Crown Castle Inc (CCI) 2010 Q3 法說會逐字稿

Good morning ladies and Gentlemen thank you for standing by and welcome to the Crown Castle Q3 2010 earnings conference call. During today's presentation, all participants will be in a listen only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) I would now like to turn the conference over to our host Fione McKone, Vice President of Finance. Please go ahead.

Thank you. Good morning everyone, and thank you all for joining us as we review our third quarter 2010 results. With me on the call this morning are Ben Moreland, Crown Castle's Chief Executive Officer, and Jay Brown, Crown Castle's Chief Financial Officer. To aid the discussion we have posted the supplemental materials in the investors section of our website at www.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 these expectations would prove to have been correct. Such forward looking statements are subject to certain risks, uncertainties and assumptions. Information about the potential factors that could affect the Company's financial results, is available in the press release and in the risk factors sections of the Company's filings with the SEC.

Should 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. Our statements are made as of today, October 28, 2010, and we assume no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.

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 www.crowncastle.com. With that I'll turn the call over to Jay.

Thank you Fiona, and Good Morning everyone.

Let me start with a few summary comments as outlined on slide three, and then I'll go through our results and outlook in greater detail.

I'm very pleased with our third quarter results, reflecting continued demand for wireless infrastructure. In the third quarter we amended a contract with a US customer to primarily provide a space on our towers for that customers data deployment , which together with the expected backend loaded nature of the year, resulted in a significant increase in third quarter site rental revenue compared to the second quarter 2010. I will discuss this amendment further in a few minutes.

In addition to a great quarter in site rental revenue, our services business performed very well. Service revenues were up 37% and service growth margins were up 64% compared to the same quarter last year. Posting the highest quarterly results in recent years, due in part to the increased take rates by our customers. The strong year-to-date results allow us to meaningfully increase our site rental revenue, site rental gross margin, adjusted EBITDA and recurring cash flow outlook for full-year 2010.

In addition, we are pleased to have completed over $6 billion in refinancing during the last six quarters, resulting in no maturities due before March 2014. This allows us to focus on investing the majority of our cash flow in activities, such as share repurchases, tower acquisitions, new site construction, and land purchases that we believe will increase long-term recurring cash flow per share.

Getting into the details, I'd like to take you through the excellent results for the quarter, the increase in our 2010 outlook, and our full year 2011 outlook. Turning to slide four, during the third quarter we generated site rental revenue of $437 million, up 10% from the third quarter of 2009. The components of the 10% growth in site rental revenue from the third quarter 2009 to the third quarter 2010 were as follow, 2% growth in the existing base of business through contracted escalators and renewal of tenant leases net of any churn, and 8% growth attributable to the additional tenant equipment added to our site reflecting new leasing activity. Site rental gross margin, defined as site rental revenue less the cost of operations, was $321 million, up 14% from the third quarter of 2009. We continue to maintain a disciplined approach to operating costs. Resulting in 97% of the gross in site rental revenue finding its way to site rental gross margin.

Adjusted EBITDA for the third quarter of 2010 was $306 million, up 18% from the third quarter of 2009. It is important to note that these growth rates were achieved almost entirely through organic growth on assets that we owned as of July 1, 2009. As revenue growth from acquisition was negligible.

Turning to slide five, recurring cash flow defined as adjusted EBITDA, less interest expense, less sustaining capital expenditures, increased 24% to $178 million compared to $144 million in the third quarter 2009. Recurring cash flow per share also increased 24% to $0.62 compared to $0.50 in the third quarter of 2009.

Before I turn to our outlook, let me make a few more comments about the amendment to the customer lease agreement that I mentioned earlier. As you know, there is a significant amount of activity in our industry currently, as several carriers are deploying 4G data networks. In an effort to efficiently and expeditiously deploy this 4G equipment, we agreed with one of our customers to provide them with the ability to add equipment to its existing arrays on our towers, without the need to negotiate pricing on individual amendments at each site. In exchange for this right, we increased the rent on a 100% of its existing leases to incorporate a meaningful amendment to every site. In essence, the deal assumes an amendment on every tower on which the customer currently resides. Further, the contract amendment does not provide rights to any other level on our towers. We are excited about the meaningful increase in rent that this amendment represents, and we will be working very hard to ensure that we achieve the operational efficiencies and speed that both parties intended through this agreement.

Moving to the outlook for the fourth quarter 2010 as shown on slide six, we expect site rental revenue of between $442 million and $447 million, and adjusted EBITDA of between $302 million and $307 million. Let me spend a minute walking you through the sequential growth in site rental revenue and adjusted EBITDA from the third quarter 2010 to our outlook for the fourth quarter 2010. Site rental gross margin in the fourth quarter is negatively impacted by site rental operating expenses being higher by approximately $4 million than the third quarter. This includes repairs and maintenance activities which we previously expected to complete in third quarter of this year. Also, we are forecasting services margin to be lowered by approximately $3 million from the third quarter of this year. This portion of our business is the most difficult to predict, but I would note that we've been exceeding our expectations for the services group all year. Further, commensurate with the increase in operating expenses related to repairs and maintenance, we expect sustaining capital expenditures to be approximately $2 million higher in the fourth quarter than the previous two quarters of 2010.

Our revised full-year 2010 outlook, as shown on slide seven, suggests site rental revenue growth of over 10% and recurring cash flow growth of 21% respectively. Substantially all of the anticipated growth is expected to come from the assets that we owned at the beginning of 2009, as we've made no significant tower acquisitions in the last two years. The growth in site rental revenue from 2009 to 2010 is comprised of the following, a little less than 4% of the growth is from the existing base of business that was in place at the beginning of the year, through contracted escalators and the renewal of tenant leases net of any churn. And a little less than 7% growth attributable to the additional tenant equipment added to our sites, reflecting the significant leasing activity we have experienced since the beginning of 2010.

For the full year 2011, we expect site rental revenue growth of approximately $130 million or 8%. This outlook for revenue growth assumes an approximate 2% growth in the existing base of business and the remaining 6% from expected additional tenant equipment to be added to our sites. Additionally, our 2011 outlook for site rental revenue has only a minimal benefit from leasing activity that is dependent on customer securing future funding. The 2011 outlook suggests site rental revenue incremental margins to be approximately 90%, and we have assumed in our outlook as is our normal practice, at significantly lower expected service margin contribution than our current run rate suggests. Our 2011 outlook for service margin is approximately $14 million lower than our expectations for full year 2010.

We have assumed in our outlook that our direct tower operating expenses will grow by approximately 3%. However, as you've seen in recent years we have achieved incremental margins higher than the normal assumed 90% by holding these cost tighter, which provides some potential upside to our 2011 outlook. Furthermore, we expect the midpoint of interest expense in 2011 to be $504 million, an increase of approximately $14 million over 2010 from mid-point to mid-point. As cash interest expense is expected to be approximately flat year-over-year, the increase in 2011 interest expense is predominantly driven by the amortization of our interest rate swap. The refinancing of the 2006 power revenue note, that we completed in August, will result in our amortizing the liability related to the 2006 note forward starting swap over a five-year period.

Year over year we project that interest expense related to this $18 to 19 million higher. The increase in interest expense related to our interest rate swap, is expected to be partially offset by the lower cash interest due to our debt purchases during 2010, and our successful refinancing of the 2006 notes, which lowered the weighted average coupon of the notes from 5.7% to 4.5%. Finally, our outlook does not include the benefit from expected future investments around our core business such as share purchases, tower acquisitions, new site construction and land purchases.

Turning to the balance sheet, the table on slide eight, reflects our current debt balances and maturity. And on slide nine we've shown total debt the last quarter annualized adjusted EBITDA as of September 30, 2010 at 5.5 times. Adjusted EBITDA to cash interest expense as of September 30, 2010, it was approximately three times. Both are adjusted EBITDA leverage ratio and cash interest expense coverage ratio are comfortably within their respective debt covenant requirements.

Moving on to investments in liquidity, in August 2010, we issued $1.55 billion of notes to refinance $1.33 billion of our 2006 tower revenue notes. The notes were refinanced at a weighted average interest rate of 4.5%, and a weighted average expected maturity of 8.7 years. During the last six quarters we've refinanced over $6 billion of debt security with an appropriate laddering of the maturity and we now have no maturity before March 2014. This gives us a tremendous flexibility, as we focus on investing activities that we expect will enhance long-term recurring cash flow per share, which we believe is the best long-term measure of shareholder value creation.

As you saw in the press release, the significant investment that we made in the third quarter was closing the NewPath acquisition. As is our practice, we evaluate purchasing our own stock against other alternatives in the market. Also, during the third quarter there were a number of opportunities available in the M&A markets that we were reviewing, and at the right price we would be prepared to acquire.

As shown in slide ten, during the third quarter of 2010, we spent $57 million on capital expenditures included $26 million on land purchases, as we continue spending on our land lease purchase program. Since the beginning of 2010, we've extended over 900 land pieces and purchased land beneath over 330 of our towers. We had a significant success with this program over the last several years. In fact, today 34% of our site rental gross rental margins is generated from towers on land that we own. Also as of today, we own or control for more than 20 years, the land beneath towers representing approximately 70% of our gross margins. Further, the average term remaining on our ground leases is approximately 31 years. Having completed over 9,000 transactions, we believe this activity has resulted in the most secure land position in the industry, based on land ownership and final ground lease expirations. We continue to believe this is an important long-term effort, that provides a long-term benefit, as it protects our margins and controls our largest operating expense.

After the third quarter we spent $5.8 million to purchase our common shares at an average price of $42.42 per share. Since January 2003, we spent $2.4 billion buying back 92.5 million shares or potential shares at an average price of just over $25. Without these purchases our current share count would be nearly a third higher.

Lastly, I would note that during the third quarter and through October 26, 2010, we spent $52 million of cash to settle approximately $303 million of the notional $1.55 billion interest rate swap due to be settled by February 2011. As we've shown on slide 11, our total current remaining swap liability is approximately $438 million, split between February 2011 and November 2011. As shown, we've also provided sensitivities for these swaps for changes in interest rates.

As of September 30, 2010, pro forma for the purchase of our common stock and partial settlement in February 2011 swap, we have approximately $279 million in cash and cash equivalents and $400 million of availability under our revolving credit facility. In summary, we had a great quarter. And I'm excited about the growth we expect for the balance of 2010 and continuing into 2011. And I'm pleased that we are able to allocate capital in areas related to our core tower business, to enhance long-term growth rate and recurring cash flow per share.

And with that, I'll turn the call over

Thanks Jay.

As Jay just mentioned, we had a strong third quarter. Seeing our outlook for site rental revenue, site rental gross margin, adjusted EBITDA and recurring cash flow. This is an exciting time to be in our business, as wireless broadband is a huge secular trend that we believe promises to drive growth for the company for a long time.

On that note, I would like to draw your attention to some of the important trends that continue to drive our business. Adoption rates for smartphones and more recently tablet devices, such as the iPAD, continue to accelerate, driving wireless data traffic and increased tower demand from carriers striving to maintain a suitable level of network quality and reliability. Research firm IDC said it expects the smartphone market to grow 55% this year, a greater increase than its previous prediction. The new estimate is some 10 percentage points higher than IDC had previously estimated due to the introduction of several new smartphones, including the iPhone 4, REM's new BlackBerry Torch, HTC EVO and more phones running on Google's Android platform. To that end, Apple announced iPhone sales in the US of 5.2 million units in the third quarter up 63% from just the second quarter of this year. Similarly, devices running Google's Android mobile operating system now account for 25% of North American mobile web consumption and 33% of the smartphone market share, nearly a 30 percentage point increase versus only a year ago.

While these trends are compelling, it is important to note that data adoption is still in the early stages with only about 40% of wireless subscribers having a data centric device, representing considerable upslide still to come. As has been well-documented all of these new devices consume enormous amounts of network capacity. In fact, a recent FCC report indicates wireless data consumption is up 450% just since the beginning of 2009. Looking ahead, industry analysts generally share the view that mobile network data traffic will continue this significant upward trend, as smartphones, laptops and other devices become increasingly integral to consumers mobile experiences. Mobile data demand is expected to grow from 2009 levels by a factor of five by 2011 to more than 20 times by 2013 and an astounding 35 times by 2014.

Mobile traffic demand is driven by data usage patterns of each device type and the quantity of devices in use. To give you some context. BlackBerry devices are consuming twice the amount of data as a typical feature phone, the iPhone user is typically consuming five times the amount of data as the BlackBerry device user, and air cards and laptops consume five times more data than even the iPhone or 56 times more data than a feature phone. For example, the average monthly usage per subscribe on Clear Wire, which many consumers use as a substitute for wireless broadband, is already seven gigabits or 280 times the amount used by a regular cell phone in a given month.

Continued growth of this device segment is likely to contribute significantly to the growth in mobile data traffic. I saw a recent statistic and just to frame this for you by historical measures, as we all used to think about subscriber minutes of use, US subscribers today are using just over 800 minutes of use per month in your historical measure of voice time. Thus the phone if you think about it is dormant in this historical measurement 98% of the time. By contrast with integrated devices, internet applications are constantly running in the background such that each device creates 24/7 demand on the network. In the US, the FCC has projected the need for continued significant wireless network expansion, between now and 2014, to even have a shot at keeping up with consumer demand. This underlies our thesis that our growth prospects in the US are significant, and the growth drivers for our business are likely to be long-term.

Currently we are in the early stages of these high-speed data network deployments. The wireless carriers are busy building out their 4G networks and we remain very excited to be partnering with them as we move to the next generation of wireless. We believe that our 2010 outlook and our 2011 outlook is consistent with the wireless carriers recent comments on their expectations for the short-term, and reflects the launch and prelaunch activities surrounding these 4G buildouts into 2011.

Just to give you some specifics, Verizon has said it expects to launch LTE this year in a total of 38 cities, and in more than 60 airports including Seattle, Denver, and Boston covering 110 million pops. The carrier expects to exceed that figure to 200 million pops by 2012 and to more than 285 million by 2013. Similarly, AT&T will launch commercial LTE service by mid-2011 and will cover between 70 million and 75 million pops by the end of next year. T-Mobile has also been rolling out HSPA plus, with plans to cover 185 million pops in 100 major markets by the end of 2010, this year. Further, Clear Wire plans to continue their coverage plan of 120 million pops by the end of 2010 and has a goal of reaching 200 million pops by the end of next year. Clearly a lot of activity with a current customer base.

Many of you have heard and we've spoken at conferences about LightSquared, and LightSquared has been very active as a new entrant in the market. With plans to launch its wholesale LTE in as many as nine markets in 2011 and that could expand to as many as 20 markets by 2012. The company, which has access to almost 60 megahertz of spectrum, has said its network will consist of around 40,000 cell sites covering 92% of the US population by 2015. This is a very significant development for our company and industry.

These new 4G deployments, which are responsive to the mobile internet demand we are all witnessing and driving, along with the ongoing activity from incumbent carriers add confidence to our long-term growth prospects.

Our recent amendment to a customer lease agreement, that Jay discussed earlier, demonstrates the value of our sites for 4G services and our ability to monetize the space on our towers. In order to maximize our opportunity, it is important that we are recognized by our customers as a firm that is willing to roll up our sleeves with them, and help them address the formidable network challenges they face. We seek to maintain our position as the best solutions provider in the US. By first continuing to deliver industry leading customer satisfaction, facilitating their desire to quickly deploy on our sites. Second, providing deployment services in greater scope with full accountability, enabling speed to market for our customers as you've seen with the continued expansion of our services business. And lastly, expanding our capability around distributed antenna systems, which are part of an evolving wireless architecture, to provide coverage and capacity solutions where towers are not feasible.

To wrap up at like to reiterate a few points from this morning. We're obviously very pleased with our results, and believe they demonstrate the quality of our assets combined with our ability to execute for our customers. As always we remain disciplined and focused on maximizing long-term recurring cash flow per share through opportunistic investment, most recent of which we believe is demonstrated from new path networks. On a macro level, we're incredibly excited about the trends we're seeing in wireless and our position to capture value from them. We are focused on the US market, where the ability of the wireless carriers to make profitable investments is most apparent and barriers to entry remain high. We have the best located assets in the industry, with significantly more towers in the top 100 markets than any of our peers. Our customer surveys continue to indicate that Crown Castle enjoys the highest level of customer satisfaction in the industry. Something that is very important to us.

So in closing, we had an excellent third quarter and look forward to finishing the year strong. With that, operator I would be pleased to turn the call over for questions.

Thank you sir. Ladies and gentleman, we will now begin the question and answer session.

(Operator Instructions)

Our first question comes from the line of Ric Prentiss with Raymond James please go ahead.

(Inaudible) I guess as opposed to the Gators and the Longhorns, so its nice to see somebody put up good numbers.

No Comment.

I know, me either. But I want to talk a little further on the modification here, I appreciate the extra color Jay, you provided about its amendment revenue if you will accelerated onto 100% of their existing leases on the existing arrays. Just want to make sure, one, so if they go into other areas of the tower there would be further amendment. Or if the demand that Ben talked to about data causes cell splitting, they need to go to a cell site that they're not on, or a tower they're not on yet, that -- that would be extra revenue is that correct?

That's correct Ric, if they go on any other level on the tower, than we would get additional rent for that or if they were to cell split and go onto a tower that they're not currently located on, we would get additional revenue from that just like we would in any other situation as we've seen historically. This is solely related to the level that they're on today and anticipate basically what they're going to be doing as they do their 4G deployment.

Any change to whether this flows into escalator versus amendment revenue? Was there any change to the escalators with his amendment?

Yes, Ric, I think both out of a desire to protect our own ability to negotiate with future terms of carriers and out of a respect for our carriers. I don't think were going to get into the specifics of the contract negotiations and how we went about pricing that. But we price -- as I mentioned in my comments, we priced it as an amendment to that all of their sites and it was a meaningful amendment which I think both parties assume there going to be making over a -- over time.

I guess part of the crux of that part of the question was to just understand any affect on straight line revenue versus cash revenues, that we need to consider with this new amendment.

Yes, to help you there, I think I'd point out the out the three numbers that I said I mentioned. If you are looking at year-over-year change Q3 2009 to Q3 2010, the benefit that we received from contracted escalators or renewable leases, which would include extending leases and picking up the straight-line benefit their. That was 2%, from Q3 '09 to Q3 2010. If you are looking at the full year 2010 over full year 2009, we picked up a 4% benefit their and in a normalized year, I would expect that we would probably get somewhere in the neighborhood of about 3% from either contracted escalators or renewable leases, including straight line. And then we're have about 1% churn, that would be a normal year.

So, a normal year would look something in the neighborhood of about 2%. So for the full year we may have picked up a 100 to 200 basis points in our full year numbers when comparing 2010 to 2009. And then I mentioned in '11, the outlook that we're providing the benefit from escalations net of churn is 2%. So, looks much more like what we saw in the third quarter than what we saw for the full-year 2010.

Right, and then on the guidance, speaking of the guidance -- 8%, 2% escalator 6% new tenants. And I think you also mentioned that a minimum benefit from folks needing further or needing future funding. So, I assumed Clearwire has got some funding playing out through 2010 maybe a little into '11, Light Squared has received some funding I guess, $850 million debt we saw the other day. So should we assume if there's new announcements from a Clearwire, in the next week or month or new announcements from Light Squared on further funding which they have -- beyond what they already have, that there could be some upside to that leasing guidance.

That's right Ric. There could be some upside and it will depend on when they get that funding and when they can actually get out and get those cell sites up on air and start to pay us lease revenues. To the extent that the timing moves into the latter half of next year, then obviously it certainly helps the run-rate going into 2012 and maybe less of a benefit to full year results in 2011. We'll just have to kind of see when the timing of those fundings come about.

Is it safe to say this year, 20 -- sorry, 2011 is more level loaded than rear-end loaded then given the way you're giving the guidance.

We are giving a more level loaded year than what we saw in 2010.

Great, thanks.

There's always, I would say, there's always -- in the way that we give outlook a tendancy to put more revenue growth in the back half of the year than the front half of the year, thats just traditionally how the carriers end up deploying the capital. The first quarter is generally a little lighter than the balance of the year. But it's not as -- certainly not as significantly back-end loaded as 2010 was.

Makes sense thanks.

Our next question comes from the line of David Barden with Bank of America Merrill Lynch, please go ahead.

Thanks guys for taking the question. I guess, the first question, I guess, Jay, is -- you know just because of how this quarter got reported you guys are saying you had a very good quarter but outside of this one time kind of step-up, it's really hard to verify whether that in fact did happen for the core business relative to guidance.

So, could you comment about whether x-ing out the impact this event, would you have been below the revenue guidance that you put out last quarter, kind of in the guidance or above it, so we can kind of get some comment about the core business growth there? And I guess, another kind of question on that topic is just -- you know with respect to -- well, let me say this, are other -- are you in negotiations with other carriers to complete transactions like this or do you think this is kind of more of a one-time event for a large customer? Thanks.

Dave on your first question we would've been certainly within the range, I think towards the higher end of the range, if we had not been able to reach an agreement on the amendment that we discussed. So, we had a very good quarter without this amendment, would have been at the high-end, certainly we would not have exceeded it anywhere close to the tune that we showed the numbers as a result of this modification. And you can see on a number of line items not just at that site rental line, which I think you were specifically referring to but with regards to cost containment both at the site rental operating cost line. We've held those costs basically flat year-over-year. This is a second straight year that we've done that.

As I alluded to in my comments I'm not sure that we can continue to hold costs completely flat were working hard to do that. But we've had a great -- we had another great quarter with regards to cost containment and you can see that same thing on the G&A line. And then obviously I spoke to the fact that our services business continues to significantly outperform our expectations and I think we've done a very good job in that business. Both building up a reputation with customers that we can get things on air and delivered on time, as they would have expected to us -- as they would expect and as we've indicated we could. And the result of that I think is that we've seen an increase in the take rate for those services.

So, I think you could point to any line item of the items that we give outlook for and see that we had a really good quarter and specifically at the revenue line. We would have been somewhere between the midpoint and the high-end, x the transaction that we said I spoke about.

Okay, good.

And Dave, with respect to other transactions I guess what I'd say, without commenting specifically on any conversations we may be having, just as we did in this one, we would look at facts and circumstances as they come up, and make our best business judgment around whats fair economics for the transaction. And so, whether or not there are others to come like this, I really couldn't say today but we would look at each one, separately, and see if we can't -- if we could come up with something that we thought was fair to us obviously that met the customers' need.

The main takeaway from this agreement, is that we've received a contractual commitment from a customer for really all their 4G amendments You know there's -- as you can tell, bring forward the revenue, on 100% of their sites in a meaningful way. And we've done this without economic concession, when we compare it to our traditional, sort of "ala carte" pricing model that we've been using for years. So, it's simply a different way to price the activity. And you might ask yourself, I think some may be asking, well, why would either party or particularly the customer, be interested in this?" And I think it really goes to the pace with which our customers are finding the need to address the 4G buildout and accomplish this in the most expeditious manner creating speed and ease around our sites as they deploy.

So, this process as you can appreciate, streamlined their deployment cycle, getting on our sites and has eliminated some complexity around having to document every single site. And so thats really at the core of what we've accomplished here and then as Jay mentioned in his comments, we're going to be working very hard to make certain that the benefit of the bargain arrives with both parties, that we actually get them on the air quickly.

And, so the bottom-line there is that you are willing to basically front-end load cash, it might result in kind of a lower relative growth rate in the future but at the end of the day, the time value money trade-off is positive?

Yes, and I think you bring up another point. You say well then, is their future growth with this particular customer around amendments? And I would have to concede, no. Actually they've sort of bought out the shelf for amendments for this particular customer. Its limited in scope, as we've described, but with respect to amendments they have pre-contracted for all of that capacity on that existing array associated with their 4G amendments going forward.

So, you know if you take that as -- and park it, well then you can certainly assume that for that particular customer on existing arrays, you're sort of sold out.

Great, that's great color thanks guys.

Thank you. Our next question comes from the line of Jason Armstrong with Goldman Sachs, please go ahead.

Hey, thanks guys and that echo's David's sediments that was great color that I was missing. Just maybe one final question on a topic from my side. Just, Ben, when you mention that this is done, without economic concessions, just, how do we think through that? Is the amendment rate the same as it would have been? It's just front loaded? Or is this time value of money really is on your side here because you're getting this all up front, as opposed to over multiple years and this still leaves room for maybe a little bit lower amendment rate, but the time value is still on your side.

And then a -- just a second question just on buybacks, we started to see them pick up in the fourth quarter absent larger deal activity. What do you think a reasonable run-rate for buybacks is?

Sure, on the -- on your question on sort of time value money, what I would suggest to you there is, its contracted. And so what I would think about there is, whereas you previously -- we have previously, for years, priced amendments on a one-off basis and each one was a discrete transaction. Here you've got a contractual commitment, over a period of time, its not in definite, by the way, I'm not going to get into the specific terms of the contract.

But its not -- its not an indefinite length of time there is an end date to it. But it gives you that contractual certainty of that commitment at a level of pricing, if you bring it back to a "per site" basis, that is very comparable to what we've seen around our amendment activity over the years. And then again, the main benefit for the customer, and for us both, is that is provides speed and ease and simplicity in the back office to get them on the air quickly, provides them certainty of what they're going to be paying for these -- this additional capacity they're going to need on the sites over this definite period of time and limited in scopes as we've talked about. The second question around capital allocation, I'll let Jay get into, just around initiation of the buybacks.

Yes, Jason, I mean I think you are going to see us continue to do what we've done over the course of this year as we look at what opportunities are in front of us, see those opportunities to invest in things like, distributed antenna systems. Building those systems, or acquisitions in that area -- in that arena.

On tower acquisitions, land purchases, we're going to balance all of those against our ability to go out and purchase our own stock. It think you've heard us articulate that perspective for six or seven years here, and we haven't changed our view. I think you will see us continue to look at the opportunities in the market and measure those against what we think opportunity is if we buy our own towers via share purchases. And think about that on a long-term recurring, cash flow, per-share basis. And that's sort of how we value it does.

Now, in the short term I mentioned in the quarter what we spent capital on and new paths consumed the majority of the capital that we spent in the third quarter and then in the fourth quarter so far we've spent some of our cash settling the interest rate swap. So, we need to settle those swaps going into 2011 and obviously we've got some flexibility around the balance sheet. We've got an undrawn revolver and have a full availability there and then significant cash (inaudible) next year. So, it's going to be a balance against the -- settling the interest rate swap will certainly do that over the balance of this year and into next year and then beyond that I think you'll see us continue to just evaluate opportunities as they become available. And we'll be focused on trying to maximize recurring cash-flow per share when we choose one activity over another.

I would just add to that in the last quarter, as you mentioned Jay, in your comments, there were more than one significant sized opportunity that we were evaluating. And we don't have anything to announce today. But at the right price we would be a buyer for any of the things that we looked at this last quarter. And so, they were of significant size, that we would have certainly been allocating our cash, and potentially some borrowing capacity toward that -- those opportunities, so that will happen from time to time and that's consistent with what we've talked about for a long time.

Great thanks guys.

Thank you. Our next question comes from the line of James Ratcliffe with Barclay Capital, please go ahead.

Good morning guys, thanks again for the color on the new contract. Two questions, I guess one, would you expect new path to have any meaningful effect on revenue in 2011? And secondly again looking at -- for 4Q, are you seeing a pickup in M&A activity from potential small sellers or on the land acquisition side because people look to be motivated by potential taxes increases in 2011? Thanks

Sure James, this is Ben. On NewPath its back-end loaded, so by the time you get to the year end '11 run rate, its -- I would call it meaningful certainly against the purchase price that we paid. But as we mentioned I think when we announced, a lot of what we purchase is under construction still -- it's contracted but in deployment and development. So, really it's the second half of 2011 before you'll see it start to kick in. And, by year-end run-rate, it becomes, I'd say, reasonably significant relative to the price we paid. But that's still further out. And more color on that as we go along.

James on your site question around M&A activity. I think certainly at the land purchase level we're seeing land lords who are watching the current tax regime and thinking that this year is probably a better year to be a seller than next year. So, we've seen a ramp in activity and I wouldn't be surprised if we don't spend a bit more capital in the fourth quarter around land purchases than we have in the first couple of quarters of this year -- first three quarters of this year. And that may continue into 2011. It's difficult to tell how much of that is macroeconomic conditions than people looking to sell assets to raise cash against what the benefit is, maybe this year from this your from executing on a transaction and potentially saving some taxes on that.

On the second part of the question around tower sales has been mentioned there were a couple and have been a couple this year of significantly sized -- significant sized tower acquisitions in the market. We have observed over a long period of time that private tower owners are generally pretty proud of their assets, and expect a multiple, often times, that exceeds the public multiple at which we're trading at. And I would go back to the comment that I made to Jason in the last questions around how we evaluate purchases. And to the extent that we see assets come available and we think the growth prospects of those assets against the required price in order to acquire them, if that beats what we think we can do by buying our own towers absolutely interested in pursuing those kinds of transactions.

But to the extent that it becomes just an opportunity to try to add more revenue or add more EBITDA and we end up paying a price on a growth adjusted basis that exceeds our own towers, we'll revert back to just buying our own shares -- buying our own shares rather than being acquirer of towers. So, I don't think I would say that there's been a pick up of activity, but certainly as all of our multiples have gotten in to the higher teens or teens area, there have been more people that own towers in the private sector who have raised their head and started to look around and see if there is an opportunity to monetize.

I would say just as you've heard us talk about for years and we continue to hear this from investors as an interesting part of the dialogue we internally ascribed a very serious opportunity cost analysis to the dollars we would use in an M&A transaction. And that opportunity cost again, as Jay mentioned, is always measured against our own growth prospects on the sites we currently own. As we delivered growth this year as we've been talking about on this call, very significant organic growth coming from this portfolio that you want to make sure you don't dilute by otherwise not appropriately appreciating the value we had resident in the current portfolio by going off and doing something else. And so that's always sort of the opportunity cost evaluation that we go through and it's pretty rigorous.

Great, thanks.

Thank you. Our next question comes from the line of Clay Moran with Benchmark, please go ahead.

Good morning, it is Clay Moran. A couple of -- well really just one thing -- the significant sized portfolios you said you looked at were those in the US and can you confirm that, that really any acquisitions you are looking to do is still in the US? And I guess also can you just talk about how important scale is when you look at these acquisitions and compare it to your own stock is there some added value for increasing your scale? Thanks.

Sure Clay, the large transactions that we've contemplated sort of in the last few months, have been in the US. It doesn't mean we're not active and wouldn't look at other international markets and as you recall we are in Australia and are very optimistic about the long-term prospects there. I think we'll have more to talk about their in the coming months. But in terms of what's going on in terms of our real activity it's continued to focus most of our attention on the US.

And the reason that the opportunity cost analysis can be pretty pure at this level is because we don't think there's a lot of benefit from gaining scale through additional files. We think we are of the significant size, we are meaningful to our customers, they are obviously meaningful to us, but I think we provide a meaningful impact on their ability to deploy and accomplish what they want to accomplish in the US market whether they be an incumbent carrier or a brand-new entrant into the market. And would never suggest that we can accomplish everything that they need to accomplish, there's certainly -- they have to rely on some of our peers to do that and that's certainly the way the business works but I think we are certainly of a size where we are meaningfully important to their deployment needs and we're not disadvantaged in any respect. So, if that's the case then we can continue to demonstrate that and it becomes a financial analysis or an opportunity cost analysis around which portfolio we want to acquire, whether it be external or internal and that's the way we'll continue to operate.

Okay thanks.

Thank you. Our next question comes from the line of Gray Powell with Wells Fargo Security, please go ahead.

Good morning everyone, thanks for taking the questions. I just had a couple. So, on the Outlook, I mean just at a really high level does your guidance for 2011 imply that leasing demand next year is higher, lower, or the same as 2010?

Gray, thanks for the question. On the outlook for '11 it would be lower than what we're experiencing in 2010, obviously we don't have as much visibility into the year, sitting here in October so we're assuming that our new leasing activity in full year '11 as I mentioned in my prepared comments is about 6% growth and for the full year 2010 the new leasing activity was about a 7% growth rate. And a little higher than that obviously in Q3 of this year, so we're assuming that next year is going to be a little lower than this year. Some of that I would go back to my comments before on how we model tenants that do not have funding for future development and minimal impact there. We could get some benefit from -- if we have some favorable funding announcements from some of our customers and they end up deploying next year. But the baseline is lower for organic revenue growth next year as compared to what we saw in 2010.

Okay, so it sounds like sort of (inaudible) a typical level of conservatism that you guys normally do at Q3 and then we can revisit things in January when you report in Q4.

We revisit at every quarter.

Right, okay, and then the color that you've given on this contract amendment has been very helpful. I just want to make sure that I understood it correctly from a tiny perspective and then just the contribution to (inaudible) going forward. So, if I look at the upside to your Q3 results versus just kind of picking the point towards the high end of your guidance, I get roughly $12 million of additional revenue related to that contract modification. How should I think about the benefits of that modification to revenue in Q4 and in 2011?

Two things there. I think Dave, earlier in the Q and A, ask a question about how do we do this in the third quarter results related to it we excluded this contract or excluded this amendment that we were speaking to. And we would've been sort of at the mid to high-end if we were to have excluded it. In terms of the longer-term -- the longer term nature of the business here, this is the recurring number. So as -- if you are looking at 2011 revenue this number would be reoccurring for four quarters in 2011.

Okay that makes sense. And then just lastly, was the contact amended like at the beginning of the quarter, like middle or end?

We got a full quarter benefit from it.

Okay, great. Thank you very much, it's very helpful.

You bet Gray.

Thank you, our next question comes from the line of Tim Horan with Oppenheimer, please go ahead.

Good morning, thanks guys. I'm trying to understand maybe when new platforms will start getting built up for 4G on a timing on that? And I guess, somewhat related to that from just pure engineering perspective, are you -- do you think data growth is still accelerating? And how do you think the networks are kind of holding up and I guess the whole just engineering behind the new dynamics of being kind of 24/7(inaudible) you kind of alluded to. It seems like the 35 full growth you're looking at out of the next five years to your point, would be extremely difficult to keep up with and do you think they are going to do things differently from an engineering perspective the next three years with 4G than we've seen the last three to four years? Maybe just a little bit more color around that, thanks.

Yes, Tim, this is Ben. Its a great question and its one I think all of us are sort of scratching our heads over how -- how did the wireless networks of today, with the spectrum limitations that are there today, accommodate this demand. And I think probably the reality is, is that its going to be sub-optimal for some time, as this continued growth explodes. But at the same time there are improvements underway and I would prefer you to -- there's a good paper out that the FCC put out last week around their expectations on wireless growth in data . The additional infrastructure that will be required to even begin to -- as I mentioned in my comments, even have a shot at covering the demand and the additional spectrum that they need to make available to the industry and all those things go together to begin to satisfy this kind of growth.

The other thing I would mention is I think you're going see, overtime and it's frankly an evitability, is that over time there's going to be multiple architectures that satisfy this demand and so you'll have a macro tower sites as we certainly come to enjoy today. That will continue to be very valuable. But you will also have alternative architectures that are complimentary in building, in high density urban areas, in venues, that will take the form of DAS systems or things that look like DAS systems. I think that's going to continue to grow and be more a meaningful part of the employment solution going forward. I think you will see WiFi offloading which we already use if you have an iPAD I note that I do.

And so you'll have a number of alternatives to a macro network running with spectrum that give us the ability to try to accommodate this untethered demand that we all seek wirelessly. But if you look at the FCC study and it's a pretty concise report. It's one of the best I've seen recently. It tries to at least bring some of these variables and put some numbers around some of these things that are no doubt a very big challenge for our customers today, to try to deal with all this demands. The are no doubt a very big challenge for our customers to try to do with all this command and as it has already over the last ten years it's going to take effort from a lot of different fronts and a number of solutions. Things like Spectral Efficiency is in this report and continued improvements there. Additional spectrums certainly as contemplated over time. Not in the short period, but in the long period. Cell splitting, smaller cells, additional cell cites being deployed. All of those things are going to be partial in this work to accommodate this demand and I don't think there's any one silver bullet. I think it's going to take all of us in the industry, ourselves our customers are peers working very hard to try to accommodate this in an efficient way one that ultimately can remain profitable for the carrier and obviously

But more specifically on the 4G buildouts. When do you think the amendments will be enough to really handle all the traffic. Is it three years from now, a year from now, you'll start to see them putting new cell sites with separate platforms with a lot more antennas in place?

Yes,Tim, I guess I would say that, you never know because you don't know what the demand is going to look like over the next couple of years from the consumer. Which is ultimately going to be the driver of how many cell sites are needed and what does that architecture look like. But if history has taught us anything in the industry you go through two or three years of activity where the carriers will go out and touch all of the sites that they're already on and it's obviously faster to do it that way, because it requires less side [act] work. They all ready have existing base stations and equipment there. So, it's relatively cheap to do that. And typically that's where the focus goes for a couple years and then once they get through that process as they've acquired new spectrum as I think all of the carriers have in the case of 4G, they acquired additional spectrum in order to roll this out.

Then they go back and they look for sites that they need to go back and in-fill where they just put that new spectrum band, specifically on -- and we've seen that through two or three cycles of -- as they go from one generation to the next generation. So, if I were guessing at this point and again a lot of this depends on what is the activity from the consumer this -- we're probably two to three years at least away from it before you would start to see carriers take on brand-new cell sites for deploying this data activity. Now, that's not to say that the carriers won't take on brand-new leasing and we've seen recently going into the third quarter and into the fourth quarter and we think we'll see this next year, that we'll actually see a higher percentage from a brand-new tenants going on towers as opposed to amendments which have been very heavy for the first three-fourths of this year. And with heavy at the end of last year, we are starting to see a trend back towards a brand-new tenet leases. Most of those though are probably related, best we ca, in areas where they have holes in their network and they are trying to do things like sell split and then fill the results (inaudible) in the network. Rather than necessarily specifically related to just data traffic. So, a lot of that is conjecture and we'll just kind of have to see does can have to see how the consumer starts to pick up the device and use the data and then we'll be ready to help our customers if they need it.

Thanks guys. Our next question comes from the line of Edward Katz with Morgan Stanley,y please go ahead.

Hey, guys, its Edward Katz for Simon Flannery. I was just wondering if you could update us on what you're hearing surrounding the timing impacts from the operating lease re-classification, proposed by FSAB. And I think at [PCIA] there was some talk of working with (inaudible) to deal with some of the changes specifically on the [lesser] side. So, any view there, I would be appreciative. Thanks.

Sure Edward, that's a riveting topic to end the call on.

Trying to run everybody off the call.

So, there's been a lot of discussion around how to account for opening leases over the last couple of years and the FASB has taken this up, both in terms of how to account for a lessor, which would obviously be our revenue side as well as how to be -- how to account for leases under a leasee transaction, which would be all of our ground leases. I would say that that, all of that literature right now is a discussion form and nothing has been settled. At the end of whatever they end up deciding, I think we'll be able to report metrics that look similar to what they do today, in other words be able to give you color around what's changing in the business and what the leasing activity is and what the results of that is in terms of cash flow being produced by the business.

So I don't think it'll have any meaningful impact their. We don't have any covenants in any of our debt agreements that would tie us down or give us a problem if the literature came out one way versus another. So I think is just going to be something that we'll see develop in terms of timing I think most believe that this is probably at least a 2013 and more likely to be 2014 or beyond before this new literature will be implemented. And then at that point we would just have to take a look at how we report and how we account for those leases to comply with the new standard if there is one. And then I think we -- you would probably also see us -- depending on how it goes, you'd see us add some supplemental closure. In order to help everyone either get back to being able to calculate that covenant or alternatively if you're trying to figure out the under lying performance of the leasing business we should be able to report that, so much more to come there in the coming days and maybe we will have something more firm by the time we get into next year.

Can we expect to see something in the Q's or K's kind of going forward, either this quarter or early 2011 on that?

I think -- and again this is all preliminary, so you don't know exactly when they're going to come out with a standard. But there is some discussion heading into the back half of this year so it's a possibility by the time we get our -- the filing of our K in the January or February timeframe, that there may be some more color around this topic, if there is we would either includes there or we would certainly disclose it in our press releases. But again, this is not a change that's going to affect 2010 or 2011 results. We're probably talking many years out before it would actually be implemented.

Okay great, thanks so much.

Well again, I want to thank everyone for joining us on the call today, we look forward to finishing the year strong and reporting those results to you. So, we will reconnect probably, towards the end of January. Thanks again.

Ladies and gentlemen, this does conclude the Crown Castle Q3 2010 earnings conference call. If you would like to listen to a replay of today's conference, please dial 1-800-406-7325 or 1-303-590-3030 and enter the access code of 4374729 followed by the pound sign. Thank you for your participation you may now disconnect.