SBA Communications Corp (SBAC) 2006 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the SBA fourth quarter earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. If you require assistance on today's call, please press star then zero. And as a reminder today's conference is being recorded.

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

Thank you for joining us this morning for SBA's fourth quarter 2006 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 2007 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, 2005, and form 10-Q filed during 2006, which documents are publicly available. These factors and others have affected historical results, may affect 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 23, and 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 directly 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 web site at www.SBAsite.com.

Tony, would you please comment on the fourth quarter results.

Thanks, Pam and good morning, everyone. Our fourth quarter results were very solid. And we met or exceeded the high end of our guidance on leasing revenue, tower cash flow and adjusted EBITDA. Total revenues were 96.8 million, up 33.6% over the year earlier period. Primarily due to the inclusion of AAT acquisition. Site leasing revenues for the fourth quarter were 74.4 million, up 73.5% over the fourth quarter of 2005. Site leasing segment operating profit was 54.1 million, up 74.2% over the year-earlier period. Site leasing contributed 95.4% of our total segment operating profit for the fourth quarter.

Under our definition of tower cash flow, which excludes noncash leasing revenue and ground lease expense, tower cash flow was 53.9 million, a 70.8% increase over year-earlier period. Tower cash flow margin was 74.8%, compared to 74.6% in the year-earlier period. This is ahead of where we originally thought tower cash flow margins would be after the AAT acquisition. We continue to believe the tower cash flow margins will eventually reach and possibly exceed 80%. Today, we have many individual tower sites with tower cash flow margins higher than that 80%.

In our services business, our services revenues were 22.3 million, compared to 29.5 million in the year-earlier period. Services segment operating profit was 2.6 million, compared to 2.4 million in the year-earlier period. Services segment operating profit margins were 11.8% in the fourth quarter, a nice improvement compared to the 8% in the year-earlier period.

SG&A expenses for the fourth quarter were 10.8 million, which includes 1.2 million of noncash compensation expense, and $500,000 of one time integration transition severance and bonus items related to the AAT acquisition.

I am very pleased to report that we have completed the integration of AAT and all of our systems and processes are working smoothly. We are now settled into our nationwide operations with our continued focus on growing our portfolio through acquisitions, new-builds and ground lease purchases. We have made a conscious decision to invest more resources into these three developing type activities, and as a result now expect our SG&A expense, excluding noncash compensation, to run us about 9 to 9.5 million per quarter, which is about a $0.5 million more than our prior expectations.

Net loss was 24.3 million, down from a loss of 32.3 million in the year-earlier period. Net loss per share for the fourth quarter was $0.23. Our weighted average shares outstanding for the quarter was 104.9 million.

Adjusted EBITDA, which excluding noncash leasing revenue and ground lease expense, noncash compensation and one-time AAT related items was 47.5 million in the fourth quarter, up 76.6% over the year-earlier period. Our adjusted EBITDA margin was 50.4%, up from 37.5% margin in the year earlier period.

During the quarter, we built 15 towers, acquired 61 towers, and ended the quarter with 5,551 towers owned and the rights to manage over 6,000 additional sites. Cash, capital expenditures, in the fourth quarter, were approximately 24.6 million, of which we spent 1.7 million on maintenance tower CapEx, 2.7 million on augmentations and rebuilds, and 300,000 on general corporate CapEx. We also spent 14.5 million of cash and acquisitions around these purchases and earn-outs and 5.4 million on new tower builds and new build work in process.

At this point, I am going to turn things over to Pam, who is going to provide an update on the capital structure.

Thanks, Tony. SBA ended the fourth quarter with 1.555 billion of commercial mortgage backed pass through certificates outstanding. 80.6 million of cash and restricted cash and net debt of 1.47 billion. We had no borrowings under our $160 million credit facility, and availability at year-end was approximately 27.6 million. Total liquidity consisting of cash, restricted cash, and credit facility availability was 108.2 million.

The Company's net debt to annualized adjusted EBITDA leverage ratio was 7.8 times at December 31, 2006, inside our target range of 6 to 8 times. Our cash interest expense is now fixed, as it relates to the CMBS issuances at 91.6 million per year, an approximate rate of 5.9% per annum. On a net basis the expense will be less after expected interest earned on cash deposits.

Kurt, will you provide an update on operations?

Thanks, Pam. And good morning, everyone. As you can see by the numbers, Q4 was another solid quarter for us here at SBA. Revenue growth and margins were strong, costs were in line or better than expectations, we continued to steadily grow our asset base, and we finished the quarter with strong backlogs in all areas of our business.

On the tower leasing side of the business, carrier activity continued to be strong for new leases and for new lease amendments. Activity varied widely from urban to suburban to highway and nonmetro areas. Activity from new market buildouts and expansions to recent launches also drove the action.

Our customers are all at different points in network maturities and density in each market area and they all have substantial plans ahead of them for continued network growth. Some of this growth will be new sites for new market buildouts or expansions, some will be technology overlays at existing sites, some will be capacity or performance enhancing amendments, some will be from network hardening activities. As you have heard from our customers and peers, the drivers for this network activity continue to be the need to reliably and ubiquitously support the increasing subscriber penetration rate, the increasing minutes of use, the continued adoption of data, all enhanced by innovative new products and services.

The deeper functionality in overall offerings and value of wireless services is really taking off and in our opinion will continue for some time to come. I'm personally very excited about the data services acceptance being reported by our customers, the convenience and functionality of the data services, and the coverage expansion occurring for those services. Over the long term, we believe the ubiquity of the wireless voice, data and video services will continue to be compelling to both consumer and business subscribers and continue to drive network growth.

In the fourth quarter, 77% of new leasing business signed on our towers was derived from new tenant agreements. While 23% came from amendments to existing leases. Amendment activity was mostly due to carriers adding equipment to the towers, and for additional ground space for electronics and backup power generators. 93% of new revenue came from telephony and other major broadband carriers including Clearwire, a very active up and coming data carrier. We saw good activity from all the big four carriers except for Cingular, who is still signing new leases and amendments but is at substantially reduced rate from their peak in early 2006. We have seen some leasing activity from recent auction winners, and have been working with many others from that group on their designs as they prepare to move to the implementation phase. We expect the back half of 2007 to be very active in this area and continue through all of 2008.

We enjoyed another strong average rent quarter for new tenants, and we continue to see improvements on the rates for new leases on the former AAT sites compared to historical levels. Same tower year-over-year revenue growth on the towers we owned for full year or more at December 31 was 13% on gross basis and 11% on net basis after churn. We did realize above average churn from Cingular decommissioning during the quarter. We understand that Cingular has sent substantially all of its decommissioning notices at this time, and based on the notices we have received we expect additional above average churn from Cingular decommissioning through the end of the third quarter of 2007 which is fully reflective in our guidance. After that, we expect the Cingular churn to slow down, and we are pleased with the expected minimal impact it will have on our business.

At December 31, on a combined basis across the entire owned tower portfolio, we had 13,602 signed leases and an approximate average cash rate of $1,728 per month, compared to $1,705 at September 30, and putting us at 2.5 times per tower. This continued pattern of increasing average monthly rents every quarter that we have enjoyed is driven by strong initial rents from new tenants, good amendment activity and contractual rent escalators.

The operational cost of our tower portfolio continues to remain very stable and predictable and Q4 was no exception. Maintenance CapEx for our towers continues to run at less than $1,000 per tower per year, while structural CapEx or augmentation CapEx continues to run less than $2,000 per tower per year. We continue to believe we have the highest quality and capacity tower portfolio in the business, and these numbers continue to support that.

On the asset growth front, our new tower build M&A programs remained active. During the fourth quarter we built 15 new towers and bought an additional 61 towers, increasing our total owned tower count to 5,551. We continue to push hard in both areas of asset growth as we feel this is an excellent use of our discretionary capital. Our operating metrics on both our new builds and our newly acquired M&A sites are very good and we continue to feed the pipeline.

In the services segment of our business, Q4 revenue was 24% below the year-ago quarter, but gross operating profit was 10% higher. The dropoff in our Cingular work hit the top line revenue of this business quickly but our profit numbers showed that our results to improve the margins in this business is paying off as our 11.8% gross margin is our highest in over three years. Our backlog headed into 2007 in this business are solid, and we are beginning to see new technology overlays, as well as continuing to perform new market and growth work for all of our core clients. We expect our mix of customer revenue will change in 2007, with the primary difference from 2006 being more Sprint Nextel and less Cingular.

Overall we believe that 2007 will have a more traditional spread of services revenues by quarter, which historically has started off the slowest for the first quarter, and then has grown sequentially throughout the year. We saw our profit margin grow sequentially every quarter of 2006, and are optimistic that our 2007 services margin will continue at 2006 levels.

Overall, our operations at SBA are strong, we're confident in our growth prospects, with all forecasts pointing to another solid year in 2007. We're excited about the continued adoption rate for all wireless products and services. And feel confident that this core driver of our carrier clients will continue to support this trend.

At this point, I will turn it over to Jeff.

Thanks, Kurt. And good morning, everyone. 2006 was a remarkable year for SBA. We substantially grew the Company in terms of both revenue and operational scope. We are operating and pursuing opportunities now on a nationwide basis. For 2006, we posted over 350 million in total revenue, at 160 million in adjusted EBITDA, both of which were record highs by a wide margin for SBA. We also produced over $67 million of equity-free cash flow in 2006, and easily led our industry in equity free cash flow per share growth. Most importantly, we ended the year financially and operationally positioned to do materially better in 2007. We are very excited about the future and we expect continued success for our company and our shareholders.

I want to touch on the six topics that matter most to me as an SBA shareholder. Customer activity, our operational execution, asset quality, asset growth, balance sheet management, and growth in equity free cash flow per share.

Our customers, the wireless carriers, are very busy. Through various data points we have, we expect busier years from Sprint Nextel, T-Mobile, Clearwire, Leap and Metro. We expect similar levels of activity compared to 2006 from Verizon and Alltel. Cingular is the only major carrier that we think may not be as active in 2007 as they were in 2006, at least with respect to the tower industry. Overall, we expect activity to increase throughout the year, and roll into 2008 at a heightened pace. We think the overall business levels in 2007 will be similar to 2006, with the likely change in mix, and with a stronger back half of the year. In summary, we expect 2007 to be another very good year for customer activity and demand.

SBA continues to execute well, and the points of evidence are many. Improved services margins, SG&A expense that continues to shrink as a percentage of revenue, increasing tower cash flow and adjusted EBITDA margins and a consistent history of meeting or exceeding our financial guidance are some of the quantifiable examples. On the more qualitative side, the performance of our team in integrating the AAT acquisition ahead of schedule and budget was extraordinary. All while executing our regular business, keeping our customers happy, acquiring and building other towers, and completely refinancing our balance sheet in the CMBS market. We have always prided ourselves on being a company of action, and nowhere is that more evident than our 2006 accomplishments. I want to thank a each and every one of our employees for their tremendous efforts and results last year. Our shareholders should take great comfort in the performance capability of our team and the fact that our team is eager to replicate last year's success in 2007.

With respect to asset quality, we continue to believe that we have the highest quality towers in the industry, and point to our operating results as proof. When our peers talk about asset quality, they choose to focus on numbers of towers in specified demographic markets. When we talk about asset quality, we are talking about the sum of a number of factors, most importantly remaining physical capacity, operating expense per tower, augmentation CapEx per tower, maintenance CapEx per tower, same tower revenue and cash flow growth, average rent per tenant, ground space, remaining ground lease terms, location, and lack of competing structures. We compare favorably on all these items.

The favorable comparisons that SBA enjoys on these items is a direct result of the manner in which our portfolio was created. Of all the public tower companies, we have by far the highest percentage of towers built by our industry for our industry, as contrasted with towers built originally by carriers for their industry. There is a difference. It does matter. And our results over the years have proven the point. It is great that our customers are very busy. But to truly maximize the opportunity, you must also have great assets. We are confident that we have them. And asset quality is a lasting characteristic that will continue to serve us well in the future.

We intend to stay active buying and building quality assets as we see a favorable customer activity and growth environment for years to come. We are off to a good start so far this year. And believe we can grow our tower portfolio 5 to 10%. We are working on a number of additional opportunities beyond what we have under purchase and sale agreement, and which we disclosed in our press release, and we are reasonably confident that we will be announcing more acquisitions as we move through the year. We expect to build more towers in 2007 than we did in 2006, we are currently projecting 80 to 100 new builds for 2007, and have a backlog in place today that gives us confidence that we can produce those numbers.

I will add one caveat to the acquisition landscape. Prices have continued to increase over the last year. As a result, we frequently need to walk away from a sale. We are focused only on those acquisition opportunities where the price to expected growth relationship fits our IRR model, and will produce value for our shareholders in the form of returns materially in excess of our cost of capital. In general, we are buying what we believe are high growth assets, that are less mature, with as good or better growth prospects than our exists average portfolio tower, at prices less than our current trading multiples of tower cash flow. We believe this path will continue to allow us to continue being a high quality, high growth and value-creating company. We intend to continue this asset growth activity to the full extent that supply, price, required returns and our capital allow us to do so.

With respect to our capital structure, we believe that active balance sheet management has led and will continue to lead to superior shareholder returns. Our outstanding indebtedness is now comprised solely of mortgage backed securities through which we have been able to obtain very favorable leverage covenants and interest rates. Long term, I expect the CMBS market will remain the source for the majority of the Company's financing.

We are very comfortable operating at the high end of our target leverage range of 6 to 8 times net debt to adjusted EBITDA, and believe that we should continue to do so to minimize our weighted average cost of capital. The factors that give us this comfort are expected continued growth rates and the speed at which we can organically reduce leverage, the current interest rate environment, and our ability to hedge future interest rate risks, the ability to access fixed rate debt and obtain minimum adjusted EBITDA to cash interest coverage ratios of 2 times or better, the ability to access additional capital to take advantage of strategic opportunities when they might arise, and the breadth and availability of the CMBS market as a source of refinancing.

Given the speed at which we currently delever, we would be comfortable exceeding 8 times leverage on a temporary basis to close an acquisition or a financing. A good example was our AAT acquisition, which we closed in April of 2006, at 9.5 times pro forma leverage, eight months later we ended the year at 7.8 times leverage. We would hope to use all of the capital that active balance sheet management will generate to buy and build additional quality towers that meet our return requirements. If for some reason we can't do that, because of supply or price issues, then we would think about other uses of our capital, including returning capital to shareholders. At some point in the future, I anticipate that we will be doing both, adding assets, and returning capital to shareholders.

Finally, as a shareholder, I think about growth in equity-free cash flow per share. We led the industry in 2006 in growth and equity-free cash flow per share and our goal is to do the same in 2007. I think we are well positioned to do so for the reasons I have discussed, strong organic growth, high quality assets, continued portfolio growth, and active balance sheet management. Equity-free cash flow per share growth is the purest view, in our opinion, of whether or not our interests in SBA as shareholders are improving or not. Our focus as a management team is to maximize that growth, and if we do, we're confident our shareholders will continue to be well rewarded.

We are very optimistic about our prospects for 2007, and we look forward to reporting our results throughout the year. And, Ryan, at this time we're ready for questions.

[OPERATOR INSTRUCTIONS] And our first question will come from the line of Jonathan Atkin, with RBC Capital Markets. Please go ahead.

Yes, good morning. A couple of questions. One, I wondered, Tony, or Jeff, if you could comment on, amplify a little bit on Tony's comments about the increase in SG&A? Maybe flesh out the factors that led to the higher tower cash flow guidance with the unchanged EBITDA. And then Kurt mentioned the expected uptick in leasing activity at a lot of carriers at sprint and Nextel. Are you noticing anything at all from that carrier on the decommissioning front?

Jonathan, the first question, we increased our leasing revenue guidance and our tower cash flow guidance to reflect the increased acquisition activity from the last time we put out full-year guidance in November. The reason that EBITDA did not rise by the same $2 million increase in tower cash flow is SG&A. As we have ended the year, and kind of positioned ourselves to continue to actively grow the Company, we have added some more people in some areas that are probably going to cause SG&A to be about $2 million per year higher than where we thought we would be in November, the last time we gave guidance. So it is all about the SG&A line, and not about the tower revenue growth or the are tower cash flow line.

Sprint Nextel decommissioning, Jonathan, we've seen nothing at all, and feel confident they are going to continue to operate both networks for the foreseeable future.

Okay. Thank you very much.

Our next question comes from the line of Vance Edelson with Morgan Stanley. Please go ahead.

Thanks a lot. Just a few quick questions. Regarding the 148 towers that you've agreed to purchase, can you give us an ideas as to the timing? Is that going to take on average days or weeks, because it has a bit of an impact on the financials? Thanks.

It does. And the best guidance I can give you there is to kind of look at those being evenly spread between now and the end of the second quarter.

Okay. Got it.. And the site development revenues, they seem to hit a peak back around the second quarter of '06, and based on guidance for the first quarter, that will be the third straight quarter that that revenue stream has come down. Is that sort of a secular trend? Or is that more seasonal? And we should expect it to eventually pick back up?

Vance, it is Kurt. I mean it is really project-driven, and Cingular driven. Cingular came down pretty hard at the end of the third quarter and we do a lot of business with them. So that is obviously slower. And then we've got a couple of other projects on the backside. We have a couple of other projects that are right on the front side that are large in scope. And will be ramping up quickly. So some of it is project driven. Some of it is carrier driven. And some of it is seasonal this year, back to a slower first quarter, but our backlogs for the year look very strong. Actually in construction, we've got one of our better backlogs to start the year that we've had a long time. It is just the timing of starting to implement it.

I would summarize that, Vance, by saying it is both seasonal, Q1, is typically the lightest, although last year it wasn't, but in years past, it is. And we're cycling out of a lot of Cingular business that we were doing on the services side last year to replacing all of that business with other carriers.

Okay. That's very helpful. And lastly, you mentioned that the prices are creeping up a bit for tower acquisitions, is there more competition? And if so, can you tell us where that competition is coming from? Or is it more that just the current owners are holding out for higher prices?

No. It is competition from all of the usual suspects, both public and private. Tower assets are valuable. And the prices at which we can acquire good assets are still very accretive, and make a lot of long-term success for our shareholders, and unfortunately, our successful recipe isn't a secret. So there is a lot of folks out there who are looking at what we've accomplished and are trying to do the same thing, and it has caused competition to be a little stiffer. However, it is a very, very fragmented market. New towers continue to begin generated every day by mom and pop developers. And we still do extremely well because we're set up to be very efficient buying 1, 10, 20 towers at a time.

Okay. Thanks for the color.

And our next question comes from the line of Rick Prentiss with Raymond James.

Thanks. Good morning, guys.

Hey, Rick.

A couple questions for you. I think we got the same tower revenue growth on a year-over-year basis, 13% gross, 11% net after churn. Is that a similar number for tower cash flow growth year-over-year?

I think it was 18 and 15.

And I don't think I caught all of Tony's comments. What were the one-timers in the quarter?

There really weren't any.

A pretty clean quarter?

The one-timers were in the SG&A number, with the AAT one timers, but I think we-- didn't we back that out of our adjusted EBITDA?

Yes.

That's what I thought I heard him say. I just wanted to make sure I was clear on that. And then with the SG&A to follow on Jonathan's question there, you mentioned are you going to be hiring more people. Is that focusing on the tower build side? To kind of get you up from the 15 towers that you built in the fourth quarter up to more than the 20-plus tower side? What side of the business is it really on as far as those people?

It is all three development sides. Acquisitions, ground lease purchases, and new builds.

And then the final question for you, these are all quick fast staccato ones. You mentioned about looking out in the future, and you see at some point, not just adding assets to your portfolio but also looking at return to shareholders. How do you look at when is the right time to do that? And how do you look at buybacks versus dividends?

There is a variety of different points, as you know, Rick, that you can kind of look to. The one that we think is most important now is maintaining a leverage level that allows us to minimize our weighted average cost of capital. And that means we need to stay in the current environment with the current equity growth prospects at the 8 times or-ish, or around there levels. So we want to stay there. So with that being the guiding factor, if we can use all of the money that that leverage produces to buy towers, and build towers, and buy ground, that's what we will do, and if we can't do that, that's when we will probably start looking to stock repurchases, or dividends. I think our first choice without really having thought this through, or certainly having done any board level discussions, would be stock repurchases just because it is more flexible and we can change our strategy, we've always been an opportunistic company that reacts to market forces so a stock repurchase program seems to be a bit more flexible than a dividend program. But long-term, I fully believe that all companies in this sector will be dividend paying.

Great. Good luck, guys.

Thanks.

[OPERATOR INSTRUCTIONS] Our next question will come from the line of Brett Feldman with Lehman Brothers. Please go ahead.

Thanks for taking the question. I've actually got a couple here.

On the private transactions you're seeing out there, I know you said prices are going up, can you give us a little more color on what you're seeing? For example, we've heard in the past that deals have been getting down between 11 and 18 times tower cash flow. Do you still see these deals under 15 times or are those days gone and are you even seeing things priced north of 20? That's my first question. The second one is, I want to get a better understanding about the relationship between land ownership and margins. You said you have a couple of towers where you get cash flow margins in excess of 80%. I see you own land there. If were you to look at a very similar tower where were you leasing the land, how much lower would that margin be?

And then the last question is on leverage. You're clearly comfortable at or above the high end of your range on net leverage to do deals. When you get to the point where you're primarily using leverage to fund capital returns, do you think you would sku to the lower end? I just want to know if you think about leverage differently, depending on what you are using the money for? Thanks.

Okay. That's a few questions. Let me start with the acquisition one, Brett. I don't know that there is many 11 times deals left out there. I think the low end of probably what we're seeing would be 13-ish times and that would be for more a more mature tower, with multiple tenants on it. The typical range is probably now, for the assets that we're interested in, which are ones that have, for the most part, average tenants lower than what we have on the portfolio as a whole would be 15 to 18 times. And we will spend more than that for assets that are essentially new build type opportunities, single tenant, freshly built towers, because that economics replicates our own internal costs of producing a new build, which on day one with 1 tenant would come in above 20 times.

So you have to be careful. And we've been at it a long time. And we know the towers that we want, and we can still get them for the prices that make sense for our shareholders. But the market clearly is up a little bit from where we were a year ago.

In terms of leverage and return of capital to shareholders, I mean we would-- we at that point in time, we will do an extensive analysis of where we think our share price should go, over three and five-year periods of time, and if we can do deals that are NPV positive to buy in our shares, we will do that. That may or may not have an immediate impact on equity-free cash flow per share. I think you're seeing that with some of our peers, you're buying stock back in that is yielding 3 or 4% on an equity free cash flow basis being funded with 6% or so debt, and while that has a day one impact, , it does make sense long-term. The beauty of what we're doing on the acquisition side is we're growing the Company and the share equity free cash flow per share, and not having that immediate dilution, which is the primary difference there, between acquisitions and stock repurchases. But that's how we would look at it. I mean this is a long-term gain for us. And we, over time, we expect our operating metrics to perform very well, and it is better to buy the stock in now rather than later.

Great. And on the land issue?

Brett, currently, we bought 10% of the portfolio was on land that is owned by us and that jumps up to about 13% or so when you factor in long term a perpetual, or a permanent and perpetual easements. But when you look at the ground lease expense, which traditionally is the highest component of our expense, to managing a portfolio, those margins could jump up anywhere from 10 to 15%, when you factor in the ownership of the land. So those margins could clearly start to approach 85 to 90% when you own the land on any of the towers.

We don't need to own all of the land, Brett. I think that is really your question. We don't really need to own all of the land to get to 80%. Actually the ones where we own the land today, we have got 95% plus margins.

Great. Thanks, guys.

Our next question will come from the line of Jim Ballan with Bear Stearns. Please go ahead.

Thanks a lot. Very complete call. Just one question I really have left, which is also along the acquisition side. With over 100 million in liquidity, and being positive, having positive free cash flow, and at the pace at which you will deleverage is sort of organically at this point, can you talk about why you continue to use stock as a currency to buy towers? Is that something that has to do with the competitive nature of the market? Is that something that you can offer sellers or something that sellers are seeking out? Or maybe you can just discuss that. That would be great.

It is a little bit of that, Jim, where some people want some tax preferred transactions, stock for stock. It is a little bit of liquidity management which continues to be less and less of an issue for us, and as a result, I think you will see us use stock less and less and less for these acquisitions.

Terrific. Thanks a lot, Jeff.

And the final question comes from the line of Anthony Klarman with Deutsche Bank. Please go ahead.

Thanks. Just a couple of questions left. First, on the new build side, could you remind us, I guess, what the challenges were in '06, in terms of not hitting, at least some of the preliminary thoughts that you would have on the number of towers you would build in '06? And why you were more confident in able to transition the backlog of new builds in the active portfolio in 2007?

And then just, I guess, finally on the balance sheet front, just given where you guys trade yourself, as a multiple of tower cash flow, and the multiples at least seem to be going higher, but are still seem to be within a reasonable range, certainly relative to where the public companies are currently trading, what is the major impediment in terms of being more aggressive in rolling up assets faster? It would seem as though there are lots of-- you guy still have kind of a dominant market position in terms of rolling up a lot of the smaller portfolio transactions, I think you referred to them as kind of mom and pop transactions. Are there mid-sized and any larger sized portfolios that are out there that-- whether they are either out of the wireless carrier hands or on your hands that you might be able to do something more formative in terms of looking at those acquisitions?

Kurt, you want to start with the new build question?

Yes, I will. Anthony, we have grown the production in this group, a couple of years ago we were 10 then 36 then 60 last year. So we think the 80 to 100 number is within our range. It is still very competitive out there. Our quality, we will not relent on the quality, and actually our stats on these new builds have come in better than we have planned, which we think speaks to our ability to pick good sites. So that's, the quality is definitely there even though the volume is down a bit from where we want.

And the last piece that gives us confidence is the pipeline that we have of width is maturing so more of the sites that have been in there are leased and zoned and permitted and have carrier interest. Zoning is still a big challenge. But we pick sites we think we can get through zoning. And some of these take longer than we like, but that gives us a good long-term asset in terms of zoning protection. So again, I think our track record shows we have been growing it and we are close to those numbers now, and we're just going to continue to push. And the good news is, the quality of the assets we're spitting out on the other end is excellence.

On the balance sheet issue, Anthony, you're right, and I can assure you that we're paddling as fast as we can on the consolidation front. But remember, it does take two to tango, and we have, IRR requirements that we look to. So if we can meet those in deals that we think makes sense we are going to do them. And there are a couple of larger opportunities out there that we will always be interested in, if the rest of our requirements can be met. So for us, it is a question of getting as much done as we can to still get deals done that has a material, which I would categorize as 4, 500 basis points return above our weighted average cost of capital. People would argue, perhaps, that you can skinny that down, and still make money in their right, but that's kind of one of the discipline points that we have used here at SBA over the years that I think has worked very well for our shareholders.

But you believe that given where your leverage is today, you still have adequate flexibility to be able to do something more formative in terms of an acquisition if that were presented?

Absolutely. The financing environment today is extremely good. I don't believe there is any likely opportunity out there that should it arise that if we wanted to pursue it we could not finance.

Great. Thank you very much.

Thank you.

And at this time I will turn it back over to the panel of speakers for any closing remarks.

Great. Well, we appreciate everybody joining us today, as we wrap up 2006. And we're excited about 2007. And look forward to speaking with you next time. Thanks, Ryan.

Certainly. Ladies and gentlemen, this conference will be available for replay after 5:00 p.m. eastern today for two weeks, which is March 9, 2007. You may access the AT&T Teleconference Replay System by dialing 1-800-475-6701 and entering the access code 862695. Those numbers again, 1-800-475-6701 with the access code 862695. That does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.