the new sites we have added over the past 12 months, our EBITDA conversion rate would have been in excess of 90%. In addition, during 2010 we've continued to make selective investments in our regional overhead systems and corporate functions. We've made substantial progress on our corporate initiatives year to date and continue to focus on our key projects, which include our on-going due diligence on a possible REIT conversion, as well as IT projects, such as their global implementation of common financial systems. Please note, corporate expense for the second quarter 2010 also included about $1 million of accrued severance costs.

As outlined in slide seven, during the second quarter we continued our disciplined approach to capital allocation. Specifically, we spent about $77.5 million on total capital expenditures, including $47 million of spending on discretionary capital projects, primarily related to the completion of 237 new sites, and about $18 million on land purchases. In addition, we completed the acquisition of 36 sites in the United States and 113 sites in Chile for a total of $44 million. And finally, rounding out our capital deployment for the quarter and consistent with our previously-announced plans to increase the pacing of our share repurchase program, we nearly tripled our buyback pacing, and accordingly spent approximately $145 million to repurchase 3.5 million shares during the second quarter.

I'd like to spend a moment on our recent launch of operations in Chile. A few weeks ago we issued a press release outlining our agreement to purchase approximately 287 sites from Telefonica, closing on 113 sites during the quarter. We are excited about our development team's recent success, and I'd like to highlight for you some of the key reasons for our investment and expansion into Chile. First, Chile currently has one of the strongest macroeconomic environments in Latin America, which should provide with us a solid foundation in which to invest. Second, Chile has a vibrant and competitive wireless market where customers in our existing Latin-American markets already conduct business today. Third, a recent spectrum auction placed 3G spectrum into the hands of a new entrant, VTR, and an existing incumbent, Nextel International, both of which are expected to deploy a meaningful amount of capital to build nationwide 3G networks in Chile over the next couple of years. And finally, the government has already indicated its interest in auctioning additional spectrum for 4G deployments, possibly in late 2011, which would provide further opportunities for organic growth.

Simply put, we are excited about our new market and expect that, through new site construction and select acquisitions to further build our portfolio, our expansion into Chile will over time provide a nice compliment to our existing Latin-American markets, with return hurdles that are consistent with our other Latin-American markets. We also are continuing to pursue additional expansion opportunities in other complimentary Latin-American markets.

Turning to slide 8, we delivered approximately 23% growth in both recurring free cash flow and recurring free cash flow per share in the quarter versus the same period last year. This growth was primarily driven by the following; our core growth in adjusted EBITDA; lower redevelopment and maintenance capital spending; and an income tax refund of approximately $9 million, which we received during the second quarter. Our year-to-date performance in recurring free cash flow has exceeded our expectations. We continue, though, to expect mid-teen annual growth in recurring free cash flow for the year, largely due to the increased interest expense resulting from the planned acquisition of the towers from Essar. These trends, along with our recent investments in attractive, discretionary projects, including the acquisitions we've made over the past five quarters, have resulted in the consistent improvement in our return on invested capital, which today stands at 11.3%.

Turning to slide nine, as a result of our performance being on plan during the first half of 2010, our recent and pending acquisitions year-to-date customer contract extensions, and our new agreement with our largest customer in Latin America, we've updated our 2010 outlook. A few of the highlights include we've increased the midpoint of our full-year Rental and Management segment revenue outlook by $40 million and consequently, our range to $1.85 billion to $1.88 billion, which now represents year-over-year growth of approximately 11% to 13%. We've increased the midpoint of our full-year adjusted EBITDA outlook by $20 million, and accordingly our range to $1.28 billion to $1.31 billion, which now represents year-over-year growth of 8% to 11%. And finally, we've increased the midpoint of our full-year cash provided by operating activities outlook by $10 million, and its corresponding range to $960 million to $990 million, which now represents an increase of 14% to 18% over 2009. Please note. Our outlook estimates reflect our acquisitions during the quarter, as well as the 63 communication tower sites in the United States we most recently purchased in July, and the Company's pending acquisition of approximately 450 communication tower sites from Essar Telecom, which we expect will close during the quarter.

Turning to slide ten, I'd like to discuss the key drivers that have resulted in our increase in 2010 outlook for Rental and Management segment revenue. As I mentioned previously, we are increasing our expectations for our Rental and Management segment revenue by $40 million at the midpoint, which is primarily a result of four key items; the core business continues to perform in line with plan; our recent and pending acquisitions, which includes our acquisition of Essar towers in India, which we will expect will close during the quarter; customer contract extensions, primarily in the US; and a new agreement with our largest customer in Latin America, which was finalized during the second quarter.

Turning to slide 11 we've also increased our 2010 outlook for adjusted EBITDA by $20 million at the midpoint, which, in addition to the items discussed with respect to revenue, is a result of the lower adjusted EBITDA margins on our recently-completed or pending acquisitions, which is primarily a result of our acquisition in India, or approximately one-third of the current revenue relates to pass-through fuel costs. As a result we currently estimate we'll have initial adjusted EBITDA margins of approximately 40% to 45%, and approximately $5 million of additional cost, primarily as a result of greater than originally anticipated development opportunities, as our pipeline for opportunities continues to grow.

Turning to slide 12, I'd like to highlight our current investment profile for 2010. Through the combination of our outlook for cash provided by operations, and incremental borrowing required to end the year at our targeted 3.5 times net debt to last 12 months adjusted EBITDA we will have access to over $1.5 billion of capital to deploy in 2010. Consistent with our capital allocation strategy we will first seek to invest this cash back into our current portfolio through our annual capital plan, which is currently expected to be between $300 million to $350 million. This includes the expected construction of between 1,200 and 1,600 new sites, and the purchase of approximately $50 million of land under our towers. In addition to CapEx we will seek to add new assets to our portfolio for pursuing select acquisitions, which together with pending acquisitions accounts for over 16 -- $600 million year to date and includes approximately $430 million from our pending acquisition of roughly 4,450 sites in India from Essar.

Finally, we continue to expect that we will return our excess capital to shareholders via our stock repurchase program. During the second quarter and consistent with our previous statements, we increased the pacing of our share repurchase program and accordingly repurchased approximately 3.5 million shares for about $145 million. Year to date we have spent approximately $196 million on our share repurchase program and will manage the pacing of the program during the third quarter to continue to move our net leverage towards our year-end target of 3.5 times net debt to last 12 months adjusted EBITDA. With our target of 3.5 times net debt as of year end we currently estimate that our remaining capacity for investment in 2010 is about $530 million, which we expect will be allocated consistent with our capital allocation strategy.

And turning to slide 13, and in conclusion, I'd like to summarize a few key take-aways for the quarter. Our second-quarter results were right on plan, with solid performance supported by year-over-year improvements in both signed and commenced new business. We remained disciplined and consistent with respect to our investments and capitol allocation strategy. In the second quarter we added 386 sites to our portfolio, primarily in the US, India, and Chile. In addition, excluding the Essar acquisition, we have added over 4,300 new sites to our portfolio since the beginning of 2009. We have received all necessary regulatory approvals for our acquisition of Essar Telecom and expect that the transaction will close during the third quarter. Our key focus in India post-closing will be on integration and driving strong organic growth on our existing tower sites. We continue to seek opportunities to expand our presence, including those in which we currently serve. As we've previously mentioned, our first priority is to invest in the United States. However, we also have teams in various geographies, including Latin America, Asia, and EMEA, who are working with counterparties to explore acquisitions or build-to-suit opportunities.

With respect to our balance sheet we currently have approximately $925 million of liquidity, and as a result, we expect we will continue to utilize a portion of our current financial capacity to continue the pacing of our share repurchase program as we work our way towards our year-end target of 3.5 times. Subsequent to the end of the second quarter we drew down approximately $350 million of our senior unsecured revolving credit facility, which we will use to fund our cash obligations in connection with our acquisition of Essar's towers. Pro forma for acquisition our 2Q 2010 net debt to EBITDA was 3.3 times. And finally, we will continue to monitor the capital markets to seek opportunistic transactions that lower our cost of debt and ladder and extend our maturities.

With that I'd like to turn the call over to Jim.

Thanks, Tom, and good morning to everyone joining us on the call today. Our strong-second quarter results show the tower business model is thriving, as the wireless communications industry transitions to delivering true broadband data services to consumers. At American Tower we continue to be excited about both the current and future prospects for our industry and for our Company. We're confident that the robust advancement of high-speed wireless data services will continue, first in developed markets, such as the US, followed by developing economies around the world.

A number of key trends support this conclusion. Let's first consider handsets. Global handset sales were up 13% in the second quarter, suggesting that wireless growth is back on track in the wake of the 2008 financial crisis. Moreover, major handset manufacturers, including Nokia, Samsung, Motorola, Sony Ericsson , RIM, and Apple are emphasizing Smartphone investments and the sales opportunities that they bring to drive their future growth. And there's plenty of upside for the deployment of Smartphones. Even in the US and Western Europe Smartphone shipments were just 30% of all handsets. And in developing markets, in the EMEA region, Asia and Latin America, the proportion of handset shipments that were Smartphones was only 10%. With the handset manufacturers focused on Smartphone unit growth, prices should come down and choices to consumers should increase, thereby leading to greater penetration of Smartphones in both the US and internationally.

The US is a leading market with respect to innovation in wireless and consumer readiness for Smartphones, and carriers are reporting shortages of their most high-end handset offerings, such as AT&T's Apple iPhone 4, Verizon's Droid and Sprint's HTC EVO 4G. Consumer demand for faster wireless data services is proving to be voracious, and a competitive mobile broadband platform is essential for any wireless carrier's continued success over time. Consequently, we believe there'll be even greater burdens on wireless networks to deliver the new level of service that Smartphone owners are demanding. Substantial investments in 3G, and now 4G technologies are being made by carriers in order to meet this demand.

Fortunately for both the wireless carriers and for the tower industry, consumers are willing to pay for these enhanced services. As a result, wireless data is now the primary growth engine for US carrier revenues. In the second quarter AT&T, Verizon increased data revenues by 27% and 24% respectively. Both carriers, in turn, reaffirmed their commitment to significant levels of capital investment to further develop these types of services while also increasing their proportion of overall corporate CapEx devoted to wireless. In addition, Sprint announced that it has been adding new CDMA sites to its network this year, and T-Mobile continues to deploy its upgrade to its current 3G system. And looking ahead from 3G to 4G, each carrier has restated their plans to support next-generation investments; in Sprint's case through the support of Clearwire; at Verizon the launch of LTE markets in the second quarter of 2010; and at AT&T the launch of 4G markets beginning in 2011. Moreover, Metro PCS and LightSquare have announced their own LTE market launches in 2010 and 2011, as well.

Once again, taking a more global view, 3G penetration in Western Europe and the US is only now approaching about 40% of subscribers, indicating significant additional subscribers and network requirements to come over the next few years for 3G and with the onset of 4G at scale to follow. Developing markets in the EMEA region, Asia, and Latin America are only at a nascent stage of 3G penetration and only approximately to 5% range in those places. We anticipate that there will be terrific future potential in these types of markets for wireless data.

In addition to compelling handsets and ongoing network investment, another key factor in the development of 3G and 4G data services is the availability of sufficient spectrum. Overall in the US, the three largest carriers, AT&T, Verizon, and Sprint through its relationship with Clearwire, appear to have sufficient spectrum to deliver today's expected service at current penetration rates, but both the wireless carrier community and the US government are looking ahead to open more spectrum for advanced wireless services. The recent government clearance of spectrum for use by LightSquare is an example of these efforts, and both the FCC and the Obama administration are working toward making additional spectrum available over the next few years. Many developing markets are right now in the process of ensuring availability of sufficient spectrum for competitive advanced data services for their consumers. In fact, new 3G spectrum is being made available in all four of our international markets; Mexico, Brazil, Chile and India. We believe that this new spectrum, combined with financial strength of the leading carriers in each of these markets, and a lower-cost Smartphone handsets that are being developed, will lead to the deployment of high-speed data networks in all of our served markets over the course of the coming years.

Given these three strong global trends in wireless -- proliferation of affordable Smartphones, wireless carrier investment plans, and additional spectrum availability -- we at American Tower are very pleased with our strategic position. In the US, all four of the national carriers -- Verizon, AT&T, Sprint, and T-Mobile -- are in the midst of a multiyear upgrade cycle. That is, each is in the process of deploying additional equipment, primarily on towers, to deliver wireless data services. In substantial part, Verizon and AT&T are currently utilizing amendments to existing cell site leases for 3G and 4G equipment while also splitting 3G cells for capacity and/or coverage. American Tower's in a strong position to garner amendment business from both AT&T and Verizon, as approximately 20% of those carriers respective cell sites reside on our towers. Sprint is now adding net subscribers and it's also adding some new sites. Additionally, Sprint is also deploying its next-generation 4G service capability via Clearwire. We expect additional new co-location business in the 2011 timeframe from small regional carriers and the LightSquare venture, though these are contingent on sufficient funding. Given American Tower's portfolio of over 20,000 locations in the United States we are also positioned well to capture a significant share of new cell site installations on our towers.

While the US market is the foundation of American Tower's business, delivering over 80% of our second-quarter tower revenue, we're putting substantial effort into building a framework for complimentary international expansion. We've found that to earn the credibility and the local market knowledge to engage in significant transactions and with the highest quality counterparties, it doesn't take months, it takes years. In Latin America, we've established a track record of operational credibility and staying power over a ten-year period in Mexico and over nine years in Brazil. We've served multimarket carriers in both countries, such as America Movil, Telefonica and Nextel International. The value of our track record and market reputation was demonstrated by our recent agreement to acquire nearly 300 towers from Telefonica in Chile and we hope to extend the success in the region to additional opportunities.

In India we've had teams on the ground for three years and I'll be making my sixth visit to the market in a couple of weeks. By investing time and resources in that region American Tower has gained a relevant place in the market, and we're now in the final process of closing our third acquisition, which will bring our tower count in India to over 7,000 sites. Given the inherent growth in the Indian wireless industry, we've experienced colocation rates there that are double that of the US, which we believe will contribute to healthy returns on our investment in the region over time.

Our overall goal as a management team is to combine unmatched market knowledge, both domestically and internationally, with our financial strength, to make superior capital allocation decisions on your behalf. As Tom mentioned, our first priority is to fund our CapEx program for the year. But each tower that we build or augment and each distributed antenna system that we install has both a credit-worthy anchor tenant and solid prospects for the future leasing growth. Each project is judged on its own merits individually, and this holds true for land purchases, as well. We also apply the disciplined approach to tower portfolio acquisitions, be they large or small.

There are two types of acquisitions; third-party independent tower operators, and carrier tower portfolio. Key decision criteria for third-party acquisitions includes the quality of the tower and ground space design, nature of existing lease contracts, the revenue per tower, future leasing prospects, and many others. And criteria for carrier-owned also include the viability and market position of the selling carrier and the rates and terms that that carrier's willing to commit to in the attached master lease agreement, since the seller, of course, is the primary lease customer on these portfolios. Each tower deal is, therefore, different and is simple comparison of multiples is often invalid. We believe there's no one better at judging the value of a tower portfolio than our regional and senior executive teams.

In any given year our objective is to deploy the cash generated from operations, which for 2010 at American Tower is expected to approach $1 billion, plus the proceeds from any additional debt capacity generated by our growth in EBITDA, roughly an additional $400 million to 500 million each year. We want to deploy this funds to new assets that meet our investment requirements. However, we don't lower the bar on our expected investment returns to deploy all this capital. Rather, it's our policy to return excess capita, as Tom mentioned, to you when cash available exceeds our anticipated investment requirements. Now, taken over the past few years we've chosen the mechanism of share repurchase to return excess capital to shareholders.

In the event that the Company determines to elect real estate investment trust, or REIT status in it's future tax returns, this would be -- by no means signal a significant change in our capital allocation strategy at all. Our priorities would remain the same. Investing in our CapEx program and in acquisitions that meet our return expectation, and thereafter returning excess capital to shareholders. Under a REIT election we'd, of course, include the additional mechanism of dividends for returning some of our cash to shareholders. However, we expect that American Tower would be able to both meet the dividend obligation under a REIT election and have sufficient cash from operations to reinvest in the business and/or continue to conduct share repurchases at some level under the capital allocation strategy outlined earlier in my remarks.

So in conclusion I'd just like to reemphasize a couple of points. First, we've increased our full-year 2009 guidance, including elevating our expectations for cash from operations, to over $970 million at the midpoint. That's nearly $1 billion of cash generated from the business in 2010 to reinvest on your behalf. Second, we're actively engaged in numerous initiatives in the US and in select key international markets to seek out, evaluate and execute on new investments designed to ensure long-term robust growth for our Company, and I emphasize the long term. And third, our overall goal is to ele -- is to leverage our current and new assets to both grow recurring free cash flow on a per share basis, while at the same time expanding returns on invested capital from one year to the next. We strive to be one of those relatively few companies that can accomplish both growth and increasing returns on investment on a consistent sustainable basis. And as we wrap up the call, I should mention that the Red Sox have the same kind of can-do attitude that we do, and they'll be getting healthy just in time to exact revenge on the Yankees this weekend and launch their surge back into first place in August.

Operator, you can now open the call to questions at this time. Operator, you could open up the call,

(Operator Instructions). Your first question comes for the line of Mike McCormack with JPMorgan.

Hi, this is Manish Jain for Mike McCormack. Just wanted to get an update on a couple of things. One, potential for a REIT conversion, just your thoughts on timing and how close you are to making a decision in terms of that conversion? And then secondly, if you guys are expecting any contribution from LightSquare in this year and how you're thinking about contributions from Clearwire and LightSquare in 2011 given their funding concerns? Thanks.

Okay, this is Tom. Let me first take the REIT and then Jim will take the LightSquare one. With regards to the REIT, we continue to do our homework and the journey to investigate the prospects for moving to a REIT. We entered the year with $1.3 billion worth of net operating losses. Current course and speed, given the first two quarters of results, we still have over $1 billion of net operating losses, so that'll extend to us 2012, so that would be the timing when our net operating losses actually expire. And from a tax perspective, we continue to work the private letter ruling process internally. We continue to model our business, as well as working through some of the operational aspects of moving to a REIT. We still, obviously, need board approval and shareholder approval. So it's a long-term journey and we're in the middle of it at this point.

And, Manish, on the issue of wholesale providers for 4G, Clearwire's been a great success story, and they're one of our largest new business customers, and I'd offer one of our best customer relationships currently and hopefully going forward. And LightSquare is apparently on track to attempt to replicate that kind of success and that's going to depend on their ability to get funding and Clearwire's ability to get additional funding in the future. Clearwire has the benefit of announced an active wholesale customer in terms of Sprint and others, and LightSquare probably would be benefited by announcing a similar kind of relationship, which we haven't heard about yet. So I think those are some key elements, funding and your customer base, and we're excited about being a partner with Clearwire and we hope that LightSquare achieves that same level of success.

Thanks a lot, guys.

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

Good morning, guys.

Hey, Ric.

Hey, a couple questions first. Glad to see the Essar transaction get the forward investment approval. In your guidance when do you assume Essar closes, because I think last quarter you said a half year of Essar might have been about $40 million in revenue and $15 million in EBITDA. Are you thinking mid quarter, anything in the quarter, just wondering exactly how much Essar?

Ric, we're assuming really four months of activity from Essar, so the end of August or the beginning of September close.

Okay. And then obviously as international continues to get big with a lot of opportunities, as Jim, you were talking about, what are the thoughts as far as breaking out international as a line of business or a segment? And then looking towards the day maybe of having a taxable REIT subsidiary, how do we think about looking at our models longer term on the international side?

Hey, Ric, this is Tom. There are a number of elements that go into looking at segments and segment reporting and we continue to evaluate that. We do try to disclose and be transparent relative to our international operations. Clearly with Essar we'll be breaking the 20% of revenue coming from international markets, so we continue to evaluate that. And as I said, until that time, if that time comes we'll continue to provide we think as much information as you need to be able to evaluate both or all of our segments, whether they're in the international or US markets.

And the final question, $530 million left to spend in the second half of the year as far as excess cash, how do you look at any large carrier transactions out there? Are there any that we should be think about in the US or in it Latin America and what that might mean for your cash or leverage?

Well, Ric, it's Jim. There are no publicly-announced auctions for our US carrier portfolio at this time that we're aware of, nor are there any in Latin America. Now having said that, we're in contact with all the carriers domestically and in the Latin America market. We're familiar, again over many years of having them as either customers or collaborators in the past, on transactions. So we feel we're in the pole position to understand if those auctions become available but there aren't any publicly announced ones yet that we're aware of.

As you look at first place, I don't think the Yankees are in first place any more, I think it's Tampa.

Well, I know. You have to get past the Yankees first, though.

Good luck, guys.

Your next question comes to the line of Jonathan Atkin with RBC Capital Markets.

good morning. So I've got questions about Latin America and India. On Latin America you talked about a customer agreement there driving some of the increased EBITDA outlook, wonder if you'd elaborate a bit on that? And then India, you've got two competitors, one of which is independent there, (inaudible), so just trying to get a sense of how you compete that in market, and is your growth going forward mainly organic, or are you going to go with further to acquisition?

Okay. Hey, Jonathan, it's Tom. Let me take the first one and then Jim will take the second one. With regards to the Latin American -- our largest Latin American customer, we have effectively put in a new agreement with them in Mexico. We are actually amending the current lease terms so that the average remaining terms end between 2019, 2020, and 2021 so we extended it out about ten years. We've increased the minimum escalation rate. We actually now have changed the functional currency of the US dollar-denominated contract to the peso and as such in the second quarter the peso is now the functional currency in Mexico. WE have a discount, which is applicable to their annual lease rate. And in addition, and I think as you've asked in the past, we've converted their outstanding accounts receivable net as of April into a long-term interest-bearing note receivable and this agreement was effective as of the beginning of the quarter. So the impact that it has on the quarter, as I mentioned in my remarks, is that it had impact of increasing the straight-line revenue, which is reflective in our updated outlook- as well as reducing some cash revenue, which about net to zero, if you will, for the entire year.

And, Jon, with regard to India, our goal is not to have the largest tower portfolio necessarily in India, it's to have in that market one of a number of complimentary international markets to our US base. And so our main metric is really tenants per tower versus number of towers, because that's going to drive profitability for us and return on invested capital. And with over 7,000 towers pro forma, post the Essar transaction -- and by the way, Essar's bringing tenants per tower of over 1.8 to our portfolio on day one -- we're going to be in great shape on the metrics that we think are most important in India for us.

Great. And then on distributed -- on outdoor DAS, just wondering if you have any updated views on growth opportunities there, what percentage mix of revenue it might grow to ultimately? I think in the past you've mentioned low single-digit percentages and are you finding any change in carrier willingness to adopt third-party DAS solutions as opposed to conventional terrestrial approaches?

Yes, Jon, when it comes to distributing antenna systems we look at it together, indoor and outdoor, and similar technologies and similar types of arrangements with customers, et cetera. We are the largest indoor DAS provider with about 200 locations in the US. We've actually got a couple up and running in Latin America, too. On the outdoor side we've got a few systems, again, up and running with customers now at 300 nodes being put out there. So it's, again, going to be in the context of 20,000 towers in the US and another 10,000 or 12,000 outside the US as we close Essar. It's a small piece of our business, we think it always will be. We'd like to take it from a couple of percent up to 5% of revenue as we grow the rest of the Company. So it'll be meaningful. It's, again, one of those five or six complimentary initiatives to our core US tower business that we'd like to develop and boost growth.

And then from a carrier interest perspective, it's similar, I think, over the last 18 to 24 months. Some interest was generated on some niche solutions. They are more expensive and harder to engineer for the carrier so they haven't elevated in the priority list, but now and then the carriers are willing to go to that solution and we want to be able to provide it as a rounded -- a rounding out of our offering so that's where we really see DAS fitting in.

Thank you.

Your next question comes from the line of Brett Feldman with Deutsche Bank.

Thanks for taking the question, just two quick ones here. A couple of your peers have talked about improved leasing backlogs into the second half of the year, I think that's sort of the consensus expectation. I was wondering if that's what you're continuing to see in your business? And then just to follow up on something I think you alluded to on the last call, you said as part of your reconversion analysis you may have to pay a purging dividend, is there any update on that at all?

Sure, Brett, it's Tom. On the first one, I think as we've even said in the first quarter call that we do expect more momentum into the second half of the year. I think it's pretty consistent with what we've actually seen over the last several years and is overall consistent with how the carriers actually spend their capital. So we would expect a stronger second half of the year than first half and we've even seen in the second quarter an increase commenced new business than we saw in the first quarter so -- versus last year. So I think we're seeing those continued trends.

Relative to the purging dividend, it really refers to the earnings and profits that exist in your business from a tax perspective, and that needs to be purged or your earnings of profit needs to be cleaned out or zero before you actually make the conversion. And we're actually going through the analysis. That's one of those steps that we're doing, looking at both foreign, as well as US domestic, which is really the element relative to the purging dividend. We should know something final probably over the next three months or so, Brett. So no new news on that but we continue to be optimistic about it.

And just on that dividend issue, I don't know how much discretion you guys have in the timing of that relative to when would you convert, but there's obviously some belief that the tax rate on dividends might increase next year. Would you have the flexibility to potentially accelerate the payment of a purging dividend into 2010 even if you weren't really going to do a conversion until 2012?

You could in the form of a dividend. We don't expect that, candidly, but, yes, you could do that.

Okay, thanks for taking the questions.

Sure, Brett.

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

Hey, thanks, good morning. A couple questions, maybe first just on -- just back to the guidance. As I look at the revenue guidance and the changes from last quarter it seems like Essar and new sites are plus $30 million and straight-line and currency is plus $20 million, and then that's netted against an extra $10 million in cancellations for the plus $40 million, so, A, I want to see if that's the right math? And then B, as we look at the -- how the guidance hikes makes its way down to EBITDA with the $20 million hike there, just given all the moving parts, can you help us think through how the revenue down to EBITDA conversion filters through? It seems like the incremental margins might have suggested a little bit higher of an EBITDA hike. Thanks.

Yes. No, Jason, thank you. In regard to guidance overall let me just review a couple items. Regards revenue, we are now reflecting the acquisition of Essar Telecom, as you suggested, which should be about $30 million. We're also reflecting additional straight-line and FX revenue of about $20 million due to the weakening of the dollar, our recent renegotiated plan with a large carrier in Latin America and some straight-line revenue in the United States. We're also including some additional discount with that large carrier in Latin America of about $10 million, as you've suggested, due to our renegotiated plan, which is offset by the contract extensions and higher minimum escalations. So, all told, an increase of $40 million, 12% growth at the midpoint, 9% to 10% core growth.

Regards EBITDA, we're increasing EBITDA by $20 million, as I said, as a result of the increased Essar-related revenue of $30 million, plus the increased straight-line and FX revenue of $20 million, offset by the $10 million cash discount with the large Latin American customer; offset by Essar direct expenses of about $15 million or so associated with the $30 million of revenue, and business development expenses of about $5 million. So our increase in EBITDA is largely non-cash related. Consequently, our EBITDA growth is in the 10% range with our core growth in the 7% range.

A couple additional thoughts relative to the second part of your question. In the quarter we have about $20 million of pass-through revenue and costs; about $7 million more than the second quarter of 2009. So if you back out these revenues and expenses, which is margin neutral, it takes our EBITDA conversion rate from about 72% to well over 80%, as I mentioned in my remarks, and then adding on our new 4,300 towers takes it up to over 90%. And relative to our outlook, we're increasing revenues year-over-year by about $200 million and EBITDA $120 million. Pass-through is about $30 million higher in 2010 versus 2009, so our EBITDA growth of $120 million should be viewed to be on about $170 million of revenue. Adding on some of our business development costs, SG&A costs to scale our business, and the lower margins of the new towers with the lower tenancies, again, our conversion rate is significant. So as we've said in the past and as Jim remarked, we're investing for the long-term growth of the business and believe we can manage strong growth while continuing to generate industry-leading margins.

That's really --

Hopefully that's helpful.

Yes, that's very helpful. Hey, Tom, just one follow up on the REIT status. One of the only procedural hurdles would be a number of assets sitting inside a taxable REIT sub and there's certain tests around that. As you get further into the discussions with the IRS, how comfortable are you that the aggregation of these assets, whether it's international or DAS services business, will fit under the threshold for income and asset tests that the REIT will require?

At this point in time we feel very good. There is a lot of precedent out there for the types of things that we're doing, so it's not like we're creating new ideas or new thoughts here. Relative to the assets that we have in the US we think that given that there have been tower companies that have [earned] REITs, obviously our assets we think qualify for REIT status. And within -- with our international assets and some of those assets even in the United States that don't qualify perhaps as REITable, we feel very comfortable that they'll fit well within the income and asset tests.

Great, thanks.

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

Okay, thank you very much, good morning. Strong balance sheet is obviously one of your hallmarks. We've seen some very attractive financing rates out in the marketplace across both the towers and elsewhere in this sector given the low interest rate environment. Have you thought about terming out your debt structure over the next -- over the balance of the year or even revisiting -- maybe going to more of the higher end of your historic leverage? And could you give us any updates on where you stand in terms of land owned, land under long-term leases? I see you continue to be active in that during the quarter. Thanks.

Sure, Simon. Relative to the debt structure, we continue to monitor every day what the rate environment looks like, how we're doing in the marketplace in terms of our existing financings, and you can be rest assured that I get called every day by just about every bank in New York. So we continue to monitor that and watch that very closely and we'll continue to be opportunistic to the extent that we can continue to increase the tenors on our debt, which is really one of the main things that we're trying to do to better match the overall revenue streams that we've got in the business. And with regards to land?

Yes.

I'll go ahead and speak to that Simon, it's Jim. As far as the US, 23% of our sites are on owned land or land subject to capital lease, which are typically 99-year leases. Outside the US -- as an aside -- we typically pass through land rent in Latin America, or it's very, very inexpensive in India so the risks there are much, much lower. We tend not to bay land in those markets because, again, the customer for the most part on a pass-through basis is bearing any kind of rent increase risk. Also, if you look at the entire portfolio in the Company, about 90% of our sites are on owned land, land under capital lease, or land on a ground lease with over ten years of life remaining, and if you just narrow that down to the US, it's over 94%. So we feel really comfortable with the basis of our real estate position under the towers and we have a very active program that seeks out those that are coming up for renewal to either buy them out or extend them.

Thank you very much.

Your next question comes from the line of Michael Rollins with Citi Investment.

Hi, good morning,, thanks for taking the question. Just a follow up, I think you mentioned earlier that with the NOLs that would take you into 2012, so as you think about a possible REIT conversion, within that context would that be the beginning of 2012, or would that be the beginning of 2013? And the second question I had was, just to follow up on some of the newer products that you've been working on, can you talk a little bit more about whether it's the backup power initiative or DAS initiative, just in terms of any further progress that you guys have made in the most recent quarter on those two things? Thanks.

Sure, Michael, it's Tom. I'll take the first one and I think Jim will take the second one. The election is actually for a full year, so the 2012 context that we've been talking about would be effective the beginning of the year, so it would be January 1st. It would be full year of 2012. And with regards to new products?

On the generators, Mike, as other industries introduce new products, it takes time to get traction in large scale projects with customers. So it's very small still, but it's active. We've got vendor arrangements, maintenance arrangements all set, and we are doing this for customers today but not at a large enough scale that it would get to where the DAS business is, for example. And on DAS, as I said, we've got 100 -- actually almost 200 indoor sites up and running. We've got two outdoor DAS installations up and running with about 300 nodes in process. A number of more outdoor DAS project in front of customers, which we think many of those will be secured. So we're in the first or second inning of a nine-inning game here I'd say on both those projects, but we're still dedicated to pursuing them and we're going to do it.

Thanks very much.

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

I have a question about your growth trajectory. There's always been a good correlation between wireless CapEx growth [toward] operators and the incremental revenues that the tower companies see, and if we look at our assumptions for the wireless CapEx in the US we were looking for about 10% growth in 2010. But every quarter we've been inching up these CapEx assumptions and we probably are looking for a 20% increase in the US now. So was just wondering why the outlook for your revenues has been more moderate than the increase we have seen on the operators side? And if you could give some color on why there might be a discrepancy or if this recent increase in the activity suggests maybe accelerating growth for next year? Thank you.

It's Jim, Batya, I'll try to address the question. And I think generally there is a relationship between increasing CapEx with wireless carriers and opportunities for revenue growth for the tower industry. I'm not sure it's ever necessarily been proven to be exactly one to one. There are timing issues, as you may -- as you actually suggested here. There's also what is the CapEx going into. At this point a couple carriers, for example, are mainly investing in some software upgrades with some of their capital expenditures. Some are investing in backhaul from the towers that is through fiber or cable or other elements that towers don't necessarily provide. So there's a mix in the timing adjustment to try to make a correlation to tower leasing revenue. Having said that, though, generally CapEx goes up it means the carriers are dedicated to rolling out more advanced networks. That's going to hit the tower industry in a big way over, again, some period of time in some fashion with mix. So we think it's a very positive correlation, it just may not be exactly a mathematical one to one.

Okay, thanks.

And your next question comes from the line of James Ratcliffe with Barclays Capital.

Good morning, folks, thanks for taking the question. Two quick ones. On currency hedging, now that you're getting close to about 25% of the revenue coming international, what are your plans around hedging and the US dollar, particularly when you're, as in Essar, borrowing in dollars to invest in other currencies? And secondly, just thoughts on the role, if any, you plan to play on the backhaul side of things as carriers are deploying backhaul, if that's going to be more a coordination role or a business you could see yourself getting into?

Sure, James, it's Tom and you're exactly right. With the increase of our international pieces we are becoming more sophisticated, I think, with regard to looking at hedging. One of the areas that we're thinking about and contemplating now is also very consistent with some of our strategies in the REIT context is to look at country financing, local country financing, and that, by definition, will help hedge some of that currency that we're driving from those international markets. Jim?

And on a backhaul perspective, there are really two major approaches to backhaul aside from the traditional T1 and T3 fixed line. One is -- that we're very involved in is the microwave option. Clearwire happens to be using that now so it's an embedded piece of their lease with us, so we're essentially 100% involved in microwave backhaul because there's a piece of the rent that's dedicated then to the microwave dish and installation. More of a coordinating role, I'd call it, on fiber to the tower or fiber backhaul. We would selectively invest -- or co-invest, I should say, with fiber providers that would like to reach the tower. We haven't done much of any of that yet but we're willing to do it. So I'd say it's more of a coordinating role with some potential investment and return on the fiber side, and it's a very involved role on the microwave side.

Great, thank you.

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

Hey, guys, thanks for taking the questions. Maybe just two quick ones, revisiting some territory we've covered. Number one, Tom, could you just confirm that you, in fact, have sent in a private letter to the IRS and when that actually occurred and what, if any, immediate feedback you've gotten? And then second, I guess we've talked a lot about all the moving parts to the guidance, but it sounds like at the end of the day, the core revenue growth expectation for 8% hasn't changed, even though, as we've heard, wireless CapEx growing, your peers have raised their expectations for second half, you guys yourselves commented that the second half was accelerating. So are we being conservative, or are we -- are there reasons to believe that AMT can't participate in some of the growth other tower companies are expecting? Thanks.

Dave, with regards to the PLR process, I think I'd like to talk about it relative to a process. We're in the middle of that process as we speak, and there's dialogue going on between the agencies and the Company. So when that process completes, we will then talk about the outcome of it, which we would expect hopefully in the next five or six months. It takes awhile.

With regards to guidance, I think that we are increasing our revenue guidance by $40 million. We have 12% growth at the midpoint, 9% to 10% core growth, so I think that's very strong growth that we have in the business. We've talked about stronger leasing demand in the second half of the year. I think you need to take that in the context of how we put our original guidance out in the marketplace. So we don't like to continually upgrade our guidance and to change things quarter over quarter over quarter. We like to give, I think, our investor base some thought at that time beginning of the year of how we really think the year is going to end.

All right, thanks, Tom.

Sure, Dave.

We have reached the allotted time for questions-and-answer session, do you have any closing remarks?

No, really appreciate everyone being on the call and your continued interest, and to the extent that you have any follow-on questions, please feel free to give us a call. Thanks, everybody.

This concludes today's teleconference. You may now disconnect.