SBA Communications Corp (SBAC) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome the SBA fourth quarter results conference call. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for your questions and instructions will be given at that time. (Operator Instructions).

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

Thank you for joining us this morning for SBA's fourth 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 Cavanagh, our Chief Financial Officer.

Before we get started I need to get the standard SEC disclosure out. Some of the information we'll discuss on this call is forward-looking including but not limited to any guidance for 2010 or 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 nights 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 our publicly available. These factors and others have affected historical results, may affect future results and may cause future results to differ materially from those expressed in any forward-looking statement we may make. Our statements as of today, February 26, 2010 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 comparable -- directly comparable GAAP financial measures and other information required by Regulation G has been posted on our website at www.SBAsite.com.

Brendan, would 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 very strong. We exceeded the high end of our guidance for several of our important metrics, including site leasing revenue, Tower cash flow, adjusted EBITDA, and equity free cash flow. Total revenues were $145 million, up 7.9% over the year earlier period. Site leasing revenues for the fourth quarter were $123.6 million, or a 10.5% increase over the fourth quarter of 2008. This leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $95.5 million, or an increase of 12.2% over the fourth quarter of 2008. Site leasing contributed 97.3% of our total segment operating profit in the fourth quarter. Tower cash flow for the fourth quarter of 2009 was $97.4 million, or a 13.4% increase over the year earlier period. Tower cash flow margin was 79.5% up 130 basis points over the year earlier period. Our Tower cash flow margins are now the highest in the industry, reflecting the quality of our assets and the efficiency of our operations.

Our services revenues were $21.3 million compared to $22.5 million in the year earlier period or a 5.2% decrease. Services segment operating profit was $2.6 million in the fourth quarter of 2009, compared to $2.8 million in the fourth quarter of 2008. Services segment operating profit margins remained constant at 12.2% in both the fourth quarter of 2009 and in the year earlier period. Kurt will discuss services in more detail shortly. SG&A expenses for the fourth quarter were $14.3 million, including non-cash compensation charges of $2.3 million. SG&A expenses were $13.3 million in the fourth quarter of 2008, and included non-cash compensation charges of $1.5 million. Changes in non-cash compensation charges represented most of the increase year-over-year, and we remained focused on and pleased with our ability to control overhead expenses. Headcount is essentially flat year-over-year.

Acquisition related expenses for the fourth quarter were approximately $2.2 million. Prior to 2009, acquisition related expenses expenses were capitalized. Net loss attributable to SBA Communications during the fourth quarter was $43.5 million, compared to net income of $6 million in the year earlier period. Included in net loss for the fourth quarter of 2009 was a $1.5 million loss resulting from the early extinguishment of our debt. Net loss per share for the fourth quarter was $0.37, compared to net income per share of $0.05 in the year earlier period. Excluding the loss from early extinguishment of debt, net loss per share would have been $0.36. Weighted average shares outstanding for the quarter were 116.9 million. Adjusted EBITDA was $88.7 million in the fourth quarter of 2009, or a 14.7% increase over the year earlier period. Adjusted EBITDA margin in the fourth quarter was 62%, up from 58% in the year earlier period, boosted by the conversion of over 100% of our revenue growth into adjusted EBITDA.

Once again, equity free cash flow increased in the quarter, reflecting strong adjusted EBITDA growth. Equity free cash flow for the fourth quarter of 2009 was $48.8 million, compared to $47 million in the year earlier period. Equity free cash flow per share for the fourth quarter of 2009 was $0.42, compared to $0.40 in the year earlier period, a 5% increase. When looked at on a full year basis, full year 2008 to full year 2009 equity free cash flow per share grew by 15%. Comparable growth in equity free cash flow per share was negatively impacted by the issuance of the July 2009 high yield notes. And comparisons will no longer be negatively impacted by that particular item, starting in the third quarter of 2010. Over the long-term, our goal continues to be annual equity free cash flow per share growth of 20% or more and we believe that goal is attainable.

In the fourth quarter, we acquired 216 Towers, built 26 Towers and ended the quarter owning 8,324 Towers and the rights to manage or lease approximately 5100 additional or actual potential communications sites. Total cash capital expenditures for the fourth quarter of 2009 was $138.8 million consisting of $2.3 million of nondiscretionary cash capital expenditures such as Tower maintenance and general corporate CapEx and $136.5 million of discretionary cash capital expenditures. Discretionary cash CapEx includes $126.2 million incurred in connection with Tower acquisitions, 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 underneath our towers we spent an aggregate of $7 million to purchase land or extend ground lease terms. As of December 31, 2009, we owned or controlled for a minimum of 50 years the land underneath 28% of our towers.

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

Thanks, Brendan. SBA ended the fourth quarter with $2.8 billion of total debt. We had cash and cash equivalents, short-term investments and short-term restricted cash of $197 million resulting in net debt of $2.6 billion. During the fourth quarter of 2009, we repurchased in open market transactions $33.3 million of our 2006 notes for an aggregate of $34.3 million in cash. Subsequent to December 31, 2009, we repurchased for cash in open market transactions an additional 2 million of our CMBS notes at prices slightly above par. These repurchases were of our higher interest rate CMBS notes and were immediately accretive to equity free cash flow. As the market prices of our debt have risen our open market purchases have slowed and at current market prices it is unlikely that we will make additional material open market debt repurchases. At December 31, 2009, our net debt to annualized adjusted EBITDA leverage ratio was 7.3 times. At December 31, 2009, our net secured debt to annualized adjusted EBITDA leverage ratio was 2.1 times. Our fourth quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was 2.4 times. All of our funded debt is fixed rate with a blended average annual interest rate of 5.3%. Earlier in the month we replaced our $320 million credit facility which was undrawn and due to mature in January 2011 with a new credit facility. The new credit facility is a five year revolving facility in the amount of $500 million, which can be used for general corporate purposes. Amounts borrowed under this facility will accrue interest at the euro dollar rate plus 187.5 basis points to 237.5 basis points, or base rate plus 87.5 basis points to 137.5 basis points depending on the leverage. There are currently no amounts outstanding under the facility and the full $500 million is available to us. The new facility also provides the ability for the issuance of up to an additional $200 million of revolving credit for an aggregate amount of up to $800 million of term loan, subject to compliance with conditions specified in the credit facility. These additional amounts are permitted but currently uncommitted.

Pro forma as of December 31, 2009 covenant capacity under the credit facility including both a revolver and any term loans would have permitted borrowings of approximately $825 million. During the fourth quarter of 2009, we began to repurchase some of our outstanding shares of common stock. We repurchased 52,000 shares of our common stock for $1.7 million during the fourth quarter and our share count at quarter end was 117.1 million. Since December 31, 2009, we have repurchased an additional 207,000 shares of our common stock for approximately $6.7 million. We have approximately 241.7 million of remaining authorization and we plan to continue to use our repurchase program opportunistically, based on then current business and overall market conditions.

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

Thanks, Pam and good morning. Our strong results in Q4 were a great way to cap off a very good year for SBA. We hit highs for the year in all key areas of our Company. Our best leasing quarter for the year, our best acquisition quarter, our best new Tower build quarter and our best services quarter. Carrier activity was high and we executed well. Our business plan continues to prove itself as an efficient, high growth, long-term model. We started 2010 with good backlogs and the outlook for carrier activity this year gives us confidence that we can have another strong year. Specifically related to our fourth quarter results, our gross leasing revenue signed during the quarter was spread nicely across three of the four big carriers plus Clearwire. Average rental rate stayed firm and amendment activity was strong. During the quarter, 71% of our new leasing revenues signed came from new tenant leases while 29% came from amendments to existing installations. On a gross dollar basis our new revenues signed during the quarter for new leases was our second highest ever and from amendments was our highest ever. We expect amendment activity to remain strong for the foreseeable future.

Overall loading required from the carriers is generally increasing due to the demands of data, and the multi-generations of technologies and frequencies deployed. Amendments for 3G UMTS continue at a fast pace as two of the big four carriers continue to overlay their national footprint to accommodate higher speed data. 4G LTE amendments are being signed with increasing frequency, rent is commencing and we expect this activity to increase and remain steady for the next two to three years. Lastly, we are seeing a steady stream of new leases from rural and suburban WiMAX providers, some of whom are deploying with NCIA, Department of Agriculture stimulus funding.

At our Tower sites we continue to see new fiber activity from a variety of providers servicing our clients. Fiber availability makes our sites even more valuable as high capacity back haul is critical to any generation or form of new technology. Our cost structure at our sites also continues to remain steady, and predictable for both OpEx and CapEx type expenses providing a high level of confidence for us when it comes to forecasting our results. As Brendan mentioned, on the asset growth front we acquired 216 towers in Q4 and built an additional 26. For the year we finished with 376 newly acquired sites and 101 new Tower builds. Our net increase of 470 sites put us right at 6% portfolio growth in 2009, squarely within our long-term goal of 5 to 10% portfolio growth, better than where we thought we would be at the beginning of the year. While competition for acquisitions and new Tower builds remain constant, we've been able to maintain our focus on quality assets and have been very pleased with the subsequent lease up results.

Our services division had its biggest quarter of the year in terms of revenues and our gross profits matched our previous strongest quarter of the year. Revenue was up 14% and gross profit was up 25%, versus third quarter of 2009. Our backlog in services is from a diverse set of the big four carriers plus many others and we expect to have another solid year of services results in 2010. As you can see from our results, we have a lot of great things going on here at SBA and feel like we're hitting on all cylinders. We expect and look forward to a strong full year in 2010.

With that, I'll now turn it of to Jeff.

Thanks, Kurt and good morning everyone. We did have a very good fourth quarter and full year 2009. And I want to thank all of our employees and customers for that. Our employees executed very well in meeting the needs of our customers, and those customer needs were and continue to be many. We continue to operate within a very favorable macro environment. As you no doubt have heard directly from our customers, the wireless carriers, network demand driven primarily by growing data use and new devices is soaring. Carrie response has been and they have stated will continue to be increase investment in their networks either to add capacity or to migrate to next generation technology. While increased carrier investment is spent in many areas, a primary area is for new or enhanced cell sites. It is this investment in cell sites that drives our leasing and services business and gives us the confidence to invest in the number of Towers we own and in repurchasing our common stock. Currently this level of investment is very strong and we expect it to stay that way.

Much detail around the specifics of carrier wireless investment, the impact of data and SmartPhones and the timing and pace of network improvement has already been presented this earnings season by our customers and our peers so I'm not going to repeat that here. But the bottom line is that organic growth prospects remain strong and we expect organic growth rates in 2010 will be at least as good, if not better, than those we enjoyed in 2009. I want to address a couple of SBA specific items and then we'll open it up for questions. First, I want to discuss our recent Extenet investment. We first got into the DAS business with our light Tower acquisition in late 2008. As we began operating our DAS business, we confirmed our belief that it was a great business that would be a permanent part of wireless infrastructure. The DAS business model is very similar to Towers. However, after looking around the industry, we concluded that we were the sixth or seventh largest player in DAS and that we were years behind the market leaders in terms of scale and capabilities. Consequently, we decided to seek a way to accelerate our investment and competence in DAS and we succeeded with Extenet.

Extenet is a world class DAS business provider. Number one or two in the market with deep resources, technical capabilities, and valuable intellectual property. We agreed to a deal with Extenet whereby we would contribute cash and our six DAS networks in exchange for a sizable minority stake. We are very pleased with our investment in Extenet and it will be the vehicle through which we channel all DAS opportunities going forward and in return Extenet will look the to SBA for Tower and macro site solutions. It's a classic example of trading up to own a piece of the market leader. We intend to increase our investment in Extenet over time and mechanisms are in place to allow us to do so.

Next I want to convey a few thoughts around refinancing and the current state of our balance sheet. All the work that needed to be done has now been completed. We have an excellent liquidity position and maturity profile and my opinion any refinancing risk which was once perceived is not completely gone. We recently obtained a new $500 million credit facility on the most favorable terms we have ever obtained. The capital markets are wide open to our industry and in particular to SBA, due to the superior credit characteristics of our business. We still have ahead of us the goal of refinancing our 2006 CMBS in advance of its anticipated repayment date in November 2011. We are likely to refinance that debt this year and we are watching currently and expected the interest rate spreads, declining prepayment penalty and other factors. The high level of inquiry we are receiving from multiple markets for that refinancing gives us the luxury of pursuing the transaction in the ordinary course of business with a focus on maximizing the end result. In summary, we are very comfortable with our balance sheet and refinancing profile. And with last year behind us, we are looking forward to spending less time talking about our balance sheet and more time talking about growing our business. On the growth side we're off to a good start. We have a number of acquisition transactions under contract and many more in negotiation. We continue to focus on buying and building growth assets that will grow faster than our portfolio average. While acquisition activity has become more competitive and is once again at 2007, early 2008 pricing levels, the strong organic growth we expect coupled with our low cost of debt capital allows us to continue to acquire assets that we project will produce positive returns above our weighted cost of capital that we have historically targeted and attained. Our geographic focus is primarily in the US and secondarily in other countries in the Western hemisphere where we hope to announce some new asset operator ownership later this year. Our non-US activity will be measured in small in relation to our overall US investment but we think exciting from a return on investment and growth perspective. We feel very good about our prospects for increasing the number of our Towers own by 5 to 10% or more this year.

Finally, I want to close with a few thoughts around our stock repurchase plan. We have purchased about 260,000 shares so far and I expect that we will purchase more shares this year. Our approach has been and will continue to be an opportunistic one, and not one based on a steady or fixed dollar amount of quarterly repurchases. We expect stock repurchases will be a valuable contributor to the growth and equity free cash flow per share but still a secondary use of investment capital behind portfolio growth. We intend to continue to balance all of our investment against the current leverage targets of 6.5 to 7 turns which we believe will drive superior value creation over time through growth in equity free cash flow per share. We are very excited about 2010. We're off to a great start and have a number of growth initiatives under way. We think our customers will stay busy all year and we believe the combination of everything we have discussed here on this call will make for a very good 2010 for SBA, and for material long-term growth in equity free cash flow per share.

Kathy, at this time we'll open it up for questions.

(Operator Instructions) Thank you. Our first question comes from David Barton with Banc of America-Merrill Lynch.

Hey, guys, good morning, thanks for taking the question. First, Jeff, just on this Extenet deal could we just touch on quick, is there going to be any noticeable revenue impact when the the deal closes. Obviously since you're taking an equity stake in a larger entity, what kind of impact on the below the line should we be looking for? Is there any cash or capital expenditure support implicit in this business? Just a little bit more about how the nitty gritty of the accounting and the go-to-market strategy might work with these guys. And then just second, we've obviously talked to a lot of the guys about the demand profile from the carriers but it sounds like we've heard in recent days that Genachowski, the FCC Chairman thinking about putting new spectrum into the market, specifically the D block or at least trying to get that out in the broadband plan in the coming week. Can you kind of elaborate on anything you think you've heard about new spectrum and the timetable and anything your customers are talking about in the terms of getting ready to spend more to develop spectrum at the margin would be helpful. Thanks.

Thanks, Dave. On Extenet. There is some revenue impact to us but it's already been reflected in guidance. When we first put out guidance in November, our DAS business was in there. When we put out guidance last night, our DAS business was not. And actually had about $2 million of revenue impact and about half million dollars of EBITDA impact, so to the extent we did increase our guidance, it's probably actually more than people might have thought. In terms of our ongoing -- we don't really have any obligations to fund Extenet. It's kind of a private equity structure where we have the right to continue to invest, provided investment is needed. We think it will be and we think we're going to want to participate. But we don't really have -- you shouldn't expect any kind obligatory relationship there. It will be a discretionary one but actually the intent is to do some more investing there. And in terms of our working relationship, it will be a very close one where Extenet does DAS, we do Towers and macro sites and where carriers need combination solutions, we'll be the joint package.

In terms of the spectrum, the Genachowski news was good and welcome. It will depend just as it has always depended in the past on exactly what new spectrum is allocated and whether they will try and set up rules where new market entrants are guaranteed. Obviously, that's a better result for the Tower industry than existing guys just adding spectrum to their position. So in general, Dave, I think it's a positive but we still need to understand exactly more of the specifics before we could speak more intelligently to what it might mean for us.

All right. Thanks, guys.

We'll go next to Clay Moran with Benchmark.

Thanks, good morning. Couple quick clarifications. Can you just remind us of the timing and amount of the prepayment penalty on the CMBS that you mentioned? And then you mentioned the M&A environment being more competitive, similar to 2007. I read that as Tower cash flow multiple range of about 14 to 18. Is that roughly correct? And then when you're looking at M&A now, are you looking for the same type of Tower characteristics as previously, sort of develop or build type growth Towers? Thanks.

Brendan, do you want to do the prepayment penalty.

Today we're looking at a prepayment penalty of approximately $40 million if we were to repay the 2006 CMBS now. That prepayment penalty goes down by roughly 3 to $4 million a month each month between now and February of next year. Once we reach February of 2011, there would be no further prepayment penalty.

On the M&A side, clay, it is back to mid to high teens Tower cash flow multiples. Our focus continues to be on growth assets where we will pay higher multiples, similar to a new build type characteristic where we think the future growth will be superior. We'll also buy more mature assets, though, where we can buy it at a lower multiple, that's not only accretive to our trading multiples but also to our equity free cash flow per share, given our low debt, low cost of incremental debt. So there's a couple different ways to play it, all of which will execute in a manner that we believe will be accretive to equity free cash flow per share.

Okay. Thank you.

We'll go next to Mike McCormack with JPMorgan.

Hey, guys, thanks. Just a couple quick ones. First, your thoughts on some of the news out there about a T-Mobile IPO and whether or not that would be more beneficial for Tower companies versus partnership, for example, with Clearwire? And then secondly, AT&T clearly has pretty significant incremental CapEx coming this year. Can you guys just sort of put some sort of maybe parameters around what opportunity may exist for the Tower guys? Thanks.

I think on the -- I don't certainly have a lot of or any inside knowledge on the T-Mobile thinking or plans, Mike, but very generally, my understanding over the years has been that T-Mobile's budget has always been a push and pull and tug between the United States and Germany and to the extent that they have independent financing, I think it can only be better for the US Tower industry because I think by anyone's admission, T-Mobile has more than they want to do in the United States in terms of building out their network. So I think that would have to be a positive. And on the the AT&T side, they're very busy. They've publicly within the last couple months said spending's going up. They're very busy with us now. They've been busy with us for, geez, years, and we just see that to be a continued big source of demand from that particular customer for the foreseeable future.

Yes, and I would add to that, Mike, that you're going to see -- it will continue to be a good mix of new cells and 3G amendments and with LTE starting this year as well. So it will be broad across different projects. They've got a lot to do.

Great. Thanks, guys.

Your next question comes from Jonathan Atkin with RBC Capital Markets.

Yes, question for I guess Kurt or Jeff. I'm wondering on the LTE activity that you mentioned, do you think you might see meaningful LTE activity from multiple carriers this year? And then with respect to Canada and other international initiatives, in Canada if you could maybe just review some of the drivers you're seeing there and how do the tenant economics compare to the US? And with regard to other markets in the Western hemisphere, might there be multiple smaller markets that you enter or is it one primary opportunity that you're looking at? Thank you.

I'll take the first one, John. This is Kurt. With LTE, I think it's pretty publicly well-stated by Verizon that they're in high gear to launch 25 markets this year and we're seeing that and feeling that. And with AT&T, we're not seeing anything different than what they're publicly stating as well, which is they're just now getting started and there's some planning activity going on and we will see some of that this year. But obviously the bigger piece will be from Verizon.

On Canada, John, we are open for business up there, building Towers, looking to buy Towers where good opportunities exist. There is not the same fragmented ownership of Towers in Canada as there is in the United States. Our strategy up there will be primarily a new build one. The economics and the business, the zoning, all the characteristics that make the US Tower markets so great are really the same in Canada. Rents are similar, cost of operations are similar, cost to build are similar. We are talking to everyone up there, incumbents and new market entrants. We will probably do most of our building for some of the new market entrants but on -- with assets that we believe will be attractive and needed by both incumbents and new entrants alike as we go forward. And in terms of other markets, we're doing some work, investigating some other markets in the Western hemisphere, and I would say in terms of how many different markets it would be one, not more than two, ideally, by the end of this year.

Thank you very much.

We'll go next to Jason Armstrong with Goldman Sachs.

Thanks. Good morning. First question on guidance. You obviously took the number up this morning but it seemed tied mostly to higher Tower counts as opposed to sort of really increasing the lease up or amendment rates you're assuming on existing Towers. We've had some fairly material things happen since you set out that guidance. AT&T doubling amendment activity or talking about that in 2010. Clearwire, $4 billion in funding. And even you guys specifically said on this call that on a gross dollar basis new revenue signed during the quarter was second highest ever and amendment activity was the highest ever. What stops you from being more constructive around the outlook at this point. Second question, Jeff on M&A AMT talking yesterday about a cost of capital advantage. Many of your peers saying that AMT is there at premium multiples for smaller assets at this point. Maybe if you could walk through the advantages you bring to the table, how you could equalize this and maybe for instance is there an equity equalizer here where you could offer up sort of premium growth equity as a currency for deals. Thanks.

In terms of the carrier growth, Jason, we do feel that 2010 is going to be very good and as we've assumed in our guidance, we're looking at organic growth rates that will be at least as good, maybe even a touch better than what we had in 2008. But it's important to know that pick the number 9%, which is what we've guided people to. To do 9% in 2010 versus what we did in 2009, if we did the same 9%, you're looking at 10% absolute incremental dollars in addition, because you're now calculating growth rates off of the higher base. So it's extremely important that people understand that just to hold the same growth rate year to year means you are definitely adding more dollars per Tower than you added the year before. So we do think it's going to be a very good year. We think there's chances to move things up as we move through the year. I'm not sure all of the guidance increases that you saw us flow through yesterday were from M&A. I think it does reflect our positive feelings about carrier activity. So I certainly don't think you should read into that any kind of skepticism or concern about the year. We think it's going to be a good one and at least as good, if not better, than last year.

In terms of M&A, it has gotten a little more competitive out there. I think we are focused on a couple of financings. One of which we just did. This credit facility allows us to acquire $500 million of debt at 2.25%. That's pretty good. So we are -- I guess compared to some, American may have a cost of capital differential, we actually don't think it's better than ours, particularly when you factor in the debt, debt to equity mix and the cost of equity. So we can be competitive but clearly we've not been the winner on some of the deals that they've announced. Those were competitive and they decided to pay what they paid to win the transaction. We continue to focus on deals of all sizes. We thought we posted a pretty healthy number of deals under contract in the press release. We got a bunch more we're working on. It's a big country out there. We've been at this for a long time in the smaller, mom and pop area. We have a number of repeat sellers who have procedures and documents in place with us that for a fair price they'll just come back to SBA. And that's a big part of what we do. So we feel pretty good about our ability to grow the Company to that 5 to 10% or more this year. And in terms of equity, I mean, we'll consider it but my focus going forward is primarily to keep the cost of our debt capital as low as we can and primarily cash fund these transactions. And I don't feel disadvantaged at all on that front.

That's helpful. Thanks a lot, Jeff.

Thank you. We'll go to Fred Feldman with Deutsche Bank.

I just want to talk quickly about your discretionary CapEx guidance. Typically that guidance is largely composed of Tower construction. If we sort of look at how many Towers you're planning on building, and what the usual costs are, doesn't quite get to what you outlined. I'm wondering what is sort of the breakdown of how you're going to get there and I'm particularly interested in the earn-out component?

I don't think there's any earn-out component in question there, is there, Brendan?

There's a very small, small amount that's related to earn-outs on previously closed deals. But I think the assumptions around the new builds is consistent with what we've historically done. The balance of the discretionary CapEx guidance is really associated purely with acquisitions that are already under contract. Plus, we've made some assumptions around ground lease purchases that we intend to do during the course of the year.

That might be it, Fred. We're actually targeting a higher level of ground lease purchase activity this year which is in those numbers than what we did last year.

Is that just a goal or do you actually see a real increase in the ability to buying a lot of land this year?

Well, it's a goal right now. I'm hoping to turn it into a reality.

Okay. Well, that was helpful. Thanks a lot.

We have a question from James Radcliffe with Barclays Capital.

Good morning, folks. I'm wondering, your down at about seven times leverage. You're growing EBITDA a pretty healthy clip. Going forward should we be expecting you to essentially be increasing the absolute level of debt over time or do you expect to sort of gradually delever purely through growth even if you aren't actually paying down debt?

Clearly, the latter, James. We will, based on our projected EBITDA growth and our positive spread of equity-free cash flow versus nondiscretionary investment, we're going to be healthfully -- that's probably not a word, but we're going to be delevering fairly easily, but for the amount of money that we choose to invest in acquisitions and stock repurchases. So that's really the driver to where we will end up on a leveraged front at any given time, but our thought now -- I mean, we have the ability to delever if that's what we chose to do. It's right there in the business model. But people should expect that in the current capital markets environment, given the cost of capital that we see and given the opportunities that we see on the portfolio growth side, that we will stay within or around that 6.5 to 7 turns range, because that's where we think we'll maximize shareholder value.

So in the current capital environment, then, it would be reasonable to assume that investments in either your own stock or additional assets would tend to exceed free cash flow?

Yes.

All right. Thank you.

We'll go next to Simon Flannery with Morgan Stanley.

Thanks very much. You mentioned in your comments about seeing some new interest from rural and suburban WiMAX providers who are getting funding out of some of the stimulus money. Can you just help us think about the potential materiality of that and really a lot of the funds have still got to be disbursed and deployed but where do you think we are in -- is that something that is going to ramp this year and more next year and what you're seeing from those guys, thanks.

Yes, some of it's been going on for a while. The Department of Agriculture funding has been going on for years. We saw it with some of the old rural cellular players and some of the stimulus funding is really filling that bucket back up and it continues and so some of these guys didn't have to wait. They had business plans ready and coming and in the two different buckets of money come with different strings attached. So I think you're going to see a mix of these players out there. We're seeing some decent numbers, tens of leases, not hundreds, but over time it will build into several hundred leases across the next couple of years and it's -- we think it's good, solid business. I've seen a couple of the business plans where they're going about this smartly, in areas where the DSL or cable modem service is not readily available and people are looking for this service and with the product and technology that's out there, I think they're being fairly successful.

I would say, though, Simon, from a financial materiality perspective, while positive, it's probably not going to be financially material, certainly this year.

Thank you.

Just a reminder, it's star one for any questions. And next we have Gray Powell with Wells Fargo.

Good morning. Thanks for taking the questions. Just had a few. At a high level, with accelerating growth in data traffic over the next few years, how do you expect carrier -- the carrier 4G upgrade cycle to compare to that of the 3G cycle?

I think it will be similar. It will take years. It will be -- there has to be a certain amount of infrastructure in place to launch a product, just like there was when they had to launch 3G. I'm trying to think of differences, Gray, between the 3G overlays and the LTE roll-outs and I'm having trouble. There's a lot of differences.

With the different frequency, wildly different frequency at 700 the need for the dedicated lines and antennas, it's really a full new network being overlaid. You could actually even say it's a healthier in some regard because you can't share since you're at a totally different frequency. But they're doing some mixing and matching. Every site the amendments look a little different based on what the loading they had originally in their original lease versus where they're headed to and they all have multiple frequencies today, 800, 1900, 2100, they're throwing 700. So it's a real mixed bag as to what the amendments look like. But on a standalone basis, at the end of the day, they need to end up with three antennas and six lines dedicated to LTE at 700 megahertz. So it's -- they can do some mixing and matching but it's a big new network coming and it's a big, robust network that doesn't just happen quickly.

Okay. That's helpful. And then on the acquisitions you made in Q4 and the pending deals that you've announced in the press release, can you just talk about the characteristics of those in terms of like tenants per Towers and the multiples, just roughly average multiples you're paying?

Yes, it's probably mid-teens and less than two tenants per Tower.

Okay. And then roughly speaking, I mean, if I just kind of do a generic Tower model and take sort of an 8% like organic growth rate for the next three or four years, it translates into roughly high teens type. I'm just curious, how much do you think you can supplement your organic free cash flow per share growth either through acquisitions or buying back stock or making other investments in the business?

Enough to get above that 20% level we mentioned earlier.

Okay. And then last question, when you think about buying a Tower versus buying stock, what's the target time frame for accretion to equity free cash know per share?

Target time frame?

I mean like had a two or three year time frame if they were -- for anything they do to be accretive to equity cash flow per share. I'm just curious what your guys target would be. Immediately accretive or -- ?

With earning a half a percent on our cash balances and accessing credit facility debt at 2%, it's accretive the minute we close on it.

Okay. Thanks.

We also have a question from Ric Prentiss with Raymond James.

Thanks. Good morning, guys.

Hey, Ric.

I apologize if this has been asked. This is one of those days that I have to be in two places at one time. On the international side, Jeff, I heard you mention the Western hemisphere looking at one to two potential countries, can you help us understand how do you rank order countries as you start thinking about the process? Is it number of licensees? New spectrum auctions? Potential that carriers might sell their Towers? Also, how important is size within a particular local? Do you need to get a big presence down there. Just trying to understand how you thing about it, not that we want to know the countries, even though we do, just how you go through the process.

I think it's all those things. We want multiplicity of carriers, either coming or existing. We want to see US-like migration paths of 2G to 3G to 4G. We certainly want to see some land rights where we feel that we've got adequate barriers to entry. That's probably -- I should have said that first. And -

For scale, do you need it to be big?

For us, we're not going to buy a single Tower in South America and set up a flag. We would need -- we would need to see our way clear to be in the hundreds of towers at some period -- over some period of time for it to I think make sense for us to go do that. So not one Tower but not 1,000 either.

And how important is carrier sales to the model or would build to suit satisfy it?

Well, as long as I can get to those Tower numbers through builds, that would be okay. Carrier sales at the right price, assuming you're buying the towers at the right point in the lease-up cycle is also always good. So those -- all those things matter. But we're in Canada now because it's primarily a new build strategy. We did not go into Canada with the belief that we will be growing materially in the near future through acquisitions, although that's how we got in there.

Speaking of build to suit, second question is the build to suit environment in the United States, we've heard mixed stories, carriers obviously like it because that gets them exactly where their thought would be. What are you seeing as far as build to suit demand from the carriers, build to suit pricing that Tower companies or independent guys are looking to commit to?

Well, there's pretty good demand. There's some crazy pricing which we've chosen to stay away from. We don't -- we have been successful in some competitive build to suit processes, but more unsuccessful than not because of price. At our -- we could probably build more towers if we decided to be the low cost provider, but that's never been our strategy. So our approach continues to be use our years of experience to identify the best real estate and then do what we do best and get the land secured and then you can actually work through what we think is an economically attractive build built to suit deal. We're certainly not winning every competitive process out there on new builds.

There's also -- Ric there's also kind of a hybrid where it's really more of a negotiated market level built to suit where we've got a good relationship with the carrier, they're comfortable with us building five or ten sites and we work out the economic terms and we get going. So it's not all just big public bids and we do a lot of strategic sites too where as Jeff said, we know of a location that three of the big four need and we'll go put a stake in the ground, get a ground lease, possibly put in zoning and as funding becomes available and we're marketing the site and they say hey, we know you're working on that one, you're ahead, let's go and they just join with us. Those are almost a quasi build to suit and everyone ends up being happy at the end. So we prefer those better than the pure bid situations.

That's the right decision to. We would rather see somebody be smart than feel they have to commit to putting the money to work. I guess the final question is we lived through a very unique, hopefully unique moment in time over that last year. You were very focused on the balance sheet, very focused on getting it in good order. You guys did a good job. As you look to 2010, what are your top priorities? What do you think the number one thing Jeff Stoops wants to think about for SBAC really is?

Having a platform that will sustain long-term growth for multiple years.

Great. Thanks, Jeff.

Thank you. And that does conclude our Q&A session for today. Please go ahead with any closing remarks.

We want to thank everybody for being on the call today. We had a great 2009 and looking forward to repeating it in 2010. Thanks.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.