SBA Communications Corp (SBAC) 2008 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the SBA's second quarter results conference call. At this time, all lines are in a listen only mode. Later, there will be an opportunity for questions, and instructions will be given at that time. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded. I'll now turn the conference over to Pam Kline, Vice President, Capital Markets. Please go ahead.

Thank you for joining us this morning for SBA's second 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 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 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 this mornings press release and our SEC filings. Particularly those set forth in our Form 10-K, for the fiscal year ended December 31, 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, August 4, 2008, 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 the most directly comparable GAAP financial measures and other information required by Regulation G has been posted on our website at www.SBASite.Com. Now I'll turn it over to Tony for our second quarter results.

Thanks, Pam and good morning, everyone. As you saw from our press release this morning, our second quarter financial results were excellent and we were near or above the high end of our guidance to site releasing revenues, tower cash flow, adjusted EBITDA and equity free cash flow. Total revenues were $112 million, up 11.6% over the year earlier period. Site leasing revenues for the second quarter were $93.7 million or a 17.8% increase over the second quarter 2007. This site leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $71.1 million, Site leasing contributed 98% of our total segment operating profit in the second quarter.

Tower cash flow for the second quarter of 2008 was $71.8 million or a 23.8% increase over the year earlier period. Tower cash flow margin was 78.1%, up 310 basis points over the year earlier period, and 60 basis points over the first quarter of 2008. Our services revenue were $18.2 million, compared to $20.7 million in the year earlier period or a 12.2% decrease. Services segment operating profit was $1.4 million in the second quarter of 2008 and $2.7 million in the second quarter of 2007. Services segment operating profit margins was 7.9% in the second quarter, compared to 13% in the year earlier period. Kurt will discuss services in more detail shortly. Our SG&A expenses for the second quarter were $12.5 million including non-cash compensation charges of $2.4 million. This compares to SG & A expense of $11.6 million in the year earlier period including non-cash compensation charges of $2.1 million. Other non-cash expenses for the second quarter included an other than temporary impairment charge of $2.5 million, related to certain auction rate securities held at June 30, 2008. As previously discussed, the Company still holds three auction rate securities with a par value of $29.8 million, which had a fair value of $9.3 million as of June 30, 2008.

Net loss during the second quarter was $18.4 million compared to a net loss of $15.1 million in the year earlier period. Net loss per share for the second quarter was $0.17 compared to a net loss of $0.15 in the year earlier period. Excluding the $2.5 million non-cash impairment charge on the auction rate securities. our net loss per share would have been $0.15. Weighted average shares outstanding for the quarter were 107.1 million. Adjusted EBITDA. as we defined for the second quarter of 2008 was $63.5 million in the second quarter, or 23.4% increase over the year earlier period. Adjusted EBITDA margin was 57.7%, up 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 $37.9 million or a 30.7% increase over the year earlier period. Equity free cash flow per share for the current period was $0.35 per share, or a 25% increase over the year earlier period. While we are pleased with the growth in equity free cash flow per share, it would have been even higher on a pro forma basis if we were to give full effect during the quarter for the convertible note offering and the tower co-acquisition. In the second quarter we acquired 555 towers, built 18 towers and ended the quarter with 6896 towers owned, and the rights to manage approximately 4400 additional or potential communication sites.

Cash, capital expenditures in the second quarter were $264.5 million, of which we spent $1.3 million on maintenance tower CapEx, $1.3 million on augmentations and rebuilds and $220,000 on general corporate CapEx. We also spent $250.6 million of cash on acquisitions and earn outs and $5.6 million on new tower builds and new build work in process. With respect to the land underneath our towers, we spent in aggregate of $5.9 million in cash to buy land and easements and to extend ground lease terms. At this point I'll turn things over to Pam, who will provide an update on our liquidity position and our balance sheet.

Thanks, Tony. SBA ended the second quarter with $1.555 billion of commercial mortgage backed pass through certificates outstanding, $350 million of 0.375% convertible senior notes, $550 million of 1.875% convertible senior notes, zero outstanding on our $335 million senior credit facility, and $242.5 million of cash and short-term restricted cash resulting in net debt of $2.2 billion. During the quarter, we issued $550 million of 1.875% Convertible Senior Notes due in 2013. We used approximately $74.1 million of the proceeds from the note offering and related warrant transactions to purchase convertible note hedges, which when taken with the warrant transactions as a whole, effectively increase the conversion price of the note from $41.46 per share to $67.37 per share. Additionally, $120 million of the note proceeds were used to repurchase 3.47 million shares of our Common Stock at a price of $34.55. Our share count at the end of the quarter was $105.9 million.

The company's net debt to annualized adjusted EBITDA leverage ratio was 8.7 times at June 30, 2008. Our net secured debt to annualized adjusted EBITDA leverage ratio was 5.2 times. Our auction rate securities are not included in our calculation of liquidity or net debt. As of quarter end, all of our debt was fixed rate with a weighted average cash coupon of 4.23% per year. Our second quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was very strong, 2.7 times. As of the date of our Press Release, we had zero outstanding and total availability of $278.9 million under our senior Credit Facility. As we build and buy towers, additional availability is created under those. Pro forma for the light tower and other transactions undersigned purchase contracts, we estimate that the total availability under the facility will be the full $335 million. We anticipate using a combination of cash on hand, draws from the credit facility, and our stock to fund our closing obligations for all of our pending acquisitions.

I'll now turn it over to Kurt to discuss our operational results.

Thanks, Pam and good morning. As you can see by the numbers, Q2 was another 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 and steadily increasing tower cash flow and adjusted EBITDA gross margins. In addition, most of our customers continue to report excellent operational and financial results for both voice and data services, which we expect will continue to lead them down the path of continued network enhancement. On a per site basis, our gross tower leasing revenues signed in the quarter was ahead of our Q2 2007 actual rate, and our net leasing revenue signed was equal to or better than any quarter in the past two years. including our big fourth quarter of 2007. It was also our best gross and net leasing revenue quarter on an absolute basis. For the quarter, year-over-year same tower cash leasing revenue and same tower cash flow growth, excluding a small amount of Cingular-AT&T merger related churn was 11% and 14 % respectively, once again the highest in our industry. Rental rates of State Farm and our average cash basis rents across our 16,851 tenants is up about 5% year-over-year to $1840 per month.

During the second quarter, 81% of our new leasing revenues signed came from new tenant leases with the other 19% coming from amendments to existing installations. The new leases continue to come predominantly from three of the four big four carriers. And we are also seeing steady activity from 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 see what we think is a broader long term movement towards that solution from several of our major customers. We are also seeing renewed interest in this area from third party providers. Our new tower build team completed another 18 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 also bought an additional 555 towers during the quarter, putting our total owned tower count to 6896 at quarters' end. The TowerCo transaction closed on May 30, and the integration was our smoothest ever for such a large portfolio. Our operations and leasing teams have done a lot of advanced planning and picked up these assets and began running with them immediately after closing.

For TowerCo, Light Tower and Ops Site and our other 2008 additions, we expect to add fewer than 10 additional personnel on the operations side, which truly shows the efficiency of scale in the tower model. On the operational side of our tower portfolio, both OpEx and CapEx expenses continued to be relatively minimal and within our budgets. Our tower augmentation CapEx was once again very low with spending right at $1 million on supporting revenue additions on high demand towers. Our gross expense in this area has been running at just about $1 million per quarter, with an annualized rate of less than $1,000 per tower per year. On a per tower basis, our expenses in these areas continue to be the lowest in the industry by a pretty wide margin. Lastly in the expense area, the percentage of our towers for which we own or control for more than 50 years the underlying land, was up to 25% as of June 30, contributing to our strong margins and risk control.

On the services side of our business, Q2 was a tighter quarter for us, given the near stoppage of all Sprint activity, which was our largest services customer for the last couple of quarters. Revenue of $18.2 million was down 12% year-over-year, and down 11% compared to Q1. Unlike on the tower leasing side of our business, where we provide service equally to all interested wireless carriers, the services business has always been more concentrated to one or two particular customers in any given quarter and in Q2, and possibly in Q3, that concentration and Sprint's pull back has impacted and may continue to impact results. Our services teams are continuing the process of reloading their backlogs with a more diverse customer base, and we feel the future quarters should see an uptick from Q2's results. We believe we're well positioned for several new projects with new entrants building both 3G and 4G networks as well as new projects from existing providers. We're very excited about our pending Ops Site and Light Tower acquisitions. We're already well into our pre-closing integration activities, and we expect things will go very smoothly.

In addition to the large number of existing high quality towers, both transactions bring material new build pipelines and relationships to what will produce new towers for us in 2008 and more in 2009. Finally, we're particularly excited about entering the outdoor DAS business through Light Tower where we will have the opportunity to confirm our belief about the attractiveness of the business, add some very talented employees, learn the business from the ground up, and create new opportunities for attractive future capital investment. While we do not believe DAS will come close to towers in operational of financial importance to SBA, we do believe DAS will play an important niche role in future wireless deployments, and we look forward to being a part of it.

At this point, I'll turn things over to Jeff.

Thanks, Kurt, and good morning, everyone.

As I think you'll agree, we have been busy this summer at SBA. We have done a number of things that not only will generate material growth in 2008, but more importantly, position us extremely well for additional growth in 2009, 2010, and beyond. Everything we have done and will continue to do is focused on a single goal, maximizing growth in equity free cash flow per share while maintaining an appropriate balance sheet. If we are successful in doing that, we believe our shareholders will continue to be rewarded over both the short-term and long term. We view the market and our share price as the ultimate judge of our success and in that regard, we believe our strategy and execution have been proven to be very successful. Our share price has materially outperformed our peers in any relevant index over the last one, three, and five year periods. The factors behind that success remain important, relevant and in place today, and we are very optimistic about our ability to produce continued success in the future. The foundation of our success is twofold. First, the explosive growth in wireless and the needs of our wireless carrier customers to continue to invest in the expansion and improvement of their networks.

Second, our ability to execute our business plan and capitalize on opportunities when presented. Both are very strong. As we have heard from Kurt, and others before us, wireless continues to grow, and in fact has become the growth engine for the large multi-product Telecom providers. 2G, 3G, and soon 4G deployments are expected to drive strong continued demand for tower space. We just finished one of our strongest lease up quarters in years, and we did so without material contributions from several carriers, which carriers had been much busier in the past and we expect to be much busier in the future. Wireless data use is soaring, data requires more network capacity and a higher level of complexity, both of which are increasingly addressed at the physical network level through additional equipment.

We expect the deployment of the recently auctioned 700 megahertz spectrum will extend this cycle of new services which leads to consumer adoption and then increasing usage and finally required network improvement for years to come. We see strong continued leasing growth for our assets in 2009, 2010, and beyond, which is why we are so excited to be growing our Company with additional high quality towers. On the execution side, we continue to perform very well. Our 11% same tower cash leasing revenue growth and 14% same tower cash flow growth once again lead our industry and by a material amount. In addition to our organic growth, our portfolio growth is well ahead of plan and is expected to be over 25% this year alone. We expect to end the year with close to 8,000 towers. As a result, growth in each of leasing revenue, tower cash flow, and adjusted EBITDA are all very strong and lead our industry this quarter by a wide margin. Expenses remain well in check as our tower cash flow margin and adjusted EBITDA margins were our highest ever. Maintenance Capital Expenditures and augmentation expenses once again were the lowest in the industry, reflecting both our asset quality and the great work of our employees. Our employees continue to perform excellently, and I thank them for their hard work.

We are very happy with the acquisitions that we have closed or announced this year. We are acquiring quality assets at reasonable and accretive prices ahead of what we believe will be a strong customer demand in 2009 and beyond. We seized on these opportunities because we believe they will produce greater near term and long term accretion to equity free cash flow per share than we would have achieved with stock repurchases and once acquired, will speed deleveraging because we have added additional growth assets to the Company. With our successes this year, we have firmly established SBA as the pre-eminent acquirer in the tower industry. Two of the three large deals we have announced this year were sole sourced to SBA by the sellers and their bankers on an exclusive basis, and none of our peers nor anyone else had a chance to look at these opportunities. Why was that? Because in the seller community, SBA has a 10 year track record of straight dealing, confidentiality, efficient negotiation documentation and closing, problem solving and most importantly, getting deals closed on the terms on which they were agreed. No one comes close to the aggregate number of transactions we have closed in that time period. We are extremely deep and capable in the acquisition area, and we have developed it to the point where we do believe it is a competitive advantage.

We believe these strengths will continue to serve us well going forward, and be even more important as we move into a world of acquisition opportunities that may lack for sizeable transactions, but we think we'll have an abundance of 10, 20, and 50 tower opportunities. These types of opportunities have historically been our bread and butter, and we believe SBA is the most capable potential acquirer for these size transactions. We intend to stay active pursuing those types of opportunities. Notwithstanding the materially larger tower count at which we will end the year, we continue to believe that we can keep growing the portfolio 5% to 10% per year for the foreseeable future, and the pool of good opportunities in the US will be there for SBA to do that.

Now that I've told you how good we feel about our future acquisition prospects, I need to temper that a little bit, at least temporarily. You should not expect us to announce any material additional cash acquisitions prior to year-end. We want to take the rest of the year to close out the site in Light Tower, integrate the assets into our Company, which we expect will go smoothly, and take advantage of expected strong continued organic growth to reduce leverage as we move into 2009. We have plenty of liquidity. That is not the issue, and in fact we believe we have no need to access the capital markets prior to 2010 and we still expect to have enough liquidity to grow the portfolio 5% to 10% per year through cash investments if we so choose. The desire to reduce leverage is driven more by our watching the current conditions in the credit markets and wanting to best position SBA for smooth refinancings in 2010 and 2011. At the end of the third quarter, we expect leverage to be similar to leverage at the end of the second quarter as we will be in the middle of closing the Optasite and Light Tower transactions.

We expect to end 2008 reporting a low eight times total net debt to annualized adjusted EBITDA leverage ratio, which would be less on a pro forma basis because we don't expect to close on Light Tower until the end of October. By the end of 2009, we expect to be at the low seven times high six times range on a total basis and approximately two times lower on a secured basis even after investing the cash necessary to achieve our goal of 5% to 10% portfolio growth in 2009. Leverage would be even lower if we choose to reduce our future cash investing, which we could always do, and would do depending on credit market conditions. We believe this path, which includes both growth and deleveraging, will putt us in excellent shape for our 2010 refinancing obligations. Based on where we expect leverage to be at that time, if the Markets were exactly the same as they are today, we believe we could refinance our 2010 obligations entirely in either the CMBS market or the bank market or we may choose a combination of both.

In closing, we could not be more pleased at our position as we move into the second half of 2008. We will be adding to our Company a material number of high growth towers and new build opportunities. We will enter the DAS business, our customers are very busy with good prospects which we anticipate will translate into an even higher level of activity in 2009. We will end the year with solid liquidity and a leverage position which we expect will create additional material value for our shareholders as we delever fairly quickly from expected strong organic growth. We are very excited about our future and we look forward to the next time we can share our progress with you.

Kathy? We can open it up for questions.

Thank you. (OPERATOR INSTRUCTIONS). We'll go first to Jonathan Atkin with RBC Capital Markets. Please go ahead.

Yes, good morning. I think Kurt mentioned in terms of the site leasing activity that three of the national carriers were active carriers to get of you as to when that fourth carrier might start spending again. Anything you're seeing on the site leasing side or in your services business that gives you any indication there and then with respect to outdoor DAS, can you talk about Light Tower in terms of their current scale, how many installations, how many customers, and how that business might get ramped over time? Thank you.

Jonathan, this is Kurt. Obviously, the fourth of the Big Four, it's a little unclear so exactly when they start ramping back up. They're making a lot of moves obviously to get themselves in a better position, and I don't want to get too customer specific here but we hope that by the end of the third quarter or fourth quarter they're back into a better gear than they are in now but that's not 100% clear to us just yet, so I'll leave that one at that. On the DAS systems. they've got five existing systems in one larger one that's in construction right now. The systems average about three tenants per system now, and on some of those installations, there's multiple bands per tenant which are basically look like almost another tenant so they definitely have done a very nice job of not just building several systems but building ones that are truly multiple tenant which is what we really liked about the Light Tower DAS business is it's very similar to our tower model. They've been very selective. Jonathan, I would add that the financial attractiveness of the business is very good at this point.

Kurt mentioned the three tenants persist em. We are approaching this the way we approached the tower business which is looking for multi-tenant opportunities. We think that's the right way to go. The returns on invested capital over time have been really very good for what Light Tower has done. The issue for us, which we will be kind of studying and drawing some conclusions on over time, is actually how big we can take the success that they've had, not quite sure yet, people should not expect that we will be materially moving the needle through DAS in the short-term and as we continue to evaluate opportunities, we'll keep you posted. And in terms of how to ramp the business, if you were to do so organically, would that require extra people or is your current site development organization able to handle outdoor DAS, or do you think the acquisition is maybe the more likely route for growth in that business?

Well, we certainly have a platform now to consider that moving forward, and we'll have to see how that goes. In terms of employees, we'll be picking up five or six folks right from the get go with Light Tower and there will be some additional folks that as we ramp up, we want to add but it's not going to be a huge number of additional folks necessary for us to go out and we think materially grow the business. But again, materially from where it is, not material when you look at it in the context of the overall SBA organization.

Great. Thank you very much.

Thank you. We'll go to Ric Prentiss with Raymond James. Please go ahead.

Thanks, good morning guys.

Hi, Ric.

A couple questions for you. First, Jeff, on the M & A front, thanks for a lot of heads up there about probably not a lot of big ones left out there at least in the current environment, more 10, 20, 50, you mentioned a couple times don't expect anymore cash deals and cash. How do you look at stock versus cash when you're going through these transactions and also, the ability to either acquire debt in the transaction or put it into your existing capital structure?

Well, the Opti Site deal really brought along very good attributes in terms of financing. With us being able to assume the existing debt at a very favorable and below market-rate and issue stock for most of the rest of our consideration, and in effect, we did not use up any of our existing cash resources or will not use up any of our existing cash resources to do that deal, and it was still done so on a very basis so we like that one a lot. We've always used our stock to supplement our capital resources. We're very careful in how we use our stock and we pay particular attention to where the stock is trading at the time we would issue it and the relationship of accretion at that time to the assets that we're buying, but it's always been a tool for us to make sure we're fully capable of seizing the good opportunities that we see are out there and stay within our overall leverage and deleveraging targets as we move forward, so as we do bigger deals and did so this year, you see a fairly good size on a combined basis of stock in the aggregate consideration. As we move forward, we may or may not be doing that based on what the opportunity pools are and the size of them, and where we see the various price relationships. But it's always something that we've used as a tool to make sure we don't miss out on any acquisition opportunities while at the seem time managing our leverage position.

Okay. Next question, I think Tony mentioned 98% of the revenues were site leasing in the second quarter. Little concerned in the marketplace today I think about the site development services business. Can you talk a little bit about where you see that business going? What kind of percent of revenue and EBITDA should that business maybe represent and what's the benefits to keeping it versus selling it?

Yeah, I'm not sure why people should be overly concerned. I think it was pretty clear for the last couple quarters that Sprint was the big services customer, and I think everybody should know or there's plenty out there to know that Sprint was not that busy this quarter or may not be that busy in the third quarter. For us, it has always been a business that keeps us close to the customer, keeps us very current on what carriers are doing in terms of equipment deployments and network expansion, that translates into we think smarter leasing and asset acquisition decisions on the hard asset side of the business, but it was, so from a gross profit perspective, it was 2% this quarter. I think over the last year, it has been no higher than 5%, and I think now, as you pro forma in Light Tower and Opti Site and the other things that we're doing, even at its highest contribution from picking out any quarter in the last four, it probably would be three or 4% of gross profit so it's not, it doesn't really impact EBITDA certainly or our equity free cash flow.

We continue to see new build opportunities that come out of it. We continue to mostly had see as I mentioned the customer intelligence factor, and in terms of going forward, as Kurt mentioned, we've got a couple irons in the fire that we think will produce improved business as we move through the rest of the year, and we'll keep you abreast of that and if we don't see that, then we'll as we always have with this business, we'll constantly be thinking about its future direction.

And then final question for you, because obviously it seems like the service business is definitely the tail small 2 to 5% kind of the business. The DAS system, Jonathan hit that a little bit, looks like an attractive niche, probably doesn't get huge for you guys in the grand scheme given your Tower model. If you think about DAS systems and now you've been looking at it with Light Tower, what's kind of the ratio to how many nodes were on a DAS system versus an equivalent to you or is there something we should be looking at as we think of DAS , and also as you've been looking at DAS with the Light Tower guys, is it a replacement per tower or an alternative to to you or how is it play into the tower leasing

Yeah, the answer to your first question is very site specific, and it ranges anywhere from 3-6 nodes to replace a macro cell site. So one macro is the equivalent of three to six DAS nodes based on all the work that we've done so far. We've had a lot of conversations with carriers. In every instant, they have indicated that they would prefer a macro site to a DAS system. DAS Has found its niche in terms of places where towers can't get to. The best example is really an asset that we're picking up with Light Tower which is their flagship DAS net the work, it's the Nantucket system, it's where a substantial portion of all the wireless on Nantucket is transported over to that system. Nantucket is not a place where you get a lot of towers built, just can't happen and that's similar to the other places where Light Tower has built these networks and that's kind of the model that we're going to pursue going Forward. It's absolutely a adjunct and ancillary to towers, it is based on everything we've seen and expect, it is not a replacement for towers.

Great. Thanks a lot. Good luck, guys.

Thank you. Our next question is from Simon Flannery with Morgan Stanley. Go ahead, please.

Okay, thanks very much. You made some interesting comments on wireless backhaul, perhaps you could provide a little bit more detail around what you're seeing and how material that is and could be for you, and on the comments about leverage, can you talk about buybacks in the context of that? You were fairly active this quarter. Is that something where we might see somewhat less activity in the second half given the focus on deleveraging? Thanks.

Kurt?

Simon, on backhaul, we're seeing carriers start to deploy more and more of their own microwave backhaul, mostly licensed spectrum that they can pick up through the government system. Some unlicensed but mostly licensed and it's very high capacity and carriers have historically had especially the old cell phone companies they had a lot of wireless backhaul. They kind of moved away from it to T1s over the years and due to the pricing of T1s getting more competitive, but now it's really had the data demand and just the capacity they need at certain sites. I mean a lot of carriers and their core say suburban network need 5, 6, 8, 10, 12, T1s just for themselves at a single site and the price point, there's a crossover point between deploying that CapEx and paying for that recurring rate on a T1 so we're seeing carrier movement toward that. You obviously seen fiber tower over the past several years deploying third party wireless backhaul services, they continue and there's others in that space as well and entering that space, and if you look at some of the stats on what or how data is going to drive the backhaul demand, it's really eye opening. It's really staggering what has to happen at these sites, and so that they don't get clogged up, and so materiality wise, it's not huge yet. It's never going to be as big as full tenant lease but we do think it's growing and we hope to, I think it's really steady growth too, and it will last for a lot of years.

Some of these microwave additions that we're seeing are adding over $1,000 per month to the existing tenant rent so it actually in specific locations is pretty nice.

I get the sense that the carriers are kind of having to scramble, that the data growth is coming in faster, more volume than they expected with things like the iPhone or laptop cards and they're really having to move fast to keep up with data demand?

Yeah, we think that's right. We think as we talk to our customers, the future wireless backhaul solutions are right at the top if not the top issue that they're all wrestling with. In terms of the deleveraging issue and the buybacks, I think it's important to note why we did the buybacks this year and last. They were a part of the convertible note offering.

We do buybacks when we do converts because we any it is the best way to maximize the execution of those transactions for the good of our shareholders. If you go back and kind of study our deals and look at the other issuances and the convert market, our deals both priced higher at closing of the announcement of those deals than they were at announcement. That's highly unusual, and that's because of the stock repurchase element that we put in there and it adds to the accretiveness of the transactions, but understand that those really were tools to maximize the capital raising transactions and while we think buybacks are really good, we think the asset growth that we're doing is great and we'll produce better accretion over time than stock buybacks which again, while good and we always can have those in our future, we prefer the opportunities that we're seeing today on the asset side. So I would not think folks should look for a lot of additional stock buybacks as we moved to end the year.

Thanks a lot.

Thank you. Our next we have Jason Armstrong with Goldman Sachs. Please go ahead.

Yeah, thanks, good morning. A couple questions. First just on the guidance raise, you sort of hit the high end this quarter. You've layered in two deals which sort of calculated a range of what they might contribute in the back end. We sort of came to it at about $11 million. Yet you moved the high end of the year up 6 million in terms of site leasing revenue so just seems like there's a little bit of a disconnect there and that number could have gone up more. Maybe a little bit more color there and then on deals you mentioned getting sole source opportunities on pretty good sized deals. You got peers out there saying that they just couldn't get there on the multiples anyways. Just wondering if you could sort of flesh out those comments a little bit more. I know you put a little bit of detail but looking for more granularity on why sellers perceive difference and your access to capital or your ability to pay a higher multiple and are willing to go sole source.

Yes, on the guidance, Jason, I think we always focus on the mid point and as we move through the year, we tend to bring the cotton up and sometimes bring the top down, and you really shouldn't focus necessarily so much on the low or the high but look at where we've moved the mid points to kind of understand where we're thinking about where the future will take us. And on the comments, I'm not sure what others we're speaking to because they really didn't have a chance to evaluate or learn anything about the two deals that I was referring to earlier in terms of sole sourcing, so I'm not quite sure to which transactions their comments were directed but our, the reason we end up getting transactions, a look at transactions that no one else does is really the history that we have in this area and the relationships that we have with the primary bankers who do most of the work representing sellers in this area, particularly the 50 to I'd say 4 or 500 tower transactions. There's a fraternity out there that we've been doing business with for 10 years. They've closed deals with everybody, they know who does their deals smoothly. They know who they trust is working with buyers, and as a result, through 10 years of extremely hard work and really focusing on developing our skills in this area, we've reached a point where folks don't want to necessarily go through the high profile auction process. They have a number in mind which if they can get to that number, they're willing to forego whatever chances an auction might produce a higher number for certainty and confidence in the counterparty and as we are able to provide people and this year was a great example of the success and the progress that we've made there.

Okay, that's helpful. Thanks, Jeff.

Thank you. We now have a question from Greg Miller with Deutsche Bank. Go ahead, please. He removed himself from queue. So we'll move on to Clayton Moran with the Stanford Group. Please go ahead.

Thank you. Couple questions. Jeff, you mentioned it was the strongest lease up quarter in years, yet it looks like you didn't raise the site leasing revenue guidance beyond the acquisitions. Can you explain why not, and then I have a couple other ones.

Yeah, I mean, when we talk about strongest lease up in years, remember we talk about leases signed. A lot of those leases don't begin hitting the financial statements until in some cases two quarters out, so what this really does is we'll see some of this in Q4 but it really sets us up for a good 2009.

Okay, and then I think it was Kurt mentioned that only three of the four national carriers have really been active. Can you at all quantify the impact if the fourth carrier were to come back and be more to normalized level, what would that do to the lease up rate?

Well, it would have a very good impact. I mean, we don't want to guess, Clay, put a number on it, but I mean if you kind of look back over history and look at site counts and what everybody does as they report it, it's pretty obvious to see it would have a good impact on the industry.

Okay. Fair enough, and then can you also just give us the tenants per tower at quarter end? Thanks.

2.5.

Okay, thank you.

Thank you. We'll go to Brett Feldman with Lehman Brothers. Go ahead, please.

Yeah, thanks for taking the question. Actually a quick follow-up to the very last one. Did you disclose a total number of actual tenants you have?

Yes, Kurt?

It was 16,851.

All right, and then I just wanted you to go back over, you talked about the impact of the residual AT&T/Cingular churn. Could you clarify the 1% same tower growth and the same 4% cash flow growth? Did that include the negative impact of the churn or was it excluded?

That was excluded.

What was it with the impact?

Probably about a point less.

Okay. And then just my last question here, there was a sizeable transaction that you guys were not involved with. I was hoping maybe you could just talk about the types of characteristics that you look for when you're looking to buy assets.

Well, you shouldn't assume that because we didn't participate in that transaction, we didn't like it. We were, as that transaction was put into the market, we were well along with our Light Tower and Opti Site transactions and also that particular transaction I'm pretty sure aware of the one you're referring together was all cash and it would have put our leverage position above where we would have wanted to be, Brett, so for all of those reasons we took a pass, but based on our understanding, there's some well located immature assets involved there that we think could and will do pretty well over time.

Okay, great. Well thank you for the color.

Thank you. Our next question is from Brad Korch with Credit Suisse. Please go ahead.

Hi, good morning. I just have one last question. Most of mine have been taken. On your two acquisitions you did in the quarter, can you talk at all about the profile of those towers, the average number of tenants and what number of tenants they can support and if you would need to upgrade those at all to lease up. Thank you.

Yeah. Those two deals, the Light Tower and Opti Site deals have asset quality profiles very similar to SBA. Independent owned and operated tower companies, put their portfolios together through a combination of buying and building, built for capacity, bought for capacity, Light Tower I believe was at 2.1 and Opti Site 2.4 although those numbers were in the press releases if I misstated those, and we think that they will perform similarly to our existing portfolio in terms of lease up rate, low expense to maintain and low expense to augment.

Okay, thank you.

Little different than the TowerCo deal where we bought at a very immature stage of portfolio growth.

Thank you.

(OPERATOR INSTRUCTIONS). We'll go to Gray Powell with Wachovia.

Great. Thanks for taking the questions. Just had a few quick ones. Can you talk about the assumptions that drive the difference between the high end and low end of your guidance range for 2008 on site rental revenue? Because if I back out acquisition revenue, it looks like your implied Q4 estimates, they just appear very conservative.

Well, we model out really to the dollar, Gray, and then we assign a high and a low to that, basically to make sure from a conservative perspective that we always hit our guidance. The main drivers of what will drive lease up for the rest of the year is Q1, Q2, maybe what we're doing now but if you sign up leases really after pretty much today, they aren't going to hit the 2008 financial statements, so we continue to model a conservative rate of lease up which we beat in the second quarter, and there's certainly a chance that we could beat it going forward, but in terms of the drivers, what clearly has driven the guidance revisions this time is substantially the acquisitions. A little bit of our Q2 results, but if people are extrapolating or trying to, if you're extrapolating a conclusion that would be we're projecting lease up to decline that's absolutely wrong. We are not projecting that in the slightest.

Okay thanks. That makes a lot of sense and then if I just look at your Q3 guidance, it appears that leasing demand remains solid so I don't want to get too far into carrier specifics, but can you just talk about whether you're seeing a change in the split of demand that's being driven by new tenants versus amendments, and can you talk about if there's any change of the mix driven by emerging carriers versus the traditional Big Four?

It's been pretty stable. I mean over the last year or two, I think we've gone 20%, 19, 20% on amendments up to 30%. Obviously a lot of what we're seeing from AT&T and T-Mobile is on the amendment side. What we're seeing for most of the others is more on the new lease side. We had a big new lease quarter in Q2 which is the reason why we were at the low end on the amendment side, although amendments were still very good, new leases were just very very good. So I think as you try to project forward you'll see a mix of new leases and amendments from T-Mobile and AT&T. Similar with Verizon, although they tend to be more on the mix of new tenant leases, and obviously when we get to Clearwire and a reinvigoration of Sprint, Clearwire will be more in the new lease side, Sprint should be a mix of both and most of Metro and Leap at this point is all new leases.

Okay, and that just brings me to my last question. I know that the Clearwire Sprint deal hasn't closed yet. Have you had much preliminary discussions with them, and then you kind of mentioned, how should we think about it next year? Is Clearwire going to be a simple augmentation in cases where Sprint already is on the tower or will they be treated as a brand new tenant paying the full rent?

Yeah, that's unclear yet. I think from a legal separation they will be written as new tenancies depending on how much additional equipment is able to be shared will drive the rate and that's still being worked out at this point, but there's a lot of action going on now, a lot of activity, a lot of preliminary discussions. We think when the merger closes, there's going to be a ton of business to be done but I don't know that any of it will show up in our 2008 financial results.

Okay. Thank you very much.

Thanks Gray.

Thank you. Next we have Jonathan Schildkraut with Jefferies. Please go ahead.

Thanks for taking the questions. Most of them have been pretty well blanketed here, but I would like to see if you could give us some commentary on international markets. It seems like you're scaling up very well in the United States. All of your focus has been here, as you start to approach more than 8,000 towers, would you just continue to focus on the United States or would you also look to Markets outside? Thanks.

Yeah, no, we will ultimately look to Markets outside the US. Our corporate goal, we believe the business model can be taken outside the US. Obviously we'll be careful about where we go and what we do and look at risk adjusted returns and make sure that everything is consistent with maximizing equity free cash flow per share growth, but it is something that over time, you should assume that we will be evaluating.

Great. One final question. In the footnotes around your guidance, you indicated that certain acquisition related costs, which are currently capitalizing will have to be expensed beginning in 2009. Obviously this is a big year for acquisitions, but order of magnitude, how should we think about the EBITDA impact for '09 based on this change of accounting?

Well, we will in a line item in our income statement will be labeled specifically as acquisition-related expenses and we will back that out of our definition of adjusted EBITDA and it will be right there for people to see. The order of magnitude for the first six months of the year was about $6 million.

Thank you very much for taking the questions.

Thank you. And Mr. Stoops, I'll turn it back to you for closing remarks.

Great, Kathy. Well thanks everyone for tuning in and we've got a lot of closing and asset acquisitions between now and our next call and we look forward to reporting our progress then. Thanks.

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