SBA Communications Corp (SBAC) 2011 Q1 法說會逐字稿

Welcome to the SBA first quarter results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being record.

I would now like to turn the conference over to our host, Mr. Mark DeRussy, Director of Finance. Please go ahead.

Thank you, Jeff. And thank you, everybody, for joining us this morning for SBA's first quarter 2011 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer, as well as 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 foward-looking, including but not limited to, any guidance for 2011 and beyond. These forward-looking statements may be affected by the risks and uncertainties in our business. Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in last night's press release and our SEC filings, which documents are publicly available. These factors and others have affected the historical results, may affect future results, and may cause future results to differ materially than those expressed in any forward-looking statement we may make. Our statements are as of today, April 29, 2011, and we have no obligation to update any foward-looking statement we may make.

Our comments today will also 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.

With that, I'd like to hand the call over to Brendan.

Thanks, Mark. Good morning.

As you saw from our press release last night, our first quarter financial and operational results were strong. We exceeded the mid-point of our guidance for site leasing revenue, tower cash flow, adjusted EBITDA, equity free cash flow, and site development revenues. Total revenues were $167.7 million, up 13.4% over the year earlier period. Site leasing revenues for first quarter were $146.5 million, or a 14.5% increase over the first quarter of 2010. Of leasing revenue, $3.2 million or 2.2% came from our international markets. This leasing revenue growth was driven by both organic growth and acquisition.

Site leasing segment operating profit was $114.5 million, or an increase of 15.9% over the first quarter of 2010. Site leasing contributed 97.8% of the total segment operating profit in the first quarter.

Tower cash flow for the first quarter of 2011 was $115.7 million, or a 14.8% increase over the year earlier period. Tower cash flow margin was 80%, compared to 79.4% in the year earlier period.

Operationally, we continue to see strong leasing trends. Our incremental organic leasing revenue, added per tower during the quarter, actually accelerated slightly from the year earlier period. This growth was of high quality as broadband telephony carriers represented 97% of this new business. Amendments, which were predominantly from AT&T and Verizon, continued to show strength and contributed over one-half of incremental leasing revenue added in the quarter.

Our leasing backlog right now is good and we expect that the second quarter will be another solid one in terms of customer activity and we expect solid levels of activity to continue throughout 2011. Our services division started the year on a strong note as carriers began to execute on their 2011 budgets. We continued to work for all the major carriers and many of their program management firms and equipment manufacturers, performing our three core services of site development, construction, and technical services.

Our services revenues were $21.3 million, compared to $20 million in the year earlier period, or a 6.3% increase. Services segment operating profit was $2.5 million in the first quarter of 2011, compared to $2.1 million in the first quarter of 2010. Services segment operating profit margin was 11.9%, compared to 10.5% in the year earlier period.

SG&A expenses for the first quarter were $18.3 million, including non-cash compensation charges of $2.7 million and acquisition-related expenses of $2.4 million. SG&A expenses were $16.6 million in the year earlier period, including non-cash compensation charges of $2.5 million and $2.1 million of acquisition-related expenses.

Adjusted EBITDA was $105.6 million, or a 15.6% increase over the year earlier period. Adjusted EBITDA margin continued to grow and was 63.7% in the first quarter of 2011, up from 62.2% in the year earlier period. Equity free cash flow for the first quarter of 2011 was $63.6 million, compared to $51.5 million in the year earlier period, an increase of 23.5%. Equity free cash flow per share, for the first quarter of 2011, was $0.56, compared to $0.44 in the year earlier period, an increase of 27.3%. Our strong growth and equity free cash flow per share is a result of solid adjusted EBITDA growth, combined with stable net interest expenses and a declining share count.

Net loss attributable to SBA Communications Corporation during the first quarter was $34.3 million, compared to a net loss of $37.3 million in the year earlier period. Net loss per share for the first quarter was $0.30, compared to a net loss per share of $0.32 in the year earlier period.

Weighted average shares outstanding for the quarter were 114.4 million, down from 117.1 million in the year earlier period, due to stock repurchase activity. Quarter-end shares outstanding were 113.3 million.

In the first quarter, we acquired 166 towers, built 35 towers, and decommissioned 22 towers, ending the quarter with 9,290 towers owned, and the rights to manage approximately 5,200 additional communication sites. Of the 9,290 towers we owned at the end of the first quarter, 8,872 were in the US and its territories, and 418 were located in international markets.

Total cash capital expenditures for the first quarter of 2011 were $110.4 million. Consisting of $3.5 million of non-discretionary cash capital expenditures, such as tower maintenance and general corporate CapEx, and $106.9 million of discretionary cash capital expenditures. Discretionary cash CapEx for the first quarter includes $82.6 million, [converting connection] with acquisitions, exclusive of any working capital adjustments, $14.3 million in new tower construction, including construction in progress, and $2.3 million for augmentations and tower upgrades. Net of reimbursements, we spent only $900,000 on discretionary tower augmentation, reflecting the high quality and high capacity of our towers.

With respect to the land underneath our towers, we spent an aggregate of $8.4 million to buy land and easements and the to extend ground lease terms. Our investments in land are both strategically beneficial and almost always immediate accretive. As of March 31, 2011, approximately 32% of our tower sites were located on land that we own or control for more than 50 years and approximately 68% of our tower sites were located on land that we own or control for more than 20 years.

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

Thanks, Brendan.

SBA ended the first quarter with $3.2 billion of total debt, including $195 million balance in our revolver. We had cash and cash equivalents, short-term investments, and short-term restricted cash of $128 million. This resulted in net debt of $3.1 billion.

At the end of the quarter 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 3.1 times. Our first quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was very strong and came in at 2.8 times.

We continued to believe our balance sheet is in excellent shape, as we have no material maturities prior to 2013, and we have ample liquidity to meet our business plan and growth objectives. At the end of the first quarter, our debt had a weighted average annual cash coupon of 4.75% and a weighted average remaining maturity of just over 4.5 years. 94% of our total debt was fixed rate in nature.

In addition to our cash, short-term investments, and short-term restricted cash of $128 million, we had available to us $305 million under our revolver, for total liquidity of approximately $433 million as of the end of the first quarter. If we desired additional liquidity, we believed various capital markets are currently available to us and are attractively priced, providing us with financial flexibility as we execute our growth strategy going forward.

During the first quarter we repurchased approximately 1.8 million shares of our common stock for $75 million at an average price of $41.74. As you saw from our press release last night, our Board has authorized a new $300 million stock repurchase plan. Jeff will provide color around the new authorization momentarily. Stock repurchases continue to be an important component within our overall capital allocation process to maximize shareholder value. We continue to view them as a tool to be utilized opportunistically, rather than systematically.

As of the end of the first quarter, we have cumulatively repurchased 5 million shares at an average price of $36.64 since we began our open market repurchase activities in late 2009. In addition, during the quarter we repurchased $15 million in principal amount of our 1.875% convertible notes for $17 million in cash. These repurchases were executed in open market transactions.

With that, I'd like to turn the call over to Jeff.

Thanks, Mark. And good morning, everyone.

We did have a very good first quarter and start to 2011. Strong revenue growth, 80% tower cash flow margin, strong adjusted EBITDA growth, and 27.3% growth in equity free cash flow per share were the highlights of what turned out to be a very solid quarter.

The macrodrivers for our business remained very strong. The number of smart phones and tablets and wireless data use in general are surging in all of our markets, creating strong demand for both additional equipment and spectrum. With spectrum availability, both scarce and unpredictable as to timing, our customers find themselves needing to invest material amounts of additional capital in their networks to try to keep their wireless customers satisfied and to keep up the constant stream of new bandwidth consuming data applications. We continue to benefit from this dynamic.

The relationship between consumer demand spectrum and network became front and center news in the first quarter with the announcement of the AT&T/ T-Mobile transaction. According to AT&T, the deal was struck in response to the overwhelming need for more spectrum and network capacity to handle the insatiable demand for wireless data services. It will, of course, be very interesting for anyone connected to wireless to see how this deal finally turns out.

AT&T just filed their first approval request with the FCC and we are among the many who are keenly watching how this transaction turns out, and particularly as to how it will relate to the future of our Company. Assuming the transaction is approved, generally as proposed, and based on the commentary AT&T has provided, so far, on the T-Mobile transaction. We believe that there will be a need for more equipment on surviving cell sites and additional cell sites to increase network density. Which will offset, to some degree, the impact of cell site decommissioning, particularly given AT&T's goal of extending 4G coverage to 97% of the US population. This result would be consistent with our Cingular AT&T merger experience.

Since the T-Mobile merger was announced, we have seen no material change in behavior by AT&T or T-Mobile, with the slight exception that T-Mobile appears to no longer be pursuing build-outs in a few markets where it roams on AT&T's network.

The one area of our activities that we have adjusted in response to the proposed AT&T/ T-Mobile transaction is domestic acquisitions. We are taking a fresh look and we are adjusting our offers where necessary. As a result, some of our previously announced acquisitions were delayed and the pace of adding new acquisitions has slowed, which I believe is temporary. We are in a period now of modestly resetting seller expectations, which is a period we have been in several times before. And I expect our domestic acquisition activity will pick up in the second half of the year. We continue to believe portfolio growth at the right price is our best use of discretionary capital and we continue to actively seek the right acquisition opportunities, both domestically and internationally.

We continue to be in discussions with Sprint on a variety of topics, including project network vision, network sharing, and iDen. Most possible outcomes involving these issues as they relate to SBA would require an amendment or modification to existing agreements or a new agreement between Sprint and SBA.

The concept of network sharing could be very exciting for us and for the other parties involved. It could allow new market [entrance] with spectrum to have fast nationwide coverage at a fraction of the cost it would have taken to build a fully independent network. The speed, scope, and cost benefits for these new market entrance could be the difference between business viability and lack of viability. For us, if it happens, it would be added revenue on a lot more of our sites, at a much shorter period of time than almost certainly would have been the case if the new market entrance build-out independently.

As to specific carrier activity in the first quarter, AT&T and Verizon were very busy with us, with new leases and particularly with amendments. These two carriers represented almost two-thirds of our incremental domestic leasing business, with the other third coming from a variety of sources. We expect this domestic activity on both total and a carrier-specific basis to remain materially constant as we move through the year.

Our international assets, while still small in contribution, are showing great demand and are leasing up ahead of expectations. Our guidance around organic growth for this year remains the same as it did when we first rolled out 2011 guidance. It is neither up nor down and reflects an overall steady lease up environment at current levels of activity throughout the year with a slight tick up in the second half. Our services group had a very good first quarter which is typically a good omen for a strong full year of customer activity.

Turning to asset growth, we grew the portfolio by a net of 179 towers in the first quarter. And we continue to target and be confident in achieving 5% to 10% portfolio growth in 2011. Currently we see a number of additional acquisition opportunities, in both the US and internationally, that we believe will satisfy or exceed our investment goals. As a result we feel very good about our chances of once again meeting our portfolio growth target this year.

We intend to grow the portfolio, both in the US and internationally, with the growth divided approximately equally between the two. We expect international growth to occur primarily in Central America, where we now own approximately 400 towers and have a large number of additional towers under contract to buy or build. We expect to end the year with 800 to 1000 towers owned internationally in Central America and Canada. We're very excited about our international activities and we will continue to look for new opportunities that we target to produce greater returns on a risk adjusted basis than current US acquisition opportunities.

To the extent we're not maintaining our target leverage solely through asset growth, which remains our primary focus, we will continue to consider and execute opportunistically on stock repurchases, where we see value on both an absolute basis and relative to our acquisition opportunities. We were active repurchasers in the first quarter. We repurchased 1.8 million shares in late February, early March. And had we waited a bit, we could have bought those shares cheaper, but I'm confident that over the long-term, we will be very happy with those repurchases as contributors to growth and equity free cash flow and increased shareholder value.

We just implemented a new $300 million stock repurchase plan, which will give us plenty of ability to take advantage of attractive repurchase opportunities when they arise. Based on what we've already purchased this year, I expect us to repurchase more in 2011 than the $107 million of our common stock we repurchased in 2010.

Because we believe we will see attractive opportunities for both asset growth and stock repurchases this year, it is likely that we will stay fully invested in 2011, which is to say we intend to continue to run the Company at current leverage levels. We're very comfortable at these levels. We've been managing our balance sheet to these levels for about two years now. Our cost of debt and access to additional capital have never been better. With our projected equity free cash flow and our credit facility, we have more than enough liquidity to increase investment through the year to maintain our current leverage levels. With the low interest costs that are currently associated with accessing such liquidity, we would expect any additional investment to be immediately accretive to equity cash flow per share.

Of all the successes we had in the first quarter, probably none is more important than our 27.3% year-over-year growth in equity free cash flow per share. It remains our primary focus for financial results and increasing shareholder value. The three primary determinants of growth in equity free cash flow per share are adjusted EBITDA, net cash interest expense, and shares outstanding. We focus and work hard on all three, and I'm confident that our efforts will continue to drive material growth and equity free cash flow per share in the future.

Before we open it up for questions, I want to recognize the contributions of our employees and customers to our success. Our employees work really hard to achieve the goals of our customers. They do a great job and our customers recognize that and as a result we are a preferred provider for our customers' network needs. Those needs have been, and we expect will continue to be, great and we look forward to completing a very successful 2011.

Jeff, at this time we're ready for questions.

Thank you, gentlemen. (Operator instructions)

Our first question is from the line of Ric Prentiss with Raymond James. Please go ahead.

Thanks. Good morning, guys.

Hi, Rick. A couple of questions for you.

First, Sprint had their call yesterday. Obviously a lot of us were on that as well. They talked about their vision plan.

A couple of things on that call. First, they mentioned that they hoped to have their decision and communicate to street by mid-year their 4G long-term strategy. If that were to occur on their timeline, how would it flow into your timeline as far as service business, application, and then the revenue showing up on the tower over their multi-year process? It's really very timing specific as your question suggests. If we can get something going -- if we, meaning Sprint -- can get something going in the third quarter on network vision, I certainly would expect we'd see some services impact positively in the fourth quarter, perhaps a little leasing, but it probably wouldn't be much.

But if we don't see a start to network vision by the end of the third quarter, I don't know that you'll see much of anything, Ric, in 2011.

Okay. We also are a little surprised Sprint, on their vision plan, said they expect to have operating expense in 2011, of about $200 million to $250 million effect on the operating expense. It would seem like a pretty sizable number and in talking with them after the call, a lot of them seemed to be setting up the duplicate rents or the co-located equipment, where they're going to have extra equipment on for a period of time. If that were to play out, they're kind of suggesting to us that the process might happen faster, I guess?

Well, I think that would be good. We'd certainly welcome that.

Okay. Obviously M&A is a large part of your story. You mentioned that some of the seller expectations are being reset.

Can you update us a little bit on what the M&A pricing you're seeing in the marketplace is at today? And where it might hopefully be headed?

Yes, I think things in general are still around 17-ish times, 18-ish times, tower cash flow for assets that would be roughly two tenant towers. So that really hasn't changed a whole lot. What has changed a little bit is those situations where you have both AT&T and T-Mobile on the same tower. And the seller is not prepared to accept the fact that the world may have changed in the future, with respect to the sustainability of that entire revenue stream.

So those are the ones that need a little bit more work in terms of our ability and desire to move forward. But I really do view it as temporary. We've been through these types adjustment periods many times before. With very few exceptions in our business, us being one, pretty much every tower that's bought or built by somebody is ultimately done so to be resold to somebody like us. So, I think it's just a matter of time.

Great. Thanks, Jeff.

Our next question is from the line of Clay Moran with Benchmark Capital. Please go ahead.

Good morning.

You say you're re-looking at domestic acquisitions because of the A T&T/T-Mobile deal. Just makes me wonder, do you also revalue towers that have exposure to Sprint now, possibly, with more opportunity there?

And then also, just wanted to ask, on the stock buy back, why now? Was that also simply because the M&A opportunity you thought was slowing? Although it seemed like you bought back before the announcement of the deal.

And then, was there any thought of a cash dividend at this point? Or is that still something in the distant future?

Yes, on the M&A question, Clay, I want to make sure people understand. We are talking about a very specific subset of opportunities here, where you have both AT&T and T-Mobile on the same tower. It shouldn't be interpreted really as a general question. And yes, to the extent that we see this network vision proposed activity on behalf of Sprint take shape, and some more leasing activity that comes out of that, we would certainly take that into account as we think about what we're prepared for pay for towers going forward.

On the stock repurchase question, we saw good value in the shares at the time. My crystal ball was not good. I did not see the AT &T/T-Mobile transaction coming. It would have been nice to know that.

But what happens is that we set the amount of money that we are prepared to spend in stock repurchases on a quarterly basis, and we spent it before the announcement of AT&T/T-Mobile, which also, in fact, occurred after our blackout window had closed. So that's what happened there.

And with respect to cash dividends, I think that is something in our future, but not in our near-term future.

Okay. Then one follow-up.

Your comment on the pace of stock buy backs would indicate more of a leaning towards slowing it after a good pace in the first quarter. Is there anything to that? What can you say more on the timeframe around the $300 million?

I don't think you should interpret my comments that there is any slowing or speeding or any type of pacing differential. Let me try and be very clear. We're going to run the business and the balance sheet to stay at current leverage levels. That's based on our guidance and you guys will run your models and see that this produces a fair amount of additional capital for investment. We have the liquidity to invest.

We're either going to invest that in acquisitions, because that remains our first choice, but they need to be good acquisitions that meet our pricing goals. Or if we don't we are going to be looking for stock repurchase opportunities.

Okay. Thanks Jeff.

Our next question is from the line of Jonathan Schildkraut of Evercore. Please go ahead. Good morning and thanks for taking the questions. A couple of them here.

First, the last two quarters seemed to have had an unusually high, at least for you guys, a level of tower decommissionings. Can you give us some kind of view into that? And maybe how we should think of that going forward?

Yes, last year we started an initiative that really began in the third quarter, to take a look at all of our negative cash flow sites, which aren't many but it was still 1% or 2% of the portfolio and look for decommissioning opportunities that made sense. I'd say we're about halfway through that process, Jonathan, and should have it completed by the middle of 2011.

Great.

In terms of your guidance on discretionary CapEx, first quarter came in a little lower than expectations and that certainly ties into the color you gave us on the acquisition front.

But as I look at the new guide for the second quarter relative for the year, it looks like discretionary CapEx is really going to scale down in the back half of the year. Is that just related to the fact that your guide doesn't include unannounced acquisitions?

Yes, Jonathan, this is Brendan.

That is basically right. We also include acquisitions that we have under contract. And we also expect to be, in the very near-term, picking up our activity around new builds in Central America. So you are seeing some of that in there as well.

Is there some seasonality to that? Does that construction activity tick up then during the summer? Or is it related to specific events?

No, it is not really seasonality related to a time of the year, particularly in Central America because the weather is good all year round. There's some of that occasionally domestically. But we're really just at a point where we're accelerating our buildouts down there, in Costa Rica in particular, so that's what's happening.

Great. Just one final question here.

We're all, I think, trying to figure out some of the puts and takes around what Sprint's network vision might mean from a revenue perspective and for the tower operators. And just trying to get some of the puts and takes as to how you price. Historically, I think that pricing has really been tied to size and weight and drag of equipment that was placed at the tower, the base of the tower. And it looks like under some of vision that might change somewhat.

Do you plan to continue to price along those metrics? Or will there be more of a move to value-based pricing?

I think, Jonathan, there will be more of a move to value-based pricing.

As equipment gets designed to be smaller and more energy efficient, weight becomes less. But at the same time, you have investment in towers that are zoned. They can't be replicate. There's height. There's security issues. There's back haul. You have to take into account the totality of the situation, both what it means to the carrier customer and what it means for us. So I think, over time, we will be headed in that direction.

Alright. Thank you very much for taking the questions. Our next question is from the line of Jason Armstrong with Goldman Sachs. Please go ahead.

Thanks. Good morning.

Maybe a couple of questions. First, sorry to beat the M&A question again. But I guess the reset or the pause around AT&T/T-Mo, I think as you whittle this down, at least in the public markets, people think through, the exposure, i.e, how many towers actually have the two co-located, think through lease durations. And there's been a lot of debate around this but I think the public markets have coming to grips with very manageable risks here.

I realize you may hit some one-off situations that are overweight, both of those two being co-located, but I'm wondering why this is enough to slow down the whole pipeline of deal activity around some big multiple rerating decision. It suggests that if the broader pipeline is slowing that you're taking a more negative view of the risks here than many public tower investors are, for instance, in relation to your own stock.

And second question on Clearwire, wondering if you can help us think through -- a lot of people talk about new builds, new cities. We've heard a lot of fill-in activity and legacy markets. If you can help us think through that? Thanks.

You clearly shouldn't interpret that we're taking a harsher view with respect to our own stock or we wouldn't be buying it and looking to buy more. That's certainly not the case.

I think, first of all, we're only talking about one quarter. We are talking exactly, specifically, about those towers where you have either AT&T and T-Mobile on the same tower, or you have AT&T, Verizon, and Sprint on the tower, and the seller wants us to pay for a future T-Mobile lease up. So I don't think we should be paying full price for that. And certainly we shouldn't be paying multiples well ahead of our own public trading multiples, which is where some sellers' expectations still are. It's really a relativity question, Jason. It's nothing more than that. It doesn't signal any real difference in view, other than we allocate capital as efficiently and as smartly as we can so that we maximize value down the road.

I'm sorry, the second question?

The second question was on Clearwire. Obviously the new builds have slowed. People know that for the year. Maybe comment on the pace of fill-in activity and legacy markets? Seems like there may be upside there.

Yes, there's some activity definitely going on with the fill-ins in existing markets. Clearwire was not really a large part of our 2011 guidance. I think to the extent that activity does pick up from here, it would be a positive for us. We'll have to see how that shakes out.

Okay. Thanks Jeff.

Our next question is from the line of Simon Flannery with Morgan Stanley. Please go ahead.

Thanks very much. Good morning.

We've talked a lot about Sprint and some of the other drivers. But on the CrownCastle call yesterday, there was a clear sense that 2012's going to be quite a pickup from the activity in 2011, more like last year. From what you're seeing so far, do you share that sentiment?

And then, just a question on the balance sheet. You're benefiting from a great funding rate. You've got reasonable maturities here. But there is a lot of concern in the marketplace about rising interest rates over time. How do you think about locking in some these rates over longer term and extended maturities? How do you think about interest rate risks? Thanks.

On the first question, I do think, particularly given the timing and presumed eventuality of the Sprint network vision project, that you will have a potentially significant pickup in 2012 activity because I certainly don't see any slow down from AT&T and Verizon.

In terms of the interest rates, we think about that a lot. We have primarily a fixed rate structure today. There is a lot of opportunity in the marketplace today, for additional fixed rate debt at low prices, relatively low, low coupons. And where we are with that, Simon, is constantly weighing the cost of refinancing and basically taking out early maturities and then extending them.

But you can rest assured that it is a great focus, and one that we're constantly working on and working to keep the interest rates as low as possible with the right risk profile.

Thanks.

Our next question is from the line of James Ratcliffe with Barclays Capital. Please go ahead.

Good morning, folks. Thanks for taking the question.

Two, if I could. First of all, regarding network sharing scenarios, how would those contracts work? Would the contract actually be with sharer or the share-ee? Or would you want essentially both to be counter parties?

And secondly, if you could just give some comment -- you mentioned about half and half -- but relatively, have you seen any shift in the relative appeal of potential acquisitions, domestically versus internationally? Thanks.

On the network sharing question, James, I don't want to get in the middle of our discussions with Sprint on this call but all those things are good and appropriate topics which we will be addressing.

In terms of the international versus US, now that we're making steps internationally and have firm bases of business in Canada and Central America, we're keenly looking for new opportunities to expand there. We now have the scale and the back office infrastructure so new assets can be added very efficient and economically. So it's really just a question of new geographies that we're now comfortable in pursuing and our best guess today as to where we think those opportunities will arise on a price and return relative basis for the rest of the year.

And the reality is, you shouldn't really put too much emphasis or reliance on the 50-50 split. Because if you know us, and I know you do, you know we're very opportunistic and if we see a good allocation of capital that causes us to go 75-25 one way or the other, we would do it.

Thank you.

Our next question is from the line of Ric Prentiss with Raymond James. Please go ahead.

Sorry, I guess they got me in there twice.

I'll ask just a quick one. You said your stock buy back window closed. With the 10b5 plan, are you going to be able to do away with the closed windows?

Yes, you would. We had two issues really, Ric.

You had the closed window prior to the AT&T/T-Mobile announcement. And we'd also spent our company-defined quarterly amount that we looked to spend each quarter. We do put limits on that so we can maintain our target leverage levels. So you can deal with the one but if you've spent all your money before the other, can't deal with that.

Got you. So it was really more that you'd spent your money?

Yes.

Thanks.

Our next question is from the line of Philip Cusick with JP Morgan. Please go ahead.

Hey, guys. So a couple of things.

One, you just talked about identifying geographies where you might want to continue to buy. Do you feel like with some other big assets coming off the table, the competition for those new geographies is going up? Or do you feel like that there's still some opportunities you've identified that might not just be a straightout auction?

Yes, I think the latter. I think we will see plenty of opportunities where, through relationships that we built, we could negotiate things on an exclusive basis. I don't know that they'll all go that way, Phil, but I certainly think some will go that way.

On the Sprint stuff, it sounds like really we're not going to see some services ramping until maybe a little bit in 3Q but more like 4Q. Is that the way to think about it?

As it relates specifically to network vision, sure. But I don't know in general that that's going to be true for our company. I think the historical trends of services work increasing as we move through the year, with the four quarter typically being the highest. Those trends should remain the same.

And with a lot of services work to be done at Sprint across the three vendors, is '12 a big opportunity for that number it really ramp? Are you guys starting to talk to the vendors about that?

It is a big opportunity. It is a big opportunity and that is also part and parcel of the discussions that we're having. But certainly the opportunity base there is very large.

I mean, you're basically adding a full new nationwide carrier, with a very extensive amount of work that has to be done to the services opportunity pool that really didn't exist in 2010 or perhaps most of 2011.

In a pretty compressed timeframe?

Right.

So we should be thinking about that one.

At what point do you think you start to get visibility on, okay, here's the timing. Here's the contracts laid down, and really start to know what your '12 is going to look like there?

Well, let me answer the question this way. For Sprint to meet their timeline that was laid out on their call yesterday, we would know that well in advance of putting out 2012 guidance.

Okay. All right. Good.

Last one just quickly. What do you think the fiber penetration is within your towers now? Crown said yesterday that that's accelerating. That makes sense but where do you think it is a year from now as well? Thanks.

It is always a guess because you don't necessarily have to be informed when a tenant uses its utilities easement to bring fiber versus copper. But we are tracking that stuff in the field as best we can.

We think we're somewhere north of 30% and pretty rapidly moving up so where we should be perhaps over 50% in 12 to 18 months.

Great. Thanks again guys.

Our next question is from the line of Brett Feldman with Deutsche Bank. Please go ahead.

Thanks for taking the question.

AT&T in the merger announcement talked a lot about spectrum. And one of the data points they gave was how quickly they were chewing up 10 megahertz of the spectrum, relative to what their historical run rates had been.

I'm just wondering how that's showing up in your business? For example, are you seeing that AT&T is adding a site and coming welcome back to it and adding gear more quickly than they historically would have? Or putting one in close proximity to it more quickly? And whatever it is that is happening, what's the relative change and is it unique to AT&T? Or are you seeing this across the industry?

You know, we are seeing tremendous amounts of activity, Brett, from AT&T and it's hard to really gauge relative amounts based on where they might have been two years ago. Because now we're seeing 4G. So there's a lot of stuff that's being mixed together that makes a pure relative evaluation difficult.

What I could say is they're extremely busy, show no signs of letting up. Besides new equipment on existing sites, we're seeing more cell splits. I think that's directionally a yes to your question.

And we are seeing that as well, from Verizon although I would say AT&T seems to be doing more different things and Verizon continues to be more focused on 4G amendments so they can get to that point , where they can tell the community and their customer base that they are nationwide 4G. But they're doing cell splits

Let me approach it from a different angle then. You've bought a ton of towers over the last few years, a lot of which had AT&T on them or potentially could have had AT&T on them. How are you finding those towers are performing relative to your initial expectations?

They are performing as well or better with AT&T being a big part of the performance.

Thanks for taking the question.

Our next question is from the line of Michael Bowen with Guggenheim. Please go ahead.

Thank you, good morning.

I was wondering if you had ever gone back. I'm just curious if you'd looked at your projections pre-AT&T, Cingular getting together and what ultimately the demand from the combined carrier for your towers was, compared to your projections of Cingular and AT&T separately?

Second question I have is can you -- you've talked about Clearwire obviously not being a part of the guidance this year but can you give us an update on any impact with regard to LightSquared?

And with regard to international, are you seeing more opportunities to build or buy? And I'll stop there. Thanks.

Well, let me take the LightSquared one first because that's the shortest. They're not in our guidance today. They've done some business with us, around their four key target markets. We think there is some additional business to be done in those markets but not enough to change our guidance as it currently exists.

Okay.

You know, Cingular AT&T, we probably did not have detailed forward views on what Cingular stand-alone and what AT&T stand-alone would have done. I guess that was what -- five, almost six, seven years ago?

But we do know that post combination, the amount of equipment that got added to certain sites, the amount of new sites that were added, and the shrinking densities, the spaces between antennas, had to be a product of the merger. We just would not have expected, nor compared to other companies that didn't combine and have that amount of subscriber base, we did not see that level of activity.

So I can't give you a mathematically precise answer but we think that the -- clearly, there was a lot more activity on the combined company. Whether it was two X or not, it probably was close but I can't answer that question specifically.

On the international side, I think this year we'll probably build more than we buy, certainly, because of what we are doing in Costa Rica. But as we go forward, we'll be open to growing our asset base in both ways.

Okay. Thank you.

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

Hey, guys. Thanks for taking the question. I appreciate it. Maybe two if I could, just real quick.

Number one, maybe Jeff, last year this 700 megahertz D block spectrum was going to get auctioned off and then they decided not to auction it. They decided to try to steer it toward public safety. And then they put it in the budget, and the idea was that we're coming up on the tenth anniversary of 9/11 and the government wanted to have something to show that they had done tangibly to try to improve first responder communication capabilities. Is there any sense on your part that there's any momentum on that at all? If there were, who would be running that process and who can we talk to find out where they are?

And the second question really is just on this notion that we're trying to take advantage of the AT&T/T-Mobile merger to maybe reset our seller expectations down. Could you give us a sense of what have that means? Is that a multiple point lower? Is that a different form of compensation and cash and stock? How do you think about what that means exactly? That'd be great. Thanks.

Yes, on the public safety I think that all continues to remain out there unchanged, David. I'm going to report something third hand. I had heard that Motorola has perhaps the primary equipment vendor to a public safety network with radios and was trying to be a guiding force to bring some momentum there. But I really don't have anything more specific than that.

I can tell you that there's nobody currently today who's looking to lease space from us for a nationwide public safety network, although we hope that certainly happens in the future.

In terms of the seller, I really fear people are going to misconstrue the comments. We're talking about a couple different transactions that had unique characteristics that were potentially impacted by the T-Mobile/AT&T transaction. And the best example was the one I gave Jason, where if there were three tenants on the tower, the three big ones, ex T-Mobile, and the seller wanted 19 times because they wanted us to bank on T-Mobile coming on that tower in two years, that's not a transaction we were prepared to proceed on.

And in any case now, where you have that tight -- and again, it is a certain unique set of these transactions where you have that dynamic at play, where a seller is looking for multiples that are 1, 2, or more higher than where our public multiples are trading, we're believing that those expectations need to be adjusted. It's not really anything to do with stock and cash. I mean, we value our stock as dearly, or more dearly, than our cash so we're not going to kind of play that game. It is all about the price paid versus what we see as the future lease up.

Good. That's clear. Thanks, Jeff.

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

Good morning, thanks for taking the call. Just had a couple of questions.

I think you touched on this in the prepared remarks but I really just want to make sure that I have it correctly. If I compare you guys to Crown, on Crown's conference call yesterday, they said they expected leasing demand for the rest of 2011 to be flat with Q1 levels. Does that make sense to you, just given that carriers like AT&T typically have a pretty big ramp in cell phone deployments throughout the year?

And then, how would you compare 2011 leasing activities to 2010 levels?

As I said, I think I said this in the prepared remarks, that we do expect lease up to remain relatively stable throughout the year but with a tick up in the second half. You know is it 52-48, 45-55? I'm not sure exactly. But that's probably the goal posts of where it could be.

And in terms of this year versus last year, I think it's going to be roughly the same.

Okay. Got it, very helpful.

And then, what is your expectation for the mix of carrier activity from amendments and new leases in 2011? And do you think the AT&T/T-Mobile deal changes that mix longer term?

I think the mix -- certainly on a leases touched basis, the number of amendments is way above the number of new leases. On a revenue basis, it's probably 50-50, maybe 60-40, towards amendments versus new leases.

But our folks who are handling all this are really swamped with a huge, huge amount of amendment activity. Going forward, Gray, I think you're going to get both because that's what happened in Cingular/AT&T. You'll probably initially a lot of amendments as AT&T adds equipment right away so that the T-Mobile handsets and the AT&T handsets can all share the same network. And over time, we would expect increased cell densification with brand-new leases.

Got it. Thank you very much.

Our next question is from the line of Jonathan Atkin with RBC Capital Markets. Please go ahead.

Yes, good morning. I wondered if you could update us with any thoughts on entering into a prepaid fixed price MLA type of arrangement, in case there is an opportunity to do so in the future. You chose not to do so last year. I just wanted to get any updated thoughts.

And then secondly, looks to us like AT&T is deploying quite a lot of generators out there and I'm wondering how that affects your business and does it spur any thoughts on your part in terms of trying to operate a share generator business?

On the MLA question, Jonathan, we are not fundamentally opposed to the concept in principle. For us, it's all about whether terms can be reached that are mutually and beneficially agreeable to the parties so never say never.

In terms of the generator, yes, we are seeing that. We're involved in that project on seeing both least amendments and also on the services side. We actually tried to share generator offering years ago and we really -- it did not get a lot of traction because if it's something the carrier wants at that time they want it. If it wasn't their idea at the time, we found that it was difficult to get them to buy in just because it was there.

So I don't know if we will take on that additional type of offering. We have a very straightforward business model today. We offer tower space. When you start getting into the ownership and maintenance and operation of generators, it adds not a huge degree of complexity but some additional complexity. So I think for the time being, we're happy to be the recipient of lease amendments and services work from that activity.

In terms of [X to net], any kind of update on that segment and could that be a use of cash, perhaps in case there's capital call requirement in the future?

Yes, [X to net] is doing well. As long as [X to net] continues to do well, which we have every reason to believe that they will, we would be certainly open and based on the terms, desirous of investing additional capital.

Great. Thank you very much.

(Operator instructions)

Our next question is the from the line of Jason Kim with Goldman Sachs. Please go ahead.

Great. Thank you. Just had a quick question on your balance sheet.

You have a nice mix of different types of debt in your capital structure right now, including some secured debt, unsecured bonds [at a mid co level] and some [holdco] converts. And I was just wondering if you're happy with the composition of mix of debt, as it stands right now? Or more specifically, I was looking at the [holdco] convert part, which is about two and a half turns of your leverage, and if you think that's the appropriate amount of leverage at that part of the capital structure going forward?

Yes, I think as we will move forward, we will look to do more secured financing because it's something we're very comfortable with. We're very comfortable with the performance of our assets. We believe that financing will offer the best terms, particularly terms of rate and that could either be in the bank market or the CMBS market.

I don't think -- let me answer your question this way. I don't think you'll see us ever having a greater amount of leverage at the [holdco] level, particularly through converts, than you see today. We'll be looking to reduce that, over time.

That doesn't mean we are going to reduce overall net debt leverage. It just means that the mix will likely change out from that into more secured lending.

Understood. Thank you.

I think we have time for one more question, if there is one.

There are no current questions in queue, sir.

Great. We appreciate everyone joining us today and we look forward to our next call. Thank you.

Ladies and gentlemen, this conference will be available for replay after 1.00 PM today until May 13th at midnight. (Operator Instructions)

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