SBA Communications Corp (SBAC) 2005 Q4 法說會逐字稿

Welcome to the SBA fourth quarter results conference call. [OPERATOR INSTRUCTIONS]

I would now like to turn the conference over to Ms. [Pam Kline], Vice President of Capital Markets. Please go ahead.

Thank you for joining us this morning for SBA's fourth quarter 2005 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer, Kurt Bagwell, our Chief Operating Officer, and Tony Macaione, our Chief Financial Officer.

Before we get started I need to get the standard SEC disclosure out. Some of the information we will discuss on this call is forward-looking, including, but not limited to any guidance for 2006 and beyond. These forward-looking statements may be effected 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 10K for the fiscal year ended December 31st, 2004, which document is publicly available. These factors and others have effected 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.

Our statements are as of today, February 21, and we have no obligation to update any forward-looking statement we may make. Our comments will include nonGAAP financial measures, as defined in Regulation G, the reconciliation of these nonGAAP financial measures to their most comparable GAAP financial measures, any other information required by Regulation G is included in our earnings press release, which has been posted on our website, at www. sbasite.com.

As described in our SEC filings, the financial results of the Company's Western Services segment, which was exited in 2004, are reflected as discontinued operations in accordance with generally accepted accounting principles for the [three] marked and fiscal year ended December 31st, 2004. Other than the net loss information, our other financial information that we will discuss is from the Company's continuing operation. Tony, would you please comment on the fourth quarter?

Thanks, Pam, and good morning, everyone. We had another very good quarter, with both--with growth both on the leasing side and services side of the business. Total revenues were 72.4 million, up 10.5% off the year earlier period.

Growth in the Leasing segment was particularly strong. Site Leasing revenues for the fourth quarter were 42.9 million, up 13.9% over the fourth quarter of 2004. That was the highest year-over-year growth of any quarter in 2005, and particularly strong given the one-time revenue benefits of approximately 700,000 in the 2004 period. Site Leasing segment operating profit was 31.1 million, up 19.8% over the year earlier period. Our Leasing segment contributed 92.9% of our total segment operating profit in the fourth quarter.

Site Development or services revenue were 29.5 million, up 5.9% over the year earlier period. Service and segment operating profit was 2.4 million, compared to 2.2 million in the year earlier period. Services segment operating profit margins were 8% in fourth quarter, the same as in the year earlier period. As has been the case in recent years, carrier customer activity and our services business was strongest in the fourth quarter. Kurt will discuss the services business in more detail shortly.

Under our definition of Tower Cash Flow, which excludes non-cash leasing revenue and ground lease expense, Tower Cash Flow was 31.5 million, a 17.6% increase over the year earlier period. Tower Cash Flow margin was 74.6% compared to 72% in the year earlier period. Leasing expenses once again came in slightly lower than expected, with some of the results due to a 300,000 one-time benefit associated with reduced property tax accruals. Year-over-year, we improved our Tower Cash Flow margin by 260 basis points. We expect Tower Cash Flow margin to continue to grow over time and remain confident that Tower Cash Flow margin can eventually reach 80% or more.

SG&A expenses for the fourth quarter were 7.1 million, or 7 million when you exclude non-cash compensation items, down from 7.2 million in the year earlier period. The reduction was due primarily to approximately 200,000 of one-time benefits associated with reduced health insurance accruals. We expect quarterly SG&A expense in 2006 to be in the 7.1 to 7.3 million range. Loss from continuing operations in net loss were both 32.3 million, substantially reduced from the year earlier period. Net loss per share from continuing operations in net loss per share for the fourth quarter were both $0.38. Weighted average shares outstanding for the quarter were approximately 85 million.

Adjusted EBITDA, which excludes non-cash leasing revenue and ground lease expense, was 26.9 million in the fourth quarter, up 22.8% over the year earlier period and our highest quarterly year-over-year growth of 2005. The one-time benefits I just discussed produce approximately 500,000 of our fourth quarter adjusted EBITDA, which was similar to the amount of one-time benefit we had in the prior year period. Adjusted EBITDA margin was 37.5%, up from the 33.6% margin in the year earlier period.

Our cash flow from operating activities in the fourth quarter was 13.8 million, up substantially over the prior year period. We built 16 towers in the quarter, acquired 73 towers and ended the quarter with 3304 towers. Cash capital expenditures in the fourth quarter were approximately 28.9 million, of which we spent 900,000 on maintenance tower CapEx, 500,000 for augmentations and rebuilds, and 500,000 on general corporate CapEx. We also spent 22.7 million on acquisitions, ground lease purchases and related fees, prorations and earn-outs, and 4.4 million on new tower builds and new build work in profits.

Kurt will talk about the new build program in a few moments. In addition, we issued approximately 80,000 shares of common stock in the acquisition of the 73 towers. At this point, I'll turn things over to Pam, who will provide an update on the balance sheet and our liquidity.

Thanks, Tony. Debt balances at December 31st, 2005, were 405 million in [inaudible] CMBS facility, 216.9 million of 9.75 senior discount notes and 162.5 million of 8.5% senior notes. We did not have any borrowings outstanding under our $160 million senior credit facility. We had net debt of 699.2 million after giving effect to 85.2 million of cash, restricted cash and short-term investments. We had an additional approximately 39.1 million available to us under the credit facility at December 31st for a total liquidity of 124.3 million.

In the fourth quarter, we redeemed 42.9 million of our 9.75% senior discount notes, which was 52.4 million of face amount, and 87.5 million of our 8.5% senior notes, with a portion of the 151.5 million of net proceeds that we received from our public offerings of 10 million shares of common stock. The equity issuance reduced our interest expense by approximately $11.6 million per year.

During the fourth quarter, we issued 405 million of investment grade commercial mortgage back pass-through debt certificates, which were referred to as the CMBS transaction. We achieved an all-in fixed average weighted rate of interest of 5.6% on a contract basis and 4.8% on a GAAP basis, after giving effect to hedging arrangements. We cash settled the hedge related to the CMBS transaction in the fourth quarter and received approximately 15 million in cash. A portion of the net proceeds from the CMBS transaction were used to refinance our $400 million senior credit facility, which had 320.9 million outstanding at the time.

The CMBS transaction involved 1714 of our towers, or approximately 52% of our portfolio as of December 31st, 2005, leaving the remaining 48% of our towers unencumbered post CMBS. We used the unencumbered towers as collateral for a new $160 million senior credit facility that we put in place for [inaudible] working capital and acquisition financing. As of December 31st, 2005, our net debt to annualized adjusted EBITDA leverage ratio was 6.5 times. Our weighted average cost of debt at December 31st, 2005 was 7.35%.

We've included our first quarter and full year 2006 outlook in our press release. While reviewing those figures, please keep in mind that our definitions of Tower Cash Flow and adjusted EBITDA [inaudible] exclude non-cash revenue and ground lease expense. Kurt, would you provide an update on operations?

Thanks, Pam. Operationally, the fourth quarter was solid for us at SBA on many different fronts. Revenues and margins were stronger. Costs were held in line or below expectations. We picked up the pace on growing our asset base and finished the quarter with solid backlogs.

On the Tower Leasing side of our business, carry activity continued to be strong for both new leases and lease amendments. We saw a wide variety of deployment by our customers ranging from core market activity to coverage expansion along corridors. At the center of this activity, we continue to sense the need of our clients to increase their network depth and quality to offer the most competitive set of voice and data products. During Q4, same-tower revenue growth on the 3060 towers owned at December 31, 2005 and December 31, 2004 was 12%, while same-Tower Cash Flow growth was 18%. 78% of our New Leasing business signed in Q4 came from new tenants, while 22% came from amendments to existing installation. Amendments were generated for the most part by carriers adding equipment to the towers, equipment at the base of the towers, and generators for backup power. The equipment added to the sites was for capacity, new technology enhancements and integration modifications due to carrier consolidations. Amendment activity was very strong in 2005, and we believe it will remain strong in 2006.

Our operational lease-up results in Q4 were better than in either of the previous two years during the same period. 75% of the New Lease revenue from executed leases came from the Big Four and their affiliates and 92% of the New Lease revenue from executed leases came from telephony carriers. We experienced a broad spread of leasing activity from each of the large wireless carriers in Q4 in addition to activity from regional carriers, data carriers, broadcast and municipal entities. Rates continue to be strong for New Leases. Metro PCS and Cricket continue to be strong in several of our areas. Our Leasing backlog has rebuilt itself quickly in the first part of Q1 and we expect to have another year of leasing very similar to the past two years, which have produced good financial growth for us.

Our end of the year lease count was 8278, with average cash basis rents of $1741 per month, up once again from the prior quarter. We have adjust the our lease count to reflect separate independent lease contracts on the same tower, even though they may be with the same tenant. The net effect of the adjustment is to increase lease count and reduce average monthly rent. On this basis, the $1741 monthly lease average is up from1711 monthly lease average at the end of the third quarter. Of the 8278 leases, 7061 were telephony customers representing 93.5% of run rate revenue at year end.

Churn was averaged for the quarter. We have seen a small number of non-renewals from Cingular that we believe are due to decommissioning. These non-renewals have had no material impact on our results and have been more than offset by amendment activity from Cingular above our expectations. We continue to believe there will be more non-renewals from decommissioning in the future, but we don't expect future non-renewals to have any material impact on future results.

The operational costs of our tower portfolio remains very stable and predictable. Q4 OpEx from a repairs and maintenance perspective typically dropped from Q3 levels, and Q4 2005 was no exception. We came in right on plan with our expense in these categories. Our 2006 budget for maintenance OpEx expenses will once again be flat on a per tower basis for the fourth straight year. Maintenance CapEx for our towers for the full year was approximately $900 per tower per year, while net structural or augmentation CapEx ran below $500,000 in the aggregate, again in Q4. We have a high quality, high capacity tower portfolio. Based on our estimates of the remaining physical capacity of our current tower portfolio, we could more than double the number of telephony tenants without incurring material augmentation costs.

On the asset growth front our new tower build program continues to expand. During the fourth quarter we built 16 new towers in the northeast and southeast U.S. Between January 1 and today's call, we built an additional ten towers. For new tower builds, this brings us up to 56 since we restarted the program in 2004. Although we fell short of our goal in this area in 2005, we continue to grow our backlog and the sites we have put into service are adding revenue at a rate that exceeds the model IRR analysis that they were approved under. Quality new tower builds are tough to come by, but the underlying economics of this growth objective are strong and we expect to continue to expand our output in this area.

In the services segment of our business, Q4 came in with higher revenues than expected, and better than break-even margins from a net perspective. Revenues were 29.5 million with gross operating profit of 2.4 million or roughly 8%. We continue to press price point in this business as these margins remain below our goals. We continue to perform services work in just our core historical areas of wireless expertise, that being site acquisition, technical services, and construction. These groups also continue to support our leasing and new tower build functions at SBA. At this point, I'll turn it over to Jeff.

Thanks, Kurt, and good morning, everyone. We had a great fourth quarter and a great year. We exceeded our own expectations and consensus estimates on leasing revenue, services revenue, Tower Cash Flow, and adjusted EBITDA. I believe that once all the reports are in, we will continue to lead the industry in Tower Cash Flow margin. We ended the year at 6.5 times leverage, ahead of plan, and well within our current target range of 6.0 to 8.0 times. We turned the corner in 2005 on equity-free cash flow and we believe we are now solidly on the positive side of position for substantial equity-free cash flow growth in 2006. While we were materially delivering the balance sheet, we increased our tower portfolio by 8%, or approximately 250 towers. We added high quality assets that on the acquisition side were accretive on day one to our EBITDA Tower Cash Flow multiples and equity-free cash flow per share and on the new build side, turned accretive within the first year with future solid growth expected.

We accomplished a lot in 2005. We had a lot of fun, as a Company doing it and we are pleased that our shareholders were so well rewarded by our success. We believe 2006 is going to be another very good year. We find ourselves in a very attractive business and growth environment. Our customers continue to be very busy, improving their wireless networks and it appears that they will need to stay very busy. Fourth quarter subscriber adds and minutes of use growth were huge for the carriers and data minutes of use continued to grow in relation to voice. We believe these factors will result in continued strong demand for tower space in our services business.

Our backlogs are strong and have actually grown during the first quarter. In addition to the favorable trends from base subscriber and minutes of use growth, there are a number of other items on the horizon that we expect will contribute positively to our 2006 and future years. A significant new spectrum option is scheduled for later this year. The advanced wireless services option. All of the large nationwide wireless carriers have committed to the buildout of next generation wireless services. We have seen new or increased interest from satellite radio and television providers and terrestrial wireless. Wireless internet providers, most notedly Clearwire are increasingly active and wireless video is becoming a reality. All of these items are expected to increase the demand for antenna space.

Operationally, we are executing very well. We've made significant progress on a number of operational fronts in 2005 that will carry into 2006 and beyond. Property taxes, utilities expense, tower maintenance, ground lease purchases, and corporate overhead expense were all areas where we made improvements or had success in 2005. Our lease-up process and response to customer inquiries continues to be the best in the industry in our opinion. We continue to have in place a stable, seasoned management team with more longevity and experience, we believe, than any of our peers. We know our business well and expect to continue to execute well operationally in 2006.

We intend to continue to invest capital and expanding our tower portfolio, both through building and buying towers. Our focus will remain on adding high quality, high growth assets. We are very pleased with the cash flow growth of our 2004 and 2005 acquisitions. They are contributing positively to equity-free cash flow per share. We are off to a good start in 2006, with 65 towers purchased and 99 more under contract. We expect these acquisitions to be accretive on day one to our Tower Cash Flow and adjusted EBITDA multiples, and equity-free cash flow per share and grow their contribution going forward.

There are a number of attractive properties currently on and expected to come on the market this year. We aren't going discuss any specifics, but you should assume that we are monitoring opportunities closely and will pursue acquisitions on terms that we believe will benefit our shareholders, both short-term and long-term, while maintaining our target leverage range long-term. We also intend to continue to invest in new tower builds and ground lease purchases or extensions. We believe both activities will provide excellent returns on capital over time. Last year we invested approximately $7.6 million in ground lease purchases or extensions.

Kurt described earlier the progress we are making in the new build area. We expect to more than double production in 2006 compared to 2005 in new tower builds and we are off to a good start. Given our experience and past success in the new tower build area, we are very excited about growing that portion of our business.

On the balance sheet side, we have accomplished a lot and are almost where we want to be, but we do have one more material step to take. We want to refinance our remaining high yield debt. We currently believe the CMBS market provides the best opportunity to do so, and we hope to accomplish a refinancing in that market by the end of the year. We have already started the process. One of our peers just priced a large CMBS transaction that appears to have been very well received. Prior to their deal, we had achieved the tightest spreads across rated tranches of any CMBS issuer in our industry. I believe their recent deal was priced even tighter, which is great news for us as it demonstrates increasing investor acceptance and appetite for the asset class. Given those market dynamics and our asset quality, we are very optimistic about what we can accomplish and the material positive impact on equity-free cash flow per share that we would expect from our next CMBS deal.

We're very excited about our prospects for 2006. It is positioned to be a year where we hit on all cylinders. The business climate is good. Our customers are very busy and expected to stay that way. New spectrum and market entrants seem to be coming. We have great assets. We are executing well. We have capital to invest on high growth accretive opportunities. We believe there will be plenty of those investment opportunities to pursue, and we have a path and a plan to end the year with an optimized capital structure and balance sheet.

The team is energized and eager to build and surpass on last year's success. We are committed to our path of high quality, high growth. We are anticipating a good year and we look forward to reporting our progress to you as we go. Operator, at this time, we are ready for questions.

Certainly. [OPERATOR INSTRUCTIONS] First we'll go to Ric Prentiss with Raymond James. Please go ahead.

Yes, good morning, everyone.

Hi, Ric.

Couple questions for you. First, can you talk a little bit about where prices have gone in the M&A environment, what you're seeing out there? You've done a good job buying and building towers to grow your portfolio. Just kind of wondering where prices are at these days. And the second question is, how important is scale to this business? You've grown now to being well over the 3000 towers. How important is it to get up to 5, 6, or is it important?

On the M&A front, there's a fairly wide range of prices at which we're pursuing transactions, and they would range anywhere from 12 times Tower Cash Flow on the low side for more mature, lesser growth assets to 18 times or somewhere around there for very high growth, lower priced per tower transactions. It's really the, the mix, Ric, of maturity and growth characteristics that will determine the price. In general, the larger transactions that tend to be auctioned or represent, in a single opportunity a chance to accumulate a lot of good assets, command fairly healthy prices. But we do see across all size range, the opportunities to add good growth towers to the portfolio that are accretive on day one to any of the metrics that we think matter for SBA.

And the second question-- scale, that's a question we get asked a lot and, we believe that we are at a scale today that gives us the size and the expertise and the resources that we need to continue to grow the business successfully. I think there's no question that you can further leverage the overhead and the SG&A expense across a wider revenue base and operate more towers without materially increasing your overhead, and I think we have shown that and we expect to continue to show that as we move forward and grow the portfolio. But we've never been of a belief Ric, that operational either in the pricing of our tower space or our growth rates, the scale really make a difference for us and in many respects, we have found that given our size, we're actually able to take advantage of some opportunities and achieve some higher growth levels than perhaps others might be able to do.

Okay. And then also, Jeff, you mentioned the exciting items out on the horizon with the auctions and the next generation buildouts. You alluded to also kind of like the satellite guys. Have you seen explicit-- have you seen explicit requests from guys that now have ancillary terrestrial coverage abilities to start kind of thinking how many cell sites they might need or how you guys might be able to help them going?

We've seen- we've had some discussions with the satellite radio providers. We have not had any discussions yet with the folks that have recently, been the subject of a lot of news articles, the satellite TV providers. They still need to pick their partner and find their spectrum. There's a lot of speculation as to what's going on in that area, and it's a little bit premature yet for them to come to us because they don't quite yet know what their spectrum path is. But from what we can tell, it looks like they do have a path and that over time, that should provide some additional incremental lease-up for our towers.

Sure sounds like a lot of leasing for a lot of years to come. Good luck, guys.

Thanks.

Our next questions from Vance Edelson with Morgan Stanley. Please go ahead.

Thanks a lot. Good quarter. Just back on the question about the tower acquisition initiative. Could you just describe for us the competitive landscape, are you winning these towers in competitive situations, or are you sometimes the only suitor? And maybe as a follow-up, do the sellers have a preference for cash or stock? And I guess I'll also ask, is the typical transaction for one or two towers, or are you picking they up a little bit more wholesale in, groups of ten or 20? Thanks.

We have--we have been sometimes the only purchaser pursuing a transaction, Vance. Those are obviously the deals we prefer. We have often participated in competitive situations. We've won some of those where we think the price versus the growth rate is the right thing for us. We've lost a bunch of those because of the competition. There is a fair amount of competition out there for these assets.

We continue to pursue any and all opportunities that we think make sense for our shareholders. A number of the towers that we added to the portfolio came in one or two-tower transactions, a lot of folks don't pursue those smaller deals. We still do. We have a team in place that make, we think makes sense to do all that. And we think going forward, it will continue to look the same. There will be larger opportunities. There will be smaller opportunities. The larger ones tend to be more competitive and we have to be careful there and stay disciplined, which we're confident we will do. And in terms of cash versus stock, we used a fair amount of stock over the last year or so as it was part of our strategy to delever the balance sheet.

We are now within our target leverage range, so we aren't really pressing that as much as an additional path to delever. I mean if somebody had a preference for that for tax reasons or other good reasons, we would certainly consider it, but I would tell you that all things being equal in this market, there is still a preference on the sell side for cash transactions.

Okay. That's very helpful. Thanks.

Our next question's from the line of Lale Topcuoglu with Goldman Sachs. Please go ahead.

Hi, I guess two questions. One, Pam, in your guidance for 2006, are you including DSO expenses and can we get a little bit of clarity what that number should be for 2006? And also, Jeff, when you look at the wireless carrier activity that you're seeing, can you give us a little bit more flavor as to how much of the activity is capacity and coverage improvements versus 3 G investments? Thanks a lot.

[inaudible] This is Tony. The first question on the employee stock options under the new accounting guidance 123R, those-- that is not included in the full year 2006 or the first quarter guidance numbers. We are in the process of finalizing that work now as we're preparing to file our 10K for year end. So when we file our 10K, we'll be able to provide a little bit more color on that, but until we get beyond the first quarter, we will not be providing any guidance on that non-cash expense.

On the lease-up, Lale, it's coming from a variety of sources. It is primarily capacity in the sense, people used to think about coverage, it was more, covering areas that weren't previously reflected as being covered on maps that were given out to consumers. We're really past all that. There's not a lot of new territories that are being covered.

There's some exceptions to that, but for the most part, it's all capacity, but actually the line is very blurred today between what's at capacity and what's the coverage build. I mean capacity really today is where there used to be antenna sites three miles apart. There's now a coverage hole between those two and in essence, it's still-- everything is a coverage build, but I think the way you meant it, it's more of a capacity plight. And it's still very hard for us to tell exactly what is directly related to EVDO versus general new builds, particularly on the CDMA carriers, because their path to deployment of 3 G is not quite as equipment-specific as the GSM carriers, but there's no doubt that part of the lease-up demand that we're seeing and expect to continue to see is due to the rollout of 3 G services.

Our next question's from Jim Ballan with Bear Stearns. Please go ahead.

Thanks a lot. Couple of questions. One is, is it fair to expect that in preparation for the refinancing of the bonds that we should, that we would see organically deleveraged over the course of the quarter, and Jeff, you mentioned being able to have an optimized balance sheet at the end of the year. Could you give us some thoughts on, just remind us of what the, what your thoughts are on what an optimized balance sheet might look like?

And the second question I have is, sounds like the whole industry had a, had a very active fourth quarter. For the first half of the first quarter, generally tends to see a little bit of slowdown as the carriers retool for a new year. Did we see that typical slowdown, or have we seen these guys continue to build aggressively in the first quarter?

Yes, I'll take the second one first. I think we're rolling into a pretty strong Q1. I mean we, as you could tell from our guidance, we're, I don't think we're expecting a particularly soft quarter. I think it will go the way prior years go, which is that the activity will build and kind of end in a crescendo in the fourth quarter. It seems to have done that now for the last couple of years. And 06 doesn't--I don't know that that'll be an exception. But I don't think we're expecting a material drop off as we roll into Q1.

In terms of the balance sheet, we are targeting a 6 to 8 times leverage ratio, but what really matters more than that, Jim, in our view, is the cash interest coverage levels. We think given this business and the solidness of the Tower Cash Flows, that a two times cash interest coverage ratio is good and conservative from a risk perspective. So depending on where interest rates are and what our costs of financing are, that will, in large part, dictate whether we're towards--closer to the six times or closer to the eight times in the target leverage range. I don't-- I mean we may have some delevering as we move through the year. I don't know that it will be all that material as we continue to, our goal is to continue to add assets. But we feel pretty comfortable with our plan that we could end the year, have refinanced everything, be predominantly, if not entirely in the CMBS market within a 6 to 8 times leverage ratio with very ample cash interest coverage ratios.

Terrific. Thanks a lot, Jeff.

And let's next go to Clay Moran with the Stanford Group. Please go ahead.

Good morning. I have two questions. First the Site Development segment, was that a positive contributor to the fourth quarter EBITDA? And do you think-- or is the guidance for '06 assuming a positive contribution from Site Development? And secondly, I think you said tower, same-tower revenue was up 12% for the quarter. Do you have what that number is for the year, and what does the guidance assume in that regard?

Services was a positive contributor in the fourth quarter, Clay, as gross profit number was what, 2.2?

2.4.

2.4, so that's going to be above, what our fully allocated SG&A would be against that side of the business. And in terms of the contribution to EBITDA in 2006, without getting into any real specifics, because we don't do that, I would answer that question that the--the positive contribution is not much.

In terms of the same-tower, we calculate that on a year-over-year quarterly basis, so we haven't really calculated it on the full-year. I guess kind of each quarter is the full last 12 months. And in terms of where we're headed with that, we feel pretty good that the same tower-- let me go over where we have been for the year. In Q1, the trailing 12, same-tower revenue growth was 12%. Then it was 9% in Q2, 9% in Q3, then up to 12% in Q4. And we feel pretty good, particularly through-- we have a fair amount of visibility now for '06, that we should be able to do, as good, if not better on that metric as we move through the year, and I would feel very comfortable-- and of course there is that element in our guidance, because we do a bottom's-up approach in providing guidance and I would say that we feel that we'll do, as good, if not better on the same-tower growth metrics as we move through the year, and we'll continue to report those on a quarterly basis.

Great. Thanks, Jeff.

And next we'll go to Anthony Klarman with Deutsche Bank. Please go ahead.

Thanks. Maybe just a point of clarification on a couple of the balance sheet comments. I would expect-- I guess what I had originally been expecting was perhaps a modest relevering, given how far you were down towards your leverage target, sort of edging towards the lower end certainly by the end of this year, and you've raised equity twice in the past 12 months to accelerate the deleveraging. Just given the [refi] of the high yield, there'll be some modesty levering disassociated with the premiums on that, but I guess thinking even outside that, would you just, considering the outlook for growth and the opportunities that are out there, consider going towards the high end, given that you would fall within that coverage range in terms of the interest coverage target that you laid out?

We would, we would, and where we really end up the year, Anthony, will depend on the level of investment in new assets versus not. And if we can't find things to invest in that we think make the most sense, which is our first choice and we think that does make the most sense, all things being equal, we will be in a position by year-end if, or certainly shortly thereafter, to look at other things in terms of returning capital to shareholders wether it be stock repurchases or dividends, to maintain that target leverage levels.

And I guess that kind of gets towards my second question. It almost seems a little silly asking this, given that you've issued equity twice in the past year, but what are your sort of longer-term views on returning capital to shareholders? And how would you evaluate the opportunities in doing that versus kind of sticking with what you've been doing, which is targeting the higher ROI, independent tower projects?

Well, I think the best recipe for our shareholders is to focus on continuing to be a high quality, high growth company, where the primary method of returning value is through share appreciation and we think our investment program will do that. We do think we're going to generate a lot of free cash flow, so if we can't reinvest it in ways that we want in new assets, then we will clearly be looking at one of, the two other ways to return capital to our shareholders. But right now, we are finding good acquisition opportunities, new build opportunities that we think are very accretive to all the metrics that matter, and we think our shareholders are better off by us continuing that path.

But the beauty of where we are is kind of a high class problem. I mean if those opportunities run out, which they shouldn't for us, given our size and we're a little bit better positioned to benefit from new assets than perhaps some others, given the fact this it will move the needle for us, we will clearly be looking at returning capital. I mean we're not-- you don't need a lot of cash to run this business on a going basis, so one of the things we won't be looking to do is, build up cash on the balance sheet.

Great. Thank you.

And next go to [Richard Worley] with Permit Capital. Please go ahead.

Hi, Jeff. I guess my question has been answered, so I'll just say terrific job. I wish you guys would do a little better job of forecasting. I sold a few shares last quarter, based on your forecast and you just trounced it. Seriously, the guidance in the coming year on tower revenue, is that based on just on towers that you currently own plus towers that you've contracted for?

Yes.

Okay. So there's no forecast of further buys in that?

Not, not beyond what's been announced.

And second, on the new builds, 80 to 100 is I think a little lighter than you had hoped to be doing, is that just a question of finding the right opportunities?

It is. It's tough. I mean we're finding the new build environment is increasingly tougher. We're very pleased and actually the results we're getting with what we're doing are ahead of expectation, but the combination of, where our carriers are and their levels of receptivity, the, incrementally difficult zoning environment, it's all kind of adding up to making it a little tougher than we had expected and that's showing itself in our production numbers. But we are building steam and we do--we are looking to at least double in 2006 and obviously our goal will be to do more than that, but for now, given the pipeline and where we are in that pipeline, our guidance is 80 to 100.

Well, as you know, I think that's a great use of funds and so do as well as you can there, and, again, thanks a lot for a great year.

Thank you.

[OPERATOR INSTRUCTIONS] I'll next go to [Dave Coleman] with RBC Capital Markets. Please go ahead.

Good morning. Thanks for taking my questions. Just trying to find out the amount of one-time revenues in 4Q '05, I guess on the Site Leasing side. And second question, your '06 guidance, the Site Leasing revenue guidance, what is that based on as far as cell site demand assumptions by the carriers relative to '05? Are we looking at--are you assuming the same rate as in '05, greater pace or 55%?

Well, roughly the same rate, David, on-- for '06 that they had in '05. Kind of similar. I mean not a material difference, up or down there. And on the first question, we didn't have any material-- actually Tony is telling me zero one-time revenue benefits in Q4 '05.

Yes, the benefit that I indicated earlier was in Q4 2004 that we obviously did not see the same one-time benefit in Q4 2005.

On the revenue side.

On the revenue side.

Now, we did have about $0.5 million of one-time benefits in Q4 that effected EBITDA positively, but that was not in the leasing revenue area.

Okay, great. Thanks.

We have a follow-up from Ric Prentiss. Please go ahead.

Yes, hey, Jeff. Follow up on your thoughts about that if the M&A or the build come through, the return to shareholders, you said you'd be able to do stock buyback or dividends. Does that assume that you've done the second tranche of that [inaudible] that you've taken out the high yield debt?

That would certainly be better, obviously, given where that would put our equity free cash flow per share and it would also remove some contractual limitations on restricted payments that we have in those instruments, Ric. But today we could do somewhere around, somewhere between 150 and $175 million of either repurchases or dividends underneath those instruments, but obviously if we can get rid of them, then we're going to be not constrained contractually, but just by the appropriate managing of our cash and the balance sheet.

Right. But obviously if there's attractive opportunities on growing the portfolio, moving the needle, as you call it, better use of funds in the short-term probably?

I think so. Yes.

And then also I agree with you on the cash on the balance sheet, probably don't need a lot of it. But what is your thoughts how much cash you want to leave on the balance sheet kind of quarter in, quarter out kind of thought process?

Well with the revolver, you really don't need a whole lot. I mean I don't-- we've kind of tended to grab it-- we've been as low as 20-- I think we had 22, 25 million a couple quarters last year. Obviously that was fine. We tend to have higher amounts today, just based on the refinancing of the CMBS transaction. We wouldn't mind using up some of that in terms of new asset investment and let that balance drop as long as we had good sources of liquidity. So, 20, $30 million is fine for this business.

Great. Thanks a lot, Jeff.

And Mr. Stoops, no further questions in queue.

Great. Well, we certainly appreciate everybody spending the time with us today and we look forward to our next report. Thank you.

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