Crown Castle Inc (CCI) 2008 Q4 法說會逐字稿

Good morning ladies and gentlemen, thank you for standing by. Welcome to the Crown Castle International Corporation fourth quarter 2008 earnings conference call. During today's presentation all parties will be in a listen only mode. Following the presentation the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Wednesday, February 25, 2009.

I will now turn to conference over to your host, Fiona McKone, Vice President of Finance. Please go ahead, ma'am.

Thank you. Good morning, everyone, and thank you for joining us as we review our fourth-quarter and full-year 2008 results. With me on the call this morning are Ben Moreland, Crown Castle's Chief Executive Officer, Jay Brand, Crown Castle's Chief Financial Officer, and John Kelly, Crown Castle's Executive Vice Chairman. To aid the discussion we have posted supplemental materials in the investor section of our web site at crowncastle.com, which we will discuss throughout the call this morning.

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, it can give no assurances that such expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions. Information about the potential factors that could effect the company's financial results are available in the press release in the risk factors sections of the company's filings with the SEC. If one or more of these or other 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 companies web site at crowncastle.com. With that I'll turn the call over to Jay.

Thanks Fiona and good morning everyone. I'd like to take you through the excellent results for the quarter and the full-year 2008, as well as highlight the reductions we have made it capital expenditure and the improvements that we've made in the capital structure since the last quarter call.

Turning to the fourth quarter, we generated site rental revenue of $355 million, up $17.5 million. On a currency neutral basis, this represents a 7% increase from the fourth quarter of 2007. As highlighted on slide three of the presentation, the fourth-quarter results were impacted by the 24% decrease in the Australian to US dollar exchange rate from the fourth quarter 2007 to the fourth quarter of 2008. Site rental ross margin, defined as tower revenues less cost of operation, was $240.8 million, an increase of $16 million or up 9% on a currency neutral basis from $224.8 million for the fourth quarter of 2007. Adjusted EBITDA for the fourth quarter of 2008 was $225.4 million, an increase of $16.2 million or up 9% on a currency neutral basis from the fourth quarter of 2007. Recurring cash flow defined as adjusted EBITDA less interest expense, less sustaining capital expenditures, increased 15% on a currency neutral basis to $125.1 million from $110.9 million in the fourth quarter of 2007. And recurring cash flow per share increased 14% on a currency neutral basis from $0.39 in the fourth quarter of 2007 to $0.44 in the fourth quarter of 2008. The comparisons between full-year 2008 and full-year 2007 were not significantly impacted by the Australian dollar to US dollar exchange rate because the exchange rate was approximately the same when considering the full-year 2007 and the full-year 2008.

For the full year of 2008, as illustrated on slide four of the presentation, site rental revenues were approximately $1.4 billion, up $116.1 million or 9% from 2007. Site rental gross margin grew 12% for the full year 2008 from $843.1 million -- from -- for full-year 2007 to $946.4 million. Adjusted EBITDA for 2008 increased 14% to $867.1 million, from $758.6 million from the full-year 2007. Recurring cash flow grew 26% to $485.9 million, from $385.1 million, and recurring cash flow per share grew 25% from $1.38 for the full-year 2007 to $1.72 for the full-year 2008. Our fourth quarter and full-year operating results continue to demonstrate our ability to grow revenues and cash flow even in these challenging economic times. Moving to the outlook for the first quarter of 2009, we expect site rental revenue for the first quarter of between $363 million and $368 million. We expect site rental gross margin for the first quarter of between $250 million and $255 million. We expect adjusted EBITDA for the first quarter of between $232 million and $237 million, an interest expense of between $103 million and $108 million. We expect sustaining capital expenditures to be between $8 million and $10 million. And recurring cash flows expected to be between $119 million and $124 million.

As shown on slide five, we expect site rental revenue for the full year of 2009 up between $1.485 billion and $1.5 billion, which is approximately 8% growth on a currency neutral basis. We expect 2009 site rental gross margin to be between $1.015 billion ad $1.030 billion. We expect 2009 adjusted EBITDA to be between $925 million and $945 million, which is approximately 9% growth on a currency neutral basis and interest expense to be between $440 million and $445 million. We expect 2009 sustaining capital expenditures to be between $25 million and $30 million. This 2009 outlook translates into expected recurring cash flow for the full year of between $455 million and $475 million. The adjustment to our outlook for recurring cash flow is wholly attributable to the interest expense related to the 9% senior notes that we issued last month, net of the interest savings on the notes repurchased to date.

Turning to the balance sheet as of December 31, 2008, securitized debt totaled 5.3 billion for the quarter and our corporate credit facility totaled approximately $808 million for total debt at the end of the quarter of $6.1 billion. We also had $314.7 million of the 6.25 convertible preferred stock outstanding as of December 31, 2008. Total net debt to last quarter adjusted -- last quarter annualized adjusted EBITDA as of December 31, 2008, was 6.6 times. This approximates the lowest level of leverage in the Company's history and I suspect that this will continue to be true on an ongoing basis as we use cash flow to retire debt. Adjusted EBITDA to cash interest expense as of December 31, 2008, pro forma for the 9% notes, was approximately 2.3 times. Both our adjusted EBITDA leverage and our cash interest expense coverage ratio were comfortably within their respective covenants and our corporate credit facility. At quarter end we had approximately $155 million of cash, excluding the restricted cash, and we had $30 million of availability under our revolving credit facility.

Moving to investments and liquidity in the fourth quarter of 2008, capital expenditure were $108 million. Sustaining capital expenditures totaled $12.2 million. We spent $33.2 million related to the addition of new tenants on existing sites. As illustrated on slide six and following through in our commitment to reduce capital spending, which I discussed on our third-quarter call, we reduced capital expenditures related to land purchases and new towers by 44%, compared to the third-quarter activity. During the fourth quarter 2008, we spent approximately $37 million on land purchases and $26 million on new towers completing the majority of our end-process committed projects. Moving on to 2009, based on current expectations we believe first-quarter expenditures on land and new tower construction will be approximately $13 million or a further 80% reduction from fourth-quarter 2008 spending. For the full-year 2009 we expect to spend approximately $32 million on land and new tower construction, a 90% reduction from 2008 levels as we complete the limited in-process projects. To be clear, we have not been taking on new capital projects. Given that we expect revenue growth in 2009 to be consistent with that of 2008 levels, we do expect to invest $80 million to $90 million related to adding new tenants to our existing towers. Before I turn the call over to Ben I'd like to make a few comments about our capital structure. Since we reported our third-quarter results we have made significant progress in raising capital and reducing capital expenditures in order to deal with our upcoming debt maturities. We are one of the very few companies that have access to the credit market since Labor Day, 2008, reflecting the quality of our business. Our ability to raise debt in these difficult credit markets reflects the long-term, recurring nature of our contracted revenue stream. The recognition that we own and operate what has become essential wireless infrastructure and the expectation of continued growth in operating results. As demonstrated by the recent offering, we will opportunistic and proactive in refinancing upcoming debt maturities.

To that end, during the first quarter of 2009, we issued $900 million of senior notes due in 2015, and we extended our revolving credit facility. The net proceeds from the notes offering of approximately $800 million will be used for general corporate purposes, including the repayment or repurchase of certain indebtedness of our subsidiaries. Since the third-quarter call, we've purchased $135.1 million of the global signal securitized notes for $125.8 million, which represents a 7% discount to the face amount of such notes. These purchase were comprised of $47 million face value of the global signal securitized notes due in December, 2009, and $88 million of face value of the securitized notes due in February, 2011. As of February 24, 2009, we had approximately $860 million in cash and investments excluding our restricted cash. And $30 million of undrawn capacity under our revolving credit facility. We are very pleased to have accessed the credit markets successfully and to extend our revolving credit facility and issue the senior notes. While I am pleased with the most recent offering, I don't want to leave you with the impression that we expect to refinance the entire balance sheet in the high yield market. Since the offering of these notes, we have received numerous inquiries and proposals related to refinancing upcoming debt maturities with potentially lower cost securities. We are working through these alternatives and would expect to take actions well ahead of debt maturities. However, the proceeds of the notes offering together with the significant cash flow generated by the business and the reduction in our discretionary capital expenditures, allows us to both repay the $411 million of debt maturities due in the next 12 months and considerably reduces our future refinancing requirement.

As shown on slide seven, we expect to have approximately $734 million in cash at the end of 2009. Which is after we have used cash to pay off the near-term maturities comprised of the remaining GSL trust 2 notes of approximately $247 million, which are due in December, 2009, fully retiring the $158 million currently drawn under our revolver, which is due in January, 2010, and settling the December, 2009, interest rate swap assuming its current value.

Another view as illustrated on slide eight is that today we have $860 million of cash on hand, which is sufficient to pay all of our 2009 and 2010 debt maturities, including our interest rate swap liability. To be clear this is before considering the benefit of cash flows that we expect the business to produce during 2009 and 2010. As shown on slide A while the final maturity dates of the $1.9 billion and $1.55 billion tower revenue notes are 2,035 and 2,036 respectively, the anticipated refinancing dated of those notes are June, 2010, and November, 2011. It is our intention, as I mentioned before, to refinance the outstanding balance of these notes prior to the anticipated refinancing dates, thus, avoiding the interest rate step-up and accelerated amortization.

Importantly, by June, 2010, we expect to have delevered the consolidated balance sheet to approximately 5.5 times as shown on slide nine, through growth and adjusted EBITDA and the use of cash flows to retired debt. Our projected June, 2010 leverage of 5.5 times compares to the consolidated leverage of approximately seven times at the time of the recent notes offing. And suggests that unless the credit markets are completely closed we will be able to refinance these notes at the then-reduced leverage levels.

Now I would like to spend a few minutes discussing in detail -- the detail and rationale of our interest rate swaps, as we've received a number of questions the last couple of months. As many of you know, in 2006 and 2007 we put in place five-year forward starting interest rate swaps as shown on slide 10. The purpose of these swaps was to lock in LIBOR at around 5.2% for the five years following the various anticipated refinancing or maturity dates of our $5.3 billion of our debt. For the sake of comparison the average LIBOR rate over the last 20 years is 5.9%. And the swaps are intended to provide protection in a high interest rate environment. The use of swaps is a common practice to hedge against interest rate fluctuations. In fact, we hedged the underlying LIBOR rate to fix our current $5.3 billion in debt at the time of the transaction. And in the event we refinance our existing debt and the current low LIBOR environment, we would likely lock in the low rate. Clearly today, in a historically low LIBOR rate environment, our swaps are under water as LIBOR is significantly below where we locked in at. Our obligation is based on the present value of the difference between what we locked the rate at, approximately 5.2%, and the five-year forward LIBOR rate. Simply put, as LIBOR goes up, our liability decreases. And as labor goes down, our liability increases.

As you see on slide 11, the liability over the last 14 months has fluctuated from a low of $61 million in June of 2008 to a high of $616 million in December, 2008. As LIBOR rates reached an all-time low. Today the liability is approximately $486 million.

However, the swaps are not due to be cash settled until the various settlement dates which are reflected on page 10. And those dates do not change irrespective of when we refinance or repay the debt underlying the swaps. So, we will not know what the actual cash obligation is until the various settlement dates of the swaps. The majority of which will not be settled -- will be settled in 2010 and 2011.

We have provided some sensitivities on slide 11 to illustrate the impact of an increase or decrease in LIBOR on our cash settlement obligation. I fully realize that in a simple business like ours, that these interest rate hedges appear to be complicated. Let me try to boil it down like this -- when we settle each swap, we will either pay or receive in cash, the difference between what LIBOR is trading at on that date and the date -- and the rate that we locked, approximately 5.2%. So, if LIBOR on that date is trading above 5.2%, we will receive a cash payment. If it is below 5.2%, we will make a cash payment. So, that the effective LIBOR rate we will pay over the following five years is 5.2%. I hope this brings some clarity to our interest rate swaps.

So, to recap, we are very pleased with the results we achieved in the fourth quarter and the full-year 2008. And look forward to a very strong 2009. We have sufficient cash to meet all of our 2009 and 2010 debt maturities without accessing the credit markets, and we have made considerable headway in addressing our long-term debt maturities. With that I'm pleased to turn the call over to Ben. Ben?

Thanks, Jay. Good morning, everybody. And thank you for joining our call this morning. As Jay just mentioned, we had an excellent fourth quarter and full-year 2008, exceeding our outlook we provided you in November for site rental gross margin, adjusted EBITDA, and recurring cash flow. Before we turn the call over for questions, I'd like to make a few comments about our operating performance and the overall environment which we're operating.

Notwithstanding the challenging macro economic environment, our business remains strong, as reflected in our 2008 full-year results. We continue to enjoy solid growth in our core business and our expectations for revenue and EBITDA growth for 2009 are the same on a currency-neutral basis as we've enjoyed in 2007 and 2008. We can say this with confidence as over 97% of our revenues for the next 12 months are already contracted which differentiates us from most other companies. In addition, new leasing applications this month are the highest we have seen in the last 16 months and the fundamentals of the wireless industry remain very good for towers and for Crown Castle specifically. The drivers of our site rental revenue growth continue unabated. As carriers continue to invest in their networks, both voice and data including the anticipation of rollouts of 4G networks in the years to come.

As I've done in past calls, I'd like to make a new comments on some of the important industry trends and statistics that are driving our business. As many of you are aware, wireless remains the strongest growth market in telecom today. And wireless data revenues continue to resist the underlying macro economic trends, growing 38% in the last 12 months to September 30, 2008. Data revenues continue to be of increasing importance to the carriers as they represent a significant area of growth. During their recent fourth-quarter calls, both Verizon Wireless and AT&T stated wireless data revenues in the quarter grew 41% and 51% respectively year-over-year, and wireless remains the carrier's most business segment. In fact, AT&T reported that the data average revenue per user or ARPU was up 36% year-over-year and represented 27% of AT&T's fourth-quarter 2008 revenue, up 20% from the fourth quarter of 2007. Similarly, data represented 27% of Verizon's fourth-quarter wireless revenue, up 21% from the fourth quarter of 2007. At AT&T, total data revenue was $10.6 billion in 2008, an increase of $3.6 billion over 2007, reflecting the rapid adoption of wireless integrated devices and increased usage of wireless internet access, messaging, and related services. A big driver of data usage is the availability of 3G or third generation services. Both the number of 3G devices and the 3G active data users on AT&T's wireless network, has more than double over the past year. 3G laptop connect cards and services also nearly doubled during that period. The growth in wireless data revenue is also driven by the increase in integrated devices. In fact, AT&T reported that in the fourth quarter of 2008, 25% of post paid subscribers now use an integrated device. Up from 13% in the fourth quarter of 2007, and nearly 60% of AT&T's post-paid net ads during the fourth quarter came from customers using an integrated device. Smart phones are the fastest growing segment of the handset sales globally, and while handset sales are expected to grow 6%, sales of smartphones are expected to grow 45% over the period of 2008 to 2011. Total ARPU on smart phones is 48% higher than other devices, while data ARPU on smart phones is 147% higher, according to Neilson. As an example, iPhone users have and average ARPU of 60% more than the average post paid subscriber. The relevance of these statistics for us is that wireless carriers are gaining incremental returns for their 3-G network investments and are leasing more sites in order to support the growth and demand for smart phones and wireless data services to capture the higher ARPU opportunity.

Many of you have asked us over the last three quarters for a project South Point measurement update. And I'm pleased to provide that to you this morning. As you are aware, we continually evaluate through engineering drive tests approximately 80% of our sites to access the leasing -- to assess the leasing opportunities as measured by wireless -- deficiencies in wireless carriers' networks. Our most recent assessment of the leasing opportunities on our US tower portfolio, which now includes the option 66 spectrum owners, is 1.5 tenants per tower of indicated need. Said another way, that's over $30,000 of additional revenue per site or nine years of leasing at the current pace of growth. I would note that the indicated need has increased from our assessment two years ago of 1.25 tenants per tower despite the significant amount of leasing we've enjoyed over that period. The final point I would make is until further developments clarify the impact of network design, of new technologies -- a network design of new technologies and usage trends from 3G and 4G smart phones, we will not model those services' impact on leasing demand.

Finally, the number of wireless-only households in the US has increased 18% in the first half of 2008. Up from 14% in the second half of 2007. As customers choose wireless exclusively over land line phones, particularly in this economic climate the need for wireless network enhancements delivered through our sites continues to increase. Furthermore, we expect to begin to see some leasing demand from LTE, which is a fourth-generation technology, later this year as some carriers begin deploying their LTE networks. Some of the wireless carriers have already begun conducting healthy e-trials, and we would expect to see LTE networks launch sometime in the next 18 to 24 months.

To wrap up before we turn the call over to questions, I would like to reiterate a few of the points from the call this morning that I believe create a compelling investment thesis for Crown Castle. First, Jay and I are absolutely focused on being proactive and opportunistic in refinancing this balance sheet as evidenced by our recent actions. Next, I would expect that over the next 24 months, we will be down to approximately five times leverage by a combination of growing EBITDA from organic growth on our towers and using cash flow to retire debt. Further, we have taken the necessary steps to increase cash flow by significantly reducing our discretionary capital expenditures. And finally, we are very pleased with the level of leasing demand we see for 2009 as mentioned earlier it looks very similar to levels we achieved in 2007 and 2008 and given our fundamental confidence in the long term demand for leasing, we remain committed to making decisions that are consistent with maximizing long term share holder value. With that operator, i would be pleased to turn the call over for questions.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) And our first question comes from the line of Brett Feldman with Barclays Capital. Please go ahead.

Hey, guys. Thanks for taking the question. I was thinking maybe we could talk about the drives of leasing activity right now. And I'm not sure what you think is the best way to characterize it. But maybe if you could talk about it in either in terms of technologies -- are you seeing a very 3G-heavy leasing, is it maybe more appropriate to talk about the types of carriers, or is it more interesting to talk about geography? Even if -- parts of the country, even just urban versus rural? I'm just curious what type of color you can give around where demand is coming from.

You know, Brett, it's not dissimilar from other years. And as we spend time with our sales team, reviewing details, both geographically and then by carrier and technology, it's a very healthy mix. It's everything from, you know, brand-new voice deployments for carriers deploying in markets for the first time, to roaming over bills, which are additional full antenna array installations. The 3G amendments which are upgrades on a number of sites to some brand-new carriers that are just -- you know, just announced that they're going to build out spectrum that they've -- that they've acquired. So, just like it has always been, it -- it typically comes in a -- not exactly as you would have expected. I mean, we can do our best to forecast overall growth. But it always, you know -- ebbs and flows just a little bit from quarter to quarter and technology to technology and carrier to carrier. But the fundamental reality is that it's a broad-based continued build and enhancement of the existing networks as well as some new networks. And that fundamentally goes to just the strength of the overall consumer demand for wireless. And as I mentioned in my comments, one of the things we focused very obviously on is the incremental returns available to carriers from this incremental capital investment. And we continue to see it being quite healthy. As evidenced by the statistics I ran through, the incremental data ARPU from network enhancements that are enabling consumers like most of us to access 3G services on our devices are high-returning activities. And that continues unabated. So, I can't really be precise with my answer to your question because it's broad based, it's all over the country. And it's technology that frankly spans from basically 2G voice installations to, you know, some very early applications we see around some of the LTE upgrades we'll see in the coming years.

Well, let me think about it a little differently then. If you think about your legacy customers, the ones that have been around for quite a long time, what type of behavior are you seeing out of them? I'm wondering if they're getting to the point where the majority of the business they're giving to you guys is much more related to lease amendments and augmentations than new sell sites. For example, the big GSM guys are really heavy with their 3G activity right now.

You know, you might think that. That's not actually the case. I mean we're continuing to see a substantial amount of -- of brand-new, first-time installs as well as a lot of amendment applications as you would expect. I mean, our leasing activity from the big-four carriers, both amendments and new, continue to remain about 60% of our total. And wireless in general -- wireless including sort of the second and smaller tier carriers would be about 90% of our overall activity. And that's a mixture of brand-new installations as well as amendments, upgrades on existing sites. The amendment activity in terms of revenue has been about 20% to 25% depending upon whether you're looking at the quarter or the full-year last year. So, it has been as high as 35% to 40% in various quarters. And so, for the trailing period, I would say that the new installations, you know, first-time installs were actually proportionally higher than we've seen in the last year or so.

Okay. Thanks. And just one other question. Really quick, the stimulus package, the tower companies are eligible for that money. Do you guys see an opportunity there?

Brett, it's a -- it's a development we're watching very carefully. The -- you know, the notion of encouraging broadband wireless development, we don't have any specifics we can report to you today on -- on exactly what the impact will be in terms of the stimulus package on building out wireless broadband. It's something we are pursuing through our own as well as PCI a channels. And as soon as we have some specific details on the impact, we'll certainly make them public.

Great, well thank you for the questions.

Uh-huh.

Thank you. Our next question is from Simon Flannery with Morgan Stanley. Please go ahead.

Thank you very much. Good morning. Sounds like you're talking a little bit more about 4G now. It seems like the clarity from some of the conferences and so forth is improving. Can -- can you give us a sense of how we should think about augmentation opportunities and -- and new build? If I'm a CDMA carrier going to LTE, how much more spend -- is that an entirely new -- basically a new carrier for tower or -- versus somebody who's on HSPA moving to LTE? And then just on the balance sheet, a lot of color there. Thank you for that. Can you think about how you weigh up the pros and cons of refinancing in -- ahead of June, 2010, versus letting up that thing reset and facing some of the constraints there? What -- what are the arguments there and the rates sort of that really -- if the market it tough that you might just ay well we'll let this thing reset and deal with it, or is it too restrictive from a -- an amortization point of view? Thanks.

Yes, Simon. That's a great question. I'm going let Jay take the second part. With respect to LTE amendments, it is early days. And we are still working through with the carriers the exact configurations. But as best we can tell, it looks like a full amendment consistent with what you would have typically seen on a 3G installation. So, typically three antennas and lines which would in and around approximate about 0.3 of a full broadband installation which is as we've talked about it for years on the 3G upgrade activity. So, it looks very much like the next-generation buildout. It's too early to say precisely the number of sites that will be hit. Obviously you roll out in phases. And you would see a less-dense -- at least populated rollout initially. But then as you get devices and consumer takeup as has been the case in every next-generation rollout, you come back and fill in density to be able to provide the bandwidth and -- and high-speed data service that are going to be required and supported by the LTE technology. So, the best that I can tell you is that it looks very similar right now to us to a 3G rollout, which was a significant amount of amendment activity. And continues to be a significant amount of activity. So, we are by no means complete on the 3G rollouts for carriers in various markets. And while I'm not -- I'm certainly not forecasting a material impact in 2009, I think, you know, we do have some applications in the door that are LTE applications that we will begin working on. And it's likely to be a 2010/2011 type impact.

And then on your second question related to the balance sheet and the notes that come up for their anticipated refinancing date in June of 2010, yes, as I stated in my comments, my intention is for us to refinance those notes before we get to the ARD date. And as I look at the market and what we were able to do in the notes offering, if we project out where we expect leverage to be on a consolidated basis, June of 2010, we would expect to be about 5.5 times leverage. Compared to where we just were when we issued these notes at about 7 times. Which improves my confidence that we should be able to refinance those notes. In a downside case scenario, if the credit markets were closed or we had to roll into an ARD date because we rolled into the -- rolled beyond the anticipated refinancing date because we weren't able to access the markets or fully retire those notes. We don't have a hard maturity there. So, one of the nice benefits that we've discussed on past calls about those notes, is that what happens is the interest rate steps up to 10%, which in this market is not all that bad and then we have accelerated amortization, meaning that all the excess cash flow from that entity goes to retire the debt. We have enough cash flow from the other entities in the company to be able to service our consolidated obligation on the notes that we just issued. As well as pay for the -- the CapEx and the G&A that we have in the business. So, while it -- it might be a little bit tight, we have plenty of cash and we wouldn't be concerned about rolling into the ARD date. But I want to be clear that some I think have taken my comments on the third-quarter call, that our assumption was that we were just going to roll into the ARD date and let the interest rates step. That's not our intention. And based on the facts as they are in the market today, I think we have a reasonable chance of being able it refinance those notes ahead of the ARD date. Obviously there's a lot of time between now and then. That's some 16 months away from today. So, a lot can change as we (inaudible) over the course of 16 months. Some of that may move in our favor, some of it against us. So, I think we have good optionality if it moves against us, and we have a lot of time as it starts to move toward us.

Okay, great, that's helpful, thank you.

Thank you. Our next question is from Rick Prentiss from Raymond James. Please go ahead.

Good morning, guys.

Hello, Rick.

A couple of followup questions there. If you refinance early, which it sounds like obviously a pretty high-priority pro-active heard a couple of times there, what happens to the interest rate hedge liability? If you had June of 2010, $192 million current valuation of that one piece of paper, do you have to settle that interest rate hedge at -- or if you replace that note?

No, we don't Rick. It doesn't -- how we refinance the debt does not affect our obligations under the interest rate hedges. So, those dates would remain under the interest rate hedges and we're free to refinance the debt when we so choose. Without having to settle the swaps.

That's pretty good. So, those dates are the amounts that you gave based on current five-year swaps and the dates, we can kind of live with that regardless of what you do as far as refinancing?

Thats correct.

Exactly. They're completely disconnected. They're just contracts that are synthetic in nature, if you will.

Okay. As you look at use of cash, you've been active already in the first I think it was first quarter, not since third-quarter call that you've bought back $135 million face in the first quarter. How do you look at use of cash sitting there with $860 million on the balance sheet, $30 million available under the credit facility? How do you look at use of cash, timing -- is there anything that modulates your ability to buy back debt sooner than the call date? Just kind of walk us through your thought process on the use of cash.

Okay, of as we look at the upcoming debt maturities into 2010 at the anticipated refinancing dates and then into 2011 with the hard maturity on the GSL trust 3 notes. I think it's prudent for us to keep maybe a little bit higher balance of cash than what we have historically. To some degree the market has dictated this as our structured notes have traded closer -- much closer to par. The GSL trust 2 notes are trading just a point or two off of par. The GSL trust 3 notes are trading just a few points off of par. I take that as a very good indication that holders are more comfortable today than they were 3 months ago about holding the structured debt and probably improved our able to refinance structured notes in one form or another particularly at the AAA and potentially at the AA level. So, I think that's a positive. Obviously, the arbitrage of the discount there, deploying the cash to buy back those notes at a significant discount thats no longer available. So, I think what we'll do is utilize the cash, probably in concert with a refinancing. And then as we find the appropriate refinancing approach, we may want to combine refinancing proceeds from a debt offering along with a portion of our cash to fully retire a particular debt instrument. So, I think what you're going to see us do is just maintain a lot of flexibility over the next couple of years as we approach refinancing the balance sheets.

I mean, it's likely that we're going to have some secured opportunities at the asset level that as Jay says, maybe at the historic AAA or AA level of leverage where we may want to then put in some of our cash to augment those proceeds to get it down to the level where you can refinance basically at the AAA level. So, to optimize the overall rate that we get on the back side this refinancing.

And when you mentioned other refi opportunities other than the high yield market, what type areas are you looking at?

You know, as you saw us do in the high yield market, there's no requirement that we refinance the mortgage loans that we have today with similar mortgage loans. So, we're open to -- we could go back to the high yield market, although I wouldn't expect to refinance the whole balance sheet in that market as I mentioned before. We could do bank debt. We could do some form of notes be they structured notes or notes that are some type of a hybrid between a bank loan and structured notes. So, right now I think we have several options based on the proposals that we've seen after doing the notes offering. You know and you know many of those look like they're going to come at potentially lower cost than what we saw in the high yield market.

Okay. And then my other question had to do with the guidance. Obviously, you had a good fourth quarter versus expectations. I think first quarter's probably surprising to a lot of people, very strong out of the gate start to first quarter guidance. But unchanged for the calendar year '09. Can you talk a little about if you think it's a front end loaded year versus a level loaded year. Are you being conservative as you look out to the back part of the year? Your thoughts on -- out of the chute, very strong first quarter. Also tower operating expense seems to be kind of flat to down first quarter versus fourth quarter. Then maybe ticking up the rest of the year. Just trying to understand any one timers, front end loaded -- that kind of question.

Yes its a great question, Rick. We don't expect really any one timers. But it's a combination of several thing. We think it's about a 40/60 year in terms of leasing, front half versus back half, thats similar to 2008. We can see that in the application volumes where December/January were sort of traditionally light. There's about a four-month lag from application to revenue commencement in our company. So, we also see a very strong February as I mentioned. The highest in 16 months, which would suggest about a June commencement for that revenue. So, we're looking at a little bit of a back end loaded, not severely, but possibly 40/60 kind of arrangement in terms of revenue. Two other things that would be tempering our enthusiasm a little bit would be, in the warmer months we will see tower maintenance -- repairs and maintenance expense tick up through the summer months. So, historically the first quarter would be the lightest. And that will be reflected in the guidance. And then secondarily, as we always do early in the year, and have been pleasantly surprised on the high side, we always temper our guidance or outlook on service margin because it's very hard to forecast. And so year-over-year the implied, although you don't get specific guidance on this -- the implied service margin is about $6 million less than we did in 2008. So, you know, if the application volume, you know, goes as we believe and our take rates -- and this is really important. If our take rates continue, which we've actually made some really good progress on, then I would see that, okay, it looks like the service margin is actually going to hang in with levels that look like 2008. And so you could have some potential outperformance just from the service margin contribution. But it's too early in the year to suggest that things would change on the leasing front. Again, as we look at it, with as much detail as we can get here at the end of February, it looks very much like the levels of activity that we originated in 2007 and 2008.

And does clear wire kind of fit into that second half -- 40/60 split?

Yes. It does. You know, it's in there. And its a mixture. Obviously, we're working on a lot of things with them right now.

Great. Thanks, guys.

Thanks, Rick.

Thank you, our next question is from Jonathan Atkin with RBC Capital Markets. Please go ahead.

Yes, a couple questions. Following up on the service margin comment, there does seem to be some fourth-quarter seasonality to that. I wondered if your could maybe just give us a refresh as to what is it that you're doing in the services business. And are there any cost allocation practices in terms of how you split up costs between site rental and -- perhaps our labor side? Site rental related costs and services that might affect why your margins from those of your peers. And any update on outdoor gas given that there's been some recent market launches thats heavily leveraged that technology.

Okay. On the services for the fourth quarter, John, we had a good -- had a good quarter. We -- we did better than we originally expected. And it really goes to the take rate comment I made earlier why. We're -- we're executing well for customers and continuing to increase our take rates throughout -- throughout the company. And so to refresh everybody's knowledge of what that business is, that's basically managing the installation both in terms of new installs and amendment upgrades of the antennas on our sites on behalf of the carriers. And so, that's essentially what that is. We pursue that business. There's -- there's margin in it. It also -- probably most importantly retains control over the improvements that are going on at our site. And its just -- it's a higher touch activity than just -- than essentially, you know, giving somebody a notice to proceed and letting them go out and access our site. It's an activity we've continued to grow in expertise and take rate. And it's something I think we'll continue. In terms of the cost allocations, Jay, you want to comment on that? There's really nothing --

No, John, I don't think there's anything different there. I mean the costs -- the direct costs associated with the site rental business would be the things that you would expect. So, land lease expense, repairs and maintenance directly on the towers. And then other fixed costs that you would have such as utilities and -- and things like cutting the grass, basically.

And overhead. You'd have -- we have -- obviously the personnel overhead associated with the tower management business is in the -- is in the tower line, as well.

And then on the services side, what would have is the direct -- the direct costs associated with performing that service. So, I -- it's fairly easy to delineate between the -- between the two activities.

Okay. Then on the outdoor gas, any -- any uptick in your activity level or in terms of how you're scaling that business?

Yes, John. There are a couple of opportunities out there that we're looking at that are small in nature that probably get into Jay's small amount of -- very small amount of spending he discussed which is sort of down 90% year-over-year. But we're -- we're going to be very, very judicious about that. Notwithstanding the transactions or the -- the systems we have today are very high returns. And we're very pleased with the results. You know, given the environment that we're in and the -- and the desire to take recurring cash flow and -- and redirect it to retiring debt, we're going to be very judicious about how we pursue that. And we're looking at some alternatives that, you know, may -- may provide some alternative sources of funding that we would participate in but not be -- not be, you know, the direct investor in that -- in that activity. And we'll talk more about that later if those come to pass.

And then with respect to the microwave back haul demand on your sites, is that kind of going along at a steady pace? Maybe taking clearwater out for the moment, are you noticing more fiber coming in relative to microwave or is that mix kind of similar from your perspective?

It's both -- its both. I mean we're continuing to see carriers self-provide microwaves as well as pull fiber as well as use copper. Continuing to order more T-1 capacity at sites. So, it's a mixture, and I don't think there's -- there's not one solution that the carriers, at least to my knowledge as we've spoken to them (inaudible). Clearly its a constraining point for them. And its -- and they're looking for multiple solutions to solve the problem. So, from our perspective what we see is continued self-provision in microwave, some shared microwave back haul, as well as, you know, pulling fiber to sites and then the traditional, just, you know, ordering four, five, six T-1's at a site.

And then finally, James Young's appointment, he's been with the company a while. So, I'm guessing that doesn't really portend any major changes in your operating practices. If you could just --

No, Jim -- yes, Jim's been with us a couple years. And has made a tremendous contribution. And this is further recognition of the contribution he's making. And really leading the operating activities as you would think about the tower operations side of the business. Jim has taken a very strong leadership position and done very well in refining and improving efficiencies, particularly around cycle times, in terms of cycle times of application processing to commencement. Standardizing practices and then also building this service business that we've been talking about and increasing take rates. So, a very strong leader and one that we're very happy to see elevate to that level in the company.

Great. Thank you very much.

Thank you. Our next question is from David Barden with Bank of America. Please go ahead.

Hey, guys. Thanks for taking the question. I got a couple. Just first, Jay and Ben, when -- last week we saw the high yield offer that you guys put out into the market. Which at the time was priced at kind of the 11% yield range trade around 9.5%. It's widened out a little bit with the markets and issues around the banks recently. But it feels like if you're looking at a range of secured financing options to replace structured financing operations or other issues that we're -- what we're really talking about is refinancing costs that seem to be trending south of 10% and maybe even south of 9%. I was wondering if you could -- you've been approached. I wonder if we could kind of share with us kind of how attractive these refinancing options could be because it -- it really starts to make the growth in the out years look better, I think relative to what the market seems to be assuming today. The second question, if I could, was just kind of going back again to that guidance question. You guys set this full-year guidance which you didn't change after third quarter results. Clearwater hadn't been funded. Sprint, there were major questions about it. Uncertainty about Verizon and AT&T. As I look at your first-quarter guidance, if I multiple the low end of adjusted EBITDA by four and assume it doesn't grow all year, you're above the low end. And if you hit the higher end of first-quarter guidance and don't grow all year, you're already above the high end. And I'm just wondering, you know, is it -- is there any reason to believe that this just isn't hyper conservative guidance? That there's some other issue lurking out there? And the last question if I could -- I apologize -- is kind of a geeky question probably. The white papers we've been read being LTE seem to suggest that at the 700/800 megahertz range, these systems could have gigantic antennas. You know, seven, eight feet tall. How do you think about the revenue opportunity in structuring towers to accommodate this kind of array? Thanks a lot.

Okay. Well I'll take the first question. And then certainly hand the last question over to one the guys sitting here on my left. With regards to the debt markets, I think, Dave, you've described it correctly. Our high-yield notes offering has traded very well in the market and did trade as low as -- as -- at a yield basis of about 9.5%. If you think about the capital structure and the plan that we're on here to use cash flow to retire debt, it's likely that the $900 million notes offering, bye the time we get to the end of 2010 or maybe the end of 2011, its going to represent about 12% to 15% of our debt outstanding. That has a cost to us of about 11%. We accomplished two things by issuing the notes offering. One is that we accessed another market which gives us a liquid issue that we could subsequently go back and add an additional notes offering to and we'd know about where that would price. So, we've gained access to another market which I think is helpful. The other thing that it does is it gives us cash on the balance sheet and gives us a lot of time and flexibility about which step do we take next. And to your point about the fact that the -- the debt at the structured level or at the asset level coming in at prices lower than what the high yield notes are -- are trading at, we would agree with. And I think it's -- it's an excellent point. And one that we're very focused on. Certainly don't believe that -- that as you look at leverage in two years out where we've got five times leverage, that all of that needs to be done in the high yield market. We have historically been able to put four to five turns of debt on the assets at the AAA and AA level. And if you look where our structured notes are trading today, those are trading in and around 8% at the AAA level. Some of them are actually inside of 8% or have been over the last couple of weeks. So, to the extent and obviously there's no guarantee as to where we're going to be able to access the market or if we're able to be successful at it. But based on trading levels, it would give me some confidence that the number could be well inside of -- well inside of the 10% ARD step-up in coupon. And obviously well inside the 11% where we just printed these high yield notes.

Great.

You know, Dave, there's a little cryptic way to look at this that we're doing internally, just out of simplicity. If you take our comments and my comments and what Jay just reiterated two years out, and you say, okay, you're probably going to be five times leveraged, call it $5 billion by the time you pay down with cash flow and then you go through the refinancing transactions that are inevitably going to take place and optimizing the mix of what's secured versus the high yield we've already taken on. If you just say to yourself, okay, well let's assume a blended rate of 8%, well, then that's $400 million of interest expense. If it happened to be a blended rate of 9% it would be [$450] million. Well that's in and around the level of expense that we're now incurring in this forward guidance for 2009. So, its our, sort of, working assumption that the interest expense level that we're running with today is basically the run rate as we work through the paydowns and the refinancings at the inevitably higher rates. It's going to sort of wash itself out. So, from our perspective it looks like 2009 is sort of the flat spot year in terms of recurring cash flow per share growth because of this increased interest expense that we've just taken on board. And from this point forward, it's sort of a wash. And then you said such that the organic revenue and EBITDA growth, starts dropping through starting in 2010. So. just to share that with you, that's sort of how we as a management team are -- are sort of working through this and how the numbers sort of fall out. With respect to the guidance of multiplying first quarter times four, that's always what we're apt to do. And we do that, as well. And yet when I -- it doesn't take much to move -- you know when you take -- when you have an expectation of a very good quarter which, again, is coming off of activity volumes we had back in the fall, which we did talk about on the third-quarter call as being very strong, you're having a great quarter. We've got lots of good carryover opportunity on the services side. So, we have high expectations for the first quarter. It's always tempting to annualize that. And yet increased run rates and R&M expense, a decreased take or run rate in service margin can eat up some revenue growth pretty quickly on a quarter-to-quarter basis. And so you'll have to trust us for a minute when we say, look, the full-year guidance is consistent almost to the penny in terms of currency-neutral revenue growth on an organic basis that we delivered in 2007 and 2008. You know, could it be higher, I guess it -- you know, it always could. We mentioned services, that could be higher, as well, if the take rate continues and the activity continues. But, you know, perhaps we're being a little bit conservative here on the front end of the year. But we think that the -- the organic growth is -- is certainly more than adequate. And then with respect to the white papers you're reading, we've seen some of the same things. I would tell you it's probably too early, but what we're seeing from some of these early applications are not, in fact, the -- the surf board type antenna. They look more like -- a more traditional antenna array from a 3G installation. So, while we've seen some of those same impacts or white papers in a, you know, obviously this is very, very early stage, and there will be different configurations depending upon the site and the terrain and the density. It's -- thus far, we haven't seen an application with, you know, some outlandish amount of antenna capacity requirements.

Alright, great. Thanks so much for the comments, guys.

Thank you. Our next question is from Jason Armstrong with the Goldman Sachs Research Department. Please go ahead.

Okay. Thanks a lot. Couple of questions. Sorry to just keep hammering the 1Q versus full-year guidance. Maybe on the revenue side, the site rental revenue guidance for 1Q '09. Big pickup. I think on the high end of guidance, implying a $13 million sequential uptick. That's a faster uptick or, you know, bigger pickup than we've seen sequentially in this business. So, I guess as we look forward to the rest of the year, you know, the leading indicators in the Fall that would have pointed you to this type of number in 1Q '09, have those indicators slowed down such that you're not adjusting the full-year guidance? So, maybe you can talk to the revenue side of it. And then the second question here is just on -- on M&A, you know, cost of credit, clearly up, cost of hedging credit is up. The equity occurancy is down. I'm just wondering, why are you being linked to deals in India at this point? There's a number of press reports about you and American Power looking at assets over there and it just seems inconsistent with the current environment.

Can I take that one first? That's a fun one. I thinks its just people's attempt to create and auction and to create some competitive deal tension. I can assure you that's not going on.

Okay, that's what it seemed like I wanted to make sure.

Go ahead.

I'll take a shot at the -- at the revenue question. Jason, what you have to look at is the -- as Ben was going through his comments before on the application volume, typically when we receive an application it takes approximately four months before we start to see revenue from it. So, seasonally, when we get to December and January, we see a slowdown in the application volume as the carriers are on focused on getting on air with all of the sites that they had given us applications for during the year. Around about the November timeframe we'd start to see -- traditionally, just a bit of a slowdown, and the focus is on getting sites on air. Obviously, what that means is you don't see it necessarily in the fourth-quarter revenues in terms of sequential growth. But as we enter the January 1 run rate, we get the benefit of all of those sites that went on air towards the end of the year. And as you can imagine, there's a rush to get sites on air, to get them counted for the fiscal year, for the fiscal year in this case getting them on before 12/31/08. Which means as we've stepped into Q1 we have all of that revenue running for the entire full quarter. Which makes our sequential increase in revenue from Q4 to Q1 look like a significant step, and it is. Obviously we then get the benefit of those revenues for the entire full year of 2009. When you look at Q1, Q1 then has the counterpoint to that which is the drag from the fact that during December and January applications slowed down. So, as you look at what would come on air in the April, May, June timeframe, we would expect that to be a little bit light. So, you don't have as much revenue turning on in the second quarter. However, as Ben mentioned, because applications are at the highest level we've seen in about 16 months in the month of February, if you roll that forward four or five months out, that means by the end of the summer going into Q3 and Q4, we would expect to be installing those antennas on the towers. So, as we look at our numbers for the balance of 2009, it looks like Q1, we get the higher step rate up. And then in the -- in the back half of the year, we would see the revenues start to grow again sequentially, quarter to quarter. But in the meantime, we might expect a bit of a lull in the second -- in the second quarter, at least that's how we're currently forecasting it based on the application volume. Obviously, while -- while some may be -- sounds like from your question a bit concerned that maybe we're seeing something to the downside here, I actually think it's a pretty strong statement about the achievability of our numbers in 2009. Obviously given the -- the volume that we have and our visible for a quarter out in Q1, we can basically achieve our 2009 forecast based on achieving and then replicating Q1 over the following quarters. So, there may be some upside here. I think we believe that really what you're probably looking at is increased run rates in the fourth quarter of 2009, probably not impacting significantly the total results for the full-year 2009, but it does bode well for us as we look at our run rates going into 2010. Okay, great. Thanks.

You bet.

Thank you. Our next question is from Michael Rollins with Citigroup. Please go ahead.

Hello, just a few follow up questions. Maybe just to keep on this revenue theme just for another couple of minutes. In the first quarter, are there any straight-line benefits that you're seeing to revenue that just mark up revenue from 4Q to 1Q or are you seeing any sort of transitory revenue items built into the guidance that you're expecting? And then secondly, on the parge -- one of the slides you talked about the drop in some of that discretionary capital spending. You -- you segmented it between land acquisitions and new tower builds. If we focus on the land and the new tower builds, how should we think about the revenue impact? So, if you -- if you spend half roughly the amount on new tower builds, in '09 over '08, what does that mean for the forward 12 months in terms of the revenue contribution? And then if you spend very little on land this year versus last year, what does that mean in terms of cost implications and the average cost of a tower, so to speak, in terms of your land rents and all the things that go along with that? Thanks.

On the first question, Mike, we've got about 60,000 tenants across our towers. And so there are always renewals and -- and step-ups from -- from our various -- from our various leases. Q1 historically has had more of a step in it related to -- into renewals, and -- and there is some of that in the Q1. Probably not -- not so significant to draw a question. I think the biggest impact that you're seeing there was the comments that I made to Jason in terms of the activity given that the activity in 2008 was back end loaded. So, you've got a significant number of new starts in revenues in revenues in our January 1 run rate lease expense with higher than what we had previously expected. With regards to your second question, on -- on land purchases. We spent a lot of time on the last quarter call talking about land purchases and how we think about it. We have undertaken to extend or purchase a number of our sites. We now own about 23% of the land in the US. We have average lease maturities of a little over 30 years on the leased sites in the US. So, we have a very long-data portfolio there. And we continue to actively work on the portfolio to extend the maturities. There is some detriment to doing that, though, in terms of the way the GAAP numbers are presented because as we extend the lease, we then straight line that rent expense over the term of the lease. Which creates a step in land lease expense thatch has been largely offset in the past by the -- the purchases that we've done. What I would tell you is we managed that extension program, both purchases and lease extension, is that we'll pair back the amount that we're willing to incur in terms of step-up in non-cash rent expenses we straight line over a longer term, to mitigate the impact of not spending cash to buy -- to buy land. So. I don't think that will be an impactful number. And for purposes of modeling it, anyone could assume about a 3% growth in that expense on an annual basis. Obviously given that we're not building towers or acquiring towers, that's about the only thing that should impact that land lease number. With regard to the new tower builds, we really frankly have not done very much in terms of new tower builds. We've talked about in the past trying to ramp up the activity to get us to the place where we were able to do 200. We -- we have not, quite frankly, gotten to the point where we were able to build that many towers. Tower acquisitions and new builds in total in 2008 added less than 0.5% to the revenue growth. So, I really don't think you'll see much of an impact from us -- from us stopping to do tower builds or the -- or the land purchases. I think we'll be able to adjust kind of the way that we -- we operate those activities. And certainly at the EBITDA line, would not expect to see any significant impact from the slowdown.

A couple of quick things I would add, Mike. On your non-cash straight lining question, if you look on page -- on our -- in our press release, as we always do, we provide you what the non-cash portion of revenues and non-cash portion of ground lease expense are. And for the entire 12 months, it was $1.8 million different. Cash versus straight line. You know, that will ebb and flow a little bit. But given what Jay was saying about what we've done, again, long-term view on protecting the ground lease side, we have, in fact, ramped that number up. Because of this non-cash expense he was -- he was referring to. So, at the margin line, it sort of all washes back to virtually zero. And I would expect that to roughly continue over time. But just to sort of punctuate the ending of your point. The notion that, you know, the continued investment of the recurring cash flow in acquisitions or builds drives a substantial amount of the growth in the business, is just not a mathematical reality. Certainly borrowing additional capital or issuing shares over time can drive nominal results. But that obviously comes with a cost -- it comes with a capital cost. And we believe the cost of that capital today is extraordinarily high. And the -- and by, you know, absolutely our judgment is that the way to reduce that cost to capital both on the debt and the implied costs on the equity is to take the cash flow and use it to retire debt and ultimately access the refinancings as we hopefully come through this credit environment that is clearly sort of unprecedented. And certainly not reflective of the ultimate credit quality, you know, of the -- of the recurring nature of this business. So, I guess, you know, just on an organic basis, as it always has been, the real value in these businesses comes from organic operations and growth on the sites that you already have and in judiciously financing those as we have over the years.

Thanks for the details.

Sure.

Thank you. Our next question is from Mike McCormack with JPMorgan. Please go ahead.

Okay, thanks, guys. Ben, maybe -- you talked a lot about sort of what's happening from a wireless user standpoint. Can you give us just a sense of what you're hearing from the carriers? Carrier behavior given what's going on in the current environment. Whether or not there's some concern about economic impact on discretionary data spend. I know some of the air card numbers looked like they served a slowed down. AT&T, I think, was the first one to report that. But just your sense for whether or not the economy could start to have a negative impact on carrier data behavior?

You know, Mike, I -- given the events that we've all been through -- the entire country over the last six months, I don't think any of us sort of go whistling past the graveyard in respect to making predictions about whether things are going to be impacted or not. Clearly there's been impacts around our business and the volatility we've undertaken -- we've incurred that are well beyond what the reality of the operations would suggest. So, I would never, on this call, suggest to you, that we would sort of say you would never see or we would never expect any economic impact or a carrier couldn't make a discretionary decision on slowing capital spending. They absolutely could do that. What I can tell you on this call is that we've not seen it. We've not seen it to date. We've got application volumes that's again higher than we've seen in the last 16 months. We're seeing carriers continue to report very strong results around -- specifically the incremental returns around the 3G data investments. We see other carriers working very hard to catch up and have a -- a comparable product in the market. Recognizing that that is the growth engine in their business today. And so everything I can see today tells me that the logic follows that they're going to continue to invest to drive these -- this network and the consumer product that we're all desiring. I would never suggest to you, you know, never say never. They could make a discretionary decision and slow down. But that has not been the practice of late, and we certainly don't see it as we sit here today.

Great. Could you give us also your thoughts on the 1.5 additional tenants, what sort of assumptions you're making around that. I mean, I know you made some commentary about depending on new technologies and usage trends. But what's the base case scenario there?

That's continuing to measure, as it always has been, the voice carriers that are currently deployed in the market, as well as now, as we mentioned, we've included auction 66 spectrum. So, we've got new carriers launching in various market. It doesn't at all measure, you know, 4G technologies or, frankly, even at a signal strength quality of -- of a traditional or goal of a 3G network. So, it is -- it is largely around our traditional voice albeit at higher standards than historical but voice requirements for carriers deployed in a market. And the -- the counter-intuitive point that I want people to make sure we walk away with is, you know, we've continued to lease these sites over the last couple of years. And yet the indicated need as measured by input even we get from carrier customers suggesting what their data -- what their thresholds are for signal strength quality at the site level, the overall indicated need has continued to go up. Let me qualify that in one respect. One thing we always talk about with this measurement is it doesn't suggest timing. It doesn't suggest over what period of time the carriers will actually work through those deficiencies in their network. Clearly there are prioritizations of spend between -- even as we've been talking about, even the potential continued 3G buildout and ultimately a 4G buildout. And so you'll -- it's somewhat likely you'll continue to see some sites that just underperform for the -- for the foreseeable future. But at the same time it's helpful from our perspective as a management team to realize that there is still laten demand of a significant amount. Again, at the current pace of leasing, it would suggest about nine years of additional leasing that we can evidence today from the engineering drive tests we see today by continually refreshing this material. This -- this engineering material on our sites.

Great. Thanks a lot, guys.

You bet.

Thank you, our next question is from Jonathan Schildkraut with Jefferies and Company. Please go ahead.

Thanks for taking the questions. Most of them have been asked and answered. So, just want to go through two things here. The first is -- and I guess you were driving with this with Mike Rollins. An organic growth scenario for the company then, just to kind of farm this down, is top line of 6% to 8%. And -- and on the EBITDA line of maybe 8% to 10%. I mean is that how we should think about it in a situation where the company can't acquire new assets -- tower assets? And then secondly, if could you give us a little bit more color on -- on the longer dated tower revenue notes? I -- as I understand it, they -- the tower assets underlying those notes are probably maybe 50% or 55% of your total tower portfolio. Just trying to get a sense as to that. And then also whether it's the same set of towers underlying both of those notes. Thank you.

Sure. I'll take the first part of that. Absolutely. You pegged it. The 6% to 8% revenue growth and the 8% to 10% EBITDA growth are sort of the operating metrics that we -- that we pursue. Understanding that just because of the law of large numbers a ecstatic level of growth and revenue which, again, we expect to do this year versus, compared to 2008 and 2007 will diminish that change that rate of change by about 80 basis points a year. So, obviously you'll come off of that. But what's important, as we always talk about, is how that ultimately translates to -- on a per-share value. So, on a per-share basis, whether you're investing the capital to retire debt or -- or even purchase stock as we have historically done, certainly not -- not contemplated currently, either shrinking the share count or shrinking the interest expense through the -- through the availability of that recurring cash flow will augment the growth rate beyond -- substantially beyond what you're getting on just a nominal EBITDA growth. And so, the value transfer just literally from transfer from debt to equity as you retire debt, you know, is not insignificant. And it's something I would point out to everyone.

Johnathan, on your second question, there are basically three groups of assets in the US business. There's about 1,200 assets underlying the GSL trust 2 that mature in December of this year. Then there's 12,000 assets underlying the $1.9 billion and $1.55 billion of tower revenue notes. Those have the -- the expected refinancing dates respectively of June of 2010 and November of 2011. So, they share in the same collateral pool. And then the other collateral pool, a group of assets, would be the GSL trust 3 notes. Those have about 7,500 towers underlying them. And those are due in February, 2011. So, as we talk about refinancing and this probably goes to the question that you're asking in some of the earlier questions about how would we think to refinance, each of those assets have a discreet level of financing on them. And we do have the ability under both our notes offering that we recently did as well as our corporate credit facility to refinance the debt at those various entity levels as they come up for either their maturity dates or their expected refinancing dates. And we have some flexibility as to how we do that. But specifically to to your question, the $1.9 billion and the $1.55 billion of the tower revenue notes, share in the same collateral of about 12,000 towers.

Great. And thats fantastic detail. And when you talk about refinancing those sets of assets, that's how you get to your 4 to 5 times leverage and potential AAA and AA rates?

Correct. Its a combination of taking the cash on the balance sheet, which today is about $860 million. Add to that the cash flow that we would produce over the next couple of years. And using the cash on hand as well as the cash flow to pay down the debt combined with growth and EBITDA. Its the combination of those two things, the growth and the use of cash to pay down the debt. That gets us to the assumed leverage levels that we were talking about.

Thank you.

You bet.

Thank you. Our next question is from Anthony Klarman with Deutsche Bank. Please go ahead.

A few questions. First, if you could just talk about the buy backs that you did made of the two securitization facilities, I assume that the buy back levels that you made given had liquidity that was far in excess of those was really due to the liquidity that was available in those. And so, are there things that you can do to repurchase more meaningful chunks of those securitizations, particularly the GSL 3, in advance of that maturity or are there make whole provisions that's would make that financially onerous?

At some level, we would probably get to the place where we felt like we needed to tender for the notes. It is a functionality of the amount of liquidity in those notes, and also the reality that I was speaking to earlier, Anthony, in terms of what the price has done on those notes. At the end of 2008, many of those notes were trading in the 60's from a price standpoint. Virtually all of our structured debt has been trading in the 90s now, so, while the opportunity to gain those notes are a steep discount, I think is gone, it certainly bodes well for our ability to hopefully be able to refinance in those markets as the holders of the notes have -- have firmed up in terms of their view of the credit quality of the business. So, I would tell you as I mentioned earlier, I think it's prudent for us to keep some cash on the balance sheet given that these notes have traded close to par now. And then use that cash in concert with -- with the refinancing in order to completely retire a debt issue and then move on to the -- move on to the next maturity.

Okay. And--

That goes to your view of probably not availing ourselves of the ARD provisions unless it's just an absolute necessity. So, you may want to keep some of that cash to be able to refinance the -- the tower notes that have the ARD in 2010. And so, that's some of the -- some of the flexibility and the different alternatives Anthony, that we're looking at which would then keep you from necessarily taking all that cash and just, you know, chasing the bid on the global signal notes to, you know, fully deploy the capital as quickly as you could. And ultimately, you know make a significant amount of headway, retiring that 2011 hard maturity. It -- it looks to us like there's going to be opportunities to finance at the asset level which Jay was mentioning. So, you just want to keep that flexibility.

Right. I was mentioning the GSL 3 only because when I had looked at it originally it looked like that facility was even more onerous and that, you know, in addition to the rate step up there were other things that could potentially happen in terms of the -- the agent sort of taking possession of those assets to waterfall the principle down. So, that -- I guess that's why I was assuming that you might target that one more aggressive (inaudible) the cash balance.

Yes -- Yes, Anthony, the -- the GSL 3 notes are a hard maturity. So, we think about those as -- as though you could take a high yield piece of paper with a hard maturity. There are provisions that could work in our favor. But I think in this environment you can't assume that the service or the trustee would -- would be maybe what they would be in a more normalized credit environment. So, I would look at those as a -- as a hard maturity that we need to refinance by February, 2011, and obviously to your point to the extent that we were into an ARD day or thought that we couldn't refinance those -- those notes in February, 2011, then we would look to apply the cash that we have on hand to reduce the refinancing requirements that we would have on those trust 3 notes. I -- I think what you're hearing from us, though, and I think this is an important point to make, is that the market has moved considerably since our third quarter call. And in the third quarter call, we tried to take everyone through the downside case of not being able to refinance our tower notes and rolling into an ARD period. That is something that today we are still comfortable with if we had to do it. That provides us enough liquidity as I mentioned before to pay our G&A and to service our debt up at the holding company. However, I think we are more optimistic that we will be able to refinance our various upcoming debt either anticipated repayment dates or our debt maturities with the combination of cash and refinancings. And I -- I think it's prudent for us to keep some cash so that we can be a little more flexible in terms of how we approach those various markets. And hopefully achieve the lower -- the lowest cost of financing possible, we certainly don't want to lock ourselves in too quickly on that.

And if I look at the CapEx numbers that you talked about and you expanded your sort of CapEx view to include sort of non-sustaining type CapEx. The top-line growth range at the mid-point is down, obviously, from '09 to -- '09 over '08 versus '08 or '07. And I realize we're missing two weeks of GSL in '07. But is that all basically attributable to the decline in the -- what I would call maybe success-based CapEx that you were spending over and above the sustaining CapEx?

No. Anthony, it's two things. You mentioned the stub period, which you're right about, thats about $15 million going back in '07. If you back off the FX adjustment, if you make it currency neutral over the two periods, the number is within like $1 million or $2 million of the change year-over-year.

Great. And then final question. Could you just remind us of how your escalators work? Are they are all tied to CPI or CPI related indices, such that, if there was, you know, deflationary pressure in the US, would you see a meaningful revaluation of the annual escalators that you have in your contracts?

Its a -- we have -- we have a portion of our lease contracts, both at the rental revenue line as well as the land lease expense line that are tied to CPI. In both cases it's about 35%. In virtually all of our contracts, both in terms of our expense side of that equation and the revenue side, there is a floor of zero. So, if CPI were to turn negative, then the rents, either that we are paying or receiving would not decrease. They would just stay the same as they have been in the previous -- in the previous period. So -- but most of them -- most on the -- both the land leased side and on the rent side are fixed.

Great. Thank you.

Thank you. Our next question is from Gray Powell from Wachovia. Please go ahead.

Good morning guys. Thanks for squeezing me in here and -- and taking the questions. I have just -- just a couple quick ones.

Okay, Gray.

Longer term question -- on wireless data and LTE. I've heard industry estimates that 4G adoption could shrink the radius of wireless carrier cell sites by 35% or more. Can you just talk about what your longer term thoughts are here and do you have and rough statistics on how (inaudible) city has increased over the last few years, as we've gone from 2G to 2.5G to 3 G?

We've had -- we've been the great beneficiary of cell site radius' shrinking over the last 10 years, Gray? Really, with every generation of technology and the consumer takeup that is now over 80% penetration and 700 minutes per month. So, we've been the great beneficiary of that. That does not appear to be abating. Thats clear when we see the network search ring data from carriers as they are planning their rollouts and their upgrades. I couldn't specifically opine -- it's too early on 4G. But if the phenomenon holds that as you continue to want to put additional bandwidth through a certain amount of cell sites and combine that with consumer takeup which has continually been underestimated, it is a combination that has historically resulted in about 2 to 3 times the density requirements on a 3G network than we would have seen on an older, traditional 2G network. And that is in order to make the bandwidth applications interesting so you can get reasonable speeds on an internet -- on an internet session. And we don't see that abating, and the conversations we're having with carriers, we continue to suggest that's in play.

Okay. Great. That makes a lot of sense. Then -- then the drive test statistics that you gave I thought were very interesting. On the 1.5 additional tenants of demand, I just want to make sure I understand it correctly, that does not include 4G, right? And then can just tell me what -- what Crown Castle's updated number is in terms of tenants per tower? It's been a while since we've gotten the update. Is it closer to 2.7 tenants per tower now?

Yes, it's about 3.

Its about 3, okay.

And again I say "about" because it's hard whether you do physical tenants versus revenue, I mean I'm not sure -- we've lost track of physical tenants in a sense because you've had so many upgrades over time. You may have an AT&T or Verizon or somebody that has continually improved an installation which is very common. So, the old notion of a broadband tenant has been a little bit sort of washed out here. And it's probably just a revenue number. It's probably the best way to to look at it. But it's effectively about 3 today.

Okay.

And when we do that drive test measuring, I should have added we do that on a carrier-specific and site-specific basis. And so, we're looking at what the either observed average signal strength is in a market for a carrier or, in some cases, where they will actually tell us what their targets are. We're loading that into our system to actually predict, you know, or determine, you know, deficiencies at the site-by-site level. So, that's just a quick recap of how we're doing that.

Okay. Great. Thanks. And then just last question. On Clearwire we've heard from other tower companies that more of their deployments will be treated as new tenants paying closer to full rent versus just a typical amendment. How do you expect that to play out with your portfolio? And also because you have the global signal assets. Do you expect that to give you any incremental advantage and in terms of attracting Clearwire?

I'd stay its going to be a mixture of both and we would probably confirm what you've heard about it -- you know, looking like a lot of discreet installations. Not -- not a full installation necessarily, but certainly -- certainly materially more than an amendment. And then there will also be those sites where the obvious best approach is to upgrade a -- an existing Sprint installation. And we're working through both of those scenarios. And I think they'll be meaningful on both sides.

Okay. Thank you very much.

Alright. We'll take one last question. Thank you.

Thank you. Our last question is from the line of Michael Bowen from Piper Jaffray. Please go ahead.

Okay. Thank you very much. I guess first comment is I think all of us want to thank you for not reporting tomorrow when -- when I think seven other tower and wireless companies report. So, thanks for that.

Sure.

I guess first question I wanted to ask is Sprint made an announcement the other day talking about in '08 they did a significant -- well over $50 million investments in Houston, San Antonio, Little Rock, Oklahoma, in talking with SBA they said basically they saw nothing out of Sprint in 2008. So, I wanted to find out if in fact -- I think Sprint is about 26% of your -- of your customer base if I'm not mistaken and larger than second place AT&T and Verizon. And I was wondering if you could give a little bit of detail, if you're allowed to, on what you're seeing out of Sprint and what you might expect in 2009? And then with -- excuse me, with regard to MRR trends, I think we calculated it as flat to slightly up in the fourth quarter over third quarter but still very good numbers. And was hoping you could talk just a little bit surrounding how we might think about that in 2009. Also whether there's any seasonality there. There typically has not been. But give us some ideas there, thank you.

Okay. Michael, we're going to make this quick. With respect to commenting specifically around Sprint, we're just probably not going to do that. We have taken it as a practice of the company to not give real specific customer-by-customer activity levels. We feel like that's really their place to talk about that. So, if you'll forgive us, we're probably not going to go into much detail with you about what Sprint may or may not be doing and mark by market. And then I'll -- I'll just confess on your second question was that monthly recurring revenues, is that what you were referring to?

Yes.

You know, I mentioned I think it was Jason's question earlier in the call. We -- we obviously saw a significant step up during the fourth quarter as we added additions. And you could look at our first quarter results -- or first quarter forecasts and sort of back into what the monthly amount of those recurring revenues are. And as I mentioned, I think that creates some of the fluctuation and questions about how do we look at full-year 2009.

Do you think that there ever will come a point on your towers where perhaps the monthly recurring revenue flattens out on a per-tower basis, or do you just foresee this to continue to grow?

Well, you -- you never say never. Obviously there's a number of thing that can affect that. But if you look at the base of -- of the revenues there, they have contracted escalators. The terms are on generally initial terms are -- customers are signing up for seven to 15 years on the initial term. And those contracts have embedded escalators of 3% to 4% in most cases. So, assuming there isn't a -- a broader impact, then yes, we would expect the monthly recurring revenues to grow on an annual basis or a monthly basis.

Okay. Then last question with regard to the Fx with regard to Australia. Obviously it -- it force you to play economist here. But how do you think about that? What -- what were your processes to go from 0.67 to 0.65? And clearly I'm assuming that you think thats probably a bottom. But what were your thoughts and methodology behind that?

I -- I certainly would not want to try to predict Fx rates. And the way we did it is pretty simple honestly. We just looked at the spot rate, which is typically what we used for the quarter in which -- the next quarter in which we're giving guidance. And then we look at the forward rate for the following 12 months to figure out what do we believe about the guidance for 2009. So, we're -- we're just using basically what the market assumed rate is for the -- between A dollars and US dollars.

Okay. Thank you very much.

Alright. I want to thank you all again for participating in this call and hanging in an hour and a half with us. I think we were able to cover a lot of good material this morning. We remain very optimistic about the (inaudible) prospects for 2009, and -- and we'll talk to you on the next call. Thank you.

Ladies and gentlemen, this concludes the Crown Castle International Corporation fourth quarter 2008 earnings conference call. If you'd like to listen to a replay of today's conference, please dial 1-800-405-2236 or 303-590-3000. And access code 11126071. ACT would like to thank you for your participation. You may now disconnect.