美國電塔 (AMT) 2014 Q4 法說會逐字稿

Good morning. My name is Stephanie and I will be your conference operator today. At this time, I'd like to welcome everyone to the American Tower's Fourth Quarter and Full Year 2014 Earnings Conference Call.

(Operator Instructions)

Leah Stearns, Senior Vice President, Treasurer, and Investor Relations, you may begin your conference.

Great, thank you. Good morning and thank you for joining American Tower's Fourth Quarter and Full-Year 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, 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 2014, as well as our outlook for 2015. After these comments, we will open 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 2015 outlook and future operating performance, our expectations regarding our pending acquisitions, future growth, industry trends, 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 yesterday afternoon's earnings press release, those set forth in our Form 10-K for the year ended December 31, 2014 and in our other filings we make 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.

Please note that any reference to our international segments' organic core growth during today's call will exclude the impact of pass-through revenues. Given our ability to now capture and report pass-through on a site level basis for the full year 2014, we will be excluding it from our reported organic core growth metric starting in the first quarter of 2015.

In addition, this morning, we announced our intention to commence an offering of common stock and mandatory convertible preferred securities. Due to securities laws, we are precluded from answering any questions related to these offerings on this call and respectfully request that you focus any questions to our earnings-related material.

With that, I'd like the call to turn over to Jim, who will discuss our long-term strategy in more detail.

Thanks, Leah. Good morning to everyone on the call. 2014 was a record year at American Tower: a result of the attractive locations and characteristics of our assets, the strength of our customer contracts and relationships, and solid operational execution. Our rental and management segments generated over $4 billion in revenue for the first time in our Company's history and delivered double-digit growth across all of our key metrics, including organic core revenue, rental and management revenue, adjusted EBITDA and AFFO per share. The cash flow generation of our legacy assets combined with our disciplined approach to inorganic growth also enabled ATC to sustain return on invested capital at the 10% level.

Last quarter, during my prepared remarks, I highlighted the industry trends that are developing across our served markets. Today, I'm going to review American Tower's long-standing fundamental strategy and provide segment performance data that clearly demonstrates the sustainable performance being delivered by the execution of that strategy.

Turning to slide 5, when I came to American Tower nearly 14 years ago, we established a three prong strategy for our business. Those three strategic pillars have not changed and they include one, to focus on operational excellence.

We strive to further expand our leasing revenue opportunity by understanding our tenants' needs and satisfying them through our unique expertise in lease contracting. We then design our business processes to minimize cycle times and deliver superior capabilities in areas such as tower construction and power and fuel management to achieve a preferred supplier position with each of our customers.

Two, to maximize the compounding growth in cash flow that's generated from our existing properties, while selectively growing our asset base. We focused on driving organic growth, maintaining stringent cost controls, and simultaneously investing in assets around the world, but only those that meet our investment criteria. Three, to maintain a strong balance sheet, to ensure we have a consistent access to capital markets at attractive rates in all market conditions to fuel our largest strategy.

Our ability to execute our strategic goals has led to total return outperformance versus the S&P 500 in 9 of the last 10 years and a cumulative total return, including REIT dividends, of nearly 500% to our stockholders since 2005. In that timeframe, we've grown the Company from a primarily domestic US communications real estate provider with about 22,000 towers to a global leader in the industry with nearly 100,000 sites, counting our pending transactions with Verizon, Telecom Italia, and Airtel. With a current enterprise value of over $51 billion today compared to $7 billion 10 years ago, we've not only established global scale, but have also positioned American Tower as a credible and reliable partner to many of the world's leading multinational mobile operators.

As outlined on slide 6, the bedrock of our major tenant partnerships are master lease agreements that leverage our scale to encourage additional revenue, while introducing process efficiency both to our own Company and to our clients. Among the most effective of these contracts are the holistic contract structures that we have with three of the national carriers in the United States, which have significantly improved our revenue growth visibility while minimizing churn.

As a result of this contract structure and pro forma for our pending acquisitions, we will have nearly $34 billion of non-cancellable revenue or about 8 times our 2014 revenues on the books. We've also created a culture of operational excellence throughout this organization, pushing cycle times lower and our customers' speed to market faster; all to support and improve customer experience that we hope further drives incremental revenue.

Our aim is to make the co-location and amendment process as efficient as possible by aligning our processes and procedures with those of our customers. Since 2010 for example, we've reduced our average cycle time for co-locations for customers with holistic MLAs by 50%.

In another key operational area, tower construction, we demonstrated leadership in earning build to suit contracts in major markets including the US, Brazil, and India. Based on our well-established expertise in tower construction, we secured customer contracts to build over 3,000 towers in 2014.

Meanwhile, in our African markets and in India, we've developed market-leading fuel and power management solutions to improve the reliability and operating efficiency of electrical power, increasing the attractiveness of American Tower sites to both existing and prospective tenants. The combination of our asset quality, strong contracts, operational execution, and investment discipline is borne out in our results in both the US and abroad.

As you can see on slide 7, since 2011, we've posted domestic organic core growth rates averaging more than 8%. The GTP portfolio, which generated organic core growth of 10.5% in 2014, and the Verizon towers, whose revenues we expect to grow at an average annual rate of around 9% to 10% for the next five years, are positioned to grow faster than the rest of our domestic base for the foreseeable future.

The Verizon portfolio in particular is poised for strong growth, due to the fact that the properties have not been actively marketed previously and have very limited exposure to churn from its existing tenant base. In fact, our sales team's already receiving inquiries from our customers regarding the Verizon properties, who've always wanted to co-locate on them but never had the opportunity to do it.

In addition, we expect to convert about 85% of incremental revenues on both these portfolios into operating profit, given the minimal incremental expenses needed for co-locations and amendments. The flow through of future growth to AFFO, in turn, should also be very high. We expect the combination of our legacy assets and the newer GTP and Verizon portfolios to contribute meaningfully to our organic growth revenue and AFFO per share growth going forward.

By combining an attractive nationwide portfolio of assets with a strong tenant base, strategic contract structures, and a focus on operational excellence, we believe that we've positioned our US business to generate strong revenue and compounding cash flow growth for many years to come. We look forward to integrating the Verizon assets once the transaction closes, similar to the way we were able to outperform our integration targets for GTP. We also expect to aggressively lease-up the Verizon towers beginning shortly after the close, especially given the pent-up demand that we believe exists on these franchise locations.

Turning to our international business on slide 8, we've been able to deliver strong organic core growth over the last several years, significantly above that of the US. This reflects the aggressive network deployments of large multi-national customers like Telefonica, MTN, Vodafone, and many others across our international footprint and has been complemented by average gross margin conversion rates, excluding pass-through, of about 80% since 2010.

While we continue to expect solid contributions to organic growth from existing assets, we also expect that under-marketed portfolios like Airtel Nigeria, when they're closed by us, will help generate very strong revenue growth going forward. The growth rates indicated on the chart for BR Towers, TIM, and Airtel are the average annual revenue growth rates we expect each portfolio to generate over the next five years, as countries like Brazil and Nigeria accelerate the deployment of broadband mobile data. By diversifying our revenue stream internationally, focusing on large well-funded multi-national carriers, and deploying capital for high growth assets, we believe that our international segment will further elevate and extend our growth trajectory beyond that of our core business for many years to come.

Strong organic growth across our global portfolio has helped drive rising tenancy and improving NOI yields, as you can see on slide 9. On sites that we've actually marketed prior to 2005, we have increased the average tenancy to 2.7 tenants, resulting in $7,000 a month in revenues excluding pass-through and a gross margin percentage of approximately 89%. The combination of contractual escalators, amendment revenues, and incremental co-locations on these assets have led to an NOI yield of more than 25% on those properties.

We've been able to replicate this kind of success on towers acquired and constructed between 2005 and 2010. The 2005 to 2010 vintage has an average of 2.3 tenants, over $4,000 in monthly revenues, and a gross margin percentage of 85% excluding pass-through, while generating an NOI yield of nearly 23%. Our asset additions since 2010 have primarily focused on low initial tenancy sites, which are well-positioned for our teams to market for co-location.

As a result, these relatively newer sites that we've added to the portfolio from 2011 to 2013 currently have an average of 1.5 tenants per tower and a current NOI yield of nearly 8.5%, leaving plenty of room for growth. We believe that we're optimally positioned to replicate our long history of transforming low tenancy, underutilized tower portfolios into high cash flow, high margin assets with these newer sites. This also applies to our recently closed acquisition of BR Towers and our pending Verizon, TIM, and Airtel tower transactions.

As previously highlighted, these assets all have existing capacity for incremental tenants in markets with strong wireless industry trends. As a result, we believe we positioned ourselves to deliver a number of years of strong organic growth and the further expansion of the initial NOI yields.

Underlying all of this is our ability to fund our growth initiatives with efficient and liquid sources of capital. To that end, we launched the process to finance our Verizon transaction this morning. Meanwhile, we expect to fund our other pending acquisitions with TIM and Airtel through a combination of cash on hand, borrowings under our existing credit facilities, and other debt financing.

Our approach is designed to preserve the strength of our balance sheet, thereby positioning the Company to effectively pursue the long-standing strategy that has served us and our shareholders so well to date. By funding these high-growth assets in this manner, we expect to retain our investment grade rating while ending 2015 at a net leverage range in the [mid-5s].

In addition to collectively being accretive to AFFO per share right out of the gate, we expect these transactions in aggregate to generate substantial accretion to our AFFO per share over time. By combining our balance sheet strength with the other pillars of our corporate strategy, we have built a high quality compounding cash flow stream with the lowest churn in the industry, a diversified customer base, and exposure to the longest demand curve as a result of our high-growth International business.

With that, I'll turn it over to Tom for a detailed review of our 2014 financial performance and 2015 outlook. Tom?

Thanks, Jim. Good morning, everyone. We finished 2014 with yet another strong quarter, achieving solid global organic core revenue growth, adding nearly 6,000 new tower assets and building on long-standing relationships with our wireless carrier customers. As Jim just highlighted, we believe that our accomplishments over the last several years, particularly from a strategic perspective, will continue this momentum and extend our runway for growth for many, many years to come.

If you'll please turn to slide 11, we achieved strong growth in all of our key metrics in the fourth quarter. Our total rental and management revenue core growth was nearly 18%, which included another solid quarter of organic core growth at nearly 10%. Our commenced new business continued to be generated by large multi-national carriers such as Verizon, Telefonica, T-Mobile and AT&T.

Domestic organic core growth was about 9%, with Verizon emerging as our top new business customer for the quarter. Internationally, we generated organic core growth of nearly 13%, with Brazil continuing to benefit from record levels of leasing demand and Ghana experiencing the highest level of organic core growth across our International markets at over 40%. We also completed the acquisition of BR Towers in Brazil in mid-November, which contributed about $11 million in revenue for the quarter.

Our adjusted EBITDA core growth was 17% and was generated primarily by our rental and management segments, which continues to drive the most profitable growth within our business. We also generated strong core AFFO growth of nearly 22% in the quarter, as a result of an adjusted EBITDA to AFFO conversion ratio of over 100%.

Moving on to slide 12, we're extremely proud of the results our teams have delivered in 2014, particularly versus our initial expectations. As you can see, we have meaningfully exceeded our initial outlook for rental and management revenue, adjusted EBITDA, and AFFO.

While some of this outperformance was due to acquisitions, the majority of the upside was driven by better than expected growth on our existing sites. A significant driver of this over achievement was our ability to generate organic core revenue growth rates about 200 basis points higher than the midpoint of our initial outlook. Importantly, we were able to convert nearly 85% of our over $140 million in revenue outperformance into adjusted EBITDA and nearly 90% of that adjusted EBITDA outperformance into incremental AFFO.

Turning to slide 13 and reviewing our full year results, our total rental and management core revenue growth was about 28%, with more than 10% attributable to organic core growth. The remainder of the growth was driven by the over 21,000 new assets we've added since the beginning of 2013 with average tenancies of around 1.4.

We commenced 30% more new business on the entire portfolio in 2014 versus 2013, reflecting the significant investments wireless carriers are making in their networks globally. Our 2014 core adjusted EBITDA grew by more than 27% with reported adjusted EBITDA growth of about 22%.

Similar to the fourth quarter, substantially all of our adjusted EBITDA growth for the year was attributable to our rental and management segments. Despite the addition of the new lower initial tenancy assets I mentioned earlier, we maintained our adjusted EBITDA margin at nearly 65%. Core growth in AFFO was over 27% and almost all of that growth was attributable to our rental and management segments.

Factored into that AFFO growth was an issuance of an aggregate of $1.4 billion in new senior notes at a weighted average interest rate of about 4%. We also completed a $600 million issuance of a mandatory convertible preferred stock as part of our plan to fund growth initiatives.

We ended the year with over 75,000 sites in 12 markets around the globe and have nearly 23,000 additional towers that we expect to close in the first half of 2015. Our focus on building relationships with large global tenants and carefully structuring contracts to enhance revenue visibility while maintaining upside potential resulted in another year of consistent profitable growth and positions us well for 2015.

Turning to slide 14, our expectations for 2015 rental and management revenue growth reflect another healthy year of demand for tower space across our global footprint. At the midpoint of our outlook, we expect consolidated rental and management core revenue growth of nearly 12%, driven by organic core growth of about 8%, with the balance being generated from new properties including the new sites we expect to build in 2015. We're forecasting consolidated churn of about 1.8%, which reflects the high contract renewal rates of our tenant base and the low number of contracts coming up for renewal this year.

On a reported basis, we expect consolidated rental and management revenue growth of over 7% at the mid-point, including over 4% of negative impacts from foreign currency exchange rate fluctuations and a few million dollars from straight line revenue accounting. As a reminder, none of the impacts from our pending transactions are included in these outlook numbers.

In the US, where we expect organic core growth of about 7%, we're forecasting commenced new business in 2015 to decline about 25% versus 2014 levels, driven by a slowdown in spending at AT&T. We've assumed that the other major carriers will be at least as active as they were in 2014 and if there is a re-acceleration of AT&T spend, there could potentially be some upside later in the year.

In 2014, by comparison, excluding the equipment decommissioning agreement that we discussed previously, our initial outlook implied an organic core growth of just around 7.8%. We ended up significantly exceeding that number by year end as a result of our ability to capitalize on higher than expected customer demand. As 4G densification initiatives continue to support rapid expansion in mobile data usage, we believe we're well-positioned to generate solid organic core growth across our portfolio.

In our international markets, where we expect organic core growth of about 10%, we are forecasting total new business commencements to be in line with those generated in 2014. We expect our Latin American markets to have another very strong year in 2015, as carriers like Vivo in Brazil and Avantel in Colombia aggressively rollout 3G and 4G networks.

African markets also are expected to perform well, as large carriers like MTN and Vodafone roll out 3G across their footprints with select 4G deployments in South Africa. Finally, we expect activity in India at roughly comparable levels to 2014, with Reliance Jio continuing to deploy 4G in urban centers and the other major carriers following suit.

Turning to slide 15, we also expect solid growth in adjusted EBITDA and AFFO in 2015. Beginning with adjusted EBITDA, we're forecasting core growth of nearly 12% at the midpoint of our outlook, with reported growth of about 8%.

This growth includes the impacts of an expected decrease in services operating profit of about $12 million as compared to 2014, given the conclusion of several large services projects last year. We remain focused on property level cost controls, as well as SG&A cost, and expect SG&A as a percentage of revenue to be right around 9%, similar to 2014.

In addition, our land acquisition program continues to benefit our margins with over 2% of our US land expense base eliminated through prior years' land purchases. Accordingly, EBITDA margins are expected to be over 65% and as we generate incremental new business across our portfolio of properties, we would expect our margins to continue to expand.

I just want to remind you that once our pending transactions close, due to their combined lower initial average tenancy of around 1.5 tenants per tower, our margins will temporarily decline. This does not change our long-term expectations of our ability to increase margins across the portfolio as we fully expect margin expansion on these assets once we begin actively marketing and leasing them up.

Turning to our outlook for AFFO, we expect core growth of over 13% at the midpoint, which will be driven by the growth in adjusted EBITDA net of interest costs associated with our 2014 acquisitions, as well as slightly higher maintenance CapEx assumptions due to our larger asset portfolio.

We expect all of our growth in AFFO to be generated by our rental and management segments. At the midpoint of outlook and assuming a weighted average diluted share count of just over 400 million shares, our outlook midpoint for AFFO per share would be around $4.91.

Moving on to slide 16, in 2015, consistent with the last several years, we expect our primary method of returning capital to stockholders will be through our REIT distribution. The amounts and timing of our dividend payments are at the discretion of our Board, but our goal continues to be to deliver annual dividend growth of over 20%.

We currently plan to spend between $800 million and $900 million in CapEx during the year, which includes the construction of about 3,000 sites at the midpoint, including around 150 to 250 sites in the US. Given our pending transactions in the US, Brazil, and Nigeria, and our global construction pipeline, we anticipate having about 100,000 sites by year end. We also expect to spend about $180 million on land acquisitions, while also targeting to opportunistically extend over 2,500 leases domestically.

Pro forma for the Verizon transaction, we expect to have over 60% of the land under our domestic sites owned or under our control for 20 years or more. Finally, we continue to maintain an active deal pipeline and continue evaluating acquisition opportunities around the world. Our capital allocation priorities in 2015 will continue to support our corporate strategy of growing our asset base profitably, while maintaining a strong balance sheet.

Turning to slide 17, we remain focused on strategically and opportunistically expanding our global business. This is reflected in the nearly 23,000 towers we expect to add to our portfolio through three transactions in the first half of this year.

Our recently announced Verizon deal will enable us to add nearly 11,500 towers to our US asset base, while meaningfully expanding our relationship with a very high quality investment grade tenant. As Jim noted earlier, we think this is an excellent portfolio of historically under-marketed, under-leased towers that are well-positioned to generate significant organic core growth for an extended period of time.

We believe that this portfolio will generate compounded annual growth in revenue over the next five years of between 9% and 10% and will help us extend our organic growth trajectory in the US. We expect to close the Verizon transaction by the end of the first quarter.

We expect to close our previously announced transaction in Nigeria with Airtel in the first half of the year, which will allow us to commence operations in our newest high-growth international market. By acquiring about 4,800 sites from Airtel, we will gain meaningful scale in a country which has the largest economy in Africa, with a fast-growing wireless sector and an extremely young, extremely mobile population with virtually no fixed line infrastructure in place. Similar to Ghana and Uganda, which generated organic core revenue growth of nearly 30% in 2014, we would expect these Nigerian sites to generate strong growth going forward to support our acquired high teen to low 20% unlevered returns.

Finally, we expect to acquire about 6,500 sites in Brazil for Telecom Italia, also in the first half of the year, which will bring our portfolio in the country to over 18,000 towers. Brazil has been one of our fastest growing markets over the last several years and organic core revenue growth in 2014 was over 19%. Given the current state of network infrastructure in Brazil, we believe that our customers will need to continue to make significant investments in their mobile networks.

We are extremely well-positioned to benefit from this, given our strategically located footprint. With a 20-year anchor lease with TIM on this portfolio and significant opportunities for organic leasing growth, we expect Brazil to be a key growth driver for our business going forward. As reminder and as I've said, we have not included any impacts from these pending transactions in our current outlook for 2015.

On an annualized year one basis, we would expect the portfolios to collectively generate revenues of around $815 million and gross margin of about $390 million. In addition, we expect them to collectively be modestly accretive to AFFO per share in their first full year and increasingly accretive thereafter.

Pro forma for these transactions, we expect to have nearly $34 billion in non-cancellable revenues, representing over 8 times pro forma 2014 revenue. With an average pro forma remaining lease term of nearly seven years, we have a solid foundation on which to drive incremental revenue and cash flow for many years to come.

Moving on to slide 18, our pending transactions reflect the continuation of our long history of prudent capital deployment. As you can see in these charts, from 2007 to the midpoint of the 2015 outlook we issued this morning, we will have recorded annual growth rates in rental and management revenue, adjusted EBITDA, and AFFO of at least 14% with growth in AFFO per share at nearly 16%.

We have also simultaneously increased our return on invested capital, attained an investment grade credit rating, and have grown the Company from just over 20,000 sites to a pro forma total of nearly 100,000 towers; creating the most comprehensive and diversified independently operated global network of towers in the world. As a result, we believe that we have positioned the business to continue to deliver consistent recurring cash flow base growth, while generating compelling total returns for our stockholders.

On slide 19 and in conclusion, we had another strong year in 2014 with core growth in rental and management revenue, adjusted EBITDA, and AFFO all over 27% and organic core growth of more than 10%. Given the ever increasing global demand for wireless services in our diverse portfolio, we expect another very solid year of profitable growth in 2015.

By combining our high-quality legacy asset base with the more than 27,000 previously underutilized, under-marketed sites we will be adding through recently closed and pending transactions, we expect to extend our organic growth profile and enhance our ability to drive strong growth in AFFO per share over the long term. We believe that our continuing focus on operational excellence coupled with select strategic investments solidifies our status as a premier global owner and operator of communications real estate.

Finally, as Leah mentioned right up front, I do want to remind you that we have begun our efforts to finance our Verizon transaction. Under Federal Securities rules, we are limited in our ability to discuss the financing on this call. We ask that you please refer to our filings we have made this morning with the SEC for additional information.

With that, I'd like to open up the call for questions. Operator?

(Operator Instructions)

Amir Rozwadowski, Barclays.

I was wondering if we could talk a bit more about the Verizon assets. You've outlined that your expectations are for this 9% to 10% growth for the assets going forward. What gives you the confidence in the ability for you folks to get better than normalized organic growth out of those assets? Since you've announced the acquisition, what type of feedback have you received from some of your customers that further solidifies that growth outlook?

First, Amir, our track record of converting non-performing assets that are essentially single use by mobile operators into performing assets by commercially leasing them is pretty clear and we outlined those in the remarks. This set of Verizon towers fits exactly into that category. It's an asset that the previous owner had used to build its own network to try to get leadership in that space in the United States and wasn't necessarily focused on marketing those sites to gain lease revenue from other carriers or competitors, frankly.

One specific item of evidence that indicates that we believe the towers are quite largely under-marketed is that, unlike other companies in the mobile operator space in the US, Verizon never established, to our knowledge, an internal tower business to go out and find lessees for these sites, process applications, generate business, et cetera. Other tower portfolios that have traded in the last few years, again, it's our understanding that those organizations did exist in those companies and therefore, the initial lease rates, when those assets traded, were significantly higher than the Verizon asset that we've disclosed. We think there's a lot of pent-up demand right off the bat, to answer your question, Amir, so that's the demand side of things.

Our customers, as I said, are already making inquiries into our sales and marketing team to get on many of these sites. They weren't necessarily in the view of those other customers available to them and Verizon, frankly, wasn't set up to effectively and quickly process applications and get them up on the towers. Our tenant base knows that's exactly our objective here and so they've already expressed interest. That really fills out the demand side of the equation on these sites for us.

On the supply side, as we call it, the towers have, what I call, distinctive characteristics as far as height, as far as structural integrity, and our view is that this is a unique portfolio and that we expect it to have, on average, one available tenant structural capacity unit without any investment in redevelopment for that. So this is a very high capacity portfolio with, again, we think distinctively sizable ground space under the tower that will enable us to put additional equipment for other customers there without necessarily having to expand the compound and getting additional land rights and paying for those. Both the demand side of the Verizon asset and the supply side we think are distinctively strong.

The other thing that I do want to highlight is the Verizon operations team managed these assets in a manner that we would consider quite close to the way we would manage these assets in terms of documentation, in terms of maintenance. Just as a key example, the speed at which you can -- when you're a tower company, lease up sites is, in large part, initially dependent on the completeness of literally the file that comes with the tower, things like ground leases, environmental studies, documentation on zoning and building permits and things like that.

Because when you go to lease that site to another customer, they're going to want to have all that material. We feel that, again, this is a distinctive portfolio in terms of the documentation that comes right with the tower. Those are some of the demand and supply side benefits, we think, to this particular portfolio.

Amir, I might just add a couple of things. In terms of the fit with our existing base, nearly 50% of the sites have no competing structures within a mile and they're very well located sites for a potential public safety rollout. Many of the locations are in less urban areas, there's no alternative structures available and given the model that we've laid out, we're really only talking about adding one additional tenant per tower on average over the entire 10 year period.

The other element is given their low tendency, 1.4 tenants per tower, there's expected to be very little churn on these, obviously we have the anchor tenant at Verizon, and the other third-party leasing activity are the other big three leasing companies. We would expect to have very, very little churn going forward on this portfolio. I think when you couple all of that, you would conclude that the 9% to 10% is very achievable from our perspective.

One quick follow up, in thinking about the organic revenue growth outlook that you guys are expecting for 2015, certainly the step down at AT&T has been well-documented and discussed, but I was wondering, as they move further south and into other territories, is there opportunities there for additional growth? Have you baked that into your expectations for near-term organic growth?

Fair question, Amir. Yes, we are absolutely excited about the opportunity for AT&T coming into Mexico and what they've done over the last 90 days. And no, none of the incremental opportunity for AT&T moving into Mexico is included in our outlook. When we have more visibility as to what AT&T's plans are for further build out, we'll update our outlook based upon their activities. Right now, there is nothing in our outlook relative to additional activity that we see from AT&T coming into Mexico.

Thank you very much for the incremental color.

Ric Prentiss, Raymond James.

Couple questions, first, on slide 8 of your deck, it talks about the international revenue growth. 2014 shows about 13% growth. Is that what Leah was talking about, about moving toward ex pass-through? Because I thought I remembered seeing something in the press release of about 15.5% in 2014.

Ric, that's exactly right. Now that we have the ability to get the detail done at the lease or at the site in 2014, we're actually able to look at 2014 and 2015 without pass-through, which we think is a better reflection of looking at real organic growth on the sites.

On slide -- so the drop from 13% ex pass-through, to 10% in 2015, I though you mentioned that most of the international markets you expect strong, Lat Am, Africa well, India roughly the same, why the drop then on apples to apples 13% to 10%?

A couple of things, one is the asset base is bigger, so as a result of the larger numbers, the similar -- you won't get the same type of overall growth rate. In 2014, we also had a fair amount of back billing on sites that I have not included that in outlook for 2015. As we generate that type of back billing revenue, we'll continually update the outlook. But that is something as a result of us going out and auditing, actually, all the sites.

It's a very difficult number to predict at the beginning of the year and as I say, we generated a fair amount of back billing in 2014 and I would hope that we would generate it in 2015, but I haven't included it in the outlook.

Okay and that was the same way you did it in 2014 guidance, I think, right?

Correct.

Another question on slide 14, the escalations show that in 2015 outlook about 3.5%. I would think, over time, as international becomes a larger number like you point out, usually inflation and escalators are higher down there. Should we expect, over time, the inflation effect in escalators should be higher?

Yes, you should and it's obviously going to be a function of what the inflation is in that particular year in those particular markets, but that's a fair assumption. In fact, in 2015, we're looking at inflation of 4%-plus, so higher than, obviously, the US rates, reflecting some of the inflation that we're seeing in some of those markets.

Last question, I know you can't talk much about the offerings that were announced today, so I appreciate, but just want to understand, when you mention AFFO per share accretive on some of the deals, how do you treat [mando] converts, such as the May 14 convert? As you look at doing one here this month, does that reflect in debts, does that reflect in equity? Obviously, it's kind of a hybrid.

If you look at our P&L, you'll see at the bottom of the P&L, the dividend that we actually are paying on that particular product, and so as such, it's actually dilutive to AFFO in the numerator. As GAAP tells us, we look at that on an as-if basis, where is it most dilutive? Whether it should be running through the P&L or whether it should be actually in your fully diluted share count.

Great, thanks, guys.

Simon Flannery, Morgan Stanley.

This is Armintas for Simon. I was hoping you could talk about some of the activity you're seeing in the US to get to your 7% organic growth and some of the activity you're seeing abroad, particularly Brazil, where we just had the 700 [megahertz] auction in the Olympics are gearing up for next year. My last question is if you could talk about the M&A landscape for the next one to two years, what you're seeing there and if we should expect any large transactions?

Let's start with the US. Our largest volume of signed business right now in the US is actually coming from Verizon. That's an important point that I want to also highlight that the non-Verizon towers in the American Tower portfolio -- non-Verizon transaction towers, is 75% of our US portfolio, roughly. Of the 40,000-plus sites, only 11,500 are the Verizon towers pro forma, so there's plenty of places for Verizon to grow into with us.

Just a further fact on that, the Verizon revenue that are on legacy ATC, non-Verizon transaction towers, is about 60%. So 60% of Verizon's pro forma revenue with us is going to continue to come on non-deal towers; therefore, there's going to be nice amendment opportunity on over half that revenue base. Verizon investing aggressively in its network going forward is going to actually be very helpful to our growth rate and contribute to that 7% number that you pointed out there, Armintas.

AT&T is still going to be active but as a comparison to last year, 2014 was the most active year that we have seen from our perspective with AT&T since I've been at the Company. It was an outsize, probably a record year for them for mobile spending. This year, 2015, is a more normalized year for AT&T and also still robust. So we expect new business from them as well, but we also see the number two application flow coming after Verizon from T-Mobile.

So T-Mobile is actually increasing, in our view, its activity level in the network based on some projects that it has going and then Sprint is continuing to work through 2.5 gigahertz and some other projects it has. That's the batting order for US application flow right now is Verizon, T-Mobile, AT&T and Sprint.

Then, turning to the international market of Brazil, which is our most significant pro forma international market in terms of revenue, we're seeing, expecting 19% core organic growth, we just reported it in 2014, we can say that now, so really high growth market for this asset base; one of the things that encouraged us to add to the asset base going forward, which we've done with BRT and now TIM.

As far as the Brazil goes, you pointed out two of the most important factors, I think; one is the run-up to the Olympics and secondly is the 700 megahertz 4G auction and rollout that's going on. But I also wanted to cross-connect from the opposite direction all of Latin America by customer. Telefonica we expect to be extremely active in Brazil, as well as Mexico. It's investing across Latin America in 3G deployment. As a corporation, I think, Telefonica wants to increase its competitiveness throughout Latin America in mobile data and Brazil and Mexico are the two biggest target markets, simply based on their size for that, but it's going to be elsewhere.

Also, the run up to the Olympics is going to be demanding investments by all four carriers and TIM is included in that, as well as Claro, which is the AMX subsidiary. We really feel that Brazil is going to continue to be a high growth market for us. Of course, that contributed to our decisions to invest and upsize our scale to about 18,000 sites pro forma for the deal.

Finally, on the M&A front, we don't speculate on potential deals. It's always fluid, but we are still in the market and we're going to continue to apply our disciplined investment approach to fill in, especially in the existing countries we have or with existing customers we have opportunities that may come available, but we don't have anything specific to point to at the moment.

Got it; thank you so much.

Jonathan Schildkraut, Evercore.

I have just a few, most of them have been hit. First, in terms of the acquisition of TIM in Brazil, it seems like you guys have started to look at that in a real basis as opposed to a dollar basis. Was there a collar on that deal or are you guys benefiting from the increased strength of the US dollar?

We are benefiting from the strength of the US dollar.

I was interested -- if I could dive a little deeper into the AT&T spend in the US, I think you said, Tom, that you were looking for a decrease in new business of 20% or 25% in the US on the back, primarily, of AT&T slower spending. Their spending is dropping about 10% and so I'm just trying to understand the translation of wireless spending going down 10% at AT&T and you're seeing 20% or 25% less incremental revenue in the US. Is there something about the nature of the spend that's also changing and having an impact on you?

No, I wouldn't suspect so, Jonathan. When you're looking at the overall wireless spend, it's very difficult to look at the overall spend and bring that down to what they're doing on the [in site] on a non-site basis. Also, I would take a look at -- we're really referring to is the end-year impact of timing of activity. So, again, I think it's very difficult to come up with an apples to apples comparison.

The overall rates of new commenced business that we're looking at in 2015 for our US domestic business, candidly, are really equivalent to what we generated in 2013. I think, which was a terrific year and as Jim talked about 2014 just being an outstanding year in terms of the LTE and 4G deployments. We're expecting 2015 to come back to really what we expected or did generate back in 2013.

Jonathan, just an operational element to all of this, we built our guidance and our budget from the ground up operationally, meaning application flows that we see late in the prior year and very early in the new year in 2015 in this example, are what we use to build up our budget. We're reflecting what we're currently seeing in the application pipeline for our major customers.

If that was to move up during the course of the year, we'll adjust our guidance, but we don't do it until we see it and it's too early at this particular case with AT&T to see it. So we are not making any prediction of a ramp up that might be more in sync with the numbers that you laid out.

I think also, just to add on, AT&T was really active in second half of 2013 and the first half of 2014. So that also had an impact in terms of the volumes that we actually generated from a commenced new business perspective in 2015. Going back over the last 18 months has an impact in terms of what the new commenced business would be that we would be generating from AT&T and that's what we see as being 25% below 2014 levels.

That makes sense, the timing front end loaded in 2014. Just one final question, if I may, as we look at the normalized organic core AFFO growth, so 13.4% at the midpoint of the guidance, obviously, this is a year where there's a big impact from foreign exchange movements, but as we look out over a long period of time, what should our guidepost be for expectations of targets on AFFO per share growth?

Jim and I have been laying this out over a number of years and looking at that mid-teen core AFFO per share growth. That's our objective, that's our goal. It would be largely driven, obviously, from growth in EBITDA and increased margin expansion and things that I referred to, as well as honing in on all of the other elements of our business, including all of the financing costs, as well as CapEx-related items. That's the underlying objective that we have within the business.

Thanks again for taking the questions.

Michael Bowen, Pacific Crest.

Couple questions, if I may, you had mentioned that the lease-up opportunity for the Verizon towers, I think you said 1.4 tenants, obviously a lot of upside there, but also a lot of pent-up demand in those areas. Can you give us a feel for what some of the customers are saying currently with regard to where these customers might have gone had this transaction not been transacted? Related to that, just wanted to touch on slide 9, I don't think I've seen this slide before, I apologize if you have done it.

But for Verizon, projected NOI yield for year one and year five, can you just walk us through, it would seem, given the upside for the Verizon towers, the 7% in year five might be a little light, but can you walk us through your assumptions and help us understand that?

From a growth perspective, it's pretty consistent throughout the entire 10-year period, so while we expect initially to be able to get these towers in leasing and marketing them this year, we actually expect the growth to be pretty ratable over the entire 10-year period. I think that's really reflective of the 7% NOI yield going forward. As Jim identified before, we build our growth profile for all of our transactions from the ground up and our sales teams within the United States are incredibly excited about this opportunity.

We get search rings in from all of our carriers every day who are identifying areas where, in fact, they need RF coverage. So that gives us the comfort and the credibility, we believe, of the pent-up demand and the growth that we expect to see in this portfolio.

The alternatives that any carrier has when there is a site in the search ring that it doesn't think it can get timely access to are simply to build their own tower. We had 600 build to suits-plus last year in the United States. Our guidance, this is just a reference point, it's not directly related, to any customer, but just as a reference point, in our guidance, we have about 150 this year. There was a lot of building last year, specifically, in this market.

Hopefully, we can channel some of that to the Verizon towers in the future, because they'll now be available on our process and on our contracts. That's one way. The other way is you just don't put the cell site out there or you put it in a sub-optimal location and all those are poorer engineering decisions or financial decisions than co-locating on an extremely well-positioned tower with good capacity and ground space, which is what we're going to be offering.

Would it be fair to say that the Verizon NOI yields really don't reflect that benefit of the reduction in the build to suit? So actually if we wanted to apply that, the numbers would look even better because this tower portfolio is now becoming part of the grander scheme of assets?

Let me answer by repeating the baseline that Tom laid out. With the demand and supply site benefits of this portfolio, our investment process in the US, if it can be justified, we tend to use one tenant over 10 year period of time additional leasing. The entire Company in the domestic business here is going to be striving to do way better than that, but our model doesn't yet reflect it because we haven't accomplished it.

Therefore, what you see on page 9 reflects our deal model and not any kind of expectations of prior outperformance in other portfolios that we brought in or synergies that are assumed on a revenue basis or anything like that. This is a very clean model-based projection, as are BR, TIM, and Airtel, frankly, and the Company is motivated and incented, I'll say, throughout the organization to outperform these things.

One last quick thing, I just wanted to ask with Iusacell and AT&T, have you had any preliminary discussions about any potential upside there?

All I can say about that is, you should assume that we have close and strong and senior relationships at all of our major tenants and that this would be an obvious topic at that level. We don't speak to specific meetings or conversations with specific customers.

Okay, thanks, guys.

Operator, I just want to thank everybody for being on the call this morning, spending time with us and I appreciate your attention. Have a great day.

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