Crown Castle Inc (CCI) 2014 Q3 法說會逐字稿

Good day, and welcome to the Crown Castle International third-quarter 2014 earnings call. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Son Nguyen. Please go ahead, sir.

Thank you, Devona, and good morning, everyone. Thank you for joining us today as we review our third-quarter 2014 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 refer to throughout the call this morning.

This conference call will contain forward-looking statements which are subject to certain ricks, uncertainties and assumptions, and actual results may vary materially from those expected. Information about potential factors which could affect our results is available in the press release and the Risk Factors section of the Company's SEC filings. Our statements are made as of today, October 31, 2014, and we assume no obligations to update any forward-looking statements.

In addition, today's call includes discussions of certain non-GAAP financial measures. Tables reconciling these non-GAAP financial measures are available in the supplemental information package in the Investor's section of the Company's website at crowncastle.com. With that, I'll turn the call over to Ben.

Thanks, Son, and good morning, everyone. Thank you for joining us.

As we indicated in our earnings release last night, I am pleased to announce that we have meaningfully raised our annual dividend from $1.40 a share to $3.28 per share starting in December of this year. I want to spend a couple of minutes discussing the reasons that led to this increased payout.

First, we wanted to align the shareholder return with how the fundamentals of the business actually function. We expect the recurring cash flow that our business generates will largely be distributed going forward in the current dividend. Future dividends will benefit from the growth expected to come from a combination of contracted escalators, leasing on our existing portfolios, and external acquisitions that exceed the initial cost to capital and increase the dividend over time.

We expect our AFFO organic growth rate over the next five years to be in the range of 6% to 7%, half of which is currently contracted via escalators on our tenant lease contracts. In any given year over, over 95% of our site rental revenues are typically under contract in the prior year, thus creating the certainty we enjoy around the dividend capacity of the Company.

Second, we believe this payout highlights and differentiates the $22 billion of high-quality future revenues under long-term contract primarily with the four major US wireless carriers. And our confidence in the sustainability of these cash flows as evidenced by this unprecedented commitment to returning capital to our shareholders.

Third, we have retained sufficient liquidity to achieve the embedded growth opportunities that are in front of us. As we've said on previous calls, the primary driver of incremental value for us at this point resides in the lease-up potential of the portfolio we already own. Most particularly, the new 17,000 towers and small cell business that we have added in recent years.

Further, this organic growth opportunity does not require a lot of capital to pursue. We have sized the dividend to retain 25% of AFFO, which we believe is necessary to pursue all of our organic growth plans and sustain the business appropriately. We will continue to seek external growth through further acquisition opportunities when such acquisitions cover the cost of the new capital, and allow us to increase the dividend over time.

Fourth, we acknowledge that our organic growth rate in the future is likely to be lower than in the past, partly because of the law of large numbers, and the headwind associated with the carrier consolidation on non-renewals we expect over the next three to four years. Thus, we believe a larger component of our shareholders' total return appropriately should come from the current distribution of our very high-quality contracted revenues, primarily serving the four national US carriers, and our industry-leading position on mission critical wireless infrastructure.

Essentially, the way we think about our business is like a growing annuity of contracted bond-like recurring cash flows, and shareholders will he receiving a current distribution that could be considered interest on the bond, if you will; backed by the $22 billion of contracted revenues I mentioned we have on the books, plus growth from the embedded escalators in those contracts, an increased utilization of our assets as carriers continue to invest in their networks to support the secular growth we are all familiar with in wireless broadband services.

The quality of this cash flow is represented by nearly 90% of our revenues coming from the four largest US carriers. For context, these carriers have a combined market capitalization of approximately $430 billion, annualized operating cash flows of $70 billion, and a composite average cost of borrowing of about 4.5%.

As a pass-through entity of these cash flows supporting the mission critical wireless infrastructure of the four largest US carriers, we believe the composite bond yield of our tenants is an interesting benchmark for evaluating Crown Castle's total return prospects.

Based on last night's closing share price, the combination of a dividend yield of approximately 4% and expected long-term organic growth in the 6% to 7% range, delivers total returns at 10% to 11%. Of this expected total return, approximately two-thirds is achieved via the current dividend and the contracted escalators under our tenant leases.

Fifth, it has long been my belief that an eventual high payout of the recurring cash flow from arguably what is one of the business best models, combined with expected growth in wireless, would yield a lower cost of capital over time. Further to this, we are maintaining a balance sheet profile that is consistent with our investment-grade ratings objectives.

As has been our long-standing practice, we have a very active ongoing dialogue about capital allocation and how we maximize long-term value for Crown Castle's shareholders. Recently, we spoke with and received feedback from many shareholders and several investment banks.

Opinions among shareholders and the investment banks were split between support for distributing a high percentage of our AFFO in the form of dividends, and the desire for us to maintain a lower payout and continue to retain more flexibility to purchase shares opportunistically. We believe both camps have reasoned and thoughtful positions, and we spent a considerable amount of time and analysis among ourselves and with our Board considering the appropriate approach for our business.

As managers of the business, we find the perspectives of our owners on matters such as capital allocation incredibly advantageous. We don't believe we have a monopoly on good ideas and, therefore, we welcome the conversation. For those of our shareholders who would have preferred that we not raise the dividend so significantly in the short term, we appreciate the effort and feedback that you provided, and would hope that you would consider the rationale that we have articulated, and why we believe that a greatly increased payout is the best approach.

Turning to our results, I want to reflect for a moment on the year we're having as we head for the finish of 2014. We have increased our 2014 outlook for AFFO to $4.20 a share, representing 14% growth compared to 2013. This growth has been achieved roughly from equal contributions from growth in our network services business, and our growth in organic site rental margins.

I'm very pleased with our results. They have been accomplished even in the face of the initial headwind from the impact of the Sprint decommissioning of its iDEN network that impacted 200 basis points of AFFO growth in 2014.

We have provided 2015 outlook today that includes AFFO per share growth of 4% for the full year. As previously disclosed, impacting our growth outlook is approximately $65 million of non-renewals from the final year of the Sprint iDEN decommissioning, as well as approximately $40 million from network rationalization of MetroPCS, Leap, and Clearwire Legacy networks. Clearly, this was a meaningful headwind, but we are pleased to be able forecast continued gross leasing activity that is driving double-digit organic growth, before the impact of these network rationalizations.

Unfortunately, based on our most recent conversations with T-Mobile, Sprint, and AT&T, we expect that the rationalization of MetroPCS, Clearwire and Leap networks will continue to be a headwind to our organic growth beyond 2015. Thus, with this AFFO headwind beyond 2015, we would expect it to impact our long-term outlook, resulting in organic growth expectations of 6% to 7% annually over the next five years. We will keep you updated quarterly as we receive more details on the network rationalization plans.

Our growth expectations are driven by long-term industry fundamentals, and 2014 is proving to be a year of continued healthy gross leasing activity. Looking ahead to 2015, we expect leasing activity from new tenant installations and amendments to existing leases to remain robust. And similar to our expectations for 2014, as all four major wireless carriers continue to upgrade their networks to meet consumer demand.

Towards that end, we have deliberately focused our energy and capital in the US, as we believe the US market offers the most compelling risk adjusted returns, where carriers have the most apparent economic incentive to invest in the world. As you can see on slide 6, the US market is uniquely attractive to, due to its relative side and robustness compared to other markets.

Further, US carriers are able to generate incremental returns on their capital investment on a scale significantly larger than other geographies. This can be seen by the approximately $600 in average annual revenues per subscribers that carriers earned, compared to approximately $100 in annual investment per subscriber.

This relatively high ARPU is supported by the staggering growth in mobile data consumption by US subscribers. As confirmation of the need to continue to invest in order to improve network quality and increase capacity and add functionality, US carriers are projected to invest billions of dollars in the upcoming AWS and Broadcast Spectrum auctions. These Spectrum auctions, in addition to Spectrum that currently resides with wireless carriers that has not yet been deployed, require wireless infrastructure to be deployed, and thus, provide a long runway of future demand.

Recent comments from wireless carriers who seek to continue to differentiate themselves based on network quality, reinforce our belief in the long-term growth prospects of our business. The reality is that there are really no limits to the opportunity wireless broadband holds for how we live our lives, and benefit from connectivity never before imagined.

In the 1999 and 2000 era, we purchased our initial portfolio sites from carriers on an unproven co-location thesis with an initial yield of around 4%. As you can see on slide 7, today those sites have a yield of over 15%.

Today, we are fielding familiar questions about the near-term results of our two large carrier tower acquisitions in 2013 and 2014 from T-Mobile and AT&T, which have initial yields of around 5% on these 17,000 towers. It's early, but we are very pleased with the early results that we've seen.

We are experiencing the lease-up we expected, and are driving yields on these portfolios up as we had anticipated. Jay will take you through some additional details on the growth of our recent acquisitions, which are tracking with our underwriting models at the time of acquisition.

As the US market leader, with nearly 40,000 towers, and a very active and growing small cell opportunity currently at 14,000 nodes, we are well-positioned to benefit from these growing macro trends. We believe the long-term prospects of the business have never been stronger, with four national US carriers actively investing for growth in their business.

We have a long track record of creating value for shareholders, and with the high quality assets that we have assembled, we believe we are poised to continue this record.

We maintain a long-term focus on the decisions we make, and welcome the opportunity to differentiate our Company, with our significant commitment to return capital to shareholders, while retaining all growth opportunities that are inherit in our long-term business plan by providing shared wireless infrastructure to the wireless industry.

And with that, I'd be pleased to turn the call over to Jay for some more comments.

Thanks, Ben. Good morning, everyone.

Turning to the financial results, we had a terrific third quarter, exceeding the high end of our previously issued outlook for site rental revenue, adjusted EBITDA, and AFFO.

The robust leasing activity continued during the quarter, and we look forward to closing out the year strong. The results achieved during the third quarter allow us to once again increase our outlook for full year 2014.

Turning to slide 8, in the third quarter, site rental revenue grew 21% year-over-year, from $621 million to $752 million. Organic site rental revenue grew approximately 7% compared to the same period in 2013.

The approximately 7% organic site rental revenue growth is comprised of approximately 4% growth from cash escalations in our tenant lease contracts. Approximately 6% growth from new leasing activity, net of approximately 3% from non-renewals.

On slide 9, I want to spend a minute to break down the composition of year-over-year growth in organic site rental revenue, and the leasing activity among our various asset portfolios we have owned for at least one year. Our legacy US assets, excluding the T-Mobile and AT&T portfolios, generated year-over-year organic site rental revenue growth of approximately 5%, inclusive of the non-renewal headwinds. The 5% in our legacy assets compares to approximately 7% for the T-Mobile portfolio. Given the lower tenancy, a significant portion of this growth is driven by new tenant installations.

We completed the integration of the T-Mobile assets about a year ago, and the assets continue to perform in line with our underwriting acquisition model. We substantially completed the integration of the AT&T assets during this past quarter, and we are encouraged by the leasing activity we are seeing on that portfolio.

The AT&T portfolio's performance is comparable to the T-Mobile assets at this stage, and is consistent with our underwriting acquisition model, which assumed one tenant added over ten years, similar to our assumption on the T-Mobile assets. While it is still early days on both the T-Mobile and the AT&T assets, we are confident in our thesis that we can create value by leasing these assets over time.

On the small cell front, we continue to see strong adoption and growth. Site rental revenue growth from our small cell networks is up approximately 30% year-over-year, contributing approximately 7% to consolidated site rental revenues.

At the end of the third quarter, we had over 6,000 miles of fiber, serving over 14,000 small cell nodes on air under construction, with 21,000 tenants residing on these nodes. Currently, we have over three tenant leases per mile of fiber we owned, or approximately one and-a-half tenants per node.

In total, those nodes are generating approximately a 7% yield on the total invested capital we have deployed to build or acquire fiber for our small cell networks. The vast majority of the current small cell activity is being driven by Verizon.

However, we believe the other carriers will follow over time, adding small cell nodes across our fiber assets, driving our expectations for returns on the investments we're making. We continue to make investments in fiber to deploy small cells, as we believe the investment will deliver attractive returns and increase our long-term dividend capacity.

On a unit economic basis, we are generally seeing initial yields from the fiber we deployed for small cells of approximately 6% to 8% with the anchor tenant. Similar to towers, we see yields on our fiber assets being driven up into the low-to-mid teens from additional lease-up and amendments.

Returning to Q3 financial results on slide 10, adjusted EBITDA for the third quarter increased 21% from the same quarter in 2013. This growth was attributable to the increase in site rental gross margin, inclusive of the AT&T towers, and strong performance from network services.

AFFO for the third quarter was $350 million, compared to $271 million for the same period a year ago, an increase of 29%. On a per share basis, AFFO was up 13%. Increasing from $0.93 per share to $1.05 per share.

Turning to investments and financing activities as shown as slide 11, during the third quarter, we invested $204 million in capital expenditures. These capital expenditures included $17 million on our land purchase program. We are on pace to complete nearly 2,200 land transactions during 2014, of which approximately 25% are purchases, with the remainder being lease extensions.

Our proactive approach to achieving long-term control of the ground beneath our sites is core to our business, as we look to control our largest operating expense, and produce stable and growing cash flow over time. Having completed more than 16,000 land transactions, we believe we have the most secure portfolio of ground interests in the industry. Today, approximately one-third of our site rental gross margin is generated from towers on land we own, and approximately 70% on land we own or lease for more than 20 years.

Where we have ground leases, the average term remaining on our ground leases is approximately 30 years. We have provided more detailed information regarding the ground interests beneath our towers in our quarterly supplement.

Of the remaining capital expenditures, we invested $167 million in revenue generating capital expenditures, consisting of $99 million on existing sites, and $68 million on the construction of new sites, primarily small cell construction activity.

We also spent approximately $20 million on sustaining CapEx, which was below our third-quarter 2014 outlook. However, we've not adjusted our full-year outlook for sustaining capital expenditures, as we expect to perform the same sustaining CapEx activities within 2014, completing this work during the fourth quarter of this year.

During the quarter, we also invested approximately $90 million in acquisitions, primarily related to the acquisitions of ground interests underneath towers. Further, during the quarter, we paid a quarterly stock dividend of $0.35 per share or $117 million in aggregate.

As of September 30, our total net debt to last quarter annualized adjusted EBITDA is 5.3 times. Our weighted average cost of debt stands at 4.2%, with a weighted average maturity of six years.

As Ben mentioned, our decision to increase the dividend has further reinforced our views regarding maintaining appropriate leverage on the balance sheet. We remain committed to staying on a path to an investment grade credit rating, and maintaining a target level of leverage -- a range of 4 to 6 times.

Moving on to the 2014 outlook on Slide 12, we have increased full-year 2014 outlook for site rental revenue, site rental gross margin, adjusted EBITDA and AFFO. The increase in the outlook is primarily driven by third-quarter results, an extension of the tenant leases with one of our major wireless carrier customers in Australia during the fourth quarter, and expected higher network services gross margin contribution, offset by a decrease in the assumed exchange rate from our previous outlook.

For 2015, as shown on slide 13, we expect new leasing activity to be similar to 2014, offset by an elevated level of tenant non-renewals. Moving from left to right on the slide, at the midpoint of our outlook, new leasing activity or incremental revenue from new tenant installations and amendments to existing leases is expected to be approximately $145 million during 2015, as compared to $125 million for 2014.

Of the approximately $145 million in new leasing activity, expected contributions from tower leasing and small cell leasing are $100 million and $45 million, respectively. The approximately $100 million in new leasing contribution from tower leasing represents over 4,000 lease equivalents on over 40,000 towers, or approximately 0.1 tenants per tower. As we've stated on numerous occasions, our long-term view of this is that we can add approximately one tenant per tower over the next ten years, and we're right on track.

This 2015 growth is offset by the expected headwind from non-renewals. Non-renewals for 2015 are expected to be between $110 million and $120 million. Of this $110 million to $120 million, we expect approximately $60 million to $70 million to come from Sprint's decommissioning of its iDEN network, as previously announced.

In addition, we would have expected 1% to 2% impact to site rental revenues from normal non-renewals, or approximately $45 million at the midpoint. For 2015, we expect the normal non-renewal bucket to be largely consumed by the beginning of the carrier consolidation non-renewals, as Ben mentioned.

Beyond 2015, we expect potential non-renewals from the decommissioning of a portion of the Leap, MetroPCS, and Clearwire networks to be approximately $160 million of current run rate site rental revenues. Based on our current understanding and the communication we've received from our customers, we expect the impact from these non-renewals related to these three networks in 2016 to be between approximately $60 million and $70 million, and approximately $100 million in 2017 and beyond.

Our expectations for the potential impact from non-renewals represent approximately 60% of the site rental revenues generated by Leap, MetroPCS and Clearwire. We do not expect any of the non-renewals to come from our small cell networks. We have provided additional details in our quarterly supplement.

Continuing with organic site rental revenue growth, escalations on the existing tenant lease contracts is expected to be approximately $90 million in 2015. New leasing escalations and non-renewals combine to arrive at organic site rental revenue growth of approximately 4% or $120 million.

The $120 million in organic site rental revenue growth for 2015 translates to approximately $55 million in expected GAAP site rental revenue growth, after making $65 million in adjustments for straight line accounting, and exchange rates, and other items.

The adjustment for straight line accounting removes the benefit of approximately $90 million in contracted escalators on the existing tenant leases, and adds approximately $30 million in straight line revenues related to the new leasing activity, including the tenant lease renewals that I mentioned before.

Moving to slide 14, our 2015 outlook for site rental gross margins and adjusted EBITDA assumes an increase of approximately 6% or $60 million in costs of operations, and general and administrative costs, as compared to 2014.

All of the increase in expenses is reflected in the run rate expenses for Q3 2014, after accounting for the typical 3% annual increase, as we have increased staffing during 2014 to accommodate an increase in small cell activity, growth in network services, and the expansion in the size of the asset portfolio. Given the strong level of leasing activity and the agreements we have in place with our tenants, we see continued strength in our network services business, and expect it to replicate the operating performance of 2014.

We expect 2015 AFFO to increase to $1.45 billion. Of this $1.45 billion in AFFO, we expect to distribute approximately $1.1 billion in dividends, and use the remaining portion to fund activities that drive our organic growth.

Let me summarize the year-over-year changes as it relates to AFFO. As shown on slide 15, beginning with the net leasing of approximately $30 million after non-renewals, plus the $90 million benefit from tenant escalations, offset by the cost increases of approximately $60 million, and other adjustments of approximately $10 million, results in our year-over-year growth in AFFO of $50 million.

This simple layout is a good model for AFFO growth for future years beyond 2015 for our business. As you consider 2016, for instance, based on the information we have provided for non-renewals, and assuming leasing activity remains at current levels, we would expect AFFO growth in 2016 to be approximately 6% or 200 basis points higher than that of 2015. As Ben mentioned, over the next five years, we target AFFO growth to be 6% to 7% organically.

To complete the picture, this underlying growth in our existing assets frames our expectation for future dividends per share, as we expect to increase the dividend commensurate with AFFO per share growth over time. With respect to our dividend policy, we believe the acceleration to a higher payout today appropriately balances providing shareholders with increased certainty for a significant portion of shareholder returns, without compromising our ability to deliver long-term organic growth.

Since the early days of Crown Castle, our long-term capital allocation goal was to distribute a meaningful portion of our cash flows to shareholders in the form of dividends, and we are pleased to realize that goal today. With that, operator, be happy to open the call to questions.

Thank you.

(Operator Instructions)

Our first question from Kevin Smithen with Macquarie.

I understand some of the pressures on 2015 [share] and site revenue growth. But I wanted to focus on the 6% to 7% long-term growth, and your comments on 6% AFFO growth in 2016.

You talked about the AT&T lease ups beginning to kick in in small cells. I guess when you add up all of that, I'm a little surprised you're not thinking about new business picking up in 2016, and AFFO growth accelerating next year.

So I wanted to know if you just can walk through the puts and takes of that, specifically your organic growth at 4% not picking up? And I think that the dividend growth component is a big determinant of where the yields should be, and, obviously, if there's a big difference between 6% and, say, 9% or 10% in a good year.

So just walk us through puts and takes of 2016 and beyond on what you've talked about the churn. I want to talk about the organic growth opportunities, if some of the lease-up on the MLAs picks up and you have some capacity.

Sure, Kevin. This is Ben. I'll start, and Jay may jump in here in a minute.

As we think about 2016, Jay mentioned, we could likely see a couple hundred basis points or so of improvement. I'd break that down for you.

First on the expense line, we certainly wouldn't expect to increase expenses again scaling as we have done in 2014. So as that returns to a more normal 3% growth rate, even allowing for new systems coming on board on the small cell side, I would think we'd pick up probably 100 to 150 basis points there of improvement to AFFO.

And then similarly, as we've given guidance on churn, our best estimate for 2016 at this point would be that we would see maybe 100 basis points or so less impact in 2016. So that's the nature of the 200 or so basis points of pick up in 2016 over 2015 pro forma. As you think longer term, it goes to really to revenue.

And I want to talk about this real clearly for everyone. Today at the current levels and our forecast for 2015, we're adding about $100 million of new revenue from new leasing on the tower portfolio that we have today. And as Jay indicated in his comments, that's equivalent to about one-tenth of on tenant on all 40,000 towers that we currently own.

We're quite comfortable with that. That was our underwriting model. And I might add, that's even continuing on some of the legacy -- many of the legacy towers we have had that are over 90,000 in revenue today per tower.

So the new assets are punching above their weight on a percentage growth basis, because they're coming off of a smaller base. But they are a smaller base. And it's a smaller contributor to our overall revenue than the enormous base we that have on the legacy portfolio today.

So in the vicinity of $100 million or so, and even if that were to increase by, let's just say, 10%, just to make up a number for you, that's $10 million. And that's not even 1% growth on AFFO. So the numbers -- and as I mentioned in my comment, not a -- didn't take them lightly, the law of large numbers here is definitely in play.

And so while the churn and the non-renewals that we've talked about is a short to medium-term obstacle that we will get over. The law of large numbers and we're adding,call it, $100 million to $150 million of AFFO a year going forward on a similar asset base.

Obviously, that's a diminishing growth rate every year. And that's something to be appreciated, and went into our thinking around how we structured the dividend and how we think about the long-term growth expectations.

Now clearly, two other points to that. As the churn continues to lessen in outer years as we roll through this consolidation churn, you would expect then to have more contribution to AFFO growth. Even on this $100 million or so on the tower side, and maybe $40 million to $50 million on the small cell side.

And I would mention again, we're getting very attractive initial yields on that investment in the small cells. And significant co-location occurring across those nodes today, as Jay mentioned.

So if you just assume that continues, that's how you get to the 6% to 7% over five years. You certainly can appreciate if you start off at 4%, and the second year might be 6%. And we're suggesting to everybody that over five years, it's 6% to 7%, obviously the back half of those years have to be better, and that's our expectation.

But I do think it's important to ground everybody in the law of large numbers around the organic growth opportunity or capability of the business. It shouldn't be lost on anyone that the guidance we've given today of 4% AFFO growth, which is inclusive of this outsized investment we've made in resources to accommodate the opportunity we see. About 100 basis points of headwind there, also has 700 basis points of churn in it.

So the organic engine, if you will, is in the vicinity of 11% or so. And we're very, very pleased with that. But that's subject to this law of large numbers, diminishment over time.

Finally, last point. No one should leave this call with any diminished view about our goal to continue opportunity to add assets through external acquisitions. Where it can cover the initial cost to capital, obviously a dividend and interest expense to the extent it requires equity capital and new debt. And then would be accretive to our ability to grow the dividend over time.

It will be a very simple formula from this day forward, because it's going to be very easy to figure out what the dividend component is and what the interest component is. And anything we would pursue, certainly would need to cover its initial cost to capital and be accretive to that growth rate over time. Or it would make no sense to do it.

So we believe that there will be opportunities to continue to grow the business, and compound the growth against that new capital. But for purposes of discussion on our five-year plan, as always, we don't forecast those acquisitions until they're on the table. And that's the guidance we've given you today.

Just a quick follow-up on the churn. Is this -- on the acquired Company churn in the out years, have you gotten requests already from the carriers for this plan? Or is this your worst-case scenario exposure -- aggregate exposure for those acquired companies?

No, Kevin. This is based on very real time significant conversations we've had with all three of those parent companies around their decommissioning plans over time, and as it would impact our business. I think in the disclosure we indicated that about $260 million of revenue resides on our tower sites today, and another $90 million or so on the small cells. Small cells are unaffected.

So it's upwards of close to 80% of our revenue on the tower side that we expect to be rationalized over time. And that's coming directly from conversations we've had. More than one, ongoing conversations we've had over this last quarter and subsequent to the quarter.

Where we feel like, in good faith, we had an obligation to bring those forward and as their real time information and put that in our forward outlook. That could change. Sometimes it does change.

But these are serious conversations. And the carriers have actually spoken publicly on numerous occasions about their opportunity to realize synergies around these networks. And you're seeing that here reflected in these numbers.

And we'll go next to David Barden with Bank of America Merrill Lynch.

Thanks for taking the questions. I guess I have a related questions.

The first one is, Ben, you've set out a five-year game plan here it seems based a series of conversations that seemed to be somewhat casual that have happened maybe over the last several weeks or a couple months. And it feels like this is a pretty significant reduction in the expectations for the future for a very long time based on a few conversations. I guess the real question is, is do you see downside to what you're presenting here?

Or are you presenting a pretty downside case? And as the world evolves, as the world of wireless does, there could conceivably be upside here.

And then the second question is, you mentioned, obviously, we're all wondering about the Verizon deal. We were expecting that there -- if you were to come to terms with Verizon, there would have to be an equity component.

With your stock down and now the dividend cost of your stock being higher, is the hurdle rate to do a deal, any deal now greater if the stock were to stay where it is right now? Or in your own mind, has your cost to capital not changed, and you look at deals now the same way you would have looked at them yesterday? Thank you.

Sure. On the non-renewal discussion, Dave, we don't take this casually. This is a material fact that we felt compelled to share with all of our shareholders.

And we realize it is a material change in our long-term growth outlook, and it was for us, too, as shareholders. I can assure you. We don't take it lightly, and these are based on more than conversations.

These are based on significant, indicated plans and planning that they have shared with us including site-specific information. And that's the nature of the conversations we've had, and the seriousness with which we take it.

I don't think it could be much worse than this, candidly, and it could be better. Certainly it could be, as carrier rationalization plans develop over time. But the point I would make on the it could be better, I would caution everybody on that because I would remind you that we continue to maintain a robust gross leasing outlook.

So we are continuing to expect that we will add upwards of $100 million or so across the tower footprint every year. Which is a robust leasing environment that would encompass certainly these three parent companies continuing to invest aggressively in their networks going forward. Post-rationalization, or wilder rationalizing the legacy acquired networks.

So I'd say on the add side of that, on the growth side, we've got a very robust expectation for leasing that we're going to work very hard to accommodate and accomplish.

On the Verizon tower transaction prospectively, I don't have anything specific to announce about that. Obviously, Verizon would speak for themselves about their desire to divest their towers, should that occur.

As we would think about a need to raise equity going forward on acquisition in general. We would, as I mentioned in my notes, we would look at any opportunity out there and view it as certainly the need to cover its initial dividend and interest expense. And then certainly have a very significant and disciplined expectation that it adds to our ability to grow the dividend over time, or there's really no reason to pursue ti.

Because we understand that the evaluation of the Firm going forward will be very much around the current dividend yield that the market will shake out, and the expectation for future growth. We've given you a view today that the organic ability of the Company is in the vicinity of 6% to 7% over the next five years. I would be quick to add that about half of that growth is already on the books today in the form of the contracted escalators we have across our Company today.

So approximately two-thirds of the total return profile that we're suggesting to people is available on the existing asset portfolio today that we own. Approximately two-thirds of that total return profile is already on the books.

And I think that's pretty compelling, and we have every opportunity to continue our legacy of growing assets and creating additional value. And we'll continue to pursue it that way.

Thanks, Ben. If I could just ask one quick follow-up. Which is, when you talk about the incremental $100 million of leasing revenue growth, you gave us a -- that's a macro picture. Is the -- could you talk about the small cell site outlook that you're baking into this 6% to 7% growth rate?

Sure. That would suggest a continued level of growth in and about the $140 million to $150 million total. So an incremental $40 million to $50 million on the small cell side as well.

That's a mixture of co-locations on existing systems, as well as investment at about the current level that we're seeing today. With the retained AFFO, as Jay mentioned in his discussion, around our logic on what we are in fact retaining.

Where we're able to continue to invest in the small cell side, which are coming attractive initial yields and provide great promise around total returns from co-location over time. So that suggests that that would stay at about the current level.

Great. All right. Thanks, guys.

And we'll go next to Ric Prentiss with Raymond James.

Thanks. Morning. One easy question, I think, and then a harder question. On the dividend, I'll give you the easy one first.

With the dividend thought process, how did the NOLs fit into it? What happens to the value -- did you see value in the NOLs, and what happens to it? That's the easy one.

The NOLs continue to have value for the Company, and they're remaining to be I think maybe just shy of $2 billion by the end of this year, Jay? Is that where we think? We're burning them now, obviously, with the federal income tax net income. So just shy of $2 billion.

When you work out, Ric, that math over the next years, it's not a huge driver of value for the Firm. But it is interesting optionality that we will retain now by not essentially consuming very much of those NOLs going forward. And so we will continue to have that, it provides some flexibility for us on potentially an asset sale one day where we would shelter a gain.

But it's not a significant driver to the overall value of the stock. And it was one that we were willing to move to the back burner in terms of order of priority. Based on what we thought was the appropriate need or desire to have shareholders participate in this recurring and growing cash flow stream, as we've outlined.

Makes sense. We had always held that on our model as like if you ever sold to Australia, that might be a nice asset to have around the NOLs.

It will be in our pocket.

The more difficult question is, I understand the law of large numbers. And I understand you guys have done a lot of portfolio additions. But a little bit back to the earlier question.

If you think about when you bought the AT&T towers and the T-Mobile towers, ballpark 1.6, 1.7 tenants per tower versus much higher tenancy at your base portfolio or your legacy portfolio. I remember hearing in the past that buying those carrier towers was like a big bet on co-location, densification. And we've seen a lot of amendment activity, heavy amendment activity versus co-los.

Is this update to your guidance a way of saying also that maybe the new co-los don't happen, or it takes a longer period of time? So just trying to reconcile the big bet on carrier portfolios of low tenancy, betting on densification, hitting co-location, and this new kind of view. What are your thoughts on that?

I haven't changed my view. That's a great question.

As we mentioned when we acquired those portfolios, we had underwritten approximately one additional tenant per tower over ten years. And we're tracking at that level.

But you're right to point out that that's based -- because there's not a lot of existing tenancy, a lot of that has to be based on future co-location. We expect that will happen. In fact, we think there's a very strong thesis that we should have ultimately, based on network demands, have essentially all four tenants on every one of our sites over time.

We don't underwrite it that way. We don't put that in our guidance. That's not in the 6% to 7%.

But if you think about the legacy portfolio, how do you get to $95,000 of revenue per tower on the legacy sites after 12 to 14 years of marking them. You get there by continuing to add tenancy and subsequent amendment activity over time, well beyond maybe your initial underwriting. That falls in the category of the upside will take care of itself.

And so we don't put that into the model or into the discussion very often. But we don't have any diminished view of that lease-up over time. Jay, did you want -- ?

Ric, you can see in the numbers. And when I made my comments about how the T-Mobile portfolio and the follow on to that is AT&T, how they've performed. Adding about 0.1 tenants is right about 7%, which is right where the portfolio is performing.

So as you get into the law of large numbers, obviously on a percentage basis, that will come down. But it's tracking right in line with what we expected.

And on the T-Mobile and AT&T, assets we continue to believe that co-locations are going to be the biggest driver of that revenue growth. I think for the quarter, we were in the ballpark of about 65% of our leasing activity were co-locations from new leases, and about 35% were from amendments to existing leases.

But if we were to see a significant shift in the carriers being from amendment spending of their CapEx to being new co-location, that could to the upside to your numbers back to the previous questions?

Yes, it could, and right now -- as we've said on prior calls, the most active co-locater in the industry today by a large margin is Verizon. And I think that's been well documented. Other carriers, the other three, are very aggressively still building LTE capacity into their network, as well as beginning to show is signs, that happily from our perspective, of adding new sites.

We're seeing that occur in all three of the carriers, where they're coming back and looking at capacity infill sites which would be new co-locations. And they've talked about it in public settings recently.

Verizon for 2014 is the most active. But we would expect over time the other three to return to co-location in a very aggressive way. As they're adding capacity density in these networks, which are required over time as they continue to add data services.

Ric, I think maybe one of the ways to speak about the portfolio and certainly it went into our thinking as we looked at the T-Mobile and AT&T assets. Was the diversity that we thought it brought to the Company, in addition to the growth. So the legacy assets, 24,000 assets, obviously, those are more heavily weighted towards amendments to existing leases.

The new assets that we bought are more heavily weighted towards a belief around co-locations of new tenants. So our experience has been, over a long period of time, that there are ebbs and flows. Where carriers allocate capital towards one activity or another, whether it's new leases or amendments.

And we feel great about the portfolio that we have. And as we talk about our longer-term forecast, we might see that move one way or another. And maybe that means for some period of time either the legacy portfolios or the more recently acquired portfolios benefit from whatever stage in the cycle the carriers are in. But we like the diversity that we have in the mix so that we think we'll do well in both cycles.

Great. Thanks for the explanation.

And we'll go next to Brett Feldman with Goldman Sachs.

Thanks for taking the question. I just want to go back to the discussion around establishing what the payout was going to be. How did you get comfortable that 75% was the right starting point?

And then as you think about going forward, what do you have to believe to believe that you could pay out a higher portion of your cash? And then lastly, based on the redistribution requirements, will you reach a point where you have to?

Why don't you handle that, Jay, and I'll pick up the second part.

Yes. The second part of that of where would we reach from an NOL standpoint. We have long believed that where we would end up is somewhere between 70% and 80%. So basically, our starting point is paying out effectively all of the taxable income.

I don't believe from an NOL standpoint that we're going to get ourselves in a place where the dividend payout would be driven based on a need to pay out a higher percentage. I think it's more likely that, Ben probably may speak more to the rationale that he laid out in his prepared remarks. But it's more likely we have a strategic conversation about that, rather than being driven by taxable income.

And in terms of where we established the payout, Brett. We really started with the notion of what do we need to retain to accomplish the organic growth expectations that we have on the existing assets that we currently own. And that includes the current level of spend on the very productive investment we're making in small cells.

So we really started with that as an opening premise. And we didn't put ourselves in a lot of risk on requiring us to raise outside capital to accomplish those growth expectations on an organic basis. I think that's a very prudent and thoughtful approach, and the rest, 75% will now be in the current dividend.

Going forward, there's a couple of things that we can think about in the future that could impact or make us reevaluate that payout. And this is pure speculation, because we're just starting out.

But as we achieve an investment grade rating, and by definition you would have more access to capital through good markets and bad at even a less cost than we're currently paying. I think that would heighten our confidence level in reliance on the capital markets to fund some of these activities. So over time, we could consider and evaluate whether or not it made sense to raise the payout.

No commitment here on my part, but that's something that would be reasonable to assume that we could evaluate. Once we have more certainty around access to capital.

We were certainly not willing to put ourselves in a position where we thought we were risking the growth opportunity, accomplishing the growth opportunity in the Company. By needing to access outside capital to make the assets perform. I think that would be irresponsible on our part here day one.

Over time as the market becomes -- as the shareholder base becomes, I think, more accustomed and more used to underwriting the sustainability of the dividend in this wonderful business we're in. I think that will be something that we'll continue to evaluate, along with the investment grade rating.

Great. Thank you for taking the question.

And we'll go to Colby Synesael with Cowan and Company.

Two questions, if I may. First off, just as it relates to the timing of the terminations, I'm just curious if the MetroPCS, the Leap and the Clearwire, if this is happening early? In other words, if they're going to be paying you some form of payment to end the contracts earlier than they otherwise would? Similar to what we're seeing with iDEN, where I think they're paying you call it $12,000 a tower to do, so or if they're actually waiting for their contracts to expire and that's why we're seeing it roll off over the next four years?

My second question had to do with you're guidance, specific to 2015. When I look at new leasing activity, and escalators specifically, in both situations for 2015 when compared to what your guidance currently is for 2014, you're assuming slower growth. I'm just trying to understand what might be the reason for that. Thanks.

Yes. Let's get on that last statement real quick, it's more [growth].

Well specifically, you're looking for 5.1% new leasing activity versus 5.5% in 2014. And for escalators, you're assuming escalators are 3.3% versus this year at 3.6%.

Colby, on the second question, I would point you to slide 13 of the presentation that we showed. We're showing that on a new leasing activity basis, we're assuming in 2014 approximately $125 million of new leasing activity. And for 2015, we're assuming $145 million.

So there's an actual pickup there of about 15% or so higher leasing activity in 2015 than there is in 2014. That obviously on a percentage basis though, also is a larger base, is going to be a lower percentage. So if you're looking at percentages, it's going to be lower.

On the escalator provision, the primary driver for that is in the legacy portfolio, as you're aware, we signed a number of MLAs that had higher escalation provisions. It's how we accounted for the opportunity for these tenants to make additional amendments on the sites. And so the escalators on those would be higher than the two acquired portfolios.

And as we roll in the AT&T portfolio into the organic year-over-year comparison, that escalator on a percentage basis is going to come down by just a touch there. So that's the primary thing there. But I think on an activity basis we're expecting slightly, slightly more.

On the first question around the timing of terminations, we're not embedding into this, into our guidance, any expectation that the tenants are going to be paying us early termination fees. We're assuming that they live by the contractual obligations that they have, and that the terms of the agreements hold up.

If, as we go along, you've heard us talk about the pay-and-walk fees that we had associated with Sprint as they were decommissioning their iDEN networks. There may be some of that over time. They will have an obligation either to make the site back to the condition that it was prior to the equipment was installed, or we would be happy to perform that service for them.

We're not forecasting that in our outlook, but that would end up running through our services business and not through site rental revenues. We typically think of that as one-time work, and put that in services instead of in site rental revenues. So but we haven't imbedded any of that in our forecast over time.

So right now, the turndown of the sites is actually aligned with when the contracts --

It's based on their contractual rights, that's how we've done it. So is there -- let me just roll the clock back and make sure I give you a wholesome answer, and one way to think about this.

When Sprint was looking at decommissioning their iDEN network years ago, they ended up coming back and doing short-term lease extensions on some of their sites. In order to -- because they weren't quite ready to decommission sites at a particular date and time. What we have provided for you is what we believe, based on what those three carriers have told us about when they're going to decommission sites and the amounts of those.

We've provided that information to you. That's our expectation of the $200 million. That aligns with their contractual rights under the tenant leases that they have with us.

If they were come back and extend that timeline or facts change, then I think would be open to having a conversation. And we'll update you as those conversations proceed. But what we've given you is a combination of their contractual rights and obligations, against what they've told us about the decommissioning of the sites.

Great. Thank you.

And we'll go next with Phil Cusick with JPMorgan.

This goes a little bit to a question a couple ago. Can you help us think about the potential for CapEx and expansion in 2015 under the 75% payout ratio?

On our math, and admittedly it's a little preliminary. But it looks like you have to take CapEx down somewhat year-over-year or go out and borrow money, which you've said you don't want to put yourself in a position to. Does it seem like there are fewer opportunities, or am I totally off base?

So we sized it, as Ben mentioned, if you look at what we spent in the third quarter for land purchases and the construction of new sites, that's effectively 25% of AFFO. The balance of the CapEx that we have is basically reimbursed by the tenants as they go on the site.

It's spending CapEx on existing sites, and that's basically reimbursed. So at the current spending level, using Q3 as the measure of that, at the current spending level we can cover that CapEx with the 25% of AFFO. Frankly, that's one of the primary ways that we sized the dividend at 75%.

And any more spending would probably be offset by preliminary or pre-fees that you don't count in AFFO any more?

Well, I think it's -- to the extent that we grew the business and we started to say we wanted to invest more in small cells, well that's a discrete investment. Similar to the way we would think about an acquisition.

And we'd need to go through that math. I think the other -- as we think about a more normal CapEx that we would spend in the business was we add additional tenants to the sites. That CapEx is absolutely reimbursed by the tenants.

And just to make sure I'm on the same page. When you say that the small cell is similar to an acquisition, does that mean that you would borrow to fund that small cell business? (multiple speakers) I'm sorry. You may need to borrow to fund that small cell business.

Yes. Well to the extend past the run rate of Q3, we would need to, yes.

And be happy to do that to the extent there's opportunities that -- it's just like an acquisition, as Jay said. Assuming the opportunity covered the cost, we're not going to be too hard on that whole point of not borrowing. We've got balance sheet capacity, and we'd be prepared to use it.

But what I wanted to do in sizing the dividend is to not put ourselves in the position where we had to do that just to capture the existing opportunity on our current sites. And so that what Jay was saying at the current spend level, we're covered. But to the extent the opportunity was there and warranted it, we'd be happy to continue to access capital and borrow some just to cover that over time.

Great. I thought you were ruling that out a few minutes ago.

No, glad for the clarification.

Thanks, guys.

We'll go next to Amir Rozwadowski with Barclays.

Thank you very much for taking the question. Just wanted to clarify some of the comments you made in some of the earlier questions.

You talked about this $100 million growth on the tower portfolio side. And it does seem as though that if we do see an increase in co-location activity, that could provide some further tailwinds for an expanded opportunity there. Is that the right interpretation of how we should think about things?

Amir, I would say about that, as I was making a comment about the ebbs and flows that we see in the business. Typically, and I would encourage you to look at this relative to the comments that the carriers are making around their CapEx and their spend in the networks. There is a natural ebb and flow that happens between the spending they make for amendments, and the spending they do for new leases.

Our experience has been the dollars and the spend on the networks is relatively similar year-over-year. The allocation of where those dollars goes tends to change. And so to the extent that you were to assume there was meaningfully more new co-locations being put out, is there a possibility that that could mean more revenue to us? Absolutely.

It could also mean that the 35% of our current activity that is amendments, that number may go down and may offset some of the increase that we see with new co-locations. So as we think about the business, we tend to think about it more on a -- over a long period of time how much revenue per tower can we add. And that 0.1 is adding about $2,400 per tower of new revenues.

And we have a belief that over time that will be a mix of new leases and amendments. And our experience has been that that will change from year to year, but results in something that looks similar to that 0.1 tenants per tower.

That's very helpful. Thank you so much for the clarification. And if I may, one other quick question on the small cell side.

If we hear what the carriers are saying, particularly when it comes to allocation of capital more towards densification and capacity type initiatives. It does feel as though we should start to see potentially increased momentum around that front. You had mentioned there's largely Verizon has been focused on that.

But clearly, it does seem like all the carriers at some point in time are going to embrace this type of network architecture. How should we think about the opportunity set for accelerating growth on the small cell side given your footprint within that arena?

Amir, this is Ben. We think that's a tremendous opportunity, and one that we are actively working on capturing for Crown Castle. We have a very large and growing pipeline of network opportunities to be built as well as co-location.

And I do agree with you. And it's certainly our investment thesis that we will see the other three carriers adopt that architecture in a very meaningful way over time. Based upon the capacity requirements of their systems, and the locations of where we're building these networks.

That has happened over time with various carriers. And we still have -- we have a significant amount of exposure and revenue, as we said earlier. MetroPCS, for example, now under T-Mobile.

All of those leases have been affirmed, and don't expect those to churn. Which is an -- I think an interesting indication of the value of the small cell networks going forward, in that these are very vital to adding capacity and densification. And are not subject, at least thus far, to the rationalization that we've seen on the tower side.

Thank you very much for the incremental color, gentlemen.

We'll go next to Tim Horan with Oppenheimer.

Two quick, ones and then a longer one. Sorry. On the HOT transaction, would that have met your interest in dividend requirements as you currently define them with the new dividend?

Secondly, your investment bankers really had weeks to look at the transaction, and we just had a couple hours. Did they tell you what they thought the dividend yield would settle out at when the market really absorbs all of this?

And then third, the longer question here really. Investors had been really nervous about shut downs of cell sites and the consolidation, and it didn't seem like the managements streams in the industry were as nervous about it.

What has really changed that from your thinking six months ago, or three months ago, or what we've seen historically? Historically, we've never really seen shut downs like this. Thanks.

On the first question, the AT&T transaction would have met that, and we believe that would be accretive to the dividend over time. We wouldn't have done the transaction if we didn't believe the dividend was going to be higher.

As Ben mentioned, on the investment banker views that we got. We engaged and asked several firms to give us their views. Those views were ranging in terms of how they thought that the market would react to the news, as well as their opinion on what the best approach was. I think that there was a whole variety of views there.

And as we looked at the information and considered both the feedback from shareholders as well as the information that we generated and analysis that we did on our own. Our belief was that increasing the dividend to about 75% of AFFO was the best outcome for us over a long period of time.

And so there were a number of views there, as Ben mentioned in his comments. But we thought it was the best approach.

Tim, in terms of specific yield, we'll let the market sort that out and tell us over time. I would offer the following observation, though. Where we're currently trading this initial yield as of last night, and that's about a 4% yield.

That would put us above the REIT composite by a significant margin. And I like my new REIT colleagues, but I wouldn't trade places with their business models. And so when I look at our opportunity for stability and growth as the mission critical infrastructure provider in the US market, I think that's a fabulous business model.

And as we've said a couple times on this call and I'll repeat. The fact that we've got built in growth on top of that dividend, I think is clearly unique. And the market will sort out what the appropriate dividend yield is over time, and a total return expectation.

But we'll certainly be out working to help them understand the resiliency and the sustainability of this business through lots of different macro economic cycles. Where back since we went public initially, we've outperformed the S&P 500 by 4X, and that's right through all of the different cycles that we've experienced since that time.

In terms of your last question on the churn, what's different this time? I think it is a little bit different this time. As you go forward, there is rationalization that can occur in these networks, particularly around overlap sites plus a little more, which is what we're forecasting.

And yet at the same time, we're seeing continued new cell site density added, which is forecasted in our revenue growth as we've talked about. So I think we've probably accurately captured it. You could say, well leasing may be a little lower if they're actually just repurposing some of the cell sites.

That's true. But on a net basis I think it probably comes out about where we've said. So we'll have to wait and see how that develops over time. But I think it is a little bit different, particularly in that we have three happening here in fairly much on top of each other.

I think there seems to be in the comments, and at least what they're indicating to us is their plans around their networks, more of a focus on spectral efficiency than in past consolidations. So that's likely the reason why we're seeing more than overlap sites go away.

T-Mobile's comments publicly about the Metro sites, I think Metro has about 12,000 macro site. T-Mobile has indicated that 10,000 of those 12,000 are going to go away. And their description along with the others' descriptions is largely around reharvesting and reusing that spectrum in a more efficient way, by taking down greater portions of the network than what we've seen in past consolidations.

And any idea why American Tower is not seeing the same effects as you guys are?

I wouldn't have any comment on American Tower. You'd need to ask them.

Thanks.

We'll go next to Batya Levi with UBS.

You touched on this before, but I wanted to get a little bit more specifics on the split of the churn coming from the acquired networks. Is the majority coming from Clearwire? I think -- and is it mostly the urban markets? I think you had mentioned before that the contract was going to be up for renewal I think in 2015 and 2016.

And when you look at the PCS T-Mo, I believe you have mentioned that the overlap is about 2% of your revenues. And you had a contract until 2017, 2018 to Leap was similar.

So you did mention that the rationalization piece is a little beyond the overlap. So you can you maybe provide a bit more color on what is included in the overlap, and what do you think is beyond that?

Yes, I wouldn't put the majority on any one of those tenants. The ranges that we provided, we essentially didn't go customer by customer on the ranges. It gives us a little bit of flexibility as it shakes out over the next several years.

So those three operators decommission their networks, we would expect it to move to some degree, which is why we tried to band the exposure. As you noted, when those announcements were made, we indicated the overlap sites was in the neighborhood of about $145 million. Those sites that were overlapped.

So the incremental amount of roughly $55 million of additional churn exposure that we believe we have, those would be on sites where they're not overlapping with the acquired network. In my comments to the prior question around spectral efficiency, I think probably best answered the why there.

In the disclosure that we had previously given, we gave the average term outstanding for the leases. And so as we work through that, obviously you can see that average basically work itself out as we've shown over the long her period of time what our exposure is to those three networks.

Thank you.

And we'll go next to Michael Bowen with Pacific Crest Investment Bank.

Okay. Thank you very much. A couple questions here.

I'm trying to figure out, first of all, with regard to the dividend, was there any thought process around rather than returning capital to shareholders -- rather than doing that, maybe spend on targeting acceleration in that 0.1 per year for the AT&T and T-Mobile portfolios?

And then number two, does this now make you guys start to think a little bit about international investments more seriously? Because clearly we're seeing higher growth rates, organic growth rates, in international than we are here in the US. Thanks.

I don't know where to start with that. I didn't catch the -- if you spend to increase the leasing, boy, if it was that simple we would have done it 15 years ago. There's no discretionary spend on our part that is inhibiting the leasing of the carrier towers or all the towers that we own today.

So we're actively outpursuing every one of those opportunities, and that's what's resident in the $100 million of revenue growth that we're seeing today, Michael. So the dividend, again, and how we sized it was essentially to retain the capital to pursue the organic opportunities that we see today.

The international opportunities that are out there, we'll continue to evaluate them. And as I've said on these calls many times against the appropriate risk adjusted rate of return we think and is appropriate against the asset prices that are out there.

In so doing, you have to look at what local borrowing costs are, what exposure to FX we'd potentially do. And all of the other factors that would involve an evaluation such as that.

But thus far, in our judgment, the investments we've made in the US have a higher risk adjusted return profile opportunity. But we'll let that sort itself out over time.

Yes. And where I was going with the first question was whether there's anything that you guys could put in place. Rather than paying out a dividend to use that capital rather to increase the tenant per tower, the incremental increase on a per year basis.

Is there anything that you contemplated or any thoughts around things you could do to accelerate that? It sounds like the answer is no, but that's where I was going.

No. I can assure you, we're capturing every one of those incremental revenue opportunities. That's our core business, and what most everybody that works here is focused on every day.

But just to be complete, the competing thought that we had lots of discussion with shareholders and we've engaged in this in a productive way before. Would be to take the $1.1 billion of dividends that we're going to pay out, and buy shares with it. Retain the flexibility until the NOL has burned off, and buy shares opportunistically with it.

Potentially, like on a day to day -- like today when we announced that there's $200 million of churn coming. So we specifically rejected that. We understand how that drives on a per-share basis higher growth in the short-term.

But we think long term, the right approach was to demonstrate the sustainability through the quarterly return of a material part of this cash flow to shareholders. And have a very significant component of their total return be made up by the current distribution plus the contracted escalator growth. And then the opportunity that we see to continue to add organic and external growth in the business.

But that would have been the competing agenda, and one we respect, and one we've executed very successfully in the past. We've bought $2.7 billion worth of stock over time. But the course we've set for the reasons that I mentioned in my notes at the beginning of this call, we think is the best long-term approach for the Company.

Thanks. Very quickly, do you guys have a expiration schedule for the NOLs? Is there an average or do you have a ladder that you can share with us?

Yes. They expire between 2020 and 2030. The average is about 2025.

Thanks, guys. Good luck.

Sure.

We'll go next to Spencer Curran with New Street Research.

Thanks for taking the question. I was wondering if you could just point us to any time frame for signs we can look for an acceleration in your overall organic growth from the AT&T or T-Mobile towers that you're seeing? Thanks.

I think the assets today, as we mentioned, are performing in line with our underwriting model. We took a ten year view on those models, and they're performing right at about the average that we expected over ten years. And out of the gate, are right there.

So we're not anticipating, or frankly, do we need to anticipate an acceleration of activity in order to get to our returns. So our game plan is to continue to run the assets as we've been doing out of the gate, and that will provide a terrific return.

But it's early days. And as I mentioned earlier on this call, the primary co-locater in this market has been Verizon since we've owned these two new portfolios.

And so as we would expect and certainly as we underwrote, we will return to a period of time. I think we're already beginning to see it, where the other three are going to need to instill their networks with increased density where these portfolios will certainly be available for them to do that. So that's part of our underwriting thesis.

Got it. And I guess if I look at your organic revenue growth guidance before on decommissionings. It looks like you're implying a modest slow down from where you came in this past quarter. And I would have thought that, excluding the negative impacts of churn, wed' see an acceleration into next year.

Yes. Quarter-to-quarter, there are a bit challenging to do. I would tell you typically in the back halves of the years that we see more activity than in the front half.

So I would encourage you to look at things on a more holistic full year over full year basis. We're forecasting, as we've mentioned a couple of times on this call, full-year 2015 to look pretty similar to full-year 2014.

Well up about a little bit higher.

Yes, up about $20 million off of 2014 numbers.

Got it. Thanks, guys.

And we'll go next to Ana Goshko with Bank of America.

Hello. Thanks very much for taking the question.

I wanted to ask you, you continue to mention the goal of achieving an investment grade rating. But wanted to understand what you believe or what you know from conversations with the rating agencies what the catalyst is to achieve that?

Because you are at your target leverage ratio. With a muted growth outlook at least in the near term, the EBITDA metrics will not be improving. And then with the higher dividend, there's really not cash left to pay down debt in any material fashion.

Ana, obviously, the decision of the rating agencies as to where they place our rating on the credit facilities. And the conversations that we've been having with over several years is the same conversation we've had on this call this morning. And have for a long period of time around the risk profile of the assets, the stability of the cash flows, and where that should be rated.

I think relative as we compare ourselves to other real estate businesses, we feel like our credit statistics are very favorable. And the rating agencies over time have embraced that view, and we have seen them gradually increase the ratings and increase the appetite for leverage on these businesses. Which we think is appropriate.

We don't anticipate, and you've correctly pointed out, we don't anticipate taking a significant portion of our cash and paying down debt. But we do expect the business to continue to grow. And so we'll achieve deleveraging of the business just through natural growth and EBITDA, rather than the paydown of debt.

And we've certainly on the call this morning wanted to make the comment and the statement. That as we think about our dividend payout, increase in the dividend payout meaningfully, we think it's an important component of that to stay on the path we've on towards achieving an investment grade credit rating. And that's certainly our intention and plan at this point.

And part of our analysis that we reflected on earlier in the call, was that in order to get -- and it's been a long held view we've had, in order to get I think the maximum appreciation and value out of this dividend stream that we're now undertaking. An investment grade rating is probably the right way to accomplish that over time.

As Jay says, we don't expect to do anything unnatural to get there. But I think we'll get there over time through continued growth. And I think that's the right way to think about the business.

Thanks for that. I have two follow-ups. So one, do you believe that the increase in the dividend for the agency's standpoint, has set you back? Or are you still on the same path or the same place on achieving the rating?

No, I don't think it's set us back. I think the communication we're having with them is similar to what we've said on this call. That we intend to continue on the path towards an investment grade credit rating, and deleveraging as we see growth in the EBITDA. And so, that's the plan.

Okay. And then, secondly, Jay, you did say publicly -- and very theoretically on the potential to acquire the Verizon assets. That if that were the case, you would be willing to take leverage back up over the six times target at least temporarily.

But with the higher amount of cash flow that's going to be supporting a dividend. I'm wondering if that's still the case?

Yes. I think all of those comments still hold. If we were to take leverage up, that would be -- well let's start with, if we were to do the transaction, we would have to believe that's accretive to the dividend and to AFFO per share over a long period of time. And we expect that that would be the case, frankly, in both the short and the long term.

The second part of it around how we would finance it. I think we would still be open to taking leverage up to the high end of our targeted level of leverage range, maybe slightly above it. However, the only way we would be interested in doing that is if we had a plan to quickly delever back down to where we've been aiming towards the -- in your prior questions around an investment grade credit rating.

So I think if we would be open to doing that, we think the Verizon towers could represent a very unique opportunity in the US market. There are not, we don't believe very many US assets left of any substantial size.

So if that were to happen, we think that's in a sense a bit of an anomaly and a really unique opportunity. So we would -- if it were there, we'd have to consider the appropriate way to finance it. And I think on the table in those conversations would certainly be a thought around leverage.

Okay. Thank you very much.

You bet.

I think with that we'll wrap up. We've gone long this morning, and I appreciate those that have stuck with us here. We wanted to make sure we captured all of your questions.

We are very excited about our future prospects, and today I think is a very important day for Crown Castle. As we've now proceeded with what I think is an unprecedented and unique opportunity for shareholders to invest in the US wireless business with us. In infrastructure that will carry a very significant and growing current return, and we are very pleased with how we're positioned.

So thank you for your attention this morning, and we will talk to you next quarter.

Thank you. This concludes today's conference and we appreciate your participation.