Crown Castle Inc (CCI) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen, thank you for standing by and welcome to the Crown Castle International Corp. first quarter 2008 conference call.

During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for question. (OPERATOR INSTRUCTIONS) This conference is being recorded today, Thursday, April 24, 2008.

And I'd like to turn the conference over to Mr. Jay Brown, Treasurer of Crown Castle. Please go ahead, sir.

Good morning, everyone, and thank you for joining us as we review our first quarter 2008 results.

With me on the call this morning are John Kelly, Crown Castle's Chief Executive Officer, and Benjamin Moreland, Crown Castle's Chief Financial Officer. This conference call will contain certain 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, it can give no assurances that such expectations will prove to have been correct.

Such forward-looking statements are subject to certain risks, uncertainties, and assumptions. Information about the potential 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 of the SEC. Should one or more or others of these risks or 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, recurring cash flow, and recurring cash flow per share. Tables reconciling such non-GAAP financial measures are available under the investor section of the Company's website at CrownCastle.com.

With that I'll turn the call over to Ben.

Thanks Jay, and good morning, everyone. Appreciate you joining us.

As you have seen in the press release, we've reported another good quarter of results. We have a little succession news which we were pleased to discuss with you this morning. During the first quarter we generated revenues of $370.6 million, which was comprised of site rental revenue which increased $45.2 million to $345 million, or up approximately 15% compared to the first quarter of 2007. Service revenue for the quarter was $25.6 million.

Gross margin from site rental revenue, defined as tower revenues less cost of operations, was $232.7 million, an increase of $39.5 million, or up 20% from $193.2 million for the first quarter of 2007. Adjusted EBITDA for the first quarter of 2008 was $211 million, an increase of $43.7 million, or up 26% from the first quarter of 2007. Recurring cash flow, defined as adjusted EBITDA less interest expense and less sustaining capital expenditures was $118.1million, comprised of $82.4 million--compared to $82.4 million in the first quarter of 2007. Recurring cash flow per share grew 40% to $0.42 per share for the first quarter 2008 compared to $0.30 per share in the first quarter of 2007.

Capital expenditures during the quarter were $61.7 million. Sustaining capital expenditures totaled $3.8 million; revenue generating capital expenditures were approximately $58 million, which was comprised of $27 million for land purchases, $17 million for CapEx for revenue enhancing activities on existing sites, $14 million on the construction of new sites, including the completion of nine towers and the acquisition of 10 towers.

Turning to the balance sheet, as of March 31, 2008 securitized tower revenue notes totaled $5.3 billion for the quarter and other debt totaled approximately $857 million for total debt of the end of the quarter of $6.1 billion. The other debt was comprised of our corporate credit facility, which was drawn $794 million and $63.8 million of our 4% convertible notes. We also had $314 million of our 6.25 convertible preferred stock outstanding as of the end of the quarter. As you have seen in our previous filings, the $5.3 billion of securitized notes are not subject to fluctuations in LIBOR for ten years from their respective initial issuances due to interest rate hedges we have undertaken.

At quarter end, we had approximately $97 million in cash, excluding restricted cash, and $100 million of availability under our revolving credit facility. Total debt to adjusted EBITDA as of the end of the quarter was 7.3 times. Since closing the Global Signal transaction in the first quarter of 2007, we have reduced total debt to adjusted EBITDA by over 1.5 turns from growth in adjusted EBITDA inclusive of $150 million of net new borrowings. Adjusted EBITDA interest expense as of the end of the quarter was 2.4 times.

As we have discuss in previous quarters, we continue to invest in our own assets through the purchase of our shares. In the first quarter of 2008 we purchased 1.1 million shares, using approximately $42 million in cash with an average price of $36.99. In total, since 2003, we have spent $2.2 billion to reduce our fully outstanding shares by 29%.

Moving to the outlook for the second quarter of 2008, we expect site rental revenue for the second quarter of between 344 and $349 million. In prior years, Crown Castle Australia has benefited from an annual customer payment in the second quarter. This benefit to site rental revenue and site rental gross margin of $2.7 million was achieved in the first quarter of 2008 this year. We expect site rental gross margin for the second quarter to be between 231 and $236 million. Consistent with prior years, this includes a seasonal increase in repairs and maintenance expense of approximately $4.5 million.

We expect adjusted EBITDA for the second quarter of between 208 and $213 million, interest expense of between 88 and $91 million. We expect sustaining capital expenditures to be between 6 and $8 million for the quarter, leaving recurring cash flow expectations to be between $112 million and $117 million for the quarter.

We have increased our full year 2008 outlook. We expect site rental revenue for the full year of 2008 of between $1.390 billion to $1.4 billion, an increase of $10.5 million from our prior outlook. We expect site rental gross margin to be between 940 and $950 million, an increase of $10 million from our prior outlook. We expect 2008 adjusted EBITDA to be between 858 and $868 million, an increase of $7 million from our prior outlook. And interest expense to be between 355 and $360 million. We expect 2008 sustaining capital expenditures to be between 21 and $26 million.

This 2008 outlook translates into expected recurring cash flow for the full year of 2008 of between 481 and $491 million, an increase of $7 million from the prior outlook, or approximately $1.74 per share based on the 279.2 million shares outstanding for the three months ended March 31, 2008. This $1.74 per share suggests 26% growth in recurring cash flow per share over last year above our targeted 20% to 25% growth per year.

Over the past few years, we have made many significant investment decisions. Most notably the purchase of approximately 29% of our fully diluted shares since 2003, as I mentioned, and the acquisition of Global Signal which closed in January of last year. The solid performance of our core tower business and the diligence we have demonstrated through an appropriately levered capital structure which has enabled us to purchase a substantial amount of our actual and potential shares outstanding, has resulted in 40% growth and recurring cash flow per share in the first quarter of 2008 compared to the first quarter of 2007.

The first year of ownership following our acquisition of the Global Signal portfolio combined with the appropriate leverage has resulted in growth rates and recurring cash flow per share significantly in excess of our targets. Consistent with our past actions, we expect to continue to use our recurring cash flow and additional borrowing capacity to make investments, including tower acquisitions and share purchases based on their anticipated impact on long-term recurring cash flow per share. We have not included the impact of these potential investments in our outlook.

Given the state of the debt markets, I would like to comment on how we see the current environment impacting our business. As we stated on the last call and continuing today, there is no requirement for this company to access additional debt to deliver on the 2008 outlook we have laid out. Existing recurring cash flow is more than adequate to fund all our contemplated capital spending around improving our existing sites, selected new tower builds, land purchases with a substantial sum left over for discretionary investments and tower acquisitions or additional share purchases which again we don't forecast in our outlook.

The rapid growth of adjusted EBITDA and the commensurate deleveraging that has occurred, and as further reflected in our outlook, gives us a lot of flexibility as we evaluate the credit markets. Absent further borrowings, we would expect to be substantially below six times debt to EBITDA when we anticipate refinancing the CMBS notes beginning materially in 2010 and 2011. While it is not our present intention to deleverage to such an extent, should the credit markets not improve, I am confident that these levels of refinancing will not be a significant issue for the Company.

Fundamentally we have not change our approach to share purchases. I would say on balance we see this as a continuing opportunity to invest in our company's assets at a substantial discount to our view of fair value, based upon our long-term outlook for the business. That said, our approach is going to be to watch the credit markets closely and take advantage of opportunistic times to be in the market, remembering that the investment of borrowed money in our business is a relative value trait against the price of the assets or the implied yield on the shares we are purchasing.

Finally, let me say how honored and pleased I am to be moving into the CEO role in July. Crown Castle has thrived under John's leadership and we have a terrific management team in place that I am very fortunate to be leading going forward. You can be assured I will to the best of my ability work to continue to execute our business plan consistent with our past actions, focused on execution of our core operating plan and capital allocation philosophy to maximize long-term recurring cash flow per share.

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

Thanks, Ben, and thanks again to all of you for joining our call this morning.

As Ben just mentioned we had an excellent first quarter. We exceeded our estimates for site rental revenue, site rental gross margin, adjusted EBITDA, and recurring cash flow. The year-over-year growth in recurring cash flow per share of 40% I think clearly demonstrates the significant growth that we are able to deliver with our tower portfolio and capital structure.

In fact, the decisions we have made over the last four years has increased our recurring cash flow per share by over eight times. Before I turn the call over for questions, I'm going to make a few comments about our expectations for Crown Castle for 2008, make a few observations about the successful conclusion of the 700 megahertz auction and the accelerating growth data services that are already being realized; in addition, I'll provide some additional background of the succession plan that was announced last night.

On the leasing front, we continue to be excited about our leasing opportunities in 2008. The activity this year is currently driven in large part by two areas. First, by our wireless customers's continued focus on improving network reliability for all their services, voice and data; and then second, by the ability of those wireless carriers that secured spectrum in the AWS auctions to increase the pace in which they deploy that spectrum this year by launching new technologies and new markets.

Thus far, 81% of our leasing in the first quarter originated from traditional wireless carriers while 19% of our leasing in the first quarter came from emerging technology companies as well as governmental entities. The distribution of leasing in the first quarter was approximately 70% new installations and 30% revenue generating amendments to our existing installations on the towers.

The activity we are seeing is a reinforcement that the tower industry fundamentals remain strong. There is a direct correlation between the increases in voice and data usage and the need for additional installations on our towers. Wireless minutes of use continue to rise up some 18% from 2006 when you look at the end of 2007, and this growth is only expected to continue with the adoption of unlimited calling plans by the largest wireless carriers and the continuing election by more customers to cut the cord, if you will, and drop wireline service all together in favor of wireless.

In addition, wireless data is another long-term driver of growth for our customers and ourselves; and we expect that the next generation deployment of high speed wireless data networks that rival anything we use at home or the office will increase the penetration of wireless data services such as e-mail, internet, mobile music, and videos. I would like to spend a few minutes to discuss some of the mobile data statistics that I believe are instructive as to the long-term effect they will have on growth in the tower industry.

In 2007, total wireless data revenue rose 53% to $23 billion and is forecasted to reach $70 billion in 2012. Data as a percentage of total carrier revenues grew to 17% in 2007 from 13% in 2006 and just 8% in 2005. And for those of you that had a chance to listen, AT&T reported two days ago that their wireless data revenues grew 57.3% year-over-year and now represent 21.5% of their total wireless service revenues.

Wireless data, both low band width services such as text messaging and high band width services such as mobile internet services, searches, and things of that sort, are growing rapidly as devices that make it easy to access data services such as the iPhone, the Blackberry and laptop cards are adopted by wireless consumers. Smart phones currently represent approximately 12% of total handsets and they are projected to account for 40% of all hand sets by 2012 as the demand for mobile data stimulates demand for mobile data enabled handsets. In a Deloitte and Touche recent survey, 36% of those surveyed viewed their cell phones as an entertainment device, an increase from 24% a year ago.

The success of the iPhone, which currently runs on a 2G data network is a good indicator of where the data trend is headed. About 60% of iPhone users are sending or receiving more than 25% megabits of data per month which is equivalent of sending 7500 e-mails. Google has reported 50 times more searches from iPhone users than from other mobile device users. As has been rumored, Apple is expected to launch a 3G version of the iPhone with faster data speeds a little later this year which is expected to further drive the demand for data as experienced in Asia and Europe.

According to Opcom, the UK telecom regulator, the deployment of next generation higher speed networks in Japan doubled the contribution of mobile data; and the same kinds of things that are happening with the handset are occurring with the average laptop card subscriber using significantly higher bandwidth than the initial expectations. ATT and Verizon recently spent over $16 billion in the 700 megahertz auction, that represents about 80% of the spectrum purchases, and they are expected to use the spectrum to build up their planned fourth generation wireless networks beginning sometime in the 2010/2011 time frame. This is great for the tower industry, as these companies have the financial capacity to make the deployment of this exciting new technology a reality.

We would expect the deployment of these new technologies to begin on existing sites with revenue generating amendments to their existing installations. Longer term, we would expect that given the new fourth generation wireless networks will be delivering very high speed data service as opposed to the slower speed and predominantly voice networks that are deployed today that our customers will need to add additional fill-in sites to optimize this new service.

When I look at our portfolio, I believe that our assets are the best located in the tower industry, with 72% of our portfolio in the top 100 BTAs. As such, I believe we are very well-positioned to benefit from the increasing use of wireless voice and data services; as wireless carriers are expected to concentrate their initial deployments of these new wireless technologies and applications in the top markets, those characterized by high population and higher potential usage.

I would like to now spend a few minutes on the succession plan. As most of you have read, our Board of Directors has approved a management success plan for the positions of Chief Executive Officer and Chief Financial Officer. Effective July 1st of this year, Ben Moreland will become our new President and Chief Executive Officer, and Jay Brown will take Ben's current role and become our new Senior Vice President and Chief Financial Officer .

I will continue in an executive position as Executive Vice Chairman with principal responsibility for overseeing Crown Castle's strategy and ensuring leadership continuity. Lanny Martin will continue as our Chairman. I have had the honor and privilege of leading this company as CEO for the last seven years. Over the years, we have built a strong and deep management team that I am very proud of.

This team has delivered consistently strong results quarter after quarter, and just successfully completed an integration of Global Signal's towers into our company, which effectively doubled our tower count overnight. Through the years, we have become a stronger company. Working in conjunction with the whole management team, we have strength strengthened the value proposition for our customers, improved our operating execution, optimized our balance sheet and institutionalized a discipline capital allocation process that we believe enhances our ability to grow recurring cash flow per share by our stated goal of 20% to 25% per year for the foreseeable future.

I am confident that under Ben's leadership our executive management team will take our company to new heights. Clearly from an investor's perspective the natural question is why would I relinquish the role of CEO, and is there something I see that concerns me about the future of our company or the tower industry?

On the contrary. As you have heard me say, I think the fundamentals of our business are as strong as ever. I continue to foresee demand for our towers as the evolution from wired telecommunications to wireless telecommunications continues unabated. And as you know this belief is not based on intuition, but is backed up by empirical analysis of leasing demand using our project self point methodology.

The simple reason for the management change is that it is the right time. The business is doing well, the wireless industry as a whole is entering a very exciting period with the future build-out of very high speed wireless data networks. Our management team is ready to capitalize on the opportunities that lie ahead and Ben is ready and fully capable to handle the opportunities of Chief Executive Officer. I'm looking forward to continuing with Crown Castle in my new role as Executive Vice Chairman, and as I said previously, my principle focus will be on ensuring a seamless and flawless transition of responsibilities over to Ben and continuing to work with Ben and the rest of our board on strategy development that seeks to optimize our returns for our investors.

So, in summary, we reported a great quarter of results, illustrated by year-over-year growth and recurring cash flow per share of 40%. In addition, given that we are finished with the integration of Global Signal, we believe in our ability to grow recurring cash flow per share by our stated goal of 20% to 25% for the foreseeable future. Leasing and applications through the first quarter are solid and that, coupled with the efficiency of our capital structure and the actions we have continued to take to reduce our outstanding shares, have positioned us, we believe, for strong recurring cash flow per share growth in 2008, as evidenced by our increased financial outlook.

And finally, I would like to congratulate Ben and Jay as they transition into their new roles. These gentlemen have been instrumental in the development and success of Crown Castle, and I am confident that our entire management--executive management team under Ben's leadership will continue our record of success.

Operator, I will now turn the call back over to you to coordinate the question and answer

Thank you, sir.

(OPERATOR INSTRUCTIONS)

And our first questions is from the line of Jonathan Atkin with RBC Capital Markets. Please go ahead.

Yes, good morning.

Regarding the management transition, are there any other changes or additions contemplated at this time in your overall management structure, or are things going to pretty much stay the same in terms of titles and position? And then secondly, kind of on the operating front, just wondering what you are seeing from the major national carriers in terms of leasing trends relative to last quarter, as well as the AWS related build outs? We have seen some modest delays in market launches, and we are wondering whether you're seeing that in terms of your site leasing activity or is activity at the tower unaffected?

Yes, Jonathan, in terms of the management changes, the plan as described is in fact the major change that is taking place in the roles of CEO and CFO. There aren't any other changes contemplated, other than those two announced changes. With respect to the leasing, for the year, what I would suggest is that it depends clearly on the carrier; but for the most part, as I was indicating in the prepared remarks, among the large wireless carriers, those that are not affected by the capital markets to the degree that some others might are continuing on their plans to deploy. Some had their plans more evenly loaded through all four quarters, others we are seeing through the application process will be building as the year continues.

Where the total activity in the first quarter was lighter than the applications would suggest the activity will be as you go through the rest of the year. And so that really is a budget execution issue with any one of these wireless carriers; but for the whole year we are seeing among those that are not impacted today by some of the financial challenges, leasing at a rate that is either consistent or slightly higher than what we had seen in 2007.

With respect to the AWS carriers, once again, that is somewhat dependent upon the carriers--the AWS deployment by carriers that's somewhat dependent upon the carrier's impact of the capital markets. Clearly in one case, there is an aggressive deployment of that spectrum associated with bringing out a 3G wireless data network. That was a fully budgeted activity; and that activity which started in 2007 is continuing at an aggressive pace in 2008.

Some of the other carriers clearly are--some of the other carriers deploying AWS spectrum, we can clearly see a lot of activity in that regard both leasing and application. The delays in some of the markets are not necessarily manifesting themselves all that directly on the tower set of the equation because the plans that these companies have clearly are to launch markets from going this year on into next year; and in order to make that a reality there is a certain amount of activity that has to take place.

But from quarter to quarter you can certainly sense if there is maybe a little bit of slowing on an actual revenue producing lease versus the application. We are not seeing a lot of that, but we think that it will probably build as the year continues; and some of the capital market questions are otherwise resolved going down the path. In summary, Jonathan, long answer, in essence we see this year as shaping up to be, as we sit here today, with everything on the table, slightly better than what we saw last year. And has the potential to continue to grow from there as some of the capital market issues are resolved hopefully later in the year.

Great, and then just real quick follow-up.

What trends are you seeing in terms of pricing on new leases? Is there any kind of variation there and then with respect to the $14 million spent on tower construction and tower acquisition, what portion of that went to the tower acquisition site?

Yes. So with respect to the pricing side of the equation, we are not seeing any softness in that particular side, Jonathan. It really is always gauged by what is the substitution, and we are not seeing any softness on that side at all. Ours are up just slightly from the prior year.

And then with respect to the $14 million, we had a total of 10 sites that were acquired and then nine sites that were finished construction; and then as you can imagine, Jonathan, part of that $14 million is construction in process for sites that are going to be turning on in the second quarter, third quarter, fourth quarter. So there is a component of that $14 million that are for sites that are yet to come online that are going to be newly constructed.

Thank you.

Our next question is from the line of Jason Armstrong with Goldman Sachs. Please go ahead.

Thanks, good morning. Ben, congratulations first of all.

A couple of questions on your approach to the business. Maybe number one on sort of the deal front for the right deal, domestic or international. Can you review what your leverage threshold would be and sort of talk us through that? And then secondly, as you assess sort of the non-site leasing investments we've seen historically in this business be it Modio or Fiber Tower, can you walk us through sort of what the lessons learned are from your perspective and maybe talk about the approach or willingness to consider something like this in the future? Thanks.

Sure Jason.

On the leverage front and looking at deals, I think probably the best way to characterize our outlook would be to look back at our history and what we did on Global Signals. We were extremely careful about the number of shares we issued into that transaction, and as you remember, we levered the Company right up to about two times interest coverage. Which I think and I have said this repeatedly, is the most instructive way to think about leverage, because it is self-governing as interest rates fluctuate. Whether they be LIBOR or spreads, and so today we are approaching 2.5 times interest coverage.

The outlook would suggest we are going to be below, pretty healthily below 7 times leverage by the end of the year if we don't relever the business; and yet as I have said, we continue to have a view that that is the most efficient way to grow cash flow per share is reasonably releveraging the business, but you could probably assume that two times interest coverage metric is something that we are going to pretty well stay in bounds with, and that sort of takes you to the 6 to 8 times leverage outlook on a debt to EBITDA basis if you think about it that way. And that will obviously change as markets ebb and flow, and we watch it carefully today; and there is various pockets of opportunistic sort of views around the market, there's some strength in developing but it is still a little bit early and we are not going to get out there and do something in the credit market that I think we could potentially short-term live to regret.

So we are going to be very careful about that; but in terms of looking at deals, absolutely have that open, and are in fact working in the small deal transaction market today. We do not forecast that in our outlook until we actually close transactions, but I fully expect that it will make a meaningful contribution to our financial results this year.

As we would think about sort of adjacent business opportunities over time, the largest remaining opportunity we have still is our 17% ownership in Fiber Tower, which remains, we believe, a very attractive business opportunity. As you know, John actually serves on the board of Fiber Tower, a public company; and so that is our approach at this point to sort of the non-tower related leasing business in the microwave back haul business.

That is the only thing we see today that looks directly adjacent and interesting in terms of growth from our perspective. Not to say there wouldn't be something else that comes along. The Modio example is an interesting one. Remember, we bought that spectrum from $9 million, and notwithstanding the amount we spent on the New York buildout, turned around and leased it for $13 million a year. So there has probably been worse outcomes that have been had for folks.

So I would not characterize that one necessarily as a bad outcome and turned out to be very, very significant and consistent with our overall leasing business. So as we sit here today, there is nothing I can tell you today that we are looking at directly but I wouldn't close out the notion that we would look at something in the future if it met our criteria of maximizing what we believe would be long-term growth in RCF per share risk adjusted accordingly.

Okay, thanks, guys.

Sure, Jason.

Thank you.

Our next question is from the line of Rick Prentiss with Raymond James. Please go ahead.

Yes, good morning, guys.

Hey, Rick.

First I'll echo my congratulations also. Job well done by the team. Nice to see the promotions and good to see guys that have been around this industry as long as I have keep moving on up. Gray hairs are fewer and fewer these days.

Let's hit a couple of questions. First, in your '08 guidance, obviously a nice increase in the mid-point, anywhere between 7.5 and $10 million depending on the line item. As you look at that guidance what's kind of baked into it as far as your thoughts on the backlog turning into actual leases? What's baked into it as far as any kind of movement on 4G buildout from Sprint and Clearwire?

I think--what we are characteristically kind of consistent on, Rick, is that we will look at our outlook based on what we have high degrees in confidence in. And so what we are looking at is the level of activity that we see coming out of the first quarter, applications that are building in our backlog, additional dialog with our customers relative to budget that is there beyond what they might have already applied for. And on items like the WiMax activity, clearly it's a little difficult to embed that into the outlook for the year by virtue of some of the questions that are still being asked concerning that deployment.

And so notwithstanding the fact that we work closely with the companies that are involved in that initiative, and can see what that could be, we are hesitant to increase our view on outlook by an amount that would include a lot of activity in that regard, because we simply don't know anymore than we do today as to whether that is going to be practical from a deployment perspective, given the various different questions that are being asked about it in the community.

So therefore, I would say that there is not consistent with our first quarter--with our call in the first quarter, there is not any large increase in activity stemming from WiMax that is built into the outlook.

I guess we are all watching to see what the latest rumor is. My guess also even if they were to announce funding probably a lot of that from turning into leases with you guys would be maybe and '09 event anyway?

Well, not necessarily, in that, the companies that are engaged in those--in that initiative, Rick, are in fact working with ourselves, and we would venture other tower companies, to ensure that the engineering and planning relative to specific sites, up to and including the application process on those sites, is being handled realtime; and so, the big issue that will ultimately be the question is do they go from application to revenue generating leases, and that can be much quicker if you have been spending the time working on it and these companies have.

Or at the point in time the capital funding has become clear, do you at that juncture start your planning, and that is not the case at this juncture; and so it wouldn't necessarily be an '09 impact from the standpoint of application to revenue generating leasing. But depending upon what time it starts this year clearly as the months pass an effective a lease in the third quarter or beginning of the fourth quarter is not going to be that great on the financial results for the year and will have a much greater impact on '09 financially. But we'll have visibility as to it sooner than that if in fact the capital funding questions are resolved.

It's kind of like playing ready golf I guess. So they are getting ready, so if the ball's actually put down there they can hit it, huh?

Exactly.

Yes, okay.

Another question what are the key takeaways for us at CTIA meetings about a month ago now was that back haul becoming more critical to kind of your comments on data becoming bigger, and just the amount of speed hitting the cell sites. Your Fiber Tower comments notwithstanding, it seems like a lot of other carriers are looking at maybe starting to look to build their own back haul, all of what Clearwire has been doing. What kind of revenue ability could there be from you guys as far as if somebody puts a back haul dish, let's say four foot microwave drum out there. What kind of revenue amendments do you see from that kind of business, and are you seeing people starting to look to design their own back haul networks?

The answer is yes. I think that the need is so critical that the carriers are otherwise looking at all available options and that includes building it themselves. I think they look at Fiber Tower clearly as an acceptable option but there are limits to what Fiber Tower can do in terms of serving every single demand point out there.

So we are seeing self build going on by just about everyone of the wireless carriers in some way, shape, or form; and it is from the revenue perspective on our site, it's about $250 for a dish of the size you are otherwise describing. It can be a little less than that if is a small pizza box size kind of dish it can be larger than that. Anywhere in the range of about $200 to $250, up to about $500 if you are talking about bigger dishes that are used for longer distance paths.

And many times if it is not an end site you are seeing two times that number, Rick, because it is--there is a dish that's being used to receive a signal from some far end site and then another dish that's being used to transmit that to the next site down the chain. So, in essence, that is another revenue opportunity and we are seeing that activity.

Two final quick questions, maybe, Ben, on the M&A front. Where are you seeing prices these days as far as kind of multiples on tower cash flow for the ten that you guys bought and then ones that you're looking at? Are seller expectations maybe coming down given what the capital markets are doing as far as difficulty to access them; and then on the land program, how able are you guys to kind of continue that 25 to maybe $30 million a quarter worth of land program give then disparate number of owners out there?

Rick on the acquisition front, the multiples really vary all over the map, as you would expect, based upon occupancy and sort of maturity of the sites from lows in the tens--low teens up to you know, north of 20, at least asking prices. We do our best to assess the value of the long-term lease activity against the price versus our current trading in the market, and you've heard us say that many times before. That is the balance we try to strike around the allocation of the dollars, and I would say that perhaps the capital markets are bringing that into clearer focus for some sellers, but at the same time there is still a lot of capital out pursuing tower acquisitions.

It's an attractive recurring cash flow business and so I wouldn't say that it's been a material change . On the land front, we do feel pretty good about our ability to continue to operate at these levels. It is something we think is strategic and financial. It's got sort of a lot of benefits to the Company, and we are going to continue to do it; and I would expect we may even grow it over time. We'll do those as we can, and the run rate we are on today is--I guess last year we spent about $130 million on it as a company; and run rate would suggest we are probably on that track this

Great. Good luck and congratulations again, guys.

Thank you. Our next question is from the line of Brett Feldman with Lehman Brothers. Please go ahead.

Yes, thanks for taking the question. It was interesting to see you guys delever just a little bit in the quarter. You're now closer to seven than say eight, which is the higher end of your range. I know you were touching on this topic a little bit earlier. I'm just curious, the deleveraging that you had in the first quarter, is that simply a function of the immediate limits on your liquidity in terms of what's available under the revolver, etc.; or are you in fact skewing a bit conservative this year on your view toward leverage and reinvestment in the business?

It is definitely the former. We are not getting more conservative, and I want to make that point very clear. It goes back to the two times interest coverage metric that we talked about, and that is still our belief based upon the long-term contractual and predictable nature of this business with minimal capital requirements on a run rate basis. Again most of the capital we spend, virtually all of it is discretionary.

So, Brett, it is not a matter of conservatism, it is a matter of trying to pick your spots wisely in the capital markets; and as we all observed it hasn't been a lot of fun out there in the last quarter and so we've decided to sort of take a holiday from being in the market, and I think that is the right approach. We are watching it weekly, I think there is an opportunity, maybe, MAYBE, to get into the securitization market and top up just the AAA levels which may be in the range of 200 over LIBOR, astounding spreads I grant you from AAA; but at the same time LIBOR has come way down so that is in and around 5% to 5.5%.

That topping up at the AAA level could yield us potentially as much as $300 million if we chose to go down that road this summer. We have access to the institutional bank market, looks to us like in the 300 to 325 range over LIBOR. Again much higher than where we've borrowed before in the 150 area but available and in and around 6% to 6.5%. So not the end of the world. We are just trying to be precise in our thinking here so we that don't do something that we are then immediately going to regret by the end of the year if the markets ultimately tighten up and we are faced with wanting to refinance something or pay (inaudible). So we are watching it very carefully and you should expect that is what we'll continue to do.

Okay, and then just one more question, the increase in your outlook for this year, if I remember correctly, your prior guidance you had indicated that you had a lot of conservatism in terms of what you were expecting for the second half of 2008, you were waiting to see what happened with the auction, and whether that might change the pattern of spending of your customers this year. You seem to have gone ahead and pulled the trigger in taking your range up. Is that reflect an expectation that you think it is going to be little bit more of an even year than you'd anticipated, or is there a little more color you can provide on that? That would be great.

Well, it's a little more even year.

It's looking at run rates where we come out of--frankly, where we come out of the fourth quarter and in the first quarter. It's also just sort of seeing the activity levels in the customers and rolling up the numbers and you get to 7 million up in EBITDA, we didn't take the full EBITDA up through the range of gross margin up of 10 because we are being a little conservative around the services business in the second half of the year. Not exactly sure how that comes in, that is volatile. So we weren't going to sort of take the bait and run the 10 all the way through to the EBITDA line because at this stage in April, we didn't think that was quite called for.

I would also highlight, as I said in the prepared remarks up front, we don't forecast acquisitions. We are working on some; we expect to close some; and so as we close them, they will come into the numbers as well. Wouldn't venture a guess on size or amount, but it is enough to change the numbers, and then the same was true if we were in the market buying shares. We don't forecast that. So there is potentially some things coming the latter half of the year that will be additive and we'll tell you about them as we do them.

Thank you very much and congratulations on the promotion to you and Jay.

Thank you.

Our next question is from the line of Richard Choe with Bear, Stearns. Please go ahead.

Hi. Just wanted to follow-up a little bit on the revenue generating CapEx spend. Is the first quarter kind of what we should see as a run rate knowing that it is choppy from a quarter quarter basis; but it seems like the activity level from your existing carriers and maybe the environment out there is pointing in a certain direction; should we see kind of this level of spend going on throughout the year? And if you can give us a little more color on that.

Sure.

Richard, I think that is probably a good run rate. In the range of 60 to $70 million is what we would expect to spend on what I'll call augmentation CapEx around existing sites; and that always comes with additional revenue associated with the site. So if you think about it in one simple respect, we are adding about $60 million of brand new, organic revenue per year in terms of brand new licenses coming on the towers and that's about a one year payback on that capital spend. Again, the remaining revenue growth comes from escalators, that is the delta there; but $60 million of organic revenue. So about a one year payback on that capital and we think that is a very good investment and probably a pretty good run rate.

Great. Thank you.

Thank you.

Our next question comes from the line of David Barden with Banc of America. Please go ahead.

Hey guys, thanks a lot. I'll echo the congratulations to both Jay and Ben.

Just two cash kind of questions. Number one, Ben, with the credit markets for the moment closed, and obviously that depends on where you go with revisiting the CMBS market, you obviously have been making choices about the $60 million in total CapEx and the $40 million of stock buy backs. Could you kind of give us a hint if the credit markets or you decided to not readjust the credit markets over the next--rest of the year, is that kind of split for capital expenditure in total versus buy backs appropriate as a baseline to kind of think about the model on a go-forward basis?

And then secondly, just because it kind of comes up time and again, if the CMBS market were to remain closed, or at least no more open than it remains today, and you look down towards the refinancings in '09 a couple hundred million and then a larger amount in '10, what is your kind of baseline game plan for refinancing and what would the cost be and the implications for cash flow? Thanks a lot.

Thanks a lot and that is a great question, Dave, and happy to answer it because we spent a lot of time thinking about it.

First of all on the cash split, I wouldn't really venture a guess on the split between share purchases and acquisitions; but I would tell you that the $120 million a quarter or so that we're generating this year, we expect to fully deploy in earning activities. So that's a lot of money even if we don't borrow any money as a percentage of contribution to our overall growth rate, and again I guess you could say the $70 million of--to Richard's previous question the $70 million is sort of already sort of implied in that organic growth in the business.

But that still leaves $410 million to then invest full year four quarters in other gainful activities and that will be--that will take the form of land, acquisitions, builds, and stock; and so I can't tell you how that's going it shake out, but I can tell you how we are going to spend every dollar of it and that is our objective and to put it to work in the highest and the best use we can. Then we'll look--continue to evaluate the credit markets and see what's the right approach.

To your second question, on the balance sheet and the refinancing activity in 2010, the big one being 2010, which is May of 2010, our first large CMBS transaction which comes up for its anticipated refinancing of a $1.9 billion. A couple of ways we think about that. Number one, if the market were not to improve at all from here for two more years, that entity not relevered on itself would be down in the range of probably 5 to 5.5 times debt to EBITDA. That would suggest even at today's traunchings that we believe are out there in the market, we could get 80% to 90% of that refinanced all AAA, okay?

So that would be the conservative view that says okay, we are just going to let it delever on itself over time through EBITDA growth, not relever the entity because we haven't seen any appreciable improvement in the market, and then that way we have best positioned ourselves when we refinance it to mitigate any increase in costs; i.e.spread against that. So today AAA levels--some of my banker friends will probably cringe at this, I think we are seeing AAA levels in and around 200 over, it changes a lot. That's up dramatically.

We issued--remember, we issued 27 over most of this stuff. So it's up you know hugely from there, but LIBOR is also much lower as well. So that is our--that's the doomsday approach, what happens if things don't get better, you're 5, 5.5 times leveraged in the entity.

I'll draw one other distinction for you if you are still with me . That doesn't necessarily mean you wouldn't relever as a parent. Because you're in two different markets and two different views. So within our overall leverage levels of targets we've suggested for ourselves, you might be back in institutional market and levering at the corporate parent level at reasonable rates; but then letting the entities continuing delever where the towers are for your--for that eventuality that the market doesn't get any better and so you've absolutely mitigated any step up in cost when you refinanced that.

To venture a guess on that today, I just couldn't. We are two years out, but we are watching it very carefully and thinking about all those

And, Ben, just a quick follow-up . In looking out two years you think the traunching would skew to 90% to 95% AAA versus how it got structured in

Well just for point of fact, about 4.5 turns were AAA on our deals when we did them, and we're being told without a formal rating process that maybe it doesn't change very much. A lot of things have improved about the business since then. So at those levels maybe 80% to 90% are AAA. If you take that scenario we just walked through where you're subject to 5.5 times on the refinancing.

So you'd only have say 20% of the 1.8 billion that would be in that kind of "all day tier".

It would all be AA.

Yes, and then you could go into the bank market or whatever to refinance that piece.

You could do that if you wish or issue AA papers as well.

Right, and AA spreads you think are where right now?

About 300 over, it looks like.

Okay, perfect. Thanks, guys.

Thank you.

Thank you.

Our next question is from the line of Mike Rollins with Citi Investment Research. Please go ahead.

Hi. Good morning. Also to extend my congratulations to the team.

Just maybe--I don't mean to belabor the point, but maybe to bring it back to maybe the 30,000 foot view. Does it just mean that if your interest costs goes up, if you look at interest coverage--if your interest cost goes up, that could dilute recurring cash flow growth at some level; and is there a sensitivity that you have done to say relative to your total interest cost for the Company today just take the whole thing, if it goes up maybe 100 bips or 50 bips, X is the headwind on recurring cash flow growth for the three to five years to follow; is that maybe a way that we could try to conceptualize how to think about your debt costs over the next I guess couple years as you approach that refinancing?

And then just a second separate question. Can you give us an update on where you are with the tax status in terms of your net operating loss balance? When you would expect to go cash tax pay; and if you would consider to go to a REIT status at some point, does that date correspond with the trigger point to REIT status, or would that actually come sooner? Thanks.

Great. The question on speculating--purely speculating and modeling around what does it cost to refinance the balance sheet is obviously complicated depending upon the market and what level of leverage you assume we are at when we get there; but it is easy to quantify if you just want to run sensitivity. So there's 5.3 billion of securitized paper, most of which rolls over in 2011 beginnings in 2010 the last piece in 2012.

The 100 basis points on that is $53 million. So staggered in--layered in as those maturities would occur, and yes, you are absolutely right, Mike; based upon the way we do our math that would affect RCF because RCF in our view, the best measure, to value the firm is EBITDA less interest expense, less sustaining capital meaning cash available to management to discretionarily employee.

So you are exactly right. Over that period of time, if you were to make that assumption, just pick a number of 1%, it would layer in $53 million of additional run rate cost; however, I would go back and remind everyone if we had it to do over again we'd do exactly what we did before, which is lever the Company appropriately and spend the proceeds on things we think enhance long-term growth.

In this case that was stock, big time, to over $2 billion and the Global Signal assets, being very judicious into how we issued shares into that transaction, remember doubling the tower count with only a 40% increase in net share count. So even if you were to say okay, we can see how you normally grow RCF maybe $100 million a year, but then you are going to sort of take a little bit of a haircut in sort of the '09, '10, '11 periods as you roll over the balance sheet, we can live with that. We are quite happy with how we've capitalized the business in 23,500 towers pushing 280 million shares that is math we like all day long.

And the tax situation?

NOLs, we are about $2 billion on NOL, and would expect without giving you absolute guidance probably in '09 turned net income positive. Unless we buy something else, in which case you roll depreciation up again, and you push it out further. Maybe you start being a tax--start net income positive in 2009 and it gets consumed over the next sort of five year time frame.

So it really doesn't seem to us to be a topic that's significant until we become a cash taxpayer at which point the REIT status would definitely be appealing just for the single taxation; and so we think that is several years out. I'll be that specific, a number of years out.

Just to clarify, sometimes the REIT books differ from the tax books versus the accrual books. I guess you introduced another set of books into the whole equation. So do they tend, though, for your business to correspond where the point at which you are reaching cash taxes if you just look at the NOLs and try to think about your income over time, that would be the point at which from a REIT perspective it would also be optimal to switch over?

I think that is the case, yes, somewhere in that time frame about the same, and that is so far out. Obviously we have thought about it but about to the extent of the conversation because it is absolutely clear today that it doesn't make sense since we're not--since there's not a tax issue and our view is that the dividend model, while appropriate probably at some in time, is clearly not appropriate today.

Thank you.

Okay, thanks, Mike.

Thank you.

Our next question is from the line of Ben Stretch with McClary Capital. Please go ahead.

Good morning, guys.

Firstly, if I look at where you spent your money in the quarter, $42 million on your own stock and $27 million on land, versus building nine towers and acquiring ten, you are sending a pretty clear message in terms of where you continue to see the best value on an IRR basis. So I guess my question is firstly, what can you tell us about what you are seeing in terms of costs and political pressures for new tower builds from the various inputs into that process? And secondly, if I can sort of draw out on Rick's question just to favor us on the small tower portfolios that are out there, is your broad feel that those smaller domestic mom and pop business multiples are generally tilling down a little? You would expect their wax for their small and less diversified portfolios to have gone up. So is that following up through to a contraction in asking prices, or are they just holding on there for the moment? Thanks.

Ben, the first answer I would give you is don't necessarily draw too much into the first quarter results in the mix of how we spent the money. There is a lot that goes into that, the tower builds, for example, are long dated and challenging to do so it takes a while to ramp that up; but we are probably going to be at a run rate in and around 100 to 150 this year give or take in terms of completed sites .

The acquisitions, same thing, they are lumpy. I would expect we will have substantially more to talk about over the next three quarters than we certainly had this quarter which was diminimus, and then land is sort of an ongoing process. So, again, I wouldn't really ask you to draw much conclusion out of this. This is within the limits of the cash flow we're generating, I think we're going to work hard to put it all to work and we'll do the best we can as we have been to allocate that; but again this mix this quarter is probably not representative of where we are going to see it going forward.

On the roll ups, it is a funny thing I have observed. There is at least for now, and maybe this is changing here rapidly in the last couple of weeks, there has been more access to capital in the small middle market companies than there has been in the institutional market, and it's been a paradox we've talked about a lot internally how small mom and pop firms in a regional bank can borrow money less than folks that are out in the institutional market.

I'm not sure that holds, it is not logical that will hold, but I don't think there has been really the scarcity of capital in that market yet that may ultimately come true that ultimately has the influence on the prices. So I can't sit here and tell you that the prices have changed materially. I mean, of course there is maybe some downward bias based upon reading the newspaper every day, and what that just does to your normal psyche if you are a seller, but not materially at this

Okay great. Thanks.

Thank you.

Our next question is from the line of Gray Powell with Wachovia. Please go ahead with your question.

Great . Thanks a lot for taking the question.

I had a few quick ones. Historically, you guys have talked about 1.25 tenants per tower of additional demand longer term, and I know that that excludes like WiMax and LTE, and just status services in general. Have you ever tried to quantify what the longer term upside to leasing demand could be with data

Yes, Gray we are doing that as we speak this year, and that should be a number that will be updated a little later this year.

Because to your point, the 1.25 does not include those kinds of very real activities. Clearly we got better sense of what at least one of the majors is thinking about doing from the standpoint of LTE during the CTI show; and with the results AT&T announced a couple of days ago it isn't any more a question of if wireless data takes off, it is taking off now. 21.5% of their wireless service revenues.

So what is that impact on our 1.25 current estimated demands? That number does not include that. So we'll be refreshing that to better predict what additional leasing will come from that and we'll be advising you a little later this year on how that number looks.

Okay, and then I know you touched on this before, but just in terms of 2008 leasing and demand. The math is a little complicated, but if I look at the incremental revenue that your towers are generating and I exclude one time items and acquisitions, based on your guidance I get to about $87 million in incremental revenue in 2008 versus call it $78 million in 2007. So now it appears that your guidance reflects just a higher level of leasing demand in your assumptions in 2008 versus 2007. Can you just talk about generally what you have seen year to date that's changed that gives you more confidence?

It is modestly up. As we said earlier, it is modestly up and a little bit ahead on run rate; and as you certainly know, Gray, as you get ahead on run rate in this business you know you track ahead for the full year . So as we look at full year '07 results and now our guidance and internal forecasts for '08, I would say modestly ahead; and some of that has to do with just activity front end loaded and run rates for the

Gray, in terms of the what is different this year than last, as I was mentioning, it is the ability for those wireless companies with AWS spectrum to be able to deploy that more easily this year than they were last because of some of the frequency clearing issues that they ran into. So that and depending upon the Company that is front end loaded certainly in terms of the deployment of the 3G network is kind of a very accelerated front end loaded activity that's occurring.

And then, quite frankly, as you listen to the other large carriers, certainly AT&T had their call earlier this week. They are absolutely committed to ensuring that they have built out third generation to secondary and tertiary markets. We are seeing that and that clearly was not something going on in 2007 . So that's taking place and that's where you are seeing the increment over the steady state leasing that we see in any given year. These are the additional kinds of catalysts that we are seeing for this year that takes up the number modestly, and then other initiatives as I had answered earlier I think to Rick's question are not embed in it. Things like a full scale WiMax deployment simply because that is too much of a question still at this

Okay, and then just one final question that's more and more housekeeping than anything else. But if I just look at the Q1 results, compare Q1 '08 to Q1 '07, back out the one-time items from both quarters, I get to almost a 10% internal revenue growth rate versus the 8% to 8.5% run rates of 2007. Can you just tell me if I'm doing that math right or if I'm missing something there?

No that's correct. That's right.

Okay. Thank you very much.

Thank you.

And our final question comes from the line of Jonathan Schildkraut with Jefferies & Company. Please go ahead.

Great, thanks for taking the questions.

Most of my questions have been asked and answered; but I was wondering if you could give us a little color on where the lease up activity is occuring, where you are seeing most of it, whether it's in your top 100 BTAs, or whether you're seeing it spread kind of evenly across markets; or alternatively whether it is kind of occurring outside of the top 100 BTAs? Thanks.

Jonathan, we do track that every quarter and it's been interesting. We track all 100 markets and we have for the last eight years, and it is occurring disproportionately in the top 100 markets as you would expect logically around the AWS build out, the 3G overlays, the new entrance in the market. Everything that's going on is clearly focused generally on those top 100 markets at least first. We are seeing secondary markets getting infill sort of Phase II if you will or increasing 3G deployment, sort of in the second phase for some; but it generally always skews towards the top 100 markets; and it's why we've been fixated on that metric as a key driver for our business going forward because we can actually see that result in our history. It has made a difference over time, obviously it's the location based business, and one where that was one of the attractions we saw in the Global Signal transaction was their high percentage of sites in the top 100 markets.

Great, thank you very much.

Okay, with that, I would like to thank all of you again for taking time out of your day to join us this morning. And we look forward to reporting on our second quarter results some time in the summer time frame, and with that we'll conclude the call.

Thank you, sir.

Ladies and gentlemen, that does conclude our conference for today, if you'd like to listen to a replay of today's conference, please dial 1-800-405-2236 or 303-590-3000 using the access code of 11112200 followed by the pound key. ACT would like to thank you for your participation. You may now disconnect.