SBA Communications Corp (SBAC) 2004 Q3 法說會逐字稿

Thank you, ladies and gentlemen. Thank you for standing by and welcome to the SBA 3rd quarter results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. If you should require assistance during the call, press star, then zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Vice President of Capital Markets, Pam Kline. Please go ahead.

Thank you for joining us this morning for SBA's 3rd quarter 2004 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer, Kurt Bagwell, our Chief Operating Officer, and Tony Maccione, our Chief Financial Officer. Before we get started I need to get the standard SEC disclosure out. Some of the information we will discuss in this call is forward-looking, including but not limited to, any guidance for 2004 and beyond. These forward-looking statements may be affected by the risks and uncertainties in our business. Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in last night's press release and our SEC filings, particularly those set forth in our form 10-K for the fiscal year ended December 31, 2003 which document is publicly available. These factors and others have affected historical results, may effect future results, and may cause future results to differ materially from those expressed in any forward-looking statement we may make. We have no obligation to update any forward-looking statement we may make. Our comments will include non-GAAP financial measures as defined in Regulation G. The reconciliation of these non-GAAP financial measures to their most comparable GAAP financial measures and the other information required by Regulation G is included in our earnings press release which has been posted on our website at www.sbasite.com. Tony, will you please comment on our 3rd quarter results?

Thanks, Pam. Good morning, everybody. In the 3rd quarter, both site leasing revenue and site development revenue were up significantly over the year earlier period. Site leasing revenues for the 3rd quarter were $37 million, up 14.9% over the 3rd quarter 2003 and a quarterly record for us. Site development or services revenues were $21.8 million up 41.2% over the year earlier period. Site leasing growth profit or tower cash flow was $26.4 million up 21.9% over the year earlier period, also a quarterly record. Services gross profit was $1.6 million compared to $800,000 in the year earlier period. Total revenues were $58.7 million, up 23.4% over the year earlier period. Net loss from continuing operations was $21.5 million, and net loss was $24 million for the 3rd quarter 2004. $2.1 million of the net loss was attributable to the write-off of the deferred financing fees in net losses associated with the extinguishment of $25.8 million of 10 and a quarter [inaudible] notes which were repurchased during the 3rd quarter. We have continued to make repurchases of our high-yield debt subsequent to September 30 and will incur the same type of charges in the 4th quarter. We may also continue to make future repurchases of our high-yield debt and may incur more of the same type of charges in the future. Net loss per share from continuing operations for the 3rd quarter was 37 cents. And net loss per share after discontinued operations was 42 cents. Excluding a $2.2 million of asset impairment and debt-related charge, debt retirement-related charges, net loss per share from continuing operations was 33 cents.

Weighted average shares outstanding for the quarter were 57.8 million, adjusted EBITDA was $20.8 million, up 31.3% from the year earlier period. Year-over-year leasing revenue growth was strong at 14.9%. This was our highest percentage growth in a number of quarters, and reflects the financial statement impact from the strong lease-up we experienced in the 1st half of 2004. We also benefited from approximately $700,000 of nonrecurring items such as account reconciliations, settlements, termination fees including those from tenants -- that may not -- that may not have begun to accrue revenue for financial statement purposes and other catch-up items. We have received some amount of nonrecurring leasing revenue every quarter. Prior to the 3rd quarter over the last year or so, it has averaged slightly less than 1% of quarterly leasing revenue. This quarter, it was approximately 2%. Our tower cash flow margin was 71.5% our highest ever in and up 410 basis points from year-ago period and up 150 basis points over the 2nd quarter 2004. We continue to believe that tower cash flow margin will continue to increase year-over-year driven by revenue growth materially exceeding expense growth. We expect modest leasing expense growth going forward with expected increases in property taxes being offset in large part by our ability to tightly control maintenance, repair, and utility expense and hopefully with success in our efforts to purchase the land underlying some of our towers that we currently lease. Services margins were 7.4% in the 3rd quarter compared to 5% in the year earlier period. Our financial performance and services in the 3rd quarter was very similar to our performance in the 2nd quarter. Kurt will discuss the services business in more detail shortly. As previously disclosed, we adopted a plan to sell our site development services operations in the western United States. And we have sold or shut down all of that business in the West. We did not receive any material proceeds from these transactions, with the transactions structured as a function of our backlog, offices and workforce and fixed assets transferred at or below book value. In connection with these dispositions, we incurred a loss in the 3rd quarter of $400,000.

Unless otherwise noted all the information we will discuss today for any period will be of continuing operations and will exclude the results of the discontinued operations of our Western service business. SG&A expenses for the 3rd quarter were $7.4 million or $7.3 million excluding noncash compensation items. SG&A excluding noncash compensation has increased by approximately $200,000 per quarter over 1st half levels due primarily to the cost of complying with Sarbanes Oxley. We expect to incur similar levels of SG&A expense in the 4th quarter. Our adjusted EBITDA margin for the 3rd quarter was 35.4%. 210 basis points higher than the 3rd quarter 2003. The adjusted EBITDA margin improvement was driven by the continuing growth of our higher margin leasing business and better services margins. Our leasing segment contributed 94.3% of our gross profit in the 3rd quarter. In last night's press release, we updated and in most cases increased our detailed 2004 guidance. We disposed of 10 towers in the 3rd quarter from asset held for sale for approximately $300,000. We built no towers in the quarter and ended the quarter with 3,045 towers in continuing operations and an additional 22 towers held for sale. So far in the 4th quarter, we have purchased four towers for $3 million. All but $500,000 of which was paid for by the issuance of common stock. Cash capital expenditures in 3rd quarter were approximately $1.3 million of which we spent $500,000 on maintenance tower Cap Ex, $600,000 for augmentations and rebuilds, and $200,000 on general corporate Cap Ex. We also spent $400,000 on acquisitions and related earn-outs. The majority of which was used for ground lease purchases. In the 4th quarter, we expect nondiscretionary capital expenditures of approximately $1 million and our increasing expected discretionary expenditures to $2.5 million to $3.5 million as we plan to complete 10 to 15 new tower builds in the 4th quarter and commence work on a number of others. Kurt will talk about the new build program in a few minutes. At this point, Pam is going to provide some information about our capital structure.

Thanks, Tony. Debt balances at September 30 were $309.2 million under our $400 million senior credit facility, $296.3 million of 9 and three quarter senior discount notes, 278.5 million of our 10 and a quarter senior notes, and net debt of $856.7 million after giving effect to $27.4 million of cash and restricted cash and $4 million of deferred gain from the termination of a derivative in 2002. We had an additional approximately $39.2 million available to us under the credit facility at September 30 with total liquidity of $66.6 million. During the 3rd quarter, we repurchased an additional $25.8 million of our 10 and a quarter senior notes. We paid $12.2 million of cash plus accrued interest and issued 2.8 million shares of our common stock. So far this quarter, we have repurchased 26.5 million of our 10 and a quarter senior notes and 1.3 million principle of our 9 and three quarter senior discount notes. We paid cash of $5.4 million plus accrued interest and issued 3.3 million shares of our common stock. Pro forma for these 4th quarter transactions net debt at September 30 was $834.7 million. As a result of our refinancing and debt repurchase activities, we have reduced our weighted cost of debt from 10.5% a year ago to 8.4% as of September 30, 2004. We are taking steps to reduce these costs even more. Today we are commencing the process to amend our senior credit facility. We are seeking to reduce the LIBOR spread and affect certain other amendments. We expect to have this process complete by mid-November, and we look forward to reporting the results. Additionally, we are also carefully studying the timing and means by which to refinance our 10 and a quarter notes which become callable in February. Once again, we have made great strides in reducing our leverage. In the 3rd quarter we have reduced our net debt to annualized adjusted EBITDA leveraged ratio by .7 times to 10.73 times at September 30, 2004 and 10.0 times on a pro forma basis giving effect to the 4th quarter debt repurchases we have already completed. We believe we will end the year with 4th quarter annualized leverage below ten times. We intend to continue to take steps to reduce our cash interest, total interest, and overall leverage at SBA and exactly what we do and when we do it will depend on market opportunities and our liquidity position at the time. Kurt, will you please provide us an update on operations?

Thanks, Pam. Good morning. From an operational front, we were pleased with the overall results for Q3 in our tower leasing business. Historically, there have been times when Q3 has been a transitional quarter between build plan approvals and releases for our customers, but we captured a substantial base of business this year and are moving into Q4 with good backlogs. The tower leasing segment of our business performed extremely well with 16% same-tower revenue growth and 21% same-tower gross profit growth, which exceeded our expectation. These are the highest numbers we have produced since 2002. It was great to see our steady lease-up in Q1 and Q2 reflected in our financials in such a positive fashion. We believe same-tower revenue growth will be in the 12% to 15% range for the 4th quarter 2004 resulting strong full-year lease-up. Our 3rd quarter operational lease-up results were better than the year-ago period, but not quite as strong as the 1st and 2nd quarters. July and August were slower, with September picking up considerably and stronger activity continuing into the 4th quarter. All three quarters have now come in well ahead of our lease-up expectations at the beginning of the year. We expect to end the year with strong 2nd half lease-ups. Carry activity in Q3 was steady in total but mixed by company. Nextel, Cingular and Verizon were our most active clients in the quarter. T-Mobile was inactive for us in the quarter due to, we believe, their budgetary focus on buying existing California and Nevada networks from Cingular. Our towers in Puerto Rico and the U.S. Virgin Islands saw good activity in Q3.

The continued push by all carriers is forecasted to continue throughout the remainder of 2004 and into 2005, as early estimates suggest 12 to 16,000 new cell sites. Whether it is for capacity, high-speed data, performance, or expansion cells, the push for increased cell density continues in all geographic area types. NVO activity and existing subscriber MOU growth is also contributing to the carrier's push to enhance their platforms. In the 3rd quarter, 96% of new leasing revenue came from the big six and other telephony carriers. Our mix in the 3rd between new revenue from new installation and new revenue from amendment was 88% and 12% respectively. The continued high percentage from new installations is another strong sign of total network development growth. We also feel that amendment activity will continue to some degree for the foreseeable future as there is always a need for upgrades, modifications, additions and changes to the physical equipment on the tower and at the base of the tower. Quarter antennas increased to 7,136 and monthly cash basis ramps on our existing portfolio increased to $1,681, driven by higher initial rents, amendments and escalator. Those are operational numbers and include newly signed leases that have not yet begun to accrue revenue for financial statements purposes. Lastly, churn was flat with the previous two quarters at a rate of approximately 1.4% of annualized revenues. Our tower maintenance Op Ex and Cap Ex continue to stay at low levels in Q3. We continue to find ways to hold these expenses substantially flat on a year-over-year same-tower basis. The four major hurricanes that came through the southeast United States hit the heart of our tower portfolio but we sustained no major damage at all to any single site. I would like to congratulate our fields maintenance and repairs organization for all the preparation and recovery in September which was a very trying month.

Our Op Ex expense in this area was under budget in Q3, and we do not expect to see any substantial expense in Q4 from the September events. We expect hurricane-relate costs to be approximately $250,000, mostly to repair washed out access roads. That amount is in our 4th quarter guidance. Our construction, site acquisition and technical services business, Q3 showed a strong increase in both top-line revenue and gross profit from the year earlier period and relatively flat with Q2. Although the services margins are still not at levels we would ultimately like to see, the business did cover its cost in the 3rd quarter and continues to prove itself valuable as it relates to our carrier relationships, industry intelligence and most importantly for our new tower build initiatives. Backlog continues to be strong for the segment. Major projects right now in our service business include those with sprint, Cingular, Bechtel AT&T New York and Verizon Wireless. We are now totally out of our west region services business. We believe that the tighter geographic focus in our services division, along with our continued focus on only our historical core offerings, site acquisition, construction, and base station installation are keys to help with the bottom line here. As you can tell, we continue to feel good about the direction of the wireless industry right now. Our backlogs are solid. The carriers are all very busy executing our multiple initiatives. The customers and potential customers continue to show their appetite for wireless services and we feel SBA is positioned well to continue to capitalize on this front. A part of our business that I am currently very excited about is our return to building new towers. As we have been discussing for some time, we are recommencing building new towers. We will start small and ultimately hope to grow our production to 100 to 200 towers per year hopefully in 2006. This quarter, we expect to build 10 to 15 towers, and next year 50 to 100 towers. All towers will be built with at least one tenant on day one paying fair market rent, with expectations of a second tenant within a year and a five-year IRR above 20%. Of all the things we have done well over the years, building new towers is at the top of the list, and our whole team is very excited to be back doing what we believe we do best. At this point, I will turn it over to Jeff.

Thanks, Kurt, and good morning, everyone. Our 3rd quarter was very strong and the high points were many. We posted the strongest tower cash flow and adjusted EBITDA growth we have produced in a number of quarters. We reduced our leverage materially, again, and ahead of planned. Most importantly, however, the milestone we believe we have attained with the combination of our financial results and our debt repurchases in the 3rd and 4th quarters, that of sustained positive equity free cash flow and we still expect to have additional and material refinancing benefits ahead of us. Our tower assets continue to demonstrate their quality and attractiveness in our 3rd quarter financial results. We enjoyed strong increases in revenue and cash flow per tower, tower cash flow margin and rents per tenant. Our tower quality has always been our crown jewel, and we believe a direct result of our building the majority of our towers. Our experience is that towers are either very good or not. With the good towers being relatively better with all market cycles. We believe our towers are very good and will continue to serve us well over time. We performed well operationally and financially in the 3rd quarter. As a result, we were able to increase our guidance for the full year. However, I believe we are far from our peak. Long term, I believe we can find additional benefits, particularly in the areas of SG&A expense, tower expenses, services margins and perhaps most materially interest expense. Those areas, together with maximum site leasing revenue growth are our focus areas for the future. We have improved our balance sheet materially this year. We are ahead of where we thought we would be on leverage, and now expect to end the year below ten times net debt 4th quarter annualized adjusted EBITDA. We are also ahead of where we thought we would be on equity free cash flow. We believe we will produce solid positive equity free cash flow in the 4th quarter and sustain it and increase it thereafter. We expect two relatively imminent events to help that.

We are commencing steps to amend and reduce the LIBOR spread on our bank facility. Furthermore, within the next couple of quarters, we hope to refinance our 10 and a quarter percent senior notes. Beyond that, we will continue to be opportunistic about improving our balance sheet. Our focus, however, will be primarily long-term shareholder value creation. We believe we have all the liquidity we need for our current plans, and we are confident that we will continue to materially delever the Company organically by at least a full turn each year without any capital markets activity. Our customers continue to get stronger. And we expect them to devote substantial amounts of their cash flow to network development. 2004 has shaped up as very good year for our industry, and we don't see any reasons today which would cause us to believe 2005 won't be equally as good. It could actually be better with Cingular moving ahead post-merger. T-Mobile moving past their California-Nevada expenditures and if certainty comes to Nextel spectrum and technology plans. Their exists cause for optimism from other areas as well. The sprint affiliates, Metro, Leap, certain wireless Internet providers and state government network needs are all stronger today than we were last year and we expect they will continue to strengthen into 2005. We feel very good about the future. Positive free cash flow and strong liquidity give us great flexibility which we intend to use toward new asset growth, particularly new tower builds. We believe over the long term, that growth in tower cash flow, adjusted EBITDA equity free cash flow and ultimately shareholder value will all be maximized through careful but steady portfolio growth, particularly for a company of our size. We are very pleased with our results so far this year, and our expectations for the 4th quarter. We look forward to our next report to you in early 2005 when we will report our full 2004 results and set forth in detail our full-year 2005 guidance. And Karen, at this time we are ready for questions.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star, then one on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from queue at any time by pressing the pound key. If you are using a speakerphone, please pick up the handset first before pressing the numbers. Once again, if you have a question, star one. And our first question comes from the line of Anthony Klarman, Deutsche Bank. Please go ahead.

Thank you. A few questions. Hi, everybody. I want to get back to the -- the tower build philosophy. Obviously before -- you know before this expansion of the tower build free cash flow, I think, was going to be up pretty significantly in '05 versus '04. And I am wondering what the economics of the tower build market are right now. If there have been any improvements or cost reductions that you think you guys can make in terms of what you can build a tower for now versus what you were building it for, perhaps, say in 1999 so that we can get a sense as to what those 100 towers might cost the company in 2005 with respect to free cash flow.

Anthony, a lot has changed. The way we will approach new builds going forward which is different from where we were in the late '90s time frame is we are not going -- we are not going to enter into any volume commitments on our part. Everything will be optional and discretionary. Secondly, we are not going to do the below-market anchor tenant rent deals which were somewhat prevalent in the early days. We also believe that we will be able to dramatically lower Cap Ex for those towers through outsourcing as compared to having large inhouse staffs the way we did, you know, four or five year ago. And finally with, you know, lower expectations when you compare to the almost 800 towers we built, I think, in '99, we think we are going to get higher-quality towers out of this. And if you look at where we are today, the company is -- is being propelled forward really by the towers that we built back then, and we are very comfortable with our knowledge and our ability to pick good sites and build good towers and now with some of the parameters that we have outlined, I think it will be even better than it was before. And in terms of -- of kind of the rules for the road for us, I mean, as we look at expenditures going forward, they have to be compatible with three primary goals. And those primary goals are: Maintaining adequate liquidity at all times, not doing anything that would prevent leverage from being reduced by at least a turn each year, and not doing anything that would cause equity free cash flow to not be, you know, materially higher at the end of the year than it was at the beginning of the year. Those are our three must-haves. And within those confines, we think our growth rates and ultimately our shareholder value are going to be best suited by more new builds into the company.

Thanks. And a question on the -- on the balance sheet. You have used -- especially the last couple of quarters a lot of equity with respect to the amount of specifically the 10 and a quarters you have taken out. Do you have a total amount of equity that you have issued to date?

We have issued to date approximately 8 million -- going all the way back to last year, approximately 8 million shares to take out approximately 45 million of high-yield debt.

Great, thank you very much.

Thank you. Our next question comes from the line of Jonathan Atkins, RBC. Please go ahead.

Yes, good morning. A couple of questions. First one about Cap Ex. I wondered if you could talk about the mix of maintenance versus augmentation Cap Ex going forward. And then the second one on churn. Thanks for quantifying the churn trends, and I wondered how you see that going forward. Relative to what you just reported.

Kurt, do you want to take the Cap Ex?

Yeah, Cap Ex roughly equivalent to each other for maintenance and augmentation in Q3. Very low levels on both. You know our towers are newer. We have got a great deal of capacity left on -- on most of them. And so we expect those levels of augmentation to stay well below the million dollar mark a quarter for the foreseeable future.

What is the nature of the augmentation of Cap Ex you are having to spend even though clearly it is lower than what your peers are spending?

Tower height extension or tower strengthening. We have towers that are popular but even though they were built for high capacity they may need a little strengthening. They come with high loads of antennas and coaxial and it is typically height extensions and strengthening.

On the churn question, John, we believe -- and we have seen a little bit of this now and expect to see more of it going forward but the trends will decline as more and more of our revenue mix is comprised of telephony customers. So we think things will get closer to 1% rather than 2% over time, and obviously we'd rather have no churn but what we do get paid for some of that churn through termination fees and other things which ties back into, you know, some of the comments Tony was making earlier. Although we would rather not get paid the termination fee, obviously. We would rather have the tenant on there forever.

And then finally on expenses. Can you describe or review how you allocate expenses between site leasing and site development?

Well, we really don't. I mean the -- the expenses at the cost of revenue line are allocated really much pursuant to GAAP rules, and everything else is in SG&A, and we don't really break that out, although, you know, we are running -- and this is a rough number that we use just for our own guidance. It's around a $1.5 million a quarter that we allocated internally to the services side of the business from the proposition -- or from the premise of, okay, if it wasn't there, what would the savings be. And that's kind of our construct for that, but it is not precise, and it's -- it's a little bit subjective but that's how we look at it.

Thank you very much.

Thank you. Our next question comes from the line of Ric Prentiss from Raymond James. Please go ahead.

Yes, good morning, everybody. A couple questions for you. Tony, you ran through those one-timers so fast I was having a hard time keeping up. Could you isolate out -- I think you said -- what, $700,000 of one-timers in the quarter? What were the particularly big items and I think you said this quarter was closer to 2% of service revenues than 1% but I just want to make sure I heard all of that right.

The lion's share, Rick, dealt with some settlements from customers that we had worked out some issues with. There was one bankruptcy of Sprint affiliate that was resolved this year. But, you know, the point that we want to make there is those are one-time in the nature of the clients, but they are not one-time in the nature of our business. We get those kind of things every quarter. And in this case it happened to be a little bit more than it was the last couple of quarters. But there were a couple of -- we're not going to name the customers or the clients. That wouldn't be appropriate. But had to do with some resolutions of some issues involving some specific relationships.

Right. Okay. And like you said we call them one-timers but they're pretty consistent out there but this time a little larger bump-up it sounded like.

You ought to think of it going forward as kind of a 1% of our revenue mix being from that. This time it happened to be 2, but, you know, for those of you who are modeling, if you really want to do it precisely as you churn off 1.5%, what you should do is bring some of that back in through these fees, because that's the largest part of what these nonrecurring items are. So you actually -- if you take it off on the churn side, you should be putting it back in on the -- on the fee side.

That makes sense.

To some degree.

Yeah. Second thing, on the towers that you bought, four towers for $3 million. On a price-per-tower basis, obviously it looks pretty high. Can tell us a little bit about how much cash flow is coming in from those towers and how much growth potential there is left on those?

I think we disclose, hopefully that made it in the press release, 11.2 times tower cashflow multiple. They are good cash-flowing towers. They are in Florida. Good growth markets. They had some legs left on them. You know, they were relatively higher priced than other towers that you may see out there, but given the price we bought them at and where we think they are going to go, we are very, very pleased with -- with what is really our first toe back in that market.

Might have been in there. I must admit yesterday was a crazy day on the earnings calendar. Final question for you. I think, Kurt, you brought up Puerto Rico. You saw some good leasing activity this past quarter. That's one the areas we have been watching also from a EVDO standpoint. Have you noticed anything from Verizon showing up there yet? Or is the potential for amendments still strong down in Puerto Rico as it goes forward?

Yeah, I mean -- it is really no different than over here. I mean the same activity the carriers are doing over by client are happening over there. They really all treat that market, you know, they try to create a ubiquitous product over there. The same as here so the experience is the same back and forth so we are seeing that from all those guys doing overlays and things like that. I am hearing the subscriber growth and the minutes per use growth over there is unbelievable. It is really tremendous.

Yeah. And just to touch on your comment about Cingular maybe getting back into things. I am sure everybody saw the ads last night starting introducing AT&T merging into Cingular. The whole emphasis of campaign, raise the bar, emphasizing the cell site coverage and how many bars you are getting on your phone. I think that maybe will mute people's concern a little bit about what happens with the divestiture or the combination of AT&T and Cingular. Clearly they have learned from Verizon they need to emphasize network quality. So that was encouraging to see that whole campaign roll out last night.

We are happy with that.

Good luck, guys.

Thanks, Ric.

Thank you. Our next question comes from the line of Blake Bath from Lehman Brothers. One moment please. I am sorry. Go ahead please.

Hello? Okay. Good morning. Can you hear me?

Yeah, Blake, how are you?

I am well, thank you. Can you talk a little bit about your leverage ratios and I know you are obviously going to be below 10 here for '04. Is it too early to put a stake in the ground on year-end '05? I know you said that those levels should come down by a turn per year, but is that, in fact, going to be a target? And, you know, as a corollary to that, obviously the stock continues to trade well and I guess I have to ask the question about your appetite for a more sizable issuance of equity than you have been doing in the -- in the high yield swaps and then I had a follow-up.

Well we are getting -- we are getting much more comfortable with the operational risk profile of the company. We still want to delever but we have accomplished some very key goals here recently which is getting leveraged down where we are comfortable. It will be below ten times by year end and then also being equity free cash flow positive. To put a stake in the ground at the end of next year it will be somewhere in the 8s. As far as an equity issuance, you know, as we -- we had some real goals to get leverage below ten times sooner rather than later and get to equity free cash flow. You know, now as we have attained those goals we are going to be even -- we are always selective in issuing equity, obviously, and we will be more selective and careful as we look to the future. I mean, I -- I don't want to be in a position where we're continuing to delever organically very quickly, and then three years from now I -- I -- we find ourselves in a position where we just have nothing else to do except buy stock back at much higher prices. So we are thinking about all those things, and probably the best I can tell you, Blake, is what we will -- if we think it is in our best long-term shareholder stock appreciation and value creation premise to issue equity for some purpose, we will do it.

Okay. And we will certainly look forward to those much-higher prices several years down the road. I guess -- the -- the other question is -- Jeff, I know that when we last met, you sounded much more positive towards -- towards building towers as opposed to buying them. And, you know, obviously you have the data point here of a pretty significant amount spent for for buying these four towers. Was that sort of one off? Does it still seem as though there is not as good an opportunity to -- to buy towers out there as there is to build them yourself? Just, you know, your mind-set with regard to the buy versus build over the next year or so.

Yeah, we bought those towers because they -- we bought them mostly with stock. They were delevering and accretive on day one, and we think they will have five-year growth equal to or exceeding our portfolio. I don't know that we will be able to re-create that scenario everywhere. And that's what we will look to do. You know, in general, I think the M&A market is very competitive. There are folks out there who have no other market in which to play, and focus all of their efforts there. And we happen to, you know, have other opportunities available us to, obviously the new builds. We are good at it. It is always been a hallmark of ours. The results that we have produced, you know, to date which, I think, are extremely good compared to the rest of the industry I think you have to attribute primarily to the strength of our new builds historically and given what we see out there not only our experience in our history but our ability to differeniate some of that by being in what at least today feels like a less competitive market because others can't compete with us there. We will continue to be favoring the new builds, and that part has not changed at all.

Okay. I guess the last question on -- on Cingular. You know you talked about Cingular having -- I forget the exact term you used but quite a bit of new work that they were -- were likely to unleash once the deal closed. They certainly have been telling us that Cap Ex is going to rise dramatically next year perhaps as much as 20% above the level that each of the two companies would spend or did spend on their own in '04. Have you spoken with them since the deal closed? Or, you know, in a period immediately before, and, you know, what do you see coming out in terms of, you know, 4th quarter and in -- into early '05 out of Cingular?

This is Kurt. We talk to them all the time. I think that you are know, they have done some preliminary planning to the best that they could under the conditions. I think they have got a lot more playing to do, but with the UMTF product in the past that they have chosen, that's going to clearly, I think, move up on the schedule. You know I -- I think they look at this as a way to really leap frog some competition and to spend some money now, you know, with the resources they have. I think they can really -- really take their network a long way in the next -- in the next year or two. So, you know, between the -- between the UMTF overlay and just good old-fashioned new cell site growth, to strengthen their network, we are hearing a lot of signs that they are going to be very bullish.

Great. Okay, thanks very much and congratulations.

Thanks, Blake.

Thank you. Our next question comes from the line of -- I am sorry comes from the line of Clay Moran, Stanford Group, please go ahead.

Yes, good morning, guys. Could you tell us how much it will cost to build an average tower today? I know you talked about it but you didn't really give any real numbers there. Can you give us more guidance there? And can you remind us of the current terms of your credit facility?

I will take the tower -- new tower cost question. It is basically -- we are seeing roughly $200,000 or less on the new builds that we are looking at right now. I think that will be a pretty -- pretty achievable number.

Okay. And current terms of the credit facility?

They are LIBOR plus 350. Is that the term you were looking for?

Yes. Yes. Thanks.

Thank you. Our next question comes from -- our next question comes from the line of Richard Worley, Pyramid Capital. Please go ahead.

Hey, guys. Terrific job. I expect a lot from you, and you continue to exceed my expectations. Question I have about the -- the growth. It's -- your growth is a lot more than the other companies, and other than that $700,000 business that you talked about earlier, is there anything in it that you think is borrowing from the future? And I don't want to pin you down to an estimate yet for next year, but, Jeff, down in Dallas, I think, at that conference, you said you thought that '05 might be as good a growth as '04. And '04 just keeps turning out better than you previously expected. Do you -- what do you -- do you think that this is sustainable for another year? And if so, you know, what do you attribute it to? The other companies are guiding pretty -- pretty slow revenue and tower cash flow growth numbers for '05.

Yeah, when we look at our portfolio and why it is performing as well as it is, I -- we keep coming back to the same reasons that we have been, you know, espousing for the last five years. We really, really have good towers, and they were hand selected and built to be maximum user-friendly, and I think a -- and Kurt put out an interesting statistic earlier which maybe -- maybe is part of the story. We seem to be making up more of our revenue ads from brand-new tenants as opposed to amendments than some of our peers. We did -- what did we do? 11%? 11% this time and I think some of our -- on the amendment side, Rich, and some of our peers were double that so we may be getting more brand-new tenants, and I don't know why that would not continue to be the same, because we still are only at about 2.3 actual tenants per tower. So there is a lot -- a lot of additional possibility there. We are in -- we are in good markets where -- all of our towers are in markets now where, you know, the big six or their affiliates want to provide coverage. So it -- it all gets back to, in our opinion tower quality, and we think we have got -- we've got it.

Okay. Well, just keep up the good work.

Thanks.

Thank you. Our next question comes from the line -- comes from the line of -- I am sorry, there is a follow-up question coming from Jonathan Atkins, RBC Capital. Please go ahead.

Two quick follow-ups. Just wondering what portion of of the time when you are evaluating new applications do you have to consider augmenting the structure? Is it one out of five times or one out of four? What is kind of the rough ratio there? And on the new build side, just based on what you are seeing now, in terms of network development needs at the carriers, any chance you may end up building more than 100 new towers next year because your goal looking into '06 appears to be more towards 200.

Jonathan, on the structural side, I mean, our upgrade ratio is below 10% of the time. So it's -- we are not -- we are not upgrading these towers very often at all. And that's why the number remains so low.

Right.

And it is possible we do more than 100 next year, but these sites, we are being very selective, and, you know, we are going for sites that have good zoning protection which means that there is a zoning process to go through on the front end. So as we get the pipeline going again, early -- early indications are good we have got some good backlog already built up, but -- I would doubt you will see many more -- many more than 100 next year.

Yeah, I mean it's -- it's not so much a it's a not -- the restraints are not necessarily financial, although they are, as we think about how we want to grow the company. The restraints, Jonathan, are much more operational. And if you don't really have some planning going on now about a site, it won't get built by the end of next year, I mean at least the sites we want built. And we know based on what we are working on today that the 50 to 100 is pretty clear where we are going to fall. It will be very unlikely for operational reasons that we will do more than 100 next year.

Your website shows about 20 some odd towers for sale. Is that already accounted for as discontinued?

Yes, those are in discontinued.

And those are mostly remnants of the western portfolio?

Yes.

All right, Thank you.

Thank you, there are no further questions at this time. Please continue.

Great. Well, thank you everyone for joining us and we look forward to sharing with you our next results, which should be sometime in late February, early March.

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