SBA Communications Corp (SBAC) 2008 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to SBA fourth quarter results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. (Operator Instructions) As a reminder, today's conference is being recorded.

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

Thank you for joining us this morning for the SBA's fourth 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 Brendan Cavanagh, 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 2009 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 in our SEC filings, particularly those set forth in our former 10-K for the fiscal year ended 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 statement we may make. Our statements are as of today, February 27, 2009, 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 has been posted on our website at www.sbasite.com. Brendan, will you comment on the fourth quarter results?

Thanks, Pam. Good morning. As you saw from our press release last night, our fourth quarter financial results were excellent and we exceed the mid-point or were above the high end of our guidance for site leasing revenues, site development revenues, tower cash flow and adjusted EBITDA and equity free cash flow. Total revenues were $134.4 million, up 23.4% over the year earlier period. Site leasing revenues for the fourth quarter were $111.9 million, or a 32.1% increase over the fourth quarter of 2007. This leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $85.1 million. Site leasing contributed 96.9% of our total segment operating profit in the fourth quarter.

Tower Cash Flow for the fourth quarter of 2008 was $85.9 million, or a 35.9% increase over the year earlier period. Tower Cash Flow margin was 78.2%, up 170 basis points over the year earlier period. Our services revenues were $22.5 million, compared to $24.2 million, in the year earlier period or a 6.9% decrease. Services segment operating profit was $2.8 million in the fourth quarter of 2008, compared to $3 million in the fourth quarter of 2007. Services segment operating profit margins were 12.2% in the fourth quarter of 2008, compared to 12.5% in the year earlier period. Kurt will discuss services in more detail shortly.

SG&A expenses for the fourth was were $13.3 million, including non-cash compensation charges of $1.5 million and a one-time pension settlement expense of $600,000 related to the termination of the AAT pension plan. This compares to SG&A expense of $11.9 million in the year earlier period, including non-cash compensation charges of $1.4 million. Other expenses for the fourth quarter included an other-than-temporary impairment charge of $7.8 million related to certain option rate securities we held at December 31st, 2008. Those securities have now been written down to less than $1 million. Net income during the fourth quarter was $2.7 million, compared to a net loss of $28.9 million in the year earlier period. Net income for the fourth quarter of 2008 includes a $32 million gain on the early extinguishment of our debt net of write-off of deferred financing fees. Net income per share for the fourth quarter was $0.02, compared to a net loss per share of $0.27 in the year earlier period. Weighted average shares outstanding for the quarter were $116.5 million.

Adjusted EBITDA was $77.3 million in the fourth quarter of 2008 or a 37.8% increase over the year earlier period. Adjusted EBITDA margin was 58.4%, 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 fourth quarter of 2008 was $47 million, a 41.5% increase over the year earlier period. Equity free cash flow per share for the fourth quarter of 2008 was $0.40 for a 29% increase over the year earlier period. In the fourth quarter, we acquired 350 towers and five distributed antenna systems or DAS networks. We also built 25 towers and completed construction on one additional DAS network, ending the quarter with 7,854 towers owned and the rights to manage approximately 4,200 additional communication sites.

Total cash capital expenditures for the fourth quarter of 2008 were $251.5 million, consisting of $1.6 million of nondiscretionary cash capital expenditures such as tower maintenance and general corporate CapEx and $249.9 million of discretionary cash capital expenditures. Discretionary cash CapEx includes $242.1 million incurred in connection with acquisitions and earn-outs, $6 million in new tower construction and $1.8 million for augmentations and tower upgrades. With respect to the land underneath our towers, we spent an aggregate of $7.9 million to buy land and easements and to extend ground lease terms. As of year end, we own or control for more than 50 years the land underneath 26% of our towers. At this point, I'll turn things over to Pam that'll provide an update on liquidity position and balance sheet.

SBA ended the fourth quarter with $1.49 billion of commercial mortgage-backed pass-through certificates outstanding, $138.1 million of 0.375% Convertible Senior Notes, $550 million of 1.875% Convertible Senior Notes, $230.6 million outstanding on our $285 million senior facility, $149 million principal balance outstanding on our Optasite credit facility, and $117.6 million of cash, short-term investments or short-term restricted cash resulting in net debt of $2.4 billion. During the fourth quarter of 2008, we repurchased and privately negotiated in open market transactions, $211.9 million of our 0.375% convertible notes and $65.5 million of our CMBS notes for $147.8 million in cash and 3.4 million shares of our Class A common stock. During the quarter, we issued 300,000 shares in connection with acquisitions and our share count at year-end was 117.5 million.

The Company's net debt to Annualized Adjusted EBITDA leverage ratio was 7.9x as of December 31, 2008. Our net secured debt to Annualized Adjusted EBITDA leverage ratio was 5.7x. Our option rate securities are not included in our calculation of liquidity or net debt. As of quarter end, 85% of our debt was fixed rate and the weighted average cash coupon on all of our debt was 4.3% per year. Our fourth quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was a very strong 2.7x. Subsequent to December 31st, 2008, we have repurchased an additional $34 million of our 0.375% convertible notes and $7.6 million of CMBS notes for $25.3 million in cash and approximately 600,000 shares of our common stock. As of today, we have our $104.2 million of our 0.375% Convertible Senior Notes outstanding, and $1.48 billion of CMBS notes outstanding. I'll now turn it over to Kurt to discuss some of our operational results.

Thanks, Pam and good morning. We were very pleased to have finished 2008 with such a strong fourth quarter. We said on our last call that the fourth quarter should be similar to the third quarter, which was a very good quarter but the fourth quarter turned out to be even more robust than originally anticipated. As Brendan outlined, we performed well in all aspects of our business as our customers remain busy. We enjoyed our highest ever organic lease subquarter in terms of dollars added, with high volume contributions from both new tenant leases and amendments to existing leases. We bought and built a lot of high quality towers, we had a good services quarter and we completed a new Boston-area DAS network on time, and on budget.

Specifically, for our fourth quarter results our gross tower leasing revenues signed in the quarter was very good on both the gross and per tower basis. Activity was highest from T-Mobile and AT&T as they expanded to new locations and also continued with their 3G UTMS overlays. Other leasing activity was diversified among Verizon, Metro, Leap and other regional carriers, along with activity from other private and governmental entities deploying specialty systems. We are also seeing the early stages of other deployments from recent spectrum winners as well as the beginnings of the clear wire ramp-up. 79% of our new revenue signed came from new tenant leases, while 21% came from amendments to existing leases which, as we have said before, we feel is a very healthy mix.

For the quarter, year-over-year same tower cash revenue growth and same tower cash flow growth was 10% and 13% respectively. Rental rates have stayed firm and our average cash basis rents across all of our 19,344 tenants at quarter end increased to $1,886 per month. We bought 350 towers in the quarter, including the culmination of our Light Tower deal on October 20th. We built another 25 towers during the quarter and finished the year having built a total of 85, approximately 40% more than each of the previous two years. We have a strong backlog of good new build prospects, and we're confident we will build as many towers in 2009 as we did in 2008.

Our structural augmentation CapEx remains very low on a per-tower basis and our teams are very focused right now on refining our operating expenses after a big year of outset growth. We feel very confident in our ability to increase our tower cash flow margins through optimization of utilities, repairs and maintenance costs, on a tower-by-tower basis, while continuing to provide the highest quality leasing service in the industry. The services side of our business had the best quarter of the year in the fourth quarter, achieving substantially higher revenues and profits than in any of the three previous quarters. The driving factors in the much improved services quarter were our success in diversifying our backlog after Sprint's pullback in early 2008 and the traditional year-end push by several carriers to hit their targets. We expect a steadier 2009 in this line of business, although it does remain very competitive.

Overall, we feel good about meeting our goals for 2009. The forecast for total carrier deployments are flat to up with 2008, we finished 2008 with a big quarter which will help define 2009 and the continued evolution in total growth of wireless, especially wireless data, gives us confidence that the tower business as great segment of the wireless industry to be in right now and for the future. With that, I'll now turn it over to Jeff.

Thanks, Kurt and good morning, everyone. As you have heard and can see in our numbers, the fourth quarter was another strong quarter for us. I'm going to spend the first part of my comments on our operational performance. Operationally, we had a great year and we believe our future continues to look very bright. I'll finish with some comments on the credit markets on our refinancing plans.

Operationally, our backlog remains solid. Our first quarter lease-up is on plan and all the other data points we see indicates leasing demand will stay strong through 2009 and beyond. The macro environment for wireless remains very favorable. Our wireless customers have resulted their fourth quarter results and they were generally very strong. Wireless minutes of use are up wireless data use is up even more and carriers are seeing improved economics from data use. Wireless minutes of use are displacing wire-line minutes.

Even though times are tough, wireless results in the current economy certainly argue that wireless has become a staple and no longer a discretionary or luxury item. Because of the favorable demand drivers our customers continue to make significant additional investment in their networks. We believe our customers have just begun to enjoy the growth that will come from mobile wireless data services. The amount of investment dollars flowing into the development of contents and mobile applications for data service is already large, growing fast and expected to drive material additional demand for 3G and 4G services.

Two positive developments in the 4G area have occurred since our last call. Clearwire has begun to build out its networks and Verizon has announced an accelerated build-out schedule for LTD, with activity commencing as early as this year. New market entrants such as Leap, Metro, Cox and a few smaller players, have announced plans for significant network investment over the next couple of years. We believe the new federal stimulus legislation will also provide us with some additional opportunities for growth that we might not otherwise have had. All of this adds up to a very favorable demand environment for SBA for the foreseeable future, notwithstanding what we know will be tough economic times in general. We continue to believe that lease-ups on a revenue add per tower basis will be is a good or better in 2009 as it was in 2008.

Operationally, we continue to execute very well. Our team put up great results last year. We grew our portfolio 26% without increasing year-over-year leverage. All the acquisitions we did last year are fully integrated and performing well. We have entered the DAS business and already have some growth to show for it. We led the industry by a wide margin in leasing growth, adjusted EBITDA growth, equity free cash flow growth and equity free cash flow per share growth. We materially expanded our tower cash flow and adjusted EBITDA margins, and our SG&A as a percentage of revenue continued to decline. With this type of operational performance and our business model, we are very well-positioned to weather an rough economy and still produce materially increasing cash flows in 2009 and beyond.

As you can see from our 2009 outlook, we are projecting materially higher and for us, record amounts of equity free cash flow next year. We will see a full year of results from the towers we acquired in 2008 and we expect organic leasing growth to once again be strong. The amount of CapEx we spend on augmentations and maintenance is a fraction of what our peers spend on a per tower basis. With reduced plans for discretionary cash capital spending and materially higher adjusted EBITDA, we expect to reduce leverage materially by the end of 2009. Our outlook implies we will end 2009 with net debt to quarterly Annualized Adjusted EBITDA in the mid 6x range. That puts us in excellent shape for our 2010 and 2011 refinancing obligations. Operationally, we ended the year strong and as a substantial company capable of and well-positioned for additional growth. I expect us to continue to excel operationally.

Now let's talk about with what has been happening in the credit markets. The fourth quarter of last year was a time when the perception by many was that no credit was ever going to be available again. For a company like SBA that uses leverage to enhance shareholder returns, it was a difficult environment. Our great operational performance was not enough to offset concerns over whether or not we could refinance at all, let alone at what price. As a result, our stock price suffered and changes were necessary to maximize shareholder value. We understood the need to change our priorities and we did so quickly and clearly. In the fourth quarter, our priority was shifted to reducing leverage and refinancing risk rather than portfolio growth. While I'm not happy about what happened to our stock price in the fourth quarter, I am very proud of the speed and decisiveness with which we addressed the rapidly changing credit market situation. We immediately slowed our discretionary cash spending on assets which you can see in our fourth quarter results as well as in our 2009 outlook. We will remain in the mode of materially reduced discretionary cash spending pending refinancing some of our debt.

In the fourth quarter, we seized on the opportunity to repurchase our debt at significant discounts and get ahead of our refinancing obligations. Since we never doubted the certainty of our future cash flows, we had the confidence to jump into the market and repurchase some of our debt at what we think were very favorable prices. Since October, we have retired $319 million of our 2010 convertible notes and our 2005 and 2006 CMBS debt in the aggregate for $173 million in cash and 4 million shares of our stock. That equates 17% of the original principal amounts of that debt, a net debt reduction of $145 million and annual cash interest savings of $5.6 million. That's real value for our shareholders. We intend to continue to repurchase our 2010, 2011 maturities where we can do so at discounts which we think are appropriate.

In my opinion, the variability in our stock price continues to be all about the credit markets and our future cost of debt. Since December, the high yield and some other debt markets have improved some financings are getting done and we have seen our stock price recover somewhat. Many companies are dealing with both the credit crutch and with operational performance issues brought on by the tough economy. For SBA, thankfully, it's not about operations. Our future operational prospects remain bright. For us it's about credit, and I believe shareholder appreciation for the foreseeable future will be dictated primarily by our success with refinancing and capital structure. Knowing that, our top priority is to refinance our debt comfortably ahead of our maturity dates on the best terms possible and I'm very confident about our prospects.

On our last call, we discussed plans around refinancing. We provided detailed plans then which remain the same and we can review with any of you, if you'd like, offline. We have a lot of flexibility given the fact that we have separated our assets for financing purposes into several different structures which can be financed together or separately. We have multiple paths we can take to comfortably refinance our 2010 and 2011 maturities. We will be opportunistic as we have always been in the capital markets.

Since the beginning of this year, we have been inundated with financing proposals to access multiple credit markets. We're ready to take advantage of the right opportunity, but we also want to continue to be thoughtful and patient. In just the last two months, spreads have tightened considerably and we would pay materially less to finance today than would have been the case in early January. While I don't want to get too far ahead of myself, I do believe in today's market that would could refinance at all-in fixed rates below 10% and that we will successfully refinance our CMBS ahead of the anticipated repayment dates and avoid any cash trap or step-up in interest rate. The market is becoming more differentiating and is disproportionately rewarding those companies that can provide predictable results at a certain future. SBA is one of those companies and we believe our current and future performance will continue to positively differentiate us with financing sources.

Having said all of that, however, we do not intends to wait too long and it is our goal to get a material financing or financings done in 2009. That result would not only remove any lingering concerns about refinancing costs, but just as importantly, would provide us with additional growth capital. We are committed to resume material portfolio growth at the appropriate time given our historical success and our operational optimism for the future. We see and we believe we will continue to see a number of opportunities for investment that we believe will produce excellent returns for our shareholders, even if our future debt costs are up a little bit. We are very good at acquiring and integrating towers into our portfolio. Our towers have performed very well and we have produced material shareholder value with our growth activities. We believe we will do the same in the future. We expect our operational performance to remain sharp and we are confident we can resume material portfolio growth on short notice if presented with the right opportunities. We are very bid about our future.

As always, I want to close by thanking our employees and customers. We accomplished a lot in 2008 and we expect to do the same in 2009. We have a great business that performs well in both good economies and bad and we look forward to reporting future results. Gary, at this time we'll open it up for questions.

(Operator Instructions). Our first question comes from Jonathan Atkin from RBC Capital Markets. Please go ahead.

Yes, I'm interested in investments this year with respect to tuck-in acquisitions. I assume that's not a priority for you relative to other years but also the DAS activity that you reference in the fourth quarter, organic growth versus buying other systems. What are your thoughts around that?

Until we accomplish some refinancing, Jonathan, we are going to be very tight on discretionary cash spending as we've outlined in our outlook. We would focus primarily on organic new tower builds and new DAS networks and at this point, we really have not guided to any cash acquisitions of either towers or new DAS networks, but with we are still interested within the outlook we've given for the reduced cash expenditures of growing both through new builds and new DAS networks and we think we'll be able to do that to some degree.

In each case, with organic growth, are you looking for two tenants from the get-go or one tenant committed to very clear visibility toward the second tenant? What is your thought on that?

The latter. It's been our experience, that we get much better results and much better use of our capital if we can get out there with one solid tenant and a clear path to see the second and we've been very pleased how that's played out over time, and that's what we'll continue to do.

On the M&A front, perhaps involving smaller companies, are you seeing or expecting that there might be private to private transactions or perhaps transactions involving carrier build towers?

Even though we're not in the cash market today, we are looking at everything and watching and there's been a few things that have occurred, there haven't been much. We haven't missed out on anything material and don't think we will. But I do think there will be a steady stream of opportunities in that area, and that's one of the reasons why we want to move forward and refinance the company on the right terms and get us back on the growth path that we have been on over the years. And I think we will, I don't know if it'll be earlier in '09 or when exactly. But there are opportunities out there, and I think they're going to be good ones. I think we're starting to see some seller price expectations come down in light of the market and we're pretty confident that there's going to be opportunities out there that will produce very good shareholder returns for us over time.

Again, with respect to ground purchases or ground lease extensions, are seller expectations coming in a bit or --

They are. We've actually ratcheted down what we are prepared to pay, and we're in the process of sorting that out with sellers. Some are saying no thanks, that's not what you were prepared to offer me last year, and we're saying, fine, that's all we are going to offer you this year and we're doing okay there. It's a process of adjusting seller expectations, but it is happening.

Great. Thank you very much.

Thank you. And our next question comes from Ric Prentiss from Raymond James. Please go ahead.

Good morning,.

Good morning.

Jeff, I want to follow up on the capital market items that you and Pam were talking about. As you look at your ability to buy some of your existing debt in the marketplace out there, talk to us a little bit about what you're seeing as January came into February as far as any discounts versus par, how the flow of sellers finding you versus you finding them has played out?

It's actually over the last couple months it's been fascinating because in the kind of the peak of the October, November pressure on the hedge funds, particularly the convertible arbitrage hedge funds, that's when we were getting calls daily and multiple calls daily from those holders looking to sell their converts back to us. That has ebbed a little bit. That pressure seems to be off those investors, you know, maybe the selling is all done or they don't have anything left to sell, I'm not quite sure which. But as the debt markets reopened, Ric, there was kind of a steady improvement in price which means, the best discounts we captured were in the probably November time frame, maybe early December, and since then the discounts have been shrinking a little bit as the credit markets have improved and people are bidding up in general debt instruments. I think we'll still capture discounts to par. I'm not holding out hope that we'll capture the same discounts that we got in November.

Probably actually is a good indicator that the rates you might be able to get in taking out new debt should be coming down as well then.

Well, it is. We got our best deals on the converts when our stocks were at $9 a share and I'm not really looking forward to that, so that's absolutely right. What we took advantage of was the silver lining but it was really a silver lining in a very cloudy environment and I'm just as happy to have all our debt prices recover because it's exactly as you say. It means the capital will be flowing and available to us at better prices.

As you look at your options and you mentioned multiple financing proposals, all kinds of different type of structures, can you let us know what some of those varied different structures have been, how senior or junior on the balance sheet might they be and another question associated with that, how much cash do you want to keep on your balance sheet?

The structures are literally all over the board. They could be at the hold-co level. They could be at an interim level between the companies that own the towers and our holding company or they could be at the asset ownership level. So we have at least three different types of levels at which we can offer debt and we have a variety of markets. We haven't been in the high yield market in a couple years, but we're watching things there. Obviously, we've been in the convert market. There is some possibility although, I wouldn't run out and get too excited about this just yet, that there may be additional securitized debt available at least on the AAA level maybe down to the AA level, so we're watching anything and everything and looking to make the best decisions for us over the long term. One thing I will tell you that we're pretty careful about and although we haven't rushed in so far, all though we could have, whatever we do, we are going to be looking for an instrument of at least five years or longer, maybe much longer, and we're going to be living with that for a while so we want to make sure we do the right thing.

As far as cash on the balance sheet, what do you think the right kind of run the business levels are?

Well, to run the business without any material additional cash expenditures beyond your equity free cash flow, $50 million. I mean, if you go back over time, the cash needs in the business other than for discretionary spending are really low. I'm sure we could do it for less than $50 million but I don't think we would.

Great, okay, thanks, guys.

Thank you. And our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.

Thank you very much. Good morning. I wanted to follow up on a couple things you said on the call. I think you said that your CapEx on augmentation and maintenance was lower than your peers. I just wanted to understand a little bit more about what's driving that and how you're able to get that advantage. And you talked about the new build activity. If we could get some more color on that, is that people building out in new footprint or the Coxs of the world or is that a consequence of 3G that you're acquiring more density and cell sites for existing carriers, perhaps a little more color about what kind of things are driving the new build?

I'm take the first and I'll let Kurt take the second. Simon, the difference between our portfolio and how it translates into lower maintenance and augmentation and CapEx all stems from the fact that our towers were either built by us or others like us and a very small percentage of our towers were originally built by carriers for their own network needs and there's just a lot of differences that go with that distinction including original structural capacities, the age of the towers. We just have a newer, more robust physical plant that allows us to take on a lot of additional tenant growth with very little additional capital required and it all stems from who originated the assets and how they were originated and for what original purpose. Kurt?

Simon, on the new builds, most of our anchor tenants are from the big four. We do some with the other regional carriers and some with the new carriers as well. But it's not really skewed toward the newer carriers, and if we do do them for the new carriers, it's not in a situation where the tower next door is full because that obviously doesn't lead us to a tower with good future growth prospects. We've been very selective with these and they're on in locations where we see a path of two, three, four tenants over a couple year time period. Some of the deals are structured where it's a build to suit deal, where it's more official with the carrier, and some are what we call strategic sites, where we may have a location and several tenants are interested initially. And the sites are a mix of suburban and highway and small town sites. It's a little bit of everything that we've got going on but it's been nice. We've spent about five years rebuilding this program. We've got the backlog up to a good point. We've been able to be selective, and we're hitting some good volumes now but it's all good quality sites that are leasing up well so we're pretty happy with it.

And a lot of this driven by the need to get a better 3G signal into some of these places?

That's some of it and some of it is just signal growth out on the edges of their network or filling in holes in the middle. It's a little bit of everything but it's definitely not just 3G.

Great, thank you.

Thank you. And our next comes from Mike McCormack of JPMorgan. Please go ahead. Is your phone on mute? Well, we will move along to the line of Jonathan Schildkraut of Jefferies.

Great, thank you for taking the questions. Just two here. In terms of the large acquisitions that you did at the end of last year can you reminds us if there are any cash earn-out provisions that we should be looking at? And, secondly, if I have it correctly, I think there's a little over $1 billion left in a facility that you guys could use for acquisitions and I just wanted to get that right number as well as get a sense as to when that facility closes? Thank you.

No earn-outs on our three big deals and on the facility, Jonathan, we actually had $100 million left but when Lehman went bankrupt, we lost $50 million of that so we have about $50 million, $55 million left on that facility which we could use for acquisitions, but we're not. It's not in our plan even though we have the liquidity because it's counter to our current goal of reducing leverage heading into refinancing but that facility matures in November of 2010.

Great. No, I understand, and you have laid out fairly clearly what your priorities are in terms of cash flow but trying to get a sense on what the dry powder is if the overall environment improves and some of your priorities change. Thank you again.

Thank you. (Operator Instructions) And our next question comes from Gary Powell from Wachovia. Please go ahead.

Good morning. Thanks for taking the questions. I just had a few quick ones here. In terms of demand, do you think that demand in 2009 is more back-end loaded or spread out evenly throughout the year and do you expect growth to be driven more by augmentations or new tenants?

Gray, what you've heard from the other guys is similar what we're seeing, probably a 40, 60 year, nothing too severe on the back-end loading so that's pretty consistent. I don't expect our augmentation mix to change a whole lot. We've been running I think as high as 70%-30% and as slow as 80%-20%. I would expect it to probably balance somewhere between there all year. The augmentations are nice but we love new leases too, so I don't really see a huge mix change there.

The devil's in the details with that question, Gray, and Clearwire, is that a new lease or is it an amendment to an existing Sprint lease? I mean, there'll be some of both. Verizon, LTE, if they begin to do business this year, is that a brand new tenancy because it probably will be a brand new lease and not folded into an existing lease. We haven't fully baked all the answers to all those questions because we haven't seen exactly the facts that we'll be addressing. The answers will be shaped as we go forward. I'm not sure it matters a whole lot because it's all good revenue but it will make a difference.

That makes sense. How should we think of the lease-up rates on the towers that you acquired in 2008 versus SBAC's core portfolio? Are you seeing any difference in demand there in 2009?

It seems to be our demand is pretty common across the portfolio.

The last question. This one might be tough to answer. But you mentioned that if you were to refinance today you could get rates below 10%. If you were to refinance debt and current conditions but leverage closer to, say, 6.5x or 6x net debt-to-EBITDA, can you ballpark what the rate would be or at least kind of quantify what the benefit of delevering by another turn, turn and a half would be?

Well, I don't want to answer that question because the answer will be lower. If you go back to an earlier question as to what point you structure your debt at in our overall corporate structure. If we issue additional secured debt, that would be cheaper than what we could issue an unsecured high yield deal at the holding company level. So--and that's why we're taking our time to work through this because there will be real interest rate differences depending on where we structure that facility and it's possible, even in today's market, that a secured deal could come below 8%.

Okay. Fair enough. That's good to know. Thank you very much.

Thank you. And our next question goes to Ric Prentiss of Raymond James. Please go ahead.

Everybody's tired after yesterday but I had a few follow-ups. Jeff, you mentioned Clearwire. Previous callers thought Clearwire might be worth $1.5 million worth of revenue for you this year. Now that they're funded, are you still thinking $1.5 million? What are you thinking on Clearwire?

Probably the same.

Okay, and with your services business going pretty well, do you have any insight into LTE as far as what's going to be involved with a LTE build-out? We keep getting mixed signals on exactly how much equipment, what size of equipment might come in? Any insight on LTE and what it might mean? What it might mean?

This is Kurt. Nothing definitive just yet but I don't see this being incredibly different than a UMTS overlay. It's a different technology. It's a different frequency and you hear reports of bigger antennas which with the frequency should generally be true. I think they will obviously try to take as much advantage of their existing leases as they can but those are limited. Depending on what--how much stakes they leased for in the past and they're trying to do a lot of different things out there with 800 MHz, 1900 MHz, now 700 MHz and 3G and 4G technology. I don't foresee it being a whole lot different, and we'll try to work with them where we can and in some cases they're going to need to acquire some more space. So I think it is substantially different than when Sprint and Verizon went to EV-DO and Rev A, that was more unseen for us but this is a new technology.

And it's clearly going to require new equipment. But I mean, the bottom line answer here, Ric, it's still not to the stage yet where we've actually gotten a specific specs for us to react to.

And the trials will take a while and before real revenue effect as far as scale is probably '10 to '11, probably?

Yes.

Final question, lost in the American Tower's call the other day, they talked about generators, spending some CapEx on generators. Update us a little bit on what you're seeing as far as demand for generators, kind of that commitment to keeping cell sites on-air and microwave backlog? You're starting to see some of that accelerate on your sites.

We see all those things and they have all been sources of incremental positive revenue for us. We had a couple years back, we trialed our own program of going out and buying generators and holding them out to the carriers and that didn't work that well, probably because we did it in Ohio. It wasn't that smart but even if you do it in the coastal areas, really it's hard to get an existing carrier to kind of buy into that if they're not of their own initiative. So what we've done, is we just hold ourselves open to facilitate their putting generators on the property, and in some cases, we have multiple generators that are paid for and incremental lease revenue added for the additional footprint in various sites. So we've generally tried to stay away from getting into equipment provisioning where there could be obsolescence. We're happy with the way it's going for us. We are getting in a lot of added generator revenue but we're not buying and maintaining generators and holding out there for people to tie into it. There have been some recent changes in the whole back-up power situation. I don't think carriers are under the same regulatory pressure they were. I think those regulations have got struck down. The carriers are still interested in the topic. They don't want the adverse publicity of downtime in the event of storms and things like that. I think we'll continue to see incremental revenue from that source for years to come and we're starting to see incrementally more on a year-over-year basis revenue from wireless back haul. But it's still tiny in comparison to just adding basic antennas for carriers looking for better capacity.

Great, thanks, guy.

Thank you. (Operator Instructions) And we go to the line of Mike McCormack of JPMorgan, please go ahead.

This is for Manish Jain for Mike McCormack How are you guys doing?

Good, how are you?

Just a couple of quick questions. You mentioned the leasing activity--that 79% is from new leases and 21% from amendments. Wondering how you expect that ratio to play out throughout the year? And regarding the broadband stimulus plan, wondering you guys think given the geographic position of your towers you may have some advantage over some of your other tower peers in that respect?

Manish, this is Kurt. On the leases versus amendments, we expect that spread to stay fairly similar, probably 20% to 30% from amendments, which is fine. I don't expect it really to go lower because there's a lot of augmentation activity out there, but we're also seeing a lot of new leases come in so I think a 20% to 30% range is going to be consistent again. On the potential stimulus spending out there, there have been specific references to tower companies being eligible for some of the money. The money will be coming through the Department of Agriculture RUS funding, which has been an existing program for years and it will get some increased funding, and they have a good set of processes in place to receive that. Some of it will be coming in through the NTIA which those processes are yet to be defined. We have had thoughts of if we have some access to some low priced money to--we have already reached out and started to chat with some of the carriers, if they could also access some of that for their equipment. Would it make sense in some of these outer areas? Does it model out to build sites which we may not otherwise build? That's a possibility. Obviously, with our existing portfolio, I don't think it really--I guess it could help if the carriers can get some of that funding for their equipment purchases, we may see some incremental lease-up in those areas.

Yes, we look at it as an incremental positive, Manish, but it hasn't caused us to rethink our outlook or materially change our views about the future.

Great, thank you.

Thank you. We have no more questions in queue. Please continue.

Great. We appreciate everybody joining us today as we wrap up our 2008 results and we look forward to our first 2009 report which will be sometime in early May. Thanks.

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