Crown Castle Inc (CCI) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Q4 2010 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, Thursday, January 27, 2011. I would now like to turn the conference over to Fiona McKone, VP of Finance. Please go ahead ma'am.

Thank you. Good morning, everyone, and thank you all for joining us as we review our fourth-quarter and full-year 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 supplemental materials in the Investor section of our website 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. 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 factor 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, January 27, 2011, 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 crowncastle.com. With that, I'll turn the call over to Jay.

Thank you, Fiona, and good morning, everyone. We had a great 2010, and are excited about the ongoing deployment of wireless data networks and the expected resulting benefits to our business. Let me quickly summarize some of our accomplishments, and then I will take you through some greater detail. Throughout 2010, we consistently delivered results above our original expectations, and we ended 2010 delivering another very good quarter of results.

For the full year, we posted site rental revenue growth of 10%; site rental gross margin and services gross margin growth of 14% and 29%, respectively; adjusted EBITDA growth of 16%; and recurring cash flow per share growth of 22%, compared to 2009. Each of these was considerably above our expectations as we ended 2009. In addition, we have settled all of our remaining forward starting interest rate swaps, and go into 2011 positioned to continue to invest in activities we believe will enhance long-term recurring cash flow per share.

With that, let me turn to slide four, as I highlight some of the results for the fourth quarter and full year 2010. During the fourth quarter, we generated site rental revenue of $447 million, up 11% from the fourth quarter of 2009. Site rental gross margin, defined as site rental revenues less cost of operations, was $325 million, up 15% from the fourth quarter of 2009. Adjusted EBITDA for the fourth quarter of 2010 was $311 million, up 18% from the fourth quarter of 2009. It is important to note that these growth rates were achieved almost entirely through organic growth on assets we owned as of October 1, 2009, as revenue growth from acquisitions was negligible.

On slide five, recurring cash flow, defined as adjusted EBITDA less interest expense less sustaining capital expenditures, was $176 million, up 33% from the fourth quarter of 2009. And recurring cash flow per share was $0.61, also up 33% from the fourth quarter of 2009. Also during the fourth quarter, we invested $106 million, as illustrated on slide six , including $80 million of capital expenditures. These capital expenditures included $32 million on our land-lease purchase program. During 2010, we extended over 1,100 land leases, and purchased land beneath over 500 of our towers.

As of today, we own or control for more than 20 years the land beneath towers representing approximately 70% of our gross margin. In fact, today, 34% of our site rental gross margin is generated from towers on land that we own. Further, the average term remaining on our ground leases is approximately 30 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 expiration. We continue to believe that this is an important endeavor that provides a long-term benefit, as it protects our margin and controls our largest operating expense.

Of the remaining capital expenditures, we spent $9.8 million on sustaining capital expenditures and $38 million on revenue-generating capital expenditures, the latter consisting of $26.4 million on existing sites and $11.6 million on the construction of new sites. Further, during the fourth quarter, we purchased $12.7 million of our common shares -- dollars worth of our common shares. Since 2003, we have spent $2.4 billion to purchase approximately 92.6 million of our common shares and potential shares, at an average price of $25.65 per share.

Also during the fourth quarter, we spent $41 million to settle the remaining [notional] of $2.9 billion of forward starting interest rate swaps that were due to be cash settled in 2011. Given that we refinanced the tower revenue notes in 2010, we no longer had refinancing exposure to interest rate variability; and, as such, we felt it was prudent to settle the swaps in the fourth quarter. I should note that the LIBOR forward rate at which we settled the swaps, was comparable to the LIBOR forward rate at the time we refinanced the tower revenue notes in August 2010.

We ended 2010 with total net debt to last quarter annualized adjusted EBITDA of 5.4 times, and adjusted EBITDA to cash interest expense of 3.1 times. For the full year 2010, as illustrated on slide seven and eight of the presentation, site rental revenues were approximately $1.7 billion, up 10% from full year 2009. Site rental gross margin grew 14% from full year 2009, to $1.2 billion. Adjusted EBITDA for the full year 2010 was $1.2 billion, up 16% in the full year of 2009.

Recurring cash flow was $657 million, up 22% from the full year 2009. And recurring cash flow per share also increased 22% from full year 2009, to $2.29 per share for the full year 2010. I would note that due to our rigorous control on costs in 2010, well over 90% of the growth in site rental revenue found its way to site rental gross margin and adjusted EBITDA. And while we are only one month into 2011, we are seeing encouraging signs of continued growth, fueled largely by carriers overlaying 4G networks.

Further, reiterating what I said on our last earnings call, our outlook for site rental revenue has only a minimal benefit from leasing activities from emerging carriers that are dependent on securing future funding. Having said that, I do believe that these emerging carriers represent the best opportunity for us to outperform our expectations during 2011, and believe this potential opportunity is most likely to manifest itself in the second half of the year.

On that note, moving to the outlook for the first quarter of 2011, as shown on slide nine, we expect site rental revenue growth of 10% from the first quarter 2010 to first quarter 2011, and recurring cash flow growth of 18%. We expect site rental revenue of between $445 million to $450 million, and adjusted EBITDA of between $305 million and $310 million for the first quarter 2011. The sequential growth in adjusted EBITDA between the fourth quarter 2010 and our outlook for the first quarter 2011 is impacted by the following items -- there is always some seasonality, it seems, with the services business, that typically results in lower services margin in the first quarter.

To that end, we expect the contribution from services margin in the first quarter 2011 to be approximately $7 million less than what we experienced in the fourth quarter of 2010. Our expectation for the services margin in the first quarter of 2011 is about what we generated in the first quarter of last year. Second, the Australian dollar to US dollar exchange ratio has moved favorably for us since we announced our full year 2011 outlook in October 2010. Since we have not changed our assumption for the Australian exchange rate throughout 2011, we have approximately $6 million of potential upside to adjusted EBITDA, if rates were to remain at the current level. Finally, several other non-recurring items positively impacted adjusted EBITDA by approximately $1 million.

Moving to full-year 2011 outlook, as outlined on slides ten and 11, we expect site rental revenue growth in 2011 of approximately $125 million, comprised of approximately 2% growth in the existing base of business, and a little less than 6% growth from the expected additional tenant equipment to be added to our sites. And, we expect recurring cash flow of approximately 11%, and would expect to augment this growth through the opportunistic investment of cash flow in activities such as share purchases, tower acquisitions, and additional site construction and land purchases.

As shown on slide 11, we expect to generate approximately $730 million of recurring cash flow, and invest approximately $275 million on capital expenditures related to the purchases of land beneath our towers, the addition of tenants to our towers, and the construction of new sites, particularly distributed antenna systems. The remaining portion of recurring cash flow represents nearly $115 million per quarter of cash flow that we could invest in activities related to our core business, including reducing common shares outstanding and acquisition. This capacity obviously ignores our financing capacity.

Consistent with our past practice, we are focused on investing our cash in activities we believe will maximize long-term recurring cash flow per share, which we believe is the best long-term measure of shareholder value creation. I believe that this level of capital investment can add between 4% and 6% to our organic recurring cash flow per share growth rate annually. In total, absent any capital raising activities, we expect our total investment capacity to be over $1 billion for 2011. In summary, we had a terrific 2010, with a number of significant accomplishments. And I am very excited about 2011, as we continue to execute around our core business and allocate capital to enhance long-term recurring cash flow per share. With that, I'm happy to turn the call over

Thanks, Jay. Good morning, everyone. Let me clean up one of the comments, just for the transcript. I think we actually spent $431 million settling the swaps, you might have said $41 million. So we -- a little more than that.But, we are happy that's behind us. Thank you for joining us this morning. I want to take a couple of minutes to reflect on the tremendous year that we had in a number of fronts.

As Jay just mentioned, we had an excellent fourth quarter and finished the year very strong, growing site rental revenue and recurring cash flow by 10% and 22%, respectively. In addition to a strong year of site leasing, our US services business performed exceptionally well, due to the increased take rate on the part of our customers. Service revenues were up 25%, and service margins were up 29% compared to full year of 2009. This success results from a diligent effort to capture more of the opportunities assisting our customers in locating or upgrading installations on our sites. This increase in services activity is attributable to the confidence our customers have shown in Crown Castle, as regularly expressed in our customer surveys, that consistently rank us as delivering the highest customer satisfaction in the industry.

Second, we closed on the acquisition of the NewPath Networks transaction, one of the leading providers of distributed antenna systems, or DAS networks, furthering our ability to extend wireless infrastructure for customers beyond those areas served by traditional towers, and broadening our service offering in this growing market. Third, we completed our refinancing activities during 2010, with an outcome that we are very proud of and that clearly surpassed our expectations when we started the refinancings in early 2009.

As Jay mentioned, our 2011 outlook for recurring cash flow growth is 11% before external investment or share purchases. And I am excited to return to enhancing our growth with opportunistic investments, such as share purchases, tower acquisitions, DAS opportunities, and land purchases that we believe are accretive to long-term recurring cash flow per share.

Reflecting on last year, I recall mentioning a stretch goal on the second-quarter call -- growing recurring cash flow per share by 20% for the year. I am very pleased that we exceeded that goal for 2010, and you can rest assured that we have similar stretch targets for 2011. There are a lot of positive dynamics in the wireless industry, which continue to create an opportunity to post these types of strong operating results, and continue to make us excited about our business.

The growth in the broader wireless and mobile Internet markets continues unabated, as consumers continue to embrace new wireless devices and carriers accelerate their plans to deploy 4G networks. We are witnessing a mobile Internet revolution, and our assets are an essential component of our carrier customers delivering on the promise of this technology. As can be seen from the recent carrier results, the delivery of these data services to consumers is the future of wireless and represents profitable growth for the industry.

On that note, I'd like to draw your attention to some important trends that continue to drive our business. On a macro level, during the first half of 2010, one in every four adults lived in a wireless-only household. That compares to one in five adults in the first half of 2009, and one in eight adults from the first half of 2010 -- so doubling the wireless penetration -- wireless-only households in just two years. Further, more than half of adults aged 25 to 29 lived in households with only wireless phones. This is the first time that the number of adults in wireless-only households has exceeded the number of adults in landline households in any age group.

The provision of data services is the most significant driver of growth for our business, as adoption rates for data-enabled devices continue to grow. The number of devices with three or more wireless transmitters or receivers, like Bluetooth, Wi-Fi, and cellular, has increased more than seven times since just 2008, from 7% total devices in 2008 to more than 50% today. Smartphone penetration was approximately 30% at the end of last year, and is widely expected to surpass 50% by the end of this year. And they obviously dominate sales.

Access to the Internet by mobile devices is on a strong upward trend. And according to a report by the Pew Research Center, 59% of Americans accessed the Internet on their phones last year, up from 25% the previous year. In fact, Gartner believes that by 2013, the number of smart phones will surpass the number of PCs globally, and that is not counting tablets.

It's important to note that while the penetration of rate of data-centric devices is impressive, it also represents considerable upside to come. At the recent Consumer Electronics Show in Las Vegas, more than 80 tablets were introduced, and 2011 was coined the year of the tablet. Tablets are forecasted to grow as fast or faster than MP3 players. According to Barclays, tablet units will top 38 million in 2011, versus 15 million in 2010, and are expected to grow to an estimated 82 million units by 2015. Undoubtedly, the proliferation of all these data-enabled devices will significantly increase the load on wireless networks, and therefore, demand for our assets.

Aside from tablets, another dominant theme for 2011 is 4G deployment. We have seen the importance of this over the past few months, with recent news releases from carriers outlining their 4G deployment plans for 2011. AT&T, which has completed its deployment of HSPA+ to almost 100% of its network, plans to launch LTE service in the middle of 2011, covering between 70 million and 75 million POPs by year-end, and be largely completed by 2013 -- and accelerating this build-out as we speak. Verizon, which has already launched LTE service, covering 100 million POPs, plans to double that coverage over the next 18 months and blanket the country in the next three years. In 2011 alone, the carrier will add over 140 additional markets to the 38 it has in operation today.

T-Mobile plans to double the speed of its 4G network to HSPA+42, and provide coverage on the faster network to 140 million Americans in 25 markets by the middle of this year. Others, notably Clearwire and LightSquared, are in the earlier stages of deployment, with attractive spectrum assets and business plans that are promising. Based on announcements by the major carriers, there will be over 50 4G devices available to consumers by the end of 2011. These statistics are why we remain focused on the US market -- the largest, fastest-growing, and most profitable market by every measure, in the world. With the demand for data services concentrated disproportionately in the major cities, we are best positioned to capture this opportunity with the highest concentration of sites in the top 100 markets and industry-leading customer service.

So, to summarize, we had a great 2010. We accomplished a number of operational and financial objectives. While we are less than a month into 2011, we are excited about the growth we see in revenue and recurring cash flow per share prospectively for 2011. And in addition, we are optimistic about the potential upside from emerging carriers and the benefit from the investment of our recurring cash flow. Finally, we are very excited to be participating in an essential component of the growth in the mobile Internet. It's a fun place to operate right now. With that, Operator, we would like 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 Jason Armstrong with Goldman Sachs. Please go ahead.

Maybe a couple questions. First, on deleveraging. You talked about building up the investment capacity, and what you can do with that capacity. But, as you said, I think that will be without the financing capacity in the business, so capital raises on incremental EBITDA. And I'm just wondering how we should think about that over the course of the year. Is there an intention to exercise incremental financial capacity, or should we expect you over the course of the year to delever the business as EBITDA grows?

And then, maybe just a second question on the pacing of 4G upgrades. You guys obviously laid out a pretty compelling case around what some of the big guys are doing. And I'm just wondering, for a company like Verizon or -- AT&T may be in a different boat, given some lease modifications. But, for those type of companies, is there a sequencing where the first layer of tower amendments, they sort of go to their own first, and then maybe the second layer is they go to towers they can upgrade more cheaply, and then, the next layer gets more expensive for them?I'm just wondering how to think about the pace of 4G and actually what it means to you guys. It seems like there could be an uptick.

Sure, Jason. Good morning. I will take the first question, and Ben will take the second one. I think what you should expect is the path that we've been on now for the better course of a year. I think what you'll see us do is take the cash flow that we are producing in the business and invest that cash flow in some of the activities that I mentioned -- share purchases, tower acquisitions, maybe increasing the amount, looking for opportunities around the distributed antenna system, and potentially even some more land purchases.

I think as we think about the capacity that we are creating and the balance sheet, don't expect us to take any of our cash flow and pay down debt. But I wouldn't necessarily expect us to go out, and just in the normal course, borrow more money to relever the business. But I think we'll trend towards about a five times debt-to-EBITDA ratio. At that point, and I would say even this today, as we look at acquisitions and assets, I think we are certainly comfortable keeping a similar level of leverage on the acquisition that we would undertake. So, certainly there is a significant amount of capacity there as we start to look at larger acquisitions.

I think we've talked about this in the past, when we talk about leverage. I think it's a balance that we're trying to strike here, both in terms of giving ourselves a little bit more headroom, so that we have some capacity if there's an acquisition that we really want to do, that we can go and access the market. Obviously, at over three turns of adjusted EBITDA to interest -- cash interest expense coverage, we are well above anything we need to do in terms of ratios -- leverage ratios and covenants, as well as comfort running the business. So, we might see it tick up a little bit, in order for us to win an acquisition, if we were interested in doing it. But I wouldn't suggest that you should expect us -- to see us add nominal levels of debt apart from an acquisition.

I think we will just delever in normal course, which is working out to be somewhere in the neighborhood of about half a turn to three quarters of a turn per year. So by the end of 2011, I think we're at about five times, and if we're growing EBITDA, as our guidance would suggest, somewhere in the neighborhood of $80 million to $100 million a year, we maintain that level of leverage on the business. That's another $500 million of cash flow.

So, the combination of taking the $730 million a year of cash flow that's growing, plus the investment of maintaining leverage in and around five times, should put our ongoing capacity somewhere in the neighborhood of $1 billion to $1.2 billion in the years [forward]. So, hopefully that's helpful, as you think about modeling over a longer term.

Yes, it's definitely helpful. Can you remind us what the threshold would be for the right deal? The deleverage threshold that you'd consider?

Well, I think our going-in assumption would be to look at it in terms of somewhere in the neighborhood of about five times. But I think we are -- and have been, given the way we've run the business over time -- if there was a different growth characteristic of an acquisition relative to the way our growth rates look in our business, we might be willing to take on a little bit more leverage to do it. I think that's probably in and around the range of maybe a turn, at the most, beyond that five turns.

But, I don't want to pin myself down to the point of saying, under no circumstances would we be interested in taking on a little bit more leverage. I just think a normal course, what you're going to see us do, is operate in and around the five times. And then, following any acquisition that we did, if we decided to take the leverage ratio up associated with an acquisition, I think you would -- after that point, see us again go back to operating and allowing the business to naturally delever. Not using cash flow to pay down debt, but the growth in EBITDA to naturally delever against a set nominal level of indebtedness and move back towards that five turns ratio.

Jason, just on your second question, in terms of pacing of 4G deployments. I would observe that the normal pattern that we saw with 3G continues to hold, which is typically the carriers will roll out a market, and then very quickly come back and do infill sites to deepen their penetration in that market, and density, and the capacity of the network, as the consumer load grows. And then, you also see amendments on the existing sites as well. So, it's -- it's directly related to the consumer take up, ultimately, and we are still in the very early days of this. But, early expectations would be that we are going to see a very similar pattern of somewhat of a thin launch, and then a continual enhancement of the networks in existing cities, as well as, obviously, continuing to launch additional markets.

And Ben, does infill mean more to you than the initial thin build? I.e., the thin build goes for the cheapest cost billed, which is their own sites or where they have capacity on existing sites, and then infill might mean something different?

Well, I think with any of the carriers today, the number of towers that they own is a small fraction of their overall network. And so, anytime a carrier is doing something in a major market, it's a significant opportunity for us in that market. So, I am not certain that they actually can prioritize their own sites. Now, obviously, they hit their own sites when they can, of course. But that's a small fraction of any of their overall networks, and so, I don't think that's a real material component. It's obviously a location-based business, and given our exposure in the top markets, we see a lot of activity, whether it's the initial overlay or the follow-on infill build.

Great. Thanks, guys.

Sure.

Thank you. Our next question comes from the line of the Jonathan Atkin with RBC Capital Markets. Please go ahead.

Good morning. A few questions. First of all, on the services business, I wondered if you can give us a flavor for whether we're trending towards further growth, or a similar range as we saw in 2010, in terms of just the volume of business as well as the margins. And then, on the CapEx, I wondered what the rough expectations might be for revenue generating CapEx at existing sites. I noticed it was down about 20% compared to 2009. And are we going to stay at these levels, or might it decline further?

Sure, Jon. On services, we are extremely pleased with the results that we delivered over the last -- really, as it's grown over the last three years. In the last two years, in many markets, we have doubled our take rate -- and I should say, in many regions of the country, more than doubled our take rate in terms of opportunities when a carrier is improving through an amendment or going on a new site, the opportunities where we capture that opportunity to install that and manage that business for them, that business has continued to grow.

I am always -- as you know, for years listening to us talk about this, always reticent to forecast that continuing to grow. Because at some level, you get to the point where you are doing about all you can. And so, as you saw from our guidance for 2011, we implicitly took that down. Although we don't give you service revenue and margin guidance directly, I think we were clear that we implicitly would guide lower, or have expectations lower, beginning of the year than we delivered last year. And we have been very fortunate to exceed that over the last few years. But there will come a year where that is flat and you don't continue to grow that on the same set of assets. And so, that's the way I would encourage all of you to think about it.

One other piece that's an ancillary benefit to that is obviously, it gets us closer to our customers, it retains control of the improvements and consistency on our own towers. And so, there is some definite operational benefits, and I would say marketing and business benefits, to being in this business. And it's not directly -- you can't see it necessarily in the financial statements. So we are very interested in continuing that activity, but you should not continue to expect it to just grow year-over-year, on out. I would say, we forecast it flat to down on any given year, and hopefully surprise ourselves on the upside. On CapEx, on improvement CapEx, Jay, you want to take that?

Yes. Jon, on that question, what I would say, maybe it's helpful to just kind of go through the total amount that I talked about for 2011, the $275 million . I think we will probably spend somewhere in the neighborhood of about $150 million on land purchases for the full year. We will spend about the same level, we expect, for revenue-generating CapEx on our existing sites, keeping in mind that's the CapEx that we spend basically to add additional tenants to our existing sites. It may be up $10 million or so, but in and around the same level as we spent in 2010. And then, the last couple -- the last meaningful component there is the amount we will spend on new sites. And we are hoping to spend somewhere in the neighborhood of $45 million to $50 million. The vast majority of that will be on distributed

Great. Thank you. And then, real quick on the services, on the margin side, any trend there to kind of think about, or should we take the past -- the average of the past several quarters as the jumping-off point?

I think -- I think that's fair.

And then, with respect to the master lease agreement that you discussed on the last call, related to 4G activities at a particular customer, any possibility that there might be additional such agreements this year?

None that I am aware of, and certainly wouldn't talk about if I -- by name, if I could. But, we are very pleased with the agreement we had struck and we described on the last-quarter call. I think some of you might ask, would you do another one? Certainly, on the right terms. And, we don't have anything brewing of that type at the moment.

Thank you very much.

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

Thanks for taking the question. Maybe just two, if I could. Just jumping off that last point, Jay, could you maybe elaborate a little bit on how the AT&T agreement is changing the 2011 outlook, relative to 2010, in terms of maybe growth and margin? Meaning, if you hadn't signed that agreement, how different do these forward-looking numbers look than they would otherwise have looked?

And then, I guess the second question is -- obviously, towards the end of last year we had a little bit of a lull, in terms of momentum, for guys like LightSquared and Clearwire -- and Sprint was obviously still kind of idle most of last year. But we have seen kind of a resurrection, a little bit. LightSquared -- it has new life breathed into it because of the regulations or the approvals they got on spectrum. Clearwire raised $1 billion, Sprint is kind of laying out a network update program. Is there any sense that that stuff is moving yet? What have you baked for that -- expectations for those kids of issues into your forward-looking numbers?

Sure. I think, relative to your first question, in terms of the outlook in the customer contract that we announced last quarter and what the impact that has on our outlook -- as we talked about, we did a transaction with one of the major carriers in the US. And it was related to amendment activity on sites that they were already on, for which they paid us a healthy -- a healthy -- what we believe to be a healthy and appropriately priced amount for the amendment as they rolled out 4G. The impact that that has, if you think -- and let's just go up to 40,000 feet and talk about the drivers of revenue growth for a second.

As I talked about in my comments, we think from 2010 to 2011, total revenue growth is around 8%. 2% of that is coming off the existing base of business, net of any churn that happens in the business, and then a little less than 6% is coming from organic growth. If you get a little bit more granular in the organic growth drivers, about 30% to 40% in any given year of the organic growth, that 6% number that I am speaking about -- about 30% to 40% of that comes from amendment activity, generally. And then, the remaining 60% to 70% comes from brand-new tenants being installed on those towers.

So, the impact to the outlook would be around that 30% to 40% of amendment activity from one of the carriers. Presumably, and we would expect this in our outlook, we'll continue to get additional revenues from the other carriers that we have not done any similar deal with. So, the impact, frankly, is relatively muted if you're trying to figure out, okay, what would the growth rate have been if we hadn't done that, it 's relatively muted. Obviously, we already -- we already have most of that in the run rate.

I think with regards to your second question and the momentum change, certainly, as we have talked about in past calls, the slowdown we really saw from the emerging carriers started in the late summer time of 2010, and we really haven't seen a pickup in that activity yet. As I referenced in my prepared remarks, we think that there is potential for upside from them, but that is probably toward the latter half of 2011, as they continue to work on deployment plans and the next phase of their build-out.

You referenced the LightSquared announcement that they made, and their intention, certainly, as they stated publicly, to get out and get a couple of -- get three (inaudible) markets launched in the third quarter of this year, as well as build out 100 million POPs by the end of 2012. We'll obviously be working hard to satisfy that customer's demand, as they focus on the market. But I think at this point, the visibility that we have towards that is relatively limited, which is why we have really a minimal impact in our outlook for '11 from those emerging characters. And we'll just have to see how the year develops.

And, if you can, on just the Sprint side of it, has anything been actually happening towards their modernization program? Presumably, they would have to engage you early in that process.

Sure. And they have been public in their discussion around their Vision project, and we are involved in conversations with them, David, and are quite pleased with where that's going. We don't ultimately discuss specific contract details with you and divulge that in terms of customers. But we are quite pleased with what we see, and believe that the configuration that they want to put up will certainly add efficiency to their network -- capacity to their network. It will also result in additional revenue for us, and that's where we are headed.

Along with that, just to probably answer your next question or maybe someone else's, they have an acknowledged desire to have flexibility around the iDEN site. They somewhat have that anyway, because the average life on the remaining iDEN leases is sort of in the three- to four-year range anyway, which somewhat conforms to their expectations of when they might want to decommission or repurchased those sites. And so, they will gain that flexibility that they effectively already have, through some kind of agreement we would contemplate moving forward with them.

But if you think about the additional charge for the configuration at the CDMA site, we think it's about a push, net net, when you wash through the configuration charge and the churn, but the flexibility that they would have . Obviously, to the extent that they don't ultimately use the churn flexibility, and repurpose those sites for CDMA purchases, well then, obviously, we wouldn't see that

All right. That's great, Ben. Thanks.

Our next question comes from the line of Richard Prentiss with Raymond James. Please go ahead.

Thanks. Good morning guys. Can you hear me okay?

Yes.

Okay. I just wanted to follow up on some of the guidance comments earlier. First, we heard, I think, the Aussie FX would be an upside if it continues to stay at the same level. So you have not updated guidance for FX, of about $6 million potential -- is that what I heard?

Right.

That's correct, Ric. It's about $6 million at the EBITDA line, and a little over $8 million at the site rental revenue line.

Okay. Second question is, historically -- gosh, I've been doing this way too long, I guess. But, at least for the last four years, you guys have not historically raised guidance on this fourth-quarter call timeframe. But I think on the first, second, and third quarter calls, I think ten out of the last 12 of those calls, you've raised guidance. What we're hearing today from you about the best ability to outperform the second half of the emerging carriers, does that mean we shouldn't be expecting that typical kind of -- you've left some in the kit bag to raise guidance as we go through quarterly?

Well, Ric, I think you've correctly noted that our business has performed very well over the last several years, and we'll just have to get into the year and see. Obviously, the carriers, as they roll out their budgets at the beginning of any calendar year and start to work on what markets are they going to deploy, and how they are going to do that.

We will start to see some of that, and the carriers will have those budgets probably laid out by market towards the latter half of the first quarter. And we'll just have to see how it goes. As we get into the balance of the year, there are certainly a number of positives, as Ben was mentioning in his prepared remarks, in the broader environment. All of those look like upsides. The timing of which those will impact us, I think, your guess is probably as good as ours at this point. So, we'll see how the year develops.

Okay. And then, just definitionally, on your recurring free cash flow -- since you've settled the swaps in 2010, you still have some amortization, I think, in the guidance, or some non-cash -- significant non-cash in the interest expense line. Can you just talk through that? I think as more and more real estate investors start looking at this space, they focus a lot on cash interest and on what AFFO we'd be looking at.

You're right, Ric. And we have in the guidance, for the full year 2011, approximately $103 million of non-cash interest expense. The majority of that would be the amortization of the swaps that we've ready settled. So obviously, they were cash at one point. But in the forward numbers, we don't have any other cash liabilities associated with that. So, I think there are -- what we have done when we picked the recurring cash flow per share metric -- and I realize some like to look at it different ways. But we picked the metric because we thought that it was the best predictor of what ultimately an FFO-like per share metric would look like in our business.

And so, as we look out four, five, six, seven years from now, at the time at which we are looking at reconversion -- somewhere in the neighborhood of the 2015 or 2016 timeframe, when our NOLs expire, we think that RCF per share is a pretty good metric to give an indication to investors as to how much cash is available to be distributed to shareholders, be that through the form of share buybacks or dividend payments. And so, I think as we proceed -- I've had a number of investors ask me whether or not we would -- will convert to some sort of FFO metric over time.

I'm certainly not opposed to that, and I think the other thing I would mention is, to the extent that you want to try to narrow down and see exactly where the cash is coming out of the business and how it moves from quarter to quarter, obviously, I think the best place to see that is in the cash flow from operating activities statement that we provide in the press release, which is really pretty close to where our RCF per share metric is. But I would continue to just encourage people to look at that RCF per share metric, as it takes into account all of the non-cash items, both moving for us and against us, and the net number there is real close to what actual cash coming out of the business is.

But if the -- if interest expense has about $100 million worth of non-cash, does that mean the operating lines have the counterbalancing effect of that?

That would be true.

Okay. And then, on the fourth quarter, a little bit higher SG&A and a little bit lower tower cash flow margins than we've seen. Anything seasonally going on there?

No, nothing out of the normal.

Okay, great. Thanks, guys.

Thank you. Our next question comes from the line of Michael Rollins with Citigroup. Please go ahead.

Thanks for taking a question. If you look at all the leases that you've extended and the land that you've bought, how should we think about the growth in cost per tower, now that you have secured more of these agreements over time? Thanks.

Yes, Mike, that's a great question, and one of the primary reasons that we are pretty excited about the efforts that we have undertaken on our land leases. If you look at the income statement, the largest expense line item that we have is interest expense. We just talked about that with Ric, on the -- it's about $400 million of cash interest expense in the business. Virtually all of that is fixed-rate debt, with an average maturity of about eight years. So we wouldn't expect that number to move around much for the next seven to eight years.

The next largest expense line item is ground lease expense, which is $300 million of our expenses. And, the normal escalations in a ground lease, like our revenue side, is about 3% to 4% per year. Now, much of that is fixed -- fixed escalators, and so we straight-line that over a long period of time. You don't see, in any given lease, a movement as much from year to year. But as the portfolio rolls or it goes into a new term, you get a step-up in that expense that would be above cash, and then it goes back towards cash over time.

So what I think we would say about this, given the number of transactions that we have done, longer term, I think we feel pretty good that we can maintain total operating costs -- direct operating costs on the tower line, somewhere in the neighborhood -- something south of about 3% growth per year. And we're starting to feel really comfortable, given the amount of transactions that we've done on the land lease side, that there aren't a lot of leases left that we would expect a meaningful step in rent that would cause that number to change by any significant amount. So, I think if you -- it gives us a lot more certainty around being able to model operating expenses over a long period of time. And I think I would say, continue to model it somewhere in the neighborhood of 2% to 3% growth on land lease, and the other operating expenses probably grow at about 3% per year.

Thanks. That's very helpful.

Thank you. Our next question comes from the line of James Ratcliffe with Barclays Capital. Please go ahead.

Good morning, guys. Thanks for taking the question. Two reasonably broad ones, related to M&A. Clearly, other than NewPath, you haven't bought anything in about 2.5 years. And, it sounds like the last time we talked, that you were kind of on the same path. Are you seeing any changes in relative valuations that make acquiring towers versus construction or other uses of the capital more appealing? And, secondly, when you look at potential assets, do you have a general view on the relative appeal of towers that were built to be multi-tenant, third-party, tower company towers, versus towers that are part of carrier portfolios?

James, sure, let me take a crack at that. On the M&A side, I don't know that we have seen enough significantly sized transactions to have an updated view on valuation, about whether it's changed up or down. Obviously, there are facts and circumstances around each individual transaction you will look at, how occupied the sites are, how many tenants per tower they are, which tend to drive -- obviously, the fewer tenants per tower, the lower revenue or margins per tower, the higher expected multiple, just as a general rule, with the expectation of adding revenue and bringing that multiple back down, obviously, less per tower in the price.

And the converse is also true.The higher occupied sites would typically have a lower multiple. But I'm not sure we've seen anything of any size lately that would give us an opinion whether that has moved dramatically. In terms of our interest in looking at something of any size -- absolutely, we have an interest, and we have plenty of financing capacity, and we will do what we have always done, which is take a very hard look at something and see if we think it adds value to the firm long-term, compared to alternatives that we have.

We don't necessarily have a bias about whether you are buying carrier towers or you're buying, as you say, tower company multi-tenant towers. For the most part, virtually everything that's been built in the last seven or eight years, whether it's by carriers or by the tower companies, have been multi-tenant capable. What's most important are the locations.

And so, we do a -- we'll do a very thorough scrub of the location of a prospective acquisition, to try to make a determination around leasing, and what that upside looks like relative to our other alternatives, including buying our own stock for our own towers, as we've talked about for years. And so, that's really how we'll look at it. We have an active interest, we have an active team looking in the market, and would expect you'll see more to come there.

Thank you.

Our next question comes from the line of Simon Flannery with Morgan Stanley. Please go ahead.

Thanks a lot. Good morning. Just to follow up on the tower acquisition point, your other colleagues in the tower space have been pretty active on the international scene recently. You've stayed away from that for a while. Any update on your viewpoint on that, given some of the opportunities there? And then, we talked about DAS a few times today. Perhaps you could give us an update on NewPath and what the -- some of the trends you're seeing in demand on that side are. Thanks.

Sure. Simon, I don't have anything new to report on international, other than to tell you that we do continue to look at other transactions internationally, if for no other reason, to stay educated and to confirm our view that we are very pleased in the two large markets that we currently operate, the US and Australia. So I don't have anything to share with you there, although as I always say, we will never foreclose that notion, and if we see something we want to do, we will certainly do it. Risk-adjusted returns are very important to us.

On the DAS front, we are very pleased with what we see. The team there is very busy. We have integrated our own DAS team into the NewPath organization, called the Crown DAS organization today. There's about 45 individuals there that are going very hard. We're working hard to leverage our own tower sales force into that business, and are very pleased with the pipeline we see developing there, and the willingness of carriers to undertake DAS -- the DAS architecture as the right solution for areas that you just -- you need more capacity than you can ultimately get with maybe a distant macro site, a tower site, where you can't otherwise locate a tower site closer. And we see a very large pipeline there.

I have said before, and I will say again, and this is something of a challenge to our team. We hope and expect that we can add one percentage point to our revenue growth from that business for a while, which is not insignificant for something as small as it is to start with. And from there, we will see where it goes. But we are pleased up front with what we see.

Thank you.

Our next question comes from the line of Jonathan Schildkraut with Evercore Partners. Please go ahead.

Great. Thanks for fitting me in here. Just kind of two questions. First, focus on the incremental margins on revenue growth. In the last couple of years, you guys have been very high -- it has a lot to do with integrating some of the portfolios that you previously acquired. As I look into 2011 expectations, it looks like maybe 400 basis points less, or maybe 93% last year, maybe 89%-ish in 2011, based on expectations. Is there something going on there that we should understand? And the second question is, you've been driving down your G&A cost as a percent of your total revenue over the last few years. The movement has been 100 basis points or more. And I was wondering, what's left there, and whether that could continue to decline? Thank you.

Yes, thanks for the question. It really is remarkable in the business to continue to be able to produce over 90% incremental margins, and we've done that through a combination -- obviously, revenue growth, and the amount of revenue growth that we have had, is really helpful. And back to my prior comment, with land lease expense going up contractually, somewhere in the neighborhood of 2% to 3% per year. And I think what we do when we give our initial outlook is what we believe for the year, and then we worked really hard on the cost side, to try to hold it lower than that.

So, somewhere in the neighborhood -- I think the guidance, as you mentioned, is 89% incremental margins, and we're doing everything we can to push those through 90% and make them as high as we possibly can. I appreciate the comment on G&A -- and you're right, we have held our cash G&A expense flat to down over the last several years, and are continuing to look for opportunities to do that and continue to manage that. I think as a percentage of revenue, we would expect that G&A would continue to fall as a percent of overall revenues as we grow revenues, and also as we look to hold that cost in and around a level that we are currently.

I would just add, for those on the operating side or maybe interested in our back office, we have become much more efficient, and it's our Management team's contention that we have some capacity where you could add assets without even remote growth in G&A that you might otherwise feel is consistent with the adding of assets.

And so, there is some scalability that is built in now, through efficiency and automation, that is why we've been able to hold it flat. But even on top of holding it flat to down, we feel like we've got some capacity resident in the organization. Some of that will go to work on the DAS business, as you can imagine, as we have high expectations for that. But otherwise could add tower assets with very little change in nominal G&A.

Great. If I could squeeze one more question in, AT&T noted that they were pulling forward some of their LTE spend to take advantage of tax incentives that are put in place for this year. And I was wondering if you were seeing -- and it's still early in the year, of course, any activity in general that would lead you to believe that other carriers might pull forward spending. And then, in terms of your own expectations for spending, particularly on the DAS, will it change your approach to how to deploy capital? Thanks.

I don't know that it would really change our approach with how to employ DAS capital. Those projects are bid and work out over a long period of time, so the pipeline is relatively long -- probably doesn't hit this calendar year. I think broadly in the space, as carriers look to deploy capital, to the extent that they will accelerate it, I think they're accelerating it largely more for the macro trends that are happening in the wireless space.

To the extent that they would try to bring some of what they would've otherwise done in '12 into 2011, that would be great for us. And I would imagine you'll have a number of folks start to look at that as the year progresses. I think it's important to note that that's probably more impactful if you start to think about what will happen in the back half or the last quarter of the year. It's probably more impactful, frankly, to our run rate revenue going into 2012, than it would necessarily move our overall outlook for the full year.

All right. Thank you again.

You bet.

Our next question comes from the line of Brett Feldman with Deutsche Bank. Please go ahead.

Thanks for taking the question. I'll stick with the M&A theme here a little bit. You mentioned how when you evaluate a potential acquisition, the location of the asset is very important. T-Mobile has made it clear they're thinking about selling their portfolio again. And like you guys, they have a very high concentration in large metro markets. I'm just curious, would adding another portfolio that was as densely concentrated in the big markets -- could it possibly positively augment your existing assets? In other words, the other assets you own in those markets might start leasing up faster because you had attained some level of density through the transaction? Or am I overthinking it, and any deal was really just a pure financial analysis, and it's either accretive or dilutive, and that's what determines whether you do it?

I guess it would be halfway in between, Brett, is what I'd say. I think you are overthinking it a little bit in terms of -- if I had more sites in the market, would I do more than 2X? More than what they would do independently? No, I wouldn't suggest that to you. But I do believe that having assets in the top 100 markets or in the major cities are very attractive.

And so, when you think about the simple accretion/dilution analysis, it's certainly more than whatever the headline multiple on the day you close, because of those sites definitely perform differently based on location. We track that in our own Company. Obviously, we have a pretty significant sample size -- 22,000 sites over a long period of time. And we are pretty good at predicting what that lease-up opportunity looks like. And therein lies how we ultimately will come to value that portfolio.

And Brett, obviously, in addition to what Ben said on the last question, I think really applies here. When you acquire assets in locations where you already have those, it allows us to more efficiently leverage the G&A that we already have in place.

And just one last thought. Historically, portfolios that were owned and operated by the carriers kind of underperformed the ones that were owned and operated by the tower guys. You obviously did a good job pulling in the Sprint towers. Do think there's still room, as you buy assets, to improve the lease-up rate on them, particularly if they are coming from carriers? Or do you feel that the execution across the industry has just gotten to be very good?

I think there is opportunity. There's clearly opportunity.

Great. Thank you for taking the question.

Sure, Brett.

Your next question --

We have time to take one more.

Okay, thank you. Our next question comes from the line of Gray Powell with Wells Fargo Securities. Please go ahead.

Good morning, guys. Thanks for squeezing me in here. I really appreciate it. I just have a couple of questions. Obviously, both AT&T and Verizon are going to be pushing 4G upgrades in 2011. However, as everybody knows, there's still a limited selection of devices. So, I guess my question is, what do you see as the bigger component of leasing demand? Is it 3G capacity enhancements, or 4G builds?

It's rollout. And we would expect to see comparatively more this year than last on both of those customers that you mentioned. And, I would certainly acknowledge, its early stages. But I had an experience the other day sitting next to someone with a 4G laptop card, and I've already gone out and gotten my new one. So it's a game-changing technology, if you haven't played with it.

And I think you will see, as we mentioned in our remarks, there are 50 devices announced to be on the market this year. And so, I think it's so early, we really don't appreciate what it's going to look like; but if you've played with an LTE 4G device or perhaps a WiMAX device and Clear, as we also have a subscription that we play with here in the office, it's a game-changing type technology, and I think you'll see significant take-up. And we see -- or have expectations for greater activity this year than last out of those two sort of incumbent carriers.

Okay. Great. And then, on the prior question, I don't think I quite caught the entire comment. You mentioned that you were giving Sprint more flexibility on iDEN sites. Are you still seeing Sprint renew iDEN as five-year contracts? And then, just what kind of flexibility are you baking in the new agreements?

Well, certainly, in the normal course they would roll through their renewal terms every day, given the thousands of sites across, I guess, we've got about, I don't know, 16,000 sites with Sprint -- the greater Sprint, both on iDEN and CDMA. So, obviously, that's one of the requests, is that we gather all those Nextel or iDEN licenses and make them coterminous and give them an ability to churn on a date certain or any time thereafter. And, the average life of the portfolio today is another sort of three to four years. So really, all they are asking for is the ability to bring all those into one logical transition that they can make. There is a negotiation that's ensuing around that, as well as the capacity that they would like to consume with their new configuration on 3G sites -- on the CDMA sites.

And so, as I mentioned, that flexibility on the Nextel side, that they will likely -- sort of de facto already have, that we will clean up for them and make it tidy, we think is about a revenue push, with the new revenue we would expect on the CDMA side. And that's assuming that they do in fact exercise the right to terminate all those sites, in the three- to five-year timeframe. If you would assume that they don't all terminate, in fact some get repurposed, and there's I think there's no way for any of us, even Sprint, to say for sure what would happen in three to five years, then obviously you wouldn't have that negative impact out in that timeframe, and it would be more positive than that.

And Gray, we are not seeing them decommission sites currently or cancel leases. They're continuing to renew leases as they come up today.

Okay, okay. That's very helpful. Thank you very much.

You bet. Okay. I think with that, we're on the hour. And I want to thank everyone for their attention and interest in Crown, and we look forward to speaking with you again, either on the conference circuit or on this call next quarter. Thank you.

Thank you, ladies and gentlemen. This concludes the Q4 2010 earnings conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325, followed by a passcode of 4396202. AT&T would like to thank you for your participation. You may now disconnect.