Crown Castle Inc (CCI) 2011 Q4 法說會逐字稿

Good day ladies and gentlemen, thank you for standing by. Welcome to the Crown Castle International Q4 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, January 26, 2012. I would now like to turn the conference over to Fiona McKone, Vice President of Finance, please go ahead.

Thank you, good morning, everyone, and thank you all for joining us as we review our fourth quarter and full-year 2011 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 26, 2012, 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, recurring cash flow per share, funds from operations, funds are operations per share, adjusted funds from operations, and adjusted funds from operations per share. Tables reconciling such non-GAAP financial measures are available under the Investor section at the 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 2011, and we are excited about the leasing activity we are seeing in our portfolio. Let me quickly summarize some of our accomplishments during the year, and then I'll take you through some greater detail.

Throughout 2011, we consistently delivered results above our original expectations. And we ended 2011 delivering another very strong quarter of results. For the full year, as shown on Slide 3, we posted growth in site rental revenue of 9%, site rental gross margin of 11%, adjusted EBITDA of 12%, and adjusted funds from operations per share of 17%, compared to 2010. These results were considerably above our expectations at the beginning of 2011.

Further, our services business continues to outperform our expectations, delivering strong growth in 2011 as we continue to work very hard to meet deployment objectives and facilitate customer installation our sites.

In addition to our strong organic leasing results, we announced several important acquisitions. In December 2011, we announced an agreement to acquire NextG Networks for $1 billion, which we expect to close in the second quarter of 2012. NextG is the leading provider of distributed antenna systems, or DAS.

This acquisition puts us in the leadership position in providing small cell solutions to our customers, in addition to our existing leadership position in US towers. We believe that DAS will make a meaningful contribution to site rental revenue growth in the next several years, as these and other small cell solutions become an increasingly important part of the wireless infrastructure complimenting our existing macro towers.

Then we will talk more about why we are excited about this investment later in the call. Further, earlier this month, we announced the agreement to acquire 2,300 ground lease related assets from Wireless Capital Partners, or WCP, an immediately accretive acquisition. We expect to close WCP in the first quarter of 2012.

Relative to other potential investments, we believe that both of these acquisitions will be accretive to our long-term growth rate, and enhancing to shareholder value. Further, we recently announced that we are seeking to refinance our credit facility with a new $3.1 billion credit facility.

The proceeds of the new facility are expected to be used to finance the NextG and WCP acquisitions, and to refinance our existing credit facility. We expect to close the transaction later this month with approximately $1 billion of undrawn revolver availability, after the aforementioned acquisition and refinancing.

I would also highlight, as you saw from our press release yesterday, we began providing funds from operations, or FFO, and adjusted funds for our AFFO metrics, which I will walk you through shortly. With that, let me turn to Slide 4 as I highlight some of the results for the fourth quarter. During the fourth quarter we generated site rental revenue of $471 million up 5% from the fourth quarter of 2010. Site rental gross margin declined as site rental revenues, less cost of operations, were $351 million, up 8% in the fourth quarter of 2010.

Adjusted EBITDA for the fourth quarter of 2011 was $335 million, up 8% from the fourth quarter of 2010. It is important to note that these growth rates were achieved almost entirely through organic growth on assets that we owned as of January 1, 2011. As revenue growth from acquisitions was negligible.

AFFO, which I will describe in more detail later, was $193 million, up 15% from the fourth quarter of 2010, or $0.68 per share, up 17% from the fourth quarter of 2010, as shown on Slide 5. There were no significant nonrecurring items in the fourth quarter of 2011.

Turning to the balance sheet, we ended 2011 pro forma for the acquisitions in our new credit facility, with total net debt to last quarter annualized adjusted EBITDA of approximately 6x. And adjusted EBITDA to cash interest expense of approximately 3x. Pro forma, both our adjusted EBITDA leverage ratio, and cash interest expense coverage ratio are comfortably within their respective debt covenant requirements.

Moving on to investments and liquidity, we expect to close on our new credit facilities on January 31, with a blended coupon based on current LIBOR of approximately 3.7% on the $2.1 billion of funded term loans.

In addition, we expect to have $1 billion of undrawn revolver capacity. This gives us tremendous flexibility for investing activities that we expect will enhance long-term AFFO per share, which we believe is the best long-term measure of shareholder value creation.

During the fourth quarter, we invested $104 million, as illustrated on Slide 6, including $83 million on capital expenditures. These capital expenditures included $33 million on our land purchase program. In total, during 2011, we extended over 1200 land leases, and purchased land beneath more than 600 of our towers. As of today, we own or control, for more than 20 years, the land beneath towers representing approximately 76% of our gross margin, up from 70% a year ago.

In fact today, 38% of our site rental gross margin is generated from towers on land that we own, up from 34% a year ago. Further, the average term remaining on our ground leases is approximately 32 years. Having completed over 11,000 land 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 this is an important endeavor that provides a long-term benefit as it affects our margins, and controls our largest operating expense. Further, our recent acquisition of the ground leases from WCP, which are predominately under our customers' towers, allows us to apply the expertise we have gained as the industry leader in land lease extension and purchase.

Of the remaining capital expenditures, we spent $9 million on sustaining capital expenditures, and $41 million on revenue generating capital expenditures. The latter consisting of $28 million on existing sites, and $13 million on the construction of new sites. During the fourth quarter, the acquisitions I previously discussed replaced our share purchase activity.

For the full year 2011, we purchased $7.7 million common shares, and potential shares, spending $318 million. Since 2003, we have spent $2.7 billion to purchase approximately 100 million of our common shares and potential shares at an average price of $26.85 per share.

Also in January, we announced the conversion of the remaining $305 million of our 6.25% convertible preferred stock, which will result in the issuance of $8.3 million common shares and a eliminate an annual dividend of approximately $19 million. For the full year 2011, as illustrated on Slide 7 and 8 of the presentation, site rental revenues were approximately $1.9 billion, up 9% from the full year 2010.

Approximately 5% of the growth was attributable to the additional tenant equipment added to our sites, reflecting the strong leasing activity we enjoyed in 2011. And approximately 4% of the growth came from the existing base of business that was in place at the beginning of 2011 through contracted escalators and renewal of tenant leases, net of any churn.

Site rental gross margin grew 11% from the full year 2010, to $1.4 billion. Adjusted EBITDA for the full year 2011 was $1.3 billion, up 12% from the full year 2010. And AFFO per share increased 17% from the full year 2010, to $2.58 for the full year 2011.

I would note that, due to our rigorous control on cost in 2011, approximately 90% of the growth in site rental revenue found its way to site rental gross margin and adjusted EBITDA.

Turning to Slide 9, while we are only a month into 2012, we are seeing encouraging signs of the continued growth, fueled largely by AT&T and Verizon overlaying 4G networks, and Sprint actively deploying their network vision program. In our full-year 2012 outlook, we have not included the expected impact from our acquisitions of WCP and NextG, or our $3.1 billion credit facility.

We would expect to include the impact of these in our quarterly earnings announcement following each respective closure. We expect site rental revenue growth in 2012 of approximately $90 million, fully comprised of new leasing activity in the form of amendments to existing installations, and brand-new installations on our sites.

This is in line with the growth in organic leasing we have enjoyed since approximately 2007. We expect the vast majority of this revenue in 2012 to come from Verizon, AT&T, and Sprint.

As shown in our Outlook on slide 10, we expect AFFO growth of approximately 11% in 2012. We would expect to augment his growth through opportunistic investment of cash flow in activities such as, share purchases, tower acquisitions, new site construction, and land purchases.

Even with our recent acquisition announcement, we expect to have significant cash to invest in activities that, we believe, will maximize long-term AFFO per share growth. During 2012 we expect to generate approximately $810 million of AFFO, and invest approximately $325 million on capital expenditures related to purchases of land beneath our towers, the addition of tenants to our towers, and the construction of new sites, including distributed antenna systems.

In addition, if we were to leverage at five times our expected growth in adjusted EBITDA, we would have an additional, approximately, $400 million to invest. In total, this is approximately $1.2 billion of investment capacity for 2012.

Ignoring our borrowing capacity, the portion of our AFFO after expected capital expenditures, represents a little over $100 million per quarter of cash flow that we could invest in activities related to our core business, including purchases of our shares and acquisitions. Consistent with our past practice, we are focused on investing our cash in activities we believe will maximize that measure long-term AFFO per share.

I believe that this level of capital investment can add between 4% and 6% to our organic AFFO per share growth rate, annually. Before I turn the call over to Ben, I would like to walk you through our new financial metrics as outlined on Slide 11.

As you've seen from our press release, we began providing FFO and AFFO metrics this quarter, with the aim to provide additional transparency, and a comparable metric to others in the tower industry and the broader REIT universe. We continue to expect that we will convert to a REIT no later than the exhaustion of our net operating losses, which we currently expect to consume by approximately 2016.

During the second half of 2011, we began some of the preliminary work that will be necessary to make the conversion to this tax efficient capital structure in the future. While we have not made a decision to convert to a REIT, we do believe it is a likely outcome, given the current tax efficiency of the structure.

As such, we decided to provide the same AFFO metric used by our peer, American Tower. For the first time in the history of the tower industry, there will be a metric that is calculated the same across multiple tower companies. I am hopeful that this definition of AFFO will become the metric that investors will use when evaluating companies in the tower industry. I believe the metric is indicative of the dividend capacity of our industry, and applaud AmericanTower for leading the way in defining the metric last quarter.

As many of you know, FFO and AFFO are widely used in the REIT industry. Long term, we believe that it will be important to REIT, and other investors, to be able to evaluate Crown Capital on this basis. And, by initiating the use of these metrics now, we will hopefully demonstrate the long-term stability and growth of our business through good and bad economic periods.

Similar to our past practice of discussing recurring cash flow, or RCF, on a per-share basis, we will focus the majority of our value creation discussion on AFFO per share. Certainly, we will be making our capital allocation decisions based on our goal of maximizing long-term AFFO per share.

To aid the transition to this metric, we have provided the FFO and AFFO metrics for the full years from 2007 through 2011, with quarterly detail for 2010 and 2011, in the supplement we posted along with our earnings release yesterday.

I would also note that cumulatively, our new AFFO metric would have yielded essentially the same result as our historical RCF metric since 2007. As noted, the cumulative difference between AFFO and RCF, from 2010 to 2012, is only $14 million, less than 0.5% of the $3.7 billion of recurring cash flow over these periods.

Our AFFO metric will provide more specificity with regards to straightline revenue, straightline expense, and non-cash interest expense. The impact of these three items largely offset one another over the last five years. As adopted, our AFFO metric adjusts for the impact of straight line revenues and expenses.

As I've mentioned in the past, we have been able to recognize site rental revenues in advance of the cash received from our customers due to the extension of contracts with our customer. In fact, our revenue growth from 2009 through 2011 benefited by approximately 150 to 200 basis points per year from lease renewals. We have been very successful, and we are working with our customers to extend the terms of our contract.

Over the past three years, we've been able to renew and extend approximately 45% of our customer contracts, with initial terms of up to 15 years with multiple renewal periods at the option of the tenant. Due to these long-term customer contracts, with fixed escalation, we've been recognizing site rental revenues in advance of a contracted cash payments from our customers in accordance with generally accepted accounting principles.

Also, we have been recognizing higher site rental expense than actual cash rental payment as a result of renewing our ground leases with fixed escalation for long periods of time. As shown on Slide 12, we have graphed all of our existing leases, both our revenue tenant leases, and our expense ground leases for years 2012 through 2020, showing the expected reported amounts and the expected cash receipt and payment. As shown, we expect that beginning in about 2015, our cash receipts from tenant leases will exceed the amount of recorded site rental revenue.

For purposes of generating the graphs, we have assumed that all leases are renewed at term ending. As illustrated in the graphs, and based on the aforementioned assumptions, we expect that our cash receipts from our existing tenant licenses will grow at approximately 3.6% per annum for years 2012 to 2020. We have made no assumptions in the graphs with regards to additional tenant leases, tenant amendments, or land purchases.

We hope that you will find our additional disclosure and the adoption of industry standard metrics helpful in your analysis. To aid in the transition to AFFO and FFO from our current metric RCF, we will continue to provide the RCF metric through the end of 2012.

In summary, we had a terrific 2011 with a number of significant accomplishments and I am very excited about 2012, as we continue to execute around our core business, integrate NextG, and continued to allocate capital to enhance long-term AFFO per share. And with that, I am happy to turn the call over to Ben.

Thanks, Jay, and thanks to everyone for joining us on the call this morning, we have a lot to cover and, as you can imagine, there has been a lot going on at Crown Castle. I want to take a couple of minutes to reflect on the tremendous year we had on a number of fronts.

As Jay just mentioned, we had an excellent fourth quarter, and finished the year very strong, growing site rental revenue, adjusted EBITDA, and AFFO by 9%, 12%, and 17%, respectively. In addition to a strong year of site-leasing, our US services business performed exceptionally well.

The success results from a diligent effort to capture more of the revenue opportunities associated with assisting our customers, and locating or upgrading installations on our sites. This increase in services activity is attributable to the confidence our customers have in Crown Castle, through our disciplined and routine execution, as regularly expressed in our customer surveys that consistently rank us as delivering the highest customer satisfaction in the industry.

As I look out to 2012 and beyond, I'm as excited about the prospects for our business, as in any time in my memory. Wireless data demands on lease networks continue unabated. We have each of Verizon, AT&T and Sprint, actively upgrading their networks, which is driving significant revenue growth on our site. Further, we see renewed activity from T-Mobile as they react to remaining independent, and seek to improve coverage, capacity, and the economics of their network.

Beyond the immediate demand we see, we believe longer-term, we will benefit from new partnerships and applications yet to be identified, that bring additional spectrum to the market with a need for our sites. It is the realization that we can extend our shared infrastructure model to assist customers in meeting these challenges that has led us to our decision to take a market-leading role in the DAS, or small cell site architecture business, through our announced acquisition of NextG networks.

I'm excited to spend a few minutes with you, this morning sharing my enthusiasm with you, by walking through our thought process, and why we believe this investment uniquely positions Crown Castle for the future, and why we believe this transaction will be accretive to our growth rates and shareholder value.

As mentioned by AT&T on their call this morning, as demand for data services accelerates, network architecture is expanding. And increasingly, we believe DAS will be an important complement to traditional tower installation. The acquisition of NextG furthers our capabilities in DAS, enabling us to provide more shared wireless infrastructure for customers beyond those areas served by traditional towers, thereby augmenting our service offering in this growing market. NextG is the leading provider of DAS with over 7,000 nodes on the air, and a further 1,500 nodes under construction.

Consistent with our focus on the top 100 BTAs in the US, over 90% of NextG's nodes are in urban and suburban locations, with 80% in the top ten US metropolitan areas, including New York, Los Angeles, Chicago, Dallas-Fort Worth. The NextG assets are expected to provide significant growth, as they currently average only 1.25 tenants per network.

Following the contemplated acquisition, we expect to be the largest independent operator of DAS systems in the US, with approximately 10,000 nodes, including 26 venues and over 20 university campuses in operation or under construction. Based on existing and contracted networks under construction, we expect the acquisition of NextG to have approximately $50 million of annualized run rate site rental gross margin when complete.

At closing, we expect NextG to have approximately $17 million of annualized run rate G&A cost. The G&A costs are largely associated with developing and building new sites, and leasing the existing networks.

We consider these development costs to be in an investment in building new systems currently under construction, and do not expect material benefit from synergies until 2013. I expect that as we work through the integration of NextG, we will achieve cost synergies no doubt, but we will go slow at achieving these synergies, as we want to ensure that we don't stifle the growth opportunity that we believe we can achieve in the DAS market. This acquisition is about scale, capability, and growth. And I don't want to spoil that opportunity with shortsighted cost synergies.

In fact, I believe that this acquisition has the potential to deliver adjusted EBITDA of five to six times its current level in five years, based on the commitment we believe wireless carriers are making to utilizing small cell site solutions. Similar to the towers we acquired from the carriers a decade or so ago, these are largely singleton assets that have tremendous lease up potential. In fact, we've enjoyed much faster lease up on our existing DAS portfolio, compared to the tower lease [uprate] where it took a decade or so to reach an average tenancy of three carriers per tower.

Our listing DAS networks are tracking to reach this level of tenancy much faster than what we saw on our traditional tower business, and we have high expectations the NextG systems will perform similarly well. There are many parallels and similarities between DAS and our existing tower business, and there are a few differences. Let me take you through a few of the key questions that we had to answer before we were willing to make a $1 billion investment in DAS.

First, is DAS a necessary component of the wireless infrastructure solution? Second, does DAS have similar barriers to entry that our towers enjoy? And third, is DAS similar enough to our existing infrastructure business to leverage our expertise in relationships? The resounding answer to all three of these questions is a yes.

Let me walk you through some of our conclusions. We have included some slides to help facilitate this discussion. As most of you are aware, towers currently serve as the primary infrastructure solution for wireless communication. As the usage of wireless devices increase, there is an increasing need for small cell architecture to help improve coverage, but more importantly, to help increase capacity in areas that can't be served by towers.

Industry estimates suggest that there could be as many as six to ten small cells deployed for each macro cell tower site over the long-term, as carriers add capacity to meet consumer demand. We are still in the early stages of this infrastructure, similar to where we were with towers a decade ago. In fact, the opportunity we see feels a lot like the early tower days of the late 90s.

Since 2003, we've gradually gained expertise in this area. Starting internally with a small cell site -- a small DAS deployment team, and specialized areas with minimal investment. As these early systems gain traction in carrier buy-in, we made $115 million investment in DAS by acquiring NewPath Networks in September of 2010. Since then, we've enjoyed significant growth in DAS from this relatively small acquisition.

As a result, we began to look for ways to leverage, on a larger scale, what we learned from our NewPath acquisition and our carrier relationships, and so we pursued NextG with the aim to become the largest operator of DAS networks in the US and secure locations that would be nearly impossible to replicate. Like the early days of the tower industry, we believe the best assets are likely to be the first ones constructed in the most densely populated areas of the US.

As illustrated in Slide 13, DAS networks are, in many ways, similar to a tower, simply laid on its side. Simply put, DAS is a network of antennas, connected by fiber, to a communications hub designed to facilitate wireless communication services for multiple operators. We rent space on our individual DAS antenna location, or nodes, via long-term contracts. These contracts are generally at least 10 years in term, with renewal options and annual escalation features.

Similar to our towers, DAS can accommodate multiple customers for antennas and other equipment necessary for the transmission of signals for wireless communication devices. Typically a DAS network will consist of nodes, or antennas, mounted on utility poles, street lamps, or traffic that signals connected by fiber to a base station radio in a remote location. The fiber routes are typically a combination of aerial cable strung pole-to-pole along a street or cable buried in a conduit.

On Slides 14 through 17, there are pictures of some completed DAS solutions. It may be helpful to talk about DAS in the context of towers. In our traditional tower business, we are responsible for building and maintaining the steel tower structure and renting the ground space on which the tower is located.

In DAS, we are responsible for building and owning underground or aerial fiber for multiple tenants, utilizing the public right of way, and locating antennas on street lamps, a traffic light, or utility poles. The fiber component of a DAS installation is akin to the galvanized steel in a traditional tower. That is what we own and lease to customers, in its most simple form.

As in the traditional tower business, the wireless carrier is typically responsible for operating their base station equipment. Economically, a good rule of thumb is to think of the tower as roughly equivalent to three DAS nodes. So our portfolio pro forma of 10,000 DAS nodes, including those under construction, relates to approximately 3,000 towers.

To help frame it for you, you can think of the cost of a node as one third the cost of a typical tower, and the rent we receive as a third of the rent we would receive for a typical tower installation. As in towers, the incremental margins on adding additional tenants are very high, as the costs associated with adding tenants are negligible, or subsidized by the additional tenant.

A DAS can typically accommodate up to five tenants. The landlord is usually the municipality or local utility company. The recurring rent associated with DAS can vary widely, depending on the location, cost, and complexity of the system. But typically, the rent is approximately one third of a typical tower lease.

Importantly, as in the tower model, this is a shared infrastructure model, and is a cost-effective solution for wireless carriers, when compared to the cost of owning the asset themselves, and our return expectations are achieved through co-location. Examples of DAS we have installed include sport venues such as stadiums and arenas where thousands of people are trying to utilize their smart phones to surf the Internet, similarly university students are typically early adopters of new communications technologies and mobile phones are no exception.

Following the acquisition of NextG, we will have over 20 universities to offer wireless carriers access via a shared DAS network. These networks deliver excellent indoor and outdoor campus coverage in lecture halls, dormitories, and sports venues. Further, in communities, particularly suburban and urban areas where there isn't space for towers, or where zoning restrictions or space limit the construction of towers, we've developed DAS solutions by attaching small antennas and small equipment cabinets on existing utility poles or light poles.

After combining the NextG systems with our own, we will have DAS deployed in marquee location such as the University of Notre Dame, Stanford University, Hilton Head Island, Colonial Williamsburg, Amway Center, high-end suburban locations such as Scottsdale Arizona, dense urban environments like Manhattan and San Francisco, and some of the most recognizable theme parks in the world.

In short, I'm thrilled about the portfolio of DAS networks we are acquiring, and the talented people we expect will be joining Crown Castle. They will play an important role as we continue to grow and expand our small cell site capability to deal with network capacity needs of the future.

So to wrap up and go to questions, we are very pleased with our fourth quarter and full year 2011 results, and believe they demonstrate the quality of our assets, combined with our ability to execute for our customers. We remain disciplined and focused on maximizing long-term AFFO per share through growing our core business and making opportunistic investments, and we have significant capacity to continue to do this in 2012. And finally, I'm excited we have positioned the Company to be the clear leader in shared wireless infrastructure in the US, with unique capabilities to meet the current and future needs of our customers. With that, Operator, I'd be pleased to turn the call over for questions.

(Operator Instructions) Simon Flannery, Morgan Stanley

Ben, thanks for all the color on the DAS, that's very helpful.

Sure.

First, on the AFFO, again, thanks for that detail. We've seen a strong performance out of American Tower, obviously, there is incremental investor demand, not just from REIT investors but from other income investors, how are you thinking about waiting for all of the NOL's to expire, you address that a little bit earlier, versus maybe getting ready to move a little bit quicker if things change over time? And paying a dividend, as a C Corp. And then, if you could comment on any potential interest in T-Mobile towers as well, that would be great.

Sure, Simon, I will take the first couple of those and let Ben take the last one on T-Mobile. With regards to where we are, as I mentioned in my comments, we expect to exhaust the net operating losses in about 2015 and 2016 and would expect that, no later than that date, we would convert to a REIT. Obviously, given the tax efficiency of the current structure, as a REIT, we would benefit from not having to pay any taxes and would expect to take advantage of that, at least in our current planning, before we would become a tax payer at the corporate level. With regards to doing that early, I think that is an evaluation we will continue to make on an ongoing basis and look at what we think the value of converting early is. As I mentioned, we've begun at least some of the preliminary work that would be necessary for us to do that, and depending on our forward view we may choose to accelerate ahead of a 2015 or 2016 date, or we may ultimately decide to stay as we are organized as a C Corp. With regard to paying a dividend, before converting to a REIT, as we've talked about in the past, look, I think this is an opportunity for us to think about, as we have historically, the allocation of capital. And to date, we spent about $2.7 billion returning cash to shareholders in the form of share purchases. As we currently think about allocation of capital, that's our preference.

However, we will continue to entertain the opportunity of potentially translating that -- transferring that return of cash to shareholders in the form of share purchases who may ultimately decide to do in the form of a dividend, but I think therein lies a significant amount of flexibility. So as we think about flexibility and allocation of capital, of flexibility of being able to choose at this point, whether to pay a dividend or not, and having the NOL covered, we think is a valuable asset, in addition to, as I talked about in my comments, having a significant amount of availability under a revolver either for future share purchases or acquisition. I think we have a tremendous amount of flexibility and will continue to evaluate that as we go.

And just to punctuate one thing, I think we think at the outside will leave the NOLs probably four years and we think that is the most efficient structure, as Jay mentioned, but we have a lot of flexibility and we don't want to give that up casually, so we are going to think very y carefully about how we do that. Simon, you asked about the T-Mobile towers. I think we've all been reading the same press reports, and I understand that potentially, there is a consideration of them coming back on the market. You would expect us to be interested in taking a look at the asset. We certainly expect to do that, but I will tell you, we will be very disciplined about how we think about the value of the asset. We've got a lot on our plate. We are extremely excited, as I mentioned in my remarks, about the growth prospects we have in front of us as a Company. Really positioned for the future, and so we will certainly take a look at any tower asset out there, including this one, but I would expect us to be pretty disciplined in our review.

Thank you.

David Barden, Bank of America.

Hey guys, thanks for taking the question and thanks, Ben, for that DAS overview. Just two things, if I could. First, just with respect to where the leverage is now, Jay, on the business. I think if this had been a year or a year and a half ago, you'd probably continue to talk about deleveraging being a priority. If you could kind of revisit where you stand in that context, now? And then maybe, Ben, AT&T -- we just ended a call where they talked about, now that the T-Mobile deal is off the table, they are going to restart a self splitting exercise and a DAS initiative that they intend to fund into 2012. I was wondering, based on your agreement with AT&T, under what circumstances can you monetize those kinds of new spending from AT&T, and have you already been approached by them? Thanks.

Sure, Dave, on the first question around leverage. We've talk about our target is being 4x to 6x, and the great benefit we have in this businesses is that it deleveraged very quickly given the organic growth in the assets. And given our view of the acceleration of growth relative to traditional towers that we expect around NextG, that's going to be increasing the speed at which we would expect in normal course the balance sheet to delever. So, I think we will continue to operate in the target. I think that this transaction that we just did illustrates the value of the flexibility that we created by running a little bit lower leverage, and operating at the midpoint of our target range. So we were approximately going towards the end of 2011 we had approximately 5 terms of leverage, and we spent a lot of time talking about our target leverage of potentially being willing to go up to 6x for the right asset, and as we look at these two assets that came available in the back half of 2011, we were able to invest $1.5 billion in assets we think are growth enhancing, strategic, and very important to the next generation of wireless. We were able to do that without issuing a single share of stock. And so, we look at the value, and the flexibility, and we say about these acquisitions, this is exactly why we were operating the balance sheet that we were.

I would further say this is why I'm excited about having a $1billion revolver because I think the revolver which we expect to have a five-year term. Obviously we all expect the balance sheet -- and would expect in the normal course of the balance sheet will delever some over time, not through the paydown of debt, but through growth in EBITDA as we move back toward target -- the middle part of the target of the range, we will have a revolver that is available for us to, again, take advantage and the strategic when the right asset our opportunity is available for us. I think as I mentioned, we would expect that if we borrowed the growth in EBITDA about 5x, there's $400 million of capacity during the year, and investing the cash flow is another $800 million so in a normal course it is $1.2 billion to invest, but certainly would want to eliminate the possibility that we operate at the high-end of that range for the right asset or the right opportunity.

Dave, let me take your question around cell splitting and AT&T's comments on our call this morning around creating more capacity within their network. Cell splitting as you know, is just that, it is utilizing a new site and reducing the size of the cell that a prior site was covering, and so certainly with the top 72% of our towers in the top 100 markets and significantly more than any of our peers, cell splitting and capacity challenges occur where population density is the greatest. And so we certainly expect to be working actively with our customer, AT&T, accommodating their needs to split cells, and we expect to have significant numbers of sites, in fact, know of many of them already, that would accommodate that type of activity around cell splitting. So we would expect to see some activity going forward in that regard. Obviously, it is just January, so it is a little bit early to put that into any kind of guidance or outlook, but you can bet we'll be very actively in those conversations.

And that fits right into the other conversation we were just having around about DAS systems, and I believe that they actually mentioned DAS as a technology and architecture they are pursuing. We already do business with AT&T, at the DAS level, and would expect that, again as I mentioned in my remarks, DAS will play an increasingly meaningful role in helping AT&T and all the carriers meet the capacity challenges is in these dense urban environments or other places where a macro tower site won't provide the capacity that is required. And let me expand on that just a moment because having been in his DAS business for now about seven years, there was a time when it was very challenging to profile the leasing opportunity for a DAS system because a lot of these areas had what we would all term as minimal or substandard coverage, voice coverage, from a traditional tower site. While obviously that standard, maybe five or six years ago, of what you potentially needed to hold a voice call is just wholly inadequate today as we are all burdening these networks with broadband Internet expectations. And that is really why now you've seen the small cell site architecture come into the forefront, and be a technology that is widely accepted and adopted and it is really demand base. It is the fact that the capacity challenges, and the demand on the networks have really come to this architecture and made it now a very attractive solution, whereas before, five or seven years ago, we didn't have those capacity challenges typically on the network, and not withstanding the technology that was there as an opportunity, the lease up opportunity was more elongated or difficult to underwrite. So, anyway, happy to answer that and appreciated, obviously, AT&T's comments this morning on the capacity needs.

Jason Armstrong, Goldman Sachs

Thank you for all the disclosure this quarter, it's definitely very helpful. Maybe, first question, just going back to the potential portfolios that might be out there, whether it is T-Mobile are the private equity portfolios -- the balance sheet where it is now, understanding you've got revolver and the ability to lever incremental growth in EBITDA, it does seem like one of these deals potentially might require you to introduce equity and issue shares. I'm just wondering how you think through that, is that something you're willing to do at this point? And then second question, we had talked on the third quarter call, as it related to the 2012 outlook about Alltel and risk that they were going to decommission -- or Verizon was going to decommission a substantial number of cell sites, and I'm just wondering if we start to get into 2012, how that is tracking, relative to the plan you laid out. Thanks.

Sure, Jason, I'll take the first one. I'll just say we will be very disciplined. We are pretty proud of our shares. You've seen what we've done to take out a third of the Company over the last several years, and we don't issue shares casually, and so we'll be very disciplined in our review of any transactions that would require us to issue shares.

On your second question, Jason, around [insurance], as I noted last quarter, we expect the turn in 2012, if you counted number of tenant, to be up about 10% over 2011. That increase was attributable, as we mentioned, partially to Alltel. It is almost -- it is 70% loaded in the front half of 2012, and 30% in the back half of the year. And the split in that first have is almost even, so, higher turn in the first few quarters of this year, and then in the back half we are currently expecting significantly less turn. As we sit here today we think it is on track for what we talked about last quarter.

Okay. Thanks, guys.

Rick Prentiss, Raymond James

First, thank you very much for the transparency. AFFO calculated the same way as American Tower, what a concept to have one number exactly the same way so we can all do valuation work, so thank you very much for that. Second, just to dig in some of the details on NextG, Ben, I think in your comment you mentioned that the $15 million annual run rate on the gross margin side, the press release talked about $40 million and then another $10 million under construction, when does that $10 million come in?

Yes, the vast majority of that will be over the first 12 months of ownership. In fact, potentially all of it in the first 12 months of ownership, and that number obviously doesn't account for any additional business or leasing that you might expect. So that is just purely contracted. So, were having to swag the number little bit, here. But that is about as close as we can peg it.

Okay. And then, you mentioned the $17 million G&A, no material synergies until 2013, and then you mentioned that the adjusted or the EBITDA impacts could be five to six times the current level in five years. Was that referring to the $40 million that you have currently, less than $17 million, just trying to gauge what you're trying to say to us there?

Everybody has had a goal, and we have some pretty tall goals around here for this asset, and so if you come off the $33 million run rate to start rate, if you will, in terms of contracted, less the full boat of G&A, could we see a business that is five to six times bigger than that in five years? That is our expectation and certainly our aspirational goal. And I will further say that I have not ever seen an opportunity in this industry where an asset that is, in our case, 5% of the enterprise value the Company could potentially, if you reverse engineer what I said about growth, could potentially be well outside its size relative to contribution to growth. Many multiples of its relative size, in terms of contribution to growth and so, it's again, it is incredible analogous. The more time we spend on this, the more similar it feels and the economics, the more similar they feel to the original tower portfolios we acquired in 1999, where, obviously the carrier built sites in the major cities have proven up, over the last 12 years, to be the most valuable, and where revenue on both sides, for example, just if we are revisiting history here, have more than tripled over the last 10 to 12 years. So, again, we have high expectations and that is where that came from.

Great, and also in original press release, when you talked about the acquisition, you mentioned that you thought it would be neutral to AFFO per share initially and it is always become quite accretive. In the press release you also mentioned, I think, $60 million in incremental interest expense from the new facility. Just trying to gauge what are you thinking in far as NextG itself, as far as AFFO per share in 2012.

Rick, I think it will probably be about a push still. The number that Ben mentioned in the first 12 months of about $33 million of adjusted EBITDA, and that is about what the interest costs will be on that component. The whole number that we gave you there includes the impact of refinancing the existing credit facilities, the money that we are raising for WCP, and a little extra funds that we'll have left over. So, I think we were trying to help you with a couple of different numbers including where interest expense will be for the full year '12 if we are right about guessing on closing dates for the various acquisitions in closing dates on the debt.

So that $60 million included the assumption debt from (inaudible).

That's right, and maybe just to be put a finer point on it, we are still seeing we think it is a push in the first 12 months for NextG, relative to the cost of the money.

That helps a lot. And another, just logical question, when you mentioned that wireless capital partners, you said that the cash before interest expense was $42 million. Where is that going to get booked? Is that going into revenue? Is that going into cost reduction? How should we think about where to that will come through the financial statements?

Well, ultimately, it will fall down to AFFO, and where it exactly falls above adjusted EBITDA, I think we are still working through exactly what that will look like and as, I think, after close we will take you through it.

Okay. And then, final question, T-Mobile, you mentioned you're starting to see some activity there. I assume the guidance for 2012 did not assume -- kind of caught a lot of people off guard, then throwing in the towel that quickly, any renewed activity from T-Mobile?

We do not include that. The vast majority of activity we have in our outlook is from AT&T, Verizon, and Sprint. We would have had some in there for T-Mobile.

Great, thanks a lot, guys and again, thanks for the AFFO

Kevin Smithen, Macquarie Capital.

Thanks. I think you've mentioned in the past, that you have over $300 million in annual ground lease expense. You already own considerably more land than your competitors, so I wonder, how do you view ground lease or other land purchase opportunities versus buying tower or additional DAS assets. Then will the pace of land acquisitions increase over the next year given the attractive credit market?

Sure, Kevin, I'll take that. You're right. We do have approximately $300 million a year of ground lease expense, and I would divide that into basically two categories. One of the activities which we have obviously spent an enormous amount of time on in the 11,000 transactions that I've talked about thus far is securing the portfolio. In 2007, we were less than 20% owned, in terms of sites, and much lower percentage of gross margin that was on sites that we had greater than 30 years. So, we have focused virtually all of our activity on ground leases that had less than 20 years remaining on them. And that activity would have, in it, a component of a mark-to-market rate on those ground leases, whether we were purchasing them or extending the ground lease. The purchases have largely offset any rental increase we have seen from the ground leases as we have renewed them.

I think the majority of that, or a lot of that, is through the system now, and so most of the activity from this point forward, and as we think about the future, the majority of the activity that we will be doing will be purely a financial test around, do we want the liability off balance sheet in the form of a ground lease because we are able to finance it as a lower cost with the landlord? Or do we prefer it on the balance sheet because we are able to achieve a lower cost of capital using our balance sheet to acquire the property? And I think more and more, as we go forward, we will be thinking about our land purchases in that context and utilizing the lowest cost of capital to acquire them, because we will have already secured the land leases for such a long period of time. In terms of pace, I think you can expect for the next four or five years, we're probably going to continue at the pace that we are on. It has great operational benefits beyond the financial benefits to have long-term leases and improve the lease structure and own land, and so it is worth facilitating customers getting on-site and customers are making decisions about where to allocate their capital to make the quickest improvement in their network. We know that land ownership and long-term leases help that, and so I think there is some operational benefit to it. I think we probably stay on this pace for the next four to five years, and then after that it probably comes down and we are just purely making a financial decision.

Thanks, that's very helpful.

James Ratcliffe, Barclays Capital

Morning, thanks for taking the question. Just two, if I could. First of all, did I understand you to say that the WCP acquisition would be accretive to the growth rate or accretive to growth? And, in general, can you talk about the relative appeal of land assets under other tower company towers versus under carrier towers? And secondly? -- I'm sorry go ahead --

No go ahead

Just, secondly, philosophically wondering if you could comment on the debate between what are more of appealing acquisitions and assets, towers that were originally built for carriers use or those that were purpose-built for [colo]. Thanks.

Okay, on the first one, James, we believe it will be both accretive to ultimately AFFO per share, which is how we evaluate everything. I think overtime you will find it be accretive to our growth rate as we go through the process of applying the expertise that we have, that we comply to our own portfolio around extensions and purchasing the land. On a relative appeal standpoint, you have to look at the underlying assets and the underlying towers and what the tenancy of those towers are and I would, say in terms of looking at that, that is one of the considerations that we make as we think about owning land under these third-party towers is, who are the tenants installed on that towers -- on the tower, as well as the location of the asset. It is not too dissimilar from the analysis that we have done under tower portfolios for long periods time.

I would just add, on the other activity around purchasing land under other people's towers, obviously, we have done that in the WCP transaction as it will close. We've also seen public announcements where the Unison, the two large portfolios that were required over time by Unison have now traded to other tower companies. We are certainly comfortable owning land under other people's towers. We are sort of in the landlord business, that is what we do for a living and there is not much difference between whether you own the steel in the tower. Obviously there is a revenue opportunity as we certainly describe our core business in terms of growth, but at the right price, it's a financial transaction, and to ultimately own and underwrite the value of that site through ownership of the ground, and we certainly would expect to do that over time. Obviously this one transaction puts us in that business. Others have made that decision already, as I mentioned. And we would expect to continue that as one of the many opportunities we have to allocate capital, but it will be purely on a discretionary, pure financial decision to see what is the highest and best use of that capital. And I guess, James, your third question was on purpose built towers?

Would we preferred towers built by the carriers originally and I think, James, this comes down to, as we've seen over time, what would ultimately determine the value of tower assets is the location and the need. And so, whether a carrier originally built it, or it is built by a company who's out building spec towers, ultimately the value of those towers is determined by the location and the need. We have done incredibly well with towers that were originally built by Bell Atlantic Mobile and BellSouth and other carriers. We've also done very well with towers that we built a long time ago. So, I think -- I wouldn't necessarily draw a distinction, in terms of preferring one over another, it just comes down to evaluating price, the location, and then, what we believe the demand would be, and it has been mentioned earlier that at that point, once you have evaluated those things, then we are pretty disciplined in the price because we know we have an alternative. We can by the towers that we already own in the form of share purchases, or pursue a third-party tower opportunity.

Great. Thank you.

Jonathan Atkin, RBC Capital Markets

Thanks for taking the question. I'm interested in just -- you commented on the four national carriers, but any commentary on other carriers such as Clearwire in terms of the pace of leasing or in Clearwire's case, amendments? With respect to the Next G growth targets over the next many years, was that an organic growth through lease up, or was that through assets expansion?

On the first question, Jon, our outlook for 2012 does not include hardly any benefit from folks like Clearwire, or others that may have a spectrum, but has not been deploying. And so as we get into the calendar year 2012, we will just have to see how some of those other carriers come. As I mentioned, virtually all of the growth that we put in the outlook comes from Verizon, AT&T, and Sprint.

And we are certainly encouraged by what we see with Clearwire. As they do their 4G LT overlay, and also prospectively go back and do some in-fill in markets, we have expectations, hopefully, that we will see some activity from them later in the year. And then, Jon, on NextG, in terms of growth and the aspirational targets I threw out, obviously that is sort of a business case and that assumes co-location on existing networks, as well as growth with building additional networks that we would capture in the marketplace. So, certainly there is a capital component that we are not going to get into this call, it's too early to do that, but suffice it to say that the capital deployed in this business, not unlike the early days of the tower business, if you get it right and we think we will based on our current experience already, is that these come at very high returns, far in excess of any kind of hurdle rate that you want to impose on it. And so, hence the reason we did the transaction. I think it is accretive to not only growth but accretive to value.

And as you make further investments in that business segment, is that going to be weighted more towards indoor or outdoor?

Oh, I think you will see us do both. The indoor is very attractive, but it is each individual one is pretty small. So you've got to do a lot of them, obviously, to make a meaningful difference, and we are doing a lot of them and we will continue to. Virtually every sports arena or public venue and ultimately class A office buildings, we think are going to have a shared wireless infrastructure component to them, and we have a long way to go on America in getting that done, and there is room for other players beyond ourselves, obviously. As that market continues to develop, we will continue to have a very active indoor presence, but we will also pursue outdoor zip codes, as we call them, neighborhoods and urban centers and things that we've describe. I think it is really a -- it is both. You will have outdoor and indoor both attempting to meet the same capacity challenge that is uniform out there.

And then finally, internationally, if you could maybe give us an update on next generation broadband in Australia, and how you feel about entering new international markets as some of your peers have been doing?

Yes, we are really pleased with Australia. It is too early to really see it much in the financial results but there is a lot going on right now down there. Not only the national broadband network that is sponsored by the government in terms of the bringing broadband fiber and wireless connectivity to, essentially 100% of the population, so there is going to be leasing and build opportunities for us there, but there is also, for the very same reason we see here, renewed commitment on the part of the carriers to add capacity and improve networks in Australia and, I was just down there a couple of months ago, and we have very high expectations. I won't put out a similar aspirational goal there, in terms of guidance or anything, but you should expect considerably more growth over the next few three than you have had seen in the last three years in Australia, and potentially some investment opportunities down there as well. It wouldn't surprise me at all to see us launch a DAS business in Australia.

I think that is something that is going to make a lot of sense to us down the road. We will continue to evaluate other international markets. We looked at a couple of things and some friends in Western Europe recently, don't really like what we see there in terms of the industry dynamics, so much. We continue to believe the US and the Australian market, which is almost identical to the US in terms of market character, is the fastest-growing most profitable market for the carriers, and where the consumer demand for data demand -- data is driving the capacity needs that is driving, frankly, these businesses, our business in the US. And so, we think at the price that we see in the market today, this is the most attractive investment for us, but others can have different views. We are going to continue work on what we have on our plate and we are pretty excited about it.

Clay Moran, Benchmark Company

Thanks, good morning. A couple of questions. One thing I did not follow was how the land purchase enhances the AFFO growth rate. So, if you could, Jay, maybe explain that again. And then over on NextG, could you just tell us what the current customer mix is? Maybe break it down by the nationals versus other, and then what the 2011 revenue growth rate was?

Sure, Clay, on your first question. As we have experienced in our own portfolio, as ground leases approach their term-end date, and you go to renegotiate those leases, you pay whatever is market as you enter into a new lease on the property so we evaluated the leases and our view is that there is an increase coming in the rental rates that are going to be paid underneath those ground leases. Thus an increase in the growth rate.

On NextG, I'm not getting into specifically breaking out each individual revenue component of NextG. The early days of some of the networks were built in urban centers for some of the later rollouts, MetroPCS, Leap Wireless. The Company today, NextG, does business with all of the major carriers in a significant way, and we would expect that to grow materially over time, with the lease-up opportunities that are resident for each of AT&T, Verizon, and Sprint, as well as new build opportunities for all of the major carriers, including T-Mobile. So, I think you'll see a significant mix change. Today it is not -- the majority of the revenue is not to the big four, but over time, I think you'll see it change and probably flip such that the majority of the revenue going forward, in my five-year aspirational goal, I think it will look a lot more like the traditional tower portfolio that we have as the capacity needs are most acute in these large four carriers.

Great, that is what I thought. Thanks.

Jonathan Schildkraut, Evercore Partners

Thanks for squeezing me in here. Just two questions. First, on the DAS business, driving a little deeper here, I just want to understand may be some of the non-cash elements, relative to the traditional towers business. Also, I was under the impression that carriers contribute to the CapEx of the DAS systems build outs, and wondering if that's accurate in terms of NextG's business. Separately, on the credit facility, I was wondering if there were any net debt leverage tests. I had read somewhere there was a 6x net debt to leverage test that drop down to 5.5x in 2014. I didn't know that was preliminary or just incorrect? Thanks.

Yes, Jonathan, on your first question, just to be really clear. We threw around a couple of numbers as Ben was going through the NextG numbers, as we talk about what we think site rental gross margin of $50 million and then obviously, the G&A, that is all cash received. The timing on that -- I don't know that there is anything more to say about that. But it would continue in perpetuity. In terms of how the carriers pay for this, and how we structure these, as Ben mentioned, similar to the tower portfolio, when a tenant comes to the site, oftentimes they do make a contribution to the CapEx or subsidize the cost of expanding the network to hold them, and over time and it just plays out and gets larger scale, and we will see how that goes. But that is probably the two, I will say or around pricing. Each system is different, but it is generally pretty similar to what you've seen, historically, in the tower business. I think, specifically on the terms of the credit facility, we will wait until that closes before I go into great detail about that. But it doesn't have an impact on changing our targeted leverage levels of four to six times, as I talked about before, and we would not expect to do anything that would limit our flexibility to be anything other than what we have had over the last five to seven years, as we structured the capital -- as we structured the capital structure.

All right, that's helpful. Thank you.

Batya Levi, UBS

Great, thanks. I just had a follow-up question on your outlook. I believe, when you first provided 2012, you suggested that the activity you are seeing from Sprint at that time was included in the Outlook and I think in 4Q, Sprint increased in activity and it's ongoing now. Is there a scenario where you could increase the outlook base on just come coming from Sprint, or is all of the MLA already accounted for? Also, just one question on the straight line impact that you guided for first Q, I think that goes up, versus the trend of deceleration. What will be a driver of that?

On the first question, if Sprint were to go out and lease more sites, or do greater amounts of activity, then we could see, potentially, a change. One thing I would point out is that we saw the actual pickup in Sprint activity dating on the way back to the second quarter of 2011, so I think we saw it earlier than others did, and the comments that are making -- that have been made more publicly recently, are really commensurate with a level of activity that we've seen for 6 plus months, from Sprint. And so as we looked at our outlook and reaffirmed it for 2012, I don't think we've seen any of that, but to the extent that they were changed their plans or processes or deploy more sites, then we could potentially see the benefit of that in our outlook. When you're looking at the differences between the contribution of cash receipts and reported revenues, there is going to be some business quarter to quarter just as leases renew in normal course. There is not anything significant that is happening in the first quarter, relative to the past quarters. I think, broadly, if you look at our revenue growth, our outlook for 2012, we've got revenue growth of approximately $85 million on a reported basis, and on a cash basis, that is going to be about $111 million. So growth on a cash basis is about 7%, roughly, but I think the ins and outs, quarter to quarter, they are going to move just a little bit but I think if I step back and look at it over the course of the year and tell you, I think that the amount of contribution from non-cash revenues is actually going to decline year-over-year to the tune of about $25 million, as we near that crossover point in 2015, as I talked about in my comments.

Okay. Thanks.

Brett Feldman, Deutsche Bank

Thanks, and just one more question here around the DAS business. You talked about the work you've done with your land leases in order to secure long-term ownership or control of the towers, you can't really own whatever would be considered land or right-of-way in the DAS business, so what type of statistics you can provide with regards to what NextG has, in terms of long-term access, or exclusivities around the rights-of-way?

Sure, Brett, that is a great question, and it is one of the differences and, I think, a favorable difference, actually, DAS versus the tower work that we've done on the ground. To operate a DAS network, in most jurisdictions, you are organized and have competitive local exchange carrier status, which gives you certain contractual rights to access of public rights-of-way and utility poles and easements. And so, there is a established practice for what the pole-attachment payments, or think of it as ground rent, are in markets and it has to be consistently applied among all users, for example a cable company in the market. And so, it is a very well-trodden legal standard there, of what gives us the access to those sites over a long period of time at very predictable expenses, or payments, and so I don't think you have a circumstance here in the DAS business where you can be -- potentially have the economics eroded over time because of what is happening on the ground, which obviously is a concern in the tower business and why we have spent the last five years working on the ground portfolio as we have. We really don't think you have that here, and in fact, a much more orderly and disciplined process of accessing the public right-of-way as a competitive local exchange carrier, and we think that is pretty well-established and a benefit of the business.

Are these agreements or these -- are they indefinite? Because the land lease might be 50 years, but there still is termination on it?

Know, these are definitely long-term.

Thanks, Ben.

Sure, Brett. Anyway, Operator, we have gone past the hour but we will take a few more questions and then end.

Timothy Horan, Oppenheimer

Thanks. Two basic questions, your margins are up at lot the last couple of years, but just looking at the FFO the versus the AMT, you're still a bit below those, guys. Do you think there is much room for expansion over the longer term here, and what drives that? And then secondly, just listening to AT&T's conference call and their issues with spectrum in trying to move the networks over, maybe at a high level, what percentage of team Verizon -- what percentage of the spectrum do they own -- do you actually think they built out, at this point? And, they did mention shutting down the 3G network to free-up spectrum capacity, how do you think that would play out and affect you? Thank you.

On your first question around margin, we would expect those to continue to go up in the absence of acquisition activity as we've seen over time, we're able to increase the margins at the site rental gross margin line just considering the growth in revenue, against growth in expenses. Those have been rising at about 150 basis points to 200 basis points per annum. As we go down to the AFFO level, certainly we don't expect that we would lose any of that with regard to G&A or other expenses. And so, I would expect you will continue to see those margins expand considerably over time. The one exception to that is, obviously, if we buy an asset that has lower margins than the existing base, it will dilute some of that growth, but NextG being a good example of that, that would be quote-unquote diluted, short-term to the margins but over time, we think it is actually margin and growth enhancing. So, I think it will come down to the mix and where -- how do we allocate capital, and what percentage of that will be allocated towards assets. But in normal course, if you just think about organic leasing, I would expect those margins to continue to expand enough to enjoy the high incremental margins that we've seen over the last several years.

With spectrum, I think the best way to answer your spectrum question is that we are not in the habit of really commenting on, specifically, spectrum as it relates to individual customers. Broadly, as you think about our business, it is important to remember that there are spectrum challenges and constraints really in all of the carriers, whether it is a capital constraint on build out, or a utilization constraint, and so they are constantly looking for a cost-effective way to utilize the spectrum or reuse the spectrum through cell splitting, to get more value out of that spectrum asset and I think you're going to continue to see more and more reuse of spectrum as we all continue to put more demands on the network. And you will probably see some, obviously the DAS component of that become meaningful over time, and other offloading strategies like Wi-Fi, even, in stationary locations. So, I would not get into, individually, with respect to each customer situation, but obviously, the capacity challenges that we are all placing on these networks is making it a significant burden on the carriers today. I think we have time for one more, and I'll say up front, I appreciate everybody hanging with us on the call for an hour and 20 minutes this morning.

Michael Rollins, Citi Investment Research

Just two real quick. So first, as we're thinking about internal growth for the Company, it looks like 2011, I think you talk a little bit about the reasons why before, is a better year -- sorry 2012 would be a better year than 2011, and how would you rate, when you look at the numbers, what is going to come from upgrades versus actually new tower co-locations? Upgrades meaning amendments. And just a follow-up question on the AFFO definition, and again, thanks for all that detail. Why wouldn't you subtract out preferred dividends just from the calculations, since that's a cost of financing, using your Company more like debt than an equity dividend? Thanks.

Sure, Mike. On your first question, we do expect slightly better internal growth, certainly on a cash basis in 2012, and I think most of that is related to the timing of the Sprint network vision. We got about six months of that during 2011, and our outlook implies that we are going to have a full 12 months of that activity in 2012, so I think that Sprint would be the main change if you are comparing those two years. And with regards to amendment activity versus new lease activity, if you're calculating it on a revenue basis, amendments continue to make up in the neighborhood of 70% of the total activity on a dollar basis, obviously if it was an account basis it would be greater than that, but on a dollar basis making up about 70% of the growth there. On your second question around deferred dividends, I would say that it is a bit of a moot point at this point, because we've just converted our 6.25% preferred, so that is now gone, but honestly, the spirit of what we were doing was just simply taking exactly what American Tower was doing, and report our Company on the exact same basis for comparability purposes. I think, in the future if we were ever to do a security and had a similar cash dividend and we could look -- should the industry adjust the metric. I'd be open to doing that, but the logic simply was, it was going away anyway, and so I thought, from a comparability standpoint, the best thing to do was to just, literally, do exactly what our other peer was doing, and hopefully that helps the interesting metric.

And just, Mike, to come back to your first question, and my two cents. I think it is January, still, so it is very early for us to be looking out for the year and see, but I think you can see beginnings of evidence that you could have more cell splitting in 2012 than you had in 2011. I don't know that that makes a material difference in our performance in any given year. Obviously, an activity, as you well know, that starts in the year and carries forward you're, at best, only going to get a half year convention in that in your financial results, and so we'll have to see. But ending run rate is always very important.

And so we are very pleased with what we see for 2012, I want to thank everybody for bearing with us on this long-winded call today. We just felt like spending $1.5 billion since we last spoke to you deserved a little more explanation than 60 minutes would contain. So, appreciate you bearing with us. We are very excited for how we have positioned the Company going forward. We have a lot of work to do, and we look forward to speaking with you on the next call. Thanks, again.

Ladies and gentlemen this concludes the Crown Castle International Q4 earnings covered call. Thank you for your participation. (Operator Instructions) Thank you. You may now disconnect.