美國電塔 (AMT) 2013 Q3 法說會逐字稿

Good morning. My name is Tequitria, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Tower third-quarter 2013 earnings call.

(Operator Instructions)

Thank you. I would now like to turn the call over to Miss Leah Sterns, Vice President of Investor Relations and Capital Markets. You may begin.

Thank you. Good morning, and thank you for joining American Tower's third-quarter 2013 earnings conference call. We have posted a presentation which we will refer to throughout our prepared remarks under the Investor Relations tab on our website.

Our agenda for this morning's call will be as follows. First, I will provide a brief overview of our third quarter and year to date results.

Then, Tom Bartlett, our Executive Vice President, CFO, and Treasurer, will review our financial and operational performance for the quarter, as well as our updated outlook for 2013. And 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, including AFFO growth and dividend per share growth, our pending acquisitions, 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 June 30, 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.

And with that, please turn to Slide 4 of the presentation, which provides a summary of our third-quarter and year-to-date 2013 results. During the quarter, our Rental and Management business accounted for approximately 99% of our total revenue, which were generated from leasing income-producing real estate, primarily to investment-grade corporate tenants. This revenue grew 14.2% to approximately $797 million.

In addition, our adjusted EBITDA increased 13.9% to approximately $528 million. Operating income increased 4.5% to approximately $309 million. And net income attributable to American Tower Corporation declined to approximately $180 million, or $0.46 per basic and $0.45 per diluted common share. The decline was primarily related to unrealized non-cash losses attributable to our intercompany loan.

Turning to our year-to-date 2013 results, our Rental and Management revenue grew 14.5% to over $2.36 billion. In addition, our adjusted EBITDA increased 13.3% to nearly $1.58 billion. Operating income increased 9.6% to approximately $921 million, and net income attributable to American Tower Corporation was approximately $451 million, or $1.14 per basic and $1.13 per diluted common share.

And with that, I would like to turn the call over to Tom, who will discuss the results in more detail

Thanks Leah, and good morning everyone.

Our teams delivered another solid quarter results in Q3, which was a direct result of the nearly 11% core organic revenue growth generated on our existing properties. Over the last year, we've also added just under 8000 tower sites across our global footprint, driving an additional 8% of revenue growth. During the quarter, we also announced two acquisitions which will expand our portfolio of properties across the US, Mexico, and Brazil.

We completed our acquisition of GTP on October 1, which included over 5000 tower sites in the US, a well-positioned network of managed rooftops, and in an established presence in Central America. In Latin America, our acquisition of sites from Nextel International is expected to close during the fourth quarter, and deepens our scale in the rapidly-growing Mexican and Brazilian wireless markets.

We continue to experience excellent organic growth overseas and anticipate these sites will position us well. We believe that our legacy business' strong organic growth, coupled with these acquisitions will position us to continue to deliver significant value to our shareholders in 2014 and beyond.

If you'll please turn to Slide 6, our total Rental and Management revenue in the quarter increased by over 14% to $797 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 total Rental and Management revenue growth was over 18%.

Of this core growth nearly 11% was organic, with the balance attributable to new sites. Our organic revenue growth in the US continued to be driven primarily by our tenants' network investments, largely in the form of lease amendments. We anticipate that over the next 12 to 18 months our tenants will gradually shift their focus from coverage to capacity-driven network investments, leading to an increase in new tenant co-los. As a result, we continue to target core organic growth at or above the high end of our long-term 6% to 8% range.

Meanwhile, our international segment posted yet another strong quarter, driving about half of our consolidated revenue growth. As a result of our diversified pool of customers, we're experiencing demand across our entire international footprint.

In our emerging wireless markets, including India and Ghana, 3G is in its early deployment stages. Increasing data uses is driving capacity to deployments in our evolving Latin American and South Africa markets, and 4G deployments are underway in Germany. We believe these investment trends will continue, and as a result expect our international segment to continue to deliver double-digit core organic growth.

Turning to Slide 7. During the third quarter, our domestic Rental and Management segment revenue growth was driven primarily by an increase in recurring cash leasing revenue from our legacy properties. Reported domestic Rental and Management segment revenue grew by over 10% to approximately $530 million, and our domestic core revenue growth was over 12%.

This is the highest core revenue growth we've reported in the US in the last five years. Our domestic core organic revenue growth was 9.2% in the quarter, significantly exceeding our ongoing 6% to 8% core organic growth goal for the US.

AT&T and Verizon continue to lead the pack in terms of new business commencements, with T-Mobile, Sprint, and a number of other customers also making meaningful contributions. In addition to our contractual escalators and guaranteed payments under our holistic MLA agreements, we again saw significant additions to pay activity in the quarter.

Domestic signed new business, which we would expect to commence within the next 6 to 12 months, remained at elevated levels during the quarter, exceeding the year-ago period by 13%. While domestic commenced new business is still over 70% amendment-related, we are starting to see signs of a shift to new leases in our new business pipeline where co-lo applications make up closer to 40% of that total.

The balance of our core growth in the US, about 3%, was generated from the more than 1000 new communication sites we have acquired or constructed in the US since the beginning of the third quarter of 2012. Included in the 1000 are about 350 new build-to-suit towers, and we expect that our US new build program will increase over the next 12 months.

Our domestic Rental and Management segment gross margin increased over $46 million, or 12%, in the quarter, representing a year-over-year conversion rate of about 94%. Our strong conversion rate trends are a result of our robust organic revenue growth, complemented by our ongoing property-level cost management program, including our land lease management initiatives.

We continue to proactively acquire and extended land leases under our sites during the quarter, purchasing 170 parcels and extending over 300 by an average of over 30 years. As of the third quarter, we owned land under approximately 30% of our domestic properties, and have on average only 1% of ground leases up for renewal per year over the next 10 years.

Combined with our recent acquisition of GTP, about 90% of our domestic tower sites are located on land that we either own or have land leases under for at least 10 years. Finally as a result of our growth in gross margin in Q3, operating profit increased 11.4% to over $410 million.

Moving on to Slide 8, during the quarter our international Rental and Management segment reported revenue increased about 23% to $267 million. International core revenue growth was nearly 32%, and international core organic revenue growth was over 14%.

During the quarter, foreign currency fluctuations negatively impacted our growth by about $6 million when compared to the rates we assumed in our outlook. Our organic growth continued to be driven primarily by strong new lease commencement activity from tenants such as Telefonica, Nextel international, and America Movil in Latin America, Vodafone and MTN in South Africa, and Bharti Vodafone and Idea Cellular in India.

Unlike the US, our international segment organic growth is primarily generated by the addition of new tenant co-locations across our existing properties. This is a result of the lower average tenancy across our international portfolio, which today stands at about 1.6.

As you recall, many of the towers we've acquired internationally over the last three years were single-tenant towers on day one. These properties did not previously been marketed or made available to other wireless service providers. Given our established presence and relationship with our customers as a leading independent tower operator, we are well positioned to drive incremental leasing on these assets. We expect this organic growth to increase tenancies across our international portfolio will also result in substantial margin improvement for the segment.

During the quarter we constructed more than 400 sites and acquired over 500 more. We have added 6800 communication sites to our international portfolio since the beginning of the third quarter of 2012, all of which contributed over 17% to our international core growth.

As we add new properties to our international portfolio, our pass-through revenue continues to increase, reflecting our ability to share a portion of our operating cost with our tenants. During the third quarter, our international pass-through revenue was over $71 million, which is up about a 25%, or $14 million, from the prior-year period.

From a reported gross margin perspective, our international Rental and Management segment increased by 25% year over year to $170 million, resulting in a 69% gross margin conversion rate. Excluding the impact of pass-through revenue, our gross margin and gross margin conversion rate would have been 87% and 96% respectively.

Finally, our international segment operating profit also increased nearly 25% to roughly $138 million. Our international segment operating profit margin was 52%, and excluding the impact of pass-through revenue, was over 70%.

Turning to Slide 9, our reported adjusted EBITDA growth relative to the third quarter of 2012 was nearly 14%, with our adjusted EBITDA core growth for the quarter at over 17%. All 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.

During the third quarter, our Services segment contribution to adjusted EBITDA declined on both a sequential and year-over-year basis as a result of the completion of a specific project related to a customer network upgrade initiative. During the fourth quarter, we expect activity will increase in our Service segment as a result of a new services project and drive activity closer to our second quarter of 2013 levels.

For the quarter, our adjusted EBITDA margin was over 65%, which increased compared to the prior-year period, despite the addition of nearly 8000 new sites since the beginning of Q3 2012. The average day one tenancy of the 8000 new sites was just over one. This results in lower initial margins, but provides a platform for margin expansion over the next several years. And excluding the impact of international pass-through revenue, our adjusted EBITDA margin for the quarter was nearly 72% (technical difficulties) and our adjusted EBITDA conversion rate was over 80%.

Moving on to Slide 10. The strong EBITDA performance we saw in the quarter also translated into solid growth in adjusted funds from operations, or AFFO, which increased by over $72 million to $367 million, or $0.92 per share. AFFO and AFFO per share growth were over 24% relative to the third quarter of 2012.

Core AFFO grew about 26%, after excluding the impact of foreign currency exchange rate fluctuations and the impact of a $3.5 million one-time favorable international cash tax refund received during the quarter. This strong growth in AFFO reflects the significant organic new business growth and a number of successful opportunistic refinancing transactions, which resulted in 100% conversion of adjusted EBITDA to AFFO during the quarter. Looking forward, we continue to target at least a mid-teen core AFFO growth and believe that we're extremely well positioned for long-term upside from our recently announced acquisitions and the continuing underlying demand trends we are seeing across our global footprint.

Turning to Slide 11, we are raising our full-year 2013 outlook for Rental and Management segment revenue to between $3.25 billion and $ 3.28 billion. This includes an incremental contribution from GTP and Nextel Mexico of approximately $86 million, plus $5 million of incremental straight-line revenue from our existing business, partially offset by a $13 million negative impact of FX fluctuations relative to our prior outlook, $6 million of which impacted our Q3 results.

We expect to close the NII tower acquisition in Brazil late in the fourth quarter, and consequently have excluded the benefits of those assets from our outlook. For the year, we now expect our core growth in Rental and Management revenue to be over 21% at the midpoint. The robust leasing activity we have assumed for the rest of the year also translates into stronger core organic growth, which we now expect will be nearly 9% in the US and about 13% in our international segment.

We are also increasing our outlook for adjusted EBITDA by $55 million at the midpoint. This includes a $58 million contribution from the GTP portfolio and the NII sites, plus a $4 million net straight-line benefit, partially offset by about $7 million in unfavorable FX fluctuations. We expect core growth in adjusted EBITDA for the full year to be more than 19%.

Finally, we are also raising our full-year AFFO outlook at the midpoint by $10 million. This increase reflects the impact of our recent acquisitions and the debt we raised in August used to help close the transactions anticipated in Q4.

It is important to highlight that we've included the interest expense impact of the full financing in our outlook, but have not layered in the associated EBITDA for the Brazilian portfolio. Also, we've included just two months of EBITDA contributions from the NII Mexican portfolio, given an expected close in November.

We now expect to generate core AFFO growth of over 22% for the year. This growth reflects the immediately accretive nature of the GTP and NII transactions.

Moving on to Slide 12 and walking through our 2013 Rental and Management segment revenue build, you can see that we expect consolidated core organic growth in 2013 to be about 10%, composed of cash growth from escalators, new leases and amendments on existing sites, partially offset by some churn. The balance of our core growth, about 12%, is attributable to the nearly 12,000 sites we've added to our portfolio since the beginning of 2012.

10% would be the highest full-year core organic growth rate we've achieved in over five years, which we believe is an excellent indicator of the momentum we are seeing across the business. Our ability to not only leverage our strong balance sheet to deploy capital for accretive transactions but also grow our large base of business organically is in our view a clear indication of the quality of our properties and global scale.

The foundational principle of the tower business is centered on organic growth, given the extremely high flow-through of revenue to margins and low levels of required incremental capital spending. We've been focused for a number of years now on positioning ourselves to generate significant sustainable organic growth from our operations, and are now seeing the fruits of those initiatives. We expect to generate continued strong organic growth across our global footprint into 2014 and beyond.

Turning to Slide 13, we remain committed to the long-term financial policies that have enabled us to deploy over $17 billion in capital since 2007 to fund accretive acquisitions, our CapEx program, and the return of cash to our shareholders through our repurchase programs and REIT distributions. As a result of our acquisition of GTP, we expect to end the year at 5.8 times net debt-to-adjusted-EBITDA on a pro forma basis.

We intend to de-lever back to our targeted range of net debt-to-adjusted-EBITDA over the next 12 to 15 months. We anticipate that this de-leveraging process will be driven by a combination of adjusted EBITDA growth from both our legacy and newly acquired assets, as well as selective debt repayments, utilizing the significant free cash flow generation of our business. Pro forma for our recently completed term loan and our acquisition of GTP, we have liquidity of about $2.6 billion, including about $700 million in cash on hand.

Turning to Slide 14 and in summary, we've had an excellent year so far in 2013. We believe that we have improved our competitive positioning and ability to drive solid returns through our recently closed acquisition of GTP and our announced transactions with Nextel International.

We've established our status of a global leader in telecommunications infrastructure, and as a result of recent acquisitions expect to have over 65,000 sites on five continents. We have positioned our Company to benefit from the next-generation network technology deployments around the world.

In the US, we believe our recently expanded portfolio of over 27,000 sites positions us to benefit from an unprecedented demand environment that we believe will continue through 2014. All four nationwide carriers are aggressively deploying 4G networks, with Verizon and AT&T leading the group, and T-Mobile and Sprint working hard to keep pace.

We have deliberately positioned our US business to better serve these large, well-funded carriers. Pro forma for the GTP portfolio, we will derive nearly 80% of our domestic Rental and Management segment revenues from the top four carriers. With over 60% of our portfolio located in the top 100 markets and significant incremental capacity on the vast majority of our tower sites, we believe we are poised to benefit from the carriers' continued investment in their networks for a number of years to come. The acquisition also increased our presence in top key markets, such as New York, San Francisco, and Washington DC.

In our international markets, where we will have nearly 40,000 sites once we close the NII transaction, our large, multinational carrier partners are also investing heavily in their networks to provide their customers with increasingly bandwidth-intensive wireless technology solutions. In our anchor Brazilian and Mexican markets, where we have demonstrated a proven ability to generate return on invested capital in excess of 20% on legacy tower sites, our portfolio will expand to over 15,000 sites.

As the largest independent tower operator in those regions, we intend to use our portfolio and long-standing relationships with key customers such, as Nextel international, Telefonica, and American Movil to continue to generate sizable returns. In Brazil, as the World Cup and Olympics approach, we anticipate the strong demand environment to continue through 2014 and beyond, and are well positioned to capitalize on this investment cycle.

We are especially excited to start leasing up the nearly 2800 predominantly single-tenant sites we are acquiring from Nextel, given their favorable locations and the fact that they have never been actively marketed previously. In Mexico, where we will also have the largest independent tower portfolio in the country, we expect the solid demand trends we have seen so far in 2013 to continue into next year, as carriers such as Nextel, America Movil, USYS Cell continue to aggressively invest in their 3G networks.

We anticipate that 4G network deployments in Mexico will commence in the near term as well, which will be another driver of organic new business for our portfolio of over 8000 sites. We expect demand trends in our other international markets to remain compelling, as well. Our customers in Africa and India are expected to continue to invest in their networks, as wireless services continue to expand. As we've talked about previously, the distinct lack of fixed-line infrastructure in these regions make wireless a compelling value proposition for the end user. And as a result, we expect to see solid growth in these emerging markets going forward.

Although we will wait to issue formal 2014 guidance until our Q4 call in February, we are confident that we will once again be able to achieve core organic growth rate at least in the high end of our target ranges of 6% to 8% in US, and at least 200 to 300 basis points above that in our international markets. We anticipate that this organic growth, in combination with the EBITDA contributions from our 2013 acquisitions and the repayment of borrowings under our credit facilities will enable us to de-lever back to our target leverage range.

Further, the impact of our GTP and NII acquisitions should contribute approximately $0.25 to $0.30 to our AFFO growth in 2014, further demonstrating the accretive nature of the investments we have made on behalf of our investors in 2013.

In summary, we believe that our legacy business performance, complemented by the accretion associated with our recent acquisitions, will position us well for another strong year in 2014. We believe that this growth in cash flow, coupled with the anticipated growth in our dividend, will create meaningful value for our shareholders.

And with that, turn the call over to Jim

Thanks Tom, and good morning to everybody on the call.

As evidenced by our elevated third-quarter and year-to-date core organic growth rate, the rapid adoption of advanced mobile services continues to drive demand for tower space. Today I'll take some time to briefly review the technical foundations of the essential role of the tower in the delivery of wireless service. These fundamentals, grounded in the physics of radio wave propagation, provide a strong validation of our future revenue and cash flow expectations. Our recent strategic initiatives, notably the GTP and NII transactions, demonstrate our confidence in these technical foundations, and will add approximately 10,000 high-quality sites to our three most long-standing markets -- the US, Mexico, and Brazil, as Tom mentioned.

From an investor perspective, I believe there is just one fundamental technology concept to keep in mind. Modern wireless services is delivered in two basic stages. The analog portion that travels through the airways between your handset and the tower-mounted antenna, and the digital portion of the signal path that is routed via the Internet or land-line telecom network. The tower is the physical point where analog and digital converge, and analog wave physics drive tower economics. ¶ Therefore, as we assess the impact of mobile technology development, it's essential to differentiate between analog and digital considerations. Analog factors determine tower density and tower loading requirements, while digital factors primarily impact the wireless operators' core network needs for base stations, switches, routers, storage, and servers.

At the most basic level, the two most important analog wave characteristics for our business are spectrum frequency and signal strength attenuation. So let's address each of these separately with respect to 4G LTE deployments in the US as our example.

First, as you all know, spectrum propagation distance is inversely proportional to frequency. In other words, the higher the frequency spectrum, the shorter the effective distance. Therefore all else being equal, higher frequency spectrum requires greater cell density, and for us more tower leases. All four national wireless carriers have begun their LTE deployments with initial spectrum either in the 700 megahertz range, Verizon and AT&T, or the PCS or AWS range, inclusive of 1.7 gigahertz to 2.1 gigahertz, and that would include Sprint and T-Mobile USA.

But based on their respective public statements and announced transactions, we believe each of these carriers is, or will be, adding higher band spectrum to its initial LTE network design. Verizon has already deployed HFDS spectrum, and is likely to later repurpose PCS spectrum to LTE. And we expect that AT&T will apply or repurpose AWS, TCS, and even WCS spectrum at 2.3 gigahertz over the next few years.

Sprint is likely to pass the Clearwire 2.5 gigahertz spectrum for a widespread LTE coverage, and T-Mobile potentially migrates to Metro PCS spectrum in the AWS band to LTE, as well. Consequently, it's our view that US carriers will need to add cell sites for coverage and/or capacity, especially in light of the shorter propagation spectrum being introduced for LTE.

The second critical analog signal factor is the level of signal strength required to deliver a competitive user experience to your handset or device. Again basic physics of wave propagation result in signal strength diminishing as the wave travels outward from its source.

Advanced mobile applications enabled by LTE, such as video, music, broadband Internet access, and voice over LTE or VoLTE, they require higher signal qualities than 2G surface switch voice, or even typical 3G data applications such as e-mail. As a result, if the signal at a given distance from the tower provided a viable user experience for 3G applications, it may actually prove inadequate for a logical 4G video stream, for example.

Consequently, the additional signal strength needed at the cell edge for many 4G applications will further encourage greater cell site density, and hence more tower leases over time. So to summarize, we expect the introduction of higher band spectrum, combined with the increasing signal quality requirements of LTE services will drive significant new leasing opportunities for our business.

This conclusion rests on basic principles of analog wave physics and addresses the coverage requirements of evolving wireless networks and large capacity applications. But in addition to these coverage considerations, other capacity constraints based on the physics of analog radio frequency transmission also come into play.

Wireless spectrum in bands usable for radio frequency transmission are, as you know, a limited resource. An incremental of wireless spectrum measured in megahertz in a given band has a limitation on how much information it can carry.

Further, there are electrical power constraints at both the cell site, and especially in the handset, due to a host of factors such as device battery life, regulatory restrictions, signal interference, thermal considerations, et cetera that also put limitations on the effective capacity of an analog radio frequency signal.

Against these special and tower limitations is the exploding consumer demand for bandwidth. As subscribers upgrade from 2G to 3G to 4G devices and applications, the amount of information being transmitted and received grows dramatically. The average megabytes per month of information transmitted from a 3G device as compared to a basic 2G device has been measured at approximately a four times increase.

However, data consumption of the average 4G device today is 1300 megabytes, or 1.3 gigabytes per month, and that's nearly 200 times that of the basic 2G feature phone. Given this very heavy usage pattern, US wireless carriers are already beginning to experience capacity challenges in major markets, since electrical power settings are generally fixed, and dedicated 4G spectrum is also relatively limited at this time.

These early capacity challenges have emerged during a year in which 4G device penetration in the US grew from 10% to only about 20% of devices. As 4G penetration and usage patterns double again from 20% to 40%, and then again from 40% to 80%, we expect that mobile operators will be adding additional equipment loading to their current cell sites, resulting in the elongation of amendment revenue opportunity for the US.

Moreover, in addition to traffic volume, the introduction of additional spectrum bands that we talked about, such as AWS, WCS, and 2.5 gigahertz spectrum will further support tower loading on existing cell sites, as dedicated antennas are often installed to optimize the different propagation characteristics of each of those bands. Finally, given the anticipated enormous increase on data throughput as the majority of subscribers end up connecting to LTE, we expect cell splitting for capacity in addition to coverage to complement that coverage-driven network identification effort that I mentioned earlier.

We've covered a lot of ground on the analog or tower base side of the wireless network, so let's turn to the digital, or core, side of the network for just a few moments. The analog signal to and from a handset or device is handled by the antenna up on the tower, as you can see. Below the antenna, either tower-mounted or in the base station on the ground, is a component known as the radiohead. This component performs the analog-digital conversions needed to connect your phone or device to the core network over the airwaves. The baseband receiver, or base station, then provides the digital signal processing to begin to guide your signal to its ultimate destination via fiber or other wired backhaul.

Much of the current development activity in wireless technology that we read about today affects the digital core side of the network. Some examples of this are software-defined networks or SDN, cloud-based radio access networks, or Cloud RAN, and LTE advanced. While these technologies hold promise for more efficient spectrum utilization and signal path optimization, we don't view them as changing the trajectory of significant growth in either cell site specification or tower loading, as the baseline limitations on the analog, or tower side, of the network remain intact.

Lastly, while we so far today focused most of the conversation so far on the US market, we expect a similar migration towards 4G LTE in all of our served markets. As a comparison of mobile data market development, the US wireless industry derives around 40% of its ARPU from data, with Brazil as an example, only at 23%, or about half. Our general expectation is that these evolving markets will track three to five years behind the US in advanced data networks deployments. With earlier stage markets, such as Ghana, tracking five to eight years behind; thereby lengthening our growth trajectory.

To wrap up in advance of taking your questions, in our view the combination of greatly expanding consumer demand for advanced high-quality wireless service in both the US and globally, plus the fundamentals of analog radio frequency physics combine to pave a clear path to continued robust growth for our business, as Tom described. Our recent acquisitions of GTP, which significantly expand our US asset base as 4G deployments trend upward here, and of NII, which further improves our position in our two largest international markets, will both enhance our AFFO per share performance.

These two important transactions will also contribute significantly to our aspirational goal of doubling our AFFO per share from 2012 to 2017. So thanks to all of you for joining our call today, and we look forward to celebrating with you all the impending Red Sox victory in the World Series.

Operator, you can now open up the line for questions

(Operator Instructions)

Ric Prentiss, Raymond James.

Can you hear me now?

Absolutely.

Sorry about that. Good morning. Congrats to Boston so far. [Campa] gave it a try, but didn't make it all the way. Question, apologize for joining the call in progress, it's been a busy earnings day, obviously. On your guidance, certainly very exciting time globally for wireless and towers. Within the guidance for 2013, can you walk us through a little bit about how much of the increase was from the acquisitions, Global Tower Partners and Nextel Mexico?

Sure, Ric. I mean, there's a slide in there that is in the appendix that I didn't talk to that actually gives a walk of the revenue, EBITDA, and AFFO growth from our prior outlook versus the new outlook. And so you can see that looking on that page, it's Page 16, the impact of GTP and NII in of itself is about $86 million at revenue, $58 million for EBITDA, and $53 million for AFFO. Less than the $36 million which is the financing, which is there some pre-funding in there because we actually raised some debt in August for that.

And that includes the GTP acquisition, as well as the assets in Mexico which we anticipate closing for two months of the quarter, not for the full three. And we then anticipate closing Brazil late in the quarter before the end of the year, and haven't included any of the benefits of that portfolio, just because of the shorter timeframe, though, to be in the quarter. So the GTP and NII Mexico transactions from a revenue perspective will generate that $86 million that we have on page 16.

Okay, and obviously a little continued weakness back in the third quarter from the FX, more than what we --

Yes, we had, in my remarks I mentioned we had about $6 million of FX headwind versus our prior outlook, and we expect another $7 million in the fourth quarter. So that gives you the impact, total impact of $13 million. Just to round out the revenue, we had some additional straight line on some of our legacy assets, as well as a couple million dollars of even positive results to generate that full $80 million increase at the midpoint.

Sure, it make sense. And I think you also mentioned that $0.25 to $0.30 of AFFO per share growth in 2014 is coming from the Global Tower Partners in both Brazil and Mexico for NII. Can you remind us about how much impact those two transactions had as far as maintenance CapEx and SG&A spending? Because I would assume that is baked into that number as well? That's a net benefit.

No, that's exactly right. All of those costs are baked in there. On the transactions, I want to say it was roughly $10 million of maintenance CapEx for 2014. NII is largely going to be integrated right into the business, so there's very little SG&A that's required, maybe a couple million dollars.

And with regard to GTP, there are some synergy benefits, but it's about, I want to say $25 million, $27 million of incremental SG&A. We added, as you recall from our last call when we talked about GTP, we anticipate spending $10 million to $12 million of integration expenses, and as a result we expect synergies of $5 million, I think it was, in the first year, thereabouts, and growing to about $10 million over a 24-kind of month period

Great, thanks so much.

Jonathan Atkin, RBC

Good morning. My questions are on international, and except Germany perhaps, can you summarize it as a degree to which you got more versus less zoning protection by region, and therefore some degree of competitive insulation for your structures? And then on any future hypothetical carrier transactions, how open do you remain to considering the joint venture structure where the carrier retains ownership of assets, an ownership stake in assets?

Good morning, Jonathan, it's Jim. I'll start of the first part by just sort of reiterating that_ the main barrier to entry for a particular tower site isn't necessarily the zoning restriction placed by the local government, but it's just the economic reality of the franchise value of the site, meaning if there's an limited amount of licenses in any given territory, to build next to somebody else is essentially an economic mistake, because you cut your available market in half. So it's not a sensible thing to do from a business perspective.

But then further supporting our franchise value is the zoning barrier, and in the US it's varied across the country but ben fairly high. And what we're seeing is in almost every other market, the trend is toward the sort of the US level, if you will. So, if you take Brazil, again it varies across Brazil, but in some of the major cities, and especially historical districts, zoning barriers is as high as they are anywhere in the US. When you get to India, as another example, again when you're in Delhi and Mumbai, zoning restrictions can be very, very difficult and existing sites become thereby more valuable, as you say. And then the last example I'll give you is Ghana, where it's probably one of the toughest new build environments anywhere from a regulatory perspective. So everything is trending at sort of toward the US on the local regulatory side, but the most important factor, again, is just economic rationality.

As for the JV structure, if we can work with a regional or global leading telecom partner, we'll entertain the opportunity for minority stakes and retention by those partners in those countries. So we have those with MTN and Millicom at the moment, and we would entertain them going forward. It also helps with risk sharing and alignment of interests in countries that are new to us as well. So we will look at it, but our goal ultimately, or even additionally often is 100% ownership.

Great, thank you

Yes, thanks

Batya Levi, UBS.

Thanks. Couple questions. First on your outlook for 2014 of at least 8% organic growth in the US, can you talk about what that assumes in terms of activity, especially coming from Sprint? Is it the level of activity you're seeing today, or are you making some assumptions that they'll continue to overlay the 2.5?

And also just in the terms of the third quarter, it looks like the core growth of existing sites were higher than the new sites? And we haven't seen that historically. Can you talk a little bit of that -- what drove that difference?

Sure, Batya. On the last question, it is just timing. I mean, strong organic growth we've seen throughout the year, and as you know, when we look at kind of new site growth we look at those assets that we just haven't owned for a full 12 months. And so given some of the timing of the transactions, it's less, if you will, in terms of the overall core revenue. Strong growth on all those new sites, but just in terms of the way we build the core organic and the new site revenue, the core organic growth is higher. And by the way, as I mentioned, it's among the highest levels that we've achieved, which I think is a reflection of just the demand that we've seen throughout the world, which kind gets into your second question.

From what we see in 2014, and we'll talk about guidance in February, the rates that what I'm talking about now are just building from -- or for 2014, are just building from the rates we have now. So I'm not anticipating any significant growth, if you will, coming from any particular carrier. It's just continuing with the deployment schedules that we're realizing at this time.

Right, and what I would add, Batya, on the US market is, we're seeing what we expected over the last few years continuing into the next few years, which is there's such terrific consumer demand, there's such interesting new devices and applications coming out that's driving carrier investment in the networks to handle all that. They're figuring out a way to do it profitably and smartly, and therefore they're increasing their demand for tower space as we go, again whether it's on existing sites through amendments and more equipment or new sites to densify the network.

So it's a positive trend. It continues along all the fundamentals, and then if you take a look at the individual companies they're -- even their public statements as late as yesterday, suggest that they're going to up their investment in these trends, whether it was Verizon at their Analyst Day or AT&T who's talking about $20 billion a year of total CapEx for the next few years, and T-Mobile and Sprint, who with their new structures, and in the case of Sprint its new parent, are bullish on investing in the US market. So all those are going to support the kinds of expectations we will be delivering in detail to you in our next call.

Great. Just one more follow-up question. Can you remind us what percent of your revenues in the US are on fixed escalators of 3.5%?

The lion's share. I mean 80%-plus are on the fixed escalator in that 3.5% range, Batya.

Okay, great, thanks.

Michael Bowen, Pacific Crest.

Okay, thank you. Good morning. I was just wondering if you could give us an idea at this point of what you're expecting with regard to small cell activity, both currently and going forward? And if you can divulge, what percentage of revenue that is currently, and also what you think could grow to in 2014? Thanks.

Sure, Michael, it is Jim. There's activity in the small cell universe. We look at it in two major categories. One is sort of traditional distributed antenna system technology, which we are active in, and we are seeing actually some of the best organic growth and some of the most interesting new venues to deploy those DAS systems in this year. So it's active, but having said that, it's about 2% of our total revenue, and would we love to get it to 3% or 4%? Yes we would, but the tower business is growing so significantly that that's a hard race to run to increase the DAS percentage against the strong growth on the tower side. So it will probably be low single-digit for the foreseeable future, but it's definitely additive and it's helpful.

And then on the sort of more distributed even single small cells, the carriers are making very public statements about that. The deployment numbers, depending on what you count, can be high, but many of those deployments are for homes or small offices where the radius is 50 to 100 feet. It doesn't really lend itself to co-location, if you will. And really not a competitive kind of product to what we do. So where we can compete effectively in large venues with DAS systems that can handle a lot of traffic, we're right in the market. And with these other smaller cells, you'll see big numbers but they will won't really be a competitive product, I don't believe

And then one quick follow-up, Jim. With regard to Verizon, are you seeing them accelerate their small cell activity? And I guess also, do you see any small cell activity internationally as well? Thanks.

I think it's best to ask the individual carriers what their technical plans are for their network, but there is interest across the major carriers in DAS, and in the US at various levels, frankly. And internationally, it's starting to get -- to pick up interest, and we've deployed some venues in Latin America and Africa, and we're looking out in Asia now. So there will be some opportunity in those places as well, but again compared to the big macro network on towers it will be complementary offering for us

Okay, thank you.

David Barden, Bank of America.

Hello, guys. Thanks for taking the question. Tom, could you kind of give us a sense, as we look both now versus last year, and maybe thinking about some of the drivers for 2014, how two things are changing? One, the mix of new cells versus amendments activity from the carriers? And then second, the amount of activity you're seeing that's been historically encompassed by MLAs that are capturing some of these amendment revenues versus off-MLA incremental revenues at the margin? Thanks.

Sure, David. I mean, first on the mix, in the US we have seen some new co-location growth, but as a percentage clearly the total, we're still seeing 70%-plus coming from amendments, albeit the amendment pricing is actually rising, which actually indicates the carriers themselves putting more up on those existing platforms, which I think is a precursor, then, for them to start to shift to more new co-los, which we're starting to see now in the application pipeline.

And so as I mentioned in my remarks, we're starting to see about 40%, 30% to 40%, of the application pipeline actually being co-location. So I think we will continue to see that growth in volumes over the next 12 to 18 months as the carriers are now going to be starting to have to split cells and increase leasing as the LTE penetration continues to grow from the kind of the mid-teens up to the kind of the north of 20%, which we would expect over, again over the next 12 months. So I think it's a natural trend, David, which we've seen in the past with prior deployments.

Relative to the question on kind of the MLAs and holistic MLAs, which I think is what your question was. About half of our core organic growth in the US is actually now fixed, which is largely the escalators plus the right-to-use fees that we have on our holistic agreements, with the balance coming from the activity from our non-holistic-related master lease agreements, less some churn. So we're actually seizing a sizable portion of our organic growth rate now as a floor, or as a fixed-rate.

So, Tom, if I take that together and then I look at your 9% core organic year-over-year growth rate in the third quarter, and then think about your comments about coming in at the higher end of core growth of 6% to 8% for next year, are there reasons that, based on Jim's comments, that you can name here now that the growth would be as slow as 6% to 8% relative to the 9% you're generating now in third quarter on a core organic basis in the US?

Well I think what I said, David, was that we would expect to be at least at the high end. So without giving formal guidance, which we will in February, we would expect the pacing to be consistent with where we are now. There's no reason to think that it would slow down.

Great, okay Thanks, Tom

Sure, Dave.

Amir Rozwadowski, Barclays

Thank you very much, for taking the question. Just following up in terms of overall opportunities in the US market here, I was wondering if you could talk about some of the pricing trends that you folks are seeing with respect to some of these new sites? I mean it does seem as though, that based on the amount of equipment that needs to go up on the towers, the amount of support that they need to provide with some of these high-bandwidth applications, our checks suggest that you folks are getting a step up when it comes to pricing with respect to an LTE tower versus what we've seen from a traditional 3G sense. And I was wondering if you could provide us a little bit more color there?

Yes. I mean overall if you take a look at the trends, candidly, over the last four or five quarters in the United States, I mean clearly our average lease rate per customer per month is up 10%. So, I think what you're suggesting is right, there's more infrastructure going on the sites themselves, which is driving the increase in revenue per lease per tower. And as well, as just more of, as what Jim was referring to, more of the radiohead, more of the electronics is actually coming up on the tower itself. So we have seen a nice growth in the US market over the last four or five quarters, just in terms of that lease rate per month. And it's been about, as I said, kind of a Q-over-Q basis, it's probably about 10%.

So, one could surmise that as you can start to see increased cell densification from the carriers, which I think seems to be now the consensus for your amongst the carriers in terms of their public commentary, that could be a beneficial trend when it comes to overall pricing trends continuing?

Absolutely

Excellent. And then if I may, just one follow-up question. Now GTP deal is completed. Obviously we've seen what's happened with the AT&T tower sale process. How do you folks view ongoing M&A opportunities going forward? I just wanted to get a better sense in terms of whether or not the pace of M&A, particularly the pace of M&A of significant scale, is likely to slow going forward at this point?

Amir, it's Jim. Obviously there are fewer large portfolios even theoretically available in the United States right now. Others will be determined by their owners, if ever and when they might come to market. We would always be interested in any of those at the right price and terms. We're pretty disciplined on how we do those calculations, but of course we would show interest and review each opportunity. But there's always smaller tower acquisition options in the US as time goes forward, and we'll be very active in that market too. In fact, GTP was quite good at that, and we're going to absorb some of the talent into our Company and keep our eyes open.

Great, thank you very much for giving lots of color

Jonathan Schildkraut, Evercore.

Great. Thank you for taking the questions. Most of them have been asked and answered, but maybe we can drill down a little bit deeper in terms of the question David asked about amendments and new cell sites. At PCIA Leah had made some comments about maybe Verizon and AT&T being further down the path in terms of the transition. And so maybe you give us a little bit more color on where those guys are in terms of their amendment versus new cell site deployments as potentially indicative for where we might see the rest of your client base go? Thanks

Jonathan, I'm going to continue to respect our customers' individual rollout plans. I again refer you to them on specifics, but if you just look at the pattern of initiation of LTE network deployment. Obviously, Verizon started fairly early, AT&T was right behind them, and then Sprint and T-Mobile really picked up the pace recently.

So the historical pattern has been a significant overlay of, say, two-thirds of your sites, then do the grooming that's involved to understand where the usage patterns are, then you may go back and start cell-splitting and filling in coverage holes, et cetera. So we are again seeing Verizon and AT&T logically be the first to enter that phase two of the standard deployment cycle, and Sprint and T-Mobile will enter a bit later. So I think, aside from that, it would be best to get more specifics from each of them

Yes, and Jonathan, just to follow on that. I mentioned that if you take a look at the pipeline that we have from an application perspective, about 40% on our co-los versus 60% amendments. That was 35% four months ago. So we're actually seeing the growth overall in new co-los, and we're seeing that, candidly, in the application pipeline, which we would expect to bring online in the next six months

All right. Thank you for trying to provide some incremental color there, guys.

Simon Flannery, Morgan Stanley

Thanks a lot. Tom, I heard you talking about de-leveraging over the next several quarters. But I did notice you did do some buybacks in the quarter. Perhaps you could talk about your appetite for continuing buybacks going forward, assuming no M&A? And then also a little bit more on dividends? And how your NOL position is changing with some of the recent deals that you've done? Thanks

No, sure. Sure, Simon. The buyback program we actually put on hold when we announced the GTP transaction. So that was the activity prior to the announcement of that particular transaction. And I think in light of what we're trying to do over the next 12 to 18 months in terms of de-levering, there will be very little buyback in our program. With regard to the NOLs, we entered the year with about $900 million and we'll use about $250 million this year. So we'll have about $650 million at the end of the year, to which we will then use over the next three to seven years, if you will. The dividend, as we've said in the past, it is obviously subject to our Board, but what Jim and I have talked about is our 20% compounded annual growth in our dividend. And so we would anticipate that our dividend will grow at that rate over the next several years.

Great, thank you.

You bet. Well, that concludes the call this morning. Everyone, really appreciate your call. I'm sure you've heard the kind of the energy around what we were able to generate in the third quarter. We think we're on path for a really solid 2013, and really well positioned for again another solid 2014, and we look to -- we're excited about being able to share those results in February with you. So thanks again for the call. Bye.

This concludes today's conference call. You may now disconnect.