SBA Communications Corp at Deutsche Bank Media, Internet and Telecom Conference

Mar 10, 2015 AM EDT
SBAC.OQ - SBA Communications Corp
SBA Communications Corp at Deutsche Bank Media, Internet and Telecom Conference
Mar 10, 2015 / 01:25PM GMT 

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Corporate Participants
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   *  Jeff Stoops
      SBA Communications Corporation - CEO and President

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Conference Call Participants
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   *  Anthony Klarman
      Deutsche Bank - Analyst

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Presentation
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 Anthony Klarman,  Deutsche Bank - Analyst   [1]
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 Welcome, everyone, to day two. I'm Anthony Klarman from the telecom/cable satellite team here at Deutsche Bank, and this is the session for SBA Communications. With me on the stage here is the Company's Chief Executive Officer, Jeff Stoops. So Jeff, thank you for coming up.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [2]
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 Thank you. Good morning.

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 Anthony Klarman,  Deutsche Bank - Analyst   [3]
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 Jeff has the benefit of probably having the shortest commute to get to the conference. So we were kidding with somebody yesterday about the longest commute.

 Jeff, before we get into specifics on the outlook, I thought maybe it would be helpful to just share what the objectives -- the high level objectives -- are of the Company in 2015 as you think about the plans that you want to execute against, both against the domestic portfolio and the international portfolio.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [4]
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 Yes, the domestic portfolio is operating on all cylinders. So we're going to capture the organic growth that's out there and presented to us, which we'll talk about I'm sure a little bit more as to what our views are on that for the year. Internationally, we intend to continue to grow the portfolio, which we also intend to do in the United States. But internationally, a little more portfolio growth. And we're still working through the integration of some of the big Brazil deals that we did last year.

 And as that continues to make progress, we expect that that will continue to bolster the organic growth prospects in that market. But maybe, Anthony, the biggest change this year is we're going to have, by the end of this month, all the warrants cleaned up related to the 4% convertible notes. And we will have spent about $1 billion to do that, which is money that we would have otherwise deployed on portfolio growth or stock repurchases.

 So, in terms of what's really changing, and we're going to have a lot more of our typical investment capacity available to us to once again grow the portfolio or for stock repurchases. And I'm looking forward to that.

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 Anthony Klarman,  Deutsche Bank - Analyst   [5]
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 Yes. So, let's stick with the domestic portfolio first and then we'll get into international. There had been some concern in the US that CapEx was starting to slow among the big four. I think AT&T announced lighter CapEx levels.

 Can you just talk about activity levels among the big four? Kind of where they stand? And then we'll talk a little bit about how some of the new spectrum coming into play fits in the portfolio.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [6]
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 Okay. And we, for those of you who follow SBA, you know that we had a banner year last year in 2014. And then when we initiated our 2015 outlook, we had a healthy organic growth measure, but it wasn't the same as last year.

 That's really solely attributable to AT&T. So, if folks think there's some kind of general or broader slowdown, we're not seeing it. It's really a function of AT&T being so busy in the first half of last year, well above anybody's expectations, certainly well above ours, during that period of time.

 And then now, coming back to what is a more typical pattern for them, which is strong spending but get out of the blocks a little slower in the first quarter and bill as we move through the year. And that's what we're seeing. But the other three major carriers in the US are all at or perhaps even slightly above where we saw in 2014. But the big swing was really just solely due to the huge levels of investment that AT&T made in the first half last year.

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 Anthony Klarman,  Deutsche Bank - Analyst   [7]
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 And how about Sprint? Sprint seems to have shifted their capital priorities from the Network Vision, 3G overlay priorities of 18 months ago, to the 2.5G deployment, but doing the 2.5G deployment on a very focused level rather than a macro US buildout. How has that change the dollar levels that Sprint has spending or has it been kind of consistent, just targeted in different areas?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [8]
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 Yes, we saw most of the activity from Sprint in the -- certainly the Network Vision project was in 2013. We saw some last year, but it started to tail off as they completed the project. And Sprint is still, I would say, somewhat at those same second half of 2014 levels.

 We are starting to see many signs of increased activity in terms of a broader rollout. Some actual new leasing that is not just solely directed at deploying the 2.5G spectrum. But it looks like that's going to get a little more broader attention beyond just the urban corridors that I think they probably were focused on at the end of the fourth quarter, and maybe this first quarter.

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 Anthony Klarman,  Deutsche Bank - Analyst   [9]
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 Yes. So, the carriers just spent over $40 billion in AWS-3. Can't mean that, I guess, call them all carriers. Somebody not even in the wireless business yet spent $10 billion. But even if you look at just Verizon and AT&T, what they spent, a really significant sum of money. And the FCC wants to hold a broadcast auction they say mid-2016. I think most people were taking the [overs] on when that will happen.

 Can you talk a little bit about the outlook past this year? Not from a guidance perspective, but how you see these new bands transitioning into the network deployment plans.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [10]
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 Yes, the AWS-3 band is going to take a little bit of time to clear. A lot of that spectrum was being used by defense agencies.

 So the latest experts, folks who are solely in that Washington kind of regulatory area, have suggested that mid-2016 might be an appropriate time to start looking for deployments there. And that's far enough away where we wouldn't have even begun discussions with the carriers around that.

 And that spectrum is obviously going to be deployed. Nobody spent $40 billion just to put it on the shelf. So if you look at the prospects for that deployment and then the 600 megahertz, which probably won't occur at the earliest before the end of 2016, we feel that there's going to be, starting in that 2016 period and then lasting for years, another healthy slug of activity as these carriers deploy this spectrum that needs to be monetized for them to make a return on their investment.

 So we continue to feel good about the length of the runway.

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 Anthony Klarman,  Deutsche Bank - Analyst   [11]
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 So, that's a point I want to hone in on a little bit more. One of your peers was here yesterday talking about it similar, and I wanted to get your perspective. If you think about 2010 to 2014, that seemed to be all around reinforcing the networks for data. Data use was exploding; all of a sudden everyone started to have smart phones in their hands.

 This new spectrum seems to be providing the backlog for the future in terms of leasing activity. Broadly speaking, do you think that the leasing activity that we'll see that comes from AWS-3 and broadcast and maybe some other incidental revenue will be as strong or as healthy as that backlog that we experienced from the prior three- or four- or five-year period?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [12]
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 Well, if you look at 2010 to 2013, I would say yes. Last year was just off the charts.

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 Anthony Klarman,  Deutsche Bank - Analyst   [13]
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 Yes, last year was 1 in a million.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [14]
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 It's hard to sit here and say we're counting on another 2014, because we're not. That's not in our business model. It wasn't last year either, but it happened. And so that was kind of a -- you set that year aside. And then if you look at the rest of the spending curve between 2010 to 2013, I think the next four or five years is going to look similar.

 And let me just expand on that a little bit. T-Mobile and Sprint still have a long way to go in terms of building the network that they want to have to handle the data challenges and the data speeds that we have today. And Verizon and AT&T are still deploying for capacity, to fine-tune their 4G systems. That started five years ago. So these cycles and these build-outs, they are multiyear projects.

 And just the fact that you are going to have a huge swath of new spectrum not even begun to be deployed until mid to 2016, followed by day 600 megahertz, I mean the combination of those two should be another five-year period of healthy deployment and healthy activity for our sector.

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 Anthony Klarman,  Deutsche Bank - Analyst   [15]
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 And when we think about how that revenue comes in, what are your agreements with the carriers allow them to do in terms of adding new bands in, adding new gear in? How much of that winds up being amendment revenue versus new leasing revenue as you think about how the carriers deploy this next wave?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [16]
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 We only have two MLAs and they're both sunsetting and at the end of their defined life. One was for the Sprint Network Vision, which was a combination of that project, the IDEN decommissioning, and some lengthening of leases. So that's coming to an end.

 And then T-Mobile, we had an agreement for a specified number of towers to do their initial 4G deployments, and that's also coming to an end. So we're about ready to be an a period where we have no MLAs which means that any time there is a change on our towers -- new equipment, changed equipment -- we have a chance to negotiate for a monetary event.

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 Anthony Klarman,  Deutsche Bank - Analyst   [17]
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 So it's a new conversation?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [18]
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 It's a new conversation. And typically, we don't charge just for new spectrum. That something that got negotiated away about 10 years ago. And our business really is very simple. Any time there is a physical change at the site, whether it's on the ground or on the tower, a conversation gets had.

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 Anthony Klarman,  Deutsche Bank - Analyst   [19]
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 And I think that's perhaps an important point of distinction between yourself and some of your peers, in the sense that some have much longer running MLAs and in terms of when they roll off.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [20]
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 Yes. I think the big difference is we have a much higher percentage of monetization for the activity that is occurring across the sector than some of our peers.

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 Anthony Klarman,  Deutsche Bank - Analyst   [21]
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 Right. So, let's talk a little bit about the international portfolio before we come back to domestic and take some questions from the audience.

 How do we think about the growth of the international portfolio from here? You've spent some significant resources and significant dollars growing the international portfolio, not just within the markets where you started, but you branch out into other markets in Latin and Central America. How should we think about the growth of the international portfolio here? And how do you weigh the opportunities now that you will have more excess cash flow to spend on growing domestically versus internationally?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [22]
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 Well, the international markets are growing faster because they're coming off a smaller base. So you actually can produce higher growth rates on a per tower basis off less absolute dollars on those assets because of where they're starting. And we expect that to continue for the foreseeable future.

 We love Central America. It's been a grand slam homerun for us on across the region. Brazil, we're still getting our legs underneath us in terms of these towers that we bought in the portfolios that we bought, and should be fairly finished with that the integration process as we move through this year.

 We want to continue to add scale in the markets we're in because it just makes financial sense to do so because we can leverage the back office in those areas very, very well. And we will continue to look for new opportunities. We think we're extremely well situated, given our existing markets and where we're located here in South Florida from a travel perspective to continue to expand in South America, down the Pacific coast.

 Colombia, Peru, Ecuador, Chile are all markets that under the right circumstances we'd like to get into. And then we'll see. We'll look at other parts of the world but I think it would be unusual and would take a special set of circumstances if we were to move outside the Western Hemisphere this year.

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 Anthony Klarman,  Deutsche Bank - Analyst   [23]
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 Yes, and it seems like you when you enter a new market there's obviously a significant upfront initial investment. You have to build some sort of local infrastructure in that market, and management, and back office.

 It would seem that it ought to be attractive to add incremental scale in existing markets rather than look at new ones. So how do you look at entering new markets versus adding scale in existing markets internationally?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [24]
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 We're always going to want to add scale, you're right, but I don't know that the opportunities -- take a step back. We always want to be fully invested to our target leverage levels. Our target leverage levels are currently still 7 to 7.5 times net debt to adjusted EBITDA. That's going to flow out a certain amount of investment capital.

 If we can deploy all that in our existing markets, we will. But the chances of that happening are not 100%.

 So, that's where new markets come in, that's where stock repurchases come in, that's how additional new things and uses of capital fall out of that equation. But you're right, the first bias is towards increasing your presence in existing markets where you can leverage that back office and that investment that you've already made.

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 Anthony Klarman,  Deutsche Bank - Analyst   [25]
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 So, let's talk about Brazil. You mentioned getting your Brazil legs under you still. What are the long pole items in the tent here on Brazil? And what do you think the performance of that portfolio will look like, relative to the rest of the international portfolio, or even the broader portfolio on an asset yield basis or (multiple speakers).

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [26]
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 The Brazilian assets that we bought, they were all bought from carriers with one exception, but the carrier assets are not unlike what you would have expected to see or did see in the United States 10, 15 years ago. There's a lot of missing documentation. There's a lot of catch-up things that have to be done. There's just a lot of loose ends that have to be tied down to have an asset that really seamlessly is there for new revenue growth.

 We had to negotiate master agreement with all major carriers in Brazil, because otherwise they won't do business with you until you have a basic set of rules in place.

 That took some time. We just completed the last one of those in Q4, so now we are well situated to move forward on that.

 But really, it's just a process of getting the assets SBA'd in our system, up to our standards, documented, papered, and administered the way that we know it takes to maximize their value and their potential long term. So as that process continues, I expect to continue to see additional activity levels. And I think Brazil on a constant currency basis has grown and will continue to grow in the midteens basis for the foreseeable future. In large part because -- well, two things.

 There's a fair activity down there. And there is a lower base off which we are working from.

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 Anthony Klarman,  Deutsche Bank - Analyst   [27]
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 Right. So, you mentioned constant currency, and I guess the one thing we know about currencies is that they're not constant. The dollar has been appreciating against most currencies globally, given where growth rates are in the US. How do you think about a strong dollar and how that impacts your businesses locally? Some of which probably still required dollars for growth. But also the translation of local currencies back into dollars as you think about things like your guidance and outlook for 2015 and beyond?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [28]
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 Yes, a strong dollar is good for the US to a certain degree, but at another degree for SBA it becomes not so good. So, without offering my views on where it all goes, it does affect our thinking. For example in Brazil now, we want to focus on the cash flows than regenerating in Brazil in reals, and reinvesting those without, at least for the foreseeable future, any additional new US dollars invested in the country that are financed off of our US balance sheet.

 So we have a fair sized base in Brazil now. It's going to produce somewhere between BRL200 million and BRL300 million this year.

 Only a fraction of that we expect to use for new builds, so there's going to be some amount of additional cash remaining for tuck-in acquisitions and things like that. And those are starting to develop in Brazil, the opportunities for those.

 There's not the same mom-and-pop market as there is in the US but there actually is a nascent market beginning to develop, which we like. So, we're going to be thoughtful around the currency issues in our existing markets. And the only one that really is impacted there is Brazil.

 And then, as we look at new markets that are not denominated in US dollars we will be considering the currency impacts as well. Because it's a translation issue for us on one level, but at another level, depending on how strong the dollar is, relative to that currency, it makes it tougher in that country for those people and for those carriers who are buying from Ericsson, Huawei, Samsung, and Nokia. They are still paying -- I'm not sure those purchases are contracted in US dollars, but they may be. And if they are not, they are in their local currencies, not the country where the product is being shipped.

 So the Brazilian carriers, for example today, have seen their costs of additional deployment go up on the equipment side.

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 Anthony Klarman,  Deutsche Bank - Analyst   [29]
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 Yes. And I guess that is at the end of the day, the questions that came up in one of the sessions yesterday was around bad debt and the precautions you can take against bad debt, because dollar expenses to the local carriers become more expensive. But you would view it probably as you're a critical piece of infrastructure, you monitor that pretty closely, and it's unlikely probably that bad debt would get away from you, even in a strong dollar scenario.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [30]
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 Well, that's certainly been our experience and I look back with comfort to the period of time in the early 2000s where most all the Sprint affiliates went bankrupt, and they all kept paying their tower leases because otherwise they didn't have a business.

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 Anthony Klarman,  Deutsche Bank - Analyst   [31]
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 Yes. So let's travel back -- well, maybe one more question on international. One of the questions that I think comes up for all the carriers now, all the tower operators now, is how big should we expect international to be as a portion of the portfolio for -- in your case you've gone from zero to pretty critical mass over the course of a few years.

 But are we at about the balance now where the growth in the US and the growth in international will balance one another out, and the mix that we have today is probably a pretty sustainable mix of domestic versus international cash flow going forward?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [32]
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 Well, I think it was in Q2 of last year, we put forth some broad guidelines as to how we were thinking about the growth in our non-US dollar denominated portfolio. And at that time we talked about 25% to 30% was kind of our target high end at that point in time, based on a variety of things that we look at.

 This year will be 15% or maybe 17%, 13%, 14%, 15% of that in Brazil. Now I think while we're watching the relationship between the US dollar and some of these other currencies where we might have opportunities, I don't think this year you'll see us dramatically change that mix.

 But in years to come, we might be closer to those target goals. I think today as we look around, and we do take all these things into consideration because we exist to make our shareholders money and US dollar translation issues have an impact on that, so we will consider those things as we think about where to spend our capital. And because of what's going on today -- and you, I think, might have heard me intimate this on the last call -- as a result of what's going on and the fact that we're going to have more capital to invest because of the warrants being cleaned up, this might be a year you see us resume stock repurchases.

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 Anthony Klarman,  Deutsche Bank - Analyst   [33]
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 Right. And last question on international. You just remind us how many of those contained CPI-based inflation fixes to offset some of the volatility in the local markets.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [34]
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 Brazil, and only Brazil. Because that's the only -- outside of Canada, that's the only country that we're in that is not denominated in US dollars.

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 Anthony Klarman,  Deutsche Bank - Analyst   [35]
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 Right.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [36]
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 Right.

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 Anthony Klarman,  Deutsche Bank - Analyst   [37]
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 So let's come back to domestic. The big Verizon asset is now gone but the question is really more on the domestic market for M&A for towers. You probably have done more what I would call independent mom-and-pop transactions than anyone. And it's not obvious that there is a carrier (multiple speakers).

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [38]
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 Over 800 separate deals since 1997.

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 Anthony Klarman,  Deutsche Bank - Analyst   [39]
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 You see that? Does that to some extent play to SBA's strengths? You've done a lot of those deals but it's to some extent harder to make them matter given your run rate is much bigger now.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [40]
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 Well, I'd like to think we have an advantage there. We do have a number of repeat sellers because we've been around for so long and have done so many deals. And we have a very good reputation for treating people fairly and getting deals closed.

 I think it's working. I was pleasantly surprised by the amount of US activity that we had already seen when we announced our fourth-quarter results. That was the end of February, and we are already got close to 400 towers either bought or under contract.

 So, yes, we're still going to be able to do a fair amount of activity in the US. Now, as we continue to grow the overall portfolio that annual 5% to 10% for portfolio growth goal gets bigger in absolute numbers. So I think -- I have no doubt that we can hit the low end just off the US and do more than that, but to get to the 10% or to exceed that number would require probably some international growth as well.

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 Anthony Klarman,  Deutsche Bank - Analyst   [41]
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 On the earnings call, you spoke a little bit about small cell and expansion in the small cell arena, whether it's DAS or traditional small cell.

 How do you rank capital deployment in the US as you look at portfolio growth? Whether it's a macro coverage or small cell or land purchases, what do the returns look like currently on each of those, given where you are? And given the proliferation of what the carriers are talking about, about carrier aggregation and small cell deployment, how important do you think small cell is going to be for SBA over the course of the next 12 to 24 months?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [42]
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 We really don't have a small cell competency today, so from a today capital allocation perspective, doesn't really factor into the equation that much. We are seeing some small cell deployments on our towers in some of the more urban markets, which of course don't really require any capital.

 But my comments over the years have evolved and they've become more positive recently as I've watched the adoption of the carriers of the technology. A couple of years ago not all the carriers were even embracing DAS and small cells as a viable technology. That's all changed now.

 All four of the US carriers have embraced DAS and small cells. How busy they are is really more a function of their budget as opposed to their technical views. So, their technical views have improved and therefore my views around the assets or the technology has improved.

 In terms of where we go in the future, I think our first expertise and our first priority is always going to be towers. I think towers on average produces better returns, but you can get tower-like returns on DAS and small cells if you price it right and if you execute it right.

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 Anthony Klarman,  Deutsche Bank - Analyst   [43]
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 Yes. So how does ExteNet play into that?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [44]
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 We have an interest in ExteNet, and given the changing -- positively changing trends around that business, we would look to increase our ownership if the right opportunity arises.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [45]
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 Right. We got about 10 minutes. I thought I'd maybe take a pause and go to the audience and see if there are questions here. Yes?

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Questions and Answers
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Unidentified Audience Member   [1]
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 It seems like -- or not seems like. It seems pretty certain we're about to enter a rising rate environment, and I was wondering if that had made any difference with regards to how you thought about your target leverage or investments, capital allocations?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [2]
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 Yes, I mean it does. We do a lot of sensitivities around our balance sheet and our debt structure. We believe we can create positive growth in AFFO per share as long as the 10 year doesn't go above 5%.

 Now, how much we create will shrink, but it will still be positive until we get to that point.

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 Anthony Klarman,  Deutsche Bank - Analyst   [3]
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 So does that imply, maybe to follow on to that, that if 18 months from now we're at that level, that target leverage would need to shrink to create additional --?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [4]
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 If the 10 year were at 5% and we thought it was going to stay there on a sustained basis, we would probably look to change our -- to adjust our targets to maximize growth in AFFO per share.

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 Anthony Klarman,  Deutsche Bank - Analyst   [5]
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 There was another one on that --.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [6]
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 It's really for us, it's all about what the -- it's very mathematical, so it's not an art. It's really a science. We all run our models and we see at what point AFFO per share -- now, if the Treasury goes to 5% and it's a non-like-Lehman crash, which is a wholly different world of course -- but if it's because the economy is improving, that means the capital markets are healthy. It means access to debt is good. It might be more expensive, but your access and your refinancing risk is all still acceptable.

 So then, it's just a question of where you set that interest rate, at what leverage level to maximize AFFO per share.

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Unidentified Audience Member   [7]
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 Yes, I'd like to ask about opportunities you may see in Europe, if that's at all an attractive market in terms of assets. And the second question, you've seen two Italian companies, Rai Way and EI Tower, talk about merging in the TV tower business. I'm just wondering if there are any opportunities in that segment in this country.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [8]
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 Europe, we've looked at. But we've actually bid on some assets there and we've been outbid. There are European infrastructure funds that -- I'm not sure how they look at the world, but they look at it on a price and a long-term yield basis differently than we do. We still are a growth company. We still look for double-digit IRRs in everything we do. And couldn't get to those numbers in Europe. There's a lot of assets, I think, coming to market in Europe. They are a little different.

 The Italian opportunities, as I understand them, will require a lot of consolidation and decommissioning. And you take 500 towers combined and it has to be 300 to really make a -- and you can do that, but that's not what we are good at. We're good at growth assets. And I'm sorry, I didn't really hear your second question. Was it on TV?

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Unidentified Audience Member   [9]
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 (inaudible - microphone inaccessible)

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [10]
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 There have been several portfolios of broadcast towers that have traded. The last one we took a close look at and concluded that a large percentage of those carriers on those towers -- and keep in mind, your revenue concentration on a broadcast tower is pretty tight. The broadcasters, they pay huge amounts of money, and if you lose them that's not good.

 And our analysis of around the upcoming 600 megahertz auction was a fair amount of those were going to go away and sell their spectrum. And that was before the AWS-3 pricing, which I think only increases the likelihood of that.

 There's opportunities for sure, but I'd be very careful today and do a very thorough analysis as to where you think that broadcaster is, post 600 megahertz auction.

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 Anthony Klarman,  Deutsche Bank - Analyst   [11]
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 And many of those I think are the really tall towers that don't necessarily have the same applicability for macro wireless network.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [12]
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 You will never make up on the wireless side what you would lose on the broadcast leases, so the longevity of those leases is, in my opinion, the most critical aspect of analyzing those types of towers.

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 Anthony Klarman,  Deutsche Bank - Analyst   [13]
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 Yes. I thought I saw -- was there one other in the room? So, Jeff, I wanted to talk a little bit about services. Sometimes services is a leading indicator of what's coming down the pipeline.

 Can you talk a little bit about the services business and what that maybe is telling us about the pace of leasing activity and how that ramps not only throughout the year but as we exit 2015 and we start to look beyond that?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [14]
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 Yes, it is an indicator. It's not a perfect indicator, because we don't do services work in proportion to the amount of carrier activity that's happening on our towers. And that's just because of relationships.

 For example, the AT&T has what are called turfing vendors, which are non-tower companies that that's where they initially give all their work too. So most of our services work comes from Sprint and T-Mobile, which was a function of the master agreements that we did. And we were obligated to get that work. But now post those agreements, we've demonstrated to the carriers that we know our assets best and therefore you should hire us because we do a good job for a fair price, and they do.

 So, yes and no. It's not a perfect match of the makeup of the services business. But is it better to have a growing services business than not? Is there some connection between that and customer activity? Yes, all things being equal.

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 Anthony Klarman,  Deutsche Bank - Analyst   [15]
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 Yes. And then a final question is, you mentioned a little bit the notion about how the excess free cash flow this year, given that the warrant overhang is completed, will create some extra cash in the system for other opportunities. You mentioned the notion of potentially buybacks.

 I was interested to hear how you and the Board think about how buybacks should be sequenced. And you've also talked about having done at least some early prep work on what a conversion to a REIT looks like. You'd still have some tax shield left. Can you just update us on where that process stands as well?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [16]
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 Well, let's go back to my earlier comment that all these capital allocation decision start from where we want to capitalize the balance sheet. And in this environment, and pending any changes that might cause us to change our target leverage, we're going to stay levered at 7 to 7.5 turns. That's going to produce a certain amount of investable capital.

 Our bias has been -- always has been, will continue to be -- quality assets, as I think that's the better way to go to build AFFO per share.

 But if that's not available or we don't see the minimum returns and the desired returns we're looking for, we will look to put that money into stock repurchases. Now I don't think we'll ever be a formula stock repurchaser, where I sit up here and say, okay, it's $100 million every quarter forever. It will be opportunistic. We'll look to take advantage of dips in the market.

 But the one thing that I think folks should assume is that we will stay levered at 7 to 7.5 times, and then you can run your own different scenarios as to where that money goes and what it means.

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 Anthony Klarman,  Deutsche Bank - Analyst   [17]
------------------------------
 Yes. And then REIT preparation?

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [18]
------------------------------
 Yes, we are ready to convert if we choose to do that. We've done a lot of work. We don't want to convert early. Early meaning before the NOLs have really been used. If you convert early, you no longer can consolidate your nontaxable -- or your non-REIT taxable subsidiaries, and our services business would be one of those. So we'd go from having X taxes to X plus taxes once we do that. But we will do that at the point in time that it makes sense for our shareholders, because long term we are going to be a REIT. So that's a long-winded way of saying we're watching carefully the political winds.

 We're watching for any potential changes in the tax laws. We had that [Cant] proposal that came out a year ago that got everybody focused on issues. That doesn't appear to be having much traction, but we're watching all that carefully, and if it looks like there is something afoot that would prematurely preclude us from later becoming a REIT, we're ready to go.

------------------------------
 Anthony Klarman,  Deutsche Bank - Analyst   [19]
------------------------------
 And just remind us as we are about out of time, but when the NOL off the current projections runs you through.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [20]
------------------------------
 It's probably three, four, five years.

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 Anthony Klarman,  Deutsche Bank - Analyst   [21]
------------------------------
 Right, so still some lead time, so pending no further change in legislation your objective would be to run the business as you are today and optimize into the REIT structure over time?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - CEO and President   [22]
------------------------------
 Yes, we're not looking to change the way we allocate capital that might be either advised or desirable operating as a -- I'm not a dividend payer today. I don't believe that's the right thing for us to do when we can compound the AFFO per share growth at the high teens, low 20s. So we're really not looking to change our capital structure, our dividend policy, any of those things.

------------------------------
 Anthony Klarman,  Deutsche Bank - Analyst   [23]
------------------------------
 Great. Well, Jeff, we are out of time but thank you very much for coming.

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 Jeff Stoops,  SBA Communications Corporation - CEO and President   [24]
------------------------------
 Great, thank you.




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