SBA Communications Corp (SBAC) 2012 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to SBA Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time.

(Operator Instructions)

As a reminder this conference is being recorded. I'd now like to turn the conference over to our host, Mr. Mark DeRussy, Director of Finance. Please go ahead, sir.

Thank you. Good morning everyone, and thank you for joining us for SBA's Third Quarter 2012 Earnings Conference Call. Here with me today are Jeff Stoops, our President and Chief Executive Officer, as well as Brendan Cavanagh, our Chief Financial Officer.

Please note that some of the information we will discuss on this call is forward-looking, including but not limited to any guidance for 2012, 2013, 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 6, 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 by Regulation G. The reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures, and the other information required by Regulation G, has been posted to our website, sbasite.com. With that, I'd like to turn the call over to Brendan to comment on our third-quarter results.

Thank you, Mark, good morning. As you saw from our press release last night, our third-quarter financial and operational results were excellent. We exceeded the high end of our guidance for leasing revenue, adjusted EBITDA, AFFO, and services revenue. Total revenues were $238.6 million, up 35.9% over the year-earlier period. Site leasing revenues for the third quarter were $208.8 million, or a 35.2% increase over the third quarter of 2011.

Our leasing revenue growth was driven by organic growth and portfolio growth, including the impact of the Mobility acquisition, which closed during the second quarter of this year. The vast majority of our site leasing revenue comes from the US and its territories, with approximately 6% of total leasing revenue coming from international operations. Site leasing segment operating profit was $162.2 million, or an increase of 34.5% over the third quarter of 2011. Site leasing contributed 97.2% of our total segment operating profit.

Tower cash flow for the third quarter of 2012 was $155.9 million, or a 28.2% increase over the year-earlier period. Tower cash flow margin was 79.3%, compared to 79.8% in the year-earlier period. Margins were slightly impacted by the addition of the less-mature Mobility portfolio. Our fourth-quarter 2012 guidance assumes a sequential decline in tower cash flow margin to reflect the less-mature TowerCo sites, which were added on October 1. We expect margins to resume sequential growth in the first quarter of 2013.

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 85% of US leasing revenue added in the quarter. The big four US carriers contributed approximately 81% of our consolidated incremental leasing activity in the quarter. We have a solid leasing backlog, and expect that the fourth quarter will be another strong one in terms of customer activity. We are off to a good start in the quarter, and expect a strong finish to the year.

Our services revenues were $29.8 million, compared to $21 million in the year-earlier period. Services segment operating profit was $4.7 million in the third-quarter, compared to $3.1 million in the third quarter of 2011. Services segment operating profit margin was 15.8%, compared to 14.8% in the year-earlier period. SG&A expenses for the third quarter were $17.6 million, including non-cash compensation charges of $3.6 million. SG&A expenses were $15.4 million in the year-earlier period, including non-cash compensation charges of $2.7 million. As a percentage of revenue, SG&A declined 142 basis points to 7.4% compared to the third quarter of 2011. We expect this positive momentum to continue into the fourth quarter and 2013, reflecting the efficiency by which we believe we can materially add assets.

Adjusted EBITDA was $146.6 million, or a 30.3% increase over the year-earlier period. Adjusted EBITDA margin was 64.7% in the third quarter of 2012, compared to 64.9% in the year-earlier period. Strong organic margin expansion from our leasing segment was offset by the inclusion of the less-mature Mobility towers, and an increase in our lower- margin services revenues. AFFO increased 42.8% to $93.1 million, compared to $65.2 million in the third quarter of 2011. AFFO per share increased an industry-leading 28.8% to $0.76, compared to $0.59 in the third quarter of 2011.

Net loss attributable to SBA Communications Corporation during the third quarter was $52.4 million, compared to a net loss of $33.3 million in the year-earlier period. Contributing to net loss in the third quarter were $5.7 million in acquisition-related expenses, primarily associated with the Mobility and TowerCo transactions, and a $22.6-million charge related to the early retirements of our remaining 8% senior notes and the Mobility bridge loan. Net loss per share for the third quarter was $0.43, compared to $0.30 per share in the year-earlier period. Quarter-end shares outstanding were 121.8 million.

In the third quarter, we acquired 37 towers and built 99 towers. We ended the quarter with 13,257 owned towers, an increase of 36% versus the year-earlier period. 11,541 of the towers were in the US and its territories, and 1,716 in international markets. Total cash capital expenditures for the third quarter of 2012 were $57.8 million, consisting of $3.1 million of non-discretionary cash capital expenditures, such as tower maintenance and general corporate CapEx; and $54.7 million of discretionary cash capital expenditures.

Discretionary cash CapEx for the third quarter includes $20.8 million incurred in connection with tower acquisitions, exclusive of any working capital adjustments and paid earn-outs. Discretionary cash CapEx also included $17.1 million in new tower construction, including construction in progress, and $6 million for gross augmentations and tower upgrades. Of the $6 million augmentation figure, approximately $5 million, or 83%, was reimbursed by our customers.

With respect to the land underneath our towers, we spent an aggregate of $10.4 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 70% of our towers. At the end of the quarter, the average remaining life under our ground leases, including renewal options under our control, is approximately 30 years pro forma for TowerCo.

In September and October, we completed our previously announced sale of certain DAS assets to ExteNet for $125 million. We received $94.3 million in cash during the third quarter, and $5.7 million in cash during the fourth quarter, which collectively represents a total $100 million in agreed-upon cash consideration for the transaction. We also received a note for $25 million. Results of these operations are reflected as income from discontinued operations in the statement of operations. The results of these operations have been excluded from our calculations of tower cash flow, adjusted EBITDA, and AFFO. At this point I will turn things over to Mark, who will provide an update on our liquidity position and balance sheet.

SBA ended the third quarter with $5.4 billion of total debt. We had cash and cash equivalents, short-term restricted cash, and short-term investments of $1.5 billion, resulting in net debt of $3.9 billion. Our net debt-to-annualized-adjusted-EBITDA leverage ratio was 6.7 times. Our third-quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 2.9 times.

We were extraordinarily active in the capital markets during the third quarter. 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%. The proceeds from this offering were used in part to pre-pay in full the Mobility bridge loan, and repay all amounts outstanding under our revolver. In August, we issued $610 million of secured tower revenue securities. The securities were issued at par and bear interest at 2.93%. They have an anticipated repayment date of December 2017, and a final maturity date of 2042. The proceeds from this offering were used to call the remaining $244 million in principal outstanding of our 8% senior notes, pay a portion of the cash consideration in connection with the TowerCo acquisition, and for general corporate purposes.

In September, we issued $500 million of senior notes due 2019. These notes were issued at par and bear interest at a rate of 5.625%. The proceeds from this offering were used to pay a portion of the cash consideration in connection with the TowerCo acquisition. Also in September, we borrowed an incremental $300 million under our existing credit agreement in the form of a seven-year Term Loan B. The loan was issued at a 25-basis-point discount to par, and will accrue interest at LIBOR plus 2.75%, with a 1% LIBOR floor. Finally, on October 1 we issued 4.6 million shares of Class A common stock, representing the equity component of the TowerCo transaction. These shares were subsequently sold by the selling shareholders in an underwritten offering.

As of the end of the third quarter, our debt had a weighted average annual cash coupon of 4.3%, and a weighted average remaining maturity of just under five years. 82% of our total debt is fixed rate. In the third quarter, we did not purchase any shares of our common stock. We currently have $150 million remaining under our existing $300-million authorization. Stock re-purchases continue to be an important component with our overall capital allocation process. However, we continue to view them as opportunistic rather than systematic.

We're very pleased with our balance sheet as we approach the end of 2012. We have long-term financing in place for both the Mobility and TowerCo transactions, as well as $700 million in committed capacity under our revolver. This year we have raised $2.4 billion in debt at a weighted average maturity of 6.7 years. We believe the capital market decisions we have made in 2012 have put us in a good position as we look into 2013 and beyond, particularly with respect to re-financing our convertible notes due in 2013. With that, I'll turn the call over to Jeff.

Thanks Mark, and good morning, everyone. Happy election day. As you have heard, we did have a great quarter, meeting or exceeding the high end of our guidance across key financial metrics. Once again we led our industry in a number of important growth metrics, including growth in AFFO per share. Our organic leasing activity was particularly strong, with the highest revenue added per tower in many years. We expect strong levels of activity to continue through the remainder of 2012 and all through 2013. We are experiencing strong demand across our entire portfolio, both domestic and international.

In the US, we are in the middle stages of 4G deployments for some customers, and early stages for others. We are seeing the benefits in both our leasing and services segments. We 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. We are seeing cell-splitting in certain 4G markets, although domestic leasing activity continues to center around customer overlays and upgrades to existing antenna sites.

Internationally, we are seeing strong growth in new cell sites, with a lot of basic 3G feet coverage builds still ongoing in Central America, and we look forward to the introduction of 4G into those international markets in the future. As a result of anticipated continued strong demand from our US and international customers, we are guiding to strong organic leasing growth in 2013.

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 50% of our new business in the quarter. We saw a substantial increase from Sprint due to its Network Vision project, and we have just begun to work with T-Mobile on its 4G upgrade.

In the third quarter, we entered into an agreement with T-Mobile extending the length of terms on approximately 2,800 legacy SBA towers, and provide for increased cash escalators for a certain period of time, in exchange for T-Mobile's rights to deploy 4G equipment on a lesser number of sites. This agreement has since been extended to 520 TowerCo towers where T-Mobile was the tenant. With the agreements now in place, T-Mobile is working hard to bring 4G to our sites, and that now makes all four US carriers extremely busy with us on technology upgrades, positively impacting both our leasing and services segments.

Our services segment produced the highest revenue and gross profit in seven years, with a level of activity that has consistently grown as we have moved through the year. We expect continued strong services segment contribution for the remainder of 2012, and all through 2013. We had a good quarter building towers and buying or extending the land under our towers. We were tremendously busy in the debt capital markets, raising $2.2 billion in four separate transactions in the third quarter alone. We acquired 37 towers in the quarter as we readied to close the pending TowerCo transaction.

We closed the TowerCo acquisition on October 1, adding 3,256 towers. As of today, we own 16,517 towers, and have increased our portfolio year to date by almost 60%. The integration of our acquisitions is going very well, and the assets are attracting good demand from our customers. A sizable amount of our backlog relates to these new assets. One of the clear benefits we are enjoying from these acquisitions is the reduction in SG&A expense as a percentage of revenue, reflecting our ability to maximize the efficiency and capabilities of our back office. As Brendan mentioned, SG&A expense has declined as a percentage of total revenue, and we expect additional reductions as TowerCo is reflected in our results of operations.

Given our success with these acquisitions and our expectation of being back within our target leverage range of 7 to 7.5 times net debt annualized adjusted EBITDA by the end of the fourth quarter, we are ready to continue with additional portfolio growth. We will look both domestically and internationally, and believe that we will find some attractive opportunities that will meet our investment requirements. We are once again establishing a goal of 5% to 10% portfolio growth in 2013, while maintaining our target leverage levels. Our initial 2013 guidance reflects a lower level of portfolio growth, and if we are successful in consummating some acquisitions, I would expect our initial 2013 outlook to increase.

Speaking of international, we continue to be very pleased with our international activity. International towers have grown to 1,716 at the end of the quarter, an increase of approximately 150% over the year-earlier period. International site leasing revenue grew 121% year over year. While US portfolio growth occupied most of our focus this year, we continue to have an interest in expanding our international business into new markets. We expect in 2013 that we will be actively looking for the right new international markets in which to expand, as well as continuing to materially grow our existing international markets.

Our access to capital and balance sheet are both in great shape. We've had a very successful year in the capital markets. We've termed out all of the debt associated with our Mobility and TowerCo acquisitions on favorable terms and interest rates. While our un-drawn $700-million revolver plus cash on hand is more than sufficient to satisfy in cash all of our expected obligations related to our 1.875% convertible notes due May 2013, we are planning on some additional debt financing prior to the May 2013 convert maturity. We're planning on this so as to preserve our revolver availability and to ensure that we will be able to stay fully invested to our target leverage range if we so choose. Our outlook assumes $600 million of such additional debt financing.

As our initial 2013 guidance indicates, we expect the current strength in our business to continue into 2013. One of the drivers of the substantial growth we expect to set forth in our initial 2013 outlook is strong-anticipated organic lease-up against a much larger portfolio of towers. With respect to organic tower cash-flow growth, we are forecasting materially the same level of incremental organic carrier activity on a cash-revenue-added-per-tower basis in 2013 as we expect for 2012. We see a tremendous amount of amendment activity again in 2013.

We have included no material contribution in 2013 from any customer that was not reasonably active in 2012, so that would exclude DISH, Clearwire, and Public Safety. Our 2013 outlook includes benefits from the Sprint and T-Mobile agreements to both cash and non-cash site leasing revenue, but our tower cash flow, adjusted EBITDA, and AFFO outlooks are all on a cash basis. Total non-cash leasing revenue in 2013 is estimated to be approximately $60 million.

For those of you doing margin analysis, since our definitions of tower cash flow and adjusted EBITDA exclude non-cash items, you need to subtract non-cash items from site leasing revenue to calculate margin. When you do, you'll see that we are expecting relatively stable margin performance in 2013, notwithstanding having added a substantial number of lower-margin Mobility and TowerCo assets. This is a result of expected strong organic leasing growth.

In our site leasing revenue outlook, we have factored in a churn allowance in the guidance, which includes all known churn plus an additional unallocated amount similar to those churn levels we have experienced during the last couple of years. On the services side, we are expecting another strong year, similar to full-year expected 2012. With respect to net cash interest, we are assuming three-month LIBOR remains at or below 0.5% throughout 2013.

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 re-purchases. As a result, we are today including our initial 2013 guidance a level of discretionary capital investment well below 2012 levels, and well below our guided AFFO. As I mentioned earlier, it will be our goal to invest additional amounts of capital and portfolio growth, or perhaps stock re-purchases, or perhaps both.

Assuming the one additional financing contemplated in our outlook ahead of the maturity of our 2013 convertible notes, we will have significant liquidity that could be deployed for additional asset growth and/or stock re-purchases. Based on our estimated 2013 year-end run rate adjusted EBITDA, we could invest approximately an additional $750 million or more into portfolio growth and still maintain our target net debt annualized adjusted EBITDA leverage levels.

In the aggregate, we believe our initial 2013 outlook is strong, with potential opportunities for improvement throughout the year. Our focus next year is straightforward -- execute well against a favorable macro-environment, add quality growth assets, and continue to take advantage of what is expected to be a favorable financing market. We expect to once again produce material growth across a number of key metrics, including growth in AFFO per share.

Before we open it up for questions, I want to recognize the contributions of our employees and customers to our success. Our employees work really hard to achieve the goals of our customers. They do a great job. 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 2013. Lola, at this time we're ready for questions.

(Operator Instructions)

James Ratcliffe, Barclays.

Hi, this is Sandeep Gupta for James. Can you talk about for your international business, what's the mix of growth between new tenancies and amendment revenue? Where do you think the international markets are in their code cycle? I have a follow-up.

The amendment new cell siting split internationally is probably 90-10 -- 90% new cell sites, 10% amendments, I think reflecting the capacity -- or excuse me, the coverage build stage that a lot of those markets are in. We see them as being several years behind, maybe as many as 5 to 10 years behind the US in terms of their development, but proceeding on exactly the same path. We're pretty excited about years to come of good international growth.

Thanks. Also about your DAS portfolio, do you think you're satisfied with the current scale, or do you need to feel further through acquisitions?

Well, we really don't have a DAS portfolio. We chose several years ago to be active in that space through our investment in ExteNet, of which we're a sizeable minority holder. We sold slightly more than half the DAS assets that we bought from Mobility to ExteNet, which Brendan mentioned, and I think we announced the closing of that. That's how we invest and stay active through the DAS side of things, and we're extremely pleased with how ExteNet is doing, and how that portion of the world, I think, is going to continue to be an important part of wireless infrastructure.

Thank you.

Ric Prentiss, Raymond James.

Thanks. Good morning, guys. A couple of questions. First, obviously it's been really tough up in the Northeast with Hurricane Sandy. Hopefully your employees were okay, but can you update us as far as what impact Hurricane Sandy had on your operations and how are things currently?

First of all, our hearts go out to the people up there whose lives are still dislocated, and we know there are many. Thankfully, we have no employee issues, other than difficulty in getting around. We have no reported material damage to our towers. There is a lot of power out that prevents cell sites from working, because the battery back-ups have all run out by now. Our obligations, and we're working hard to do this, is to make sure that our customers have access to the site, cleared roads, ability to get to their equipment, and get them up and running. We feel very confident that we'll be able to do that very quickly. Having said all that, again, while the Sandy thing is a heartache for so many people, we don't really see it having any material impact on our business.

Second question is with the timing, maybe, of that $600 million financing to take out the 1.875% convert, what is your assumption as far as when you would execute that $600 million transaction in the guidance? The 3.5% rate that's the assumed rate, is that basically signaling to us that you might be able to do a securitization on the TowerCo assets?

Brendan, what did we assume in guidance, February or March?

Actually, March. The end of the first quarter was the timing assumption, Ric.

Okay.

Yes, we do expect to try and securitize some of those TowerCo assets in that financing. I mean, that financing is -- let me say that our first choice at this time would be to do that financing through a securitization, although we've certainly left ourself room and have the structural capacity to do it in the bank market as well.

I think it's October of 2014, convert that's out there, the 4% one -- should we think about that maybe being more possibly in shares, given how successful your stock price has been, and hopefully will continue to be?

No, we're working to position the Company to retire all that in cash, because we believe that the cash that we'll be able to access through the debt markets will have a lower yield than our shares on a AFFO-per-share basis. The resultant impact on long-term AFFO per share leads towards cash settlement. Now, we'll balance all that against leverage and what other portfolio growth opportunities that we have at the time, but we kind of always think about positioning the Company to settle these things for cash, Ric.

Great, thanks guys.

Jonathan Schildkraut, Evercore Partners.

Thanks for taking my questions. Just to really -- in your prepared remarks you mentioned seeing strong demand for your new assets. I was just wondering if you could give us some kind of color comparison to your other assets, the relative demand; and if the demand is different, are you seeing more new sites for the new assets, or is it still kind of broadly amendment activity? Secondly, in terms of looking at international markets, just wondering if your focus is still on Latin America, Central America, or if you're looking to other geographies? Thanks.

Jonathan, the new assets are actually seeing a little more cell-splitting, which is what we were contemplating and banking on. It's not yet to the levels that we expect in years to come as 4G becomes -- the coverage gets built out, and then they go back in for capacity. But we're encouraged by the amount of activity that we've seen so far, so you're going to have a higher new cell-splitting mix of added revenue on the new assets. In terms of international, we continue to like the western hemisphere, but we are open and looking all throughout the world for the right opportunities as we look to grow the Company. I would have to continue to say that the western hemisphere continues to be our bias.

Great. If I could just sneak one more question in. The $750 million or more that you highlighted as potential fuel for further investment in 2013, is that based on the 7 times debt-to-EBITDA, or 7.5 times debt-to-EBITDA? Thanks.

Probably closer to the 7.5.

Great. Thanks for taking the questions.

Jonathan Atkin, RBC Capital Markets.

Yes, good morning. I had a question about ExteNet and to what extent you might anticipate making additional investments or give capital calls or what-not that would represent a use of cash. On the iDEN de-commissioning that Sprint has announced, I think a lot of the equipment still actually needs to be taken down. I'm interested in just some color on what you're seeing in your portfolio, and how that might impact your 2013 outlook?

On ExteNet, Jonathan, we continue to like our investment and continue in general to have a desire to increase our investment. The note that we took back from ExteNet in the sale of the DAS assets is convertible should we so choose at the time, if ever, that they decide to go out and raise additional equity. We structured that for exactly that reason. If the world continues to move in the direction that it's moving in terms of DAS and small cells, we will continue to have an interest in expanding our relationship with an investment in ExteNet.

In terms of the iDEN, it's a bit unclear to us, because Sprint has the ability to power down its equipment and yet leave the equipment on the sites for certain periods of time. We don't actually know whether certain iDEN sites are still transmitting or not. We do have rights to perform the services work to take that equipment down. We haven't done much of that in 2012, and we have some of that in our guidance for 2013. But in terms of what our numbers reflect, and whether we have a numeric path to actually confirm or check how much of Sprint's iDEN network is actually powered or not, we can't tell you.

I guess I was interested more in how the lease terminations play a role in your 2013 outlook?

Yes. We have as part of the deal that we cut last year, we have a specified run-off of iDEN termination rights for Sprint, and we have included in our guidance $5 million to $6 million of that revenue loss in our 2013 outlook.

Got it. On 2013, how does it feel to you right now in terms of the seasonality of organic leasing and then the growth compared to 2012? Maybe a little more evenly weighted, or markedly back-half weighted? How does it feel to you right now?

I think carriers plow right through the year end and go pretty hard right out of the gates in January, based on where we see the projects and what we know of their goals in terms of getting this 4G stuff done.

Thanks very much.

I think it's going to be more equally weighted all through the entire year.

Great, appreciate it.

Simon Flannery, Morgan Stanley.

Thank you very much, good morning. Can you talk about the M&A environment? You've obviously been active in the US, but there's fewer large portfolios available. Do you expect that as you grow your portfolio that more of that will likely be international, or do you still think there's good opportunities domestically? Also, are you starting to see people coming outside -- exceeding their MLAs with some of the traffic that we're starting to see on some of these 4G networks, and do you expect some of that next year as well?

I'll answer the second one first. We are seeing instances where folks who we have entered into an MLA with have come back and are seeking to install equipment outside or above and beyond the parameters that we agreed to, which results in additional leasing revenue for us. I do think we'll continue to see that, perhaps even more of it in 2013.

In terms of M&A, there has been a number of large deals done this year in the United States. There remain a couple, less than a handful of, I think, legitimate opportunities for north of 1,000 towers. I think there's somewhere between 5 and 10 between 300 and 800 towers, and then there's a whole still bunch of smaller M&A opportunities in the US, and still a lot of towers being built specifically for later sale to companies like us. I think our growth in the US, Simon, will be come from greater numerosity of transactions, but I do think there'll still be plenty of growth opportunities left. I think the odds of the bigger deal, if we find one we like and if we actually move on one, might be international.

Thank you.

Brett Feldman, Deutsche Bank.

Thanks. During your comments, you talked about some churn assumptions you made in your guidance. You talked about known churn events, and then you added to that, which I think is your usual churn rate of -- I think it's usually about 1.5%. The known churn event component, is that principally the iDEN stuff you previously outlined, or is there another impact we need to be accounting for?

No, it's the iDEN, Brett.

Okay, thanks. You were talking before about seasonality in leasing, and you noted that you expect 2013 to start off pretty strong. In light of the MLAs that you've put in place, how relevant is seasonality to the performance of your business on a reported basis going forward? Is it less significant than it previously was? How do we think about as we do channel checks and try to figure about what our model should look like based on the actual leasing dynamics within a given year?

That's a good question. I think that points out the difference, of course, in the non-cash GAAP straight-line results from the cash. The way the T-Mobile deal with struck, the seasonality's not going to matter, because it's now kind of a locked-in increase based on increased escalators which have already started to kick in. On the Sprint MLA, the seasonality would not impact the GAAP revenue, but it would definitely impact the TCF. I would encourage everyone, as we've now entered into some of these transactions where the GAAP and the cash impacts differ, to pay most close attention to our TCF numbers, our adjusted EBITDA numbers, and our AFFO numbers, all of which are cash-based. An up or down first quarter wouldn't impact the GAAP recognition on those two contracts, Brett, but it would impact the cash reports. So watch the cash.

Thanks for the color.

Phil Cusick, JPMorgan.

Hi this is Richard Choe for Phil. Just a few quick follow-ups. In terms of your new asset, you said you're starting to see some good activity there. When can we actually see that hit its run rate? Will it take a few quarters, maybe at the end of next year? A little more color on that side would be great.

Well, we're starting to book leases and amendments now, so it's already factoring into the consolidated numbers. As I mentioned earlier, we expect the best is still yet to come as we move on an industry basis through the initial 4G coverage builds into capacity. You're starting to see incremental revenue in our results from those new assets in the third quarter.

Great. In terms of the service revenue, I guess you mentioned a good finish to this year, a good level next year. It seems like we're talking about mid-to-high 20s per quarter. Is this kind of a new level of service revenue that we could see for longer than this year and into next year, or do you think this is just the level of activity of going on -- there's so much going on with the carriers right now?

Well, I think it's the latter, which is so much activity right now, but we see that level of activity continuing through the rest of this year and all through 2013. We feel pretty good about strong services numbers at least through the end of next year.

Great, and just one final one. It seems like the business is going really well, and most of the carriers are doing a lot of activity. Is there any worries with, I guess, AT&T and Verizon kind of pulling back on their CapEx for wireless spending next year, and with some of these transactions between carriers, that there will be any pause in activity, or are people being more conservative until some of these deals close?

Well, we don't see any signs of that, but if it were to occur -- a pause or a stoppage by either AT&T or Verizon -- would change things. Not just given the magnitude of the work that they've been doing and we expect that they will continue to do. We don't see any signs of that, however.

Great. Thank you.

David Barden, Bank of America.

Hi, guys. Thanks for taking the questions. Jeff, there were reports out yesterday that KPN is going to sell their German tower assets. I was wondering if you could kind of comment on whether that's the sort of western hemisphere-type international deal that would be appealing to SBA? You also specifically called out you're not putting things like FirstNet or DISH or Clearwire in the numbers for next year. Can you comment on whether you're seeing any signs of life or activity there? If so, what kind would be helpful insight. Appreciate it.

We are looking world-wide, David. You should not assume that we wouldn't be interested in something like that. We'd have to go through the same analysis that we do everywhere -- multiplicity of carriers, where are they in their development cycle, rule of law, all those things. That would be something that you should not rule out that we might be looking at, or something like that.

The second question -- what was your second question, David? Oh, where additional things may come from. Clearwire has started to do a little bit around their 4G conversion, but it's not in numbers that we think materially at this point is going to impact 2012 or move the 2013 outlook. Dish is waiting on the FCC. They have folks in place that are starting to think about how they might roll that network out, but it's all really on hold until they hear from the FCC. Public Safety's really just getting started. They've had a couple of requests for information that have gone out. I know PCIA, which represents the tower industry, has commented on that. It's all moving in the right direction. I can't really tell you when it gets to the point of material impact in our numbers, but when we get there I'll let you know.

If I could just quick follow up on that, Jeff. In terms of kind of looking at the FirstNet website, and how they're planning on architecting their network, it looks like they're planning on putting up their own radios and their own spectrum, but that they want to piggy-back on the existing infrastructure of the commercial carriers. Have you thought at all about, or talked at all about, how that kind of relationship would work from a pricing and contractual flexibility issue, and have they approached you guys to try to see how flexible you guys might be in terms of helping them get this thing built?

Yes. That was one idea that was submitted, the kind of the shared, almost the LightSquared idea with respect to Sprint's network that they had last year. I don't know that it's actually locked in that they're going that direction, David. I will have to see. If there were elements of sharing, either on the ground or on the tower with existing carriers, they'd have to strike that deal with those folks first. It is a concept that we've wrestled with and dealt with before, in the context of Sprint and LightSquared, but in terms of do we have anything yet that approaches kind of financial certainty around what that might look like, the answer is no.

Got it. All right, thanks guys.

Kevin Smithen, Macquarie.

I wondered if you could walk through the specific puts and takes in your forecast for organic site revenue growth in 2013. We're trying to reconcile -- it looks like they're -- given the very strong site revenue guidance for Q4, it looks like there's an implied slow-down in 2013, and I'm trying to reconcile. I know there's iDEN de-commissioning, but what are the various puts and takes from escalators to churn and specifically iDEN churn that they're using in those numbers?

Well, the iDEN churn is $5 million to $6 million plus 1% to 1.5% of unallocated churn, because that's kind of where it's been over the years. There's nothing more -- there's nothing else in the churn numbers. In terms of the revenue -- the problem with the -- if you're working off the GAAP numbers, Kevin, it's going to be impossible to figure out, with all the puts and takes with the GAAP versus the cash. Keep in mind that as you recognize cash revenue, particularly under the Sprint Network Vision contract, which will increase TCF and adjusted EBITDA, it actually lowers the GAAP revenue. That probably is what you're seeing. I would suggest that maybe after this call you get Mark and Brendan on the line and we can walk you through all that. If you're basing your analysis off the GAAP revenue, it's not going to be the right picture.

No, I think that's fair. Thank you.

(Operator Instructions)

Colby Synesael, Cowen and Company.

Great. Thanks for taking the questions. I missed the first part of the call so I apologize if you talked about this, but now that you seem to have signed up the MLAs with T-Mobile, I was wondering if you could give us the average lease term of the big four guys, and if you're willing, what the average lease term is for each of the big four? Thanks.

It's nine with Sprint, seven with T-Mobile, and four-ish for each of AT&T and Verizon.

Great. Thank you.

At this time, no one is in queue to ask a question. I'll turn it back for any closing remarks.

Great. Thanks, Lola. We appreciate everyone's participation on the call today. We look forward to a strong finish to the year. We'll speak with you in 2013. Thanks.

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