美國電塔 (AMT) 2013 Q4 法說會逐字稿

Good morning. My name is Carmen and I will be your conference operator today. At this time I would like to welcome everyone to the American Tower fourth-quarter and full-year 2013 earnings call. (Operator Instructions)

I will now turn the call over to Leah Stearns, Vice President of Investor Relations and Treasurer.

Thank you, Carmen. Good morning and thank you for joining American Tower's fourth-quarter and full-year 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, www.AmericanTower.com.

Our agenda for this morning's call will be as follows. First, Jim Taiclet, our Chairman, President, and CEO, will provide opening remarks. Then Tom Bartlett, our Executive Vice President and CFO, will review our financial and operational performance for the fourth-quarter and full-year 2013, as well as our outlook for 2014. After these comments, we will open up the call for your questions.

Before we 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 2014 outlook and future operating performance, including AFFO growth and dividend per share growth; our capital allocation strategy, including our redistribution; 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 September 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.

With that, I would like to turn the call over to Jim.

Thanks, Leah, and good morning to everyone. A year ago we reestablished an aspirational goal of once again doubling our AFFO per share by 2017, as we had previously done in the 2007 to 2012 time frame. Today I am pleased to report that we are well on track to meet our redoubling goal.

In 2013, we drove record levels of organic growth in both our US and international segments and added over 10,000 sites to our global asset base through the acquisitions of the GTP and NII portfolios and our ongoing site construction program. We continued to implement our disciplined investment strategy and to drive operational execution, which we believe have positioned American Tower for sustainable and consistent growth for years to come.

During the more than 12 years that I have been at the Company, we have purposely and methodically expanded our asset base to over 67,000 towers that deliver strong organic growth as well as the highest margins in our industry. Today I will cover three main topics before turning it over to Tom for the details on our 2013 results and 2014 outlook.

First, I will discuss the solid foundation we have built in the US, in which we expect to generate 66% of our 2014 rental revenue through our high-quality asset base, operational acumen, and solid customer contracts. Next I will summarize how we extended our expertise to take advantage of robust wireless growth trends outside of the US through prudent investments and partnerships with large multinational wireless carriers. Finally, I will outline how our legacy portfolio and newly acquired assets together should enable us to continue generating at least mid-teen annual core growth and AFFO per share for the foreseeable future.

So, turning to slide 5, the quality of our US properties and our strong contractual arrangements with the Big Four wireless carriers have led to sustained outperformance in our domestic business. Throughout our history, we have focused on purchasing assets constructed by third-party tower providers, like us, or by cellular operators, both of whom have traditionally invested significant time and capital in developing the quality and maintenance of the tower structure along with relatively generous ground space with favorable land lease terms.

We believe that our domestic sites are very well positioned for long-term growth for a number of reasons. First of these is the structural capacity of our towers is substantial.

With approximately 2.5 tenants per tower versus design capacity of typically around 5 tenants, the vast majority of our properties in the US have significant incremental structural capacity without the need for redevelopment capital spending. Our average tower height of approximately 210 feet provides ample vertical space for numerous platforms and transmission equipment as well.

Second, we believe that the locations of our US sites position us well to capture significant incremental co-location. With a majority of our towers in suburban and rural areas, our portfolio can take advantage of strong wireless usage trends in areas where macro sites are and will remain the preferred deployment option for carriers; and this is from a cost, technical performance, and spectrum-efficiency perspective. In combination, the structural strength and location distribution of our assets has yielded strong performance in our domestic business to date and provides solid upside future leasing activity.

Third, our US assets are predominantly owned macro towers which generate approximately 95% of our domestic revenues today. It is our experience that traditional tower structures continue to generate the highest leasing demand and the most resilient long-term recurring cash revenue streams. Our focus therefore continues to be on maximizing the quality and efficiency of our macro tower portfolio.

Finally, our domestic assets have a very strong land rights profile. Currently, we own the land under 28% of our US towers and conduct a highly active program to either purchase additional land or extend the ground lease, depending on what is most economically attractive in each case. Today, over 50% of our US land leases have remaining terms of 20 years or more, with an average remaining lease term of 24 years.

Turning now to slide 6, with the proliferation of advanced data services such as mobile video, music, and gaming, wireless data consumption trends in the US continue to drive up average revenue per user, or ARPU, for our carrier customers. Demand for wireless data continues to rise, and the latest Cisco VNI report projects wireless data carried over macro networks to grow at a nearly 50% cumulative average growth rate through 2018.

So, to preserve quality of service and minimize their customer churn, our carriers are spending significantly more CapEx to bolster the quality and coverage of their networks. As you can see in the chart, total domestic wireless CapEx was over $30 billion in 2013, compared to historical levels of between $20 billion and $25 billion per year.

These record levels of spending have supported our domestic growth over the last several years and, given the further explosion in data usage and upcoming voice-over-LTE deployments, we believe carrier activity will remain elevated into the future.

Each of our customers is at a different phase in the 4G rollout cycle. While Verizon has finished its initial LTE coverage buildout and AT&T is largely complete, T-Mobile and Sprint continue to work on achieving their coverage goals. The leasing environment in the US remains very strong, and with the overall 4G coverage space progressing well we are now seeing mobile operators in the US moving into expanding capacity and driving new lease activity as they densify their networks to handle 4G traffic.

Then turning to slide 7, as the major carriers began investing aggressively in their networks, we negotiated with them comprehensive long-term contractual arrangements to drive strong domestic core growth for American Tower while streamlining application and installation processes and reducing timelines for our customers. What we call the holistic Master Lease Agreements that we have in place with three of our four largest customers provide compelling time-to-market advantages to them, making us then a preferred provider of tower real estate. Furthermore, given the aggressive network upgrade programs that carriers have in place, in many cases the limits established in our holistic agreements have been exceeded and resulted in incremental revenue for us above and beyond the initial contract.

Our Master Lease Agreement contracts and operational capabilities in areas such as rapid lease amendment processing and in-house structural engineering have contribute to elevated core organic revenue growth reaching a record of 8.7% in 2013. Further, we continue to leverage our strong asset base to drive additional leasing activity across our sites at minimal cost to our Company.

In most cases, because of the quality of the assets, our towers require no development capital expenditures to support incremental co-location. In those circumstances where CapEx is required, we spend an average of less than $20,000 of net investment per project. In addition to low redevelopment costs, we have also had low historical maintenance CapEx that average between $1,500 and $1,700 per property per year.

So taken together, our solid asset base, operational excellence, and strong customer relationships have led consistent, recurring long-term growth in our domestic business. With our recent GTP acquisition and our continuing emphasis on driving organic leasing growth, carefully managing site-level costs, and maintaining an active construction program, we believe our domestic segment will drive a substantial portion of our projected growth and AFFO per share up to and beyond our 2017 time horizon.

Now turning to slide 8, we have been able to extend our rich operating history and experience in the US to selected international markets, where we are strategically aligning American Tower with many of the world's leading multinational mobile operators. Over the past seven years we have consciously positioned the Company to take advantage of a well-diversified set of international opportunities ranging from voice-centric to data-centric markets.

Given the minimal wireline, telecom, cable, and fiber infrastructure in most of our international markets, we expect wireless deployments will be the primary means to achieve nationwide broadband deployment and the associated economic benefits of functions such as online commerce and mobile banking. As subscribers continue adopting high-valent applications and devices overseas, we anticipate seeing even further investment in these networks, which will continue to drive demand for our international sites.

As a result, we have already seen substantial co-location activity on our non-US towers. And given the early stage of technology deployment in many of these markets, as compared to the US, we expect this trend to continue over many years.

Turning to slide 9, it is clear that leasing activity on the international sites we have built and acquired to date has been quite strong. In the years following the 2008 financial crisis, we were able to secure a significant number of international tower deals at attractive prices. Since integrating a majority of these new assets into our portfolio in 2011, we have achieved organic growth rates ahead of our target range, and we continue to believe our international operations will consistently generate a core organic growth rate 200 to 300 basis points in excess of our domestic operations.

Moving to slide 10, we provide some quantitative evidence of our ability to make disciplined, strategic investments to the business that have then generated solid growth, delivered by our operational teams around the world. Let's first take a closer look at the significant leasing activity and margins we have been able to achieve with our assets in the US that we have operated for 10 or more years.

Specifically, we have more than doubled the revenue per tower and increased gross margin percentage by over 1,300 basis points on sites that have been in our portfolio since the end of 2003 -- or, using a wine connoisseur's perspective, our pre-2004 tower vintages. Our ability to achieve this kind of financial performance on these towers is largely predicated on the key areas of focus I discussed earlier: the quality of the assets, our solid contractual agreements with our customers, and our operational ability to maximize the leasing on these towers.

Between 2011 and 2013, we have added over 6,000 new properties to our US portfolio which we believe provide us with an excellent opportunity to replicate our prior success. As you can see on the chart, sites that we have added to our domestic portfolio over the last three years currently generate revenues per tower and margins well below that of our early vintage US assets. As we drive leasing activity onto these new sites, including the excellent GTP portfolio that we just acquired, we expect to drive incremental revenues and improve our margin significantly on these new assets.

Now turning to slide 11, we have demonstrated a similar track record with the investments we have made in our international markets. As shown on the left-hand side of the chart, we have nearly doubled our revenue per tower on a constant currency basis for our international sites in place since the end of 2003, while simultaneously increasing the gross margin percentage. Excluding pass-through revenues, such as ground rent and generator fuel in the relevant markets, these sites currently generate gross margins significantly in excess of 90% today.

We believe the new properties we have added to the portfolio since 2011 will produce a potentially even stronger trajectory, given the quality of these assets, their lower initial tenancy of just over 1 per tower, and their correspondingly lower gross margin profile. Further, these sites have solid structural characteristics and attractive geographic distribution, where we anticipate seeing tremendous lease-up opportunity over the next few years.

Turning to slide 12, our strong organic growth and acquisitions in 2013 have positioned us well heading into 2014. And as you can see, we are ahead of the growth trajectory we set forth as an aspirational goal just last year. As a result, we are well on our way to again doubling our AFFO per share by 2017.

It is important to note that a component of our future success is the Company's commitment to a strong balance sheet. We continue to contain our exposure to the possibility of rising interest rates, with just 20% or so of our capital structure being comprised of floating-rate debt. We presently have no material near-term maturities; and since the beginning of 2013 we have extended the average duration of our debt to nearly 6 years while reducing our average borrowing costs to about 4%.

Further, we are increasingly utilizing local currency debt to create an additional hedge for fluctuations in foreign currency exchange rates.

In conclusion, through years of disciplined investments and operational focus, American Tower has built a high-quality global asset base that largely hosts the world's leading telecom providers as tenants. We have demonstrated an outstanding track record for achieving solid leasing and financial performance on our assets, and we are highly confident that the recent investments we have made will generate similar success.

Our 2013 results and outlook for 2014, which Tom will discuss in further detail, reflect this expectation for continued strong performance. As a result, we are well on our way to accomplishing our five-year aspirational goal of achieving at least $6 in AFFO per share by 2017.

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

Hey, thanks, Jim. Good morning, everyone. We finished 2013 with a very strong fourth quarter, adding over 10,000 new tower assets, achieving very strong global organic growth, and building on long-standing relationships with our wireless carrier customers. 2013 was an excellent first step towards achieving our goal of doubling our AFFO per share from 2012 levels to 2017, and we feel we are very well positioned for another terrific year in 2014.

If you will please turn the slide 14, we achieved solid growth across all of our key metrics in the fourth quarter. 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 nearly 31%. Our organic were growth was over 11%.

The balance of our core revenue growth came from the over 16,000 new properties we have added to our portfolio since the beginning of October in 2012. This core growth includes the nearly $100 million in revenues generated by our newly acquired GTP and NII assets.

We converted this solid growth in rental revenue into significant adjusted EBITDA growth, which on a core basis was over 27%. Substantially all of this growth was attributable to our rental and management segment, where we generate recurring, contractually based cash flows rather than the project-based type of revenues generated by our services segment.

Additionally, our international segment, which accounted for roughly 25% of adjusted EBITDA during the quarter, contributed close to 40% of the total growth in EBITDA. This was as a result of both solid organic growth and our recent acquisitions, including the NII sites in Brazil and Mexico.

Finally, we generated core AFFO growth of over 27% in the fourth quarter, significantly above our long-term mid-teen target range. Our newly acquired GTP and NII towers generated just over $0.05 of the $0.22 in core AFFO per share growth in the quarter.

Turning to slide 15, we also generated excellent full-year results. Our total rental and management segment core revenue growth was over 22%, with nearly 10% attributable to organic core growth and the remainder driven by the nearly 22,000 new assets we have added since the beginning of 2012, with an average of about 1.3 tenants per tower on day one.

Due to the significant wireless carrier network investments being made worldwide, 2013 represented a record year of activity for us both in the US and internationally. Global commenced new business rose 20% versus 2012, while signed new business was up nearly 30%.

Our 2013 core adjusted EBITDA increased by almost 20% from 2012. On a reported basis, we ended the year with adjusted EBITDA over $70 million above the midpoint of our initial 2013 outlook, despite FX headwinds of an incremental $30 million.

Similar to the fourth quarter, substantially all of our adjusted EBITDA growth for the full year was attributable to our rental and management segment. Our EBITDA margin for the year was sustained at nearly 65%.

AFFO growth in 2013 was over 23% on a core basis and reflects the strong adjusted EBITDA growth we experienced, net of the funding costs associated with our acquisitions. Virtually all of our AFFO growth was attributable to our rental and management segment and was complemented by opportunistic refinancing activities and our continuing access to capital markets at very attractive borrowing rates.

For example, we refinanced our $1.75 billion 2007 securitization in March, with an interest rate savings of nearly 300 basis points, while extending the weighted average expiration to about 8 years. We continue to believe that our prudent balance sheet management will continue to play an important role in our growth going forward.

2013 was a terrific year for us with core growth in rental and management revenue of over 22%, adjusted EBITDA of nearly 20%, and AFFO of over 23%. We ended the year with over 67,000 sites in 13 markets around the globe and believe that this positioning will generate strong growth again for our shareholders in 2014 and beyond.

Moving on to slide 16, our expectations for 2014 rental and management revenue growth reflect our belief that the strong leasing levels we experienced in 2013 will continue. At the midpoint of our outlook, we expect core rental and management revenue growth of 23%, driven by about 9% of organic core growth, with the balance being generated from new properties, including the new sites we expect to construct in 2014.

We're forecasting consolidated churn of about 1.5%, which reflects the high contract renewal rates of our tenant base as well as the protective impact of the holistic agreements we have in place with three of our top four tenants in the US. On a reported basis, we expect rental and management revenue growth of about 18% at the midpoint, which includes about $150 million of negative impacts from foreign currency exchange rate fluctuations and straight-line revenue accounting.

Turning to slide 17, we expect the 2013 drivers of both our domestic and international segments to carry forward into 2014. US wireless carrier CapEx spend projections for the year are nearly $35 billion, as all four major nationwide carriers continue to spend aggressively on their various network initiatives.

Demand for wireless data continues to rise, and the latest forecasts project wireless data carried over macro networks to grow at a nearly 50% compounded annual growth rate through 2018, as Jim described. In addition, with VoLTE slated to come online over the next few years, we believe that network densification initiatives throughout the US will need to accelerate even further for our tenants, to maintain a consistent quality of service for their customers.

With a domestic portfolio of nearly 28,000 owned towers, more than 300 DAS systems, and access to a nationwide managed rooftop portfolio, we believe we are extremely well positioned to capture the incremental US demand for communications real estate generated by these drivers.

We believe that the underlying growth drivers in our international markets are equally compelling. Large multinational carriers are investing aggressively in 3G and 4G networks throughout our served markets, and we expect the relationships we have built with those carriers to continue to yield significant benefits both in terms of new business commitments and future tower acquisition opportunities.

In 2013, for example, nearly 50% of our total signed international new business was driven by five carriers, including Vodafone, MTN, and Telefonica. Of our total international revenue in 2013, more than 50% was attributable to investment-grade tenants, reflecting our ongoing focus on aligning ourselves with large, well-positioned multinational carriers.

We have very carefully and deliberately positioned the Company to benefit from a broad range of network development and deployment activity across our international footprint, ranging from initial 3G network rollouts in India, Ghana, and Uganda; to 3G densification and initial 4G builds in Brazil, Mexico, and South Africa; to more mature 4G buildouts in Germany. As our international markets progress throughout the voice-centric to data-centric migration path, we expect to participate in each successive network deployment cycle just as we have done in the US.

As a result, we believe our international operations will continue to generate organic core growth rates significantly in excess of our domestic operations. In our view, the long-term growth story in international is very exciting.

Moving on to slide 18, as a result of these demand drivers we expect our domestic and international rental and management segments to show significant growth in 2014. In the US, we expect core revenue growth of over 20%, with organic core growth of between 8% and 9%. We expect our organic core growth to also include about 12% in new property core growth, with the majority coming from the newly acquired GTP portfolio.

Outside of the US, we expect our markets will generate core growth of roughly 28%, including organic core growth of about 11%. Core growth from new properties, including the recently acquired NII portfolios in Brazil and Mexico, is projected to be about 17%.

Our international organic core growth is projected to outpace that of the US by about 250 basis points, which is trending towards the high end of our long-term target range and is indicative of the aggressive investments our international wireless carrier customers are making in their networks. As has been the case over the last few years, we expect the majority of our new business outside of the US to be driven by large, multinational carriers like MTN, Telefonica, Vodafone, and Bharti.

Turning to slide 19, we also expect solid growth in adjusted EBITDA and AFFO in 2014. Beginning with adjusted EBITDA, we are forecasting core growth of over 22% at the midpoint of our outlook, with reported growth of about 16%.

We remain focused on property-level cost controls as well as SG&A costs and expect SG&A as a percentage of revenue to fall to approximately 9.6%. Accordingly, EBITDA margins are expected to be in the mid-60% range. And as we generate incremental new business across our portfolio of properties, we expect our margins will expand over the long term.

Turning to our outlook for AFFO, we expect core growth of almost 21% at the midpoint, which will be driven by the growth in adjusted EBITDA, net of costs associated with our recent acquisitions including interest expense and maintenance CapEx. We expect substantially all of our AFFO growth to be generated by our rental and management segment.

At the midpoint of outlook and assuming a weighted average diluted share count of about 400 million shares, our outlook for a FFO per share would be roughly $4.30.

Moving on to slide 20, in 2014 and consistent with the last several years, we expect our primary method of returning capital to stockholders will be our REIT distribution. The amount and timing of our dividend payments are at the discretion of the Board; but our goal continues to be to deliver annual dividend growth of at least 20% over the next five years.

We currently plan to spend between $850 million and $950 million in CapEx during the year, which includes the construction of 2,500 sites at the midpoint. We expect to build between 400 and 500 sites in the US, compared to just over 300 in 2013, in response to increased carrier network densification activity.

Pro forma for our construction pipeline and additional sites which we may acquire pursuant to previously announced acquisitions, we expect to have over 70,000 sites by year-end. In addition, we expect to spend about $110 million on land acquisitions, while also targeting to opportunistically extend over 2,000 leases domestically in 2014.

Finally, we continue to maintain an active deal pipeline and expect to continue evaluating acquisition opportunities around the world. Our capital allocation priorities in 2014 continue to support our corporate strategy of growing our asset base while maintaining a strong balance sheet.

Turning to slide 21 and in summary, we believe we had an excellent year in 2013, with solid growth across all of our key metrics. As a result of the acquisition of the GTP tower portfolio, we re-levered the Company to our home US market, where all four major carriers continue to aggressively invest in their networks. Internationally, we continued to deepen our presence in our legacy markets, particularly in Mexico and Brazil through the acquisition of towers from NII, while continuing to build on existing relationships with major carriers throughout our global footprint.

We continued to proactively manage our balance sheet, extending our average debt tenor to about 5.5 years while reducing our average drawn cost to about 4% as of year-end. By combining our newly acquired and built towers, the solid organic growth we generated in 2013, and our strong balance sheet, we believe we have positioned ourselves to achieve another terrific year in 2014.

So, in conclusion, we expect another year of global heightened customer demand for our communications real estate in 2014 and, as a result, expect to post strong organic core growth of about 9%, core adjusted EBITDA growth of over 22%, and core AFFO growth of nearly 21%. We believe that this type of growth, coupled with our anticipated dividend, will generate meaningful shareholder returns in 2014 and position us well to drive strong, sustainable returns for many years to come.

With that, we would like to open up the call for your questions. Operator?

(Operator Instructions) Simon Flannery, Morgan Stanley.

Follow-up on the guidance around doubling the AFFO per share. Does that envisage some of these opportunistic acquisitions? Or do you think that you can get there even if you don't do any deals from here?

Perhaps you'd just talk a little bit about the landscape. It seems like in the US there is not a whole lot left of any scale. Latin America we have had a lot of transactions. Where do you see the most fruitful areas for expansion going forward? Thanks.

Sure. Hey, Simon. This is Tom. With regard to doubling the AFFO per share, there are a few components of it. Clearly the organic growth of 6% to 8% in the US and 200 to 300 basis points on top of that, extending that to 2017 really gets us halfway through the target. The build program that we have ongoing, which is 2,300 sites last year, 25 at the midpoint, 100 this year, we would expect to continue that; gets another 10% to 15% to 20% of the target.

And the balance will come from the additional cash that we are generating either buying back shares or, to the extent that the opportunities are there, moving forward with some acquisitions that hit our cost of capital requirements. So we think we have all of the ingredients in place, candidly, to be able to achieve that $6-plus per share.

Simon, it's Jim. The summary is, we are not dependent on additional acquisition internationally or domestically, we think, to hit our target. We think the asset base we have along with everything that Tom just pointed out is sufficient to hit the target. We are going to try to beat the target, however; and that is the thing to watch.

Any particular regions of focus the next couple of years?

Well, our strategy has continued to be to deepen our position in the existing major markets for us, on one hand; and secondarily, to continue to weave a fabric in our international markets across these major multinational carriers like MTN, Telefonica, America Movil, etc. So we are first and foremost having the US as a priority, but you correctly point out the number of opportunities of size are getting less. Nevertheless, we will continue to evaluate and pursue those.

But also, the international aperture we have across the four continents we are participating in outside of North America give us a lot of opportunities. And as I said, these multinationals that we work with tend to be in numerous markets, many of which we are already in.

So it's really a balance between domestic and international. What is great about the five-year plan is we don't have to reach for a deal to get it. So we are shooting for accretive deals just like GTP and NII. If we can get them, it will augment the slope of that curve in the upward direction, but that is not a dependency.

Thank you.

Batya Levi, UBS.

On CapEx, the 2014 outlook seems to be a bit higher than the trend and what we were looking for. Can you talk a little bit about the drivers of higher redevelopment CapEx? I am assuming maybe some incremental CapEx that will be required for the acquisitions.

Also, maybe some guidelines on what the startup capital projects may be. And when you look at the new site builds, I think it is about 2,500 for this year. Similar to last year, but the discretionary CapEx is a bit higher. Any color on the cost to build? That would be great. Thanks.

Sure, Batya, it's Tom. You're right, on the redev it's largely driven by building up the DAS network and upgrading the network to LTE. As you know, much of the capital that we do invest for redev we do get back from our customers; so the numbers that we are looking at are gross CapEx numbers.

On the startup piece, as we have in some of the transactions identified structural engineering efforts that they need to get up to be able to support the kinds of ongoing co-location activity that we expect for that portfolio. So NII is probably the most significant one in 2014, and we identified that back when we actually did the transaction.

It is embedded in the deal model, if you will. But for 2014/2015, there will be some additional startup CapEx for the NII transaction.

Back on the redevelopment, we expect of the additional redevelopment CapEx to probably get back about $130 million in reimbursements in 2014. Again, that is an area of augmentation where we actually share the cost with our customers.

On the cost to build, it is going up on a per basis, largely because of the additional sites that we are actually building in the United States. So over the last year, 2013, we built about 300 sites in the US; we expect that to be upwards of about 500-plus in the United States. And that is actually driving up the cost per build from an average of like $70,000 to $90,000.

What is the cost to build international now?

It varies by market. In India less than $50,000; and in Latin America it's in the $150,000 range. Similar ranges in EMEA, if you will. And in the United States, it is $200,000, $225,000.

Great. Thank you.

Jonathan Schildkraut, Evercore.

First, if you could give us a sense as to the level of activity that falls underneath those holistic arrangements that Tom mentioned during your prepared remarks, and maybe compare that back to a year ago; and if we can separate between capacity sites and coverage sites, so maybe some of the carriers have eaten up their predetermined buckets for those capacity increases.

Then on a second question, just wondering where you were on small-cell and DAS. Obviously there has been a lot of news flow coming out of Mobile World Congress about carriers deploying these more as part of their network configurations. Just wondering if you are seeing any difference in trends and how you are pivoting relative to that demand. Thanks.

Sure. Hey, Jonathan, let me take the first part and Jim will take the second part. On the organic, core organic growth rate we are generating in the US is -- I think to the point of your first question -- it's in that 8% to 9% range. About half of that is coming from the cash escalator and the right to use fee, 3.5% and 1.5%. So actually it's a little bit over half is actually coming from that piece.

The additions to pay, which is what you were alluding to before, which are those revenues, those fees coming from activity outside of the holistic arrangement with holistic customers, is about 75 basis points. And then the balance of the organic growth, is coming from the non-holistic co-location and amendment activity, net of churn.

So it is very consistent. We expect 2013 versus 2014 core organic growth, as I said, in that 8% to 9%. Over half of it is coming from the fixed element, if you will, the cash escalator, plus that right to use fee.

Jonathan, regarding small-cells, we studied this extensively with outside advisers and our own engineers and with our customers actually in some cases. The best way I think to think about small-cells is their role in the mobile network versus the fixed-line substitution network.

What I mean by that is mobile applications are for when we are out and about, moving around, whether actually in motion or just in places that are not our home or not our primary workplace. So that is what the mobile network is designed to address. That is what we serve.

A lot of small-cell applications tend to be Wi-Fi, local fixed-line replacements where you are not mobile. In your home, the small hot-spots that you can get for your home fit in this category. Office Wi-Fi or small-cell networks in campuses, office parks, office tower buildings, etc., fit into that category.

So what we have analyzed is: what growth is going to happen in the mobile network and how much of that will be, quote, offloaded to these kinds of technologies?

Going back to the Cisco study, we think that the assumptions in there are very reasonable and that you are going to have this significant CAGR of year-over-year mobile network deployment. So this doesn't count Wi-Fi substitutions in homes and things like that. And that is the 50% of your CAGR.

When you multiply that through over five years, it is a dramatic increase, obviously. Our estimation, our technical assessment, is that 80% of that mobile application will be covered through macro sites, towers predominantly; and 20% of actual mobile applications will be offloaded.

Now let's just go to the other side for a second. Fixed-line substitution is going to be largely small-cell. Because it makes sense; you are just replacing your phone line or your Internet connection in your home, in your office. It's not a mobile application. We think that is where a lot of small-cells are going to be deployed.

So our view is that tower demand is not adversely affected by these small-cell deployments because of the nature of where our assets are -- as we pointed out, suburban and rural predominantly. Those geographies and topologies really demand macro siting. They don't make sense economically, technically, or from a spectrum and interference perspective to do them with small-cells.

So our wheelhouse of large sites, relatively wide coverage areas, between 0.8 mile and 2 miles, that is always going to be the tower. And that is where we play.

Thank you for answering the questions.

Ric Prentiss, Raymond James.

Hey, couple questions. One, on your guidance, can you let us know a little bit about -- there's a couple of major projects underway. Just trying to figure out if that is in your guidance or not.

Sprint has talked about their Sprint Spark project, heavily focusing on the 2.5-gigahertz frequency they got from Clearwire. T-Mobile is looking to buy low-frequency 700 band from Verizon by the middle of the year. How much of Sprint Spark and T-Mobile low band would be either explicit or implicit in your guidance?

Yes, Ric, based upon what we see from an activity perspective, with all of our customers, they are based upon what we have over the next three to six months, if you will. So with regards to the United States, we are expecting really our organic run rate, if you will, to be consistent with where it was in 2013.

So no meaningful changes, if you will, in terms of their deployment cycles. Now to the extent that they continue to get more aggressive, we may see some more activity towards the second half of the year. But based upon what we are seeing right now, those kinds of items, those kinds of events are in the forecast.

Okay. Then Nextel International, you closed some of the portfolio in the fourth quarter, but I think there was still some slopping over. How much of the 2014 guidance assumes the completion of the Nextel portfolios, and what kind of time frame?

None of the -- you're right, about 1,000 sites were not picked up relative to the NII transaction. And none of that activity, none of those sites are in the guidance.

Okay, because when you did the transaction you said: here is what it might add annually; and so you have not put that full amount in yet.

That's right.

Great. Jim, there's been some New York Times articles recently about some different technology. One called pCell; I must admit I am not that familiar with it. But have you guys looked into what that kind of left-field technology current status is?

Yes, we have, and that is in a very early stage. I would say, lab-based approach that, once you think about scaling something like that up into a network where you are going to have 300 million devices using 2 or 3 gigabytes a month of traffic, the computing tower to actually use a technology like that to provide service -- I think there are some very difficult issues in physics and technology that have to be overcome.

So ultimately, maybe this is a point solution for certain kinds of applications, like again workplace environments where you've got a lot of people in an office, on the floor of an office building, that need that kind of augmentation. But as far as a wide-scale deployment technology vis-a-vis the macro site network that is out there globally, I don't see it.

It's kind of like, what, four years ago lightRadio made a flurry and we're just now starting to see it show up a little bit.

Yes. I would expect that this type of technology can be a niche solution to offload real high-volume traffic. Again, that is not what the towers are really there for in the first place.

One cleanup question for Tom. The leverage range of 3 to 5X, wanting to get back in the target within 12 to 15 months. Where are you guys at as far as thinking where you want to live in that target range?

I know it is probably contingent on what kind of M&A opportunity might be out there. But is it 12 to 15 months to get to the 5? Are you comfortable staying at 5? Just trying to gauge where the 3 to 5 plays out.

Yes, I mean the 12 to 15 months, I think, Ric, gets us to the 5, perhaps slightly below the 5. I think that we stated our target range in a 3 to 5 range.

If you look historically over the last couple of years we have been pretty comfortable to live in the 4 to 5 range. So we think that is a bit of a sweet spot for us at this point.

Great. Thanks, guys.

Jonathan Atkin, RBC Capital Markets.

On churn, the 1.5% in 2013, I wondered where that came from, and then how that might differ in 2014.

Then regarding the Global Tower Partners acquisition, I am just wondering the leasing trends you are seeing on that portfolio, and how does that differ qualitatively or quantitatively compared to your legacy US assets?

Hey, Jonathan, it's Tom. Relative to the churn, it's very consistent 2013 versus 2014. It's around 1.5%, $45 million, as you can see on page 16 of the page.

And with regards to the GTP, we did have a very good quarter, I have to say, with GTP; it's what we expected. And we are looking to have a really solid 2014 lease-up on that portfolio as well. We will be putting all of those towers in front of our customers and expect some really exciting things to come of it.

Jonathan, on sources of churn, it consistently is very small customers, paging companies, local mobile radio operators, either converting to a different technology or just declining in their business. This churn does not come from major wireless carriers in the US or overseas, frankly.

I also want to point out specifically that there is no iDEN churn possibility for our Company whatsoever, because we have included that in our holistic deal and have eliminated it. So the vast majority of churn comes from these very small customers.

And then just a point on GTP, the sales team already beat the deal model in the first quarter that we were responsible for the business, which was Q4. What is interesting about GTP is their contracts are non-holistic, and we will have an opportunity maybe to bring those sites into an even larger, more comprehensive holistic deal, extending terms, and really locking in some nice growth on a bigger portfolio as time goes on. So we are really interested in that aspect of the GTP opportunity.

I might just add, just to put a final note on it, on the GTP side, they do have some very small bit of churn associated with iDEN over the next couple of years, which is baked into the 2014 outlook. But it's minimal.

Great. Thank you very much.

Imari Love, Morningstar.

Thanks for taking the call, guys. Good quarter. I wanted to ask you about returns on invested capital both here and abroad. You had the graphic after, I believe, the second-quarter results last year of the international returns on invested capital being in the low 20%s and the mid-teens here in the US.

Any insights or color in terms of what the targets are for that going forward? And have the internal rates of return target that you have on a per-country basis shifted or changed over the last 12 to 18 months?

Yes. I mean on the ROIC side -- and you see how we define return on invested capital -- if you exclude the impacts of GTP and NII, it actually rose about 100 basis points over the last couple of years. So what we are really trying to do here is to drive AFFO per share as well as drive ROIC.

And it's an and; it's not an or. So we think that -- and that's largely based upon the disciplined strategy that we have in terms of how we look at allocating capital.

From a cost of capital perspective, we update our cost of capital estimates monthly. So, yes, there are changes that go on, on a monthly basis, looking at interest rates and looking at local country risk as well as betas and all of the things that go into the CAPM model.

But generally speaking, the IRR requirements, if you will, in the United States and Germany are in the high single digits, the 7% to 9%, depending upon the particular type of product. A DAS investment might require a higher rate of return than a pure tower investment. And looking down than at Latin America, we're in the 11% to 13%-plus range, as well as in India. Then in Africa, it will range from the 12% to 13% range, whether it is in South Africa, or up to the 18% to 20% range if we're in some of the other emerging markets there.

That is kind of the baseline. And then on top of it, we will look at the counterparty risk associated with the transaction and some additional elements associated with the type of a structure of an agreement that we are putting in place.

All told, if we go back and we take a look at the results that we've had across the portfolio, then I think it is important to look at the ROIC. That is where we have been able to increase the ROIC by 100 basis points over the last couple of years. So hopefully that's helpful.

Yes, it is. Great, thanks.

David Barden, Bank of America.

Good morning. Thanks for taking the questions. So just, Tom, maybe a couple for you. Just first, given the increased capital allocations to the build-to-suits, could you walk us through the economic model there on the build-to-suit a little bit in general terms?

Specifically, are you still dedicated to the notion of bringing two players to a new tower build? Or are you doing a little bit more even on the spec side? That would helpful to understand.

Then second, just some of the questions people are filtering through. One of the things is looking at the domestic fourth-quarter rental income, multiplying it by 4, and then comparing it to your 2014 guidance implies something around a compounded rate of growth quarter-to-quarter through 2014 of around 5%, which feels low to people relative to some of the commentary you have given about expectations for very strong performance in the domestic market. So could you square for people the 2014 guidance relative to the strength we just saw in the fourth quarter? It would be helpful. Thanks.

Yes, sure, David. Let me start and if I don't -- if I miss a piece, just let me know. If you take a look at the build-to-suit program, that is one of the highest areas that we can allocate capital. We are building for a customer generally under a Master Lease Agreement with an anchor tenant around the globe; and we expect very high rates of returns on that particular activity.

So even if you look at -- if you use TCF, tower cash flow, divided by cost as a surrogate for rate of return, if you go back and you take a look at our 2009 towers that we built, we are generating 20% rate of returns on our international portfolio and over 10% on the US portfolio.

So we are very excited about that program. As I said, they come with an anchor tenant. And generally, we will be looking for another tenant on that particular tower over the following 36 months, if you will. And that additional tenant then gets baked into quota for our local sales teams.

So it is a very high rate of return, and we will continue to allocate as much capital as possible, as we can, for that particular category because of the ROI characteristics of it.

With regards to guidance, we have I think perhaps a couple of things going on there, I guess. If you take a look at the organic growth that we see going on in the market, it's terrific; it's 8% to 9%; really consistent with 2013.

The run rate, the new business run rate is almost identical to what it was in 2013. And with the spend that we see in the marketplace, we are excited about the opportunity there. We layer on that growth with what we expect to be generated from the GTP transaction and the delta for GTP in 2014, it's $250 million to $260 million.

What we have that perhaps is working against that is the straight-line lease accounting in the United States, which is upwards of about $40 million. So that is one element, I think, if you will, David, that could be cutting back on the incremental Q-to-Q type of growth. I think if you take a look at the core growth that we are generating in the market, though, from a cash perspective, I think it is as exciting as it was in 2013.

In the international markets, again we have a couple of things. We have 11% core organic growth rate. We have a little bit less pass-through revenue that is being generated in the year; it's about $40 million versus -- I think it was upwards of $60 million to $70 million in 2013 versus 2012.

And that is why we had core organic growth, if you will, in our international markets up in the 12% to 14% range, if you will; and they are about 11%.

And then we have taken you could say a rather conservative approach with regard to looking at FX; but we are looking at about $115 million of FX headwinds, if you will, across our footprint. The slightly different approach that I'd have taken this year is to not just look at the forecast for what FX will be by market around the globe, but I am also comparing that to the existing spot rates; and I am being more -- the most conservative and taking the most conservative FX, if you will, relative to the spot rate or to the forecast for the year. That is a slightly different approach I have taken this year versus last year.

Got it. All right. That is helpful, Tom. So I guess in the domestic market, obviously, that's always that issue of trying to make sure you are not reading too much into the GAAP numbers relative to the cash. And then I know we had this issue last year where you used to look at maybe the one-year forward rates, and you've got more conservative on the FX.

So it's a new practice, being a little bit more conservative, using the spot FX rates.

Exactly.

Okay, cool. All right. Thank you very much.

Eric Frankel, Green Street Advisors.

Thank you very much. I was wondering if you can go through your land purchase program and just talk about the increased values. I am assuming that is what's related to the increased tower count.

Yes, largely. We've had a pickup in our land acquisition program over the last three years. Our US tower land acquisition group have been terrific, and they continue to up the ante in terms of the amount of leases that they are impacting on a year-over-year basis.

We have increased the capital that we are going to be spending on that program in 2014, as well as impacting about 2,000 other sites. It's really just a function of, I think, the process that we have built there.

Clearly we are bring on more sites from GTP with the 5,000 sites, so there is going to be an opportunity there. But whatever I ask of our land acquisition group up in our US tower group, they deliver; so I am really proud of what they have done. And as a result of it, they have been able to significantly reduce the overall rent expense on a year-over-year basis.

Great, thanks. Then just regarding the ground lease extension, is there a big step-up in the rent that you negotiated, or is it pretty flat? I'm just curious how the economics work related to the extend-versus-buy decision.

There is a modest increase at times. The escalator is in the 2% to 3% range, so it's not different than what it has been historically. Really it just comes down to dealing with a landlord at a time, what their interests are.

And to the extent that it makes sense for us to be able to buy it, just due to the economics, we will do that. If not, we will put it out on an extension. And as Jim mentioned, the average length of our portfolio is about 24 years.

Great. Then finally, just regarding your AFFO aspirations in a few years, do you have an ideal land profile when you reach that target?

No. Really don't. The key is to look at the underlying economics of it.

We want to continue to knock out the average years, if you will. So that is why we have taken it from some 20 years to 24 years. And we just want to stay on top of it.

The group is roughly looking at leases that are expiring three, four years from now. We have about 100 parcels that will come due any given year.

But we just look at it as we look at all of our investment activities on a very disciplined approach. And when it makes sense to acquire, we will acquire; and if it doesn't, we will continue to put it out on lease.

Terrific. Thank you very much.

Okay, operator, thank you very much. Appreciate everyone being on the call this morning. Leah and I are here, obviously, to be able to answer any other phone calls, and we appreciate all of your attention. Thank you.

Take heart. Pitchers and catchers and others are already practicing in Florida, so that's good. Bye, everybody. Thanks for joining us today.

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