美國電塔 (AMT) 2015 Q1 法說會逐字稿

Good morning. My name is Steve and I will be your conference operator today. At this time I would like to overcome everyone to the American Tower first-quarter 2015 earnings conference call. All lines have been placed on mute to prevent any background noise. (Operator Instructions). Thank you.

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

Great. Good morning and thank you for joining us this morning for American Tower's first-quarter 2015 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, Tom Bartlett, our Executive Vice President and CFO, will review our financial and operational performance for the first quarter as well as our outlook for 2015 and then 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 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 this morning'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 we have adjusted the definitions of core growth, organic core growth and new property core growth to exclude the impacts of pass-through. You will see this change reflected during today's call and in our earnings materials going forward.

With that, please turn to slide four of our presentation which provides a summary of our first-quarter 2015 results.

During the quarter our rental and management revenue grew 10.6% from the first quarter of 2014 to over $1.06 billion. In addition, our adjusted EBITDA grew 13% to approximately $724 million and adjusted funds from operations increased 16.9% to approximately $514 million. Net income attributable to American Tower Corporation common stockholders was approximately $183 million and net income per basic and diluted common share was $0.45.

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 we had a strong start to the year with solid global organic core growth in revenue, good margin performance across our business, the closing of our strategic transaction with Verizon in the US and just yesterday, the closing of the first tranche of TIM sites in Brazil. We believe that our legacy asset base coupled with the Verizon, TIM Brazil and Airtel Nigeria transactions positions us well for not only another excellent year in 2015 but also well into the future.

If you please turn to slide six, our consolidated rental and management revenue in the quarter increased by nearly 11% to well over $1 billion. On a core basis, our total rental and management revenue growth was barely 16% and of this core growth over 9% was organic. The balance of our core growth or more than 6% was attributable to properties we have added since the beginning of last year including more than 12,000 in the United States and over 8000 in our international markets.

Turning to slide seven, our domestic rental and management reported in core growth in revenue was about 13% with organic core growth of 9.3%. During the quarter, we recognized about $17 million in revenue associated with a decommissioning agreement with one of our major tenants. As we have said previously, this is an agreement that will generate roughly $20 million of revenue annually through 2016 but the recognition of that revenue will not occur evenly through the year.

Excluding revenue recorded under this agreement from both periods, domestic organic core growth would have been approximately 7.4%.

The Verizon Tower transaction which we closed at the very end of the quarter generated around $4 million in rental revenue and $2 million in gross margin in Q1. For 2015, we expect these towers to generate about $300 million in rental revenue and $160 million or so in rental gross margin as well as around $10 million in services revenue and $5 million in services gross margin.

During the quarter our application pipeline showed a significant increase from three of our four top customers. This supports our previous expectations that new business activity would be weighted more in the second half of the year.

Domestic rental and management gross margin increased by almost 14% on both a reported and core basis to $585 million and reflected an 87% revenue conversion rate. We constructed 23 towers in the quarter and purchased or extended the remaining term on more than 350 ground leases with extensions averaging about 29 years.

As of the end of the quarter, including the new Verizon sites, nearly 60% of the land under our US towers was either owned or controlled for more than 20 years and we are targeting to achieve 80% within the next five years. Given that land ownership under our recently added Verizon sites is under 10%, we think that we have an excellent opportunity to deploy capital for land at attractive returns over the next several years.

Finally, we generated reported and core domestic rental and management operating profit growth of nearly 15%. This reflects our continuing focus on property level cost controls, SG&A as a percentage of revenue of less than 4% coupled with strong revenue growth.

Moving on to slide eight, our International Rental & Management segment had a solid quarter with core growth of approximately 22% and organic core growth of about 10%. Reported revenue which was impacted by the negative foreign currency translation effects of about $50 million from the year ago period was over 6%. We continue to see strong demand for sites across our portfolio with markets in Latin America such as Brazil and Colombia once again leading the way in terms of total new business commencements generating organic core growth of 12% and 17% respectively.

In addition, markets such as India and Ghana are seeing strong momentum from a leasing perspective with organic core growth of 11% and 23% respectively. The majority of our international organic new business commencements continues to come from large investment grade tenants including Airtel, Vodafone and Telefonica who are also the three largest international signed new business customers in the quarter.

In addition, we completed the construction of more than 600 build-to-suit properties across our international footprint in Q1. In India where we built over 400 sites, our program is anchored by build-to-suits for operator such as Bharti Airtel and Vodafone. In Brazil where we completed the construction of over 90 sites, our program is primarily supporting the new build needs of Vivo and TIM, who are also expected to drive the majority of our new business revenue in the market this year and will support our expectations of seeing mid-teen core organic growth in Brazil this year.

International Rental & Management gross margin in the quarter grew nearly 12% to about $221 million while core growth in gross margin was around 28% outpacing the 22% in revenue core growth. International Rental & Management segment operating profit grew 10.5% to $186 million and our core international operating profit margin which excludes pass-through was 73%.

Turning to slide nine, reported adjusted EBITDA growth in the quarter was 13%, adjusted EBITDA core growth was 17.5%, and our adjusted EBITDA margin was over 67%. Excluding the impact of international pass-through revenue our adjusted EBITDA margin for the quarter was 73% and our adjusted EBITDA conversion rate was 93%. This conversion ratio was impacted favorably by around 100 basis points due to the $17 million in revenue we recorded under the decommissioning agreement I mentioned earlier. For the balance of the year, we would expect our reported conversion ratio to moderate as we add the Verizon sites and the TIM and Airtel portfolios to our asset base due to their lower average tenancies versus our legacy portfolio.

Cash SG&A as a percentage of total revenue in the quarter was about 8.7% and for the full-year, we continue to expect our cash SG&A as a percentage of revenue to be under 9%. Longer-term, we would expect this percentage to decline further as we drive organic growth across the portfolio.

Our strong adjusted EBITDA performance resulted in solid growth in AFFO which increased nearly 17% to $514 million or $1.25 per share. AFFO per share growth was about 14% which includes a one-time negative impact of about $0.03 per share attributable to the timing of our recent equity issuance versus the actual closings of the Verizon transaction. Core AFFO growth was over 21% and our adjusted EBITDA to AFFO conversion rate during the quarter was about 89%.

These metrics were also favorably impacted by the resulting impacts of the equipment decommissioning agreement.

I do want to highlight that on a sequential basis due to the timing of these decommissioning revenues as well as some seasonality and maintenance CapEx and the timing of our preferred dividend distributions, we expect second-quarter growth in organic revenues, adjusted EBITDA and AFFO to be below what we were reporting for Q1. This impact will be more pronounced given the bulk of our US equipment decommissioning revenues last year were recorded in the second quarter.

As a result of this timing difference, our expectations for the quarter include domestic organic core growth of just under 7%. Excluding the impacts of decommissioning in both periods, we would expect Q2 domestic organic core growth to be consistent with Q1 at around 7.5%.

Moving on to slide 10, we are raising our full-year outlook for rental and management revenue and adjusted EBITDA due to the addition of the Verizon and TIM Brazil sites, stronger-than-expected growth attributable to recurring cash revenues associated with our core rental and management business, and slightly higher than expected backfilling revenue. This is being partially offset by the negative foreign currency translation effects implied by our revised outlook FX rates which are calculated by taking the more conservative of the Bloomberg median forecast and the 30-day average spot for each currency. Our revised outlook FX rates are currently 3% to 4% above yesterday's closing spot rates.

We now expect 2015 Rental & Management segment revenue of about $4.6 billion at the midpoint. The increase is driven by about $300 million in additional rental revenue from the Verizon assets including about $20 million in straight-line and $55 million in revenue from the TIM sites. We also now expect an increase in other straight-line revenue for the full year of $10 million and about $10 million of other legacy asset outperformance. This growth is being partially offset by an incremental $75 million of negative foreign currency translation effects relative to our prior outlook and a $10 million decrease in expected pass-through revenue.

As a reminder, the impacts of the roughly 2300 TIM sites we have not yet closed on as well as the 4800 Airtel Nigeria sites are excluded from our current outlook. Together we would expect these portfolios to generate nearly $300 million in additional revenue on a full-year pro forma basis.

For the year we now expect core growth in consolidated Rental & Management segment revenue of around 22% which includes organic core growth expectations of over 7% and 10% for our Domestic and International segments respectively. This organic core growth is slightly better than the assumptions included in our prior outlook and on a consolidated basis we expect 2015 organic core revenue growth to be about 8%.

In addition, we are increasing our outlook for adjusted EBITDA by $150 million at the midpoint which primarily reflects the new assets we have added to our portfolio complemented by organic outperformance and solid cost controls. The midpoint of our outlook reflects SG&A as a percentage of revenue of under 9% and on a consolidated basis we now expect core growth and adjusted EBITDA for the full year to be over 19%.

Turning to slide 11, we are also raising our full-year AFFO outlook at the midpoint by $85 million. This is being driven by about $175 million in incremental cash EBITDA from new assets and $10 million in incremental cash EBITDA from legacy sites. This growth is being partially offset by just over $65 million in incremental cash interest and preferred dividend payments which includes the impact of funding the Verizon and TIM Brazil transactions. We also expect our cash taxes to be lower by over $10 million versus our prior outlook assumptions.

Finally, the negative foreign currency translation affects leads to an incremental $45 million negative impact versus our prior AFFO outlook. We now expect to generate AFFO growth of about 13% for the year or over 21% on a core basis.

As you can see in the chart on the right side of the page, we now expect to have about 423 million weighted average diluted shares for the year given our recent common stock issuance which implies AFFO per share of about $4.86 at the midpoint of our outlook compared with about $4.91 at the midpoint of our prior outlook. This includes an approximately $0.11 per share due to the negative effects of foreign currency translation as well as a one-time cost of $0.03 due to the timing of our equity issuance and transaction closings partially offset by some outperformance in our core business.

However, we expect our pending Airtel transaction to provide an incremental $0.05 or so of AFFO per share accretion relative to our 2015 outlook with an anticipated end of May closing date. So as a result, we expect to fully offset the incremental negative impact of foreign currency translation and equity pre-funding costs and AFFO per share for the year and maintain the $4.91 AFFO per share expectation.

Moving on to slide 12, we remain committed to our capital deployment strategy and continue to focus on our goal of simultaneously funding growth, returning cash to our stockholders and maintaining a strong balance sheet. So far this year we have invested nearly $6 billion through our M&A program, declared over $200 million in common and mandatory convertible preferred stock dividends and deployed nearly $160 million in CapEx. We believe that the combination of our growth in AFFO per share and consistent return of capital to stockholders through our redistributions will create meaningful value for our stockholders. This includes expected annual growth in our REIT distribution of over 20% and in fact over the last 12 months, growth in our common dividend per share has been close to 30%.

Please note that the amounts and timing of our future REIT distributions will be at the discretion of our Board.

We seek to maintain a substantial base of liquidity and as of the end of the quarter pro forma for the first tranche of the TIM deal and the retirement of our 7% notes, had over $1 billion in cash and borrowing capacity under our revolvers. From a capital markets perspective, our focus for the remainder of the year will be to further extend duration and ladder out our maturities which today have an average remaining term of about five years with an average cost of less than 4%. By funding our M&A in 2015 with a combination of proceeds from common and mandatory convertible preferred stock issuances, debt and cash on hand we expect to end 2015 with net leverage in the mid 5 times range. Longer-term, our target leverage range continues to be between 3 and 5 times net debt to adjusted EBITDA.

Turning to slide 13 and in summary, we started 2015 with a strong operational quarter, strategically expanded our US footprint to about 40,000 towers, and added nearly 4200 sites in Brazil by closing the first tranche of the TIM transaction just yesterday. Our top priority remains driving continued operational performance while focusing on the integration of these portfolios as effectively and efficiently as possible.

As a result, we believe we are well-positioned to sustain strong growth in all of our key metrics and are raising our 2015 outlook for rental and management revenue, adjusted EBITDA and AFFO. Similar to last year we now expect core growth in all three of these metrics to be well above our long-term targets.

By year-end, we expect to have nearly 100,000 sites worldwide with a solid balance sheet, ample liquidity and manageable leverage in the mid-5 times range. Due to our disciplined consistent global capital allocation program, we continue to generate organic core revenue growth that compares favorably to that of our peers with a global portfolio more than double the size of our closest US publicly traded peers.

Our asset base now with an average current tenancy of just under two tenants per tower and significant exposure to high growth markets, positions us to not only benefit from significant near-term network investments but also sustain strong growth over the long-term. As a result, we expect to continue to deliver consistent, recurring growth in AFFO per share and a compelling total return to stockholders.

With that I turn the call over to Jim for some closing remarks before we take some Q&A. Jim?

Thanks, Tom, and good morning, everyone. Last quarter I reviewed American Tower's long-standing strategy and provided performance data on the Company successful execution of that strategy. Today I will focus on the leasing environment in the US tower market which is by far our largest segment in terms of financial results.

Our overall conclusion is that ongoing escalating demand for mobile bandwidth, especially video, will support robust leasing growth in the US for many years to come. And that this will especially benefit our newly acquired Verizon towers given their low existing tenancy, franchised locations and distinctive structural and ground space attributes.

Today the US telecom industry is in the midst of a multi-decade investment cycle supporting the transition of communications in our country and media delivery as well from wired and cordless to truly mobile technologies. The cycle's first decade occurred roughly between 2000 and 2010 and was mainly characterized by delivering basic mobile voice, text and Internet services to the mass market using simple feature phones. In this period, US wireless penetration rose from 38% to 99% and carriers invested approximately $220 billion in wireless CapEx or about $20 billion a year as voice and data coverage was completed across the nation.

To better support our customers during this time frame, we significantly expanded our domestic tower portfolio. In 2005 we achieved industry-leading scale by adding more than 7800 tower sites through our merger with SpectraSite. Then with the initial iPhone launch in 2007, existing network infrastructure in the US was rapidly overwhelmed and the market began to transition to the decade of data.

As consumers have shifted more and more of their daily activities to a mobile environment, data usage has exploded. From 2010 through the end of 2014, mobile data usage in the US grew more than eightfold as smartphone penetration tripled during those four years from just 25% or so in 2010 to more than 75%. Consumers can now buy a cup of coffee or plane ticket, [tailor] (inaudible) or a lift, pay a bill or transfer funds to or from their bank accounts all on their smartphone. With more than 400 million connected devices in the US today generating ever higher usage, wireless carriers have invested more than $135 billion in wireless CapEx since 2010 or around $30 billion a year and are expected to invest another $30 billion or more in 2015.

Moreover, while incremental spectrum and technology improvements have helped to alleviate a portion of the strain on carriers' networks, most of the solution lies in adding physical equipment such as base station electronics, antennas and connecting cables largely deployed on macro towers. Often even technology improvements such as voice over LTE eventually lead to additional physical equipment requirements as we described in a prior call.

Another example is the concept known as carrier aggregation in which multiple bands of spectrum with different propagation characteristics are paired together and the result is improved network speeds. However, as 4G penetration grow and mobile data usage inevitably escalates, if mobile operators continue to utilize carrier aggregation they will be increasingly compelled to design their network architecture around the highest frequency band being used.

Given that signals using higher frequency spectrum travel shorter distances, a denser transmission site footprint to cover a given territory will be needed. Hence the ultimate outcome of carrier aggregation in our view includes more deployed physical equipment on more tower sites to maintain signal strength and coverage consistently.

Looking ahead over the next five years, mobile data usage is expected to grow at nearly 50% annually with much of this growth driven by the expansion of mobile video. For example, the NFL is set to kick off an over the top mobile offering this upcoming football season. In addition, Apple, HBO and Sony have all announced their intention to participate in direct mobile delivery of premium branded content to handsets. And Google just last week announced the launch of its own wireless services to promote greater mobile Internet use including for its YouTube videos.

So to facilitate these video and other applications, industry projections suggest that 4G penetration should rise from its current level of 40% in the US to well over 60% or more by 2020. While we expect wireless trends over the next five years to drive significant incremental network investment and leasing business on our real estate, we also believe the outlook for the following decade has the potential to be just as dynamic.

We expect much of the network investment in the 2020s in the US to be driven by further expansion and high-bandwidth mobile video content. According to Cisco, video will account for over 70% of US mobile data traffic by 2019 and we expect that percentage to increase even further thereafter. As carriers add density to their 4G networks and as 5G becomes a reality in 2020 and beyond, we anticipate that consumers will come to expect that their favorite HD quality video sources should all be available on all of their viewing devices, including mobile.

Premium subscriber base content and live sporting events streamed directly to handsets and tablets will create unprecedented strain on wireless networks and we expect that the majority of the solution for that problem will continue to be to add incremental equipment, largely on macro towers.

Given that 84% of the US population lives outside of core cities and that the average American spends nearly an hour a day commuting in a car, bus or train, the need for tower-based communications infrastructure is only going to increase over time. After acquiring GTP in late 2013 and adding the Verizon assets to our portfolio at the end of the first quarter, we believe that American Tower is extremely well-positioned to achieve sustainable long-term growth in the US by providing the mission-critical real estate as these mobile industry trends play out over time.

Our recent transaction with Verizon brought us a very large portfolio of properties in attractive locations that provide significant available high structural capacity and ground space. These sites come to us with the lowest initial tenancy of any major US tower deal that we are aware of. This combination bodes well for solid leasing growth over a long period of time.

Moreover, two-thirds of these sites have no competing structure within a half mile highlighting the franchise value of these locations.

Our US tower operation is off to a fast start on the integration of the Verizon portfolio. All of the 11,448 properties are already in our cloud-based site locator app and we are already aggressively marketing these assets to our tenant base.

In closing, we believe that we are squarely in the middle of an extensive, long-term cycle of technological innovation in the US telecom industry. We have seen the transition from land lines to basic cell phones, to 3G smartphones, now to 4G connected devices. We are all today using mobile applications that were unavailable just five years ago and our expectations is that the breakneck speed of mobile technology innovation and development especially regarding the entertainment industry will continue well into the future. Consequently we believe that when it comes to the ongoing growth of our US leasing business we have plenty of runway remaining in front of us.

Steve, could you now please open the line for questions? Thanks.

(Operator Instructions). Batya Levi, UBS.

Great, thank you. I wanted to see if you could give a little bit more color on the initial demand that you are seeing for the Verizon towers. And the revenue and gross margin contribution was slightly lower than what we had expected for three quarters of the year. Is that a timing issue? And some sort of color on all the puts and takes in the outlook and if you could just talk about what the outperformance in the core business that you are seeing if you could quantify that, that would be great. Thank you.

Actually I'm not quite sure where to start, a fair amount of questions there. On the Verizon one, Jim and I will kind of tag team this a little bit. On the Verizon transaction for the nine months, there is some timing largely due to the escalations that on a full-year basis you would see versus what we would expect to see now in 2016 given the fact that we are picking all of these assets in late March. Other than that, lease up tenancy is all very consistent with what we have said before. And as Jim said, I think it will just be a major contributor to our business going forward.

Our US sales team is already seeing applications, we are processing them. There is a lot of pent-up demand we think on these towers and we have had them in our possession for about a month I guess so far. So the pipeline has started, is running and as I said, we are already fully loaded into our site application system and ready to provide these to customers on a fast track.

So then what was the second or third question?

The second question I guess just looking out all the puts and takes and the increase in the guidance, you mentioned that you are seeing outperformance in the core business. So if we can just look at it now versus three months ago, can you provide a little bit of color on maybe the magnitude of how much more core outperformance you are seeing?

I think what I said before is that overall on a consolidated basis we are taking up our core organic up to around 8%. It was slightly below that. What we have seen coming out of the gate are strong volumes in our international markets, Brazil, Colombia, some of those markets are continually seeing strong demand.

As I mentioned on the last call, back billing is something that we track throughout the year because we don't really have a sense out of the gate how that is going to pan out for the year. So we would expect some increase in our back billing revenue for the year.

And in the US, it is right where we thought it was going to be. However, we are seeing application volume significantly higher than where they were at the end of third and fourth quarter of last year so we are expecting good solid growth from that as I mentioned before as we originally expected largely in the second half of the year. So all told, we are seeing growth really up in all of our markets.

On the expense side, we continue to hone in on our cost controls and expenses and so that is also in our EBITDA outperformance. That is driving about $10 million of that outperformance.

So I think it is a really strong start to the year and as I mentioned coupling it with the Verizon sites and the sites we just closed yesterday with TIM and expect to close with Airtel next month and then following on with the other tranche of the TIM sites, we are able to raise our overall guidance.

Great, thank you.

Ric Prentiss, Raymond James.

Good morning, guys. First question, probably know it is coming, with PCIA small cells were all the buzz down there and then this morning Crown Castle puts $1 billion into buying 10,000 more fiber miles. Talk to us a little bit about -- Jim, you mentioned the big demand. We see that coming as well but small cells versus macro just help us understand your thoughts on that.

Ric, we continually analyze all the telecom asset classes that are available in the industry. So that could start with say dark fiber to small cell nodes of which we have 17,000 by the way in our own network moving onto macro towers. And all of our analytics and all of our experience in the field and in performance metrics is demonstrated to us continuously that the macro tower is the best-performing asset class of all of the telecom assets.

We are really high conviction on that and it is based again on regression analysis we have done on our own assets plus how we can model current assets that are up for sale and then track those over time. So we are quite convinced that the macro tower is the place to focus and the place to be. We do have land generators and small cells in our portfolio. We like the diversification and the customer service that we provide through that but we are going to focus and continue to focus on the best-performing asset class which is macro towers.

And speaking of macro towers, your balance sheet is set up maybe for some more M&A pipeline work as you look out there may be some in the US but internationally, update us as far as what regions are interesting and where we might see you guys plant a flag or expand your presence in the future?

Rick, it is Jim again. The US is always interesting and there is a medium-sized carrier portfolio still not traded and numerous small carrier and small third-party tower companies so we will always keep our eyes open in interest there. Our overall strategy inclusive of the US is to extend our leadership position in our major markets so Mexico, I think we are in quite good shape there. Brazil, again quite good shape but with about 18,000 pro forma towers. But there are a couple of places that we would like to expand our presence further such as South Africa, such as India and we will be opportunistic about those and apply the disciplined process we have always applied when and if something comes available so that is going to be the main focus areas for us.

And India sounds like it is getting a little better from where it was a couple of years ago, is that your sense?

Our India business based on again our disciplined investments that we have made has always performed in line for us as far as a part of our portfolio. And now the environment is improving. Spectrum policy is moving toward a very rational end game allowing the major operators in India to have enough spectrum to go ahead and deploy advanced data services like we just talked about in the remarks in India so that is a plus. And we are seeing a pickup in business there especially in build-to-suit towers as well as in co-locations in India. So I do think we are at the beginning of an upward cycle in the India market for tower leasing.

And we are expecting, Ric, a double-digit core organic growth in the market. In the first-quarter I think we put on more tenancies in the first quarter than we have in any other quarter since we have been there. So yes, I think the teams there are really, our team there is really very excited about what is going on in the market and we are expecting a really terrific year.

Great, thank you.

David Barden, Bank of America.

Thanks a lot. I wanted to go back to the Verizon question. It is probably no surprise to you guys that to the extent that there are controversies, one of the bigger controversies is American Tower's claim that the Verizon portfolio will be growing in a premium to the core domestic portfolio in roughly a year's time. I was wondering if you could kind of go back to those claims and if I am characterizing them correctly and kind of map out the sources behind where you see that growth coming from maybe, Jim, irrespective of the larger picture issues that you mentioned.

Second, on the international side, if I understand it correctly, I think that the international business has mostly if not entirely, inflation-based escalators. If I looked at your 10% expectation for core growth which now excludes the pass-throughs and subtracted inflation, what kind of volume growth would I be looking at in the international portfolio today? Thanks a lot.

On the Verizon one, as we have said over the 10-year period, we are expecting to add a full tenant's worth of revenue over that 10-year period. I think as Jim laid out, why do we feel comfortable as to that assumption if the fact that there is very little overlap, there is very few competitive sites nearby and the fact that the tenancy on the existing towers is at 1.4 and the fact that these sites have not been marketed candidly to any of the other carriers. Particularly not just the big cellular carriers but all of the other local users, local customers that we can potentially tap into in those local markets.

So for this particular year from a growth perspective, we are integrating them now. As Jim said, we've put them all now out on our ON AIR app and we are excited about the types of demand and the backlogs that we are seeing.

So we are very, very excited about the growth that we would expect and I think given the tenancy and given the location, the fact that they haven't marketed we would expect it in short order that the core organic growth rates on these assets should exceed that of our existing portfolio.

So, David, as I mentioned we have managed these sites for a month so far so for the first full year, I've got 11 months to go in the first full year and so the pipeline has already started up. Where are these applications going to come from? Maybe I will step through the US operators and importantly our industry vertical suggests that source is for new business here.

Verizon, first of all is the most active global operator we have in our US marketplace today as far as tower leasing. And of course, it is their towers and they have some rights there but let's put that in perspective for a second. Of the 40,000 towers we have in the US, about 11,500 of them are these Verizon transacted towers leaving 28,500 other towers that they have plenty of opportunity to go on. So that isn't the portfolio we are talking about but I just want to put it in perspective that three-quarters of our US tower portfolio is wide open to additional applications for both amendments and co-locations by Verizon.

So stepping down to the second most active carrier that we see in our first quarter was T-Mobile. T-Mobile is doing a terrific job of adding some net subscribers and therefore needing to build up their network to serve those subscribers. They are deploying their 700 MHz spectrum and they are also upgrading the Metro PCS sites to their sort of overall standards that they can deliver great service to these new customers that they are bringing on board.

Third is still AT&T and AT&T for us first of all has a really nice base of growth which is our holistic agreement. So at AT&T while every carrier will have variations in its spend and deployment pattern over quarter to quarter over a period of years, we have smoothed out much of that pattern in the case of AT&T with our holistic agreement. So we've got nice growth from them all through this year even though their spend rates may be in a variable position versus last year. We are seeing good business from them.

Now the holistic agreement does not apply to the Verizon sites and so as AT&T ramps up back into more normalized deployment rates, spend rate, we are going to be extremely well-positioned for those Verizon sites to capture that on a retail basis if you will.

And then Sprint again not as active as the other three but again also pent-up demand we think to work on their network as the next few quarters play out. Although we are not seeing the applications quite yet, we expect to see some more from Sprint as we go forward.

Lastly, I mentioned the industry verticals. These are the rural carriers, the ISPs, government agencies, industries that we serve such as the oil and gas industry and others that will welcome a smooth and easy application process to get on these vertical sites.

We've got 11 months to run in our first full year and those are the sources that I feel will add to the demand for the Verizon towers.

And David, just to your last question, in terms of the international growth, we expect the escalations to be in the 4.5% range. And as I mentioned, the total core organic growth in that 10% range so kind of that 1.5% kind of churn you are looking at new business growth, really new business on those sites being in kind of that 7% to 8% range so very strong growth across the portfolio.

Great. Okay, I really appreciate it. Thanks, guys.

Kevin Smithen, Macquarie.

Thanks. Over the last year you have seen your AFFO multiple compress by 2 to 3 turns. Obviously you have got a lot of pending acquisitions and recently completed acquisitions which will probably take up a lot of your management time. At what point do you consider a share repurchase? It looks like you've got a fair amount of capacity coming up and you haven't been really aggressive with a buyback in quite some time. But let's say at a 16 times multiple given borrowing costs today seems like it would be very, very accretive to start a repurchase here.

Kevin, our fundamental strategy for this Company is to build the world's leading real estate business serving the mobile Internet industry around the world. You probably have to take a 20- or 30-year timeframe to do that. And as we pursue that goal, we also have the objective of delivering sort of midteens AFFO per share growth over a very long period of time on what we call a core basis meaning after the effects of currency translation and straight-line. We are on that path and therefore we are going to continue to invest in the business when the returns makes sense and right now the returns make sense for us.

And our batting order so of speak of how we deploy our cash has been stable all the way through this 20- to 30-year strategic timeframe which is now firstly with the REIT dividend that will be first in the order but it has always been building towers, acquiring towers or lease rights and then with the remaining cash if we can't find the investment opportunities, we will buy back stock.

So we don't time it based on interest rates or multiples or any other thing. We are running the business for a multi-decade strategy to deliver that midteen AFFO per share growth and we think over the long run that is going to justify a really fair equity price and equity price appreciation over time for our shareholders.

Kevin, I might just add so p based on that, if you take a look at the portfolios that we have acquired over the last 10 years and you look at the vintage, those assets that we acquired even before 2005, we are generating 25% returns. And 2005 to 2010 just under that at 23% returns.

So it is not our notion to as Jim said, to hoard cash. To the extent that those opportunities don't exist and we don't see them and we as you know very disciplined investment committee process within the business, we will return cash back to shareholders in addition to the dividend that we pay. And we had done that about two years ago. But the assets that we've acquired over the last two years were very compelling and we would expect significant returns coming from those.

And so on until we get our balance sheet back to where we think it is stable which is at that south of 5 times, we are going to continue to repay that debt and again provide that footing for us going forward. It is not to preclude us from looking at opportunities going forward, we will do so and do so on kind of a neutral leverage type of a way. And if those opportunities don't exist when we get down to those kind of levels, yes, we would then look to open back up the buyback program that the Board has authorized us to do.

Thanks.

Amir Rozwadowski, Barclays.

Thank you very much and good morning, folks. Thanks so much for providing the color with respect to sort of the overall technology evolution and what that is doing for densification. And just sort of a follow-up question to the commentary is if you are starting to think that carrier aggregation from a carrier perspective is necessary in order to support ongoing bandwidth demand and that requires densification, why is small cells not enough to provide that even from just sort of a network planning or technology perspective? Is it cost prohibitive versus a macro cell investment? Just trying to understand the dynamics there as to why that type of migration from a technology perspective should continue to support the macro cell investment?

It is Jim. It is technology and economically prohibitive to serve the US population widely with small cells for this purpose. And the technical reasons are again that most of the US population lives in places with population densities of less than 5000 people per square mile and you need about 10,000 people per square mile in our view to make a small cell deployment even in conjunction with an overarching macro cell deployment on top of it economically and technically feasible.

And so just to go down a couple of the factors on the technology piece, the handoff requirement from places where our towers serve people which are often around highways and other transportation corridors, suburban or rural, you've got people traveling 30 to 60 miles an hour, you can't really have sufficient handoff capability over a very large stretch of multi-mile roadway to economically provide those handoffs.

Secondly, your signal needs to cover more ground. It has to be elevated and therefore it kind of obviates the architecture of small cells when you get into the suburban and rural environment. And again to put that all in context, the notion of where our towers are and where small cells make sense is really important. So in areas of 10,000 people per square mile or above, we have only got about 0.5% of our tower base in those areas. If you go to 5000 people or above, we have only got about 5% total of our towers in those places.

So our towers serve people in suburbs, rural areas and transportation corridors where again technically and economically the small cells don't make sense.

I will give you a couple of points on the economics. You've got to have a fiber connection to every small cell so if you are going to try to cover the roadway from Hopkinton, Massachusetts where the marathon starts all the way to Boylston Street, you need hundreds and hundreds of small cells to do that. You would need 26 miles of fiber just to do one road. And that is one of many, many roads that go from west to east in our area. It is just an economically unfeasible opportunity.

And you also need by the way siting costs. Where ever you put your small cell you usually have to pay somebody whether it is the town, the utility, have a revenue share, the economics just again don't make sense once you get outside in our view of about 10,000 people per square mile.

So in dense urban, absolutely small cells are going to happen. Their growth rates are going to be high because small cells are a very small proportion of the gigabit per month delivery of the network today and so it is going to grow faster and we have shown and said that in some of our previous technology briefings. But the bulk of the spending and the bulk of the traffic is still in our view for years to come going to be carried by the macro site because that is where most of the people are.

That is very helpful and then a quick follow-up if I may. If we look at the US carrier market, there seems to be a pretty big disparity between the number of cell sites between the different carriers. Given what you are thinking in terms of overall demand curve, do you expect that gap to sort of tighten here? You had mentioned T-Mobile has obviously taken a bit more of a proactive stance in terms of its network investment in terms of supporting some of its growth. I think there's a lot of questions in terms of what Sprint is going to do here. But would love to hear your color and sort of those number of sites and the trajectory at which you expect those to improve I guess.

Technically and theoretically, the site count should converge over time. We are not sure what the rate and pace of that will be but if you look at the technical factors which are the spectrum profiles of each of the four carriers, the territories that they are trying to ultimately cover which will be probably all 320 million POPs by the end of the decade, and the gigabits per month that they are going to be competitively offering which is by again the end of the decade probably 3 to 5 Gb per 4G subscriber per month, engineers can do the math to figure out what the density needs to be and it should converge over time.

Thank you very much for the incremental color, Jim.

Simon Flannery, Morgan Stanley.

Thank you very much. One country you haven't talked about up until now is Mexico. I know Tom, you know it very well. There is a lot going on down there with AT&T buying Nextel and Iusacell committing to an aggressive rollout of LTE and AMX spinning off the tele-sites business. So talk to us about the opportunities there, the consolidation of those portfolios and how we should think about that over the next couple of years?

Yes, we spent some time together I think in that market. A couple of things. First of all, AT&T moving into the market. We think very much of a positive for us. I think that AT&T right now having closed the Iusacell transaction and I believe just about ready to move on the other transaction with NAI are in the midst of developing their own plans of what that buildout would be and I would expect that they would want to have the same type of customer experience in Mexico that they have in the United States so we are very hopeful that we will be seeing some of that build and some of that activity probably in the latter half of the year.

With regards to what America Mobile is doing in terms of the split out of their sites, I think time will tell in terms of the impact in the marketplace, in terms of are they going to be aggressively marking those sites or not, will they ultimately be putting those sites up for sale or not? It is very difficult to tell at this point in time but we think that overall, Simon, it is going to open up the entire market and it will compel the competition in the market to more aggressively spend in the market.

As I've said over the last year or so given all the activity that is going on in the market relative to American Mobile and now AT&T, the market for us has been relatively sleepy from a core organic growth rate, it has been below 10% for us whereas the prior couple of years before that the core organic growth rate was quite extensive. So I think that there has been some under spend in that market over the last 24 months and I think once some of these issues get put to bed, I am hopeful that we will start to see some really solid organic growth rate over the next 18 to 24 months.

To put that into context, Simon, over the medium- to long-term, our expectation is in the US that by the end of this decade by 2019, that most people in the United States could be upwards of 90% will have a 4G phone in their pocket and they are going to be using 3 to 5 Gb a month of data. That is kind of our core technical assumption in the US and that drives our long-term projection for the business here.

In Mexico, the entry of AT&T we believe is going to accelerate that pattern in Mexico. So there is essentially very limited or no 4G service in the Mexican market today. Our expectation is that AT&T will prompt that technology addition into the market and now you will have 100 people in Mexico that will be on a track whether it is by the end of this decade or by the middle of the next decade to have most of its population on 4G at 3 to -5 Gb a per month service.

And we see this as a row catalyst for Mexico for the next 5- to 10-year period that AT&T is going to bring its level of quality, its level of consumer delivery of gigabits a month or close to that level at least from the US to Mexico.

Do you think you might sign sort of a master lease agreement with them once they have sort of got ready here?

Our history in the US with AT&T is that we have since I have been here, had a master lease agreement with them and so just from a historical perspective, I would expect that we will have a large comprehensive agreement of some sort and some structure with AT&T to partner with them in Mexico as we have partnered with them here.

And by the way, this fits into our global strategy to serve the world's leading mobile operators in multiple markets and it just happens to be the first time that one of our US core customers has tracked outside of this country. But even T-Mobile, which is majority owned in the US by Deutsche Telekom is a customer of ours in Europe as well. So this is want to continue to evolve I think and the AT&T entry into Mexico is a great example of our theory.

Thank you.

Michael Rollins, Citi.

Thanks for taking the questions. Just a follow-up and a question if I could. Just following up on the last question, are there examples that you can share with us where you have a relationship with a carrier in one market and you can say with some sort of quantification of what the benefit was for co-location in another market because you had this existing relationship you got more share or more volume or better pricing or terms than maybe what you would have had otherwise?

Then the second question is just curious if there is an update that you can help us with on the public safety front. Is there anything that you are seeing there that your investors should be aware of? Thanks.

I will just choose one of our many examples of cross connection of our global customer base between markets and that would be Bharti Airtel which we serve in India as a tenant. We don't have any asset deals with them in India at this time but we also find them as our largest new business customer last quarter in Uganda an example and also one of our major customers in Ghana and Nigeria, we do have an asset transaction that we will be closing in the month of May of size, 4800 towers in Nigeria. So the customer where we have a multi-continental collaboration with both on the leasing side and the asset side which we hope to expand over the coming years.

And then as far as the public safety network in the US, it is still we perceive in the planning stages where our teams are involved with people that are managing that for the US government. And hopefully we will see some real deployments of some sort in the 2016 timeframe but still unclear as to the scale, scope and design of all of that. So of course it is not anywhere in our guidance or even in our five-year plan yet.

Thanks very much.

There are no further questions at this time. Presenters, I turn the call back to you.

Thank you again very much for all of your attention. If you have any other questions, please feel free to give Leah or myself a call. Again, we had I think a great start to the year. Hopefully you think that as well and we look forward to seeing you in the future. Thank you.

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