美國電塔 (AMT) 2014 Q2 法說會逐字稿

Good morning, my name is Chrissy, and I'll be your Conference Operator today. At this time I would like to welcome everyone to the American Tower second-quarter 2014 earnings conference call.

(Operator Instructions)

I would now like to turn the call over to Leah Stearns, Vice President of Investor Relations and Treasury. Please go ahead.

Thank you. Good morning and thank you for joining American Tower's second-quarter 2014 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 second-quarter results. Then Tom Bartlett, our Executive Vice President and CFO, will review our financial and operational performance for the quarter, as well as our updated outlook for 2014. 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 2014 outlook and future operating performance, our expectation regarding future growth, our AFFO per share, industry trends and any other statements regarding matters that are not historical fact.

You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's press release, those set forth in our Form 10-Q for the quarter ended March 31, 2014, 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 second-quarter 2014 results. During the quarter, our rental and management business accounted for approximately 98% of our total revenue, which we generated from leasing income producing real estate primarily to investment-grade corporate tenants. This revenue grew 27.4% from the quarter ended 2013 to over $1 billion.

In addition, our adjusted EBITDA grew 30.2% to approximately $682 million, adjusted funds from operations increased 29.4% to approximately $474 million, and net income, attributable to American Tower Corporation's common stockholders, was approximately $230 million, or $0.58 per basic and diluted common share.

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

Thanks, Leah, good morning, everyone.

As you can see from our press release, we had another strong quarter in both our domestic and international businesses. Aggressive carrier or 4G deployments in the US continue and the demand for tower space in our international markets also remains strong as wireless services become increasingly ubiquitous. As a result, we're again raising our full-year 2014 outlook for all of our key metrics.

If you please turn to slide 6, our total rental and management revenue in the quarter increased by more than 27% to over $1 billion. On a core growth basis, which we'll 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 33%. Of this core growth, 13.6% was organic resulting from another very strong quarter of commenced new business. Excluding the impacts of pass-through, organic core revenue growth was about 11.5%.

In addition, we experienced an excellent quarter of signed new business, which positions us well to continue delivering high levels of organic growth. The balance of our core growth, or over 19%, was attributable to properties we have acquired since the beginning of Q2 2013, including the GTP and NII portfolios we acquired late last year and the Richland assets we added in April. These assets continue to augment our organic growth and we expect to generate strong growth on these sites in the future.

Turning to slide 7, our domestic rental and management revenue growth in the quarter was over 26% with core growth of around 30%. Domestic organic core growth was over 11%, which consisted of about 3% from escalations and more than 10% from existing site revenue growth, net of around 1.5% from tenant churn. This organic core growth reflects our tenants continued aggressive network investments they're making in 4G.

In addition, organic core growth in the quarter benefited from accelerated revenue recognition under a multi-year equipment customer agreement, which is expected to generate about $21 million per year through 2016. We had projected that revenue associated with this activity would be evenly spread throughout the year. However, during the quarter, we recognized $8 million of incremental revenue due to the accelerated timing of work performed under this agreement. Going forward, our revenue recognition attributable to this agreement may continue to fluctuate quarter to quarter. Our domestic organic core growth without this incremental revenue would have been just under 10%.

Overall, in the US, about 60% of the commenced new business activity generated in the quarter, outside of the holistic agreements, was in the form of amendments, compared to about 65% a year ago. Also our new business pipeline reflects a split of 55% amendments and 45% co-locations, reflecting a continuing shift towards network densification. As a result of this strong activity, we expect organic core growth in the US to be in the mid 9% range for 2014.

Domestic rental and management gross margin increased by more than 25% to over $533 million and grew by about 29% on a core basis. Domestic organic gross margin core growth was over 12%, which reflects an 87% conversion rate for properties which we have owned since the beginning of Q2 2013. We also constructed 276 towers in Q2, and in addition, purchased or extended the remaining term on almost 600 of our ground leases, with the extensions averaging about 30 years.

Finally, we generated domestic rental and management operating profit growth of nearly 26%, or about 30% on a core basis. Which reflects our continuing commitment to property level cost controls and disciplined spending on SG&A expenses. As we referenced last quarter, SG&A synergies from the GTP acquisition continued to new to come in ahead of initial expectations.

Moving on to slide 8, our international rental and management segment generated revenue growth of 29%, or nearly 39% on a core basis during the quarter. Of this core growth, about 18% was organic with a balance driven by the nearly 8000 new assets we've acquired since the beginning of Q2 2013. These new properties continue to outperform our original expectations.

Similar to the US, we are seeing a very strong demand backdrop overseas, and our Brazilian and Columbian markets both had a record quarter of commenced new business in the quarter. Organic revenue core growth rates range from about 10% in India, around 18% in Latin America and over 22% in EMEA during the quarter. With Telefonica, Airtel and Vodafone among others continuing to spend extensively on their networks.

In addition to organic new business out performance, we recorded increased pass-through revenues in a number of markets, which boosted our organic core growth in the quarter. Excluding pass-through, international organic core growth was about 12%. International rental and management gross margin in the quarter grew 26% to about $212 million, while core growth in gross margin was nearly 32%. International organic core growth in gross margin, excluding pass-through, was about 16%, which reflects a gross margin conversion ratio actually of over 100%.

Our international rental and management segment operating profit margin grew over 30% to $178 million, while the operating profit percentage was 51%. Excluding the effects of pass-through revenue, our international operating profit margin was over 70%.

Turning to slide 9, our reported adjusted EBITDA growth in the quarter was over 30% with our adjusted EBITDA core growth at more than 33%. Similar to prior quarters, our adjusted EBITDA core growth was primarily attributable to our rental and management segment, which generally represents recurring run rate contributions to EBITDA as opposed to the project oriented non-run rate nature of EBITDA generated by our services business.

Our Q2 adjusted EBITDA margin was over 66%. Excluding the impact of international pass-through revenue, our adjusted EBITDA margin for the quarter was nearly 73% and our adjusted EBITDA conversion rate was 79%.

Cash SG&A as a percentage of total revenue in the quarter was under 8%, which includes the added benefit of the recovery of certain expenses in corporate SG&A of about $7 million. For the full year, we expect our cash SG&A as a percentage of revenue to be under 9%.

This strong EBITDA performance resulted in solid growth in AFFO, which increased to $474 million, or $1.19 per share. AFFO and AFFO per share growth were both over 29%. Core AFFO growth was 31% reflecting significant organic new business growth, coupled with the addition of a number of AFFO accretive acquisitions.

Our adjusted EBITDA to AFFO conversion rate during the quarter was about 68%. We continue to target at least mid teen core AFFO growth going forward and believe that we are well positioned to exceed our goal of doubling 2012 AFFO per share by 2017.

Moving on to slide 10. We remain committed to our capital deployment strategy. Our goal is to simultaneously fund growth, return cash to our stockholders and maintain a strong balance sheet. Year to date, we have declared over $261 million in common stock dividends, spent about $466 million on CapEx, and have reduced our total debt by more than $500 million.

The $500 million plus we have spent on acquisitions so far this year includes about 60 tall towers in the US and over 400 towers internationally. We also announced the Brazilian acquisition of BR Towers in June and expect that transaction to close in the fourth quarter of 2014. We have not included any impacts from pending acquisitions in our current outlook.

We continue to expect that our primary method of returning capital to stockholders for the rest of this year will be through our REIT distributions, as well as dividend payments to holders of our mandatory convertible preferred stock. The amounts and timing of our dividend payments are at the discretion of our Board, but our goal continues to be to deliver base annual common stock dividend growth of over 20%.

Our net leverage as a function of EBITDA as of quarter end was approximately 5 times on an LQA basis. We continue to maintain a long-term target range of between 3 to 5 times and expect to be in the low 5 times range at year end 2014. We have maintained significant liquidity, and as of the end of the quarter, had nearly $300 million in cash on hand and about $3.2 billion in capacity under our credit facilities. Our average remaining term of debt is over five years with an average cost of about 4%.

Turning to slide 11, based on the strong tenant demand trends we are seeing across our footprint, we are raising our full-year 2014 outlook for rental and management segment revenue by $45 million at the midpoint $3.98 billion. About $15 million of the increase is attributable to organic revenue out performance in our domestic business with an additional $5 million or so attributable to US straight line.

The balance of the increase is being driven by our international operations, including about $10 million attributable to organic revenue out performance, about $8 million in incremental straight line revenue and a $12 million increase in pass-through revenues. And this is partially offset by around $5 million in FX headwinds versus our prior outlook.

For the year, we expect core growth and consolidated rental and management segment revenue of 26%. We expect domestic organic revenue core growth for the year to be between 9% and 10%, and now expect our 2014 international organic revenue core growth to be around 15%.

Our strategy of acquiring less mature, higher growth assets in international markets has boosted our organic growth rates and we would expect that trend to continue in the future. On a consolidated basis, we expect organic core revenue growth in 2014 to be about 10.6%. In addition, while not yet included in our core organic metrics, the portfolios we've acquired over the last year are outperforming expectations.

We're also increasing our outlook for adjusted EBITDA by $55 million at the midpoint. This includes about $30 million from domestic and corporate out performance, including stronger than expected organic revenue growth and around $10 million in corporate SG&A expense recovery, $7 million of which we booked in Q2.

In addition, about $20 million of the increase is attributable to our international business, driven predominately by organic out performance, with $5 million or so from out performance in the services segment. On a consolidated basis, we now expect core growth and adjusted EBITDA for the full year to be nearly 26%.

And finally, we are raising our full-year AFFO outlook at the midpoint by $30 million, reflecting the increase in adjusted EBITDA, and a $5 million decrease in maintenance CapEx, partially offset by about $16 million in net straight-line impacts and $14 million in incremental funding costs associated with acquisitions. We now expect to generate AFFO growth of nearly 21% for the year, or over 23% on a core basis.

Turning to slide 12 and in summary, we continue to maintain momentum we realized in the first quarter. Organic core revenue growth in the US continues to benefit from our tenants increasing the coverage and capacity of their 4G networks. Internationally, key customers like Aircel, Airtel, Vodafone and Telefonica are maintaining sizable network investments as their customer bases adopt increasingly advanced wireless services.

In addition to capitalizing on these organic growth trends, we continue to add high-quality assets through accretive acquisitions, while being mindful of preserving our strong balance sheet. For example, by issuing mandatory convertible preferred stock subsequent to our acquisition of Richland Towers, which was initially funded through our revolver, we were able to simultaneously reduce leverage, preserve the accretive nature of the transaction and increase our flexibility to fund additional M&A for the balance of the year.

For example, we expect to close our BR Towers transaction in the fourth quarter, further expanding our presence in a fast-growing attractive market, while also maintaining leverage in the low 5 times range. We also maintained our strong track record of growing adjusted EBITDA and AFFO per share in the quarter, with both metrics significantly outperforming our long-term mid-teen growth targets.

In addition, we declared a common dividend of $0.34 per share, or about $135 million, representing an increase of nearly 26% as compared to the second quarter 2013. We believe we are well positioned to sustain this momentum, and as a result, are once again raising our 2014 outlook across all of our key metrics. Application levels for space on our towers remain at elevated levels giving us solid visibility into new business growth on our existing assets throughout the rest of the year.

And with that, I'll turn the call over to Jim for some closing remarks before we take some Q&A. Jim?

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

Today I'm going to continue our practice of focusing on a specific theme for my prepared remarks. As you may recall, during our February call, we provided an in-depth update on our long-term strategic plan and key aspirational goals for our Company.

Then on our call in May, I focused on the strong domestic wireless investment environment and the out performance of our US operations. Today I'll provide a similar perspective on our international segment. Finally in looking ahead on our upcoming Q3 call in the fall, our focus will turn to the fundamental trends in wireless technology, which we believe will continue to drive network investment and long-term growth for American Tower.

So in today's remarks I'll discuss a brief overview of our international business and recent investment priorities, a snapshot of current global technology and industry trends that we anticipate will support ongoing organic core revenue growth of 200 to 300 basis points in excess of our domestic segment. And a brief assessment on the performance of three significant international investments we have made in the major regional telecom markets of Brazil and Latin America, India and the Asia-Pacific region, and South Africa and the Europe, Middle East, Africa region.

As many of you may recall, we reenergized our commitment to international market in 2007 following the acquisition and integration of SpectraSite. Since then, our international investment evaluation process has entailed an exhaustive assessment of each target countries' political and macroeconomic fundamentals, of its wireless, commercial and regulatory environment, and of the specific counterparty for each potential transaction. Further, we established country specific hurdle rates which reflect specific risk adjustment based on several key factors, the largest of which tends to be the spread between the local government bond and its US Treasury equivalent.

As a reference point, our assessments tend to result in unlevered return hurdle rates in the low to mid teens in markets across Latin America and in India and return to the mid-to high teens, if not 20% or more, in markets in Africa. By having pursued early international expansion through a disciplined and methodical approach, we've constructed a diversified portfolio of properties which consistently generates organic growth rates exceeding those of our high-performing domestic business. This quarter was no exception.

As Tom previously mentioned, the second-quarter core organic growth rate for our international business was nearly 18%. Or in this case over 600 basis points greater than the impressive growth rate delivered by our domestic US segment. We believe that several key factors will continue to support strong international tower leasing demand in the long term.

First, consumer demand for mobile services globally continues to increase rapidly and put a strain on existing wireless networks. Second, we believe that the carriers desire to monetize this increased usage will compel them to compete and seek to improve their networks. And finally, we expect this to translate into significant carrier investments in wireless CapEx and an incremental lease up on our global portfolio of towers as a result.

While the fundamental drivers of demand for tower leasing are consistent both in the US and globally, the different stages of wireless technology development across the markets we serve presents us with the unique opportunity. In evolving wireless markets like Mexico and Brazil, carriers are focused on adding equipment to new and existing sites actually for 3G capacity and initial 4G coverage.

While in emerging wireless markets like India, where smartphone penetration is only 10%, the wireless carriers there are primarily focused on adding equipment for 2G capacity and initial 3G coverage. Forecasts indicate that these markets will see tremendous growth in mobile data usage over the next 5 to 10 years, and we fully expect that our portfolio will benefit from the investments required to support the resulting network upgrade cycles at all of these countries.

In addition to pursuing higher growth rates and solid returns to investing internationally, we also strive to minimize potential execution, counterparty and inflation risks. We are able to greatly mitigate execution risks in our newer markets by exporting seasoned management, establish systems and processes and our best commercial practices and contracts from our US and legacy international operations.

Counterparty risk is minimized by maintaining close relationships with strong multi-national tenants. In fact, six of our top international tenants are customers of American Tower in more than one of our markets. Further most of our contracts in international markets are hedged for inflation through CPI linked escalators and pass-through provisions for our largest expenses.

We're also well diversified within our international portfolio, which is spread across 12 countries and 4 continents. As a result, our international business is not dependent on any one country to achieve strong growth.

And internationally, just as in the US, consumers want more and more access to both basic and advanced mobile services. Smartphone penetration is at about 55% in the United States, but it's just 12% in emerging markets.

We're starting to see smartphone adoption rising rapidly in those markets with smartphone penetration rising quickly, over 65% versus prior year across emerging markets. With respect to the most advanced mobile technology, global 4G LTE subscriptions grew even faster at 170% last year, yet there are still just 180 million LTE subscriptions worldwide and over 80% of those are concentrated in only three countries, the US, Japan and South Korea.

Consequently while global mobile data traffic grew 81% last year, there remains significant pent-up demand around the world, especially in less developed markets. As a result of consumers healthy appetite for mobile access and increasing bandwidth, we believe wireless carriers will also be rewarded by investing in higher quality networks.

In the US, where there is well developed wireless infrastructure, annual industry churn stands around 1.7% among our carrier customers. In comparison, in emerging markets where wireless infrastructure is less developed, churn is more than double the US at about 4.1%. Given the cost that subscriber churn represents, carriers are further incentivized to improve the quality of their networks.

Brazil is a prime example of a Latin American market where we are well positioned to capture the resulting leasing activity as the wireless carriers ramp up their networks to meet rising consumer demand while retaining their existing customers. For example, in Brazil, current 3G penetration stands at about 40% and smartphone penetration only at 20%. Those figures lag the US by about five years.

However, today consumer demand is strong and rapidly increasing in Brazil for mobile access and mobile data. Last quarter's smart phone penetration there grew 67% over the prior-year period. This trend is expected to continue with the forecast of data as a percent of ARPU for the carriers to grow nearly 1900 basis points from 27% at the end of 2013 to 46% by 2018. Over this same time period, mobile data traffic is expected to grow by 11 times in Brazil.

Consequently, further network investment is necessary in Brazil to meet growing consumer demand. Currently Brazil has over 4000 subscribers per each cell site, compared to the US with just over 1000 subscribers per each cell site, despite having similar spectrum to subscriber ratios. This means that Brazilian carriers will need to add sites as wireless data usage carry across their networks increases.

Additionally, Anatel, the Brazilian telecommunications regulator, has become increasingly focused on mobile quality of service. Given the expanding consumer demand and regulatory focus on service quality, the CEO of EVO recently stated that his company will need 10,000 new macro cells in the next two years. Further, recent 4G auctions have also featured aggressive rollout targets spanning major cities and rural areas across Brazil. As a result, carriers have committed to increased capital investments to improve the capacity of their 3G networks and increase coverage of their new 4G networks.

American Tower is poised to benefit from this investment cycle due to our strong relationships with the major mobile operators in the region, and our industry-leading portfolio of towers and desirable locations in Brazil, with nearly three-quarters of our sites there located in urban areas where wireless usage is concentrated.

Based on these trends and our positive track record in Brazil, we continue to make strategic investments in the country to enhance the scale of our existing business. Our core organic revenue growth in Brazil grew over 20% in the last quarter and the result -- and resulting return on investment across all tower (inaudible) there continues to increase.

Also impressive is the return on investment for our properties acquired and constructed from 2006 to 2010, which has increased by over 200 basis points over just the past year into the high 20% range for those towers. In addition, the performance on our recent investments has been solid with the increasing tendency on the towers we just acquired from Vivo resulting in core revenue growth of 31% and tower cash flow growth of 39%.

So given our positive investment performance in the country and our strong operational foundation, we remain active investors in Brazil and expect our recently announced acquisition of BR Towers to close in the fourth quarter. This acquisition will compliment our existing portfolio well and increase our scale in Brazil to over 11,500 towers.

Turning to our EMEA region, South Africa was our initial entry market and is at a similar stage as Brazil in terms of development of its wireless sector. Smartphone penetration is only about 20% in South Africa, while during the first quarter of 2014, it grew nearly 50% from the prior year. Data as a percent of ARPU is expected to increase nearly 1800 basis points over the next five years up to 48%. And further, mobile data traffic is expected to grow 53% a year in South Africa.

Similar to those in Brazil, mobile operators in South Africa are still working to increase capacity for 3G and has started an initial coverage builds for 4G. The current ratio of subscribers to sites is 3000 per cell site, which is nearly 3 times as high as United States. As a result, forecasts indicate that cell sites in South Africa will increase by 8% a year on average for the next five years, with 11,000 sites expected to be added there by 2018.

Our financial performance in South Africa has been positive and we remain committed to helping our customers expand their networks in that region. Towers acquired in the country prior to 2012, which includes the original Cell C transaction to launch our South African business, have increased their returns by over 250 basis points over the last year, which are now in the high 20% range. This was driven by core revenue growth, excluding cash drove 9% and tower cash flow growth of 10% over last year.

India is another key market for our Company where we currently have a footprint of 12,000 towers. While the Brazilian and South African mobile markets are about five years behind the domestic US market, the Indian telecom market is estimated to be some 10 years behind that of the US. In fact, nearly 90% of mobile connections in India are still made using 2G technology. While technological deployments in India lag that of Brazil, South Africa and the US, consumer appetite for wireless access does not.

Mobile connectivity has become instrumental to many consumers in India and over 90% of the country's Internet subscribers use a mobile connection to access the Internet. In addition, smartphone penetration has begun to increase rapidly more than doubling to 10% during 2013.

Given strong consumer demand, a long runway for growth and indications of an improving regulatory environment, we believe that the major carriers in India are increasingly well positioned for future success. Recent results are also improving as on average carrier EBITDA service margins there have improved each of the last four quarters on a year-over-year basis. This trend is expected to continue with EBITDA service margins expected to expand 270 basis points over the next two years to nearly 34% for these carriers, while over the same time period, ARPU is forecast for them to grow over 12%.

This positive financial performance is expected to help support network investment with capital expenditures among Indian carriers anticipated to grow 30% during 2014 and another 19% in 2015. In addition, Reliance Jio has committed to building a nationwide 4G network to provide data only mobile access to Indian customers. This would be the first network of its kind in the Indian market and we look forward to partnering with Jio in this endeavor throughout our recently signed master lease agreement with this new customer.

In anticipation of this capital investment cycle, American Tower has developed a robust build program in India. Over 40% of our current India tower portfolio is composed of American Tower constructed sites. These towers drive strong returns for our Company and we remain committed to helping the carriers expand mobile access through our tower construction program.

Return on investment for new build in India generally reaches into double digits on day one, due to relatively low construction costs in the market, and, over time, these returns expand. For example, our portfolio towers constructed between 2006 and 2010 generated returns in the mid to high teens during this second quarter.

In conclusion, we believe the investments we've made are delivering solid returns and have positioned us well to deliver strong operational results from both our domestic and international segments for many years to come. We also believe that by investing in our portfolio across select markets at various stages of wireless development, we will lengthen and strengthen our growth profile while diversifying the Company's long-term revenue and cash flow streams.

Our international portfolio's strong return on invested capital performance and organic growth rates clearly demonstrate that our international strategy is tremendously complimentary to our consistently high performing US operations. Given our strong domestic acquisition track record, we also remain committed to making smart investments in the US, as demonstrated in the most recent cases of GTP and Richland Towers.

We also plan to continue our disciplined expansion efforts in international markets which bring greater scale, a global presence to serve leading multinational mobile operators and further drives our growth trajectory.

And with that, Operator, can you please open the call for questions?

(Operator Instructions)

Simon Flannery, Morgan Stanley.

This is [Armentis] for Simon. Thank you for all that color on the international markets, that was very helpful. It seems like we hear about an international tower portfolio coming to the market several times a week. Wanted to get your color in terms of if there's a goal, a percentage goal for the international business and if you're considering other markets that you didn't highlight in your presentation? And also another one, get some more detail on the BR Towers and the thought process behind the acquisition. Thank you.

Sure, this is Jim. First of all, I want to point out that we've stated a few times before publicly that we don't have a specific goal for percentage of revenue for example in our international business. We have the benefit of a global aperture, so we can look at opportunities for acquisitions and growth in the US and all of the regions I just talked about.

So we're going for the best risk adjusted return on capital. Many of the opportunities that do come to market as you pointed out, whether they're in the US or overseas, don't meet our investment criteria and therefore you don't see us move forward with those. Whether others do or not is a different story.

And so we're really focused on our existing markets and ancillary markets that compliment those. So an example of an ancillary complementary market would be Ghana as to the complimentary major market of South Africa. Those are the kinds of situations we look for.

And as another input to those reviews, we look for those multinational carriers that I talked about in the prepared remarks that we serve at least in one other country in that region as a plus for a given country. But most of our investment you've seen lately has been in existing markets especially in the US, Brazil as you pointed out and others like it. So Tom, if you want to talk a bit about the BR Towers.

And I would just add that strategically what we're trying to do is make sure that we're either number one or two in every market that we serve. And as Jim said, strategically what we're trying to do is invest in our existing markets is where we can get the best return profile is given the amount of investment that we've already made into the market.

With regards to BR, as I mentioned in some of my remarks, that the impact of BR is not included in our guidance. We expect to close this in Q4 really no earlier than October 31. We paid as you may recall just under $980 million, the day one annualized revenue is about $130 million. Day one TCF is about $80 million, so we paid about 12 times TCF. And EBITDA is right around $75 million to $80 million.

We picked up 4600 sites. It's modestly AFFO accretive initially, around $0.04 per share. 24% of the sites are in the top 15 cities. 45% are in the top 300 cities. So we're very excited about this opportunity, it really positions us well on top of the existing portfolio that we have in the market. We have a traffic management team in the market, we're really excited about the opportunity and the future going forward.

Thank you.

The SG&A by the way, on that is also very low. Again, it compliments what I was saying before in terms of investing into our existing markets. So the additional SG&A on this is 2.5% of revenue, so very, very low given the amount of infrastructure we already have in the market. So hope that helps.

Thank you.

Batya Levi, UBS.

Couple questions. Sprint on it's call right now lowered its CapEx outlook by $1 billion for 2014 as it neared completion of the network vision plan, which is actually contradictory to our view. Do you expect any slowdown in activity from Sprint or do you see any slowdown right now? And another question on the integration process for new tower purchases, how long do you think it takes to refit them into your base and how does the incremental lease up compare to your more mature portfolio, which I believe it has been growing about 2/10 on an annual basis?

Batya it's Jim, good morning. As to Sprint, you may recall that we introduced with them a fairly innovative contract structure a few years ago that stabilizes and locks in our growth rate for a number of years and we're in the process of implementing and executing that contract and partnership with Sprint now. So we're very confident that the growth rate and inputs that we're seeing from Sprint in our case are going to continue to be very similar.

The other thing that that contract did was obviated any of (inaudible) churn with American Tower. So even if they accelerate, which we believe they have given our equipment takedowns that Tom talked about earlier from our sites, that's not going to negatively impact the Company. So whether Sprint moves its CapEx up or down by $1 billion really shouldn't have a material input on our proceeds and revenue streams from them. Go ahead Tom, he can talk about integration.

Talking about on the integration, and obviously is a function of whether we're actually acquiring a carrier portfolio or an existing tower portfolio. Sp you can see that with the acquisition that we made with GTP, we are largely completed with the GTP Tower portfolio into our business. And as a matter fact in some of the remarks I made, you saw that we have really accelerated much of the benefits that we saw that would happen in two years time, two, three years time, we were actually realizing a lot of those synergies actually in 2014.

And with regards to the lease up opportunity, a lot of it depends upon the amount of tenancy that exists on the towers out of the gate. So in both Jim's comments and my comments we talked about a lot of the portfolios that we've acquired internationally over the last three years have been with low tenancy on their towers. And you can see that the organic growth rates in those markets for those towers that we've had for greater than a year are up in the this particular quarter 18%. So it's a function of tenancy really that they have in the marketplace and how we're positioning in the market. But clearly in those lower tenancy towers, we're seeing a very accelerated rate of growth in those markets.

In GTP, which is a portfolio that obviously we just acquired, given they had about two tenants per tower, we're seeing consistent rates of growth on the GTP as we are with the US. So it's a function more of how the towers are positioned in the market and what kind of tenancy they're coming with. Hopefully that helps, Batya.

That's great, thanks. One quick follow up, there was some chatter that potentially in Mexico we could see some M&A with Telefonica looking at (inaudible). So can you if you have the data can you tell us what is the remaining contract life for those tenants and what the overlapping exposure would be?

Without having that specific spreadsheet in front of me, it'd be on the order of seven years, Batya, in our case.

Okay, thank you.

Ric Prentiss, Raymond James.

Apologize if the questions has been asked, I was two places at one time today. First question for you guys if I could, on international portfolios as you think about it I think Tom I heard you say you want to be number one or number two in the market. How do you consider partial sales or operating control, do you guys want to I assume be in control of operations of tower portfolios?

Ric, that's been one of the premises of our actually domestic and international expansions since this Management team has been in place. We think it's really important for us if we're the owner/operator of the sites that we have the independent face to the marketplace so that other mobile operators feel comfortable leasing the sites on one hand.

And secondly, so the carrier partner doesn't have a veto on who goes on the site or how fast they can get on it. So for us is important to have operating control. While there are exceptions to every principle, there can be but we haven't gone in that direction as of yet on any transaction.

And then also I noticed you closed about 100 or so of the next owner national remaining towers in this 2Q, still expectation to close the rest of probably 900 towers towards the end of the year?

It'll be a subset of that Ric, but it won't be the full 900.

Okay, and two other quickie ones. You consider on the US side your guidance, is there any significant or how has Sprint sparked the 2.5 gigahertz reflected in your guidance? And also have you seen the activity from the T-Mobile low band work?

Yes, on the Sprint side, Ric, it's very consistent with what we've been realizing in the first half of the year. So no, there's no real significant uptick in spark. I mean we're seeing some, two and a half being rolled out, but pretty modestly. So we would expect that more of a 2015 kind of an activity. As well as T-Mobile, pretty consistent with -- in the second half what we've realized in the first half, so we would expect an uptick in that perhaps towards the latter part of the year and into 2015.

Makes great sense. And the final question is when you consider amendment versus co-location, what's been the split on $1 basis maybe in the US side as far as how much of the leasing activity in 2Q was coming from amendment activity versus co-lo?

Yes, on the overall levels it's in the [60%] kind of [40%] range. I mean we're seeing application or seeing values of amendments in that $700 or $800 range and probably three times that relative to new co-los.

And as far as -- that was a dollar value, 60% of new revenues worth amendments versus co-los?

Yes, that's right, Ric.

Great, thanks so much, guys.

Phil Cusick, JPMorgan.

Hi this is Richard for Phil, following up on Batya and Ric. In terms of the domestic revenue guidance after the first half performance it seems like even with the revenue -- accelerated revenue recognition that growth is accelerating and above the 9.5% to get to the guidance, it seems like there might be a slowdown in the second half. Is that is being conservative or is there something that we're not seeing? And then also in terms of domestic, what is driving the strong build and should we expect that going forward?

Yes, let me - on the build program, that continues with a lot of the momentum we started last year. I think it's just indicative of the fact that carriers are looking for some additional density as well as some coverage but largely additional density. So we have obviously strong relationships with the customers and we expect actually to build in the 500 to 600 towers for 2014, and we're hopeful that that kind of energy will continue into 2016.

With regards to your first question on their results note the application levels in the second quarter were 20% higher than they were same time last year. So we're expecting continued solid core organic growth going in the second half of the year. Keep in mind that we do have on the US basis that acceleration of some of the revenue associated with the decommissioning. So there is some skewing with that from a first half of the year and not in the second half of the year. But we're excited about what we're seeing going forward.

And then in terms of AFFO, can you give us a sense of what percentage comes from the services business?

Yes, service is very, very small. I would say less than 5%. The (inaudible) is coming from the US (inaudible) did with the international. And then the services which is probably in the 3 -- 2% to 3%.

Great. Thank you.

Amir Rozwadowski, Barclays.

The first question from my side, Jim, clearly we've seen the CapEx plans come out of the carriers that have reported thus far. And I recognize that delineating your business from their CapEx trajectory is a little bit more magic than science. But with AT&T and Verizon implying that they front end loaded CapEx for the year, what gives you comfort in terms of the visibility for the back half of this year clearly in raising your outlook? And then any indications of how we should think about the carry forward into 2015?

Sure Amir, it's Jim here. Look our actual experience to date with both Verizon and AT&T and frankly the other carriers, major carriers in the US as well, Sprint and T-Mobile, is that we haven't seen a decline in activity whether it is commencements meaning we start to build that includes installation of equipment, whether it's as Tom said applications, sign new business, all this is trending very positive for us. And that gives us very confident visibility into the next few quarters that our demand for space real estate is going to stay strong.

When various companies recognize CapEx for equipment or saw cost or other things and put it on their P&L and balance sheet, that's something you have to really tease out with them. And secondly, we also want to point out that AT&T in this specific case continues to be our largest new business customer anywhere in the world. We have a strong pipeline of new business with them both in build-to-suit towers and in co-locations and amendments and numerous [stash] projects as well.

Verizon is not far behind frankly in all of those kinds of activities with us. And AT&T reiterated its CapEx guidance for the full year at $21 billion. And again how they may account and put things through the general ledger and when they do that versus when equipment gets installed on sites and we start billing, those things may not be perfectly correlated as you said.

So our confidence is shown through in our guidance. There was some one-time or seasonal things that happened in the US to our benefit in the first half. It's not an issue of demand as the second half guidance that we put out there, demand is strong.

Thanks a lot. And then a follow up on some of the international trends here thinking about potential appetite for other transactions in the marketplace, it does seem as though we're hearing more and more about opportunities in some of the international markets which you folks have defined as core international areas of focus. Appetite for additional transactions, Jim, or anything along those lines would be helpful.

Well the appetite for additional transactions is totally in place for our Company. Each of those has to on its merits meet our investment criteria. And as I've said in the past and even today, there are evaluations we do of the country, the wireless market in the country and the specific counterparty. And then it's a matter of our modeling the assets growth over time and does the purchase price being sought by the seller then fit within our investment model? Sometimes it does and you see us act and other times you don't and some of else takes it or the offer for sale is withdrawn.

So the appetite is clearly there. We've got terrific Management teams in Latin America, EMEA and Asia that are involved in pretty much every opportunity that one could think of that is ongoing out there. And those that pass muster we'll act on and we have the balance sheet and the financial position to do that. And those that don't meet our investment criteria, we won't act on and there are more of those than the ones we act on. But we're quite active everywhere.

Great. Thank you very much for the incremental color.

Jonathan Schildkraut, Evercore.

I'd like to ask question on DAS. I know that you guys have had pretty deep operations on the indoor DAS side for a while. With the inclusion of the rooftops from Global Tower Partners, I thought that we were sensing maybe a changing perspective on outdoor DAS. But I recently read an interview with Steve Marshall where he talked about some of the challenges on oDAS and really the inability to scale. And I was wondering if you could update us on your perspective for investments in the DAS business? And then maybe elaborate a little bit on the challenges of getting scale on the oDAS side. Thanks.

Well there is a differentiation between outdoor DAS and indoor DAS in our experience at American Tower. The indoor DAS projects which we focused on since the SpectraSite acquisition, nearly 10 years ago now, have had leasing rates, additional tenancies and upgrades to the technology at a similar pace as the classic tower would have. And our experience frankly in outdoor DAS which is a much, much smaller piece of our particular business has been that those revenue growth rates per unit aren't as rapid.

So we have to then bake that experience of somewhat lower growth rate into our investment models and therefore we end up doing less of those projects frankly. It's still a good complementary technology. We are doing a few projects as we speak but those have been long in negotiation and we've been able to get in a position where those do meet our investment criteria. But it's tougher to make the hurdle frankly for outdoor DAS in our Company than it is for an indoor DAS project or classic tower.

Great. If I can ask a follow-up question, in terms of your debt, you've got down to 5 times leverage now. It hasn't seemed to hold you back from making acquisitions, but now that you've gotten back into your leverage target range, does it open up new opportunities for you to do investments?

Well we've never really held back candidly on investments that we were looking at. We always had we believe the liquidity as well as the wherewithal to look at any investment as we've do. We've been pretty inquisitive even in the first half of the year. And looking at the BR Tower transaction in the second half of the year. We have been fortunate in terms of being able to issue the mandatory preferred and subsequent to the Richland Tower deal and that give us a little bit more flexibility to continue to have a pretty good run rate of looking at opportunities down the path.

We're not shy if to the extent that there was a large strategic transaction there, just as we had identified at the end of last year we would use equity where we thought that it was value creating and accretive to our business. So yes, in the second quarter we did land it at around 5 times with the BR transaction. And what we expect for the second half of the year we should be in the 5.1 to 5.3 times. But as I said we're not shy from using our balance sheet and all of the tools therein to the extent that we see a transaction that makes sense for us.

All right, thank you so much.

Steve Sakwa, ISI Group.

A couple of quick questions. As it relates to capital deployment, I know you've got the Brazil transaction closing in Q4. Is there anything else that's been announced but has not closed, I want to make sure I have my dollars slotted in correctly for Q3.

We have one additional small US transaction that we have just signed and it's a couple hundred million dollars of funding for -- it'll occur $140 million, $150 million actually, Steve. It'll be in the fourth quarter, but that's really it. Subsequent to the end of the Q we did buyout the minority partners interest in Colombia and that was to the tune of $100 million or so. Couple small little items like that.

Okay so maybe [$100 million] in Q3 and then an incremental call it [$150 million] in Q4 with Brazil?

Yes and then Brazil on top of that, that's right.

Correct, okay. And then to make sure I understand, the incremental $8 million of revenue that you picked up seemed to be somewhat of a timing issue. So as we think about normalizing Q3 would you say half of that goes away in Q3 or I want to make sure we don't over extrapolate or under cheat the run rate going forward.

No, fair point. The way we had it in our original outlook as I mentioned it's about $21 million of revenue in the year. And we had it ratably across all four quarters, so it was $5 million per quarter. So for the first half of the year, we've actually recognized $17 million, $18 million of that revenue. So there will be $3 million left that we will recognize in the second half of the year.

Okay. And to be clear that goes away in 2015?

No, no, no, that's recurring through 2016.

Okay, sorry about that. And then on the expense side, that $7 million again to be clear, about another $3 million benefit will occur in Q3 but almost sounds like that $7 million was a little bit high in terms of a run rate?

Yes, that's exactly right. We would expect another $3 million some time in the second half of the year.

Okay great. That's it for me, thanks.

Kevin Smithen, Macquarie.

This is Will for Kevin. Regarding Mexico, there's been a lot of news over the past few weeks. Can you update us on current lease up and amendment activity there and your take on America Movil's tower spinoff and the other potential Iusacell and Movistar merger being reported today? And also do you expect AT&T to enter the market?

What we can speak too with most accuracy is our own run rate in Mexico, which has been solid and stable over the last couple of years I'd say and meets our investment criteria and has been a very successful market for us. It's on the order -- the results are on the order of Mexico again long tenured experience there with American Tower in that country and we've got a great Management team as well in Mexico and they've been performing steadily over the last few years.

As far as the other situations, it's best I think left to the parties you mentioned to elaborate on those. America Movil I will point out is an important customer of ours in multiple markets in Latin America. I think we have a strong business relationship with their management team. If they like us to collaborate with them down the road in some fashion, we would certainly listen to that. But we have nothing to report at all on how they're going to dispose of their towers at this time.

And then finally with Iusacell Telefonica Movistar, again we have long-lasting contracts with both of those 7 year, 10 years. If they get together you'll have certainly a much stronger competitor in Mexico by combining those two companies. But we don't have any visibility as to the probability of that happening or any regulatory inputs that might happen.

We'll be successful we think whether they are three or four large carriers in Mexico just like we've been successful in the US as it's gone from seven to four over the last few years. So we wouldn't look this as a material concern for us. And then finally the only people that can comment if AT&T is going to enter the market are AT&T, so we don't have any view into that at all.

All right, thank you.

I'll now turn the call back over to our presenters for any closing remarks.

Thanks, Operator, and thank you all for being here with us today. I know it's a busy day and we appreciate all of your attention. To the extent that you have any follow-up questions, please give Leah or myself a call. Thank you.

And ladies and gentleman, this does conclude today's conference call. Thanks for joining us, you may now disconnect.