SBA Communications Corp (SBAC) 2008 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the SBA first 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. (OPERATOR INSTRUCTIONS) As a reminder, this continuation is being recorded. I would now like to turn the conference over to our first speaker, Pam Kline, Vice President of Capital Markets. Please go ahead.

Thank you for joining us this morning for SBA's first quarter 2008 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer; Kurt Bagwell, our Chief Operating Officer, and Tony Macaioni, 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 2008 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 31st 2007 and our quarterly reports on Form 10-Q, 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, May 1st, 2008, and we have no obligation to update any forward-looking statements that we 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 has been posted on our Web site at www.sbasite.com. Tony, would you please get us started and comment on the first quarter results?

Thanks, Pam, and good morning, everyone. As you saw from our press release last night, our first quarter financial results were excellent and we were at the high end or above our guidance for site leasing revenues, tower cash flow, adjusted EBITDA, and equity free cash flow. Total revenues were $109.9 million, up 14.7% over the year earlier period. Site leasing revenues for the first quarter were $89.4 million, or a 16.8% increase over the first quarter of 2007. This leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $67.3 million. Site leasing contributed 96.6% of our total segment operating profit for the first quarter. Tower cash flow for the first quarter of 2008 was $67.7 million, or a 21.4% increase over the year earlier period. Tower cash flow margin was 77.5%, up 230 basis points over the year earlier period and 100 basis points over the fourth quarter of 2007. Our services revenues were $20.5 million, compared to $19.3 million in the year earlier period or a 6.4% increase. Services segment operating profit was $2.4 million in both the first quarter of 2008 and the first quarter of 2007. Services segment operating profit margins were 11.5% in the first quarter, compared to 12.5% in the year earlier period. SG&A expenses for the first quarter were $10.5 million, including non-cash compensation charges of $1.4 million and one-time net benefits of approximately $900,000 associated with the reduction of certain accruals that were originally recorded at estimated amounts. This compares to SG&A expense of $10.8 million in the year earlier period, including non-cash compensation charges of $1.4 million. Other non-cash expenses in the first quarter included an other than temporary impairment charge of $2.5 million related to certain auction rate securities held at March 31st 2008.

As discussed in our previous earnings calls, the company still holds three auction rate securities with a par value of $29.8 million, which had a fair value of 11.8 million at March 31st 2008. Net loss during the quarter was $14.6 million, compared to a net loss of $16.4 million in the year earlier period. Net loss per share for the first quarter was $0.13, compared to a net loss of $0.16 in the year earlier period. Excluding the $2.5 million non-cash impairment charge in the auction rate securities, our net loss per share would have been $0.11. Weighted average shares outstanding for the quarter were 108.5 million. Adjusted EBITDA for the first quarter of '08, which excludes certain items such as described in last night's press release, were $61.5 million in the first quarter, or a 25.4% increase over the year earlier period. Adjusted EBITDA margin was 56.9%, up from 52.5% in the year earlier period. Once again, equity free cash flow increased materially in the quarter, reflecting strong adjusted EBITDA growth. Equity free cash flow for the current period was $38.3 million, 54.6% increase over the year earlier period. Equity free cash flow per share for the period was $0.35 per share, or a 52.2% increase over the year earlier period. In the first quarter, we acquired 88 towers, built 20 towers, and ended the quarter with 6,325 towers owned and the rights to manage approximately 4,400 additional or potential communication sites. Cash capital expenditures in the first quarter were $58.7 million, of which we spent $1 million on maintenance tower CapEx, $1.1 million on augmentations and rebuilds, and $200,000 on general corporate CapEx. We also spent $47.3 million of cash on acquisitions and earnouts, and $6.1 million on new tower builds and new build work in progress. With respect to the land underneath our towers, we spent in total $4.4 million in cash to buy land and easements and do extend ground lease terms. And at this point, I'll turn things over to Pam, who will provide you with an update on our liquidity and balance sheet.

Thanks, Tony. SBA ended the first quarter with $1.555 billion of commercial mortgage-backed pass-through certificates outstanding, $350 million of 0.375% convertible senior notes, $40 million outstanding on our $335 million senior credit facility, and $162.7 million of cash and short-term restricted cash, for a net debt of $1.8 billion. We increased our senior credit facility to $335 million from $285 million during the quarter. We did not issue stock in the first quarter for acquisitions, and our share count at the end of the quarter was 108.5 million. The company's net debt to annualized adjusted EBITDA leverage ratio was 7.3 times at March 31st 2008, down materially from the 8.0 leverage ratio at December 31st 2007. Our net secured debt to annualized adjusted EBITDA leverage ratio was 5.8. Our auction rate securities are not included in our calculation of liquidity or net debt. As of quarter end, all but $40 million of our debt was fixed rate with a weighted average cash coupon of 4.9% per year. Our first quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was a very strong 2.8 times, compared to two (inaudible) times in the year earlier period. As of the date of our press release, we had total availability of $227 million under our credit facility, $20 million outstanding, remaining availability of $207 million. As we build and buy towers, additional availability is created under the credit facility. Pro forma for the TowerCo and other transactions under signed purchase contracts, we estimate that the total availability under the facility will be approximately $310 million. We anticipate using a combination of cash on hand and draws from the credit facility to fund our closing obligations for such acquisitions. I'll now turn it over to Kurt to discuss some of our operational results.

Thanks, Pam, and good morning. As you see by the numbers, Q1 it was a very good quarter for us. It continued to show the steady lease-up and resultant revenues from our desirable tower space, the consistent and predictable nature of our expenses, and the efficiency of our scale through the high yet steadily increasing gross margins. Most of our major customers were busy leasing tower space from us in the quarter. We expect this level of activity to continue. So far this quarter, wireless carriers have continued to report excellent operational and financial results for both voice and especially data services, which we believe will continue to lead them down the path of continued network development. Same tower revenue and tower cash flow growth was strong at 10% and 13%, respectively, on a cash basis, excluding approximately 130 basis points of Cingular/AT&T merger related decommissioning. In the first quarter, our churn rate was well below historical levels, representing only .2% of revenue on an annualized basis, with a majority of the Cingular/AT&T churn now behind us. Prices stayed firm in our average cash basis rents across our 15,726 tenants, now up to $1,828 per month. During the first quarter, 80% of our new revenues signed came from new tenant leases, with the other 20% coming from amendments to existing installations. The new leases came from a mix of Big Four carriers, and new and existing regional carriers. The mix of new lease activity has been widespread from geographic coverage expansion to performance-enhancing cells, technology overlays, and to cover in-building penetration and capacity needs. Wireless backhaul is also gaining momentum, and we are starting to so what we think is a broader long-term movement towards that medium from several of our major customers.

Backup power continues to be an active area for our clients and the rental of additional ground space for their variety of solutions has been steady. Our new tower build team completed 20 towers during the quarter, putting them on track to have their best year since the restart of this program a couple of years ago. We are also busy on the acquisition side, which Jeff will discuss in more detail. On the operational side of our tower portfolio, both OpEx and CapEx expenses continue to be low, and reflect the high quality of our portfolio. The biggest highlight of our expense story continued to be in the low rate of occurrence of a structural upgrade being required when we go to approve a new tenant lease application. Upgrades to our towers are required in only about one out of 15 cases, which we believe to be by far the lowest rate among the major tower owners in the industry. As a result, augmentation expenditures for the quarter averaged less than $750 per tower per year. Our maintenance capital expenditures for the quarter also averaged less than $700 per tower per year. Our maintenance capital expenditures for the quarter also averaged less than $700 per tower per year. Lastly, in the expense area, the percentage of our tower sites, for which we owned or control for more than 50 years the underlying land, grew to 25% as of March 31, contributing to our strong margins and increased control of our assets.

Our tower cash flow margins grew 230 basis points year-over-year to 77.5%. On the services side of our business, Q1 came in with revenues and gross margins as expected. Revenue of $20.5 million was up 6% year-over-year and segment operating profit of $2.4 million was virtually flat year-over-year on a total dollar basis. We performed services work for a variety of carrier customers in the first quarter. We're anticipating that our work for one particular carrier, which has been a primary services customer for the last several quarters, will be less in the second quarter and thereafter for an unknown period of time. Our second quarter and full year services revenue guidance reflects this lower expectation, which is carrier-specific. Those of our services personnel impacted by this carrier level activity are in the process of transitioning into other work. On the bright side, there is plenty of network development services work out there from a wide variety of the existing and potential SBA customers, as evidenced by our high (inaudible) backlogs. We are looking forward to another good year, operationally. At this point, I'll turn things over to Jeff.

Thanks, Kurt, and good morning, everyone. We had a very good quarter, which we believe sets us up for a very good year. We continue to benefit from, and execute well on, our three-part strategy to grow equity free cash flow per share, maximize organic growth, grow the portfolio materially through intelligent use of capital, and appropriately leveraging the balance sheet. The strategy continues to work well for us, as evidenced by our industry-leading year-over-year growth in equity free cash flow per share of 52%. We intend to stick with our strategy and believe that it will continue to produce material growth and equity free cash flow per share. As you heard from Kurt, most of our customers have been very active leasing space on our towers. Our new tenant lease backlog is at a recent high and is one of the drivers behind our increased full year outlook. We do not a need a new Sprint-Clearwire WiMAX network to achieve our 2008 outlook, although obviously it would be welcome and could add to the results, depending on the timing. We see no evidence that our customers are cutting back on network investment because of the general economy. Long term, the prospects for continued strong growth demand are very good. UMTS overlays will extend in 2009 and perhaps beyond. AWS new market launches will extend into 2009, and most 700-megahertz deployments will not start until 2009, at the earliest. We do believe that Sprint and Clearwire, separately or together, will develop a WiMAX network. Based the amount of money spent on the 700-megahertz auction and the first quarter results of some of our customers, it appears that we have entered a new phase of wireless growth, that of data services. Data transmissions typically require greater network densities. We have been the beneficiary of that trend and expect to continue to be a beneficiary for years to come.

In summary, organic demand remains strong and we expect it to stay that way. We have taken that strong organic customer demand and have efficiently converted it into cash flow through our high-quality assets and strong operational execution. Obviously 10% same tower revenue growth demonstrates the attractiveness of our towers to wireless providers, but it is also in the low cost expense structure of our portfolio that Kurt highlighted that equally drives equity free cash flow. We focus particularly hard on asset selection and operational execution, and we believe our results prove out the success of our efforts. We continue to benefit from the high quality of our towers and the fact that the substantial majority of our portfolio was built by our industry for our industry. Going forward, we believe there will be continued strong demand from our customers for our towers and that the quality of our assets and the strength of our execution will allow us to efficiently convert top-line demand for SBA tower space into recurring cash flow. We've made a great start to the year on the second part of our strategy, which is portfolio growth. We announced the TowerCo transaction where we have agreed to buy up to 444 towers, and through today we have acquired or agreed to acquire an additional 263 towers from a variety of sellers. Combined with the towers we expect to build, we expect to add over 700 towers to the portfolio this year, which would be portfolio growth of 11.25%, well above the high-end of the portfolio growth range we established at the beginning of the year. This is another reason why we have increased our full- year outlook. We are thrilled with the TowerCo transaction, and believe those assets to be one of the highest quality, highest growth portfolios of size available, or likely to be available, for the foreseeable future. We expect to pay approximately 22 times run rate tower cash flow at closing for the towers, not to exceed $450,000 per tower. While the multiple is on the high end of what we typically pay, we believe it is more than justified by the quality, cost per tower, and expected growth of the assets. At closing, the portfolio will average less than 1.5 telephony tenants per tower with an average capacity for four, an average age of approximately three years, and approximately $20,000 of run rate tower cash flow per tower.

The addition of one telephony tenant per tower over the next five years, which we believe is conservative projection and would only bring the assets up to our existing level of occupancy, would more than double tower cash flow, produce internal rates of return above 15%, and would produce same tower revenue growth and same tower cash flow grow in excess of our portfolio as a whole. We are very pleased with all of the real estate and structural aspects of the towers, and it is clear the portfolio was built and assembled by a very experienced and knowledgeable team. Customer demand for the towers is strong. We expect the transaction to be accretive to equity free cash flow per share starting in the fourth quarter of 2008 and be much more accretive in 2009 and beyond. We have been working diligently on the transaction and are on track to close be May 30th 2008. As to the other towers we have bought this year or have under contract to acquire, we are paying a wide range of multiples of run rate tower cash flow, ranging from nine times to 23 times, depending on the price and the growth prospects of the tower, with an average of approximately 17 times and $500,000 per tower. Besides acquisitions, we continue to be, and intend to stay, active as possible building towers for our ownership and buying the land underneath our towers. For the rest of the year, we will continue to look at additional acquisition opportunities but, given that we will exceed our portfolio growth goals by closing what we currently have under contract, we will have the luxury of being very selective. Given our current capitalization, we may have an appetite for up to an additional $100 million of cash acquisitions. There are a number of additional opportunities we are pursuing but none of those are signed or are in our outlook. And even if they were signed or closed this year, they may have little to no impact on 2008 financial results, depending on the timing of closing. They would, of course, have full impact in 2009. The $100 million of additional potential investment is driven by where such amount of cash acquisitions would put us at year end in terms of desired and projected leverage and liquidity.

That is a good segue to the third part of our strategy, appropriately leveraging the balance sheet. We enjoyed a material drop in leverage in the first quarter, 7/10 of a turn, due to strong current quarter organic growth and the impact of a full quarter of results from our fourth quarter 2007 strong lease-up and portfolio additions. At 7.3 times net debt to adjusted EBITDA leverage, we are in the middle of our target range of six to eight times and at the lowest leverage level since right before we purchased AAT two years ago. The magnitude of the leverage reduction in the first quarter really demonstrates the operational ability of the business to handle leverage and reaffirms our comfort around target leverage. With adjusted EBITDA to net interest coverage of 2.8 times, and primarily fixed rate debt, we are very comfortable operationally with our debt service. Looking forward, the TowerCo and other second quarter acquisitions will return leverage to approximately 8.0 times, at the end of the second quarter, and in the 7's on a pro forma basis, as we will only have approximately one month of TowerCo in second quarter actual results. After that, given our strong leasing backlog and our positive views around future customer demand, we expect to resume reducing leverage rapidly. If we spent the extra $100 million I discussed earlier on as-yet unannounced acquisitions in the second half of the year, our models indicate that we would end the year with fourth quarter annualized leverage in the low to mid-7 times range, depending on the timing of the closings, with pro forma leverage even low lower and with year-end liquidity, including credit facility availability, estimated to be between $150 million and $200 million. We believe that would be a very good position on which to end the year and move into 2009. If we don't spend the extra $100 million, year-end leverage would be even lower and liquidity higher. Either way, we would have materially grown the portfolio and materially reduced leverage in the same year.

Given the speed at which the business organically delivers, we are studying whether we should access additional debt capital in 2008 to maintain leverage at eight times. Operationally, the business can obviously handle the leverage. The debt markets, however, while recently improved, are still very challenging. Given all of our expected portfolio growth this year, we have the luxury of being able to be very selective around additional debt. And as a result, by are taking a wait and see approach to the debt markets. We are going to continue to monitor conditions, maintain a state of readiness, and stay flexible if a good opportunity comes our way. This is the key, a good opportunity, because we don't need to raise any additional capital to achieve our goals this year or grow the portfolio again next year. In the last couple of years, we have been very successful with the rate and terms on which we have accessed debt capital. Any additional debt that we have added has been carefully evaluated on the basis of impact on equity free cash flow per share, covenants, and refinancing risks. We would perform the same analysis today, with particular emphasis on the impact to our 2010 and 2011 refinancing obligations. We would only be interested in raising additional debt if it had a neutral to positive impact on the 2010 and 2011 refinancings. In the currently challenging debt markets, we may or may not find an opportunity that satisfies our goals. If we do find such an opportunity, we may seize it. If we don't, we are perfectly content to finish the year with the capital structure we currently have, as we will have exceeded our portfolio growth goals for 2008 and still be positioned for material portfolio growth and additional de-leveraging in 2009.

That's the update on our three-part strategy. It's working very well, and equity free cash flow per share is growing materially. We had a great first quarter, one that was ahead of our expectations. We are in excellent financial shape, and our customers are busy. We are extremely excited about our prospects for the future and we are grateful to be in the business we are in, as we look at how some other businesses are faring in this economy. I want to thank all of our customers and our employees for their role in our success. And for our shareholders, we intend to channel our excitement into continued strong expectation and growth in equity free cash flow per share and look forward to reporting future results. Linda, at this time, we are ready for questions.

Thank you. (OPERATOR INSTRUCTIONS). One moment please, for our first question. Our first question will come from the line of Jonathan Atkin from RBC Capital Markets. Please go ahead.

Yes, good morning. A couple of questions. In the earnings release, it talks about the backlog of site applications being at a multi-year high, and I wonder, you know, either Jeff or Kurt, if you could comment at the speed at which you are converting applications to actual revenue, any different trend there. And then just a couple of housekeeping items, if you could repeat the run rate tower cash flow per tower on the TowerCo assets, as well as the -- in the SBA portfolio, the number of leases at quarter end and the average lease rates?

The application conversions, Jonathan, is still pretty much the same. We haven't seen a speedup or a slowdown there. I mean, typically, you know, from the time something hits us -- I mean we turn things around in 48 hours, but by the time it ultimately gets signed up by a carrier, you know, it may be a month or so, depending on how quickly they want to move. Some want to move quicker than others, but in general, I think the averages are still the same, so I don't -- I don't think there's really been any change there in terms of speed, but there has been an uptick in volume. Kurt, you want to go beak over the --

Jonathan, 15,726 tenants at $1,828 per month. Is that what you were looking for?

Yes. And the TowerCo TCF run rate at closing, Jonathan, is expected to be approximately 22 times at $20,000 of run rate tower cash flow.

Great. And then the -- I think you talked about the CDMA, the spending level at one CDM carrier affecting the services business, and has leasing activity from that carrier slowed down as well?

I don't think we said CDMA.

Oh, I'm sorry.

But yes, I think that when we talk about robust carrier activity, it's not generally uniform, and that your question was headed in the right direction.

Okay. And then and comment on any changes in the sales or operations organization. I think you're hiring a national director of sales. I'm assuming that's the services business, but if you could kind of update us on that?

Yes, we're adding something depth there and trying to maintain our momentum in that business. It's -- you know, obviously, a very competitive business and one that you have to work on your sales and your backlog every day, and nothing -- nothing more than that.

Yes, it's a personnel issue and not -- it's not a change in direction or outlook or view.

Okay and then finally, with regard to the 700-megahertz auctions, is there any anticipation that you would be seeing lease applications from any regional buildouts as a result of 700 megahertz?

This year?

This year, yes.

Potentially. It's a little early to say, but potentially that could happen in some pockets, I think.

Great. Thanks very much.

Our next question will come from the line of Clayton Moran from Stanford Group. Please go ahead.

Good morning. Two areas I want to ask about. First on the guidance, can you just confirm that that includes pending acquisitions, and that therefore the increase in EBITDA is due, about $6 million of it, is due to the acquisitions? And then secondly, I think for Kurt, talked about maintenance CapEx down to about $700,000 per tower per year. Do you think that's a good run rate -- $700, I mean. And then can you would talk about the -- the tower portfolio in general that you currently have, the average age, the life of the tower that you expect, the tenants per tower, and the total capacity per tower? Thanks.

Yes, the guidance play, you're right, I don't know if it's -- if it's 60% acquisitions. It might more be 50-50, but it is a mix of both organic growth and acquisitions.

Maintenance CapEx, Clay, I don't see a major change in that line item. I mean it fluctuates every quarter up and down a little bit. But there's nothing there that, you know, we spent money on that I foresee dramatically changing on an ongoing basis.

Yes, I think we've been running $700,000 to $800,000 on a fun rate basis per year for a couple of years now. In terms of the overall portfolio, Clay it's two and a half tenants per power, about 2.0 telephony tenants per tower. Overall capacity continues to be between four and five telephony tenants per tower. So we estimate that we're about 40% utilized with 60% remaining capacity, which ties in directly to some of these low numbers that Kurt mentioned. We just have a lot of capacity left that doesn't require any money to fill. And the average age of our towers is -- and this will be a guess -- I would guess probably five -- five-ish years on average.

And do you -- what do you expect life of a tower is at this point? Now that we're a little more mature in this business, do you have a sense for how long the average tower will last?

Well, I think it's 30 years plus.

Okay. Thanks.

Our next question will come from the line of [Jonathan Schildkraut] from Jefferies. Please go ahead.

All right. Thank you for taking the questions. Just to follow up on some of the earlier questions, in terms of the higher level of applications, we had heard from one of your peers that Sprint had been doing a number of applications around its WiMAX deployment, just kind of getting set for rolling that out potentially either this year or next year. I was wondering if you had seen any activity along those lines. And then also if you could give us a little bit more color, if you are seeing any activity from the wireless backhaul guys and how significant it is at this point. Additionally, what the rental rates on that type of deployment versus a traditional telephony deployment might look like. Thanks.

Jonathan, as to your first question, we would say some, but we don't really get into carrier specifics. On the second question, we are definitely seeing an uptick in wireless backhaul from carriers that we had not historically seen a year or two ago, so that's up. And the way that we are benefiting from that increased activity is to rent out additional tower space for microwave dishes. And the rate on those leases varies, depending on the size of the microwave dish, where they want to place it on the tower, what -- where the tower is located, how much room is left. So it could vary from, you know, $150 a month to over $500 a month. But clearly an uptick in that type of business for us and one that we believe will continue to trend positively, as carriers continue to search for data backhaul solutions.

Great. In terms of the expected decrease in development revenues, it sounds like it will be a little bit more on the construction sides rather than consulting side. Is that correct?

Generally. I mean, that's, you know, 80% of the business anyway, and it's always a bigger driver of the numbers.

Okay. Thank you very much.

Our next question will come from the line of [Jason Armstrong] from Goldman Sachs. Please go ahead.

Thanks a lot. Good morning. A couple of questions. First, you know, we came into the year saying '08 was sort of a cashier in terms of deals, and you spent a lot of time obviously talking about the capacity of the credit facility. I'm just wondering, given the pace of deals, you're talking about, you know, 700 plus, and odds are it moves higher than that, and the improved equity currency you're working with. Should we expect, you know, at least, you know, a partial equity component as we go into the back half of the year on some of these deals? And then second question, any comments around potential cost savings from the TowerCo acquisition? Thanks.

I'll tackle the last one first. You know, when we have guided with respect to TowerCo, it's fully in anticipation of all the synergies that we will enjoy there. That is a transaction that's essentially an asset transaction in nature, where we will not be bringing over any overhead in connection with that transaction. We will probably need to add two, maybe three people to the company out in the field and maybe one on the sales side, just as we grow our portfolio because we kind of view those functions as a -- on a per -- per person, per number of towers function, but that would be it. So very, very, very little, almost total dropdown to the EBITDA line as a result of that transaction. And, you know, we'll see on the equity side. We haven't liked where our stock price was early in the year, and we did have the cash availability to us. I don't know that people should count on that, going forward, but again, they shouldn't be surprised by it either. And our guiding light there will be the same as it's always been, that this is a deal that should be done. or in some cases if it's required to be done by the seller for tax reasons, to be stock. And it makes good sense for us from us from an equity per cash flow per share basis, we'll do it.

Great. Thanks, Jeff.

Thank you. Our next question will come from the line of Rick Prentiss from Raymond James. Please go ahead.

Hi, this is [Charlie Castillo] sitting in for Rick. On the M&A front, are seller expectations moderating, given that the capital markets still remain challenging?

Yes, a little bit, a little bit they are. I think some of the opportunities that are available at all are available because operators have decided that, you know, the capital isn't available for them to continue to grow their companies and execute their plan. So it's caused some folks to think about selling who might not have otherwise done that. And I do think, you know, expectations are slowly starting to come down, as people understand that it's a different credit market environment out there.

Okay. And other than the TowerCo portfolio, which you gave us some pretty good detail on, in general, like how mature are the towers that you're looking at acquiring?

Well, they would be probably one-and-a-half to 1.6, maybe 1.7 tenants on average, a little bit more mature than the TowerCo assets, hence the higher price per tower and the lower multiple, but still well below our existing portfolio averages, and of the same type tower, such as we believe that the growth on those towers in the future will exceed portfolio growth as a whole.

That's helpful. That's it for me.

Thank you. Our next question will come from the line of Brett Feldman from Lehman Brothers. Please go ahead.

Yes, thanks for taking the question. Actually it's a follow-up on the last one. The types of assets that you're looking at, can you sort of describe where they are? In other words, are you primary looking at putting towers in markets where you already have operations? Are you trying to branch out into new areas? Are you getting to areas that you never thought you might go to because you see demand? And then you talked about having confidence that you'd be able to lease these assets up. How do you get that confidence? Is it simply based on the number of operators in the market or is there something more sophisticated that you do?

Well it's 20 years of being in the network development business, that's first and foremost, and a pretty good understanding of what is a good tower and what carriers will look for. And it's not really, Brett, so much geographic focus as it is focusing on the assets, themselves. I mean there are so many places in this country where a well located, well protected tower will do extremely well over time. And those are the types of assets that we're looking for. We're looking for high growth assets that are in spots where carriers are going to need to be, but not necessarily have been there yet. And with the increased densities that we've seen, the trends over the last couple of years, and particularly now with data, that strategy has really served us well.

Do you see any strategic value in increasing the density of your towers in specific markets? Because some of your larger peers are able to do like large volume deals because they happen to have a lot of presence in the market. Is that something you're doing, is it something you want to do, and does that factor into your acquisition strategy?

No, no, it's not something that we have pursued. You know, with those large volume deals typically come other strings attached and that's not -- we have tended to price our assets, and want to continue to price our assets, on a tower-by-tower basis. So that's not really a strategy, Brad, that we've pursued nor do I think we will be pursuing.

Okay, thanks for taking the question.

All right.

Our next question will come from the line of [Gray Powell] from Wachovia. Please go ahead.

Thanks. Good morning, everybody. Just had a few -- just had a few quick questions. The statistics you gave on the Tower Company acquisition were actually very helpful. Can you just talk about the tenant demand for those properties that you're seeing today, relative to what you're seeing on your core portfolio?

It's about the same, it's strong.

Okay. Because I mean if they're seeing like a .2 BBE lease-up rate, I mean, on a base of 1.5 tenants, that would imply that the revenue growth is significantly higher.

We believe it will be.

Okay. And then, you know obviously there's been a lot of talk about the potential Sprint-Clearwire WiMAX joint venture. If a deal were announced, just how quickly do you think that you would be able to get leases signed and start generating the incremental revenue on your towers?

I think very quickly. There's been a large amount of preparatory work that has been done by both of those customers in the last year to 18 months, so they theoretically have the ability to step right in and move fairly quickly.

Okay. And then my last question is that in the press release you stated that the backlog of new tenant leases is at a multi-year high. I thought that was particularly impressive, just given that Sprint has curtailed their spending so far this year. So is there-- is there any one area -- area in particular that you can point to that's offsetting that, or is there any way that you can quantify the upside that you're seeing today?

Everybody else is very busy. I mean, it's really -- I can't really single out any one particular contributor above the rest, but it's just a very good level of overall activity that we're seeing not only on the lease and what -- you know, when we talk about backlog, that's really just the new tenant leases. It's also on the amendment side with all of the UMTS overlays still going on. So we really do feel good about the additional business prospects for the rest of the year.

Okay. Thank you very much.

Our next question will come from the line of [Simon Flannery] from Morgan Stanley. Please go ahead.

Okay. Thanks very much. Good morning. If I could come back to the wireless backhaul topic, is there way to help us sort of size the opportunity? You know, what percentage of revenues today are from wireless backhaul, what sort of year-over-year growth rates are you seeing in revenues from wireless backhaul, anything like that? And then in terms of what's driving it, obviously the demand for data is driving it. But is it that the backhaul facilities, are (inaudible) the T1's, whatever, are -- there's not enough capacity going to the towers that people wants or just the pricing is so high that it's forcing people to look to alternative mechanisms? Thanks.

Simon, I can address the last piece of the question. You know, it's really a combination of capacity and costs of the current and backhaul that's being offered. And, you know, the data services are pushing the bandwidth requirements to be extreme in a lot of cases. You know, we're seeing carriers that need, you know -- you know tens -- tens of T1's to backhaul at a site. I mean I think some of the minimum sites now with a lot of the Big Four carriers have, you know, four to six T1's of backhaul to start with, and it goes straight up from there, depending on the usage. And so a lot of the wireless backhaul we're seeing put in is by the carriers directly. We're still seeing a good bit of third-party wireless backhauls put in, but a lot of it is from the carriers directly. And, you know, they are reaching that crossover point where they can carry the traffic themselves, you know the crossover point between the CapEx and the OpEx. And once they put in a system themselves, they can scale that capacity very well. The systems that are offered today are very high capacity and scalable and, you know, they're just -- they're reaching that crossover point.

Yes. In terms of the magnitude of the current activity, we don't have exact numbers for you on that, Simon, but just off the top of my head, given, you know, some of the new folks that have only appeared on that front in the last 12 months, I would say on a trailing 12-month basis, what we've seen this most current 12 months is two or three time the level of microwave applications that we saw over the preceding 12-month period.

That's very helpful. Thank you.

(OPERATOR INSTRUCTIONS). We now go to the line of [Brad Korch] from Credit Suisse. Please go ahead.

Hi. Thanks for taking the question. Just one last follow-on on the site leasing backlog. With the higher than expected backlog, have you seen any changes in pricing trends with respect to new leases? Are you able to raise prices at all? And then on the demand that you're seeing, is it any specific region or any specific type of market, top 100, or non-top 100? Thank you.

The demand is pretty well spread across the entire portfolio. It's definitely not concentrated. And in terms of pricing, we continue to see prices being very steady. And on a, you know, apples-to-apples, year-over-year basis, we're probably seeing, you know, mid-single digit increases on new lease applications.

Okay. Thank you very much.

There are no further questions at this time. I'll turn it back to you.

Great. Well, we certainly appreciate everyone dialing in today for our update, and we look forward to sharing our second quarter results with you. Thank you.

And ladies and gentlemen, this conference will be available after 12 p.m., Eastern Time, until midnight on May 15th of 2008. You may access the AT&T Executive Replay Service at any time by dialing 1-800-475-6701 and entering in the access code 918953. Those numbers again are 1-800-475-6701, access code 918953. That does conclude our conference for today. We thank you for your participation and for using the AT&T Executive Telecom Service. You may now disconnect.