SBA Communications Corp (SBAC) 2012 Q2 法說會逐字稿

Welcome to the SBA second-quarter earnings call. For the conference all participants are in a listen only mode. There will be an opportunity for your questions; instructions will be given at that time. (Operator Instructions). As a reminder, today's call is being recorded. With that being said, I will turn the conference now over to the Director of Finance, Mr. Mark DeRussy. Please go ahead.

Good morning and thank you for joining us for SBA's second quarter 2012 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 on 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 statement we may make.

Our statements are as of today, August 3, 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 the most directly comparable GAAP financial measures and other information required by Regulation G has been posted on our website, SBAsite.com. With that I will turn it over to Brendan to comment on our second-quarter results.

Thank you, Mark, good morning, everyone. As you saw from our press release last night, our second-quarter financial and operational results were excellent. We exceeded the high end of our guidance across all of our most important financial metrics including leasing revenue, tower cash flow adjusted EBITDA and AFFO.

Total revenues were $229.1 million, up 34% over the year earlier period. Site leasing revenues for the second quarter were $203.6 million, or a 35.6% increase over the second quarter of 2011. Our leasing revenue growth was driven by organic growth and portfolio growth, including the impact of the Mobilitie acquisition which closed on April 2.

The vast majority of our site leasing revenue comes from the US and its territories, with approximately 5.7% of total leasing revenue coming from international operations. Site leasing segment operating profit was $158.8 million or an increase of 34.5% over the second quarter of 2011. Site leasing contributed 97.5% of our total segment operating profit.

Tower cash flow for the second quarter of 2012 was $152.3 million or a 28.4% increase over the year earlier period. Tower cash flow margin was 79.3% compared to 80.1% in the year earlier period. Margins were slightly impacted by the addition of the less mature Mobilitie portfolio and are expected to be similarly impacted by the TowerCo acquisition and then resume their growth thereafter.

We continue to experience strong leasing demand both domestically and internationally. Amendments, which were predominately from AT&T, Verizon and Sprint, continue to be numerous and contributed approximately 80% of US leasing revenue added in the quarter.

The big four US carriers contributed approximately 75% of our consolidated incremental leasing activity in the quarter. We have a solid leasing backlog and expect that the third quarter will be another strong one in terms of customer activity. We are off to a good start in the quarter.

Our services revenues were $25.6 million compared to $20.9 million in the year earlier period. Services segment operating profit was $4.1 million in the second quarter compared to $2.9 million in the second quarter of 2011. Services segment operating profit margin was 16.1% compared to 13.9% in the year earlier period.

SG&A expenses for the second quarter were $17.7 million including non-cash compensation charges of $3.8 million. SG&A expenses were $15.7 million in the year earlier period including non-cash compensation charges of $3.1 million. As a percentage of revenue, SG&A declined 150 basis points compared to the second quarter of 2011, reflecting the efficiency by which we can materially add assets.

Adjusted EBITDA was $142.9 million, or a 30.5% increase over the year earlier period. Adjusted EBITDA margin was 65.6% in the second quarter of 2012, up from 64.8% in the year earlier period, an 80 basis point increase.

AFFO increased 46% to $95.3 million compared to $65.2 million in the second quarter of 2011. AFFO per share increased an industry-leading 34.5% to $0.78 compared to $0.58 in the second quarter of 2011.

Net loss attributable to SBA Communications Corporation during the second quarter was $53.5 million compared to a net loss of $29.8 million in the year earlier period. Contributing to net loss in the second quarter were $15.8 million in acquisition related expenses primarily associated with the Mobilitie transaction and a $27.1 million charge related to the early retirement of a portion of our 8% and 8.25% senior notes.

We expect to incur a similar type of charge in the third quarter in an anticipated amount of approximately $23 million primarily in connection with the early retirement of our remaining 8% senior notes and the Mobilitie bridge loan.

Net loss per share for the second quarter was $0.44 compared to $0.27 per share in the year earlier period. Quarter end shares outstanding were 121.5 million.

In the second quarter we acquired 2,381 towers, the substantial majority of which were from the Mobilitie acquisition, and built 90 towers. We ended the quarter with 13,122 owned towers, an increase of 37% versus the year earlier period. 11,488 of the towers were in the US and its territories and 1,634 in international markets.

Total cash capital expenditures for the second quarter of 2012 were $923.5 million consisting of $2.4 million of nondiscretionary cash capital expenditures such as tower maintenance and general corporate CapEx, and $921.1 million of discretionary cash capital expenditures.

Discretionary cash CapEx for the second-quarter includes $887.9 million incurred in connection with tower acquisitions exclusive of any working capital adjustments and paid earnouts. The substantial majority of this was the cash consideration in the Mobilitie acquisition.

Discretionary cash CapEx also included $15.6 million in new tower construction including construction in progress and $5.4 million for gross augmentations and tower upgrades. Of the $5.4 million augmentation figure approximately $2.9 million, or 54%, was reimbursed by our customers.

With respect to the land underneath our towers, we spent an aggregate of $13.2 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 the quarter we owned or controlled for more than 20 years the land underneath approximately 71% of our towers, including those we acquired from Mobilitie. The average remaining life under our ground leases, including renewal options under our control, is 32 years.

In July we entered into an agreement to sell certain DAS assets acquired in the Mobilitie acquisition to ExteNet for a total consideration of $125 million including $100 million in cash and $25 million in the form of a promissory note. The transaction is expected to close by the end of the third quarter.

These assets produce approximately $8.6 million in run rate annual tower cash flow. The results of these operations are reflected as income from discontinued operations in the statement of operations, but are not included in our calculations of tower cash flow, adjusted EBITDA and AFFO.

We have retained ownership of three DAS networks located in Chicago which contributed $1.8 million of leasing revenue and tower cash flow during the second quarter. At this point I will turn things over to Mark who will provide an update on our liquidity position and balance sheet.

Thanks, Brendan. SBA ended the second quarter with $4.1 billion of total debt. We had cash and cash equivalents, short-term restricted cash and short-term investments of $109 million resulting in net debt of $4.0 billion. Our net debt to annualized adjusted EBITDA leverage ratio was seven times. Our second quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 3.3 times.

We were very active in the capital market during and subsequent to the second-quarter; several of the second quarter events we have already reported and discussed. In April we issued 5.25 million shares of common stock to fund the equity portion of the Mobilitie transaction. The cash portion of the purchase price was funded with a $400 million bridge loan and the balance from a draw on our revolver.

Also in April we redeemed $131 million of principle of each of our 8% and 8.25% senior notes with proceeds from an equity offering in the first quarter. In May we obtained a new five-year $200 million Term Loan A, which was issued in par and bears interest at LIBOR plus a margin that ranges from 2% to 2.5%. The proceeds from this loan were used to pay down amounts outstanding under our revolver.

Simultaneous with the Term Loan A, we amended our credit facility to increase the committed availability under our revolver to $700 million and to extend the maturity date out until May of 2017.

In July we issued $800 million of Senior Notes due 2020, the notes were issued at par and bear interest at a rate of 5.75%. Proceeds from this offering were used in part to repay the full Mobilitie bridge loan and to repay all amounts borrowed under our revolver.

Also in July we priced a $610 million offering of secured power revenue securities. These securities will be issued at par and bear interest at 2.933%. They have an anticipated repayment date of December 2017 and a final maturity date of 2042.

The proceeds in this offering, scheduled to close August 9, will be used to call the remaining $244 million in principal outstanding of our 8% senior notes this month at a price of [$106 million], pay a portion of the cash consideration in connection with our pending TowerCo acquisition and for general corporate purposes.

As of the end of the second quarter and pro forma for our two July debt offerings, our debt had a weighted average annual cash coupon of 4.4% and a weighted average remaining maturity of 4.6 years. We have reduced our weighted average cost of debt by 20 basis points and extended the weighted average maturity by six months in just one quarter. 86% of our pro forma total debt is fixed rate.

In the second quarter we did not purchase any shares of our common stock. We currently have $150 million remaining under our existing $300 million authorization. While stock purchases continue to be an important component within our overall capital allocation process, we continue to view them as opportunistic rather than systematic.

We are very pleased with our balance sheet as we enter the second half of 2012. Pro forma for July debt offerings, we have long-term financing in place for the Mobilitie transaction, $700 million in committed capacity under our revolver, approximately $500 million in cash and committed financing for the TowerCo acquisition. The current capital market environment is very favorable for the tower industry and we expect it will continue to provide us with diverse and attractive sources of capital. I will now turn the call over to Jeff.

Thanks, Mark, and good morning, everyone. Thank you for joining us. As you have heard, we had an excellent second quarter, one of the best that I can remember. All of the factors that materially contribute to our financial results came together positively in the second quarter and ahead of our expectations. Probably more exciting is our belief that these factors will continue to combine positively for the rest of 2012 and into 2013.

We've had a number of moving parts this year that may make it a challenge to fully appreciate what is going on at SBA, but it really boils down to four key factors that have combined to drive our success -- strong customer activity, both domestically and internationally; excellent operational performance across all lines of our business; material portfolio growth with quality assets at attractive prices; and successful opportunistic financings executed on very attractive terms.

These four areas, which have always been the keys to our success, came together in the second quarter in such a way as to permit SBA to post superior growth in tower cash flow, adjusted EBITDA and particularly AFFO per share. We expect these four areas will continue to combine together in a positive way for us in the remainder of 2012 and as we move into 2013.

I'm going to focus the rest of my comments on several SBA specific points within these four areas, which I believe will provide you not only with a better understanding of the drivers to our second-quarter success, but also why we are so excited about our prospects for the rest of the year.

Organic growth was and continues to be very strong driven in the second quarter by AT&T, Verizon, Sprint and our international assets. Much commentary about strong wireless CapEx and network upgrade trends in general has been delivered this earnings season from our customers and peers, so I'm not going to repeat that here.

For SBA we saw continued strength from AT&T and Verizon on amendments and a substantial pickup from Sprint in Network Vision activity. These three carriers were the primary contributors to our US leasing business. International activity was also strong and came from a variety of customers. International results are ahead of plan and we are very pleased with what we have accomplished in the six countries in which we operate outside the United States.

We had no material contribution in the second quarter from T-Mobile, 4G or Clearwire LTE activity and none has yet been included in our 2012 guidance. We are in discussions with T-Mobile on their 4G upgrade program and if and when we do reach an agreement with T-Mobile we would at that time incorporate our expectations around their 4G upgrade into guidance.

We have a lot of runway left around amendments. Between AT&T, Verizon and Sprint we have commenced cash revenue recognition from 4G or Network Vision amendments on less than 25% of their existing sites through the end of the second quarter -- a long way to go. Our backlogs of leases and amendments are very strong and we have clear visibility to continued strong organic growth through the rest of this year and well into 2013.

The Mobilitie integration is going according to plan and we expect the TowerCo closing and integration to go very smoothly. Mobilitie assets are performing to expectation with lease up in the second quarter and a growing backlog moving forward. We believe that TowerCo will close in October and contribute to our fourth-quarter results, although we have not included any benefit from TowerCo in our guidance.

Operationally we continue to perform well and with increasing efficiency. Cash SG&A expense as a percentage of total revenue declined to 5.95% from 7.1% in the year earlier period. This offering efficiency helped drive continued increases in adjusted EBITDA margin which increased to 65.6% from 64.8% in the year earlier period.

Once the TowerCo acquisition is closed and fully integrated we would expect SG&A expense to drop further as a percentage of revenue. As we have previously discussed, we expect incremental SG&A expense required from the Mobilitie and TowerCo acquisitions combined to be only approximately $5 million per year to handle an approximate 50% increase in the size of our tower portfolio.

We had strong operational performance throughout the Company including new builds, ground-lease purchases and leasing where we handled the highest quarterly volume ever of new lease and amendment transactions. Our services segment in the second quarter began to see material work related to Sprint's Network Vision project which we expect will continue to increase as we move through this year and into next.

Our employees continue to work very hard and efficiently to meet the needs of our customers and I want to thank and applaud our employees for their efforts.

We've enjoyed tremendous financing success since the beginning of the second quarter, securing $1.81 billion of funded and committed debt capital. Included in this amount was a $200 million increase to our revolver, which is undrawn. $1.41 billion of the total $1.81 billion of debt is fixed-rate. The weighted average interest rate for all of this recent financing is 4.1%, well below our expectations.

Because of our financing success, and assuming our sale of DAS assets to ExteNet closes as anticipated, we now expect to draw only approximately $650 million of the $900 million bridge commitment in connection with the closing of the TowerCo acquisition. Having successfully funded a good portion of the TowerCo cash consideration in advance will increase our cash interest expense and impact our AFFO for the rest of the year, as you can see in the guidance.

Our multiple successful financings have not only put us in a good position for the TowerCo acquisition, but have also provided the liquidity necessary to satisfy our only debt obligation due in the next 12 months. Our undrawn $700 million revolver is expected to be more than sufficient to satisfy in cash all of our obligations related to our 1.875% convertible notes due May, 2013.

We do not need to draw on the revolver to fund the TowerCo acquisition and expect that AFFO generation over the next 12 months should provide plenty of capital for discretionary spending and investment.

While we are likely to do some additional opportunistic debt financing prior to the May 2013 convert maturity so as not to rely entirely on our revolver, the fact that we can means that we have all the committed financing we need to satisfy all of our debt obligations until the fourth quarter of 2014.

Our strong operational performance and lower than expected net debt leverage ratio exiting Q2 allows us to revise our post-TowerCo year end leverage estimate to 7.5 times to 7.7 times pro forma fourth-quarter annualized net debt to adjusted EBITDA at or only slightly above the high end of our target leverage ratio of 7.0 to 7.5 times. This means we will be in a position to resume material investment of additional capital early in 2013.

We see SBA as in excellent shape and very well-positioned for additional growth. By the end of this year we will have added approximately 6,000 towers to our Company, over half of which will first begin to contribute materially to our financial results in the fourth quarter. This sets the Company up for material year over year growth for the remainder of 2012 and all through 2013.

Adding to the contribution from portfolio growth has been, and we expect will continue to be, organic leasing growth in amounts and volumes as high as we have experienced in years. We see no near-term decline in US or international customer activity.

Finally, our recent refinancings have reduced our weighted average cost of debt, lengthened our maturities and provide us with tremendous liquidity such that we could operate and continue to grow through the fourth quarter of 2014 without the need for any additional financing if we so chose.

The combination of all these items makes for exciting prospects around continued material growth in AFFO and AFFO per share. We look forward to reporting future results. John, at this time we are ready for questions.

(Operator Instructions). Jonathan Atkin, RBC Capital Markets.

A couple questions. First on the DAS assets that you are continuing to operate, would you look to maybe expand that or maybe find another purchaser for those assets? And then with regard to just the traditional macro business ending the quarter I'm interested in what kind of rank order of lease-up pace you were seeing amongst AT&T, Verizon and Sprint.

On the DAS assets, John, we are probably going to keep them and work to improve their efficiencies. We are going to work with ExteNet on that and at some point I would expect us to sell those assets to ExteNet as well.

In terms of the rank order, I think AT&T was number one, but not by a whole lot over Verizon, right? And then Sprint was third. But all in very material amounts of activity. I think that is going to continue to roll through the rest of the year with the possible exception that Sprint may rise in the rankings as the Network Vision amendments really start to accelerate.

And then with regard to the Mobilitie integration, but also respectively TowerCo, can you just remind us what are the main operational and back office challenges involved in those assets?

Well, a lot of it is IT related and movements of data files and making sure the data that comes over is organized the way that we run our Company. That process is well underway. There will be some additional field operations people added.

We tend to run that side of our business based on a certain tower count in the geography. Obviously our tower count is going up quite a bit. And we will probably add a few more salespeople around those assets, but those positions are already in the process of being filled and things have gone smoothly so far, we expect that to continue.

Thank you.

Phil Cusick, JPMorgan.

Can I just follow up on the DAS Chicago, why an ExteNet's home market are you holding onto these? Is there an efficiency problem that you can better improve than they can?

No, we just can't agree at this point on price and terms for those assets.

Okay. So as they develop then you will -- everybody will know better what is going on?

Yes.

Okay. And then can you -- I want to make sure I heard this right. Less than 25% of your Tier Verizon sites had been amended so far, is that right?

No. Combined all of our AT&T, Verizon and Sprint sites, less than 25% of those. And in rank order of who is amended the most it is Verizon followed by AT&T and then Sprint in third place.

As you talk to T-Mobile, I mean so far you have sort of avoided some of the MLA's that other people have done. Are you more inclined to do this MLA with T-Mobile or is it not high on your priority list?

Well, it is -- all of those are high on our priority list for the right terms. And again, we don't have a religious opposition to MLAs; it is all about what is best for SBA both today and looking out the future financially. So we are open and in dialogue and I would think some resolution happens here in the not too distant future.

Okay, thanks, Jeff.

Ric Prentiss, Raymond James.

I will followed Joe Cusick there. First a couple of things. On the T-Mobile MLA possibility in the not so distant future -- we've seen some people starting to look at MLAs and try and protect from wireless industry consolidation by getting long-term lease extensions. How would you frame your thoughts about revenue upside versus churn protection and wireless consolidation?

I think it is a balance, Rick. I mean we would find more money and longer terms both attractive.

Okay, and Jeff, to Phil's question on the T plus Verizon plus Sprint under 25% -- I assume Sprint excludes the item stuff, so it is truly T plus Verizon plus just the CDMA side of Sprint that is in that number?

Correct.

And then on the financing, you have done a really good job, Mark has been really busy there, as you all have, in getting the financings done here in the last few months. When you bring in the Mobilitie towers -- excuse me the TowerCo towers, is there a possibility that you could securitize some of those at pretty attractive rates and what would be the trigger to look at doing that?

Yes, I mean, we do intend to continue to access the securitization market. One of the things that we did is we kind of got our unsecured higher costing debt refinancing out of the way with the 5.75% senior notes, although on an absolute basis that was a wonderful rate. So the future financings post-TowerCo we have position to fit within the secured buckets that we look to fill and you can assume that some of that will be in the CMBS market.

Well, I don't know if you can assume it or not, but that is certainly our intent. The TowerCo assets are in great shape, we're actually taking steps today working with TowerCo to begin a securitization readiness state for those assets. And we feel pretty good about our ability to tap that market again post-transaction.

Great. And the promissory note for the DAS business sale to ExteNet, what kind of form is that going to take and how should we think about how that affects your balance sheet numbers?

Well, it's not that big, it's $25 million and it accrues interest at 10% and it's got some healthy terms for us which are designed to give ExteNet the incentive to not leave it out there a whole long time.

Great, thanks for the color.

David Barden, Bank of America.

Just two, I wonder if I could -- the first maybe, Brendan. Could you just tie out the change in the midpoint guidance for us in the (inaudible) EBITDA? I think that retention of the DAS business is going to be probably about a little more than half of the revenue change, a little less than half of the EBITDA change from last quarter to this quarter.

And then the rest of it I guess would be some combination of organic growth and new tower builds, et cetera. So if you could give us some better breakdown there it would be helpful.

And then, Jeff, I think you said during your remarks that because you were going to end the year at around 7.7 times leverage, roughly in line with your debt target, that you were going to be ready to reinvest capital again into the market. Could you elaborate a little bit?

Did you mean starting to go look again at more aggressive portfolio builds? Or did you mean coming back to buy back more stock or both would be great? Thanks.

Hey, David, on the guidance change what you said is basically right. I mean we are adding to our full year guidance about $5.4 million to revenue and tower cash flow and EBITDA from the inclusion of the DAS assets that we are keeping, that is about $1.8 million per quarter for the three quarters.

Obviously we already got that benefit in Q2 and then the remaining $3.6 million for the second half of the year. The balance of the increase is primarily from organic growth. So if you look at site leasing revenue, we have increased the midpoint there $9 million, less the $5.4 million from the DAS, the balance of that $3.6 million is all organic growth because we've signed up very little in terms of new acquisitions.

And the same would apply as you go down to tower cash flow and EBITDA. Obviously we did a little bit better on the EBITDA line in Q2 in part because we had a better than expected services quarter as well. But all of that is baked into the increase, so you've got $12.5 million on EBITDA, only about $5.5 million of that is from the DAS, the rest is all organic growth.

And on the future investment question, David, I mean once we get back to the high end and working our way down on -- the high end of our target range of 7.5 times and below, we will once again turn our thinking back to capital investment, which has always been a choice for us between portfolio growth, which is our bias and then stock repurchases if those look to be better deals than our portfolio growth opportunities.

So no change in how we will think about things, just really a question of when we get back to that level. And I think it is now going to be sooner than we thought given how well we performed in the second quarter and what our expectations are for the second half of the year.

Great. Okay, perfect, thank you very much, guys.

Jonathan Schildkraut, Evercore Partners.

First on the ExteNet sale, the sale of the DAS assets rather to ExteNet. It looks like you sold at about 14.5 times tower cash flow. This might be a good opportunity for you guys to give us a sense as to some of that unrecognized value in terms of your DAS investment -- 14.5 times the tower cash flows seems like a good number.

Secondly, in terms of your investment there, is there a reason that you chose to take cash plus a note as opposed to an increased percentage of ownership? And then I would like to return with a different line of questions. Thanks.

Well the form of consideration was heavily negotiated in terms of their desire for additional equity issues, our desire for good financial return where the senior lenders to ExteNet would want to be. So all of those things, Jon. Even though we are in minority investor there you can assume it was a robust conversation.

And in terms of the value, we have never really disclosed how ExteNet is doing; I'm not going to start that now. Although I will say that based on those multiples the value of our ExteNet investment is above what we are carrying now on our books.

Okay, great. One question around the conversations with T-Mobile. In the past the company has talked about a desire to potentially address the anchor tenant arrangement on the Mobilitie assets. Is it fair to assume that that has entered part of the conversation?

It is, although it's -- it may or may not be addressed as part of a holistic agreement with -- it is still on the table. But there is a lot of -- first of all we have been a little busy this quarter, T-Mobile has been a little busy. So we have all those opportunities still ahead.

All right, great. Thank you for taking the questions.

James Ratcliffe, Barclays.

Any comment on AT&T's purchase of NextWave and the assets from Comcast and Horizon and particularly, I know it is longer-term, but if they wanted to deploy those WCS frequencies what sort of amendment activity would be necessary or would those be covered under typically existing amendments? Thanks.

It would all come down to the issue of whether or not new equipment was necessary to transmit at that 2.3 gigahertz level. I don't know the answer, yet, on that, James. That is pretty new news for us and we are just starting to understand that. But it becomes a fairly simple answer to your question -- if new equipment is required then it would be a necessity for AT&T to come back and talk with us. If not they would not have to.

Great, thank you.

Jason Armstrong, Goldman Sachs.

Maybe first question just on amendments, obviously very strong activity, you talked about being sort of 80% of incremental activity here and then still lots of room to run given the 25% stat. How are you feeling about the outlook for cell splitting and kind of where we are in the LTE amendment versus eventual cell splitting cycle?

And then maybe just second question on T-Mo assets and tower sale. I know, Jeff, you had talked in the past about you had done two relatively large deals this year that seemingly put you out of the market for the T-Mo towers. But now with your comments about the leverage profile and being willing to consider stuff sort of beginning of next year when you hit the 7.5 turns.

That is a portfolio and a deal that would obviously take some time to close. Are you signaling here that you may be willing to look at those assets at this point in sort of pulling that forward? Thanks.

I will take the last one first. You should not expect any material big new deals for us announced this year while we continue to work back to our target leverage range. In terms of the amendments, you had me so focused on the second one, Jason, what was the amendment question?

The question was really more of a cell splitting question. Obviously we are sort of in a big amendment cycle at this point. What are you seeing on the cell splitting side?

You know, we are seeing from AT&T and Verizon some new tenancies, which gives us reason to continue to believe in our base belief, which is the driver behind Mobilitie and TowerCo that once the LTE initial rollout is completed there will be capacity in-fill and cell splitting.

It will be -- it will take a variety of forms, both macro sites and small cells. There will be plenty of macro sites and we are already seeing some examples where capacity needs are emerging now and are being addressed with new tenancies.

Great, thank you.

Simon Flannery, Morgan Stanley.

If we can come back to the future expansion, 2013. I think, Jeff, in the past you have talked about 5% to 10% portfolio growth annually, obviously you have done a lot more than that this year. Is that the sort of thing that, all other things being equal, we should think about for 2013 and 2014 as your baseline target? And maybe you can just talk about international versus domestic in terms of areas of focus. Thanks.

We will provide some more color on that when we give out full-year guidance in our next call, Simon. I mean, we are getting larger -- we will continue to invest. What will be the governing factor and this is how we come up with the statements that we have that about 5% to 10% portfolio growth will be where we want to continue to leverage the business.

And if it continues to be in the 7 to 7.5 times range, which I feel is appropriate today, when most of that investment can go towards portfolio growth with good growth assets, from that will fall out a number of towers and that is kind of how we will talk about it in -- so I can't really speak to the 5% to 10% today, but I will tell you exactly how we will calculate and speak to that issue.

And in terms of international versus domestic, we are going to continue to look in all of those areas. We are having great success both domestically and internationally with lease-up and customer activity. So we will take a wide view of where our additional investments will go.

Thank you.

Colby Synesael, Cowen.

On the TowerCo deal you guys had noted that when that closes it should be immediately AFFO accretive and obviously there is some debt financing that you have not done to make it so you guys could get that done. I'm just curious on the interest rate that you have received on that debt, is that in line with what you were expecting? And what are the implications then for the accretion analysis you may have given us initially and what you are expecting now?

And then the second question has to do with the 25% of existing sites that you noted who have now been upgraded to LTE for I guess what's AT&T, Sprint and Verizon. Is there a direct correlation, in other words, implying then that between going to a higher number and actually what the revenue growth could be because of the MLAs?

I would think that because of the MLAs that you signed with those guys that as you actually start to expand to more LTE on those towers it might not necessarily be a direct correlation to what the revenue growth could be.

On the TowerCo debt accretion we have done better in our two recent financings than we thought. We actually thought we would do a blend of around 5% between high yield and secured and in actuality it was 4.1%, so we did a lot better and of course that should have a benefit to the TowerCo accretion.

Now you mentioned something about having to line up some more debt. We really don't have any more debt to line up; we have a committed bridge facility in place that bears interest at LIBOR plus 350. So when you roll it all together our matched debt against that transaction will be well below 5%.

And in terms of the revenue growth, we only have an MLA with Sprint. And as we sign up amendments -- we have straight-lined the revenue so it is all in there and that was the reason why we had a GAAP revenue pickup. But we only recognize the AFFO impact when we actually begin the cash revenue recognition.

So, we actually do have a lot of additional runway based on where we think that 25 -- or it is actually well below -- it is below 25%, where we think that number is headed as you look at the impact on cash AFFO.

Okay, great. Thank you.

Chris Larson, Piper Jaffray.

I wanted to come back to a couple of questions. One was the amendments and I wonder if you could just comment on as you sign these amendments are you extending out the total lease of those? And then if you could give us a sense for the weighted average lease length for the big four carriers?

And then just to -- on that question you just answered on the Sprint MLA, is that to imply that -- I guess the question is, is there additional upside on a GAAP basis or Sprint on the MLA basis or are they already in that 25%, are they greater than that now?

I'm going to let Brendan take the second one first.

Yes, Chris, with regard to this straight-line, there is an upside to the GAAP revenue for Sprint based on timing of when they actually commence those amendments. Because while it is in our numbers today, it is in there at the latest possible date that they are allowed to commence them.

So to the extent that they commence them earlier you would have a pickup, although albeit smaller pickup than obviously if it weren't in there at all. And then secondarily, to the extent that they are to sign amendments at greater rates than the minimum that they are obligated to, that obviously also has a positive impact and we are seeing some of that in the early going at this point.

And on the MLA versus lease extension question, Chris, we again only signed an MLA with Sprint. And in connection with that we did extend leases and I think our average with Sprint CDMA sites is around nine years now. The other three guys average three to four years and they run -- their leases run in the traditional five years with five, five-year renewal option cycle.

Great, thank you.

Kevin Smithen, Macquarie.

In the outlook section of your press release it identifies, the Company intends to spend additional capital in 2012 in acquiring revenue-producing assets not yet identified or under contract, the impact which is not reflected in 2012 guidance.

Based on what you said on the call, there seems to be no major deals, but are there tuck-in deals that you are expecting that could be material in terms of revenue developments this year into next year?

Yes, there will be additional deals, Kevin, I don't know that they will be material, I suspect they won't. But we will continue to stay active in the mom and pop market and continue -- we have some additional capital that we are interested and prepared to spend but nothing material while we close TowerCo and work leverage back down to our target range.

Also your international site revenue is 5.7% and that is pre-TowerCo. Given the strong dollar right now and the cheap borrowing costs, should we expect to see you guys more aggressive in LATAM and internationally in 2013?

We like the market a lot, and what we have done so far in Central America is all dollar-denominated, so we like that too. So I think the answer is yes, we like those markets. There are other markets that I think we could like as well but that is certainly an area in which we are interested in finding good additional investment.

And 10% is still your long-term goal for international revenue mix?

It is. And again, that was really more of a goal to give ourselves something to shoot for. Our international business is growing a lot; actually, on an organic basis, faster than our US business. But with Mobilitie and TowerCo, it is kind of -- it has been pushed back a little bit on a pro forma basis. But yes, that is still a number that we are interested in getting to.

Thanks.

Imari Love, Morningstar.

The augmentation CapEx trends, I just wanted to get a feel for how you see those lining up in the second half versus the first. They have been running low relative to 2011.

Other question was, of the 19 acquired towers since the end of the quarter, and you said you had 38 more that you agreed to purchase, where are the locations on those?

On the 19, I'm embarrassed to say I don't know exactly where they are. They are US towers spread around the country.

That's what I was asking, US versus international.

Yes. Yes, they are US towers. And the augmentation CapEx trends I think are -- Brendan, correct me if you see it differently -- but I think the trends are good. We don't see any material increase there. And particularly keep in mind that we report gross numbers, but actually have over the last couple years had more than 50% of that cost reimbursed to us by the tenants whose activity requires the augmentation.

Yes, I would agree with that. I mean we are seeing more of our sites being touched because of the greater amount of amendments and, as a result, in some cases we are seeing a little bit of an uptick generally in augmentation CapEx to accommodate the additional equipment. But we are having greater success in terms of recovering those funds from the carriers that are actually causing those augmentations. So on a net basis we are actually doing better.

Great, thanks. Appreciate it.

And to the presenters, no further questions in queue.

Great. Well, I want to thank everyone for joining us today and we look forward to speaking with you next time. Thank you.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.