SBA Communications Corp (SBAC) 2009 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the SBA second 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 conference is being recorded. I would now like to turn the conference over to our host, Pam Kline, VP of Capital Markets. Please go ahead.

Thank you for joining us this morning for SBA's second quarter 2009 earnings conference call. Here with me today are Jeff Stoops, our President and CEO, Kurt Bagwell, our Chief Operating Officer and Brendon 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 and our SEC filings. Particularly, those set forth in our Form 10-K for the fiscal year ended December 31, 2008 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 statements we may make. Our statements are as of today, July 29, 2009, and we have no obligation to update any forward-looking statements 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, www.sbasite.com. Brendan, would you comment on our second quarter results?

Thanks, Pam. Good morning. As you saw from our press release last night, our second quarter financial results were very good. We exceeded the midpoint of our guidance for site leasing revenues and equity free cash flow. We were above the high end of our guidance for tower cash flow and adjusted EBITDA.

Total revenues were $136.2 million, up 21.7% over the year earlier period. Site leasing revenues for the second quarter were $117.3 million or a 25.2% increase over the second quarter of 2008. This leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $89.8 million or an increase of 26.3% over the second quarter of 2008. Site leasing contributed 97.3% of our total segment operating profit in the quarter -- in the second quarter. Tower cash flow for the second quarter of 2009 was $91.3 million or a 27.2% increase over the year earlier period. Tower cash flow margin was 78.9%, up 80 basis points over the year earlier period despite the fact that we added a number of lower margin towers during the period. Our services revenues were $18.9 million compared to $18.2 million in the year earlier period or a 3.5% increase. Services segment operating profit was $2.5 million in the second quarter of 2009 compared to $1.4 million in the second quarter of 2008. Services segment operating profit margins were 13.2% in the second quarter of 2009 compared to 7.9% in the year earlier period. Kurt will discuss services in more detail shortly.

SG&A expenses for the second quarter were $13.2 million including non-cash compensation charges of $2.3 million. Acquisition related expenses were $1.3 million during the quarter, a large portion of which were from our acquisition of a Canadian tower company. Acquisition related expenses were capitalized in all periods prior to 2009. SG&A expense was $12.5 million in the year earlier period including non-cash compensation charges of $2.4 million. Net loss during the second quarter was $29.4 million compared to a net loss of $26.2 million in the year earlier period. Net loss for the second quarter of 2009 included a $2.4 million gain on the early extinguishment of our debt net of the writeoff of deferred financing fees. Net loss per share for the second quarter was $0.25 compared to a net loss per share of $0.24 in the year earlier period. Weighted average shares outstanding for the quarter were $117.1 million. Adjusted EBITDA was $83.3 million in the second quarter of 2009 or a 31.1% increase over the year earlier period. Adjusted EBITDA margin was 61.9%, up from 57.7% 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 second quarter of 2009 was $51 million, a 34.3% increase over the year earlier period. Equity free cash flow per share for the second quarter of 2009 was $0.44 or a 25.7% increase over the year earlier period.

In the second quarter, we acquired 95 towers, including 52 in Canada. We also built 25 towers ending the quarter with 8,004 towers owned and the rights to manage approximately 5,000 additional communications sites. Total cash capital expenditures for the second quarter of 2009 were $39.5 million, consisting of $2.2 million of nondiscretionary cash capital expenditures such as tower maintenance and general corporate CapEx and $37.3 million of discretionary cash capital expenditures. Discretionary cash CapEx includes $25.4 million incurred in connection with tower acquisitions, land acquisitions and acquisition earn outs, $9.4 million in new tower construction and $2.5 million for augmentations of tower upgrades. With respect to the land underneath our towers, we spent in aggregate of $3.6 million in cash and stock to buy land and easements and to extend ground lease terms. As of June 30, 2009, we own or control for more than 50 years the land underneath 27% of our towers. At this point, I will turn things over to Pam who will provide an update on our liquidity position and balance sheet.

Thanks, Brendan. SBA ended the second quarter with $2.7 billion of total debt. We had cash and cash equivalents, short term investments and sort-term restricted cash of $214.8 million, resulting in net debt of $2.5 billion. During the second quarter of 2009, we repurchased through open market transactions $51.5 million of our 0.375% convertible notes and $21.2 million of our CMBS notes for $71.0 million in cash. During the quarter, we issued approximately 368,000 shares in connection with acquisitions, and our share count at quarter end was $116.6 million. At June 30, 2009, our net debt to annualized adjusted EBITDA leverage ratio was 7.4 times. At June 30, 2009 our net secured debt to annualized adjusted EBITDA leverage ratio was 4.2 times. Our second quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was a very strong 2.8 times. Subsequent to June 30, 2009, we repurchased in open market transactions an additional $4 million of our 0.375% convertible senior notes and $38.4 million of our CMBS notes for $42.2 million in cash.

As previously reported, in April we issued $500 million of 4% convertible senior notes due 2014. The notes were issued with an initial conversion price of $30.38. Gross proceeds from the offering were $488.2 million, and we used $50 million of those proceeds to repurchase 2.016 million shares of our common stock and used $61.6 million of the net proceeds and the proceeds of a warrant we sold concurrently to purchase a hedge which effectively increases the conversion price of the notes to $44.64 per share. As you may have seen in last week's press release, we recently completed a $750 million senior notes offering. We issued $375 million of unsecured senior notes due 2016 at 99.33% of face value with an interest rate of 8% and $375 million of unsecured senior notes due 2019 at 99.152% of face value with an interest rate of 8.25%. The net proceeds of $728 million have been or will be used to repay the 2005 CMBS notes in associated prepayment consideration, to repay our senior credit facility, to repay our Optisite credit facility which will also be terminated and to repurchase or repay at maturity the outstanding 0.375% convertible notes. Any proceeds remaining will be used for general corporate purposes.

As adjusted to reflect these transactions, all of our funded debt is now fixed rate with a blended average annual interest rate of 5.4%. We have done a lot in the capital markets recently, and to help you get a better understanding of our debt balances, pro forma for the recent transaction and recent debt buy backs, we have posted on our website and filed with last night's Form 8-K our debt balances and leverage ratios as adjusted to reflect these transactions. I would encourage you to take a look at the adjusted leverage ratios, particularly our net secured debt leverage ratio which is a low of 2.1 times on an as adjusted basis. I will now turn it over to Kurt to discuss some of our operational results.

Thanks, Pam, and good morning. As you have seen and heard with our numbers, Q2 was a good quarter for us and along with our solid Q1, we are half way through what we expect will be another very good year for our company. Despite the current economic conditions that we have been in for some time now, the demand for wireless services continues to be -- continues to demonstrate its staying power. Voice and data, texting and air cards, thousands of apps, blue tooth convenience, a plethora of multipurpose music, data, gaming, touch screen and voice command devices, prepaid and postpaid. No matter how you slice it or which one of these products or features is driving increased users and usage, demand is strong and clear and our tower infrastructure continues to be at the core of the networks that are providing these services. National advertising and high penetration rates require the carriers to continue to compete in all geographic areas and provide seamless technology and functionality at each transmission point. Recent carrier reports show revenue from data in the 30% range and the statistics on data usage and growth are stunning, including one carrier averaging over 1 billion text messages sent per day.

Specifically related to our second quarter results, our gross leasing revenue signed in the quarter was the second highest ever at SBA and only slightly behind our big fourth quarter of 2008. Activity continued to be the highest from AT&T and T-Mobile as they continue to deploy new cell sites and overlay their networks with 3G technology. Verizon was also active along with Metro PCS and Cricket. Clearwire is moving up nicely in our backlog of applications, and executed agreements and higher volumes are expected throughout the remainder of 2009 and 2010. We have also had good activity from system providers that directly or indirectly support governmental initiatives. We expect activity in the second half of 2009 to be modestly higher than in the first half, positioning us well for strong 2010 financial results.

In addition, we are seeing continued activity from both the carriers and third party wireless backhaul providers who are installing high capacity microwave links to connect cells to fiber rings and switching centers. In addition to microwave backhaul, we are also seeing an increase in the amount of fiber being installed at our tower sites from a variety of providers including local telcos, cable companies and non-regulated arms of utility companies. While not necessarily a big source of incremental leasing revenue for us, we feel that having access to high capacity backhaul is a technology upgrade that makes tower sites even more valuable as the preferred locations to install commercial antenna systems. With the emergence of 3G and 4G technology, backhaul demands are being defined as high as 100-megabits of service required which is a far cry from the old days of a single T1.

During the quarter, 73% of our new revenue signed came from new tenant leases while 27% came from amendments to existing leases. Rental rates continue to stay firm, and our average cash basis rent per lease across our approximately 19,800 tenant leases increased to $1,937 per month. Augmentation CapEx of $2.5 million in Q2 reflects our current 8,000 tower portfolio. For our portfolio at its current size, we estimate the quarterly augmentation CapEx will run $2.0 million to $2.5 million per quarter and will continue to be the lowest in the industry on a per tower basis. The majority of this recorded augmentation CapEx is recaptured from new tenants in the form of one time contributions.

On the asset growth front, we acquired 95 towers in the quarter and are now fully reengaged in pursuing qualified acquisition opportunities. Our new tower build team also completed another 25 new towers during the quarter and we continue to feel confident in our ability to complete 90 to 100 new towers in 2009. Our backlogs in this area continue to grow and the lease up on these strategically placed sites has been excellent. Our services business also had a very good second quarter. We continue to stress profitability over volume in this segment, and that was evident in our results.

Our segment operating profit was 73% ahead of our second quarter 2008 segment operating profit on a revenue increase of just over 3.5%. We do foresee the second half of the year being larger from a revenue perspective than the first half for this line of business, but we will continue to focus keenly on profitability and stay selective with the projects we take on. At this point, I will turn the call over to Jeff.

Thank, Kurt, and good morning, everyone. As you have heard, the second quarter was another strong quarter for us and a continuation of the solid results that we have produced the last several years. We continue to perform well operationally. Our customers are busy investing in their networks and are expected to stay that way.

We continue to find ourselves in a very favorable macro wireless environment, notwithstanding the still difficult general economy around us. Within the telecom universe, wireless continues to grow in contribution and importance. For diversified companies like AT&T and Verizon, wireless is the most important segment and grows faster than other lines of their telecommunications business.

We are now squarely within the wireless data phase of wireless services growth. Wireless data is the fastest growing segment within wireless. Smart phones are now the fastest growing type of handset and within the smart phone category, media intensive and high bandwidth consumers such as the iPhone are the most popular. 3G and now 4G technology which will provide greatly increased data speeds are actively being pursued by multiple providers. To handle increasing data connections at ever faster speeds, data only networks and networks which handle both voice and data traffic need continuous expansion and improvement. As long as our customers find the data business profitable and demand continues to grow, we expect SBA to benefit. Given where we are in the early stages of 3G and 4G network completions, we see many years of strong customer demand for our tower space and services.

I want to take a few moments to discuss the impact of our recent $750 million high yield deal. The deal is significantly positive, not only for our short term refinancing goals, but also for our long term growth, future access to capital and future growth in equity free cash flow per share. All of our refinancing goals have now been satisfied until 2011 and absent a large acquisition, I don't expect to return to the capital markets until late 2010 at the earliest.

Our debt, other than what we may draw on the credit facility in the future, is now all fixed rate. After the transaction, we have no secured debt outstanding other than our $1 billion of 2006 CMBS. That means all of our assets would be available as collateral to refinance the 2006 CMBS in 2011. We estimate that early 2011, we will need to obtain only approximately 2.5 turns of total debt and less on a net debt basis to fully refinance the 2006 CMBS which we can issue on a fully secured basis.

We would expect this financing to be available at lower rates compared to unsecured or more highly leveraged financing. In our opinion, we will easily be able to obtain 2.5 turns of leverage on a secured basis and as a result, all refinancing risk around the 2006 CMBS has now been effectively eliminated. On a pro forma basis, at June 30, 2009 we would have cash, short term restricted cash and cash equivalents of $358 million at a fully available but undrawn $320 million revolver for total committed liquidity of $678 million. Going forward that is more than sufficient to satisfy our annual asset growth goals of 5% to 10% portfolio growth.

With all of this cash liquidity, we currently don't anticipate issuing stock for acquisitions unless we were presented with a large acquisition opportunity or for tax required reasons. Our $320 million revolver lasts until January 2011 and is priced very attractively at one month LIBOR plus a spread of 150 to 300 basis points. If we were to draw the full $320 million based on our second quarter results, we would only pay LIBOR plus 150 basis points based on the pricing grid. Based on our high yield note covenants and our second quarter results, our additional permitted debt capacity is approximately $550 million, all of which could be secured which we believe would make it easier and cheaper to obtain if we wanted it. That amount would include borrowings under our $320 million revolver.

With our convertible debt and now our high yield debt supporting and structurally junior to any future secured debt, we believe we would be a very desirable borrower in the secured market. Permitted debt capacity plus pro forma cash, short term restricted cash and cash equivalents is approximately $900 million dollars. This capacity grows as our adjusted EBITDA grows and gives us more capacity for investment capital than we have ever had. The senior note offering further improved our laddering of maturities so that we no longer will have disproportionately large financings due in any one year. We have no maturities due currently in 2017 and 2018 which will serve us well when we refinance the 2006 CMBS some time in 2011. The deal also puts us back in the high yield market, and it will be a goal going forward for SBA to stay diversified in the number of debt markets we use.

So bottom line, we are very pleased with the results. We now have no need for any additional financing activity for almost a year and a half until January 2011 when our revolving credit facility matures. Now we can and will direct all of our focus and energy once again to growing our company with the ultimate goal of maximizing equity free cash flow per share. As we always do, we will continue to focus on generating strong organic growth, and we believe our prospects for doing so are very good. We will also grow through investment. We intend to pursue all of the traditional areas of investment that we have pursued historically: new builds, acquisitions, (inaudible) and ground lease purchases as well as international and possibly stock repurchases. Each investment will continue to be evaluated separately and will be required to meet certain expected returns on investment.

We have entered the Canadian market through the acquisition of a company which currently owns 52 towers and controls a number of roof tops in Canada. We are very excited about the prospects in Canada given the 2008 spectrum auctions and the emergence of new market entrants, the plans for future spectrum auctions and the relative underpenetration of wireless and particularly wireless data in Canada as compared to the US. The market is very similar to the US in terms of legal structures, zoning and acceptance of colocation.

We intend to pursue primarily a new build strategy in Canada and believe that a number of new tower sites will be needed by and attractive to multiple wireless carriers. We continue to explore other international markets and if and when we acquire any towers or otherwise make a material investment in another market, we will let you know. Having said that, however, we do continue to believe that the substantial majority of our portfolio growth for the foreseeable future will occur in the US. We see plenty of acquisition and new build opportunities remaining in the US, and our international interests are simply designed to insure that we have at all times the appropriate geographic capabilities to meet our portfolio growth return on investment and balance sheet optimization goals.

With respect to our balance sheet goals, we expect to continue to delever organically as we move through the year. Our current goal is to reduce net debt leverage to 6.5 to 7 turns. When we get there will depend primarily on the size and timing of our cash investing. We do not intend to issue any more equity to help speed the deleveraging process. Our decision on leverage at any given time will always be based on a combination of our operational prospects, capital markets conditions and our assessment of the appropriate risk profile to maximize shareholder returns. We believe this process is as much art as it is science and it is one we monitor and think about constantly. We do believe maintaining an appropriately leveraged balance sheet is important to shareholder returns. We also continue to believe capital generated from appropriately leveraging the balance sheet is best deployed in asset growth or EBITDA growing areas, but if the right opportunities or returns are not available for some reason, then the capital should be returned to shareholders in the form of stock repurchases or dividends.

The process we expect to follow is simple. Leverage the balance sheet appropriately and then use the available capital in a way which maximizes equity free cash flow per share over a forward five year period. And of course, while doing that, maximize our organic growth. That has been our philosophy and approach in the past, and it will continue to be our philosophy and approach going forward. We remain very excited about the rest of this year and beyond, and we look forward to reporting future results. As always, I want to close by thanking our employees and our customers. And Bob, at this time, we are ready for questions.

Thank you, sir. (Operator Instructions). One moment please for the first question. We will go to the line of Dave Cohen, RBC Capital Markets. Please go ahead.

Kurt, I was wondering if you could just -- I am not sure if you disclosed it, but the number of signed leases at the end of the second quarter?

That was about 19,800.

Okay. If I look at your -- the midpoint of your 3Q guidance for revenue, tower cash flow and EBITDA, it implies about high 50% incremental tower cash flow and EBITDA margins. Just wondering if there's any reason for that or any reason why it wouldn't be higher, closer to 80%, 90% or if it is just due to management being conservative.

Yes, I think it is a little bit of the later, David. It's also some timing issues. In Q3, we typically run higher maintenance CapEx expenses. We -- it is also a quarter where property taxes may be a bit higher than normal. But it really -- you shouldn't read anything into that. On a go forward apples-to-apples basis, we are still enjoying 90% or better incremental drop down of revenue to the tower cash flow line.

Okay, great. And as far as the towers that you acquired in Canada, can you talk about the multiple and just sort of some of the metrics surrounding those towers? Number of tenants, rents, et cetera?

Yes, the rents are similar to the US, similar deployments. We have all of the big three Canadian carriers, Rogers, Telus and Bell on those towers. I believe they were about 1.5, 1.6 tenants per tower and we paid about a 13 times multiple for those. Actually we paid 12, but we own about 90%, 90%, 91% of that entity, and the remaining amount is owned by the prior owners and management. So when you do that math, it is about a 13 times for the whole entity.

Great. Thanks a lot.

Next we will go to the line of Simon Flannery, Morgan Stanley Company. Please go ahead.

(Inaudible) on behalf of Simon. Just going back to the leasing revenue guidance, how much was -- how much of that was a result of acquisition activity and how much was a result of the organic growth? Thanks.

On the full year basis, about $1 million dollars of the increase is acquisitions. The rest would be organic.

Okay. Thank you.

And our next question comes from the line of Mike McCormack, JPMorgan. Please go ahead.

Hey, thanks. Just a quick question on your thoughts on -- you discussed Clearwire starting to ramp up. Just trying to get a sense for if there's any change to guidance based on Clearwire, and then secondly, Sprint put up some pretty good numbers today on Boost unlimited subscribers on the IDEN network. Can you give us a sense if there's any additional spending going on there?

There's a little bit of additional spending that we are seeing from Sprint, Mike. I don't want to over dramatize that, because it is on an absolute basis, it is not very much. But compared to say a year ago or in the second half of '08 when we saw very little to nothing from Sprint, we are seeing a little bit more. The Clearwire business continues to ramp up. It really isn't affecting our '09 guidance because of the timing of operational leasing versus when it hits your financial statements, but we would expect it to be more of a contributor to our 2010 reported results.

Great. Thank you, guys.

And next we go to the line of Rick Prentiss, Raymond James. Please go ahead.

Hey guys. A couple of questions for you. Jeff, first, can you break out for us in the second quarter what same tower revenue growth was and same tower cash flow growth was to get an organic year-over-year growth, stripping out those big acquisitions you made last year?

Yes. The -- well, that's -- if you strip out the acquisitions where we had a lot of our lease up over the last eight or nine months, it is not in that calculation. So stripping all of those out, it is about 8%. But we had a disproportionate lease up on our new assets, so we continue to believe that when you annualize it and put it all together, we're running about 9% to 10%.

And the 8% was both same tower revenue, same tower cash flow?

No, the tower cash flow was 200, 300 basis points higher.

That makes sense. And then obviously now you guys can get back in the game. I think you said focus all your energies on growing the company, the 5%, 10% portfolio growth. Talk just a little bit about what you are seeing out there as far as M&A prices.

Yes, the M&A prices dropped off a little bit in the second half of '08. But they have returned almost to probably where they were pre- Labor Day given the improvement in the credit markets and the improved access to capital and slowly dropping interest rates which you would expect given the fact that operational performance for the towers and our industry really has continued uninterrupted. It is really all a cost of financing question as it affects valuation and now that those costs are coming down, prices are starting to return.

We didn't see a lot of activity in the industry in the second half. A lot of the owners of towers were not distressed sellers, and were holding back, I think in expectation that the world would turn out the way it seems to be turning out. There are still a great number of towers out there that we do know and expect to be available, though, in years to come. And we are feeling very good about our opportunities to grow at that 5% to 10% portfolio growth rate year-over-year, particularly when you throw in 100 plus new builds per year.

So does that mean prices kind of moving up into the mid teens maybe on tower cash flow?

Yes. I think that's -- again, it is very asset specific. We are still seeing stuff that is more mature at 13 or maybe 14 times. It is stuff right out of the ground, very immature, a lot of growth left to it, 16 or 17 times. So, maybe if you push it all, blend it together, 15 times is a good proxy.

And then a couple of times in your comments you mentioned not coming back into the markets unless there's a big acquisition. You mentioned big acquisition maybe a couple of times. As you look out there, are there any elephants out there, are there any carrier portfolios or other tower company portfolios that might be coming up? What are your thoughts as far as the landscape as far as -- other than the smaller deals that you guys are excellent at? What are the opportunities for a larger transaction possibly?

There are a number of pools of assets that are north of 1,000; both private and carrier owned. I don't have any reason to believe though, Rick, that any of those will be marketed or certainly today that I know that they're being marketed. If they are, obviously we will take a look and if it makes financial sense to do so, we will take a run at them. We have a lot of capacity now given our recent financing, but I made the comments I made because I actually do think for us the next year or two, the foreseeable future, we will be continuing to grow the company much as we have done historically by buying towers 5, 10, 25 at a time.

Right, and those larger portfolios, you are thinking still domestic; right?

Yes.

Okay, perfect. Thanks, guys.

Next we go to the line of Jason Armstrong, Goldman Sachs. Please go ahead.

Good morning. Maybe a follow up on the 8% same tower revenue growth. Given your comments around the pick up in backlog and activity levels, you have been talking about more of a real-time view. Would you expect that 8% to improve from here? And maybe the second question on revenue per tenant, it looks like it is slowing a little bit. I guess just given built-in escalators and some of the amendment activity you guys have talked about, seems like there is a little bit more of an opportunity to drive that metric higher, so maybe just some context around the pricing side. Thanks.

The 8%, because we only calculate it on towers we have owned at least a year excludes everything basically we added to the portfolio last year. So, when you look at what we did on those from an actual lease up perspective, if you annualized all of that, Jason, the number would be higher. So with that kind of in the bag, we fully expect that as you go forward, the number will be 9% to 10% across the entire portfolio. And we continue to jump our rents $20, $30, $40 a month per quarter. So I am not sure I would agree with your comment about revenue per tenant is slowing. I think it continues to climb steadily, and we expect it to continue to climb steadily as a result of the escalators, the amendments and some modest price increases that we're enjoying on an apples- to-apples basis year-over-year on brand new tenancies.

Okay, great. Thanks.

Next we go to line of David Barden, Banc of America. Please go ahead.

Morning. Thanks for taking the question. Jeff, maybe just a few bank shots. Sprint obviously came out this quarter with their network outsourcing agreement. It turns out that much of that had actually been started in the first quarter. But could you just run us through your thoughts or what interactions you've had with Ericsson and how you think that their presence in the market may or may not have any influence on where tower demand might be going up or down.

The second one was T-Mobile was talking about slowing down their CapEx in the quarter to help the parent company on the cash flow side. Do you see that impact 2Q or do you foresee that maybe impacting 3Q at all? And I guess my last one is since you guys are the first ones from the tower group to come out and talk about it, any color you would have on if you have seen any opportunities in any of this broadband subsidy stuff for your tower development initiatives? Thanks.

On the Ericsson question, David, it is a little early yet. Kurt, when is that supposed to actually happen?

I think the employees move over in September, so end of Q3.

So it is a little early yet to give you any history of what it means for us. But what we -- we've have had a bunch of conversations with both Sprint employees and Ericsson folks, and we really see it as an employee outsourcing exercise only that will not affect CapEx decisions or deployment needs or desires on the part of Sprint. So, at this point, we are really expecting that for us and our industry, it is not going to be much of a change at all. In terms of -- what was your second question?

T-Mobile.

The T -Mobile. I would say on that that we actually saw a little bit of that starting in Q1, and while they were active in Q2, probably not to the same degree that they were in the second half '08 and knowing what their overall goals are in terms of 2G and 3G network improvement and where they are in that process, we would expect that things continue to move up in terms of activity levels from T-Mobile. Now that's purely based on what we know to be their operational goals and needs and not based on any edict out of Germany or anything like that.

It really slowed more on the hard cost construction side than it did on the leasing side. To save the big dollars, you really -- they deferred building some of the sites, but they continued on the leasing side securing the properties which is less expensive of a side acquisition task. So, our understanding is by the end of the year in fourth quarter, they will have a big release on that construction to get a lot of these assets into service. So we think it is fairly temporary.

And on the new broadband stimulus package and some of the money that's being spent there, we are following all of that. We have not made application for any of the monies ourselves. Our strategy continues to be only build towers where we have a good anchor tenant on day one and the prospects for a couple more. So the fact that there's some stimulus money out there really doesn't affect our thinking there. But we will continue to watch. None of what we have done so far this year or what we would expect to build in the second half of '09 is driven by that.

Okay, that's great. Appreciate it, guys.

And next we go to the line of Gray Powell, Wells Fargo. Please go ahead.

Good morning, everyone. Thanks for taking the questions. I just have a few. Last quarter both you and your peers talked about demand trends in 2009 being somewhat back end loaded and I think generally speaking, most were looking for about a 60/40 split between the second half and first half. Is that still the case, or has anything changed in your opinion?

That feels probably still accurate.

Okay. And as I just look at your organic revenue growth, and I know you have touched on this already, can you just say what the organic revenue growth rate is implied by the new midpoint of your 2009 guidance?

It should be 9% to 10%.

Okay, and then final question, roughly speaking, your incremental cost of debt going forward is going to be in the 7% to 8% range. Can you quantify how much you think you can supplement free cash flow per share growth just longer term by reinvesting in your business, whether it is buying towers, building towers or at some point, buying back your stock.

I think there's very big possible benefits through all of those areas, Gray, and whether a acquisition or -- well, new build generally will always trump anything else, given the historical success we've had there. But then an acquisition versus a stock repurchase is very price dependent at the time you make the investment decision. But the big picture is that the amount of capital that we now have access to and the ability to deploy will give us the future opportunities to I think materially drive increases in equity free cash flow per share through investment, which is why I wanted to make a point of touching on that in my prepared comments.

And you also said one other thing which I am not sure I agree with. We have structured the portfolio now, the balance sheet so that we really have a great underpinning of unsecured debt which would allow us for the foreseeable future to access all of our incremental debt in the secured market which we think comes at below 7%, and our credit facility alone if we drew on that it would be at 2%.

That's really interesting. That's --.

What -- the reason we spent as much time on that issue as we is did is we are trying to make sure everyone understands the positioning that we've put the company in to access future debt capital at absolutely the lowest cost available.

Okay. Well, thank you very much. That's all I have.

(Operator Instructions). We go to the line of Chris Larsen, Piper Jaffray. Please go ahead.

Hi, thanks, and good morning. The first question I have was on Canada. I think you are, if I am not mistaken, the first of the public carrier companies to move into the Canadian market. If you could talk a little bit about the some of the dynamics there and some of our due diligence has suggested that the Canadian wireless carriers are a little reluctant to share their towers as they view it as a competitive barrier to entry. Also, if you could talk about maybe some of the opportunity with the new entrants and the spectrum auctions that are upcoming there. Just how aggressive do you think -- or how big the market is for towers in Canada? In other words, non-carrier owned towers in Canada. Secondly, if you have any thoughts on LTE, I know that Verizon is out doing some demos, what that might mean in terms of incremental augmentation revenues.

In terms of Canada, the attractiveness of the market changed for us last year with the new spectrum auctions and emergence of new market entrants. At that point, we were able to exclude that in any given spot, there would be enough viable potential tenants to make our returns on investment that we seek. So that was kind of the big threshold change in our view of the market.

And with additional spectrum auctions scheduled, we think that dynamic continues to improve. As there was in the United States in the mid-90s, there is an existing -- a bit of a bias by existing carriers to collocation. We have seen that story before. In Canada, they have actually gone a step further to, through governmental proclamation, establish a bias toward co-location, so we think that ultimately plays out the same way it has in the United States, which is an acceptance of collocation. And there are a number of opportunities that we see up there, again, primarily in the new build area.

We don't necessarily believe it will be a large acquisition opportunity market for us. But with the new market entrants and then the existing encumbants moving to 3G and ultimately 4G and what we have seen here in terms of the density requirements in the United States, we believe that there will be many, many opportunities for good new builds up there which will be our focus going forward. And in terms of the Verizon LTE, we do see a lot of amendment opportunities there.

We think that business -- and we are already kind of starting to see activity there, and it looks like it is going to result in the types of amendments that we saw throughout the UNCS overlays by -- and are still seeing by AT&T and T-Mobile. Similar types of equipment with similar positive impacts to our revenue stream.

Thank you. That's very helpful.

Next we go to Anthony Klarman of Deutsche Bank. Please go ahead.

Hi, thanks. One sort of theoretical question for you. The business I guess proved out its ability to delever relatively quickly in the third quarter, fourth quarter and first quarter when you needed to do so in response to the market pull back. I am wondering if that changes your long term attitude on leverage and how aggressive you might be going forward on maybe a more aggressive build strategy or acquisition philosophy.

And then as a follow-on to that, you mentioned the acquisition pace, and it seems like there's a bid offer spread between buyers and sellers. It doesn't seem like there's a lot of middle market lending that's still going on, so I am wondering if someone in your position who just accessed pretty cheap capital maybe more of at an advantage than you were just a couple of months ago as you look at some of these smaller portfolio opportunities.

Well, I think we are. I will answer your last question first. I think we are, and what is really changed is our appetite. Now that we have got this deal behind us, we no longer feel constrained around refinancing issues which took our attention, our focus prior to getting this deal done, although, we took a halfway step when we did the convert in April. But now we are fully done in terms of our mental energy and focus on refinancing.

In terms -- so we feel good about our access to capital, our cost of capital, our ability to generate some good value for shareholders in the acquisition area going forward. In terms of leverage, Anthony, what we have learned through the years, and this was reinforced in the fall, is the business is unbelievably steady, very predictable. Not much change in the EBITDA line because of macro events and credit market gyrations. We saw this in 2002. We saw it again last fall.

What we really -- what we had underscored in the fall is the management of refinancing risk. So, that is really where leverage gets set. Leverage in our industry -- you don't really pay a whole lot less money for less leverage if you look at the prices of the various debt instruments that are out there. You will see that there's really not that much difference, even though there's a wider difference in terms of where those instruments are levered. So really, it's -- as we manage our capital structure, it is really about managing refinancing risks and comfort going forward, and we have taken huge steps to do that now with lengthening our maturities, laddering our maturities.

So we have the ability to move leverage up or down depending on what our assessment of those factors are at any given time. But as we sit here today, we are looking at gradually reducing leverage down to the 6.5 to 7 times level and then running the business right there. But that may change if the world changes again on us over the next six months to a year.

And you mentioned not really needing to access the capital markets again until obviously next year and probably later next year given the next ARD date is off a bit. I am wondering if your comments then, we can sort of lead that to think you will continue to delever modestly in the hopes of -- or, I was going to say maximizing, but really minimizing the cost to the company over the next refi given how cheap your all-in cost of capital is today given what you are going to refi next is a more substantial piece of your capital structure.

Well, with what we have put in place now, we can fully refi in the secured market and as I mentioned to one of the earlier questions, I think that today we think that money is LIBOR based and below 7%. And that probably still is at a wider spread than what towers have historically enjoyed. So we could see additional improvement there. So we are really positioned now to -- for the next incremental dollar of capital to come in at very, very low rates. The key to our success here, particularly for our equity, will be how well we deploy that capital and what its impact is on equity free cash flow per share.

Thanks, Jeff.

There are no other questions in queue at this time. Please continue.

Well we appreciate everyone joining us for our second quarter update, and we look forward to the next time we speak about the third quarter. Thank you.

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