美國電塔 (AMT) 2013 Q2 法說會逐字稿

Good morning. My name is Monserrat, and I'll be your conference operator today. At this time, I would like to welcome everyone to the American Tower Second Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

I would now like to pass this call over to your host, Ms. Leah Stearns, Vice President of Investor Relations and Capital Markets. Ma'am, you may begin your conference.

Thank you. Good morning, and thank you for joining American Tower's Second Quarter 2013 Earnings Conference Call. We have posted a presentation, which we will refer to throughout our prepared remarks, under the Investor Relations section of our website. Our agenda for this morning's call will be as follows. First, I will provide a brief overview of our second-quarter and year-to-date results. Then Tom Bartlett, our Executive Vice President, Chief Financial Officer, and Treasurer, will review our financial and operational performance for our quarter, as well as our updated outlook for 2013. Finally, Jim Taiclet, our Chairman, President, and CEO, will provide closing remarks. After these comments, we will open up the call for your questions.

Before I begin, I would like to remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include those regarding our 2013 outlook and future operating performance, 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, those set forth in our Form 10-Q for the quarter ended March 31, 2013, 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 in this call to reflect subsequent events or circumstances.

With that, please turn to slide 4 of the presentation, which provides a summary of our second-quarter and year-to-date 2013 results. During the quarter, our rental and management business accounted for approximately 98% of our total revenue, which were generated from leasing income-producing real estate, primarily to investment-grade corporate tenants. This revenue grew 15.7% to nearly $789 million from the second quarter of 2012. In addition, our adjusted EBITDA increased 12.5% to approximately $524 million. Operating income increased 15.6% to approximately $313 million, and net income attributable to American Tower Corporation was approximately $100 million, or $0.25 per basic and diluted common share.

During the quarter, we recorded unrealized non-cash losses which negatively impacted net income attributable to American Tower Corporation for approximately $114 million, or $0.28, which is due primarily to the translational impact of foreign currency exchange-rate fluctuations, related to approximately $1.1 billion of inter-company loan, which are denominated in currencies other than local currencies. We have utilized these loans to facilitate the funding of our international expansion initiative and general operations. For accounting purposes, at the end of each quarter these loans are re-measured based on the actual foreign currency rate on the last day of the quarter end. As a result of a stronger US dollar, as of June 30, 2013, relative to March 31, 2013, the re-measurement of these loans generated non-cash losses for accounting purposes.

Turning to our results for the first half of 2013, our rental and management revenue grew 14.7% to approximately $1.57 billion from the first half of 2012. In addition, our adjusted EBITDA increased 12.9% to approximately $1.05 billion. Operating income increased 12.4% to approximately $612 million, and net income attributable to American Tower Corporation was approximately $271 million, or $0.69 per basic, and $0.68 per diluted, common share. With that, I would like to turn the call over to Tom, who will discuss our results in more detail.

Thanks, Leah. Good morning, everyone. As you can see from the results we released this morning, we had another solid quarter, with our core business once again out-performing internal expectations, as our global customer base continues to rapidly invest in their networks. Over the last few quarters, we have seen the initial shift towards cell splitting take shape, and new leasing activity in the US is picking up. Meanwhile, our international portfolio continues to see co-location activity in the form of new leasing, as our customers seek to expand their network coverage and increase network capacity by utilizing our towers.

From a financing perspective during the quarter, we refinanced our 2011 revolving credit facility, reducing the draw-in borrowing cost by over 40 basis points, extending the maturity date by two years, increasing our credit available under the facility to $1.5 billion, while also providing us with the ability to draw in certain foreign currencies.

Towards the end of the quarter, the translation of our international segments performance was impacted by the strengthening of the US dollar against many of our international market currencies. This resulted in a head wind to second quarter 2013 international rental and management revenue of approximately $7 million, and adjusted EBITDA of approximately $3 million, versus the rates assumed in our previously issued outlook. We view the recent movements in foreign currency exchange rates as non-cash translational impacts to our results, as the cash flows we are generating off-shore are substantially being reinvested into our markets to add additional scale to are existing portfolios.

As a result of these foreign currency exchange rate movements, we have adjusted the assumptions implicit in our outlook for the remainder of the year. Despite these head winds, which for the full year we expect will be roughly $40 million to revenue, $20 million to adjusted EBITDA, and $15 million to AFFO, we are reiterating the mid-point of our 2013 outlook for our total rental and management segment revenue, and raising the mid-point of our outlook for adjusted EBITDA and AFFO. This is an indication of the strength we see in our underlying organic business, and our confidence in the secular demand trends we are seeing throughout our global footprint.

If you please turn to slide 6, you'll see that for the second quarter, our total rental and management revenue increased by nearly 16% to $789 million. On a core basis, which we will reference throughout this presentation as reported results, excluding the impacts of foreign currency exchange rate fluctuations, non-cash straight-line lease accounting, and significant one-time items, our consolidated rental and management revenue growth was over 18%.

Of this core growth, nearly 9% was organic, with the balance attributable to growth from new sites. As we mentioned last quarter, the non-recurrence of a $5-million revenue reserve reversal in Mexico from the second quarter of 2012 negatively impacted our core organic growth this quarter. Adjusting for the impact of that discreet item, our consolidated core organic growth would have been nearly 10%.

Our organic growth in the US continued to be driven primarily by amendments, although as I mentioned earlier, we began to see an increase in new leasing activity during the quarter from certain customers, reflecting the beginning of a shift from coverage to capacity builds in certain geographies. It's important to note that we do expect the amendment cycle to remain strong, as customers such as Sprint and T-Mobile continue to deploy LTE across their top markets. In total, our new business commitments in the US during the quarter increased by over 70% compared to the year-ago period, and the average amendment rate continued to exceed $700 per month, reflecting a significant amount of new infrastructure which is being added by our customers.

Meanwhile, our international segment posted yet another strong quarter of core business out- performance. Continuing the trend from the first quarter, our international operations drove over half of our consolidated core revenue growth, and we saw new business momentum throughout our international footprint. Our international business continues to be a significant source of profitable growth for the Company, and the consistent long-term returns we are generating throughout our global footprint remain compelling as the reach of wireless service continues to expand worldwide.

Turning to slide 7, during the second quarter our domestic rental and management segment revenue growth was driven primarily by an increase in recurring cash leasing revenue from our legacy properties, partially offset by a $4-million, year-over-year, straight-line revenue decline. Reported domestic revenue grew by about 10% to approximately $521 million. Our domestic core revenue growth, which adjusts for the impact of straight-line revenue, was nearly 12%, or about $52 million.

Our domestic rental and management segment core organic revenue growth was 8.8% in the quarter, which exceeded our ongoing 6% to 8% core organic growth goal for the US. This growth continues to be primarily generated from the big four carriers, as they continue to overlay 4G technology across their networks. This includes ongoing contributions from both AT&T and Verizon, and is now being augmented by significant increases in new business from both T-Mobile and Sprint, as they continue their respective network modernization initiatives.

Domestic signed new business also remained at elevated levels, exceeding the year-ago period by 60%. We would expect the vast majority of these signed contracts to commence within the next 12 months or so, and consistent with our commentary last quarter, our application pipeline remains very robust, and suggests that the favorable leasing trends we've seen so far this year should continue into 2014, supporting our outlook of core organic growth at nearly 8.5% in 2013. The balance of our second-quarter core growth in the US, about 3%, was generated from the more than 1,100 new communication sites we have acquired or constructed in the US since the beginning of the second quarter of last year.

Our domestic rental and management segment gross margin increased over $40 million, or 10.5% in the quarter, representing a year-over-year conversion rate of over 85%. This conversion rate is indicative of our strong ongoing property-level cost-management program, including our land-lease management initiatives. We continued to proactively acquire and extend land leases under our sites during the quarter, purchasing nearly 150 parcels, and extending an additional 355 by an average of 29 years. For the full year, we continue to expect capital spending on land acquisitions of $95 million at the mid-point. Finally as a result of our growth in gross margin in Q2, operating profit increased over 10% to nearly $402 million.

Moving onto slide 8, during the quarter our international rental and management segment reported revenue increased 28% to $268 million. International core revenue growth was nearly 32%, and international core organic growth was about 9%, which continued to be driven primarily by strong new lease commencement activity from tenants such as Telefonica, Nextel International, and American Mobile in Latin America, Vodafone and MTN in South Africa, as well as Bharti and Idea Cellular in India.

As we had discussed last quarter, our Q2 international core organic growth was negatively impacted by a revenue reserve reversal of about $5 million during the second quarter of 2012. Excluding this discreet items, the international segment generated 11.8% core organic growth, which was about 300 basis points higher relative to the US, as both of our rental and management segments continue to out-perform our core organic growth expectations.

Continuing with the trend seen the last few quarters, about 90% of our signed new business internationally was in the form of new leases, rather than amendments, as carriers augmented their networks by adding new platforms of equipment on to our existing sites. For the full year, we expect international core organic growth rates of over 12%, which is roughly 400 basis points above that of our domestic segment, and well ahead of our internal goal of at least 200 to 300 basis points above that of our domestic segment.

During the quarter we constructed more than 300 sites, and acquired over 100 more, allowing us to further expand our international presence. We have added over 8,200 communication sites to our international portfolio since the beginning of the second quarter of 2012, contributing over 22% to our international core growth, and driving our international revenues to 34% of our total consolidated rental and management revenues. As we add new sites to our international portfolio, our pass-through revenue continues to increase, as we are able to share a portion of our operating course with our tenants. During the second quarter, our international pass-through revenue was over $71 million, which is up about 29% from the prior-year period.

From a reported gross margin perspective, our international rental and management segment increased by almost 25% year over year to $169 million, reflecting a 56% gross margin conversion rate. Excluding the impact of pass-through revenue, our gross margin and gross margin conversion rate would have been 86% and 77%, respectively. Finally, our international segment operating profit increased over 17% to roughly $137 million. Our international segment operating profit margin was 51%, and excluding the impact of pass-through revenue, exceeded 69%.

Turning to slide nine, our reported adjusted EBITDA growth relative to the second quarter of 2012 was nearly 13%, with our adjusted EBITDA core growth for the quarter at nearly 15%. Over 90% of our adjusted EBITDA core growth was attributable to our rental and management segment, which generally represents recurring run-rate contributions to EBITDA, as opposed to the non-run-rate nature of EBITDA generated by our services business.

Reported adjusted EBITDA increased by approximately $58 million in the quarter. Of the approximately $33 million increase in direct expenses that impacted this growth, $16 million was related to international pass-through costs. SG&A increased nearly $19 million from the prior-year period, driven primarily by our international expansion initiatives, as well as select investments we have made in our domestic business, and several corporate initiatives. In addition, the non-recurrence of a bad-debt reversal from the year-ago period in Mexico accounted for approximately $4 million of the increase.

For the quarter, our adjusted EBITDA margin was 65%, as compared to approximately 67% in the prior-year period. Excluding the impact of international pass-through revenue, our adjusted EBITDA margin for the quarter was about 71%, and our adjusted EBITDA conversion rate was approximately 61%. We continue to maintain industry-leading adjusted EBITDA margins in the 65% range, even with the addition of over 33,000 sites over the last five years -- many with just a single tenant day one. As a result of our continued focus on driving co-location activity across our portfolio, and the material conversion rate of revenue to adjusted EBITDA that occurs, we are able to transform previously under-utilized wireless infrastructure assets into profitable, high- margin components of our overall portfolio.

The strong EBITDA performance we saw in the quarter also translated into solid growth in adjusted funds from operations, of AFFO, which increased by over $60 million, or more than 19% relative to AFFO in Q2 of last year. Core AFFO grew over 18%, after excluding the impact of foreign currency exchange rate fluctuations, and s $4.5-million non-recurring tax refund received in one of our international operations during the second quarter. We continue to target at least mid-teen core AFFO growth going forward, as both our domestic and international operations continue to generate strong recurring cash-based returns.

Turning to slide 10, we deployed about $157 million in capital expenditures in the second quarter, including $73 million on discretionary capital projects associated with the completion of the construction of over 400 sites globally. Of these new builds, about 100 were in the US with the remainder throughout our international markets. Our international new-tower build for the quarter was split fairly evenly between Latin America, India, and Africa. We continued our discretionary land purchase program in the US to secure additional interest under our existing tower sites. In the second quarter we invested about $17 million to purchase land under our existing sites, and as of the end of the quarter, we owned or held long-term capital leases under approximately 29% of our domestic sites.

Our second quarter 2013 spending on redevelopment capital expenditures, which we incur to accommodate additional tenants on our properties, was $23 million. Our capital improvements and corporate capital expenditures for the quarter came in at about $35 million. The increase in capital improvement and corporate capital spending was largely attributable to incremental investments we have made in IT infrastructure, as well as a few capital improvement initiatives we have spoken about previously in the US, including a lighting system upgrade and network operations center. Finally, we spent approximately $8 million on start-up capital projects in Q2.

For the full-year, we currently expect to spend approximately $525 million to $625 million in total CapEx, which reflects a slight reduction in discretionary capital projects related to a slower international build plan, primarily in India. We are now forecasting to add approximately 2,000 new sites to our portfolio in 2013 through our build-to-suit pipeline.

From a total capital allocation perspective, year to date we have deployed over $900 million, including our first- and second-quarter dividends of $0.26 and $0.27 per share, or about $210 million, about $281 million on CapEx, and nearly $360 million for acquisitions. During the second quarter we added 34 communication sites through acquisitions in the US, and nearly 119 communication sites internationally. Finally, we have spent about $75 million to repurchase about 1 million shares of our common stock, pursuant to our stock repurchase program. We continue to expect that we will manage the pacing of our stock repurchases based on market conditions and other relevant factors.

Moving on to slide 11, based on the continuing favorable demand trends we are seeing across our global footprint, and the momentum in our core business, we are reiterating our full-year 2013 outlook for rental and management segment revenue of $3.16 billion to $3.21 billion. We expect the underlying performance of our business globally will offset the negative impact of translational FX fluctuations at the rates implied in our guidance. As a result, we now expect our core growth in rental and management revenue to be nearly 18% at the mid-point.

This robust leasing activity also translates into stronger core organic growth, which we now expect will be over 8% in the US, and over 12% in our international segment. In addition to reiterating our rental and management segment revenue outlook, we are increasing our outlook for adjusted EBITDA by $5 million at the mid-point. We anticipate that the strong performance of our global business, including stronger-than-planned organic growth, and continued property-level cost controls, will allow us to more than offset the expected translational FX head winds to EBITDA relative to our prior outlook, which is driving our increase in core growth by 140 basis points.

We continue to leverage the co-location model to drive strong flow-through from the top line to the EBITDA level, and expect our rental and management segment to drive almost all of the adjusted EBITDA growth for the full year. Finally, we are also raising our full-year AFFO outlook at the mid-point by $10 million. This increase reflects the robust core performance of our business, which is now expected to generate core AFFO growth of over 21%. Irrespective of the translational FX impacts I mentioned previously, we have now increase the mid-point of our AFFO outlook by $70 million, or over 5%, since we issued our initial 2013 guidance in February, primarily from recurring cash flow sources.

If you will turn to slide 12, I want to provide some incremental color on the components of our revised outlook. In terms of rental and management segment revenue, we are reiterating the mid-point of our existing outlook, despite our anticipation of about $40 million of translational FX head winds relative to our prior-outlook assumptions. This is being driven by the core out-performance of both our domestic and international segments, as well as approximately $4 million in incremental straight-line revenue. The core revenue out-performance in the US is attributable predominantly to stronger-than-anticipated new business commitments, as our major customers continue to make progress in their 4G network build-outs.

Similarly, in our international markets, a significant portion of our expected core revenue growth is being driven by new business commitments. In addition, approximately $5 million of the increase is attributable to an incremental pass-through revenue we expect to receive in Africa due to higher ongoing fuel usage. Overall, we are raising our outlook for core rental and management segment revenue core growth by 1.4% to nearly 18%.

In addition, are we are raising the mid-point of our adjusted EBITDA outlook by $5 million, which translates into core growth expectations of 16%. We believe that the business out-performance I just mentioned will enable us to more than offset the forecasted $20-million adjusted EBITDA impact from unfavorable foreign currency translation. Of note, adjusting for the $5 million in incremental international pass-through revenue I mentioned earlier, the international conversion ratio of core revenue to core adjusted EBITDA is expected to be nearly 80%. In the US, this conversion ratio is lower, largely due to a one-time land rent benefit recorded in Q4 of last year. In addition, we anticipate an approximately $4-million contribution from the impacts of incremental straight-line revenue to flow-through to EBITDA.

The growth in core adjusted EBITDA that I just discussed, combined with some favorability in expected cash taxes for the year, has allowed us to raise the mid-point of our AFFO outlook by $10 million, while raising our core AFFO growth projections for the year to over 21%. The $10-million increase includes an incremental $5 million in corporate CapEx that were spending to augment our IT systems in the US. We believe that our ability to raise our outlook for adjusted EBITDA and AFFO, even in the face of foreign currency translational head winds, clearly illustrates the strength of our core business.

Now moving on to slide 13, as we've highlighted in the past, we remain focused on deploying capital, while simultaneously increasing AFFO and return on invested capital. As you can see in the chart, we believe that our investment discipline has created meaningful value for our shareholders. Since 2007, we have invested over $12 billion in CapEx, acquisitions, stock repurchases and dividends, adding more than 33,000 new sites, and expanding into eight additional markets on three continents. Concurrently, we have consistently increased both our AFFO and AFFO per share on a mid-teen compounded annual basis.

In addition, based on the investments we have made to date, we expect to have increased our return on invested capital by nearly 200 basis points, to 11% by the end of the year. This sustained growth in AFFO and ROIC reflects the disciplined capital allocation strategy we have used in the past, and will continue to utilize in the future to drive long-term profitable growth. In addition to returning significant cash to our shareholders via our regular dividend distributions, we continue to seek to maximize our returns as we deploy capital for new builds and acquisitions worldwide.

Our extensive, methodical investment evaluation process, combined with our experienced development and operational teams across the globe, provides us with a competitive advantage that we believe is unmatched in the industry; and our track record of generating significant returns speaks for itself. We are focusing are efforts on continuing to drive strong growth in AFFO, and further improving are ROIC metric, and believe our meaningful rapidly-growing dividend, in combination with our ability to grow the business, will provide our shareholders with a compelling total return over the long term.

Turning to slide 14, I wanted to briefly talk about how we've seen our segment level return on invested capital metrics trend by segment since 2007, to highlight the underlying strength of our legacy business, while also framing the opportunity we believe is embedded in our recently-acquired assets. Starting in our international segment, as you can see in 2007, our legacy operations, Mexico and Brazil, were generating ROIC of approximately 17%. This was a reflection of the leasing momentum we have seen in those countries since the early 2000s, and the value we added to initial investments we made as a result of our ability to add new tenants to previously single-tenant sites, which we acquired from carriers such as Nextel International.

Since 2007, if you isolate those legacy international assets, you can see that we have consistently grown ROIC on this portfolio, which stands today at approximately 22%. Over the same time period, we have added over 30,000 sites to our international portfolio, many of which, like our legacy Mexican and Brazilian assets, were initially single-tenant sites acquired from carriers. Further, in 2010, 2011, and 2012, the vast majority of our acquisitions were completed during the fourth quarter. As a result, the end-year impact to return on invested capital is muted.

This illustrates the underlying thesis of our investment philosophy, which seeks to acquire non-performing tower assets from multi-national wireless service providers, and turn the properties into shared infrastructure solutions that can be leveraged by multiple tenants. We believe that this growth will drive significant improvements in the cash-generation characteristics of our recently acquired international assets, and will drive a corresponding increase in the returns on invested capital into the future.

Turning to the US, where we have not added new assets to the extent we have in our international markets, you can clearly see the steady trajectory of ROIC improvement since 2007, once again, reflecting our ability to drive meaningful organic cash flow growth on our assets over time. Given the very high conversion of organic revenue into EBITDA, and ultimately into operating cash flow, we would expect to see this trend continue in the US.

Taken as a whole, we think that these long-term trends are extremely effective in communicating the way that we look at the business. We have invested heavily over the last several years in less mature assets in rapidly growing wireless markets, because we believe the trends we have seen in Mexico and Brazil and the trends we have seen in the US will ultimately be replicated in other emerging markets. The short-term dilutive impact on ROIC that these high-growth investments have, in our view, pales in comparison to the long-term potential for meaningful, sustained cash-flow growth that they should provide.

Finally, on slide 15, and in summary, our core business at American Tower continues to out-perform our internal expectations. The secular trends we are seeing in the global wireless sector continue to translate into robust demand for our tower space, generating strong revenue, adjusted EBITDA, and AFFO growth. As a global leader in communications infrastructure, we believe we are in an excellent position to continue to expand our portfolio and operations, while simultaneously growing recurring cash flows in support of our goal of doubling our AFFO per share over the next five years.

The disciplined investments we have made throughout the world over the last decade continue to yield strong returns, and provide a solid foundation or us to build on going forward. In the US, we are in what we believe is a compelling demand environment, with all four major US carriers aggressively deploying 4G. The leader is starting to transition from the initial coverage builds to cell splitting and in-fill activity.

In our international markets, our large multi-national carrier partners are also investing heavily in their networks to provide their customers with ever-advancing wireless technology solutions. Taken as a whole, we believe we are extremely well positioned to continue to leverage our diversified asset base throughout the world to generate significant, sustained, long-term returns for our shareholders. With that, turn the call over to Jim.

Thanks, Tom. Good morning to everyone on the call. During are first earnings call of the year back in February, I outlined to you our aspirations to once again double American Tower's key operating and financial metrics over the next five years. We did and still do firmly believe that the rapid expansion of 4G mobile data and entertainment deployment in our core US market, coupled with the advancement in our international markets through 2G, 3G, and on to 4G, will support the mid-teens annual AFFO growth required for us to get there.

On the last call, I identified specific demand drivers that we are seeing in the United States that will play a critical role in the growth of our domestic business. These include our customers' 4G LTE network investment cycle, where we are seeing carriers progress through the coverage build-out phase, while simultaneously preparing to bolster network capacity, as demand for data services continues to grow at a rapid pace.

As a quick update, here's our view on each of the four major US carriers' network plans that we're confident will drive the 6% to 8% core organic growth that we expect in our domestic business, which still delivers 75% of our rental and management segment's operating profit. Verizon Wireless has completed it's first-phase LTE coverage build, but is now increasing capacity by the deployment of AWS spectrum, which will provide additional amendment revenue, in addition to brand-new cell site co-location leases that they're deploying to densify their network.

AT&T Mobility continues to invest aggressively to achieve its coverage goals of 270 million people by the end of this year, growing to 300 million by year-end 2014. AT&T is already engaged in sight densification, as well, to support growing LTE adoption. Sprint and T-Mobile are racing towards the 200-million population coverage milestone by the end of this year. We fully expect both companies to pursue wider and deeper coverage well beyond that. Each of these carriers has recently secured financial and strategic successes that significantly strengthen their respective abilities to fund and implement competitive 4G networks in the United States.

Sprint now has access to the SoftBank funding and Clearwire's spectrum and subscribers. T-Mobile, meanwhile, has bolstered its own financial subscriber and spectrum positions through its merger with Metro PCS. As a result, it's our view that the recent strategic activity between Sprint, SoftBank, and Clearwire; and between T-Mobile and Metro PCS has significantly enhanced the prospects of having four very competitive mobile operators in the United States. We anticipate that all four will continue driving toward nationwide 4G deployment, which is very positive for our Company.

Not only will the four leading mobile operators in the US seek to leverage consumer excitement around 4G to grow their revenues and profits through advanced data and video utilization, but they are also evolving these new networks to carry high-quality voice traffic to more efficiently employ their valuable wireless spectrum.

This will be done by a Voice Over Internet Protocol technology using 4G LTE, all better know as VoLTE. Already, Verizon is planning to roll out VoLTE beginning in 2014. As you may recall, we also spoke of the technological requirements of VoLTE on our last earnings call, which we believe necessitates further cell-site densification in the near-to-intermediate term, and thereby elevates future demand for tower space for all four US carriers.

Since we focused on our US market environment on the previous call, today I will develop most of my remarks to reviewing the strong performance of our international business, which we believe is the perfect complement to our US operation. We will cover the international segment legacy assets, how these assets expand our Company's scale while diversifying our customer base, and how our international markets will lengthen and strengthen the growth trajectory of our business. I will also identify some of the key wireless network investment trends across our global markets that will underpin this continued growth. As a quick FYI, during our next earnings call I will provide our thoughts behind key wireless technology developments, which we believe well further support long-term growth across our business globally.

Turning to our international initiatives, in 2006, soon after the integration of our acquisition of SpectraSite in the US, which is the first major domestic industry consolidation, we began preparing the Company to expand overseas beyond our established presence in Mexico and Brazil that Tom has talked about. Importantly, to complement the Senior Management team we had in place at the time, we added some new members, with broad expertise and experience in global business development and operations.

Today, each of my five direct reports, as well as myself, have run international operations for leading public companies. The four new executives that have joined us since 2006 bring the capabilities that they developed at large, established multi-nationals, including United Technologies, Verizon, Motorola, and National Grid. Each of my direct reports, in turn, have recruited their own senior teams of experienced management, including both ex-pats and regional leaders from Latin America, South Asia, the UK, Germany, and South Africa, among other sources. Of one thing I am very certain -- we have the domestic and international talent base to re-double the size of the Company over the next five years, and to deliver on our performance targets, both in the US and internationally.

Having established a global leadership team, we embarked on an evaluation country by country to determine the areas of investment focus we would pursue. This country selection process involved a rigorous market risk assessment, including conducting due diligence on political, legal, regulatory, and business environments, as well as each country's respective macroeconomic condition and forecasts. Special attention was and is paid to the tradition of rule of law in that country, the track record of judicial independence, and respect for property rights, specifically with regard to existing foreign investors.

To confirm this, we often actually interview US and European company executives that are already operating in these markets. Further, we evaluated the competitive characteristics of each target country's wireless industry. We narrowed the list to where there were three or more wireless service providers, a growing demand for voice and or data services, and a government which was actively making required spectrum available.

Finally, we assessed various strategic entry strategies, which typically consisted of either an asset purchase from an existing carrier -- and in most of these cases was an existing customer of ours in another market. Each identified transaction opportunity is assessed to weigh a specific risk and relative to the assets of the counter party, and while being benchmarked for returns based on our expectations of future organic revenue growth. This whole process is conducted and quantified using a 10-year discounted cash flow analysis, with conservative risk-adjusted target return hurdles, which outside the United States are well above our domestic target returns.

As evidenced by our international customer base today, we have strategically aligned ourselves with strong, multi-national wireless operators with solid financial foundations, and we have leveraged these relationships across multiple countries and even regions.

For example, we have purchased assets or have co-investment projects, and or have significant commercial lease arrangements with the following multinational telecoms, in addition to many others -- Telefonica in Mexico, Brazil, Chile, Columbia, Peru, and Germany; Vodafone in Germany, South Africa, Ghana, India, and the US via its substantial ownership position in Verizon Wireless; America Movil, also in Mexico, Brazil, Chile, Columbia, and Peru; and also in Germany, through it's part-ownership of KPN; AT&T in the US, of course, and indirectly those same five Latin American countries through AT&T's part-ownership in American Movil; T-Mobile in the US and Germany and Millicom in Columbia and Ghana. There's many other examples.

The growth we've pursued across our international segment has enabled us to meaningfully increase are scale and global brand recognition, while allowing us to a diversify our market exposure and broaden our revenue sources, with over 50% of our international tenants rated as investment-grade. We are confident our ability to successfully apply this thorough evaluation process to every international investment prospect, and effectively operate our business globally.

As a result of the international investments we have made over the last five years, we have established a diverse portfolio of international properties which span 10 countries at varying stages of the wireless technology cycle. Our early-stage markets include India, Ghana, and Uganda, which are all primarily focused on bolstering the speed, quality, and coverage of voice networks, while beginning to introduce data services. Our transitional markets include five select countries in Latin America, as well as South Africa, which has extensive voice coverage, and our ramping up their data network investments utilizing 3G and 4G. Our advanced-stage market is Germany, which has seen the deployment of 3G for several years to address subscribers' expanding data usage, and where 4G deployments are now bringing greater speed and capability.

Now let's review a few examples of how American Tower has executed in our international investment process. Looking at our legacy markets, Mexico and Brazil, and two of our newer markets, South Africa and India. I'd like to mention that the industry statistic that I'll periodically reference throughout these portions of my remarks are data points provided by our external technology advisors.

Let's begin with those pioneering initial investments in Mexico and Brazil, which utilized in 1999 and 2000. As Tom illustrated earlier, our pre-2008 legacy sites today generate the highest level of return in invested capital in the business, at 22%. Our Mexican and Brazilian legacy sites today have tenancy rates and generate revenue and profit margins per tower that are in excess of our assets in the US. At the time of our international initial investments, the wireless profiles of these countries were characterized by nascent voice penetration and initial 2G build-outs. They've evolved today to roughly 100% voice penetration, as carriers shift their focus to early-date network investments via 3G and 4G deployments.

One might characterize that the wireless markets in Mexico and Brazil were and are about five years behind the US, but on a similar network development trajectory, as we have experienced here domestically. Our portfolio has benefited tremendously from these compelling cellular growth trends, as evidenced by the strong returns generated by our long-held towers in Mexico and Brazil.

The more recent transactions we have completed in Latin America are also generating solid performance for the business. For example, the portfolio we acquired from site sharing in Brazil in 2011 is seeing robust leasing activity. Since integrating these sites into our portfolio just under two years ago, on a currency-neutral basis we have grown revenues by over 20%, and EBITDA by over 15% on these assets. Again, all in less than two years.

Further, we've increased the occupancy rate on these site by over half a tenant, which is higher than initial expectations. Over the next several years, we expect to continue benefiting from solid industry trends in Latin America, as carriers in Brazil work toward building out 4G spectrum in advance of the 2014 World Cup, and 2016 Summer Olympics. In both Mexico and Brazil, mobile data is still early in the adoption phase, while smartphone penetration in both markets was just 15% at the end of 2012. It did grow rapidly, though, at a 67% per year annual pace.

Also, RFU driven by data is approximately 23% for Brazil, and 37% for Mexico, compared to the US at just over 40%. This signals that demand for more complex wireless services and sophisticated handsets is increasing, as markets move down a technology curve over time. We fully expected this trend will result in robust and long-term leasing activity across our asset base in Latin America and elsewhere around the world.

South Africa is our cornerstone country in Africa, and another example of a key wireless market in transition, from a focus on voice services to data services. By year-end 2012, 25% of RFUs there were data-driven, and subscribers' adoption of mobile internet remains on an upward trajectory. Consumer trends are similar to when mobile, e-mail, and web browsing started taken off in the US during the 2005 to 2007 time frame, back when Blackberry each year was on the rise, and the original iPhone was introduced.

As overall internet usage continues to expand in South Africa, we anticipate that the vast majority of this growth will continue to be captured on the mobile network, given South Africa's very low wire line penetration of 9%. Already, the strongest subscriber ramp-up in data is fueling significant need by the carriers to invest in 3G capacity builds. MTN and Vodacom, for example, have recently reported plans to increase their 3G deployment activity. This is resulting in leasing activity across our South African sites well in excess of our original expectation.

Our acquisition of towers from Cell C, which represented our launch into South Africa, is a prime example of this success. Upon acquisition the portfolio had on average just over one tenant equivalent per tower. Within just three years of integrating these assets, we have grown the occupancy rate to nearly two tenant equivalents per tower, and today are generating a return on invested capital of approximately 20% in local currency. It has been through our disciplined approach to identifying and evaluating investments like this that has enabled us to achieve these types of results.

However, we believe we still have substantial up side to grow in South Africa. Today, smartphone penetration is only 20%. There's significant up side to data adoption, as handsets become cheaper and more accessible for those consumers. Further down the road, we view LTE deployments as a longer-term growth driver in the South African market, and anticipate that carriers will largely use the spectrum they have been allocated to provide more advanced services, such as mobile video. South Africa, like our other transitional markets in Latin America, therefore represents another opportunity to elongate our growth profile by five to 10 years beyond what we are seeing domestically.

Lastly, let's turn to one of our early-phase wireless markets, India. In this nation of nearly 1.2 billion people, subscriber trends continue to be marked by rapid-growing voice penetration. At the end of 2012, wireless subscriptions in India were at 75% which represented a 33% compounded annual growth rate since 2007, and only 16% of the RFUs from these folks were generated from data usage. We estimate that today's stage of wireless network investment in India would be equivalent to what we saw in the US around 10 years ago. Due to the lack of wire line infrastructure, wireless communications is the first and only mode of communications available for a large portion of this population.

Back in the mid-2000s as we assessed the investment opportunity India presented, these long-term subscriber trends stood out to us as being compelling for the tower co-location model. We want to participate in the evolution of these trends, which we believe complemented our market exposures in Mexico and Brazil. However, at that time, asset valuations for portfolios on the market were notably higher than our investment process supported. As a result, we opted to launch our Indian operations not through an acquisition, but through a massive tower construction program, primarily with the large incumbent carrier. We then proceeded to increase are scale in India through M&A, only when the asset price was moderated and met our investment criteria.

Furthermore, with our long-term perspective, we strategically aligned ourselves with the incumbent, well-capitalized players in that market, with the belief that the wireless industry would, and it did, see consolidation of the smaller operators. Our Indian assets have experience strong leasing with relatively low churn, and today average nearly two tenants per tower, resulting from the robust cellular growth trends across the region, and our focus on those major national operators.

Recently, carriers have made notable efforts to stimulate further 3G subscriber penetration in India. In mid-2012, for example, most of the large incumbent carriers cut data service pricing to promote 3G update. Overall, consumer Internet penetration, wireless, and wired across the country is only at 10%. We believe this demand will grow rapidly, with the vast majority of people getting online by the mobile network. We therefore view the Indian market as a long-term growth investment.

In conclusion, we believe we are extremely well-positioned to deliver strong operational results from both our domestic US segment and our international segment over many years. We believe the investments we have made and our commitment to doing business with integrity everywhere will enable us to meet our goal of doubling AFFO per share over the next five years. Further, as demonstrated by the success of our current legacy international portfolio assets, which generate approximately 600 basis points of incremental return on invested capital versus our legacy domestic assets, we believe we're being prudent in our assessment of risk-adjusted hurdle rates, the prices we're willing to pay for assets in the US and abroad, and our overall deployment of capital. With that, operator, can you please open the call for questions.

Yes sir.

(Operator Instructions)

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

Thanks for taking the question, and thanks for that deep dive on your international business. I think that was very helpful. Along those lines, you have been a little less active this year in terms of acquiring portfolios. You have done some deals, but still below your recent run rate. You have a huge liquidity position. I was hoping you could share with us some thoughts on the opportunities you see out there, both domestically and internationally? If you don't identify an attractive deal soon, what are the type options you have for that cash?

Hi Brett, thanks for the kind words. The pipeline continues to be incredibly busy. As you know, we have a very disciplined investment approach, and while we have close on a couple hundred towers, if you will, in Q2, we have passed on many opportunities just because they did not meet our investment hurdles. I can assure you there is a significant pipeline globally in just about every market that we are representing.

To the extent that those don't pan out, as we have done in the past, and will continue to use is our buy-back program. We have just over $1 billion of buy-back available under the plan that the Board put in place just a couple of years ago. As we did this past quarter, we increased the pacing of that buy-back. To the extent that opportunities that meet are hurdles don't pan out, for the balance of the year we will continue to use that as a means of returning capital back to shareholders.

Great. I'm sure you have got a lot of questions in the queue, so I'll leave it there. Thanks a lot.

You bet.

You next question comes from the line of Rick Prentice with Raymond James.

Thanks. Piggy-back on a little bit of Brett's question there. You reduced the tower build program -- sounds like primarily in India. Can you talk a little bit about what is going on there, in particular regards to Jim's comments? As you look at transactions internationally, buying a portfolio versus building, how do you think about the price per tower necessarily? Is it a premium to the build cost, and how that relates?

Rick, it's Jim. Good morning. Our tower build program, especially in India in our original budget submissions was very aggressive. We recognize that here, but we wanted to make sure if there was that much opportunity in the market to build sites this year that did, again, meet our -- in each particular individual case -- our hurdle rates there, we wanted to make sure we had the capital to do it. Just based on carrier budgets and timing and schedules, it wasn't as aggressively deployed as far as new builds as we thought. By the way, the co-location business did quite well so far in India, as a side to that. We probably budgeted more -- we definitely budgeted more than we ever had for India to build towers. The team was very aggressive and kind of overshot, frankly. So we are scaling the guidance back a little bit in that regard.

When it comes to build versus buy, price per tower is a derivative outcome of our investment process, Rick. As you know, whether it's one tower or 10,000, we use the same model framework. A price per tower is going to depend on build cost. It is going to depend on how many customers we think we can get on it, and over how long a period? What's the amount of equipment, and therefore rent that the first customer's signing up to pay. There's a host of inputs that to go into whether we're going to decide to build a tower or not. The two things that fall out of our 10-year DCF, whether it's one tower or 10,000, are what was the multiple of cash flow, and what was the price per tower? Those things are derivative answers from investment process that's built on a 10-year DCF.

And rough prices to build in the different regions, is it still kind of $60,000-ish in India, $150,000-ish in Latin America, just broad build cost?

Yes, about $50,000 in the US, depending whether it's a roof top, or whether it's a ground-based tower, to $150,000-ish down in Latin America. $250,000, if you will, in the US. In Africa, that $150,000 range.

Great. Thanks guys.

Your next question comes from the line of Michael Rawlins with Citi Investment Research Group.

Question. I was wondering if you could talk a little bit about cash that you receive on a pre-paid basis for capital reimbursement? Maybe you can give a sense of what kind of number that is on an annual basis? Also, how much of the amortization related to those cash payments do you see in your revenue, or in your AFFO on an annual basis? Thanks.

Sure. Thanks, Mike. We actually have additional disclosure, actually, in our release that you can probably point to. You can see, it's actually on page 12 of the release. We talk about the balances on a year-over-year balance. You can see that our beginning balance, actually was quite a bit higher than last year, largely due to bringing on some new markets, and the fact in Germany we get a lot of the cash, actually, up front.

You can see the cash component of it that we actually received in the quarter was about $18 million. What we actually run through the P&L is what runs through AFFO, which is about $14 million. You can see on -- for the first six months, if you will Michael, in 2013, the delta is about $18 million. We received cash of about $45 million, but we amortized that over the balance of that lease, as GAAP tell us to do. We amortized about $27 million. That, in essence, is what runs through our P&L and our AFFO. Was that the question?

Yes. That's actually very helpful disclosures with that detail. Can you just review for us how you think the fair way is to present these types of numbers within the AFFO, or what the practices from your research into when you look at other REITs and other companies that try to define it -- what you think the most fair practice is?

Well, I think what we're trying to do is present what the recurring cash flow nature is of our business. I think the way we reflect it, running through -- what runs through the P&L runs through the AFFO -- is the way we should be looking at it to give our investors the notion of what they should expect to be on a recurring basis. We think that this is the appropriate way of disclosing this type of an event.

Thanks very much.

(inaudible - multiple speakers) cap, but it's consistent through revenue EBITDA and AFFO for us. It is all treated on an amortized fashion. We think that is the right way to go.

Thanks very much for that detail.

You bet, Michael.

Your next question comes from the line of Tim Horan with Oppenheimer.

Two questions. Jim, when we get through the amendment process here and we start seeing more cell splitting, what do you think that means for overall revenue growth? You are obviously growing at a really healthy pace at this point. Secondly, is there much variance on what customers pay you internationally for co-locating on your cell sites? Maybe the original tenant paying, are they paying potentially more or less than what you think the market rates are, or is it fairly even? Thanks.

I'll take the first one. Tom can pick up the second question. Whether it's amendments or new co-locations via cell splitting, the way at least I and we view the market is that it all flows from subscriber demand and interest in the population for paying more for advanced mobile services. We see that happening sort of everywhere around the word. It's most prominent and obvious here in the United States. That subscriber demand then flows through to revenue, can cash flow to the carriers, which makes them feel comfortable investing at the levels they have been over the last few years, collectively, among the big carriers, $20-billion-plus a year.

There is so much on the network side. There are so many projects, amendments, new sites that the engineers want. There's plenty of things to spend money on. It is really a cash -- I look at it as a cash supply and demand. There's plenty of demand from the engineers to put more cell sites in, to put more equipment out there to improve their network. Will the investor base and the carriers support the cash supply to do that? We see that happening.

Therefore, we think the overall run rate that you're seeing today, whether it's the mix of amendments and call those changes, the supply of cash is going to be similar over the next three or four years to roll these networks out, and so we think our demand is going to be similar. May result in a different amendment split for us, but I think the overall area under the demand curve for leasing activity is going to come out very similar in cash terms.

Tim, on the second part of the question, as you would expect, the rental rates are going to largely be from the carrier's perspective based upon the invested capital to actually build the tower. If you take a look at kind of our average rates, which have continually been trending positively -- you look at the United States, our average rates on a rental basis are in the $2,500 range. Going down to Mexico and Brazil, they're in the $2,000 range. Ghana's a little bit higher, South Africa is in that range. India, what you would expect where the tower cost us $50,000 to build, the rental rates in India are in the $500,.$600 range. It's reflective of kind of the ROI from the carrier's perspective. They do very in each of the markets, depending upon the level of investment that it takes to build a tower.

Thanks guys.

Sure.

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

Just a couple on FX. I guess the first question would be just confirming, Tom, that the revenue guidance mid-point off of the first quarter currency expectations would have been $40 million higher, but for the change in the expectations for 4X that we're making this year. I guess, two questions on --

That is exactly -- David, that's exactly -- I will put that one to bed. That is exactly right.

Okay, perfect. Two questions, then. One is, with respect to the rates that you're choosing to guide to now, can you walk us through how you come to those expectations? For instance, why is a 2.2 real the right number if the spot rate's 2.29? The second question is, walk us again through the thinking on hedging or not hedging, and why not hedging is the right choice? Thanks.

David, with regards to the selection of the points, we have used a process -- this is since I got here. This is a consistent process we've used right from the beginning. We look at Bloomberg, candidly, for the balance of the year, which is an average in a number of banks, and use that rate as a rate and disclose it as it is disclosed on page four of our release to give investors the transparency in terms of what we have selected. We have said for the second half of the year, you picked the real of being 2.2. It is a consistent process we have used. People can use different rates if they would like, but we think this is a process that's been consistent and is appropriate. As a result, it results in that $40 million of head winds at the rental and management revenue level.

With regards to hedging, as you well know, don't currently actively hedge our international FX exposure on a material basis. We do hedge specific transactions, and have done in the past. We've had cash going out the door on a specific date, and wanted to lock in an attractive FX rate at a time. Given all of -- given virtually all of our international revenue operating expenses, and SG&A are dominated in local currency, we've got an implicit operational hedge in place without actually entering into any specific hedging transaction.

As you know, substantially all the cash generated by our foreign operations is reinvested right back into those same markets. So hedging that cash flow has not made much sense to us at this point, particularly in light of the costs involved. Candidly, translational hedging is really just cost prohibitive. Since we're not repatriating any meaningful cash from our international operations to the yes]. If we were to hedge, we would essentially be sending real cash out the door in order to hedge strictly translational FX impacts, which generally has not made sense to us, given those costs.

We do reach a point in the future where we actually are repatriating substantial amount of international cash back to the US, it may make some sense to reevaluate our hedging strategies at that time. But in the mean time, we are constantly evaluating potential hedging opportunities but would not expect to hedge our international operations material for the time being.

Okay, great. Thanks, Tom.

You bet.

Your next question comes from the line of [Battia Lari] with UBS.

A question on the US. You mentioned organic growth of about 8.5% for this year, exceeding your target. Can you talk a little bit about if that includes any increased activity from Clearwire? Also, looking out to 2014, you do expect leasing activity to remain strong. How should we think about how that translates to organic growth for next year? Thanks.

Yes, relative to -- not meaningful, candidly. Little bit of an up-tick so far, but I wouldn't say they're a meaningful contributor to the 8.50% growth. We see -- we saw, as I mentioned before in my remarks, significant new signed activity in the quarter. We would expect that to be commenced, if you will, over the next 12 months. We have consistently said that our goal is at the 6% to 8%. We are quite a bit over that, if you will, for 2013, and hopefully we'll see some of those similar trends in 2014. But it's really too early to kind of tell at this point, Battia, in terms of where that might be in the curve. I think we are seeing some really positive signs in the US market.

Great. Thank you.

Question comes from the line of Jonathan Schildkraut with Evercore.

Great work, thank you for taking my questions. Two, if I may. First, you gave us a lot of great color in terms of the up-tick in new lease activity. I was just wondering if maybe you could give us some additional detail on whether this is incremental to the amendment activity, or whether this is a shift in demand? Maybe in that, give us the break-down of activity between new cell sites and amendments? Secondly, we've gotten a lot of questions about what it's going to mean for the tower companies, as Sprint defines a higher CapEx plan, and potentially comes out with network vision two, if you will. Want to get a sense as to -- given your MLA being different from some of your partners -- under what scenarios that you will benefit from an up-tick in spending from Sprint? Thank you.

Sure, Jonathan. Speaking first to new lease activity, and how it is incremental to our MLA run rates. These master lease agreements we have with three of the four national carriers are very well defined when it comes to how many sites can be used. In most cases, how much equipment can be on a single platform, how much vertical space you can operate on, and ground space if you are a carrier, and spectrum constraints.

Going over and above any of those parameters results in what we call additions to pay beyond the -- what we call the wholistic use rate of doing some amendments within those boundaries. There is a significant proportion of our new business now that's coming from these additions to pay, because carriers are needing more equipment. Sometimes they're needing two transmission elevations on the tower. Sometimes they're needing more ground space. All these things are outside of the parameters and, therefore they result in additions to pay, which in the US have been significant for us.

In addition to that, most of these agreements don't have any provisions for new co-locations. None of them have any provisions for build-to-suit sites. We're one of the most prolific builders in the United States of new towers right now and of DAS systems, and those are outside of these agreements. Any acquisitions we do in the US are also outside these agreements.

There is a complete portfolio of addition to pay opportunities, I guess I would call them. We are seeing a lot of that now. The split in the US currently is 70% amendments and 30% otherwise. Again, co-locations, need build to suits, DAS installations, things like that. That's really where we get the turbocharger on these national lease agreements is through that structure and those additions to pay.

Secondly, when it comes to Sprint, I think it's always important for us to lead off to say we have zero Nextel-related churn risk with Sprint. That is because in the wholistic agreement we put together with them, we gave them some more flexibility on CDMA, and ultimately 4G and network vision, to prevent any churn when the Nextel equipment was going -- and site were going to come down, which they are as we speak.

That agreement has limitations, as well. There are some additions to pay with the Sprint agreement. As far as network vision two, again, there is a limitation on total number of sites, which if exceeded, will be completely outside this agreement. We think there is some up side to us with SoftBank funding and with Clearwire spectrum being able to be controlled by Sprint.

Awesome, thanks a lot.

Your question comes from Colby Synesael with Cowen.

Thank you. There has been a lot of change in who owns what spectrum -- certainly recently in some deals that have been done, but also carriers now just deploying spectrum they've been holding on to. Can you just remind us, as carriers start to deploy new spectrums -- Verizon, for example, deploying AWS, how that could potentially benefit you, especially in consideration of the MLAs that you have? Thanks.

It has a very direct benefit, especially in the case that you cite, which is Verizon AWS. Let me step back for just a second. We think the two most important things going on in the US market right now is this ability for carriers to have the financial foundations to deploy national 4G competitive networks. Also, to have the spectrum that enables them to actually do that in a quality way. When spectrum gets in the right hands, so to speak, to someone that can actually put it out there in the field and install equipment on towers, that is going to benefit our industry. AWS spectrum that Verizon has secured is an excellent example of that.

When it comes to our agreements, we tend again to have spectrum limitations or definitions around what can be on the tower. More importantly, almost all of that new spectrum tends to come with additional equipment, because you don't necessarily want to dilute your existing transmission operation to add the spectrum, which would be counterproductive. Carriers often add equipment to bolster their ability to transmit. In the case of AWS, there is sort of an amendment standard of biller materials that Verizon tends to put on for an AWS upgrades, if you will. We have rates by region of the country for those. That is complete additional amendment revenue for us, with our arrangement in that particular case.

Great, thank you.

Next question comes from the line of Imari Love with Morningstar.

Thanks for taking the call, guys. Wanted to touch back internationally on zoning restrictions, ground-leasing dynamics, access to licensing. If you can speak to, on a high level, are things getting on the margin easier to make moves, builds, of acquisitions internationally? Specifically in Latin America, or are things starting to get a little tighter maybe from a regulatory backdrop perspective?

Broadly, zoning and permitting restrictions are increasing in difficulty in every market at a different pace, but they are increasing everywhere. I also think it's important to reiterate that zoning is not what makes a franchise tower. What makes a franchise tower is the economic disincentive to build next to an existing site, because the existing site is able to capture on its own within its territory all of the license holders in that location. So if there are five license holders, we have a tower there. We've got five potential customers.

For someone to build next to us once we're already up and running and have, say, a couple of those customers already on, is economically foolish. Because A, we've already got two of the five customers. In theory, they'd be splitting the opportunity for the rest. So no one really does that in any market. Rationality has come to all of the competitive tower markets that we operate in. The biggest disincentive to someone building near your tower and damaging the franchise, potentially, is an economic incentive that is universal.

You add to that the zoning instructions, which are difficult and getting more difficult, especially in places like Chile and Brazil, Mexico, South Africa -- Ghana is very tough right now. India is increasing. Municipalities are sort of enhancing our franchise value as we speak. But the main franchise protector is economic.

Great, thanks.

Operator, we'll take one more question, if we could.

Your final question comes from Jonathan Atkin with RBC Capital Markets.

Good morning. I was wondering about the property-level cost control you mentioned that contributed to the EBITDA raise. What was that, and where was that? Which market? Then wondered about Latin America. It sounds like your new tower builds are over an index towards the Mexico. What's driving that? Is Mexico still going to be where you build a preponderance of your new builds in that region? Thanks.

Yes, sure Jonathan. On the first one, it's largely in the US. As we have done historically, we continue to either extend leasing contracts with landlords or buying towers. Last year, we affected about 1,000 parcels. We have affected roughly 1,000 parcels in just the first half of this year, and the goal for our US tower team is 2,000 parcels. They have assured me they are going to hit that number. It is largely just a function of buying parcels where it makes sense, and extending them where the landlord is not interested in selling, and just wants to go back out on a renewal.

The other element globally is we are becoming, I think, quite capable in fuel management in the markets where we have to deal with that. You can actually drive down fuel cost, put in sort of programmatic power contracts with your customers, where there's actually some profitable up side, a little bit of profitable up side there sometimes. But we're getting very good at fuel management. That is helping us to manage our cost.

Just as a back -- from 2007 to 2012, land lease expense as a percentage of domestic rental revenues continued to decline from about 16% to 13%, illustrating our revenue growth significantly out-paced any increase in our land expense.

When it comes to construction, one of the things we're proud of in the Company. We built 400 sites last quarter. Almost 100 of those were in the US, by the way, just last quarter. Mexico was actually third -- fourth, frankly -- behind India and one of our African markets. There was 48 towers built in Mexico, much of that driven by just the transitions we talked about from a strong 2G network to a much stronger 3G network that can deliver data. There's density requirements, especially regards to spectrum that's being deployed that need to be addressed, and so tower building is helping with that.

Thank you.

Great. Well, thanks everybody. I really appreciate you spending a little bit longer with us this morning. I really appreciate all of your ongoing support, and to the extent you have any further questions, Lee and I are both here for you. Thanks again, and have a great morning.

Ladies and gentlemen, with this we conclude today's presentation. We thank you for joining. You may now disconnect.