SBA Communications Corp (SBAC) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the second quarter 2010 earnings conference call. (Operator Instructions) We do remind you, today's call is being recorded. And starting off, we have Director of Finance, Mark DeRussy. Please go ahead.

Thank you, and thank you for joining us this morning for SBA's second quarter 2010 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer, Kurt Bagwell, our Chief Operating Officer, and Brendan Cavanagh, our Chief Financial Officer. Before we get started, I need to get the standard SEC disclosure out. Some of the information we will discuss in this call is forward-looking, including, but are not limited to, any guidance for 2010 and beyond. These forward-looking statements may be affected by the risks and uncertainties in our business. Everything that 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 form 10-K for the fiscal year ended December 31, 2009, which documents are publicly available. These factors and others have affected historical results, may affect future results, and may cause future results to differ materially from those expressed in any forward-looking statement we may make. Our statements are as of today, August 3rd, 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 directly comparable GAAP financial measures and other information required by Regulation G has been posted on our website www.sbasite.com. Brendan, would you please comment on our second quarter results.

Yes, thanks, Mark. Good morning. As you saw from our press release last night, our second quarter financial results were excellent. 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 site development revenues, Tower cash flow and adjusted EBITDA. Total revenues were $154.5 million, up 13.5% over the year earlier period. Site leasing revenues for the second-quarter were $131.7 million, or a 12.3% increase over the second quarter of 2009. This site leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $101.7 million, or an increase of 13.3% over the second quarter of 2009. Site leasing contributed 97.3% of our total segment operating profit in the second quarter. Tower cash flow for the second quarter of 2010 was $103.8 million, or a 13.7% increase over the year earlier period. Tower cash flow margin was 79.5%, compared to 78.9% in the year earlier period. Our services revenues were $22.8 million, compared to $18.9 million in the year earlier period, or a 20.8% increase. Services segment operating profit was $2.8 million in the second quarter of 2010, compared to $2.5 million in the second quarter of 2009. Services segment operating profit margins were 12.4%, compared to 13.2% in the year earlier period. Kurt will discuss services in more detail shortly.

SG&A expenses for the second quarter were $15.7 million, including non-cash compensation charges of $2.7 million and acquisition-related expenses of $1.4 million. SG&A expenses were $14.5 million in the year earlier period, including non-cash compensation charges of $2.3 million and $1.3 million of acquisition-related expense. Aside from the non-cash compensation increases, the increase in SG&A was primarily due to increased expenses associated with existing and prospective international operations. We continue to enjoy a high degree of operational leverage and, not withstanding an increase in absolute cash SG&A expense, our adjusted EBITDA margin continued to grow. We expect this trend to continue even as we grow the portfolio. Adjusted EBITDA was $95.5 million, or a 14.8% increase over the year earlier period. Adjusted EBITDA included approximately $900,000 of one-time property tax and sales tax-related expense reductions in the second quarter of 2010, $600,000 of which benefited Tower cash flow and the remainder reduced SG&A expense. Adjusted EBITDA margin was 62.3% in the 2nd quarter of 2010, up from 61.8% in the year earlier period.

Equity-free-cash flow for the second quarter of 2010 was $54.2 million, compared to $50.9 million in the year earlier period. Equity-free-cash flow per share for the second quarter of 2010 was $0.47, compared to $0.43 in the year early period and $0.44 in the first quarter of 2010. With our interest expense projected to be stable over at least of the next 12 months, we expect to produce materially higher year-over-year growth on a percentage basis, and equity-free-cash flow per share.

Net loss attributable to SBA Communications Corporation during the second quarter was $83.7 million, compared to a net loss of $29.4 million in the year earlier period. This increase in net loss was primarily due to a $48.9 million loss on extinguishment of debt associated with the repayment of our $938.6 million in principal of our 2006 CMBS certificates, which was previously discussed in connection with our 2010 Secured Tower Revenue Securities offering and an increase in cash and non cash interest expense. Net loss per share for the 2nd quarter was $0.72, compared to a net loss per share of $0.25 in the year earlier period. Net loss for the second quarter of 2010, excluding the impact of the $48.9 million loss on extinguishment of debt was $34.8 million, or $0.30 per share. Weighted average shares outstanding for the quarter were 115.7 million, down from 117.1 million for the year earlier period, due to stock repurchases. Quarter-end shares outstanding were 114.6 million.

In the second quarter, we acquired 185 Towers and built 24 Towers, ending with 8588 Towers owned, and the rights to manage approximately 5600 additional communication sites.

Total cash capital expenditures for the second quarter of 2010 were $97 million, consisting of $2.6 million of nondiscretionary cash capital expenditures, such as Tower maintenance and general corporate CapEx , and $94.4 million of discretionary cash capital expenditures. Discretionary cash CapEx includes $74.4 million, incurred in connection with acquisitions, exclusive of any working capital adjustments. $10.6 million in new Tower construction, including construction in progress, and $2.2 million for augmentations and Tower upgrades. With respect to the land underneath our Towers, we spent an aggregate of $7.8 million to buy land and easements and to extend ground lease terms. Our investments in land are both strategically beneficial and immediately accretive to equity free cash flow per share. As of June 30, 2010, we own or control for more than 50 years the land underneath 29% of our Towers, and approximately 70% is owned or controlled for more than 20 years. At this point, I will turn things over to Mark, who will provide an update on our liquidity position and balance

Thanks, Brendan. We had a very busy and productive second quarter with respect to Capital Markets activities. Further improving the structure of our balance sheet and repurchasing a significant number of shares of our stock. During the second quarter of 2010, we opportunistically repurchased approximately 2.6 million shares of class A common stock for $88.4 million, representing an average price of $33.58 per share. As of June 30, 2010 we have cumulatively repurchased 2.9 million shares at an average price of $33.49 per share and have approximately 151 million remaining under our stock repurchase authorization.

In April, 2010 we issued $1.23 billion of Secured Tower Revenue Securities at a weighted average fixed coupon interest rate of 4.6%. This issue consists of two securities. $680 million with an anticipated repayment date of April 16, 2015, and $550 million with an anticipated repayment date of April 16, 2017. Net proceeds from this issuance were approximately $1.21 billion, and were used to repay the outstanding 2006 CMBS certificates in the amount of $938.6 million. And the associated prepayment consideration of approximately $38.5 million. The remaining net proceeds will be used for general corporate purposes.

As of the end of the second quarter, 100% of our outstanding debt was fixed rate, with a weighted average coupon of 4.85% per year. In addition to our cash, restricted cash, and short term investment balances of $260 million, we have available to us $500 million under our revolver, for a total liquidity of approximately $760 million as of the end of the second quarter.

With the completion of our Secured Tower Revenue Securities transaction, our refinancing goals have been fully met. We have no material debt maturities prior to 2013, and we have ample liquidity. The structure of our balance sheet has been materially improved, with financings now a mix of secured and unsecured debt from a variety of markets. Our debt maturities have been lengthened and staggered so that in no future refinancing year will we need to refinance more than 22% of our current debt.

We believe our balance sheet is it excellent shape. SBA ended the second quarter with $3.1 billion of total debt. We have cash, cash equivalents, short-term investments, and short-term restricted cash of $260 million, resulting in net debt of $2.8 billion. At June 30, 2010, our net debt to annualized adjusted EBITDA leverage ratio was 7.3 times. And our net secured debt to annualized adjusted EBITDA leverage ratio was 2.5 times. Our second quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was very strong at 2.5 times. I will now turn it over to Kurt to discuss some of our operational results.

Thanks, Mark, and good morning. During the second quarter, our activity picked up on all fronts. Leasing revenues signed was higher than in Q1, we built and bought more Towers. Our services revenue was higher and our backlogs finished in good position. On the leasing side, we had a good spread of activity on new sites and even greater activity on upgrades to existing installations for 3G and 4G overlays. We expect upgrade or amendment activity to remain stong for the remainder of the year and activity in general from all sources to pick up in the second half. Rental rates for new leases have remained very firm, and the amendment rates to existing installations have also been favorable. Equipment loads required on the Tower and ground continue to be substantial. We expect the demand for high quality voice and data for both consumers and businesses will continue to cause cell additions for capacity, performance, and coverage. As the major carriers continue to push their 3G and 4G overlays to the forefront of their activity, just over half of our new revenues signed in the quarter was from amendments to existing installations. Q2 was our biggest amendment quarter ever, more than either of the prior two quarters, which already represented a significant spike over levels of one to two years ago. Continued backhaul improvements have been made at our sites through a variety of fiber providers and also through microwave additions by both the carriers themselves and some third party providers. The numbers of sites with upgraded backhaul service is increasing daily. This is expected to continue for some time as the new technologies and features require the higher bandwidth and speeds.

In addition to the 185 Towers purchased in the quarter, we built 22 new Towers domestically, and two internationally, with the ramp-up expected in both areas in the second half of this year. We continue to add high quality, high growth assets into our base of Towers, and we expect to continue to find good opportunities to increase the size of our Tower portfolio.

Operationally, our Tower OpEx and CapEx remain in line with our budgets and estimates and continue to prove predictable and controllable. Our team has a good set of systems in place to manage every type of expense, and we believe that consistent, favorable expense trends offer more evidence of the highly efficient and scalable nature of our Tower base.

Lastly, our services division had a strong quarter, and their numbers were up year-over-year and quarter-over-quarter in both revenues and profits. We continue to perform high volumes of the same three core services we have been offering for years -- site development consulting, construction, and technical services. We have been very involved with every major carrier on both new cell additions and technology overlays in all of our services markets.

Overall, it was a very good quarter for us. We're optimistic about the future, based on our backlogs, our customer interactions and their plans, and the continued overall demand for high quality wireless services. At this point I will turn it over to Jeff.

Thank you, Kurt and good morning everyone. We did have a very good second quarter. The drivers of our operating results in the second quarter were essentially the same as the first quarter, but with higher volume all around and some improved expense results, which led to higher sequential results. Once again, we led our industry in adjusted EBITDA growth by a good amount.

As a result of our second quarter results, our expectations around a strong second half, and additional acquisitions, we are once again able to increase the mid-points of most items of our full-year guidance. I want to thank all of our employees and customers for our continued success. Our employees executed very well in meeting the needs of our customers and our customers were busy. We continue to operate within a very favorable macro environment.

2010 will likely be remembered as the year of the smartphone and the beginning of 4G. For a number of our carrier customers that has meant additional investment in their networks, either to add capacity or to migrate to next generation technology. As was the case in the first quarter, most of our activity in the second quarter came from three customers -- AT&T, Verizon, and Clearwire. The combined level of activity from these three was greater in the second quarter than in the first quarter. We are also seeing signs of increasing activity from some of the other customers, particularly T-Mobile.

We agree with the commentary that second half leasing activities should be greater than first half, which bodes well for our 2011 financial results. All in all, we expect 2010 to be another very solid year for organic leasing activity, with added revenue similar, on a per Tower basis, to 2009 and greater absolute added organic revenue in 2010 because of our larger base of Towers. Longer term, we expect years of continued solid organic leasing demand, both in the US and in the international markets we are pursuing. There is much 3G network development left to do, 4G deployment is just beginning. A brand-new 4G network through Harbinger Light Squared has about announced, and plans for the release of new spectrum are being formulated, all against the backdrop of seemingly insatiable consumer demand for faster wireless speeds and more broadband consumption. Our future continues to be very bright.

On the capital allocation side, we continue to increase the size of our portfolio through buying and building Towers. We have almost 300 Towers under contract to purchase, and we are evaluating additional opportunities. We are on track to increase our portfolio by our goal of 5% to 10% this year. We continue to focus on buying and building growth assets that we expect will grow faster than our portfolio average, both domestically and Internationally. All acquisition activity has become more competitive and expensive on an absolute basis in the US. 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 average cost of capital. Our geographic focus remains primarily in the US, and secondarily in other countries in the western hemisphere. While all the 298 Towers currently under contract to acquire are in the US, we are increasing our level of activity in Central America. Since our last call, when we announced our Panama acquisition, we have expanded our central American Tower ownership to Costa Rica and El Salvador, buying ten Towers in El Salvador and building two Towers in Costa Rica. We now have 114 Towers in the region. We like certain markets in the region a lot. 3G and smartphone adoption is in the early stages, and additional spectrum auctions are planned. We expect primarily all of our revenue and expense will be denominated in US dollars. Our goal is to build more Towers in Central America, particularly in Costa Rica, and we are well-positioned to do so. We have actually been engaged in development activities in Costa Rica for over two years, working closely with all the Central American carriers who are also the likely license winners in the upcoming Costa Rican wireless spectrum auctions. We believe the results will be very good for SBA once the spectrum auctions occur and licenses are awarded.

In addition to building Towers, we are continuing and will continue to evaluate additional acquisition opportunities in Central America and Canada. Currently, our Towers owned outside of the United States and its territories represent less than 2% of our portfolio, and we would like to see that number grow to 10% over time. That will likely take us several years to accomplish. We intend to continue to invest in the land underneath our Towers, through both buying the land and extending the underlying lease terms. That activity continues to make sound strategic and financial sense to us.

Last quarter, we repurchased $88 million of our stock under our $250 million repurchase authorization. That is our largest quarterly amount under the current authorization and is a function of several factors. First, we are very comfortable with our balance sheet, and our leverage targets gave us some room to invest. Second, market price fluctuations gave us the opportunity to repurchase our stock at what we believe were very attractive prices. We determined that stock repurchases at those prices were more attractive than some of the acquisition opportunities we were presented at the time. Our decisions in this regard will continue to be governed first and foremost by target leverage levels, then by the relative attractiveness of acquisition and stock repurchase opportunities available to us. It will continue to be an opportunistic, flexible approach.

In light of our leveraged targets and our current backlog of contracted and prospective acquisitions, I believe we will invest more capital in acquisitions than in stock repurchases in the second half of 2010, because we find these acquisition opportunities to be very attractive. But opportunities come and go, and we'll have to wait to see what happens there. We are committed to keep our balance sheet optimized, to maximize growth and equity-free-cash flow per share. We are very excited about the future. The underlying drivers to our business remain 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 great shape. Our employees are working hard and executing well. We believe our prospects are excellent for future material growth and equity free cash flow per share. And we look forward to reporting future results. Kevin, at this time we're ready for questions.

(Operator Instructions) First question is from the line of Jonathan Atkin of RBC Capital Markets. Please, go ahead.

Yes, good morning. I had a question about the services business and some of the drivers there, as well as Canada. On services, I'm just wondering the growth there was it driven by more customers of yours in a greater number of regions, or just expanding the scope of work with your existing customers in your traditional territories? And then on Canada, if you could maybe comment a little bit on the leasing drivers you have seen and then expectations for the second half and beyond.

Jonathan, it's Kurt. On services, basically it's busy out there. We have been in the same number of markets in the same geographic locations for a long time and our teams have a very diverse customer base. This past quarter, they had a lot of business from a lot of different customers and that is what drives a better quarter. It wasn't just any single big project, which is when you are in the services business that is nice because it's a steadier flow of business and easier to provision and earn money at.

So it was really just a diverse backlog and customer set, and some good spending by the carriers. Canada, the leasing, obviously a lot of new entrant activity, several new entrants, some more national, some more regional. We're seeing also some lease-up from the incumbent carriers and we have got quite a few new tower builds in the mix going right now. Going through the leasing and zoning process, so it's feeling pretty good up there. The asset protection is excellent. It's really driven a lot of our leasing results and I think the new Tower builds that we're doing will fall in that same mold.

And then finally, on outdoor DAS, is there anything that you would do outside of your existing investment on your own, or is all of that going to be channeled through your investment activity there?

It will all be excuse me, Jonathan, it will all be channeled through our investment in ExteNet.

Thank you.

Our next question is from the line of Ric Prentiss, Raymond James, please, go ahead.

Good morning, guys.

Good morning.

I have a couple questions for you. First in the M&A arena, Jeff I think you mentioned how the pricing was getting a little more expensive. Can you tell us what we're seeing out there? Is it still teens? Are we starting to into those 20s up there? And timing to close the transactions. Last quarter you had given us a thought of how many deals you would close in the third quarter, and now you have given us kind of a second half. Are deals taking a little bit longer to close? So pricing and kind of timing.

I will address the latter first, timing really hasn't changed. It's still a 90 to 120-day process. Really the difference in timing between the two quarterly results, Ric, is just that we added more Towers under contract between last release and this release. But no material change in timing. We continue to do very well. I think by industry standards, given our length of time in this business and our experience. On pricing, I would say on average things are high teens. There is some low 20's deals that make sense, because they look -- it's not that they look like, they are basically brand new Towers, new builds, which if you pencil out, if you build it yourself your day one multiple would be above 20 times with a single tenant, but with unbelievably great growth prospects. So you really have a lot of variation out there. You can't really focus just on the day one multiple without understanding two additional very important factors, which is the price per Tower paid and the growth prospects of that Tower.

And then now that we're here in August, hard to believe already, might start seeing some 2011 lease applications. Just wondering what you are getting a sense for 2011 business and any sense of Light Squared and Clearwire what they would look like next year in the leasing portfolio or leasing applications?

Well, we think Light Squared will be not really 2010 business. There is dialogue with them now, but it's not likely or expected to result in anything in 2010. Certainly that would hit the financial statements. We don't really see any reason to believe that any of AT&T, Verizon, Clearwire or any of the carriers would be materially slower in 2011 and I think there is good reason to believe that they will actually be a little bit better. So just based on where we know carriers to be and their buildout plans, we're expecting a very, very strong year in 2011.

One housekeeping one, on the increased presence in Central America with El Salvador and Costa Rica, any further increase in SG&A expected or have you scaled up that Central American business?

There might be a tad more, but we have already incurred a lot of the expense that we are going to have there.

Great, thanks, Jeff.

Thank you, our next question is from the line of the Mike McCormack, JPMorgan. Please, go ahead.

Hi, this is Manish Jain for Mike McCormack. Just had a couple of questions for you guys, one was I guess there has been a lot of speculation that T-Mobile would partner with either LightSquared or Clearwire for their 4G build and I was wondering if their decision would -- If you would have a preference for their decision for one versus the other? And then second, just wanted to get your sense on -- you mentioned your top three contributors to revenue for the first half of the year. What that looked like for the second half of the year and more along those lines is Sprint ramping as a contributor in the second half of the year versus the first half? Thanks.

I will take the second one first. Sprint is ramping but we expect the majority of the business to continue to come from the three that it came from in the first half, which is AT&T, Clearwire and Verizon. In terms of LightSquared, T-Mobile, I don't really want to speculate as to what might happen there, but in general the Tower industry has always benefited by a well capitalized brand-new network operator. So if we all had our druthers, we would want additional brand new stand alone networks that were well-capitalized and financially successful. We'll have to wait and see what happens there, but regardless of the outcome, the deployment of that spectrum will occur over time, given its value and that of course will be good for SBA.

Thank you, guys.

Our next question is from the line of David Barden, Bank of America. Please, go ahead.

Hey, guys, thanks for taking the question. I was just doing some math on the release, the Towers that got done in the quarter you bought for $402,000 in the quarter, the ones signed after the quarter, $445,000, the ones that you've agreed to close later, $446,000 per Tower. It sounds like the Tower portfolios that are coming out, to your point Jeff, the price per Tower at the beginning all seems to be roughly similar. Could you give us a sense as to what these portfolios look like in terms of the tenants per Tower, and what the growth expectations that you have for these Towers are at the margin, if you lease them up? Thanks.

The averages, David, are running 1.3 to 1.5 tenants per Tower and we would expect these Towers to add at least one tenant, perhaps some additional amendment activity over a forward five-year period of time.

And what kind of IRR do you think you generate with those kinds of assumptions, Jeff?

We're targeting and our results show that we're on-track to slightly ahead of plan to produce low-double digit returns in the US and high teens returns internationally, unlevered.

Perfect. And then I guess the last question, just if a larger portfolio became available, with respect to your 7.3 times net leverage in the quarter, how much would you be willing to scale that up in order to reach to get a larger portfolio, if one became available?

Some, but not double-digits.

Perfect. Thanks, Jeff.

Thank you. Our next question is from the line of Simon Flannery, Morgan Stanley, please go ahead.

Thank you very much, good morning. You talked about augmentation being at a record level in the second quarter. Can you just give us a little bit more color on that, presumably most of it is from AT&T and Verizon? Is this the start of 4G build ads? Is this a lot of coverage? Improved capacity on the 3G side? And what is the incremental revenues that you are getting on these augmentations? If you could give us some color around that? Is it like a quarter of a tenant? Anything given, that would be great. Thanks.

The amendments are -- and you are correct Simon, for AT&T it's primarily additional 3G deployment to offer 3G services at that particular cell site and for Verizon, it's of moving to LTE. And the price ranges there are anywhere from -- well, they really varied. They are 25% to in some cases 50% of the existing lease rate, particularly where microwave is being added.

And is that -- are there a lot of them with microwave these days?

Some. We would like more, but there is a fair smattering.

Thank you.

Thank you, our next question is from the line of Jason Armstrong, Goldman Sachs, please, go ahead.

Good morning. On the portfolio growth, I know you talked earlier in the year and there are some references to it here too about frustration with irrational multiples and I think it priced you out of some earlier deal activity. Yet despite this you are still trending towards 10% portfolio growth this year. It is very high under your range. I'm just wondering should we reset expectations from here for you guys to grow the portfolio higher than expected? And the international growth that you talked about, 2% exposure right now with the goal to take that to 10%. Can you give us parameters around build versus buy into these markets and then what will dictate the pacing of your entry? Thanks.

On acquisitions, Jason, I think I wouldn't go too far outside or above the 10%. It could happen, but it's getting fairly late in the year to get deals done and closed, and -- well under contract and then closed. So we are starting to run -- we'll probably have another couple months of opportunity-seeking that could lead to closed deals by year-end, but once you get into September, it's pretty much a 2011 item. I do think what people should take away from this is that there are plenty of opportunities to grow the portfolio. You just have to be careful how you do it and where you put your money. That is where the careful consideration of acquisition versus stock repurchase capital allocations comes in. In terms of Latin America, it will be dictated by opportunity. We want to build a lot of Towers down there. We do think that there will be opportunities to do that, obviously in Costa Rica, where you have a brand-new market. It will all be greenfield builds for the new market entrants down there, but in the other countries as well, additional Towers will be needed, just as they were in the United States as carriers move to 2G, and then 3G and 4G. We do think there will be some acquisition opportunities there as well. It will be a mix and it will be opportunity-driven. It's kind of hard for me to put a timeline on that.

Okay. Great. Thank you.

Thank you, our next question is from the line of James Ratcliffe, Barclays Capital. Please, go ahead.

Good morning and thanks for taking the question. I wonder if you could talk a little about the profile of the assets that you are getting in Central America and specifically in terms of (inaudible) revenues and also, how, if at all, the business model differs there versus the US markets, cost pass-throughs, difference in contract structures, et cetera?

Yes, the business model is very similar, James. There are several immaterial differences. There might be slightly more pass-throughs of some lower-dollar expense items, but in terms of the cost structure, we're finding that it's roughly on both the expense and the capital allocation side to build Towers roughly half of the US cost. The Towers that we have down there now average probably -- because more of them have been bought than built, at least to-date -- average about 1.3 tenants, I think. Maybe 1.4 tenants per Tower. And the rents per tenant on an equivalent equipment loading down there are similar -- not quite as high -- but similar, more similar to the US rates than the expense structure. So what we're looking at is a market where off of, on average, fewer tenants per Tower than will be required in the US to hit our desired returns. So we are very excited about the market, and we actually are -- enlisted the help of some very expensed operators down there, who are spearheading our efforts down there. A lot of deep industry contacts, which is very important in the region. So we feel pretty good about the future down there.

To this point you haven't gone into any markets where any other US operators have a presence. Do you have a view on that one way or the other?

We would always love to keep all opportunities to ourselves and I'm sure our peers would say the same. I don't know that we have consciously avoided markets, other than we have just been driven by our own opportunities and the folks that are working with us where their contacts and best relationships are. It's not a conscious effort to avoid anyone.

Great, thank you.

Thank you. Our next question is from the line of Gray Powell, Wells Fargo. Please, go ahead.

Good morning, everyone, thanks for taking the questions. I just had a couple of quick ones. So obviously Harbinger has received a lot of interest recently, just on a similar topic, we're hearing that a company called Digital Bridge has intentions to build a network with anywhere between 3,000 and 5,000 sites over the next few years, primarily focusing on tier 2 and tier 3-type markets. Just curious if you have had any discussions with them?

Yes, we know those folks.

Okay. Then can you give us a sense as to the contribution of amendments in 2010 versus new lease signings? And how do you expect that mix to change going forward?

It's going to be at its all-time high in 2010, given the fact that most all of Verizon's spending at least as we see it, is amendment-based and LTE driven and much of AT&T's is the same. Hard to say, Gray, whether that is exceeded in 2011 or not, but it will clearly be another big year as Verizon continues it's LTE build and AT&T probably gets started on its, which will also be an amendment-type activity.

Okay. And then just jumping around a bit. I'm sorry if you touched on this before. I may have missed it. What kind of multiples on run rate Tower cash flow, just generally speaking, are you seeing in Latin America?

Lower than the US. I'm not going to get more specific than that for competitive reasons.

Okay. Fair enough. Well, thank you very much.

Thank you. Our next question is from the line of Michael Rollins, Citi, please, go ahead.

Hi, good morning, and thanks for taking the question. I was curious, have you been in touch with Sprint at all regarding the network modernization RFP that they are working on? And are there any implications that you can see in terms of rents or utilization, if they go to a multimodal, multifrequency-base station structure? Thanks.

Yes, we have been contacted by them. Our services group is talking to them about some additional business there. We're not really anticipating at this point, Mike, any real changes there, because it's not really a weight-based business. It's still a location-based business and you have got to use the ground and you have to use the Tower. So if they swap something out, that has less weight, and that is actually part of the long-term goal, we don't see any real material changes in that as we move through. But yes, it's a big project and I know it has got a lot of their focus today. I think the primary driver for it, from Sprint's perspective, is increased RF efficiency.

Great. Thanks very much.

Thank you, our next question is from the line of Ilya Grozovsky, Morgan Joseph.

Just had a question on Clearwire. You guys had mentioned that you see them as a similar type of customer in 2011, are you -- obviously given their financing issues to continue deployments next year, are you basing that on conversations that you are having with them? Where are you on that?

Basically where we believe they are on their network build and we have assumed all along with respect to Clearwire that they will get the money that they need when they need it. They certainly have so far. We don't -- when we think about the future, we basically take these folks at their word for developed carriers at least. We wouldn't necessarily do that for somebody who is just starting up. Clearwire has proven their ability to finance and so when they say they are going to do x, y, and z this year or next we take them at their word.

Has there been any planning for 2011 between you and Clearwire?

I would say. Yes, a little bit. They are signing up leases now that they are in markets that I don't believe they are expecting to turn on before 2011. So I would say, yes.

Great. Thank you very much.

Thank you, our next question is from the line of Michael Boam of Guggenheim Securities.

Thanks for taking the question. Your discretionary CapEx in your guidance went up pretty markedly for the year and I was hoping you could give us a little bit of detail around that. And then also a second question, with regard to augmentations out there that are happening and also that you expect next year, are you seeing any particular carrier or any kind of a split between 4G and 3G augmentation? I'm just trying to get an idea of where the greatest activity level is, because we have obviously heard that the augmentation going to 4G is not going to be as great as it was from 2G to 3G, but I'm trying to get a handle on where the greatest rate of change is occurring out there either by customer or by equipment? Thanks.

This is Kurt. I will take that last one first. I wouldn't really say that the augmentations are dramatically different. It's really very site-specific, it's customer-specific, it depends on what their current reserved load is on that Tower? If they have reserved conservatively in the past for six lines and six antennas and now they are increasing that with the new overlay, versus someone in the past who reserved space for even more and didn't install it all yet. It's going to be a little less. So it's really a mix and it varies by site. I don't think you will see it as much by 3G to 4G. And the Towers, it's the same analysis for us on the Tower augmentation that we go through to understand if an upgrade is going to be required or not. Luckily in our case, our Tower upgrade augmentation CapEx has continued to stay pretty darn low.

And the discretionary capital spend increase is driven almost entirely by increased acquisition activity.

Okay, thank you.

(Operator Instructions) Speakers, there are no additional questions in queue.

Great. Thanks, Kevin. And for those of you on the call, thanks for participating. And we look forward to next quarter's results.

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