SBA Communications Corp (SBAC) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the SBA third quarter results call. At this time, all participants are in and listen only mode. Later we will conduct an answer any question session. Instructions will be given at that time. (Operator Instructions)

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

Thank you for joining us this morning for SBA's third quarter 2009 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer, Kurt Bagwell, our Chief Operating Officer and Brendan Cavanaugh, 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, 2010, or beyond. These forward-looking statements may be affected by the rest of 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 an hour 10K for the fiscal year ended December 31, 2008 which documents are publicly of available. These factors and others have affected histroical 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, October 30th 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 come and other information required by Regulation G has been posted on our website www.sbasite.co,. Brendan, would you comment on the third quarter?

Yes, thanks Pam. Good morning. As you saw from our press released last night, our third quarter financial results were very good period. We exceeded the midpoint of our guidance for adjusted EBITDA and equity free cashflow. We were above the high end of our guidance for site leasing revenue and our tower cash flow. Total revenues were $139.3 million, up 17.4% over the year earlier periods. Site leasing revenues for the third quarter were $120.6 million, or 19.9% increase over the third quarter of 2008. This leasing revenue growth was driven by organic growth and acquisitions. Site leasing segment operating profit was $91.9 million, or an increase of 21.3% over the third quarter 2008. Site leasing contributed 97.8% of our total segment operating profit in the third quarter.

Tower cashflow for the third quarter of 2009 was $93.6 million or 22.2% increase over the year earlier periods. Tower cashflow margin was 78.6%, up 90 basis points over the year earlier periods. Our services revenues were up $18.7 million compared to $18.2 million in this year earlier periods, or a 3.2% increase. Services segment operating profits was $2.1 million in the third quarter of 2009 compared to $869,000 in the third quarter of 2008. Services segment operating profit margins were 11.2% in the third quarter of 2009, compared to 4.8% in the year earlier periods. Kurt will discuss services in more detail shortly.

SG&A expenses for third quarter were $13 2 million including noncash compensation margins of $1.9 million. SG&A expenses were $12.4 million in the third quarter of 2008 and included non-cash compensation charges of $1.6 million. Acquisition related expenses for the third quarter were approximately $900,000. Prior to 2009, acquisition related expenses were capitalized. Net loss during the third quarter was $50.1 million, compared to a net loss of $27.6 million in the year earlier periods. Included in that loss for the third quarter of 2009 was a $12.5 million loss resulting from the early extinguishment of our debt.

Net loss per share for the third quarter was $0.43, compared to a net loss per share of $0.26 in the year earlier period. Excluding the loss for early extinguishment debt, net loss per share would have been $0.32. Weighted average shares outstanding for the quarter were 116.7 million. Adjusted EBITDA was $85 million in the third quarter of 2009, or 27% increase over the year earlier period. Adjusted EBITDA margin was 61.7%, up from 57.3% in the year earlier period. Once again equity free cash flow increased in the quarter reflecting strong adjusted EBITDA growth. Equity free cash flow for the third quarter 2009 was $46 million, a 17.1% increase over the year earlier period. Equity free cash flow per share for the third quarter of 2009 was $0.39 compared to $0.37 in the year earlier period.

In the third quarter, we acquired 58 towers, built 25 towers, and ended the quarter owning with 8,085 towers, six DAS networks, and the rights to manage approximately 5,200 additional actual or potential communications sites. Total cash capital expenditures for the third quarter of 2009 were $37.5 million consisting of $2.2 million of not discretionary cash capital expenditures such as tower maintenance and general corporate CapEx. And $35.3 million of the discretionary cash capital expenditures. Discretionary cash CapEx includes $25 million incurred in connection with tower acquisition, land acquisitions, and acquisition earn outs, $7.9 million in new tower construction and $2.4 million for augmentations and tower upgrades. With respect to the land under our towers, we spent an aggregate of $3.2 million to buy land and easements and to extend ground lease terms. As of September 30th 2009, we owned or controlled for more than 50 years the land underneath 27% of our towers.

At this point, I'll turn things over to Pam who will provide an update on our liquidity position and balance sheet.

Thanks, Brendan. SBA ended the quarter with $2.8 billion of total debt. We cash and cash equivalents, short-term investments, short term restricted cash of $318.7 million resulting in net debt of $2.5 billion.

In July, we issued $375 million of unsecured senior notes due 2016 at 99.33% of face value with a coupon of 8%, and $375 million of unsecured senior notes due in 2019 at 99.152% of face value with a coupon of 8.25%. The net proceeds of $728.7 million were used to repay the 2005 CMBS notes and associated prepayment consideration to repay amounts outstanding under our senior credit facility and to repay and terminate our offsite credit facility. Remaining proceeds will be used for general corporate purposes. Additionally, during the third quarter of 2009, we repurchased in open market transactions $4 million of our 0. 375% convertible senior notes and $105.6 million of our 2006 CMBS notes for an aggregate of $109. 2 million in cash. Our share count at the end of the quarter was 116.8 million shares.

At September 30th 2009, our net debt to annualized adjusted EBITDA leverage ratio was 7.3. On September 30th, 2009, our net secured debt to annualized adjusted EBITDA leverage ratio was 1.9 times. Our third quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was 2.4 times. All of our funded debt is now fixed rate with a blended average annual interest rate of 5.3%. Subsequent to September 30th 2009, we have repurchased for cash in open market transaction an additional 605,000 of or CMBS notes at prices slightly below par. I will now turn it over to Kurt to discuss the operational results.

Thanks, Pam and good morning. We continue to be very happy with our overall company performance. Our leasing results have been solid, our costs have remained predictable and manageable, our asset growth is accelerating, and our customers and users continue to push wireless voice and data usage to new heights. I think our numbers demonstrate that the wireless infrastructure business continues to be very good business to be in and the outlook for the future is strong.

Specifically related to our third quarter results, our gross leasing revenue sign during the quarter was very good and came from a variety of carriers. AT&T, Verizon, and Clearwire were the most active during Q3 and we finished the quarter with our highest leasing backlog in over a year. Average rents also continue to be strong. During the quarter, 70% of the new leasing revenue sign came from new leases and 30% from amendments to existing installations. This is at the higher end of the historical range for amendments and we expect amendment revenue to remain relatively high for the foreseeable future. We have begun to sign and commence LTE amendments and expect this activity to accelerate and continue for two to three years. UMTS overlays also continue in the tier two in three markets for several carriers. We have recently seen activity with (inaudible) carriers as well, some of whom are active in obtaining [NTI] Department of Agriculture stimulus funding.

Our managed site business, which contributes approximately $12.9 million of annualized leasing revenue had a very good quarter in Q3 and is currently sitting on its highest leasing backlog of the year as well. We feel very confident that a strong Q4 for contribution from that team. Our distributed antenna or DAS business is also very active in leasing up additional tenants on additional networks while also winning several awards for new networks. This model continues to be attractive to us as it maintains very similar characteristics to the classic macro tower model in terms of efficient, organic leasing growth and operating leverage.

With regards to tower expenses, our OpEx came in once again exactly where we had planned, and we expect it to continue to be very sustainable and predictable. Maintenance CapEx and net augmentation CapEx each continue to run well below $1,000 per tower, per year. Which continues to support our belief that our towers at the highest capacity and quality in the industry.

With the continuing emergence of an data services, they are consuming huge amounts of bandwidth and backhaul. We are seeing more fiber brought to our towers every week. Fiber availability adds to the attractiveness of our assets as data moves more mainstream with the end users. We're working with a variety of fiber providers to help them bring fiber to our sites.

On the asset growth front, we acquired 58 towers during the quarter and built 25 towers. We anticipate finishing the year with approximately 100 new builds. We expect that number will remain constant or increase slightly for 2010 as we expect to build 100 to 110 new towers. These new assets have leased up very well end exceeded our initial internal projections. Our services division was roughly flat in volume that had profits far ahead of the third quarter a year ago.

I saw a couple items this morning expressing concern over our projected Q4 services revenue. I want to reiterate and be clear that we are emphasizing profit over volume in this business segment. In addition, there's no correlation between our Services revenue and our leasing activity or carrier activity in general. We have had steady profits this year in Services. The forecast is for this trend to continue, and there are a couple of very good opportunities on the horizon for us as we move into 2010.

Overall, we feel excellent about our future prospects and our ability to continue to produce good results. Our carrier customers are staying active, and their customers continue to increase wireless uses every day. At this point, I'll turn it over to Jeff.

Thanks, Kurt and good morning, everyone. The third quarter was another strong quarter for us, particularly in site releasing revenue and tower cash flow. Our leasing backlog remains solid, and all the other data points we see tell us that leasing demand will stay strong through the remainder of 2009 into 2010.

With respect to 2009, the year is turning out pretty much as we expected. Operationally, we have once again executed well. Wireless growth in general and wireless data growth in particular are driving demand for our business. Strong network development activities by most of our customers have so far outweighed the impact of a weak economy and challenging credit markets. As is the case in all years, some carriers were busier than others. 2009 will be remembered as the year where substantial 3G deployments occurred and 4G became a reality. In 2009, Clearwire placed many new networks in operation, Verizon commenced its move to LTE, and AT&T announced its move to LTE. All in all, 2009 will be another very solid year for SBA with the highlights for our company being significant balance sheet improvement and substantial growth and adjusted EBITDA and equity free cash flow.

In last night's press release, we provided our initial to it 2010 guidance. As a can see, we expect it to be another very good year, and one similar to 2009 in terms of overall customer activity. We are initially guiding to 9% organics same tower revenue growth, which in absolute dollars added is a slight increase over 2009. We measure that against expected Q4 to Q4 results on a GAAP basis. As is the case in 2009, we expect some carriers to be busier than others, and our guidance reflects expected differences in activity levels among our customers. With respect to customer activity, we expect that 4G deployments will be significant in 2010 and comprise a much greater source of business than was the case for us in 2009.

With respect to portfolio growth, as is our custom, we only guide to acquisitions that we have under contract. We have a goal of 5% to 10% portfolio growth in 2010, only a portion of which is reflected in our initial 2010 outlook. We anticipate that we will identify and close on additional acquisitions during the year which, if consummated, will provide upside to our initial outlook. We have the capitol to accomplish this portfolio growth, and we believe the pool of opportunities to achieve our growth objectives is there. We are confident we can grow the portfolio without any material increase in our SG&A expense, as one of the benefits of the past twelve months has been our continued improvement and processes. We have the operational and back office capabilities to increase the size of our company substantially.

With respect to portfolio growth, we are once again fully engaged and we are seeing plenty of good opportunities that meet our investment criteria. Acquisition pricing has essentially returned to mid 2008 levels, reflecting dramatically improved access to capital for our sector and continued optimism around future carrier demands. As a result of the improvement in the capital markets, our weighted average cost of capital has declined materially this year, and we are able to source acquisitions at expected returns that produce the same positive spread to our [WAC] that we have targeted for the past several years. We expect that the substantial portion of our portfolio growth in 2010 will occur once again in the United States, although we have gained some momentum recently in Canada around new tower builds And we are actively researching and developing opportunities in a few other countries.

The SG&A cost associated with our international activities is approximately $1.5 million per year and is included in our 2010 outlook. I we are successful in producing some additional assets out of these international activities as we expect, there could be upside to our outlook, although the 2010 contribution from any international activity will be relatively small. We have made tremendous strides this year with our balance sheet, reducing net debt leverage by 1.5 turns in the last year. We are approaching what we believe is the optimum balance sheet position for maximizing shareholder value, while at the same time maintaining a great deal of comfort around operational flexibility and refinancing goals.

Under current market conditions, we are targeting net debt leverage of 6.5 to 7 turns and cash interest coverage of greater in 2.0 turns. Our current balance sheet is extremely well structured, as it relates to our maturity profile and mix of debt with great flexibility to expand or contract as the situation dictates. As I indicated earlier, our goal of 5% to 10% portfolio growth in 2010 is fully funded from our cash on hand and cash flow from operations with no need for additional capital. And we have the capitol to exceed that growth goal for the right opportunities.

We have no immediate need to return to the capital markets into 2009 or 2010, although we will remain flexible and may access the capital markets to address our 2006 CMBS ahead of the November 2011 anticipated repayment date. Our cost of debt has dropped steadily all year. If we had to refinance our entire debt structure today at 7.3 terms net debt leverage, we are confident that we could do so using a mix of secured and unsecured debt at blended interest rates of 6.0% or less.

I want to spend a little time on the stock repurchase plan approval to make sure everyone has the right perspective on what we are doing with the authorization. The authorization does not reflect the change in our strategy of favoring portfolio growth as our primary use for discretionary capital. We favor portfolio growth because of our optimism around future organic growth, our ability to smoothly close and integrate new towers into the Company, and the ability of our back office to handle a materially greater number of assets. Stock repurchases represent an additional tool for us to use to keep our balance sheet optimized in the event we choose not to achieve such optimization entirely through growth.

In addition, this year we have seen some excellent buy opportunities in our stock price as a historical spread between public multiples and private acquisition multiples has narrowed considerably. To take advantage of these opportunities, we need to have a Board approved publicly announced plan in place, and now we have one. By combining our portfolio growth and stock repurchase capabilities, we will be ideally positioned to maintain an optimum balance sheet of maximized growth and adjusted EBITDA and equity for cash flow per share. While we do not have a feel for exactly how much stock repurchase activity we will achieve in 2009 or 2010, I do believe that you will see share count decline as we move through 2010, unless we were to be involved in a major acquisition transaction.

We are very excited about the future, the underlying drivers to our business remained very strong with 4G now a reality and expected to provide years of solid customer demand for leasing space and services. Our balance sheet is in good shape, and our access to capital continues to improve providing us with ample resources to continue to grow domestically and internationally. We believe our prospects are excellent for material growth and equity free cashflow per share.

As always, I want to close by thanking our employees and customers. We have accomplished a lot so far this year. I am confident that their contributions will remain strong as we look to a very good finish to 2009 and a solid 2010. We have a great business that is performing well with excellent prospects, and we look forward to reporting future results. Stacy, at this time, we are ready for questions.

(Operator Instructions) Our first question comes from the line of Jonathan Atkins with RBC Capital Markets Please go ahead.

A couple housekeeping questions first. What was the average lease rate during Q3, and what was the number of signed leases at the end of the quarter?

Jonathan, over the last -- well, a couple times over the last year we have actually run into a competitive and customer relations issues because of the specificity around that number where we have historically provided our monthly average rent per tenant. We decided that we are not going to provide that anymore. Since you can get to that number through specific tenant count, to guard our rents, we're not going to be able to provide that number either. But we will continue to provide tenants per tower information which excludes our managed site and DAS tenants and our current tenants per owned tower is 2.5.

Okay. And then with respect to the 2010 outlook, as you look at it now, is the year likely to be more evenly weighted front end, back end? And I am wondering what the outlook foresees in terms of further activity on 4G, particularly on the [wi-max] side in what assumptions you are making.

We expect 2010 to be relatively even in, and we expect 4G work to come from both Clearwire and Verizon. We are expecting that the levels of activity that we are currently seeing and except in the fourth quarter of 2009 from Clearwire remain relatively steady throughout 2010.

Okay. And then you do in the guidance imply a fairly healthy increase in service revenue. I'm just wondering what's driving that.

Well, Jonathan, with all these different projects going on with wi-max and LTE and also we feel that it is one to be more evenly weighted year. We think our ability to capture some of that work, even though it is competitive, we can jump back up to levels we have been at before. It is a more competitive and relationship business. We've got some good things in the hopper. We hope we can close on and get there.

There are a couple specific opportunities out there, Jonathan, that any one of which, if it is landed, gives us the confidence around those numbers. We are pretty confident we will at least get one of these opportunities we are thinking about.

Okay. Sorry to make you repeat the script. I missed the rationale behind the stock buyback with respect to supporting private market M&A, I missed the linkage there, if you could repeat that.

That is really the valuation premise. Historically, if you looked at the public stock prices of the tower industry and private multiples, there was a bit of a gap there with the public multiples being higher. That has narrowed now somewhat, and it means that from the use of capital perspective, depending on the instance -- we are going to be better off in some cases five years out.

Our equity free cash flow per share basis buying our stock instead of a portfolio growth alternative. Is really a valuation issue on the multiples. That was the point, there. The overall reason behind it is we just wanted to have another tool in the tool kit to be able to have all our ability to use and the way it works illegally, unless you Board approved a stock repurchase plan and publicly announced it, you can't do it. We don't really know how much stock we will be acquiring over the next year, but we do know that if we didn't take this step, we would not have that opportunity to avail ourselves of. That is why we did it.

Thanks very much.

Thank you. We have a question from David Barton from Bank of America.

Thanks for taking the question. I guess just following up a little bit on your international comments. Jeff, is that part of the 5% to 10% portfolio growth you are expecting? Is a build or a buy type of situation? What countries ? More information would be hopeful on that. I guess the second question would be -- and again, I know we are zooming in on it right away, this stock buyback issue. Just from the standpoint of thinking of how much cash flow, many years do you think you are going to go with this? There is no end to the buyback program, but is there a target to get this back to stockholders over a couple of years based on your expected run rate for 2010? That would be helpful.

Well, let me address the last question first, David. If we don't acquire any towers next year, we will be able to get the $250 million back in one year or less. If we see all kinds of great portfolio opportunities that would cause us to pursue them, and at the end of next year, be it around seven times levered, we may not buy a single share. I realize that is not helpful, but that is really how we are thinking about this. It is an opportunistic yet secondary desired use of our capital.

But having said that, we are going to be smart and thoughtful all-around how to use our money to maximize equity free cash flow per share growth over a five year period. So the single biggest determinant of how much stock we buy will be what we are doing on the portfolio growth side.

Jeff, if I could just follow up on that. Do you think that will be quarter by quarter determination, or are you going to go to the year, see what is available, and at the end of the year make your determination about the buyback?

We will go quarter to quarter.

Okay.

And on the international side, we are in Canada now. That is going to be primarily a new build strategy. If we get 50 towers there a year, that is going to be very, very good. We believe the towers that we will end up the building in Canada will be very high return on investment, but they will not be necessarily huge in volume. So, anything we do internationally, David, is going to be on top of the 5% to 10% portfolio growth figure, which we thought about primarily in terms of United States expansion.

We are looking at a couple other countries with characteristics that are similar to the U.S. , multiple carrier, good land-use protections, rule of law, political stability. But those are going to also the countries where it will be a slow, steady type of investment and not anything that would materially move the needle in any one year. And whatever we do there will also be on top of the 5% to 10% portfolio growth that we have guided to. And I am sure you will notice that in none of my comments have I given you a country and I am not when to do that, because what we are pursuing is competitive. There is only room for so many

Got you. Thanks, Jeff.

Thanks.

We will go to the line of Simon Flannery from Morgan Stanley, please go ahead.

Good morning. You can't pick up the papers without reading about the network congestion issues in the wireless industry right now. Can you give us a little sense of what the mindset is amongst the network planners and how that benefits you in terms of balancing, putting in new towers, augmenting existing powers, going back to 850 perhaps doing an overlay there versus putting fiber in the towers? Perhaps you can just talk about how much of this is really an urban or even a suburban phenomenon. I think AT&T has talked about it being a coastal issue more than anything else. Some color around what you are seeing in terms of demand there and what the carriers are doing about it and how they can address these issues. Thanks.

I am going to make a couple brought comments and let Kurt give you some more specifics. What we are clearly feeling, Simon, is that what I have characterized as an increased sense of urgency amongst our customers to enhance the networks to deal with the smart phone phenomenon, the huge current and expected exponential use of data. There is a real feeling out there that this is here now, it's coming even in a bigger way. We have to spend time, money and attention on network, and we are feeling that from all of our customers. And they are addressing it in a variety of ways. Kurt, why don't you pick up on that?

Simon, as Jeff said, we are seeing it in a variety of ways. We are seeing carriers do a lot of cell splits. If they can't add more capacity in individual sites, and it will put a cell in between a couple side so you have three sites carrying the traffic the two used to. We are seen them add channels to the existing base stations where another hardware adds. We are seeing them do more sectorizations on some other sites that used to be more suburban and rural. They can go to a sectorized site and get some capacity that.

Over time, we are seeing a lot of fiber come in. Some of the blocking you hear about is at the base station level. A lot of it is at the backhaul level. Some of it could be depending on how their system was designed due to the reuse of their spectrum pattern, how much spectrum the have and how often they can reuse a channel. It really varies widely by carrier, but we're seeing them do, as Jeff said, they have a big sense of urgency now to take care of this through a variety of mechanisms on a site by site basis.

Over time as the 4G, LTE and wi-max networks get built obviously a lot of the data initially will move over to those networks with dual mode devices and a lot of the voice will stay on the existing networks. So that will help offload their traffic tremendously. It will take awhile for the embedded handset base and air card base to get swapped out. A lot of different things happening. Obviously common it is more of an urban and suburban issue than a rural issue. The densities of users, it is a natural thing where they can adjust the networks more in those areas than other coastal areas where the populations are typically more dense and follow right along with that.

All right. That's helpful. Thanks.

And we will go to the line of Jonathan Schildkraut from Jefferies & Company.

Great, just a couple questions here on tower acquisition or portfolio growth, rather. In your release you highlighted that you would be around 5% portfolio growth in 2009. Just looking at what you've announced from a build perspective as well as acquisitions that you did post September 30th, it would seem to imply that there would be more out there to get to a number pretty close to 5%. Just wondering if we should look for more acquisitions in the fourth quarter.

Also, I was wondering if any of the acquisitions that you highlighted coming out of your Q2 call may have slipped into the first quarter.

The way we are thinking about that, Jonathan, is we started the year with 8,000 towers. I think a tad less. We are going to build around 100 towers this year and we are going to acquire around 300. So whatever the delta is between where we have already acquired and where we need to ge to to be at 300 by year end is what we expect to do in Q4. And I don't think we have to-- I am confident we don't have to sign up anything else to hit those numbers. We just have to close a fair chunk of what we have in our backlog. I'm sorry. What was your second question?

I was wondering whether some of the acquisitions you announced in the second quarter had slipped into the first quarter of next year.

Of next year? Anything? I don't think so. I don't think so.

Right. Thank you for taking the questions.

We have a question from Ric Prentiss from Raymond James.

Good morning, guys. A couple questions. First, Jeff you were talking about the multiples you are seeing in the marketplace. Obviously that also ties into your stock buyback program. Can you update us as far as what you are seeing as far as auction to deal prices, what multiple of tower cashflow you see and it varying by portfolio size?

Historically, it has varied and I think will continue to a vary by portfolio size with the bigger the size commanding on a per tower basis slightly higher multiples. And where we are currently seeing things, Ric, is broadly in the range of 14 to 17 times tower cash flow. More in some cases, for brand new towers and less in some cases for more mature things. And that is up a multiple or two from where it was six months ago or nine months ago when we were in the depths of the credit crisis and back to where we bought were pre-Lehman Brothers collapsed.

As far as managing your balance sheet, you've set the optimal target level and interest coverage. How much cash do you want to keep on hand in the balance sheet? How readily available is the other liquidity you have available to move up and down ads the deals flow through and the buyback program may flow through?

Well, we have a revolver that's undrawn today, it's fully available. That is $320 million. We are sitting on a ton of liquidity today. Actually, we want to get that liquidity invested. In terms of where we need -- we really don't need to run the business other than -- I mean, we want to have stuff on hand to take care of discretionary spending, obviously. But if you took the discretionary side of it away, we'd feel comfortable with $50 million on the balance sheet. We are always going to have plenty -- well, at least we expect to always have plenty of cash available to us. The real issue is, where should we be investing the liquidity that is available to us today?

I think Kurt also mentioned working with some of the fiber guys to bring back haul in. Can you update us to-- do you know roughly what percent of your towers already have been on fibered? What specifically are you doing as far as getting fiber to the towers? It sure seems like a pretty good opportunity to make the towers marketable. Is there any revenue benefits to you to getting fiber there?

We are exploring the revenue benefits. So far, we have decided to not to be in the fiber business. That yesterday's decision. Maybe that changes. It is likely not to. What we're doing instead is to really facilitate bringing of fiber to our sites by partnering -- I don't mean partnering in an economic sense but partnering in an information sense to all the fiber providers to really help them get enough information to bring fiber to our sites quickly, because we definitely believe what you said about making the sites more marketable. Kurt, I know we are doing some work around trying to be more specific about fiber to our sites in terms of number. What do we think there?

It is probably 20% to 25% now, Ric, and growing weekly. Literally, I was at a tower this week and there was a brand new fiber cabinet there. And as Jeff said, we are really working with these guys closely to identify our sites and the ones with multiple tenants that are going to benefit us both the most first and working with the on all the access and utility easements that come along with the deploying the fiber first from their main lines into an actual leased parcel. It is really picking up though.

The balance there, Ric, is want to have everything available to our customers, but when you step into the middle of the revenue stream, you are forcing your customers to take a particular backhaul solution, and we're not sure that is the right thing to do.

Are these mostly [i-lex], [c-lex] cable companies, who are you seeing--electric companies-- who is the biggest guy looking to pull fiber spurs over to the site?

I tell you it really varies by market. I've seen the power companies who some of them have some big fiber plants out there. I have seen the cable companies. I know big contracts with them with some of the Big Four carriers. Obviously, the income that lacks in some other guys who are fiber only. It is really a mixed bag. It really varies by market, but they are all very active.

Great. Thanks, guys.

We have a question from Jason Armstrong from Goldman Sachs, please go ahead.

Good morning. A couple questions. Maybe first just following on Rick's in terms of fiber at the cell sites. You said 20% to 25% fiber fed. Outside the revenue opportunities for you for fiber, if you look at lease up activities on the specific sites, in your words, Ric's words, more marketable site. Is there a noticeable difference you have seen so far on lease up activity on those sites versus those that are copper fed? Second question, just broader, on the organic leasing growth when you talked about the outlook for 2010, what is built in is 9%. Jeff, I've heard you talk more recently at run rating at trends more closer to 10%. So wondering how you think about the underlying drivers there. Seems like, how you are talking about the business, we shouldn't necessarily think about a slowdown here.

Jason on the first question, the lease up activities at sites with fiber, a carrier assumes--they pick our sites first and foremost based on the location for their RF propagation needs. They assume they are going to be able to get back call services reliable and high capacity, high speed. Whether they get that through T1s today, multiple T1s or DS3s or microwave or fiber, they basically assume they can get that. They will get it in some form or fashion. If the site also has fiber or moves to fiber, the bigger issue for us long term is it gives them a nice-- typically a monetary vision and you can get higher bandwidth for a lower cost per circuit. But it is going to help us with churn over time. That is really where it comes out to.

If the carrier looks at where they've got valuable transmission points, when they look at our towers, which are very flexible macro sites for them, they can do anything they want with their antennas and base station equipment and then they also have high-capacity cheap back haul there. They are not going to look at ever leaving that site, we don't think. It is probably not going to drive as much initially for some people. Overtime at will, but it is really going to help with the churn as well.

Jason, on the organic revenue growth, I think it is important to keep in mind the fundamental nature of how that works. Because we don't lose revenue, 10% in one year on the same dollars that following year is 9%, just because of the law of larger numbers and larger revenue per tower. We are clearly not suggesting that there is any slowdown. That 9% implies there is a slight pickup in absolute dollars we are going to be adding on a per tower basis to our towers in '10 to '09. So quite to the contrary. And the other thing is, this is our initial guidance. We are not going to stick our necks out too far here.

Okay. That's great. Thanks a lot.

And we have a question from the line of Chris Larsen from Piper Jaffray.

I am wondering if you could talk just a little bit about how the revenues from the amendments for 4G starting to shake out. You mentioned that you are starting to get some of those now. Within that, can you also talk specifically with Clearwire, are they able to come in on the Sprint contracts and use amendments, or are those mostly brand new leases for the Clearwire? Thanks.

On the Clearwire side, they are using a mix of both. They're coming in on some Sprint infrastructure piggybacking using what they can, and that would be legally -- at least the way we look at it -- an amendment to the Sprint lease that gets passed through to Clearwire. On the installations where they are not piggybacking, Clearwire is contracting in its own name and doing a more full of some installation including typically microwave dishes.

And on the LTE stuff, we look across and look at Verizon and AT&T. That is mostly -- perhaps entirely going to be comprised of amendments to existing lease contracts. It is going to look a lot like the way the UMTS overlays gets booked for the tower business by both AT&T and T-Mobile, we expect the LTE business is to going to look very similar.

And without giving, I know understandably you don't want to give too much away, but those tended to be in the 28% to 25% to 30% range in terms of incremental revenue generated. Is that still fair for what you're seeing on LTE?

Yes, and I don't really want to get into --

Understandably.

I would say you are right on track.

One clarification. You mentioned something about a fiber cabinet that popped in my head. Are you generating incremental revenue from the fiber provider as he installs a cabinet at your site?

In some cases we will depending on the footprint that they take up. In some cases, we will not. It really depends. If they are going to take up some good leasable space, we are going to have to charge them, obviously. But it will be a mixed bag.

Okay. Thank you very much.

Thank you. We have a question from Mike McCormick from JP Morgan.

Thanks. Maybe just a follow up on Simon's question on some of the traffic patterns by the carriers. I guess there was an article out this morning talking about Verizon preparing their network for the android. I want to get a sense from you guys if you saw any increased activity on Verizon in front of the android launch?

Secondly, thoughts on the 2009 or fourth quarter guidance, the rationale for taking the top out end of the range. Is there something during the quarter you picked up that you figured you couldn't get to that top end? Is there anything else should be thinking about? Thanks.

I will take the last one first. I will let Kurt do the other. The only reason--as we move through the year, our custom is we continue to bring down both ends of the range and increase the midpoint in good years, which this is one of those good years where we have moved up the midpoints of the important metrics. What appears to be the headline out there is that our services top line is down.

Some people are focused on the total revenue, which is unfortunate given the real diminimus importance to the profit line of that business. But other then we are only going to take the most profitable service businesses, Mike, there is absolutely nothing that should be read into that in terms of our feelings about the strengths of the fourth quarter, the fact that the trends are great and we are going to finish the year strong and have a good 2010.

Mike, on the Verizon android issue, typically on a products like that, there is nothing -- there is no quick fixes that they can do to increase network capacity. They can go throw some more T1s in potentially on the site if they have a back haul issue, they can add some more channels to base stations, but if you put out a big successful product, you need some long-term planning and long-term implementation across all of your sites to handle it as the customers move around. There is nothing specifically we saw for android. To the extent all of their PDA phones are all selling well and android bumps it up. It will continue to keep pressure on them to build up capacity in the density of their network.

Thanks, guys.

Thank you. We have the question from the line of Gray Powell from Wells Fargo Securities.

Thanks for taking questions. Just had a few here. Can you tell us what bookings -- or generally speaking, what carrier deployments looked like in Q3 versus Q2 levels? And talking with some of my carrier contacts, it sounds like Q4 activity should be up sequentially from Q3. Was just wondering if you would agree with that directionally?

Yes. Q2 and Q3 were similar. Q4 is starting out and has the backlog and other attributes where it should be up sequentially

So Q3 activity was about, roughly flat from Q2?

Similar. Yes.

And then switching topics, back on acquisitions. Can you talk about the characteristics of the towers you have acquired recently this year, just the tenants per tower and how their growth compares to your core portfolio?

Well, we're just owing them now. But we are expecting that they will grow at least as fast or faster because they are coming in-- they are good sites that have all the other physical attributes of our existing portfolio, but they are coming in on average at less tenants per tower. Probably 1.6, 1.7 tenants per tower on the batch that we acquired and will be acquiring this year. So similar to our historical behavior, Greg, we are looking to acquire growth towers that will over time equal or exceed the portfolio growth of the rest of the Company.

Okay. That makes a lot of sense. And last question. I know you touched on this in a prepared comments. You still have some refinancing to do, but like you said, it is not until November of 2011. If you were to do a it secured offering today, what do you think -- if you just had to ballpark the rate, what you think it would be?

Well, it is so good I hesitate to answer that question. The CNBS market has reopened. We could refi that entire existing CNBS structure almost entirely at the Triple A level and lock in fixed rates below 5%. Those are proposals that are on the table today. Why don't we do that? We don't do it because we don't want to pay a $45 million prepayment penalty, and we don't think that that particular market is going to at least for us fall off materially. Rates would have to move close to 2% for us to make sense of swallowing a $50 million -- move that much in one year for us to make financial sense of swallowing a $45 million prepayment penalty today. But we are extremely -- and that is a good question, because it gets to the underlying comfort that we have with our balance sheet in the levels of the 6.5 to 7 turns. The debt markets for us just keep getting better and better and better.

Okay, great. Thank you very much.

(Operator Instructions) And at this time, there are no questions. Thank you. Please continue.

Great, well we want to thank everyone for joining us today. This is our last call for 2009. We look forward to catching up with everyone in the new year with our fourth quarter results. Thank you.

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