SBA Communications Corp (SBAC) 2011 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the SBA third-quarter results conference. At this time, all phone lines are in a listen-only mode. We will have a question-and-answer session, with instructions given at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

I'd now like to turn the conference over to Mark DeRussy, Director of Finance. Please go ahead.

Good morning, and thank you for joining us for SBA's third-quarter 2011 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer; and Brendan Cavanagh, our Chief Financial Officer. Some of the information we will discuss in this call is forward-looking, including but not limited to any guidance for 2011, 2012 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 historical results, may affect future results, and may cause future results to differ materially from those expressed in any forward-looking statements we may make. Our statements are as of today, November 1, 2011, and we have no obligation to update any forward-looking statements that we may make.

Our comments this morning 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.

With that, I will turn the call over to Brendan to comment on our third-quarter results.

Thanks, Mark. Good morning. As you saw from our press release last night, our third quarter financial and operational results were very strong. We exceeded the mid-point of our guidance for site leasing revenues, tower cash flow, adjusted EBITDA, and equity free cash flow. Total revenues were $175.5 million, up 10.7% over the year-earlier period.

Site leasing revenues for the third quarter were $154.5 million, or a 13.9% increase over the third quarter of 2010. Our site leasing revenue growth was driven by both organic and portfolio growth. The vast majority of our site leasing revenue comes from the US and its territories, with approximately 3.7% of total leasing revenue coming from international operations. Site leasing segment operating profit was $120.6 million, or an increase of 14.4% over the third quarter of 2010. Site leasing contributed 97.5% of our total segment operating profit.

Tower cash flow for the third quarter of 2011 was $121.6 million, or a 14.2% increase over the year-earlier period. Tower cash flow margin was 79.8% compared to 79.4% in the year-earlier period. Operationally, we are experiencing strong leasing demand, both domestically and internationally. Amendments, which were predominantly from AT&T and Verizon, continue to be numerous, and contributed over one half of total incremental leasing revenue added in the quarter. Our leasing backlog right now remains solid, and we expect that the fourth quarter will be another strong one in terms of customer activity.

Our services revenues were $21 million compared to $23 million in the year-earlier period. Services segment operating profit was $3.1 million in the third quarter, compared to $2.7 million in the third quarter of 2010. Services segment operating profit margin was 14.8% compared to 11.7% in the year-earlier period, a 310-basis-point improvement as a result of better execution and a mix shift towards higher margin business.

SG&A expenses for the third quarter were $15.4 million, including non-cash compensation charges of $2.7 million. SG&A expenses were $14.4 million in the year-earlier period, including non-cash compensation charges of $2.4 million. Adjusted EBITDA was $112.5 million, or a 15.1% increase over the year-earlier period. Adjusted EBITDA margin continued to grow, and was 64.9% in the third quarter of 2011, up from 62.2% in the year-earlier period, a 270-basis-point increase.

Equity free cash flow for the third quarter of 2011 was $63.9 million, compared to $56.8 million in the year-earlier period, an increase of 12.7%. Equity free cash flow per share for the third quarter of 2011 was $0.58, compared to $0.49 in the year-earlier period, an increase of 18.4%. Our strong growth in equity free cash flow per share is the result of solid adjusted EBITDA growth, combined with a declining share count. Net loss attributable to SBA Communications Corporation during the third quarter was $33.3 million, compared to a net loss of $34.5 million in the year-earlier period. Net loss per share for the third quarter was $0.30, the same as the net loss per share in the year-earlier period.

Weighted average shares outstanding for the quarter were 110.2 million, down from 114.7 million in the year-earlier period due to stock repurchase activity. Quarter-end shares outstanding were down to 109.4 million.

In the third quarter, we acquired 82 towers and built 119 towers, ending the quarter with 9,762 towers owned, and the rights to manage approximately 4,900 additional communication sites. As of September 30, we owned 9,071 towers in the US and its territories, and 691 in international markets.

Total cash capital expenditures for the third quarter of 2011 were $84.3 million, consisting of $4.4 million of non-discretionary cash capital expenditures such as tower maintenance and general corporate CapEx, and $79.9 million of discretionary cash capital expenditures. Non-discretionary CapEx included about $0.5 million of storm related damage above estimated insurance recoveries from Hurricane Irene, tornadoes, floods, and mud slides that impacted a number of our markets in the second and third quarters.

Discretionary cash CapEx for the third quarter includes $42.2 million incurred in connection with acquisitions, exclusive of $4.1 million of working capital adjustments. It also includes $32.5 million in new tower construction, including construction in progress, and $4 million for gross augmentations and tower upgrades. The augmentation figure is a gross number, and does not reflect approximately $2.6 million, or 65%, of cash reimbursements paid by our customers.

With respect to the land underneath our towers, we spent an aggregate of $8.6 million to buy land and easements, and to extend ground lease terms. Our investments in land are both strategically beneficial and almost always immediately accretive. As of September 30, 2011, approximately 71% of our tower sites were located on land that we own or control for more than 20 years. The average remaining life under our ground leases, including renewal options under our control, is 32 years.

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

Thanks, Brendan. SBA ended the third quarter with $3.5 billion in total debt. We had cash and cash equivalents, short-term restricted cash, and short-term investments totaling $209 million, resulting in net debt of $3.3 billion. Our net debt to annualized adjusted EBITDA leverage ratio was 7.3 times, the same approximate level it has been for the last 8 quarters. Our net secured debt to annualized adjusted EBITDA leverage ratio was 3.4 times.

Our third quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was a very strong 2.7 times. As of the end of the quarter, our debt had a weighted average annual cash coupon of 4.7%, and a weighted average remaining maturity of 4.5 years. 86% of our total debt was fixed rate. We believe our balance sheet is in very good shape, as we have no material debt maturities prior to 2013, and we believe we have ample liquidity to meet our business plans and growth objectives.

At the end of the quarter, our $500 million revolver was undrawn, and fully available to us. This, combined with our cash, cash equivalent short-term investments, and short-term restricted cash of $209 million, gave us total and immediately available liquidity of approximately $709 million. Including anticipated equity free cash flow over the next 12 months, we will have approximately $1 billion of liquidity.

In the third quarter, we repurchased approximately 2.2 million shares of our Common Stock for $75 million at an average price of $34.42. We currently have $150 million remaining under our existing $300 million authorization. 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 September 30, 2011, we had cumulatively repurchased 9.1 million shares since we began our open market purchase activities in late 2009, representing approximately 8% of our outstanding shares.

I will now turn the call over to Jeff.

Thanks, Mark, and good morning, everyone. As you have heard, we did have a great quarter, exceeding our guidance mid-points across key financial metrics. Our organic leasing activity was strong, and we expect this trend to continue through the remainder of 2011 and into 2012. We continue to see strong demand across our entire portfolio, particularly as carriers continue to enhance and upgrade their networks to next-generation technology to keep up with the strong secular demand for high-speed wireless data. We believe we are in the early stages of 4G deployments, and expect to benefit from this technological upgrade for the next several years, as carriers build out their initial coverage footprints to be followed by capacity spending as consumer adoption increases.

In the third quarter, we had our most active quarter with respect to executed lease amendments in the Company's history. AT&T and Verizon continue to be very busy, and represented well over half of our new business in the quarter. Most of the domestic leasing activity the last couple of years, and we believe for the next couple of years, has centered around customer overlays and upgrades to existing antenna sites, as opposed to deployments of new antenna sites. SBA has been a great beneficiary of this trend due to our large embedded base of AT&T and Verizon tenancies, and we expect our position will only be enhanced as Sprint begins a similar type of existing network upgrade with their Network Vision project. Primarily as a result of anticipated continued strong demand from AT&T and Verizon, and material new demand from Sprint, we are guiding to strong organic domestic leasing growth in 2012.

Portfolio growth remains a primary focus for SBA. With respect to acquisitions and new tower builds, we continue to see a number of opportunities both domestically and internationally. We are staying disciplined in pursuing only those opportunities that we believe will meet or exceed our internal rate of return targets, and passing on those that do not. As you can see from the number of towers under agreement to acquire, as disclosed in last night's press release, we expect a strong finish to 2011 and a solid start to 2012. We expect to finish 2011 with over 10,000 towers owned, exceeding the high end of our target range for portfolio growth of 5% to 10%. We are once again targeting 5% to 10% portfolio growth in 2012.

Our international business continues to see strong growth. International tower count grew to almost 700 at the end of Q3, and revenues were 3.7% of our total leasing revenue. During the quarter, we bought 16 towers and built 89 internationally. The substantial majority of the 704 towers we disclosed as under agreement to acquire are in Central America, and have new-build characteristics, in that we are buying them at essentially replacement cost and they start with 1 tenant. In our international markets, follow-on lease up has been very strong, and we are very pleased with the operating processes and overall metrics in these markets.

We have successfully developed US tower company-style businesses in these markets. We intend to continue to expand in these countries, and also continue to review opportunities in additional countries where we see a potential fit for our business model. Overall, we expect to continue to grow our business internationally, but also continue to do so with a measured and careful approach. We anticipate materially increasing our international site leasing revenue as a percentage of total site leasing revenue in 2012, but still not hit our goal of 10%. That likely won't be attained until 2013, or perhaps 2014.

We had another quarter of material stock repurchase activity. We evaluate and execute stock repurchases opportunistically, based on the absolute price of our stock, and relative to acquisition opportunities. While portfolio growth continues to be our priority, as long as the market continues to undervalue our stock we expect to take advantage of the opportunity, and repurchase our shares. Based on the mid-point of our fourth-quarter 2011 tower cash flow guidance, we have repurchased our stock this year at an average 15.0 times tower cash flow multiple. We believe the price at which we have repurchased our stock is well below intrinsic value.

With respect to our negotiations with Sprint, covering Network Vision, potential iDEN migration, network sharing, and other topics, I am pleased to say we have concluded negotiations, and recently signed a comprehensive agreement covering such topics.

I want to spend the rest of my prepared remarks on our 2012 guidance. As our initial guidance indicates, we expect the current strength in our business to continue into 2012. With respect to organic site leasing revenue growth, we expect to repeat materially the same level of incremental organic carrier activity on a revenue added per tower basis in 2012, as we have seen year to date in 2011.

In addition to that, we expect to see activity related to Sprint's Network Vision project in 2012 that would be additive to our 2000 levels of activity. As a result, we believe that we will be able to maintain our organic cash leasing revenue growth expectation of 9%, implying that the absolute incremental amount of our organic cash leasing revenue added per tower will also be up 9% from 2011 levels, inclusive of the escalators and without any regard to any non-cash straight line benefits. Our 2012 outlook includes benefits from the Sprint agreement to both cash and non-cash site leasing revenue. Total non-cash site leasing revenue in our 2012 outlook is approximately $30 million, of which approximately $20 million is attributable to the Sprint agreement.

For those of you doing margin analysis, keep in mind that our definitions of tower cash flow and adjusted EBITDA exclude non-cash items, so you need to subtract non-cash items from site leasing revenue to calculate margin. When you do, you will see that we are expecting another strong year of margin performance in 2012. The portion of our guidance that relates to Sprint comes only from expected Network Vision upgrades, and not from any network sharing that Sprint might undertake. Network sharing by Sprint, which is covered by our agreement, would be additive.

Our tower cash flow and adjusted EBITDA outlook for 2012 includes approximately $4 million of cash basis site leasing revenue from Sprint Network Vision. The accuracy of our guidance around the Sprint incremental portion of 2012 site leasing cash revenue growth will depend entirely on the speed with which Sprint hits our sites for Network Vision upgrades in 2012. And while we've talked much about Sprint, when you analyze our 2012 organic cash leasing revenue outlook, you will see we expect continued strong contributions from AT&T and Verizon.

In our site leasing revenue outlook, we expect no material surprises from churn to our 2012 results, as we have already factored in a churn allowance in the guidance which allowance is similar to those churn levels we have experienced in the last couple of years. On the services revenue side, the guided increase to the 2012 mid-point over expected full-year 2011 results is entirely due to expected work from the Network Vision project. With respect to net cash interest expense, we are assuming 3-month LIBOR remains at or below 1.0% throughout 2012.

As is our custom, our outlook includes only those towers we own, intend to build, or have under agreement to acquire as of today, and we do not guide to any stock repurchases. As a result, we are today including in our initial 2012 guidance a level of discretionary capital investment well below 2011 levels. It will be our goal to invest additional material amounts of capital in portfolio growth, stock repurchases, or both. As Mark mentioned earlier, we have significant liquidity that could be deployed for asset growth and/or stock repurchases, which could improve our outlook over the course of 2012. If we were to extrapolate our fourth-quarter 2012 EBITDA from our full-year guidance, and we chose to maintain our current net debt to adjusted EBITDA leverage levels, we could invest approximately an additional $500 million and more if the investment goes into portfolio growth.

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. Our employees do a great job. Our customers recognize that, and as a result we are a preferred provider for our customers' network needs. Our customers are, and we think will remain, extremely busy improving and expanding their wireless networks. We look forward to continued success as we finish this year and move into 2012.

And, Nick, at this time, let's open it up for questions.

Thank you. (Operator Instructions) Our first question comes from the line of Jonathan Atkin with RBC Capital Markets.

Yes, good morning. On the Sprint MLA, I'm interested, does that contemplate just the CDMA and the LTE-related work or does it also include the impact of taking down iDEN equipment in the medium to longer term?

Yes, hey, Jonathan, it's Brendan. It covers a few things. One of those things is the iDEN termination. We've given Sprint certain negotiated termination rights associated with the iDEN decommissioning, and it's important I think to point out in our revenue guidance and calculation of the potential impact on straight line that we've assumed in our calculation sort of the worst case in terms of timing and amount associated with the iDEN terminations.

And just since we're on the subject, a couple of the other things that are covered by the Sprint agreement are extensions of the length of the minimum lease term associated with the existing lease agreements, that obviously contributed to the straight line component of our guidance, as well as a minimum payment obligation that Sprint would have in connection with the Network Vision equipment adds, or replacements really, where they will be paying us as they make those installations but even if they don't, there is a date certain by which they would ultimately have to pay either way. So those are the main components of the Sprint arrangement.

And is the minimum obligation then straight line or do you recognize that only as it is incurred?

No, it's straight lined.

Okay.

It would be adjusted though to the extent that they actually install on our sites earlier than that minimum obligation date. There would be an impact where the cash revenue would start perhaps a little bit earlier than is assumed for purposes of the straight line calculation.

Understand. And on 2012, the 400 tower builds, what would be the approximate split between the US and international?

It would be approximately 120 US and the rest international.

And then can you remind us, or tell us, what the employee headcount is and then how might that change next year as you ramp up international?

I think we're about 850 employees today and I -- we might add 10 folks, but I don't see us materially increasing headcount or SG&A above what is already included in our outlook, Jonathan.

And then finally, can you repeat the non-cash revenue, the $30 million and how much of that is attributable to Sprint for 2012 and then what the non-cash contribution is for 2011 so we can think about margins?

Yes, it's $20 million for 2012.

No, it's $20 million from Sprint. It's $30 million roughly in total for 2012, and in 2011 the total number implied in our full year 2011 guidance is around $11 million. That includes, just for clarification, about $3 million incremental from Sprint in Q4.

Okay, and then the revenue, you get the 65% cash reimbursement for augmentation CapEx, that flows through site leasing revenues, I believe, and over what period is that straight lined?

It's spread out over the term of the lease agreement that it's signed up in connection with, so typically those leases are five years, if it's an amendment it might be over a slightly lesser period of time.

The remaining current term.

Right.

Understand, thank you very much.

Thank you. We'll go to the line of Ric Prentiss with Raymond James.

Thanks, good morning, guys.

Hi, Ric.

Couple of questions for you, if I could. Jeff, you mentioned that the Sprint contribution was $4 million on a cash basis but it would depend on the timing. Have you noticed an acceleration of Sprint applications as you negotiated and then signed the agreement?

Actually, that's all just starting for us now because all along our contemplated arrangement with Sprint would not only be the leasing side of the work but also the services. So until we kind of reach the overall agreement there wasn't a lot, but now we expect things to open up there materially. And because of that reason there's really no incremental cash benefit assumed in our fourth quarter outlook from Sprint. It all starts in 2012.

That makes sense. And you mentioned no unusual churn expected or no material surprise in churn expected in 2012. What is your typical churn level these days on a percent of revenue?

It's about 1.5%, and we've had two years now of a portion of that coming from Verizon/Alltel. We actually are pretty confident we're well through the lions share of that. There will be some of that in 2012 but that's in our numbers.

Sure, and then on the international side, do any of your transactions [on] there anticipate pass through?

Yes, they do, they do. It's not all and it's kind of case-by-case but there will be some pass throughs of ground rents in some cases.

Okay, and as American tower today started reporting AFFO and FFO, Crown, on their call, said they would look to consider reporting AFFO. Have you guys given any thought to the industry coming together and creating an AFFO standard that everybody would report?

Well, that would certainly be the goal, and I think we're going to study American's definition which I think was first rolled out kind of now, and like to see what Crown does, and then we'll do the same thing. But I hope when I say the same thing it truly is the same thing.

Me too. It always helps when people report the same kind of basis. And nice to get all of the straight line adjustments finally out there for everybody too. Great. Thanks, guys.

Thank you. We'll go now to the line of Jonathan Schildkraut with Evercore.

Good morning, thank you for taking the questions. I'd like to actually go a little bit deeper on to the MLA with Sprint. Last year, you guys had kind of quantified your exposure to iDEN, I think, at 8% to 9% about a year ago, maybe if you can give us an update there. Also historically, you guys have shied away from these MLA-type agreements and maybe if you can give us some color as to why this one was an important one or a more advantageous one to go ahead pursue and then ultimately sign.

And then finally, as we think about lease renewals in general, what we've heard from both Crown and American is that maybe over the last few years, lease renewals have been a little bit more aggressive, considering you haven't entered those MLAs, maybe you can give us some context for thinking about what your kind of lease renewal role schedule looks like? Thanks.

Yes, we continue to renew 99% or better of our leases as they come due, so we continue to, we really haven't seen any change in that at all, Jonathan. On the view about the comprehensive agreement, we've said this now several times, that really the only reason that we have entered this agreement is because it was the only way to kind of deal with so many different moving parts, and in fact some of which were despair at concepts, but all came together to be viewed as one kind of relationship with our customer.

So it should not be viewed as signaling any change in our long-term view but really the only practical way to deal with this many different issues with this one particular customer. And in terms of our remaining Nextel exposure, it drops every quarter. I think it's 6% to 7%-ish now and not all of that, we believe that not all of that will be lost over time.

Great, thank you for taking the questions.

We'll go now to the line of David Barden with Bank of America.

Hi, guys, thanks for taking the question. Sorry if you guys touched on this a little bit, but just going back to the 704 towers that you guys have an agreement in the principal. Number one, those towers are in next year's tower guidance I understand, but number two, could you kind of elaborate when the cash goes out the door? Is it in the fourth quarter, discretionary CapEx which looks high, or is it in next year's discretionary cash which looks low, as you explained? And then, kind of where those towers are precisely again? Thanks.

Yes. Most of them, a substantial majority of the 704 are in Central America, the rest would be in the United States. And the cash expenditure we've kind of spread between Q4 and Q1 of 2012.

Q4 of 2011 and Q1 of 2012?

Yes.

Got you. Sorry, Jeff, but any more specific numbers on the cash out the door in Q4 and Q1 and the number of towers in the US versus Latin America?

No, I think you can analyze the cash out the door pretty well by looking at our Q4 CapEx guidance.

Okay, perfect. And then just second, and apologize to broach the subject, but we're coming up potentially in a month, Clearwire has an interest payment coming up and there's been a lot of debate in the industry about what the significance of that interest payment date is and kind of what Clearwire has been working on as its potential options for dealing with that.

Just as a representative tower company, I know that there's been a very robust history between the tower companies and companies that have struggled in the wireless business, but are you making any particular preparations or doing anything special with respect to that company? Thanks.

The answer is no. We are not doing anything in particular other than monitoring the situation carefully and we know what all the options are and you can rest assured we'll be kind of reviewing what SBA's response might be in light of all those options. But are we doing anything in particularly different? No.

And could you remind us kind of the history, your experience with these sorts of situations in the past?

Yes, in every case where a company has chosen to reorganize through a Chapter 11 process, they have renewed, I think, without exception every one of their leases with us because that is the business they are reorganizing around. In those cases where the business was liquidated, which goes back to the 2001 and 2002 period, Chapter 7, you would lose those leases. But in every case where the business was reorganized around the debt restructure, all the leases were renewed.

Perfect. All right, thanks, Jeff.

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

Hi, good morning. I wanted to get back to the 704 towers, just wondering if this is multiple deals or was that one seller, and just wanted to make sure that when you say Central America it's in your previously announced markets of Costa Rica and Panama? And in addition, is it all cash deal and then lastly, does this fairly sizeable cash payment mean that you might slow down your near-term stock repurchases?

It is all cash. It is multiple transactions. We will be entering Guatemala as a result of these transactions in addition to adding towers in the rest of our already existing markets of Panama, Costa Rica and El Salvador. And we'll have to stay tuned on the stock repurchase side, Clay, as we've tried to point out we have ample liquidity, and if we decide to stay capitalized on a debt to EBITDA basis the way we have today, we have a lot of additional investment capabilities that could go towards stock repurchases or portfolio growth, or in all likelihood both.

Okay, thank you.

Thank you. Our next question comes from Jason Armstrong with Goldman Sachs.

Hi, thanks, good morning. Maybe a couple questions, first on just the margin trajectory into 2012. Jeff, I think you've appropriately mentioned, when you peel out the $20 million on the non-cash revenue side the implied margins are better than they otherwise would have been. But if you look at it and peel that out it's still sort of flat incremental margins in 2012.

I'm just wondering when you would expect to see margin expansion on sort of an incremental basis? And then secondly, the land deals that we've seen some of your peers doing this past quarter involved buying land to swap with others, involved buying land under carrier towers with an eye towards maybe that forces the carrier to sell over time. Is that an opportunity that you think might be interesting as well? Thanks.

On the margins, Jason, it's not just the Sprint piece. You'd have to peel out the whole $30 million to appropriately calculate the margin, and I would have two comments to your view. We have a larger contribution expected in 2012 from services which is a lower margin business, and we also have a bunch of relatively new build-type towers that we're adding to the portfolio. I'm not sure whether you were focused on the tower cash flow margin or the adjusted EBITDA margin.

The adjusted EBITDA margin, I think is still going to grow and the tower cash flow margin should grow some but perhaps not as much as the adjusted EBITDA margin. On the land deals, we look at those things and, I guess, for a price, we would find land under other folks' towers attractive. We have simply just not made that decision to go that route when we would, because land under other folks' towers we would have to kind of view really along the same lines as additional portfolio growth or stock repurchases and we've simply seen in our particular case better opportunities with the latter.

Okay. Thanks, Jeff.

Thank you. Next we'll go to the line of Simon Flannery with Morgan Stanley.

Thank you very much. Good morning. MetroPCS was just talking earlier this morning about moving to cell splitting to deal with the data demands from their customers, and I think there's been a general expectation that the industry would start to move away from adding to existing sites and moving more into a cell splitting-type model. I was wondering if you could comment on what you've been seeing in the last few months and what are you expecting as you move into 2012? Thanks.

Well, Metro is a little unique, or at least different than, say, AT&T or Verizon as they're moving forward. In AT&T and Verizon's case, it is a new spectrum that is being deployed as an overlay, so it's entirely amendment driven until they get this done. Metro is, of course, deploying LTE in the same spectrum. So to maximize that spectrum, it works through cell splitting. So that's all very logical, Simon, and doesn't necessarily reflect industry-wide trends as much as I do believe it reflects Metro specific issues. But having said all that, we have seen some business for Metro and we expect to see more in 2012.

And when do you think the big carriers will start to think about -- they've talked about spectrum shortages out a couple of years. When do you think they start to look to increase their cell counts more dramatically?

Well, it's happening a little bit now, but I think you have to, if history is a guide, and I think it will be here, you will need to see them get through substantially all of their technology upgrades so that they can accurately and correctly say that they're offering these services nationwide, and then you begin the cell split.

Great. Thank you.

Our next question is from the line of Suhail Chandy with Wedbush Securities.

Thank you for taking the question. Can I go back to the Sprint agreement. I realize you said that you kind of have the worst case assumptions. Can you remind us, how would this potentially change the timing of iDEN decommissioning? I think it was originally, perhaps, 2013 to 2017. Do the current assumptions assume maybe an earlier start to that?

No. That's the time period in which we have assumed for purposes of calculating the straight line impact.

Okay, great. Two large big picture questions. Do you think, anecdotal evidence of private valuations for tower companies versus public valuations of a slight disconnect, do you expect that valuation disconnect to start contracting a bit some time in 2012? And the second question, on land parcels under your site, have you done any kind of analysis on ownership concentration of those, ownership of the land parcels under your sites?

On the price disconnect, I do think the prices will begin to converge and I do expect to see that more in 2012. They haven't done that quite as much in 2011, which is one of the reasons why we've allocated more capital on a proportionate basis than historically to stock repurchases. And on the land, we have done an analysis. We have literally about a 0.5% of land under our towers that is out in the lands of third parties to the best of our knowledge and that is amongst a bunch of disparate owners. So we feel like we're in excellent shape in that regard and as you can tell from our results we keep working the land side of our business every quarter.

Great, thanks and congrats on the quarter.

Our next question is from James Ratcliffe with Barclays Capital.

Good morning. Thanks for taking the question. Two, if I could. First of all, to what degree is any possible outcome of AT&T/T-Mobile incorporating your 2012 results, either from accelerated activity in the event the deal happens or divestitures, et cetera? And secondly, if you look at the Clearwire base you have, in the event of, some sort of event, how would you consider the leases and the terms of those leases versus your overall portfolio? Are they meaningfully different in terms of pricing or term or the like? Thanks.

On the latter first, James, I don't think they're any different. They are the standard five-year, five-year renewal option, so we're in the midst of all of the rollovers there. So there would be a typical average remaining life, and I would just want to remind folks that Clearwire has been a great customer and we wish them all the success and we're going to help them get there, but they are about 1% of our site leasing revenue. Your other question, I'm sorry?

AT&T and T-Mobile, to what degree that is or isn't in the 2012 guidance, one way or the other?

Yes, we don't have a specific divestiture model that has been run through there. We think by the time the deal would be completed, you'd be in the middle of the year and you'd have, in fact, very little if any impact on 2012 results. We would think you wouldn't have any real impact at all until 2013, even if then, depending on what path they choose to take. But, so the bottom line answer to your question is we don't expect much impact to our 2012 results.

Great, thank you.

Our next question comes from the line of Colby Synesael with Cowen.

Great. I have two questions. Just wanted to go back to the question that Schildkraut asked about lease renewals. I was wondering if you could just give us a little bit more color. Are you expecting a larger percentage of your portfolio to renew leases in 2012 versus 2011? And then my other question just had to touch back on the AT&T and Verizon current LTE build-outs.

As we move into, call it the second stage of their build-out when they've reach the majority of their POPs in 2012, can you talk about how we shipped in terms of activity and maybe fill-ins and what the financial opportunity tied to that could be? Is it more, is it less, or is it the same over the next few years relative to what we've seen in the last year? Thanks.

On the renewal, we're not anticipating any material change in the level of the rate in 2012 versus 2011 versus 2010 versus 2009 for that matter. Its always been around 99% renewal rates and we think 2012 will be the same. In terms of the AT&T/Verizon activity, what has happened historically is when a carrier moves through with a new technology upgrade, they will launch that and roll that out on a nationwide basis and then depending on activity levels, they will cell split and infill with new tenancies.

The difference is you'll get similar revenue contributions off a third to a half of new tenancies that you do amendments. So it's a volume difference in terms of number of sites touched but over time, it has actually worked out that the contributions have been fairly steady during periods of both new technology rollout as well as infill and cell splitting periods.

Great, thank you.

Next we go to the line of Phil Cusick with JPMorgan.

Hi, you guys, thanks. Just a quick clarification. The iDEN churn that will probably start ramping, I think you said 2013, do you think that will be additive to the 1.5% that you talked about earlier or is that sort of replacing other things that have been churning for a long time?

It might be slightly additive, but it will also be replacing other things that have still not fully churned off like AT&T, Cingular or Centennial, or the tail end of Alltel/Verizon, so it all kind of will roll in just as other things are rolling out.

And is that a steady number of churn towers over a four- or five-year period, something like that?

It is. It is a steady number that we've kind of worked around in terms of a negotiation with Sprint but we're not going to get into the exact details of that.

Great, and then you mentioned this a few minutes ago, but at a conference last month, I think you talked about leverage, you're happy with where it is, you could even take it up. Where is the conversation internally, you and with the Board, happening right now around leverage? Are you fairly happy with where you are and is there a conversation about taking it up?

We are happy with where it is and there really is not a conversation about taking it up because we think where we are right now is the right place to be.

Good. Thanks, Jeff.

The next question is from Michael Rollins with Citi Investment.

Hi, thanks for taking my question. Good morning. Just on the organic growth, if you could break down, and you may have done this earlier, but just with a little bit more specificity, if we look at 3Q site leasing revenue growth, I think it was like 13.9%. If you could break it down from internal growth versus external growth, and then just how to think about those components moving into 2012, I think last quarter you may have given an indication of internal or organic of around 9% and just looking for an update on that, thank you.

Yes, I think that's still where we are, Mike, 9%, of which 3% of the 9% comes from escalators, or slightly above that and then the rest would be from new incremental revenue added in the last couple quarters, predominantly from amendments but also from new tenancies. So everything above that you would, I think, correctly view as inorganic growth.

And is that the same for the quarter as well?

Yes. And that would include new builds. New builds goes in the inorganic calculation and not the organic calculation.

And just one other question. When you say 3% from escalators, is that a gross 3% and then we've got a minus some churn off that, if you can, I think you mentioned earlier churn was about 1.5% so how does that factor into the calculus?

Yes, we have -- the escalators are between 3% and 3.5% on a gross basis. That's not net of churn. Churn is a separate item but it is netted into the 9% growth calculation.

Yes, so the incremental is -- the incremental is what's netted of the churn, not the escalator.

Great. Thanks very much.

Next we'll go to the line of Brett Feldman with Deutsche Bank.

Thanks, and just two quick ones here. First to clarify, and I know we've kind of belabored this on the Nextel churn, but it sounds like there's no real point during the duration of the wind down where you hit a cliff or a wall or some jolt to the run rate in the churn. Is that the appropriate way of thinking about it?

Yes.

Okay, good. And then just to follow-up on Phil's question about leverage. You do have a little over $1 billion of debt maturities in 2013 and 2014 and I was just interested your thinking right now. You had talked about how you have upwards of around $1 billion of total liquidity to deploy. It seems like you're inclined to deploy it. What would change your mind?

What would make you more cautious, more thoughtful about building cash? Are there triggers you look for in the credit markets or the economy? I mean, anything you can do to sort of help us think about that would be great.

Well, first and foremost, we will be watching the 2013 May maturity date. That focal point is in part the reason for my answer to Phil that we're not really looking to take leverage up as we head into that refinancing obligation, and we will watch what we spend and what our refinancing is going into that, Brett. But that, obviously, will be a primary determinant of exactly where leverage is as we exit 2012.

And do you have any changing thoughts on like the mix of secured and unsecured, convertible securities and stuff like that?

You know, we continue to, I think, have a business that's ideally suited for secured financing. It's a very steady business and, therefore, it is very suited to the covenant style lending that you see there and in exchange for that you get great rates, or at least on a relative basis, great rates, and so we like that. You should assume we'll continue to do as much in that market as we can and that's a combination of the securitization market and the traditional term loan A and term loan B market. And then over and above that, we'll be looking at the various options for unsecured financing.

Great. Thanks for taking the question.

Thank you, speakers, and at this time there are no further questions in the queue.

Great. Well, we will end the call now. I want to thank everybody for joining us and the next time we talk it will actually be 2012 and we look forward to reporting our fourth quarter results. Thank you.

With that, ladies and gentlemen, that does conclude our conference for today. We thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.