Crown Castle Inc (CCI) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Crown Castle International conference call. At this time all participants are in a listen only mode. Following today's presentation, instructions will be given what the question-and-answer session. If anyone needs assistance at any time during the conference, please press the star followed by the 0.

As a reminder this conference is being recorded April 29th of 2005. At this time I'd like to turn the conference over to Jay Brown, Crown Castle's Treasurer.

Good morning, everyone, and thank you for joining us as we review our first quarter 2005 results. With me on the call this morning is John Kelly, Crown Castle's Chief Executive Officer; and Ben Moreland, Crown Castle's Chief Financial Officer.

This conference call will contain forward-looking statements and information based on management's current expectations. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable we can give no assurance as to such accusations will prove to have been correct. Such forward-looking statements are subject to certain risks, uncertainties, and assumptions. Information about the central risk factors that could affect the Company's financial results are available in the press release and in the risk factor sections of the Company's filings with the SEC. If one or more of these risks or other uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary significantly from those expected.

In addition, today's call includes discussions of certain non GAAP financial measures, including adjusted EBITDA and recurring cash flow. Tables reconciling such non-recurring financial measures are available under the investor section of the Company's Web site at www.CrownCastle.com. With that, I will turn the call over to Ben. Ben.

Thanks, Jay, and good morning, everyone. We will review the financial results first and then move into some other comments. During the first quarter, we generated revenues of 157 million. Of that site rental revenues were up 10.7 million to 140.9 million, a 8.3% growth from the first quarter of 2004. If one were to normalize the first quarter of 2004 revenue for 2.4 million in unusual items, site rental revenue would have been up 10.4% over 2004 first quarter.

Service revenues for the quarter were 16.2 million. Ignoring the flowthrough impact of these unusual revenue items last year, reported gross profit from site rental revenue -- defined as tower revenues, less the cost of operations -- was 93.2 million, up 7.7 million or 9% from 85.6 million for the first quarter of 2004.

Capital expenditures during the quarter were 9.6 million, which were spent predominantly around our existing assets. (indiscernible) capital expenditures totaled approximately 3.2 million. These capital expenditures include such items that extend the useful life of our assets, including things like capitalized maintenance cost, field vehicles, and IT. Revenue-generating capital expenditures were 6.4 million for the quarter comprised of 3.5 million of CapEx for revenue around existing sites; 2.6 million for revenue-generating on new sites; and 300,000 for land purchases.

For the first quarter recurring cash flow -- defined as adjusted EBITDA, less interest expense and less sustaining CapEx -- was 34.1 million.

Turning to the balance sheet, senior bank debt at the end of the first quarter totaled 158 million in our Crown Atlantic subsidiary. High yield debt totaled 1.6 billion and total debt at the end of the quarter 1.7 billion. In addition, we had approximately 508 million of convertible preferred stock outstanding.

As of April 28, pro forma for the purchases of our 4% convertible notes and common stock in April, we had approximately 238 million of cash and cash equivalents. We have now purchased approximately 72% of the 4% notes and eliminated the potential dilution from conversion by 15.3 million shares.

We continue to focus on opportunistically reducing our potential shares outstanding. We view this investment in our shares as an attractive use of our cash that is consistent with our goal to maximize recurring cash flow per share. During the last 4 months we reduced our share account by 17 million shares or approximately 7% including the future conversion of the 4% notes. In the last nine months, we have invested nearly $450 million, purchased approximately 24.5 million shares, (indiscernible) conversion of the 4% notes or roughly 10% of the shares outstanding.

In addition we invested 295 million to purchase Verizon's minority interest in the Crown Atlantic joint venture, giving us 100% ownership of that 2000 plus tower portfolio. A combination of these investments totalling nearly $750 million are a strong indication of our conviction of the inherent value of our existing assets and the growth we expect to deliver on this existing portfolio of assets.

As we discussed in the press release, we are now presenting an emerging business segment, which will include Crown Castle Mobile Media and Crown Castle Solutions in our consolidated financial statements. We have decided to break out the emerging business segment to provide additional clarity on the performance of our core tower business on a stand-alone basis, and a measurement of the success of these new businesses. We consider both operating and capital expenditures as investment in these new businesses and are evaluating those expenditures accordingly. We believe these emerging businesses have the potential to meet our risk-adjusted investment hurdle rates; complement our existing core business; and provide an important strategic extension of our wireless deployment capability -- particularly in the area of distributing tenant systems.

Moving onto our outlook. For the second quarter, we expect site rental revenue to be between 144 and 146 million. Our outlook for site rental revenue assumes a $2.1 million increase in site rental revenue from our Australia business due a contractual agreement with one of our largest customers. We expect site rental gross margin from the second quarter to be between 95 and 97 million. Higher than usual repair and maintenance expenses are anticipated, due to seasonality which is expected to be offset by the increase in revenue from our Australia business. We expect adjusted EBITDA for the second quarter of between 77 and 79 million and interest expense of between 35 and 37 million.

I might point out that while we use GAAP interest expense figure in our recurring cash flow metric, we have about 10 million of non-cash interest expense running through this category annually in the form of deferred financing costs and interests associated with the amortization of the free rent liability in Australia. On a cash basis, it's a little high.

Moving along, we expect sustaining CapEx to be between 5 and 6 million in the second quarter and revenue-generating capital expenditures to be between 13 and 25 million in the second quarter. Recurring cash flow therefore is expected to be between $35 and $37 million. We expect site rental revenue for the full year 2005 of between 575 and 585 million. We expect 2005 site rental gross margin to be between $385 and $400 million; and we expect 2005 adjusted EBITDA to be between 310 and 320 million, interest expense between 130 and 137 million. We expect 2005 capital expenditures to be between 57 and 81 million with the sustaining capital expenditures of between 10 and 14 million and revenue-generating capital expenditures of between $47 and $67 million.

We expect the result of this will be recurring cash flow for the full year 2005 between 165 and 175 million. Our 2005 outlook includes our expected interest expense savings, which may be achieved through refinancings in the second quarter and further debt reductions using cash balances.

As we discussed last quarter, we continue to work on refinancing our balance sheet. Any refinancing we contemplate is in line with our initiatives to both reduce interest cost and increase our investment flexibility. At this point, we are not going to comment any further on our refinancing activities beyond what we've said previously.

In conclusion, as can be seen through our investment of significant sums in our own shares, we are optimistic about the growth of the portfolio we already own. We may also look to leverage our operating expertise by acquiring select U.S. assets if this can be done at an excess acceptable investment return. As we have said before, through the combination of operating growth and investments of our cash flow and borrowing capacity, we are targeting to deliver recurring cash flow per share growth of 20 to 25% per year over an extended period of time.

With that, I'm pleased to turn the call over to John.

Thanks, Ben. As indicated in the earnings release, we started the year 2005 on solid footing. Our recurring topline growth continues to be in the 8 to 10% range which as we've indicated before drives adjusted EBITDA growth of 10 to 12%. Of important note, substantially all of this growth is accomplished on our existing towers without the benefit of any acquisitions or builds. This growth in our core tower business was due to strong results among our wireless customers. With four out of the top five wireless carriers in the U.S. reporting their first quarter results, several have reported results that largely exceeded street consensus subscriber forecasts.

In addition, they are seeing increases in data usage resulting in higher data revenue per user, demonstrating consumers' desire for ever-increasing wireless application. We expect the combination of higher subscriber numbers, continued robust voice demand, and increasing data demand will continue to contribute to wireless minutes of use growth, which is the key driver of our business.

In addition to the previously mentioned U.S. trends, our Australia business is benefiting from the deployment of both 3G networks and wireless broadband services. The wireless broadband services offered in Australia are a competitive offering to cable or DSL high-speed data access, and are enjoying early success. We believe that wireless broadband leasing opportunities will occur in the U.S. as well. Something else new this year. We're beginning to see some early benefits from the sale of previously unused Spectrum in the U.S. including that of NextWave. We may see an increase in activity as a result of the Spectrum being deployed by the new owners of that Spectrum. We are encouraged by these positive results and our carrier customers' interest in building out their networks to meet consumer demand for wireless minutes of use.

As Ben alluded to in his remarks, we are beginning to see our investment philosophy in action. In order to grow recurring cash flow per share at a rate greater than 20% per year, we have to make appropriate investments of our recurring cash flow and borrowing capacity -- either by shrinking the share count, building, or acquiring assets. As Ben mentioned, over the last nine months we investment $750 million effectively in our own towers by purchasing our common stock convertible notes in Verizon's minority interest. While you hear some described share buy back as a return of capital to shareholders, we consider the purchase of our shares as an investment in our own towers for the benefit of those shareholders that remain. Roughly speaking, over the last nine months, we've removed approximately 10% of our shares outstanding, thus spreading the long-term value of our business across the 90% of those shares that remain.

We provided you the input that's necessary to evaluate this investment in our own assets, including our belief of perspective U.S. leasing demand, which we have discussed on numerous occasions including at our Analyst Day last April. We used this very same information that confidently invests in our own assets to share repurchases.

Another way to grow recurring cash flow per share is to make investments in productive new assets. I would like to highlight the two such investments that are in our emerging businesses segment. The first of which is Crown Castle Solutions -- our business of deploying distributed antenna systems. I really like this business. It has all the attributes of the traditional tower business; it goes in places that traditional powers can't; and solves long-standing deployment and engineering challenges for our customers.

For those of you not familiar with distributed antenna systems, also called DAS, it's effectively a very tall tower turned on its side if you will. From a common base station we distribute cellular signal through a wireless signal -- cellular PCS -- through a series of small antennas on light posts and telephone poles to a specific geographic area. Good example of an area where DAS makes sense is one we will be deploying at Disneyland in California. As a follow-on to successful deployment of traditional shared infrastructure at Disney World in Florida, we have been engaged to build and operate a DAS network that Disneyland to accommodate all the major wireless players. This is a great example of where a DAS network is the only viable way to cover a geography with robust signal and it's the type of project that we are pursuing as we develop this business.

By the way, for those of you wondering about the economics, the economics of these DAS systems are very similar to those of a well executed tower build and generate similar returns.

The other business in our emerging business segment is Crown Castle Mobile Media, which you've heard me talk about in the past. I'd like to just outline where we are in terms of Crown Castle Mobile Media. We have been successful in deploying our test network in Pittsburgh. We expect to fund this business largely on a stand-alone basis with outside strategic partners that would acquire minority interest. As we announced previously Crown Castle Mobile Media is being advised by Allen & Co., a New York-based investment bank in (indiscernible).

Finally, we continue to achieve important milestones as evidenced by our recent press releases to reach our goal to operate a digital network for broadcasting digital TV content to handheld devices.

We believe our investment in Crown Castle Mobile Media is the best use of our nationwide spectrum and one which we believe will maximize value to the Company over the long-term. Further, we believe that the value of this entity is significantly greater than our investments to date.

We think long-term and that is why we've taken a very deliberate approach towards recapitalizing this Company and why we've been deploying our cash in the purchase of common shares and convertible notes, rather than just paying down high coupon debt. Obviously in the short-term, paying down debt would increase near-term cash flow per share. But we are investing in buying back our shares and other investments, because we believe that long-term, this will maximize recurring cash flow per share and we are confident in our ability to refinance our higher coupon debt through methods we previously discussed.

In summary, we had a great quarter, we are excited about the prospects for the balance of the year and you should expect that we will continue to act on our belief in this business.

With that, I'm pleased to turn the call back over to the operator for questions.

+++ q-and-a.

(OPERATOR INSTRUCTIONS) Rick Prentice.

First on the interest expense guidance, I know you mentioned how you may be able to reduce it with the refinancings that have been discussed in the past. Could you talk to us a little bit about your guidance and what the guidance assumes as far as when you would get some refinancing done, at what rates? Would there be some overlap between having a new piece of paper out there on the existing piece of papers? And how is the rising interest rate environment and the GM paying (ph) affecting your whole process in that area?

Let's see what I can answer there. What's contemplated in the guidance is that we will get the refinancing done in whatever performance it ultimately takes in the second quarter. So that's what we expect. There has been some volatility in the right market as you certainly observed. We've actually made up some ground here of late and so we are not too concerned about that, ultimately.

In terms of execution, we don't expect to see, really, any overlap in terms of having new debt come on as bonds are potentially coming out. So, don't think that is going to be a big issue for us. It is one we're sensitive to; but in terms of getting into any other details around the financing or specific timing, really can't get into that at this time.

Obviously, the timing issue is something that is a transient issue. As you look out to '06, what are your thoughts as far as what the interest level would be then, to give us a clean annual run rate of what the new capital structure would look like? Whichever way you end up finally doing it.

That's tough to do because I would be speculating with you on exactly the form that the financing ultimately takes. But it's safe to assume that the first five or six months of run rates here in 2005 would then be substantially reduced in the back half of the year and then on to the run rate of 2006. So, I hope and expect that when we get on the call next time, we can talk about the new run rate that will then be on an annualized basis quite different from the one you are seeing in the first half of this year. But we've told you previously what our overall targets were in terms of prospective interest expense so that it depends upon whether we take out various issues and performance financing.

I don't want to get into that too much with you but suffice it to say that substantial reduction in quarterly run rate, post whatever it is we ultimately complete.

The second question is, as we look at the first quarter results, you had solid operation results. The carriers, though, were pretty quite as far as how many new cell sites they deployed. We've had four or five -- depending on how you want to count them -- report results so far. And it looks like the national operators are only going to have added about 2000 cell sites in the first quarter yet it does look like they are going to do about 14,000 at the national carrier level for the year '05. How does that impact your numbers? When we look at the 8% year-over-year revenue growth, has that somewhat muted their 2000 in the quarter or is it possible that they spend the 14,000, and we're going say that upper end of the 8 to 10% revenue guidance that you talked about, John.

And then a second question with that is, did you see a lot of amendment type revenue in the quarter as well? Maybe give us the split as far as amendments vs. new leasing?

Yes, I think it's that last part of the question that really goes to the first quarter as well in terms of the results and as Ben indicated if you look back in the year-over-year, quarter-to-quarter comparison '04 to '05, if you take out a couple of items in the first quarter of '04 that were not normal as it were, the year-over-year growth would've been in and around that 10% range already given an apples to apples comparison. But your point about the new site deployment -- I would suggest that we have seen in that it wasn't as if there was a huge pickup in new site deployment coming off the fourth quarter into the first quarter. It would appear as if some of the carriers as have indicated on their calls are back-end loading their CapEx spending and perhaps some of their cell site deployments.

But, the last part of the question that you asked about amendments. I think it continues to be a strong contributor in our case. We had some 30% of our activity in the first quarter coming from amendments and that continues to be the activity we have discussed in the past as carriers deploy additional antennas, lines, and in some cases ground space for the deployment of new electronics to accommodate data services and/or just increase capacity in that particular site. We realize some benefit in the form of additional rent as they add equipment to our facilities.

So that 30% is what occurred in the first quarter and that certainly would have offset any kind of slow ramp-up in new site deployment that might -- that was occurring with some of the carriers.

So if it picks up in the second half of the year and amendments continue, we should be -- and the normalization if you will with that Australia or the 2 million out of period thing last year -- we could be seeing the upper end of the guidance pretty easily then?

Guidance is 8 to 8.5% and as -- last year we outperformed that level a little bit and, again, to the degree there's more licensing activity in the summer than you would get ahead of the run rate. But the 8 to 8.5% level in the $40 to $45 million level of growth is more than adequate to meet the kind of objectives that we have set for ourselves.

Jonathan Atkin.

If I could just piggyback on that last comment about the new cell sites and pretty overall industry for the national carriers as a whole, then, are you expecting the same level of new site deployments that you did earlier this year? On the acquisition front, you talked about the possibility of acquiring some assets in the U.S. What's the typical range in terms of portfolio size that you would consider most likely?

On the first question, Jonathan, our guidance for the year continues to suggest a leasing rate that is nominally less than what we had -- than what we did last year in 2004. Certainly everything that we are seeing to date would suggest that there's no problems with what we have forecast in our plan and what, then, is incorporated in our guidance. First quarter came together the way we had contemplated it. And we feel good about the way that resulted.

In terms of the second question, clearly, in terms of the acquisition aspect of assets, these would be tuck-in types of acquisitions. Some of the smaller portfolios that are in the market where we could otherwise acquire those into existing geographies, where we already operate substantially, eliminating most of the G&A that otherwise is required to operated as a stand-alone business as we just folded in under our existing area structure. That is the kind of thing that we are looking at and you should expect to see from us as we go forward.

We run those sites through the same profile that we do our own, on the Southpoint data and pretty carefully, the future lease-up prospects. And as we said on this call a number of times before, we are investing to buy assets either way. We are either buying our own towers or we are buying a third party site. And I think you'll see us do some of both over time.

If I could ask about the distributed antenna systems. What are the main dating (ph) factors to that growth opportunity. Is it just the ability to deploy the systems fast enough? Or is it a matter of carrier awareness and willingness to coinvest? Or maybe it's other third parties getting involved in this? What are the moving parts at DAS opportunity?

I think it is the former point that you made, Jonathan. What it really -- in our case, what we look at is four points in a value proposition from a customer perspective. When a customer is otherwise looking at a particular problem, whether it is just new coverage or capacity in a particular area and they release (indiscernible), the first thing they're looking for is they are looking for co-location. And on a tower, specifically, if they can find it because is the fastest easiest way to otherwise take care of that issue.

And in our case it's certainly the first thing we look to help them with is co-location on our existing assets. If we don't happen to have one there, they will be looking at other towers and/or conceivably going to other types of structures with vertical height -- rooftops, water tanks. Something to that effect. If those don't exist, a tower then is the third option -- new tower being built -- and that is something that we will do as well for a customer. If that is what is required to otherwise fill that area because there's nothing else in that location.

It is when you otherwise get to a point where a tower just can't be built because of the sensitivity of the particular area. There is no way to that particular locale or -- in the case of the example I gave in Disneyland, that particular venue -- when a tower is inconsistent with what would otherwise be in that location, that is when the distributed antenna systems make a lot of sense. Because in essence they're hidden among the existing utility infrastructure that is in place. So that is -- I think what you are going to see is a buildup as we start to deploy more of these. We have three on the air right now. One in Pittsburgh, one on the Hutchinson River Parkway as we discussed in the past and one in Hilton Head Plantation. We are working on a few more.

I think as we continue to build out some of these, what we're beginning to see is more of these types of specific geographies that won't and can't be accommodated by a tower. And I think that is what is going to start building on itself. So it's not a huge material contributor to the business in the current calendar year. But I think as we continue go forward, it's certainly a solution that we think is an appropriate part of our complete mix of solutions for our customers.

One final question as it relates to carrier consolidation and network integration. The word decommissioning gets mentioned sometimes but I want to know does decommissioning translate into tower lease termination? Are you seeing any possibility that leases on your sites would in fact be terminated as a result of any carriers' integration activity?

That's a great question, Jonathan, and basically to date, there is still a lot more analysis that seems to be going on as to whether there will be any specific sites that are going to be decommissioned, i.e., lease-terminated. And as we have pointed out in the past, because these leases are fixed terms, to the degree that anything was terminated, there would be a prepayment as it were, of the remaining term on whatever that term was on that site.

But what we're finding is one has to look at a couple of different components in the overlap of these carriers on sites -- whether or not it's the AT&T Wireless Cingular or, prospectively, the Sprint Nextel. And that is that not all geographies, therefore, not all overlaps are created equally. Where the overlaps occur in dense urban markets as opposed to a rural market, the reality is that, as these carriers are looking at the continued need that they have -- both from a capacity perspective and a the new applications perspective, including data applications we talked about in the comment -- there's a question as to whether or not it makes a lot of sense to be decommissioning the sites if you're going to be needing additional antennas and lines for some of these new activities that I mentioned.

So, to date, I will tell you that we have not seen anything. We certainly hear some of what you would hear as well which is that this is still under study, particularly at AT&T Cingular with the AT&T footprint being analyzed. We do not know exactly what the implications are going to be at this point in time. The sense we have is that there will be more than enough new sites that would offset anything that would be coming off in some of these decommissionings that you are hearing about.

Anthony (technical difficulty) (indiscernible).

Just a question on the stock repurchases. What I'm wondering is the cash that is being used for the stock and convert repurchases. Is that cash that is at the Restricted Group or the unrestricted sub? And with respect to the purchase of the Verizon interest, I'm assuming that that was cash that now resides at the unrestricted subsidiaries. Is that correct?

That's right. Let me run through that with you again because it's in both spots. The common stock purchases get funded from cash in the unrestricted group. Today post-repurchases we have got about $40 odd million in the unrestricted group. To be clear, as we talked about on last quarter call, we do have the ability to continue moving equity interest as the Crown Atlantic subsidiaries, the former Verizon interest that was held in the unrestricted group have the ability to continue to essentially acquire that into the Restricted Group by purchasing it with cash from the unrestricted group that we then move over to the Restricted Group. I'm sorry to the unrestricted group. So if you think that through at the valuation that we paid Verizon for their interest, we would then transfer, prospectively, in the future -- could transfer the remaining 48% of that interest over to the Restricted Group in exchange for about $350 million.

So, Anthony, that's the amount of value if you will, equity value, in that entity that still resides in outside of the bond -- the bond of Restricted Group.

I guess the point I am getting at is, even if for some unforeseen reason in the credit markets or any other type of markets, you were unable to affect the recapitalization you are talking about by June 3. (indiscernible) say, it took six months longer than that. You still have plenty of capacity at the unrestricted subsidiary to be able to continue to purchase stock in the open market?

We do. Through that transfer mechanism I was just mentioning. Then just put the factual matter to clear up -- just to remind everyone. The 4% convertible notes are debt obviously on the balance sheet. So we are using funds from the Restricted Group to take out those. And then the purchase of the Verizon interest, last year we disclosed that we talked about here was funds from the unrestricted group.

So even though those converts are well on the money they still count past debt in the -- so, effectively, you are just refinancing (indiscernible) indebtedness?

That's correct.

On the emerging media business. I don't want to spend too much time on it because obviously it's not a significant contributor to the operations. But I was just wondering, in the interim until the external financing is raised, how was the capital at that entity being funded? Were there some small contributions that were coming from Allen & Company -- who I think in a prior release had said was taking a minority interest -- or did the Company put any seed capital into that business aside from the Spectrum that was contributed to that entity?

The original Spectrum, as you recall we paid $12.6 million for. And that asset -- the Spectrum -- resides in the unrestricted group. It was funded with unrestricted capital. Since the acquisition we have spent a small amount of capital and some operating G&A, as you see, in the emerging business segment on pursuing this line of business and the beginnings of site acquisition work on, prospectively, the first market that would be launched. But, not a significant amount -- really not even -- I mean it's implicit in this guidance we've already got in here and so not really anything significant.

Going forward. What we said is as we said last time was, if this were to be successfully deployed and if it would ramp materially in terms of capital required and that would be funded, we believe, through the external investments that we are seeking through a strategic partner. The accounting would be a little tricky because you'd see that interest come in and we would be booking this as capital expenditures. And we will talk to you about that when it occurs but on a cash in cash out basis, it gets funded through the external investment.

Michael Rowan (ph).

Just a question on pricing. Just curious what your current thoughts on the pricing environment for new co-location and as you look at the competitive environment today what are the top three issues that we should make about going forward that's going to influence the pricing for new co-location on your towers? I realize, of course, going into question that probably pricing is dependent on location but just taking that out for a moment that would be great?

Fundamentally pricing hasn't changed a whole lot in our business in quite some time. You'll see it very up or down, less than 5% typically across the years. Generally trending slightly upward. But as we think about pricing and the competitive tension or pressures that are out there, as we have talks about before in the vast majority of our sites don't compete with another structure within half a mile. Even more fundamentally than that we think about it as a very efficient mechanism for carriers to locate their cell sites on a shared basis on these towers.

If you accept for a moment the natural tension of landlord tenant tension of is there ever a question about would the tenant prefer to pay less rent? Of course there is. If you step back and look at the value proposition there and the fact that, on a gross asset yield, what we are earnings including the sharing of all the sites that we have with 2 1/2 tenants for tower, our gross yield is not even 8% yet on days. You can certainly make the case fairly compellingly that the carriers are occupying sites that's something less than 3% occupancy cost. Based upon the sharing across the portfolio.

That is very competitive with their ultimate cost to capital. It's one of the things we think about a lot as a company and that is as we work to reduce the cost of capital in this business long-term, we think that's very strategic. Because we find that to the degree our cost of capital approaches even gets below some of our customers, we become more competitive in being able to invest even in some new sites for them on a value-added basis for them and for us. But on the competitive nature today, I think it's fundamentally rooted in the sharing nature of it and the cost to construct, otherwise.

Jim Allen.

A few questions just on the stock buybacks. Just going forward, can you comment at all about the pace at which you expect to continue to buy back stock? Can you keep up at this kind of pace? Are you a bit slower going forward or faster and can you comment on maybe a target share price for -- not share price -- that's my job. A target share account for the end of the year?

Also can you talk about any restrictions other than where the cash is, between restricted and unrestricted subs? Any other restrictions on buying back stock? And then the last thing on that would be -- I don't want to beat a dead horse on the interest expense -- but would there be any impact on your interest expense guidance if you were to continue to be aggressive on buying back stock?

The answer to the last one because I can remember that one first is, no. I don't think that we would do anything that impacts interest expense guidance.

What I would say about the pace and the price on the stock buybacks is that, clearly, we have some surplus liquidity today that we intend to put to work as we have talked about on this call and previous calls. We are not going to sit here and suboptimize the capital structure here. So we found that, obviously, we find this to be an attractive investment and a very efficient way to put the money to work. Longer-term, when we have the balance sheet sorted like we believe it will you can reflect on some comments we have made previously -- that the business if you assume you're leveraging the EBITDA growth about six times or so, that's roughly 200 million of borrowing capacity. And then the recurring cash flow, that would be on a run rate upwards of 200 million a year, you would then carve out from there the capital expenditures you would expect us to make around the core business. And looking at this guidance it's -- call it $60 million a year. So net that out it gives you somewhere between $300 to $350 million a year that we, then, become charged with investing properly, annually.

That is what we are really focused on. Sure, what you've just seen is some attempt to put some of this to work in the near-term. But on a more ongoing longer-term basis, we are focused on the fact that we believe we have got about somewhere between $300 and $350 million a year of discretionary investment capacity. Again after the CapEx and the core that we are going to put to work. It's very important as those on the call think about the valuation and running your models as we think about it. The proper investment of that $350 million a year drives a significant amount of value, long-term. Whether you assume we buy or build assets with it or shrink a share count. Either way, the recurring cash flow per share number which is what we are focused on gets driven again at the rates we are talking about, which is the goal to drive it 20 to 25% per year.

So that's sort of how we think about it. That's a long winded answer to a many faceted question. Hopefully that covers it.

Could you also comment just on your restrictions you have in buying back stock outside of the cash in the --?

Back to Anthony's question. It's really the ability to continue to transfer the current Atlantic entity in which would give us approximately $350 million more capacity than we have today. And, again, today in the unrestricted group, we've got about $40 million left, so that's really the sum total of the capacity until there was some change in the covenants on the bonds through, hopefully, through refinancing.

One other question on the emerging business. Can you give us an idea of what -- including the investment in the Spectrum -- what's your total committed capital to that division is? And I guess also maybe talk about when you think we might say meaningful revenue or free cash flow coming out of that division?

Total committed to date on Mobile Media is, you saw the Spectrum addition. I'll say it's less than $20 million to date. With Spectrum -- many on this call would probably agree with us -- we believe it's worth substantially more than the net investment to date.

Do you have an idea when you think you might get meaningful revenue or cash flow out of the division?

I think you'll begin to probably see some visibility around that in 2006.

(technical difficulty)

I was wondering if, Bob, you could give us a figure for the current RP capacity within the Restricted Group under the (indiscernible)? I know you said before that it's negative. But just trying to figure out if it's close to turning positive any time soon?

David I haven't looked at that in about -- I think it's about a year or so from turning positive at the rate we are adding to it at this point. But I haven't looked at that recently. It's not a significant consideration here. We are not going to have restricted payment capacity for some time under the bond -- under the existing bonds.

Just to just to confirm on the interest expense guidance change and after that, what form it is going to take and what (indiscernible). But the actual change you made from the previous guidance to this guidance was just the timing of the refinancing and, essentially, using 100 million in cash to buy back stock that could have been used to delever it to not relate it to this, what form it takes?

Yes you generally got it. There's a lot of ins and outs but that's pretty close. It is mostly timing as we continue to slide into the second quarter.

(technical difficulty)

I didn't hear who that was.

Thomas (ph) Yeager (ph).

I just had a question on industry trends as far as Cingular has to build up their California systems since they've sold their old network back to T-mobile. I was just curious if you're seeing -- if you're having a lot of discussions with them on site locations so far?

Yes. I think that, as a result of all the basic trends that we talked about, in that case there's a specific element there. And clearly they've sold a network that they have. Of course they have now the AT&T network that was previously in California as well. So, they've sold the one they were operating on, previously, to T-mobile. They've got the AT&T Network and, certainly, are focused on continuing to improve the service that they provide, as all carriers are doing, as well as the various different types of applications that they can provide on those sites.

So we do have that conversation with all of these -- all of our wireless carrier customers. And I think that, as I'd indicated up front, the outlook for this year continues to be consistent with what we had thought, based on the guidance and whatnot. We feel good about the demand profile that we see at this juncture and feel good about the year.

Rick Prentice.

Wanted to get a follow-up question on the buybacks also. Ben, can you talk a little bit about when your windows open or close on those buybacks? And then, what are the logistics for being able to transfer the Crown Atlantic between the unrestricted to the restricted?

The logistics are in the bond covenants and require a fairness opinion to be issued by an independent firm on the valuation of that entity. It was very convenient. The first transfer occurred concurrent with the purchase of the interest from Verizon; so it was obviously helpful that we had a third party valuation and validated it. Again, using the same value unadjusted for time is where I come up to the $350 million level.

But as a technical matter it requires a fairness opinion and I would guess that's a two- to four-week process to get done if we decided to make another transfer there. In terms of open windows, I guess it's -- frankly, it varies depending upon the Company's possession of materials non-public information. We make that call as we go along and obviously stay within the rules.

You mentioned buying buildings and buybacks as far as what you might put to use the 300 or 350 million per year that your growth and free cash flow -- recurring free cash flow -- would create on a correctly levered basis. What about dividends? How does those play into the equation if ever at Crown Castle?

I think it's a discussion that we will definitely get into, down the road. It's one that we are going to be pretty thoughtful about. One -- I'm a believer that, potentially, it's a way to maximize the valuation, given a certain level of growth characteristics of the Company. Obviously, that's well established in the REIT industry. But we are not going to be quick about that. That introduces some inflexibility in the Company and also potentially suboptimizes valuation to the degree that we have a belief that we're prepared to act on that the value of stock -- it's better to take it out and shrink the share count than paying it out to the dividend. I think there will naturally come a time -- I just don't know exactly when that is and we will be thoughtful about how we think that through.

The question I've got for you is on the CapEx side. The revenue-generating CapEx went up in the guidance this time, I think. Was that on the land side? I can't remember it if you had broken out any land program previously. And I guess you are not going to let John build any Mickey Mouse DAS systems or is that what you're going to call the Disney systems?

Hardly Mickey Mouse. It looks pretty good. We are going buy some land. So there is some of that in there.

And then there was some of the new DAS builds including the CapEx associated with building out the system in Disneyland, Rick, so that was -- it was a little bit of both of those.

Got a pretty good view for the year now and not expecting any other tweaks up in it?

No.

I think the only potential tweak is what we mentioned a few minutes ago which is, with the admission of another partner in the Mobile Media business, you'd see that adjustment.

But most of that would be funded externally but it would (indiscernible) booked into yours, right?

Yes.

Yes.

But I'm talking about from the cash burn standpoint, it wouldn't really be yours burning.

Exactly. Maybe we will take one more question.

David Barton.

Actually this is Rob (indiscernible) from Bank of America. One quick follow-up on the new site construction guidance. It looks like you took your guidance up from about 5 to 10 million to 20 to 25 for the full year. Is there a specific number of towers that we should think about? Or maybe you can walk through some of the economics of where that 20 to 25 million is going to be spent in '05?

We did take that up and your numbers are correct. Similar answer to Rick's question. It's not so much the numbers of towers although there will inevitably be a few. It's really more sort of almost you can think about it is I don't know if we can come up with some new measure about broadband power equivalents or something. I hate to mention that because I don't want to go down that path. But a lot of this is would be DAS systems, some minor more investment in the Mobile Media system and again in the site (indiscernible) work. I think in this number, something less than half of this is in DAS systems. And the rest is kind of a mixture of all the other kind of catch-all. So that's really the mixture of that 20 to 30 million.

But it's less actual new physical big standard towers?

Right. You can't take the midpoint. If you can't take 25 million and divided by 250,000 and figure out where's the extra towers coming from. It's not going to be that (indiscernible) .

But I would say we are holding ourselves accountable, obviously, by giving you an emerging business segment and you will see the capital be deployed, obviously, before you see the revenue and margins. But as we get into 2006 you should expect and obviously we expect to see those kinds of returns coming out of that business or else the capital isn't going to get spent.

All right. At this juncture I think what we would like to do is thank you all for joining us on the call for the review of our first quarter results. We appreciate all of your interest in our Company and we look forward to talking you again on the second quarter call in the next few months. Thank you.

Thank you, sir. Ladies and gentlemen, at this time, we will conclude today's teleconference presentation. We thank you for participating on the conference. If you would like to listen to a replay of the presentation please dial 1-800-405-2236 or 303-590-3000 with an access code of 11029402. We thank you for your participation on today's conference call. At this time, we will conclude.