SBA Communications Corp (SBAC) 2011 Q4 法說會逐字稿

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

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

Good morning, everyone, and thank you for joining us for SBA's fourth 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 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, February 24, 2012, and we have no obligation to update any forward-looking statement we may make.

Our comments will include non-GAAP financial measures as defined in Regulation G. The reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and the other information required by Regulation G has been posted on our website.

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

Thanks, Mark. Good morning.

As you saw from our press release last night, our fourth quarter financial and operational results were strong. We exceeded the high end of our guidance for site leasing revenues and tower cash flow, and produced adjusted EBITDA and equity free cash flow at the high end of our outlook. Total revenues were $183.8 million, up 11.1% over the year-earlier period. Site leasing revenues for the fourth quarter were $165.1 million, or a 17.9% increase over the fourth quarter of 2010.

Our site leasing revenue growth was driven by organic growth, portfolio growth, and the straight line impact of our Sprint Network Vision agreement. The vast majority of our site leasing revenue comes from the US and its territories, with approximately 3.4% of total leasing revenue coming from international operations.

Site leasing segment operating profit was $131.2 million, or an increase of 18.8% over the fourth quarter of 2010. Site leasing contributed 98.3% of our total segment operating profit. Tower cash flow for the fourth quarter of 2011 was $127.5 million, or a 14.6% increase over the year-earlier period. As is our custom, tower cash flow excludes any non-cash straight line benefit from our Sprint Network Vision agreement or any other source. Tower cash flow margin was 80.5%, compared to 80.3% 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 approximately one half of total incremental leasing revenue added in the quarter. Our leasing backlog right now remains solid. Demand seems to be increasing and we expect that the first quarter will be another strong one in terms of customer activity.

Our Services revenues were $18.7 million, compared to $25.4 million in the year-earlier period. This decline reflects, in part, a slowdown in activity from a principal customer in the fourth quarter, but appears to be correcting itself now in 2012. Services segment operating profit was $2.3 million in the fourth quarter, compared to $3.3 million in the fourth quarter of 2010. Services segment operating profit margin was 12.4%, compared to 12.8% in the year-earlier period.

SG&A expenses for the fourth quarter were $15.8 million, including non-cash compensation charges of $2.7 million. SG&A expenses were $15 million in the year-earlier period, including non-cash compensation charges of $2.6 million. We are particularly pleased with our ability to grow our Company materially while holding SG&A expense relatively steady. Adjusted EBITDA was $117.3 million, or a 14.1% increase over the year-earlier period. Adjusted EBITDA margin continued to grow and was 66.2% in the fourth quarter of 2011, up from 62.7% in the year-earlier period, a 350-basis-point increase.

Equity free cash flow for the fourth quarter of 2011 was $70 million, compared to $61.4 million in the year-earlier period, an increase of 13.9%. Equity free cash flow per share for the fourth quarter of 2011 was $0.64, compared to $0.53 in the year-earlier period, an increase of 20.8%. Our strong growth in equity free cash flow per share is a result of solid adjusted EBITDA growth combined with a declining share count.

Beginning with our first quarter 2012 Earnings Release, we will begin providing funds Funds from Operations, or FFO, and Adjusted Funds from Operations, or AFFO, metrics. We anticipate that AFFO will be calculated in a manner materially similar to our current calculation of equity free cash flow.

Net loss attributable to SBA Communications Corporation during the fourth quarter was $29.1 million, compared to a net loss of $39.2 million in the year-earlier period. Net loss per share for the fourth quarter was $0.27, compared to $0.34 per share in the prior-year period. Weighted average shares outstanding for the quarter were 109.5 million, down from 114.9 million in the year-earlier period, due to stock repurchase activity during 2011. Quarter end shares outstanding were 109.7 million.

In the fourth quarter, we acquired 697 towers, built 83 towers, and decommissioned 18 towers, for a net increase of 762 towers. We ended 2011 with 10,524 owned towers, an increase of nearly 16% versus the end of 2010. 9,194 of the towers were in the US and its territories, and 1,330 in international markets.

Total cash capital expenditures for the fourth quarter of 2011 were $200.2 million, consisting of $3.8 million of nondiscretionary cash capital expenditures, such as tower maintenance and general corporate CapEx, and $196.4 million of discretionary cash capital expenditures. Discretionary cash CapEx for the fourth quarter includes $154.7 million incurred in connection with tower acquisitions, exclusive of $8.1 million of working capital adjustments and paid earn outs, $19.3million in tower construction, including construction in progress, and $7.1 million for gross augmentations and tower upgrades.

We've experienced an increase in the amount of augmentation CapEx over the prior year, based largely on an increase in the number of sites we are touching in order to accommodate the increased volume in customer contracts, as well as changes in state wind loading codes. However, it is important to remember that the augmentation figure is a gross number and does not reflect approximately $4.1 million, or 58% of cash reimbursements paid by our customers.

With respect to the land underneath our towers, we spent an aggregate of $8.7 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. At the end of 2011, we owned or controlled for more than 20 years the land underneath approximately 70% of our towers. The average remaining life under our ground leases, including renewal options under our control, is 33 years.

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

Thank you, Brendan.

We ended the quarter with $3.5 billion of total debt. We had cash and cash equivalents, short-term restricted cash and short-term investments of $75 million, resulting in net debt of $3.4 billion. Our net debt to annualized adjusted EBITDA leverage ratio was 7.3 times, the same approximate level it has been for the last eight quarters. Our net secured debt to annualized adjusted EBITDA leverage ratio was 3.5 times.

Our fourth quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was very strong, at 2.8 times. As of the end of the fourth quarter, our debt had a weighted average annual cash coupon of 4.7%, and a weighted average remaining maturity of 4.3 years. 86% of our total debt is fixed.

As Jeff will discuss in a few moments, we plan to use available and committed debt financing to fund a portion of the Mobilitie transaction. While this will increase our second quarter leverage ratio slightly above our target range of 7 to 7.5 times, we are committed to, and see a clear path to getting back into that range in the second half of this year. As part of the Mobilitie transaction, we carefully considered the impact on capital structure and we structured the transaction to provide us with maximum flexibility going forward. As a result, we remain confident around future liquidity, future refinancing needs, and having ample resources to continue to grow our Business.

In the fourth quarter, we did not repurchase any shares of our common stock. 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. However, it is likely that we will undertake little to no additional stock repurchases until we return to our target leverage range.

I will now turn the call over to Jeff.

Thanks, Mark, and good morning, everyone.

As you have heard, we did have a great end to the year, exceeding or nearing the high end of our guidance across key financial metrics. Our organic leasing activity was strong, and we expect this trend to continue through all of 2012. AT&T and Verizon stayed very active right through the end of the year and represented almost half of our new business in the fourth quarter. We also saw a material uptick in activity from T-Mobile.

Now we are seeing, in addition to continued demand from AT&T, Verizon and T-Mobile, material amounts of new activity from Sprint through Network Vision. 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.

These views around strong organic growth, as well as portfolio growth, are the reasons we were able to increase certain items in our full-year 2012 outlook. We believe we are in the early stages of 4G deployments in the US and smartphone adoption in our international markets. In the last two weeks alone, several US carriers have disclosed higher spending plans around 4G.

We expect to benefit from these factors for the next several years as carriers build out their initial coverage footprints, to be followed by capacity spending as consumer adoption increases. With the shortage of spectrum in relation to the demand for wireless data service well-known and the potential for a new public safety network in the US now greater than ever, we believe the demand for wireless infrastructure will be great for years to come.

Given our expectations around future demand for wireless infrastructure, portfolio growth remains a top priority for SBA. We finished the year very strongly, adding in one quarter a material number of towers to our portfolio, most of which we added internationally.

We continue to be very focused on the quality, price, future prospects and expected returns of the towers we add and we are very pleased with our results in that regard. We're off to a strong start in 2012, even before the Mobilitie announcement, and obviously, when that transaction closes, we will have greatly exceeded the high end of our 10% annual portfolio growth goal.

Internationally, we are experiencing material growth. During the fourth quarter, we bought 584 towers, built 57, and established new operations in Guatemala and Nicaragua. We now operate internationally in five countries in Central America, plus Canada. Pro forma for the Mobilitie transaction and anticipated 2012 new builds, we will own over 1,650 towers in Central America, making us the preeminent Tower company in the countries in which we operate, in terms of resources and the number of towers we own.

We are developing strong relationships with our customers in these markets, which include Telefonica, America Movea and Digicel. In our international markets, just as in the US, lease-up has been very strong and we are very pleased with the results and customer acceptance of the co-location model in these markets. We expect to be presented with more opportunities for growth in these countries. We will also continue to review opportunities in additional countries for a potential fit to our business model.

And now we'll discuss our Mobilitie transaction, which we announced just this past Tuesday morning. We're very excited about the transaction for a number of reasons, including how complementary the Mobilitie assets are to our existing portfolio. Approximately 2,090 of the sites are located throughout the US, and the remainder are located in Guatemala and Nicaragua, where we now have operations.

We expect all of these towers to be integrated and absorbed into our Company smoothly and with only a modest increase in our SG&A expense. We expect an annual increase in SG&A expense of approximately $2 million to operate the Mobilitie assets, and less if we sell the DAS assets.

The towers themselves are all relatively new, with an average capacity of three or more tenants, with good ground space and terms. In the US, 67% of the Mobilitie towers are located within the top 50 BTAs and 77% in the top 100. Reflecting their young age, the Mobilitie towers average 1.3 tenants per tower. Most of these towers were originated when AT&T and Verizon, in particular, were focused on technology overlays on their existing sites and not on new site creation through cell splitting.

Given all the recent news about future mobile data usage, spectrum shortages, increased capital spending on 4G and now a new public safety network, we're very excited about the lease-up potential of these assets. We are particularly excited about converting these assets into our lease-up system, which has proven very successful over our history.

The substantial majority of the US towers were built for T-Mobile, with most of the remainder being built for Sprint. T-Mobile represents 66% of the US tower revenue, with approximately 91% of the existing US tower revenue coming from the Big Four nationwide providers.

The anchor tenant relationships with the US Mobilitie towers are structured differently than our or the traditional anchor tenant relationships in the Tower industry. In the Mobilitie case, the anchor tenant was provided favorable equipment rights at one mounting height and 50% revenue share on future co-location revenue.

Excuse me. Brendan, would you pick up?

Sure.

In exchange for that -- those favorable equipment rights and the 50% revenue share, the anchor tenant pays a market rental rate which escalates at 3% per year, plus reimburses to the tower owner all operating and capital expenses of the tower. In other words, a triple net lease in the traditional commercial real estate sense. Co-locations of additional tenants are handled in the traditional manner and the same way as we process co-locations.

The net economic result for the Mobilitie US towers is 100% tower cash flow margins and no maintenance CapEx. Although the accounting result is different, as we will record the operating expenses as an expense, and then gross up the revenue by the reimbursable pass-through expenses. The Central American towers follow the traditional tower model.

Thanks, Brendan. Sorry about that. Fighting a horrible cold here.

While the Mobilitie US towers were originated under a different model, it is a model that we are comfortable with in terms of expected financial returns. This was not a strategic transaction for us, but a financial one. We are buying the assets at what we think is a very good price, in terms of both multiple and price per tower.

Based on what we think are conservative lease-up forecasts, particularly around terminal tenants per tower, which for purposes of our evaluation we assumed would be below our portfolio average, we are targeting a double-digit five-year internal rate of return of 300 to 500 basis points above our weighted average cost of capital. And that is after the impact of revenue sharing.

With respect to organic same tower growth rates, we expect the Mobilitie towers with revenue share to grow at slightly less than our portfolio average, but only slightly less because of their lower starting base. As an example, a Mobilitie tower with 1.3 tenants today growing to 2.0 tenants over five years, or 7/10 of a tenant added, would produce a compound tower cash flow growth rate to us of 8% after revenue share. And we will have opportunities to do a lot better, given the locations of these towers.

The transaction will add materially to adjusted EBITDA and our equity free cash flow, substantially increasing our scale and financial capabilities and be materially accretive to equity free cash flow per share. Most importantly, we believe our equity free cash flow per share will be materially higher five years from now than it otherwise would have been, as a result of this transaction. All in all, we believe it to be a great financial transaction for us.

Part of the attractiveness of the transaction for us was the cost and mix of financing. By using a combination of cash and stock, we are able to achieve a very accretive outcome to equity free cash flow per share, while only increasing net debt leverage modestly above our target range of 7.0 to 7.5 times. We will be committed to reducing leverage back to where we are today, and post closing we expect leverage to drop to within our target range in the second half of 2012.

The cash portion of the transaction will be funded from our fully available $500 million revolving credit facility, which will be expanded to $600 million as part of the transaction, plus a $400 million one-year acquisition term loan secured by the Mobilitie assets. The revolver draw will bear interest at one-month LIBOR plus approximately 237 basis points. Full availability will be created under the revolver without the need for inclusion of any of the Mobilitie assets.

The acquisition term loan will bear interest at one-month LIBOR plus 350 basis points. The combination of the two produces a blended interest rate on the financing of approximately 3.2%, based on today's LIBOR rates. Going forward, we will look to source replacement debt financing to reload a portion of our revolver, repay the acquisition term loan and possibly fix some of the interest rates associated with this financing. The way we have structured the transaction provides us tremendous flexibility to move collateral around to maximize financing outcomes, and the markets are currently very robust around and desirous of this type of credit.

Included in the transaction are various indoor and outdoor DAS assets in New York, Chicago, Las Vegas and Auburn University. Pursuant to the terms of our investment in ExteNet Systems, we are obligated to attempt to negotiate a sale of those assets to ExteNet for cash back to SBA.

We have kept ExteNet generally apprised of our progress with Mobilitie, and we look forward to now seeing if we can strike and close a deal with ExteNet with respect to the DAS assets. If we can't, we will likely keep and operate the DAS assets, or we may choose to sell them to someone else. If we kept the assets, we would not be looking to expand our DAS business beyond these particular assets. We will continue to channel new DAS opportunities through our investment into ExteNet.

We're very excited about the Mobilitie opportunity. The acquisition is expected to close in the second quarter; and as soon as it does, we will be revising our outlook in our next Earnings Release to incorporate the transaction.

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 move through 2012. And a special thanks to Brendan for stepping in, in my moment of need. (laughter)

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

Thank you. (Operator Instructions)

Ric Prentiss with Raymond James.

I think I'll ask Brendan this, so you can save your voice there, Jeff.

Sorry about that. Embarrassing.

Maybe just walk us through a sample math on the sharing agreement -- just to use easy numbers -- not to say it's the actual rent, but just round numbers. If the anchor rent was $2,000 a month, and the operating expense at the tower was -- $1,000, $1,500 -- just to use easy math -- just want you to walk through how it will be reflected into your income statement when that next tenant gets added.

Ric, it's Brendan.

So the way that it will work is that, that base rent, so $2,000 in your example, plus the expenses, another $1,000, will be recognized as revenue. You'd have $3,000 of revenue. You'd have $1,000 -- I'm sorry. You'd have -- yes, $3,000 of revenue. You gross up the expenses. If we incurred the $1,000 of expense, they would reimburse us for that. So we would have $3,000 of expense. I'm sorry -- $3,000 of revenue and $1,000 of expense.

If we add a co-locater, depending on how that agreement is struck, it would result in us getting 50% of that revenue from the new co-locater, which we would recognize as revenue, and there wouldn't be any recognition of the other 50% that would be paid. It would be netted against the payment that goes to the anchor.

So Ric, if that were another $2,000 tenant, then we would be recording total revenue including reimbursements of $4,000, and $1,000 of expense.

I just wanted to understand how to get it built into the model. Thanks for that.

We understand that Mobilitie had also signed an MLA agreement with Sprint. Can you compare and contrast that for us, to understand what their agreement might be like, knowing that American Tower had an MLA with Sprint that addressed all towers, even before they touched provision? Whereas I think the other tower companies have done one that's more, as you touch it. Can you help us understand what the Mobilitie agreement is like?

It's the same, basically, as it is for T-Mobile. It's the anchor tenant gets revenue share and picks up all operating expenses and maintenance CapEx expenses. So it's basically the same.

And so as Sprint goes through Vision, is there a change?

They are going to have flexible equipment rights that will likely include most of the Network Vision just for Sprint, but it would not include any network sharing or other carriers who might want to network share with that equipment.

And that's only where they're the anchor tenant.

That's about 300 of the sites.

Okay. Great.

And then, I think you mentioned T-Mobile has been active, but it seems like they were just kind of pulling together their view of what they wanted to do, even into mid-February, with what they announced yesterday. Do you think the activity pickup you've seen from T-Mobile is reflective of this new go-out-and-build LT? Or is it just they were getting busy because the T-Mobile -- or the AT&T deal had collapsed?

No, it was the latter. Most of the pickup in activity that I was speaking to was the roaming overbuild. It had nothing to do with the announcement yesterday.

Right. That makes sense. Thanks, Jeff.

Phil Cusick with JPMorgan.

Just to follow up, as usual, on Ric -- what do you anticipate is built in here for Clearwire and T-Mobile for this year? Is there anything of that within guidance?

Not on the new T-Mo announcement; and not really anything for Clearwire. We had some T-Mo in there that we expected roaming overbuild, and the activity that we would expect that they would have undertaken, but this was prior to the 4G announcement.

Okay. And given the higher leverage now, do you anticipate that you still have the ability to compete if T-Mobile decides to sell towers later in the year? Or do you feel like you're out of that?

Any deal like that would have required us to use a mix of cash and equity. I don't think that we're out of it. Obviously, we're going to be working on reducing the leverage from this transaction down, which we expect to do very quickly. But because any deal like that would have required a mix of equity for us, I would say no. We'll take a look, as we do with all transactions.

Got it.

Barring that, you said you'll get back down into the 7.5 or below range by the second half. Can you anticipate getting back into a buying stock scenario this year, or is that really a '13 event?

It will depend on what we see in the market, whether we see portfolio growth opportunities that we like better than stock repurchase opportunities. Last year we favored more than we had previously, stock repurchase, which I think was also a reflection of what we saw in the acquisition market. So it really depends. Obviously, this year we've got some big portfolio growth acquisition plans ahead of us, but we're committed to continue to be opportunistic stock repurchasers. But we always compare that to what's out there in terms of portfolio growth opportunities, which remains our primary focus for use of capital.

Got it. Thanks, guys.

Jonathan Schildkraut with Evercore.

I was wondering if you could give us a sense on the Mobilitie side as to what portion of the cash flows that you highlighted in the release come from the DAS business relative to towers business? So if we're trying to separate those two businesses over the longer term. And then in terms of your investments into new tower builds, could you just give us a sense where you would like to deploy most of that capital, in the US or internationally, and then what the longer term goals are for international revenue as a total contribution.

Yes. The split between the tower cash flow and the DAS cash flow in the Mobilitie transaction is approximately $16 million of expected 2012, and $59 million on the tower side for expected 2012.

In terms of our international mix and our desires for new builds, we are doing a lot of early stage high-growth assets internationally, which we think will continue to grow and drive growth for our overall Company materially as we move forward. So we will continue to focus. We will build more towers outside the United States again this year than we will build in the United States.

And in terms of our revenue contribution, it will grow in 2012. We will end the year, we're confident, at a higher absolute number. In terms of the pro forma effect of Mobilitie, that may cause international to not grow as much on a percentage basis, but it will clearly grow materially on an absolute dollars. We will still look to get to that 10% level in the next several years.

If I could ask one more question about ExteNet -- I don't know if I've ever seen you guys break out what your ownership percentage is there. I was just wondering if you could give us any incremental color on what your longer term considerations are around your investment.

We own a sizable minority interest in ExteNet. Our long-term interest is to continue to support them, and should ExteNet decide that they want to monetize or move on or sell the business, we're, I think, well positioned to take a look; and we would be very interested if that opportunity comes along.

David Barden with Bank of America.

First, maybe, Jeff -- on the -- your view of valuation as you looked at the Mobilitie asset. I think a lot of us have been trying to figure out, based on what Crown Castle was paying for DAS businesses, how you guys are looking at the split of valuation between the two different streams that you saw coming out of Mobilitie. That would be question number one.

And question number two -- as you look at the game plan for the public safety network, and what the chatter is out there, what's an insider's view of how you think this thing's going to potentially unfold? Are they going to really try to leverage the existing network infrastructure? Or do you see them trying to carve out a separate network infrastructure for themselves? I'd love some insight from you on that.

Let me start with the last first, Dave.

On the public -- there will be the idealists who will want a standalone network that is free of external touches, so to speak. They don't want people around that equipment. I think that is an idealistic view. I think the economic realities may very well force a network sharing type of situation, and perhaps the truth is somewhere in between. But I think it's going to be economically impossible to have the ideal operational goal of the public safety world, which would be, actually, not only your own RAD centers, but your own towers. I just don't think that's going to happen. So I think the ideals will have to meet economic reality somewhere in between.

In terms of the DAS business, we bought basically four locations. They're kind of discrete assets without any backlog or kind of future growth of new -- it wasn't an ongoing business, so to speak, the way Crown bought NextG. But they're good assets, and we think they'll be -- I don't really want to get into the splits, because we have to negotiate the price with ExteNet. So pardon me for ducking on that one. But they're good assets, and we think ExteNet's going to be very interested.

Got you. Thanks for that color.

Simon Flannery with Morgan Stanley.

Wonder if you could touch on the T-Mobile leases with the Mobilitie acquisition. I think you'd said before, your T-Mobile leases had an average three-year life. Is there any material difference with these leases?

And then, I guess as part of the recent payroll tax legislation there was some tower legislation included in there, easing the co-location process. I wonder if you could just talk about some of the opportunities that presents.

Yes. The new T-Mo leases average about seven years on the Mobilitie assets. And in terms of your second question?

I think --

Oh, the co-location by right legislation. That's going to help in certain assets. That legislation will really -- it's really geographic-specific.

Because in most places where we do business, and I think this is true for the whole tower industry, you really did not have a lot of trouble getting additional co-los on. But there were definitely some jurisdictions, Southern California and some other parts of the country, where it was a problem. So, in those areas where you did the have those issues, that legislation will definitely be impactful. I don't think for the industry as a whole, it will be -- it will materially change things, but it's certainly an incremental positive.

Great. Thank you.

Jason Armstrong with Goldman Sachs.

Maybe just a couple follows. First, on the guidance hike -- just thinking through the mechanics, I guess your answer to Phil's question earlier indicates Clearwire and T-Mo weren't really drivers on the fundamental side. Should we interpret that, that the hike is predominantly new towers you've added into the mix; and anything fundamental -- improvements you've seen in the last few months -- wasn't necessarily layered in?

And then second question, back to Mobilitie. You talked through, obviously, the different anchor tenant structure. I'm just wondering, do you have a path to potentially tweak the relationship? A path or desire to change that relationship with the anchor tenant to really sync it up with how your traditional tower arrangements work?

Brendan, do you want to take the first one?

Yes. We -- I'm sorry, the first question was -- ?

On the guidance hike and the mechanics --

Most of the guidance hike was based on portfolio growth. There was a small increase associated with what we're seeing in our organic growth profile.

It really, Jason, did not take into account yesterday's announcements from T-Mo or Clearwire.

Okay.

And on the Mobilitie, there's always -- we were very attracted to the group of assets because of the ability to potentially tweak relationships and restructure things going forward. So we do think there's a variety of interesting opportunities that are going to be considered and available to us in that respect.

Okay. Thank you.

James Ratcliffe with Barclays Capital.

Two, if I could, quickly. One, on the DAS assets -- you said there were only four of them, so maybe this is not a relevant question. But, is the mix materially different, in terms of the customer base, from the tower Mobilitie assets?

And secondly, on T-Mobile. I know it's early and they just made the announcement. But can you help us think through ways that what they're announcing, in terms of what they're doing with LTE, single antenna, and the like, would be meaningfully different from the upgrade path you've seen Verizon and AT&T take?

On the DAS assets, James, it's not materially different in terms of the customer mix. And in terms of the upgrade, T-Mobile will most likely -- we don't know all the details yet, but I would guess it's going to be similar, given the same types of technology migration path, that AT&T has done.

Got it.

Which means there will be some amendments and some new equipment needed, and certainly the amendment possibility. So it's a very favorable development, I think, for our Company and the industry in general.

I specifically would say AT&T, because of the similarities of the technology migration path.

Great. Thanks.

Suhail Chandy with Wedbush.

Congrats on the quarter and Mobilitie. First, a housekeeping question -- trying to understand what's underlying guidance, could you possibly give us a split on the discretionary CapEx between new build and tower upgrades for 2012?

The CapEx, the discretionary CapEx for the acquisition sites are all detailed in the press release, so it's only based on what we have under contract as of today. And then, on our new builds, we're estimating that we're going to build a little over 400 sites during 2012. Most of those are international, so the average cost is somewhere a little less than $200,000. So if that gives you an idea.

Great. Thanks. And the organic revenue growth assumption that you've built in that's underlying -- is it more like 8%, or higher?

8% to 9%. 9% is still where we are.

Great. Two final questions, if I may.

On the Mobilitie portfolio, what's the percent of towers that have any anchor tenant? And I think you said T-Mobile was two-thirds; I may have missed it.

Well, there's 100% anchored.

100%. Okay.

They all have anchor tenants. Most of them are T-Mobile. About 1,700 are T-Mobile, and the remainder in the US would be Sprint.

Great. Thanks. That's very helpful.

Final question -- regarding the legislation that is possibly going to get passed with favorable co-location, does that touch all types of equipment? So everything that's in the shelter, basically, or can it also potentially address shared generators and any other changes to the site configuration?

You know, I think it was more co-location by -- I don't think it extends to equipment on the ground. I don't believe that they would legislate that. I don't believe it covers anything other than the antennas on the tower. But I don't think they really needed to go beyond that, either. I don't really know of any issues where people are having trouble getting generators in place or anything else, other than the antennas on towers that were already previously built and approved.

Thanks. That's very helpful.

Thank you.

(Operator Instructions)

Michael Rollins with Citi Investment Research.

I guess, more of a philosophical question about how you're looking at acquisitions these days, in light of the Mobilitie transaction -- you mentioned about some of the constraints in the industry, and we've only a few months ago were talking of the possibility of AT&T and T-Mo getting together and what that would mean for you guys. And if the industry's not in its final resting place in terms of structure, how do you look at picking up tenant exposure that could be involved in the next level of consolidation? How do you weigh that versus some of the financial metrics of the transaction? Maybe you could talk about that, both with respect to how you look at the Mobilitie transaction, and how you might look at future deals going forward.

That's a great question, Mike.

To be honest with you, we were not really pursuing the Mobilitie assets while the T-Mobile/AT&T transaction was pending. We really did not develop our interest in those assets until after it was clear that, that transaction would be not passed through, and then based on all the color around the US desire and perceived demands that there are going to be four nationwide carriers for some period of time. So we do take all those issues into careful consideration. And really our interest in Mobilitie was generated upon the termination of the AT&T/T-Mobile transaction.

Thanks.

Kevin Smithen with Macquarie.

Yes. You funded the Mobilitie transaction with very attractive low cost debt. We've seen a number of your competitors also raise money at very attractive interest rates of 3% to 4% on the secured basis, 5% or so unsecured. Are you concerned at all that this low cost of capital is going to drive up transaction multiples for the industry, and we're going to get into some significant bidding wars for future assets, just given how cheap capital is right now?

Well, I hope that doesn't happen, Kevin. History -- in the real estate business, there are direct correlations between prices for assets and cost of financing. And I don't know if our future will be any different than the traditional commercial real estate past in that regard. Clearly, when you are looking to generate material growth in equity free cash flow per share, cost of financing matters, and then that translates into what you're willing to pay to achieve the desired growth in equity free cash flow per share.

So does it have an impact? Sure, absolutely. Will it cause people to not be disciplined? It's not going to cause us to not be disciplined. And I think our peers are pretty good in that respect, as well.

Thanks a lot.

Thank you. Gentlemen, we have no further questions. Please go ahead with any closing remarks.

Well, thank you, everyone. And I apologize for losing my voice midstream, but Brendan picked up well. And we look forward to reporting our next results, which, in all likelihood, may include the Mobilitie transaction closing and the changes in guidance that will result from that. Thank you.

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