Q2 2015 SBA Communications Corp Earnings Call

Jul 30, 2015 AM EDT
SBAC.OQ - SBA Communications Corp
Q2 2015 SBA Communications Corp Earnings Call
Jul 30, 2015 / 02:00PM GMT 

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Corporate Participants
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   *  Mark DeRussy
      SBA Communications Corporation - VP of Finance
   *  Brendan Cavanagh
      SBA Communications Corporation - CFO
   *  Jeffrey Stoops
      SBA Communications Corporation - President & CEO

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Conference Call Participants
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   *  David Barden
      BofA Merrill Lynch - Analyst
   *  Rick Prentiss
      Raymond James & Associates, Inc. - Analyst
   *  Jonathan Atkin
      RBC Capital Markets - Analyst
   *  Amir Rozwadowski
      Barclays Capital - Analyst
   *  Jonathan Schildkraut
      Evercore ISI - Analyst
   *  Colby Synesael
      Cowen and Company - Analyst
   *  Mike McCormack
      Jefferies LLC - Analyst
   *  Phil Cusick
      JPMorgan - Analyst
   *  Brett Feldman
      Goldman Sachs - Analyst
   *  Michael Bowen
      Pacific Crest Securities - Analyst
   *  Simon Flannery
      Morgan Stanley - Analyst
   *  Spencer Kurn
      New Street Research - Analyst
   *  Walter Piecyk 
      BTIG - Analyst

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Presentation
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Operator   [1]
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 Ladies and gentlemen, thank you for standing by, and welcome to the SBA Communications Corp second-quarter results call. At this time, all lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given at that time.

 (Operator Instructions)

 And as a reminder, this conference is being recorded. I'll now turn the conference over to Vice President of Finance, Mark DeRussy. Please go ahead, sir.

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 Mark DeRussy,  SBA Communications Corporation - VP of Finance   [2]
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 Thank you. Good morning, everyone, and thank you for joining us for SBA second-quarter 2015 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.

 Some of the information we are going to discuss in this call is forward-looking, including but not limited to any guidance for 2015 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, make cause future results to differ materially from those expressed in any forward-looking statements we may make. Our statements are as of today July 30, 2015, and we have no obligation to update any forward-looking statements we may make.

 The comments we will make today will include non-GAAP financial measures as defined by Regulation G and other key operating metrics. The reconciliation of these non-GAAP financial measures and their most directly comparable GAAP financial measures, and other information required by Regulation G, has been posted to our website, SBAsite.com. With that, I will turn it over to Brendan to comment on our second-quarter results.

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 Brendan Cavanagh,  SBA Communications Corporation - CFO   [3]
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 Thank you, Mark, good morning. As you saw from our press release last night, we had another very strong quarter in all areas. We were above the midpoint of our guidance for site-leasing revenue, tower cash flow, adjusted EBITDA, and AFFO. GAAP site leasing revenues for the second quarter were $370.5 million, or an 8.8% increase over the second quarter of the 2014. Domestic cash site-leasing revenue increased 8.5% to $300.2 million, and international cash site-leasing revenue increased 17.3% to $57 million. Eliminating the impact of changes in the foreign currency exchange rate, total site-leasing revenue would have increased 13.9% over the year-earlier period, and international cash site leasing revenue would have increased 49%. Our leasing revenue growth was driven by organic growth and portfolio growth, including our fourth-quarter acquisition from Oi in Brazil.

 We continue to experience solid leasing demand, both domestically and internationally. Approximately two-thirds of our incremental leasing activity in the quarter came from new leases. The big four US carriers contributed approximately 70% of our consolidated incremental leasing revenue signed up in the quarter.

 Tower cash flow for the second quarter of 2015 was $284 million, or a 9.7% increase over the year-earlier period. Eliminating the impact of changes in the foreign currency exchange rates, tower cash flow would have increased 13.4% over the second quarter of 2014. Tower cash flow margin was 79.5%, compared to 79.6% in the year-earlier period.

 Our services revenues were $40.2 million compared to $43 million in the year-earlier period. Services segment operating profit was $9.9 million in the second quarter, compared to $10.9 million in the second quarter of 2014. Services segment operating profit margin was 24.5%, compared to 25.4% in the year-earlier period.

 SG&A expenses for the second quarter were $28.3 million, including non-cash compensation charges of $8.1 million. SG&A expenses were $25.4 million in the year-earlier period, including non-cash compensation charges of $6.1 million. Adjusted EBITDA was $274.3 million, or an increase of 9.2% over the year-earlier period. Eliminating the impact of changes in foreign currency exchange rates, adjusted EBITDA would have increased 12.9% over the year-earlier period.

 Adjusted EBITDA margin was 69% in the second quarter of 2015, compared to 68.2% in the year-earlier period. Approximately 96% of our total adjusted EBITDA is attributable to our tower leasing business. AFFO increased 8.2% to $184.5 million compared to $170.6 million in the second quarter of 2014. AFFO per share increased 8.4% to $1.42, compared to $1.31 in the second quarter of 2014.

 Combined changes in the Brazilian and Canadian exchange rate during the second quarter versus the rates assumed in our guidance negatively impacted leasing revenue by $265,000, and both adjusted EBITDA and AFFO by approximately $150,000. IDEN-related churn during the quarter had a negative impact of $950,000. Net income during the second quarter was $28.3 million, compared to net loss of $9.5 million in the year-earlier period. Net income for the second quarter of 2015 included a $15.7-million gain on the currency-related re-measurement of a US dollar-denominated inter-Company loan with our Brazilian subsidiary. Net income per share for the second quarter of 2015 was $0.22, compared to net loss per share of $0.07 in the year-earlier period. Quarter-end shares outstanding were $128.2 million.

 In the second quarter, we acquired 317 communications sites and other assets for $220.1 million in cash. SBA also built 117 sites during the second quarter. We ended the quarter with 24,808 sites; 15,467 of these sites are in the US and its territories, and 9,341 are in international markets. Total cash capital expenditures for the second quarter of 2015 were $320.1 million, consisting of $8.5 million of non-discretionary cash capital expenditures, such as tower maintenance and general corporate CapEx, and $311.6 million of discretionary cash capital expenditures. Discretionary cash CapEx for the second quarter includes $220.1 million incurred in connection with acquisitions, excluding working capital adjustments. Discretionary cash CapEx also included $24.1 million in new tower construction, including construction in progress, and $15 million for gross augmentations and tower upgrades. The substantial majority of augmentation CapEx is reimbursed to us by our customers.

 During the quarter, we spent an aggregate of $54.9 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 73% 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 33 years.

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

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 Mark DeRussy,  SBA Communications Corporation - VP of Finance   [4]
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 Thank you, Brendan. SBA ended the second quarter with $8.3 billion of total debt. We had cash, cash equivalents, short-term restricted cash, short-term investments of $117.6 million Our net debt to annualized adjusted EBITDA leverage ratio was 7.4 times. Our second-quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 3.5 times.

 During the quarter, we borrowed an incremental $500 million under our existing credit agreement in the form of a seven-year term loan B. The loan was issued at 99% of par value and will accrue interest at LIBOR plus 250 basis points, with a 75-basis-point LIBOR floor. Proceeds from this financing were used to repay $490 million of the outstanding balance under our revolver. Currently, we have $170 million outstanding under our $1 billion revolver. At the end of the quarter, our total debt carried a weighted average coupon of 3.9% and a weighted average maturity of just over five years.

 During the quarter, we purchased the remaining $150 million of common stock authorized under our $300-million repurchase plan. This consisted of the repurchase of over 1.3 million shares at an average price of $114.96 per share. On June 4, we announced the authorization of a new $1 billion stock repurchase plan. Subsequent to the end of the second quarter, we repurchased approximately 800,000 shares of stock for $91.9 million, at an average price per share of $115.50, and currently have $908 million of repurchase authorization remaining under our current program.

 I'll now turn the call over to Jeff.

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [5]
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 Thank you, Mark, and good morning, everyone. As you have heard, we had another solid quarter, exceeding the midpoint of our guidance across all key financial metrics. Organic leasing activity, strong expense control, and some contribution from acquisitions were once again the primary reasons for our performance. We continue to see solid demand across our entire portfolio, both domestic and international, as well as in our services segment. We expect continued solid levels of activity for years to come, as carriers seek additional network capacity, as use of wireless data marches ever higher, and as new spectrum gets deployed. Ahead of us is the deployment of AWS-3, WCS 600 megahertz, FirstNet, and Dish spectrum. All of those deployments we believe will require some additional infrastructure. The need for and the catalyst behind additional network investment continue on, and we see no end in sight. These dynamics are at play in all our markets, both domestically and internationally.

 In the second quarter, we posted solid leasing results across our entire portfolio, domestic and particularly international. Same tower cash-leasing revenue growth compared to the year-ago prior period was 9.5% on a gross constant-currency basis and 6.5% on a net of churn basis, including iDEN-related churn. Our same tower calculation, as always, is reflective of organic growth in recurring cash leasing revenue over the last four quarters, in this case, ending June 30 and not including the second quarter of 2014, which was the highest leasing quarter in our history.

 Our same tower calculation includes no new tower builds or acquisitions, and since our augmentation costs are almost entirely reimbursed, this growth comes at virtually no capital expenditure cost. Our domestic same tower growth rate was also 9.5% on a gross basis, and was 6% on a net basis, while our international organic growth rate was 11.5%, both gross and net, on a currency-neutral basis. Brazil grew at an organic rate of 12.5%. We attribute our leasing success to a combination of quality assets, strong execution, good contracts, and excellent demand from our customers.

 In the second quarter in the US, the leasing demand environment improved over levels we experienced in the prior two quarters and was consistent with our expectations when we issued our 2015 outlook in November. Our incremental revenue added per tower in the US this quarter was at the exact same rate as the second quarter of 2013, coincidentally. In total, we executed high numbers of both new tenant leases and amendments. Revenue from new leases was greater than that from amendment and represented approximately 60% of incremental leasing revenue in the US. Verizon and T-Mobile represented the majority of our new business in the quarter. AT&T was more active in the second quarter compared to the first quarter, but still at greatly reduced levels compared to the first three quarters of 2014. Contributions from Sprint were both new leases and amendments at a pace similar to prior quarters, and where we believe in advance of formally launching its next-generation network plans, which are still ahead.

 Our backlogs continue to be healthy. We continue to expect that leasing levels will increase in the second half of the year over first-half levels, which depending on timing, may or may not impact 2015 financial results. At a minimum, we expect to end the year with a strong leasing run rate, which will bode well for 2016, when we will have also gotten past substantially all of our iDEN termination.

 We saw strong activity in our international market, adding our most incremental revenue in a quarter ever on a constant currency basis. International growth rates picked up nicely from the first quarter. As expected, new leases represented the majority of the activity, contributing approximately 80% of the total incremental international leasing revenue added in the quarter.

 International cash leasing revenue and tower cash flow growth grew materially year over year, once again, primarily due to portfolio growth. International tower cash flow margins were strong at 70%, and are expected to grow now that we have had a couple of quarters to integrate our Brazilian acquisitions. GAAP requires us to mark up our revenue and expenses by the amount of the ground lease expenses reimbursed to us by our customers, so the true economic cash flow margins in Brazil are much higher.

 I continue to be pleased with the progress we are making in Brazil. While the macro environment in Brazil continues to be challenging, and to some degree, we believe limiting carrier investment, we had our best quarter yet in terms of leasing revenue added. We remain convinced that Brazil will be an excellent long-term investment. The demographic trends, smartphone sales, network needs, new spectrum in the competitive carrier dynamic, all lead us continue to believe that Brazil will be a growth market for network investment for many years to come. We are making great progress improving and integrating the towers we most recently acquired in Brazil, and positioning ourselves to capture all the benefits of future improved economic conditions and increased barrier spending. Our services segment produced another strong quarter of results for us in the second quarter, and we expect the steady services segment contribution through all of 2015.

 Our operational performance across the entire Company was once again very strong in the second quarter. We posted industry-leading tower cash flow margins of almost 80% Company-wide, and over 81% in the US. Strong tower cash flow and services margins, as well as low cash SG&A expense as a percentage of revenue, drove our adjusted EBITDA margin to another record at 69%. We are generating phenomenal operating leverage in our business, even as we continue to invest in additional international back-office and other capabilities. We believe our industry-leading tower cash flow and EBITDA margins are due to our focus on and experience with macro tower sites and the expense efficiencies attainable through the gross margin and SG&A lines in that business. The strong adjusted EBITDA results we had in the second quarter drove our equally strong AFO and AFFO per share result.

 Our updated 2015 outlook reflects our expectations of solid carrier activity, organic growth rates, and services for the remainder of the year. On a constant currency basis, the current outlook represents approximately a 1% increase to the midpoints from our initial outlook for leasing revenue, adjusted EBITDA, and AFFO. Unfavorable changes in the Brazilian real to US dollar exchange rate are expected, however, to more than offset those increases. We believe carrier activity will continue to increase as we move through the second half, which will position us well for 2016. Our current 2015 outlook contemplates approximately 9% gross same tower cash revenue growth on a constant currency basis before iDEN churn. We have included no material contribution in 2015 from Dish, Public Safety, AWS3, or Sprint's next-generation network plan.

 Our balance sheet remains in great shape and additional capital, if needed, remains readily available. We intend to continue our balance sheet strategy and maintain our existing leverage targets, as we believe them to contribute materially to shareholder value creation. Our capital allocation focus is portfolio growth that meets our underwriting and investment return requirements, and on share repurchases at prices that we believe are below intrinsic value. If neither of those conditions are met, we don't allocate capital. Capital allocation for us is a dynamic and opportunistic process. We had a good second quarter, acquiring 317 additional sites, almost all of which were in the US.

 We have a healthy amount of towers under contract to purchase, mostly international. Our new tower build activities were also very solid in the second quarter, both domestically and internationally. Portfolio growth remains our top priority, but again, only for qualified opportunities with the right price, terms, and business characteristics. So far this year, our investment capacity has exceeded the amount of those qualified portfolio growth opportunities, so we have repurchased a significant amount of our stock at prices we believe are well below intrinsic value. With respect to portfolio growth, our primary focus remains in the western hemisphere. If we are successful in consummating some additional acquisitions, depending on the timing of such acquisitions, our 2015 outlook could increase.

 Last week, ExteNet announced a restructuring, where its current investors, including SBA, will exit and a new investment group will come in. The restructuring contemplates both initial and future earn-out payments, and when it is all said and done, we expect a return of more than two times our initial investment of nearly $43 million, which we believe will equate to approximately 13% to 15% internal rate of return. We have been investors in ExteNet for over five years and had a front row seat to watch the development of this DAS and small cell business. We respect the management team there greatly and wish them the best. We learned a lot.

 Through the experience, we have concluded that we prefer the macro site tower business, given our history, experience, and the business model's proven success, operational leverage, and financial advantages. We chose to exit ExteNet rather than increase our investment, as we believe we have better uses of capital that will produce superior long-term growth and AFFO per-share. In no way do we believe our macro site tower business will be negatively impacted by small cells in general, or specifically by our decision not to increase our investment in small cells. We will continue to allocate resources to non-macro site technology, with a primary focus on accommodating non-macro site technology on the over 30,000 sites we own or manage around the globe, where we have capital efficiency, exclusivity, contract advantages, and a traditional real estate structure.

 Before we open it up for questions, I want to thank our employees for their hard work in the second quarter, and our customers for continuing to entrust us with their business. We look forward to continued success as we move through 2015. Operator, at this time, we are ready for questions.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions)

 David Barden with Bank of America.

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 David Barden,  BofA Merrill Lynch - Analyst   [2]
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 Hello. Thanks a lot for taking the questions. Jeff, maybe a couple for you. First, following up on the ExteNet decision, I think it was about six months ago when you were asked if you had to come down on one side or the other of the decision between the Crown Castle small-cell site focus for incremental investment or the American Tower International, you actually said you were leaning on the Crown Castle side of things, which I think put a lot of focus on SBA's intentions in the small-cell site business. Could you tell us a little bit more about what you've learned over the course of that exercise that led you to decide that the doubling of your investment was enough to buy you out of that strategy?

 And then the second part would be just on the impact on the outlook with respect to Brazil and the currency movements there highlight the risks of investing, certainly in individual international markets. Is what's going on in Brazil increasing your desire to diversify away from Brazil? Is it increasing your desire to focus more on the US? Or is it really having no effect on your capital allocation decisions? That would be super helpful. Thank you.

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [3]
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 Yes. Let me first say, David, I don't recall saying that we favored a Crown approach over an American Tower approach. I think what I recall saying was that I saw an increased level of activity in the small cell business and that that was a positive change from years ago, but that we were still evaluating our interest in the business from a capital efficiency and impact on an AFFO per-share generation. So, I don't -- we really haven't changed any views over the last six months.

 But over the last five years, we've taken it all in and concluded that to substantially increase our SG&A overhead expense, to vigorously compete for what we believe is the lower margin capital-intensive long-cycle business, which is currently, and we think is going to stay, a relatively small percentage of our customer spending, is inconsistent with our long-term views of increasing tower cash flow margin, adjusted EBITDA margin, AFFO margin, and ultimately maximizing AFFO per share. It was really a financial decision, as most things we do are, and again, it's all about our quest to constantly maximize AFFO per share.

 In terms of your international question, I think you have to be cognizant of what's going on in the Brazil with the real. Again, we're in these markets to maximize AFFO per share. Over the last year, Brazil has not particularly contributed in that endeavor. We do believe that it will, over time, do very well, but you have to take into consideration currency issues and what that means and whether that's a short-term dynamic, a long-term dynamic. So, we would have an interest in definitely continuing to diversify those income streams and currency risks as we continue to move forward.

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 David Barden,  BofA Merrill Lynch - Analyst   [4]
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 Thank you very much.

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Operator   [5]
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 Rick Prentiss with Raymond James.

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 Rick Prentiss,  Raymond James & Associates, Inc. - Analyst   [6]
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 Thanks, good morning. The first question I've got for you, if you think about your 2015 guidance change, can you break out for us how much of the change in guidance was due to external acquisitions, how much of the guidance change was from increased business in your legacy assets? I think I heard maybe 1% cost of currency FX. How much was FX effect?

 And then also talk a little bit about the change in interest cost. I'm trying to create a bridge, if you will, from last guidance to this guidance. How much was external driven? How much was internal business doing better? How much was FX and how much was the interest cost?

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 Brendan Cavanagh,  SBA Communications Corporation - CFO   [7]
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 Hey Rick.

 Just to clarify, you mentioned the 1%. The 1% is in reference to the changes that took place from the time that we initially gave our guidance in November of last year. But going back to what we guided to just a quarter ago for the full-year 2015 and the changes in the new guidance that we just put out yesterday, basically on the revenue line, the entire change is just due to the FX shift.

 We lowered the midpoint of our full-year leasing revenue guidance by $9 million. The impact of the FX changes in our assumptions versus what we assumed last time was $9 million. So basically, that's the whole change, and really, that's driven by the fact that while we did add a little bit of M&A, it's frankly inconsequential. We've increased our discretionary CapEx by about $40 million for the year. A lot of that will be staggered over the last part of the year and will have very little impact on the P&L.

 So, our views on the organic leasing opportunities really are basically the same as what we had before. As Jeff mentioned earlier in his remarks, we expect to see a pickup in the second half in terms of activity levels. That's what we expected before, so there really has been no change. So, basically, we're looking at the same expectations we had previously. And as you go down the other categories, we have slight pickups in tower cash flow and EBITDA driven by expense control, a little bit our-performance in services that we had in the second quarter. So, that's basically what's flowing through to those items.

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 Rick Prentiss,  Raymond James & Associates, Inc. - Analyst   [8]
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 And the interest expense change?

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 Brendan Cavanagh,  SBA Communications Corporation - CFO   [9]
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 Yes, we've increased our interest expense, which is basically due to two things. One, in our last guidance, we did not include any expectations for stock repurchases. As you are aware, we've repurchased to date since that time about $240 million of stock buybacks, so that's all basically paid for through incremental debt. It takes into account the term loan that we did, which was essentially terming out some of our revolver borrowings. While that gives us a greater liquidity, it does come at a slightly higher interest rate than the revolver. So, basically you put those two things together, we're up about $5.5 million at the midpoint on our interest expense guidance. And that negatively impacts the AFFO, but will certainly help positively impact AFFO per share as a lot of those dollars are going to buy back stock.

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 Rick Prentiss,  Raymond James & Associates, Inc. - Analyst   [10]
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 Great, and then, when we think of forward to next quarter historically, you will give the future year guide. Are you still expecting on the third-quarter call to give 2016 guidance? And how do you feel about the visibility of the different carriers by then?

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 Mark DeRussy,  SBA Communications Corporation - VP of Finance   [11]
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 Yes, we will definitely give full-year guidance then, and I think we're actually looking forward to it. Because we will be able to talk about a year where our iDEN terminations have ended. We believe that there was a very good likelihood that a certain US customers will come off historically low spending activity. We'll take a fresh look at the exchange rates. So, we expect to have the same visibility, Rick, that we always have in any type of outlook, which is pretty good, six months ahead. So, I think we will have a good dialogue.

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 Rick Prentiss,  Raymond James & Associates, Inc. - Analyst   [12]
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 I think the Street is looking forward to that third-quarter call and the 2015 guidance, as well.

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 Mark DeRussy,  SBA Communications Corporation - VP of Finance   [13]
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 Yes.

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 Rick Prentiss,  Raymond James & Associates, Inc. - Analyst   [14]
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 Great, thank you.

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Operator   [15]
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 Jonathan Atkin with RBC Capital Markets.

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 Jonathan Atkin,  RBC Capital Markets - Analyst   [16]
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 I was interested in maybe drilling down in Brazil a little bit, in terms of what have been the drivers. Is it Vivo? Is it TIM? Is it 3G overlays, 4G initial coverage, if you characterize that a little bit. As well as your appetite in that market potentially for mom-and-pop acquisition.

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [17]
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 I believe, Jonathan, in the order of contribution it has been Vivo, TIM, Claro, Oi, and Oi would be expected to be where they are, because we bought most of our towers from them so they already have some presence on almost every asset that we own. In terms of our additional appetite, we every much have an interest in continuing to invest the reals that were the positive cash flow in reals that we're generating down there in additional asset growth, whether it be new tower builds or acquisitions. And we're pleasantly surprised to see a nice cottage mom-and-pop development market growing down there that will give us a chance to continue to grow through small to medium acquisitions for a long time.

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 Jonathan Atkin,  RBC Capital Markets - Analyst   [18]
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 And then on the US, I wondered if you could venture a rough guess or timeframe around AWS-3 and when that might start to happen. There's going to be three carriers deploying that and NWCS, which is obviously just one carrier. Any sense as to when that might become noticeable in 2016?

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [19]
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 I don't have a quarter for you, Jonathan. I don't believe it will be 2015. But that will be something that we will have at least a three-months better view on when we give out our full-year guidance at our next call.

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 Jonathan Atkin,  RBC Capital Markets - Analyst   [20]
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 And then on the small-cell topic, are you seeing any demand on your macro sites, perhaps at lower height, that's driven by some of the same drivers that are driving the small-cell opportunity?

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [21]
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 Yes, we are. We absolutely have. We've leased up a fair number of positions at approximately the 20- to 30-foot level, which of course is typically an open spot on the tower and a great incremental source of revenue for us and something we're going to be excited about going forward.

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 Jonathan Atkin,  RBC Capital Markets - Analyst   [22]
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 Thank you very much.

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Operator   [23]
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 Amir Rozwadowski with Barclays.

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 Amir Rozwadowski,  Barclays Capital - Analyst   [24]
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 Thank you very much. When we think about your guidance for the duration of the year, it sounds like there is no real expectation for a change in the current spending environment that we're seeing. And certainly even if there was, it doesn't seem like that would really impact this year. But, can you give us an update in terms of what you're seeing in terms of bookings activities or maybe some of the initial conversations that you're having with some of the carriers to maybe give us a sense in terms of where the trajectory could fall out?

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [25]
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 Yes, we clearly are seeing upticks in our backlog. I think your first comment, Amir, was spot on. You know this business; if you don't really have your operational leased-up, signed up by the end of September, it will really typically not impact your full-year financial results.

 So as a practical matter, we have about two months of operational leasing activity in the US to impact full-year results. But looking past all that, we are very pleased with we're seeing on the backlogs and the build. And we have every reason to believe that activity levels across -- in the aggregate, when you take all four carriers in the US together, we will be up in 2016.

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 Amir Rozwadowski,  Barclays Capital - Analyst   [26]
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 Thank you. And then one follow-up, if I may. When you are thinking about your capital allocation decisions, clearly the buyback percolated to the top in terms of return criteria for you folks, over the last couple of months. Any sense you can give us in terms of expectations for AFFO growth over the long term that's baked into this calculation of intrinsic value that you are looking at?

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [27]
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 We're still battling every day for 15% to 20% compound growth in AFFO per share.

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 Amir Rozwadowski,  Barclays Capital - Analyst   [28]
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 Thank you very much for the incremental color.

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Operator   [29]
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 Jonathan Schildkraut with Evercore ISI.

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 Jonathan Schildkraut,  Evercore ISI - Analyst   [30]
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 Great, thank you for taking the questions. Two, if I can. First, I just wanted to swing back to ExteNet, make sure that I fully understood your commentary on the sale, Jeff. You're talking about 2 times on your investment back; you invested $43 million. Does that mean you're going to see gross proceeds of around $130 million? Just wanted to make sure I understood that. And then what's the timing of the receipt on that payment?

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [31]
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 No, Jonathan, there's going to be -- there's some variability here because there's an earn-out period that ends March 31. So when we say 2 times or better, that would be the gross proceeds to us would be that multiple of what we invested, the $43 million.

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 Jonathan Schildkraut,  Evercore ISI - Analyst   [32]
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 Thank you. So, we've been spending a lot of time, I think talking about Brazil. I don't know when the last time we walked through some of the other markets that you have exposure to on the international side. I was wondering if you might spend a minute talking through some of the dynamics in those markets. Thank you.

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 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [33]
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 We had huge lease up by at least the last four, eight quarters averages in Central America, particularly in Panama, Nicaragua, and Guatemala. And Costa Rica and El Salvador continued to be very steady, so we were very, very pleased with Central America. Canada continues to be steady, but given the size of our asset base there and good growth, but not at the same level that we had in Central America, and certainly not as good as we've had in Brazil, continues to move forward. At this point, though, we've got such a low tower cash-flow multiple to invested capital that it's a great-yielding market for us.

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 Jonathan Schildkraut,  Evercore ISI - Analyst   [34]
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 Excellent, and if I can ask one more question, given the movements in the real, based on the second-quarter results, what percent of revenue is currently coming out of Brazil?

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 Brendan Cavanagh,  SBA Communications Corporation - CFO   [35]
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 Brazil within our 2015 guidance is projected to contribute just about 11.5% of the total leasing revenue. A little bit less, actually, on a cash-leasing revenue basis.

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 Jonathan Schildkraut,  Evercore ISI - Analyst   [36]
------------------------------
 Thank you for taking the questions.

------------------------------
Operator   [37]
------------------------------
 Colby Synesael with Cowen and Company.

------------------------------
 Colby Synesael,  Cowen and Company - Analyst   [38]
------------------------------
 Great, I just wanted to go back to the buyback. Appreciate that you spent I think about $90 million year to date in the third quarter, but obviously you've taken out debt, [that 15] interest expense. Just trying to get a sense of pacing as you go forward. Would you expect to continue to lean on the buyback, really as we go into the end of the year, assuming there isn't any additional M&A opportunities, or could we see that slow down? And then, my next question more broadly, as we go into 2016 and you start to get a better sense of what the domestic operators are planning or intending to do, does it make sense to actually put an MLA in place with any of those carriers, which could be beneficial for both parties? Thank you.

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [39]
------------------------------
 Colby, we intend to stay capitalized at relatively all times at our target leverage levels. So as I mentioned, portfolio growth remains the number one priority, but it has to meet our standard requirement terms and returns. And if we can find that, that's where the capital investment will go, and if not and we can buy our stock at prices that we believe are below intrinsic value, that's what will do. So, I don't know that you should assume up or down. Whether it will be one or the other, I think will depend on the portfolio growth opportunities that we see and our views on intrinsic value of a stock.

 In terms of MLAs, we have them with Sprint. We have them with T-Mobile. It's not as if there is an absolute aversion. It's all about the terms and conditions. So the hypothetical -- or the theoretical answer to your question is, of course, if there are things that we do, in fact, find mutually beneficial.

 But in terms of our history, we're extremely happy that we did not do some of the MLAs that have been done and has allowed us to capture every bit of activity and monetize that, which today, is of course the permanent and escalating part of our recurrent revenue base. So that's what we're really focused on and if an MLA can allow that to happen, sure, we'd be interested.

------------------------------
 Colby Synesael,  Cowen and Company - Analyst   [40]
------------------------------
 To go back to the buyback then, if from a modeling perspective, we're not assuming in our models any additional M&A beyond what the Company has already talked about or disclosed. Basically, holding onto the low end of your target leverage ratio and assuming everything goes to buyback is probably a prudent way of thinking about it.

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [41]
------------------------------
 Yes. Particularly if otherwise your models would have us below our target leverage range.

------------------------------
 Colby Synesael,  Cowen and Company - Analyst   [42]
------------------------------
 Thank you.

------------------------------
Operator   [43]
------------------------------
 Mike McCormack with Jefferies.

------------------------------
 Mike McCormack,  Jefferies LLC - Analyst   [44]
------------------------------
 Thank you. Jeff, just another question on the small cell side. Is your thought process there, does it have anything to do with your thoughts regarding barriers to entry in small cell? Or alternatively, what you are seeing as far as pricing trends in small cell?

 Then secondly on the AT&T side, there are commentary regarding spending this year including Mexican spending obviously means maybe a little more dampening in the US. Although, you said something I thought was more positive in the current quarter. How do you think about the second half with respect to AT&T specifically?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [45]
------------------------------
 Let me take your second question first. My comment was that they were more active than first quarter. But, first quarter was at levels that I don't think we've seen on an absolute spend basis from that customer in for as long as I can remember. So the spending on a historical average is way down, and we've been at this for a long time. And that dynamic, while it of course makes for our traditional beat and raise quarters here little more difficult in 2015, I think it sets us up extremely well for 2016.

 And on the small cell question, we had a window seat there for a very long time, and we saw all aspects of the business. And you mentioned two reasons, Mike, but there are 10, 20, 30 other reasons why we just simply prefer the macro site business. And for us, it's all about maximizing AFFO per share, and we believe that through our decision-making, we are going to put ourselves in the best position to do that.

------------------------------
 Mike McCormack,  Jefferies LLC - Analyst   [46]
------------------------------
 Great. Thank you.

------------------------------
Operator   [47]
------------------------------
 Phil Cusick with JPMorgan.

------------------------------
 Phil Cusick,  JPMorgan - Analyst   [48]
------------------------------
 Jeff, could you talk a little bit about -- remind us of the iDEN churn headwind in 2015, and is there any expectation of the abnormal merger churn in 2016?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [49]
------------------------------
 Brendan?

------------------------------
 Brendan Cavanagh,  SBA Communications Corporation - CFO   [50]
------------------------------
 Phil, the impact from the churn that's taking place in 2015 on 2015 is about [$16] million. Although a lot of that churn is in the fourth quarter, so October 1 is the big churn day that we have due to the Tower Co portfolio we bought a few years ago, which had more of a cliff termination that they've agreed to. And that will basically be about $6.5 million, approximately, of quarterly revenue that goes away on October 1.

------------------------------
 Phil Cusick,  JPMorgan - Analyst   [51]
------------------------------
 Anything for 2016 that we should be thinking about?

------------------------------
 Brendan Cavanagh,  SBA Communications Corporation - CFO   [52]
------------------------------
 As it relates to iDEN churn? Nothing.

------------------------------
 Phil Cusick,  JPMorgan - Analyst   [53]
------------------------------
 No, from other merger churn.

------------------------------
 Brendan Cavanagh,  SBA Communications Corporation - CFO   [54]
------------------------------
 Nothing that would outside of our normal 1% to 1.5% of churn that we typically see as our average.

------------------------------
 Phil Cusick,  JPMorgan - Analyst   [55]
------------------------------
 Okay.

------------------------------
 Mark DeRussy,  SBA Communications Corporation - VP of Finance   [56]
------------------------------
 Which, let's be clear on that. Our non-iDEN churn in the US this quarter was 1%. We're not seeing any kind of aberrational activity there, Phil, and we don't expect any.

------------------------------
 Phil Cusick,  JPMorgan - Analyst   [57]
------------------------------
 We've now seen a bit of time now where you haven't bought anything. Is it fair to say that given the higher currency of volatility that we've seen in the last year that your hurdle rate for doing deals outside of the US is maybe higher than it was before?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [58]
------------------------------
 Yes, more than fair to say that. Thank you.

------------------------------
Operator   [59]
------------------------------
 Brett Feldman with Goldman Sachs.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [60]
------------------------------
 Thank you for taking the question. Just thinking ahead to the broadcast incentive option, we've been so focused on site densification, but those are going to be the lowest frequencies we've ever seen, and those are frequencies that are generally well-suited for towers.

 And so with that as the backdrop, can you maybe just give us some updated statistics on your portfolio? For example, to what extent are your towers situated in rural and suburban markets, where we're likely going to see a lot of deployments? Maybe average heights? And then just as a follow-up, do you think there's an opportunity maybe increase your construction of towers as a result of that option?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [61]
------------------------------
 We believe the upcoming activity, particularly the low frequency spectrum and even the AWS-3 and the other spectrum -- FirstNet, for example, that's going to become available is going to be a boon to the non-urban markets. And that, of course, is where we're primarily located.

 I have to refresh myself, Brett, on where we are in terms of demographics, but I believe we're 50% of our US towers are located in the top 100 markets. And then of course the other 50 would be outside of that. I believe our current average heights are 175 to maybe 200 or more, so we've got plenty of capacity there. To the extent that there is activity outside the cities, we're going to get more than our fair share and I'm pretty optimistic that is, in fact, going to happen.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [62]
------------------------------
 Thank you.

------------------------------
Operator   [63]
------------------------------
 Michael Bowen with Pacific Crest.

------------------------------
 Michael Bowen,  Pacific Crest Securities - Analyst   [64]
------------------------------
 Thank you for taking the questions.

 You had mentioned that you're expecting to see a pickup in the second half. I was wondering if you might be able to talk a little bit about which carriers, specifically you might be looking at there? And then also same question for 20s16. I know that you'd also mentioned that Sprint's been very, very low. But they're coming off that low spending activity, or at least planning too. So if you can talk a little bit about perhaps timing of what you're seeing for the lease up, that would be great.

 Thank you.

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [65]
------------------------------
 Keep in mind when we say pickup in activity, we're talking about operational activity and not financial activity. But having said that, I think the pickup is going to come from AT&T and Sprint. Probably more so from the former, and depending on the timing of the new next-generation plans, still a little unclear. But once that does emerge, that is going to be an increase in activity for the entire industry.

------------------------------
 Michael Bowen,  Pacific Crest Securities - Analyst   [66]
------------------------------
 Then, quickly, back on iDEN, I apologize. Did you say there would or would not be impact from iDEN determination in 2016?

------------------------------
 Brendan Cavanagh,  SBA Communications Corporation - CFO   [67]
------------------------------
 There would be nothing of any note in 2016.

------------------------------
 Michael Bowen,  Pacific Crest Securities - Analyst   [68]
------------------------------
 Great. Thank you.

------------------------------
Operator   [69]
------------------------------
 Simon Flannery with Morgan Stanley.

------------------------------
 Simon Flannery,  Morgan Stanley - Analyst   [70]
------------------------------
 Great, thank you very much. I think you mentioned, Jeff, about the value for the buyback being well below intrinsic value. Can you just give us a little bit more color on how you go about assessing intrinsic value, and by all means give us an actual number?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [71]
------------------------------
 You have to save for that one for the bar, Simon, after you buy me a couple cocktails.

------------------------------
 Simon Flannery,  Morgan Stanley - Analyst   [72]
------------------------------
 It sounds like a big spread. Then, on AT&T, coming back to that commentary, there obviously in this grooming period after spending heavily. Can you just look back at similar periods in history? How long can you really go without spending significantly on adding capacity when you have the growth we're seeing and the traffic right now. Is that a year? Is that 18 months? Any color on that would be great.

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [73]
------------------------------
 It's never really been longer than a year or so, Simon. And again, I said this earlier, and it's hard to over emphasize: we've never quite seen this particular customer at this low level of the spend. So, I am pretty confident and have every reason to believe things are going to pick up, and that's one of the key drivers behind why we're buying back our stock. In terms of how we think about that, we look at a variety of metrics.

 We look at our five-year model going forward and project where AFFO per share is going to be. We look at DCFs. Obviously we look at industry comps, and look at where private multiples are trading. And so we triangulate all that back, come up with a price that we will buy at. We're not formula buyers; we are opportunistic buyers, and depending on pricing, there may be periods of time where we go for a while without buying stock, and there may be other periods of time where we jump in with both feet

------------------------------
 Simon Flannery,  Morgan Stanley - Analyst   [74]
------------------------------
 And on the available cash, is the lack of M&A, is there partly fewer opportunities or higher prices, or is it mostly the hurdle rate comment that you mentioned earlier?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [75]
------------------------------
 Higher prices equals hurdle rate issues. We actually had a pretty good quarter in terms of the US towers that we acquired. But we also passed on a lot of towers that we thought looked no better than, and perhaps worse than the towers we own that we're trading at four times or more, our public tower cash flow multiples. So, we will pay higher multiples, but we have to see greater growth and we have to see other reasons that -- to do that. Otherwise, it makes the most financial sense to pass on those that don't meet the hurdle rate and see if your stock is at a price that is below intrinsic value.

------------------------------
 Simon Flannery,  Morgan Stanley - Analyst   [76]
------------------------------
 Thank you.

------------------------------
Operator   [77]
------------------------------
 (Operator Instructions)

 Spencer Kurn with New Street Research.

------------------------------
 Spencer Kurn,  New Street Research - Analyst   [78]
------------------------------
 Hello. Thank you for taking my question. Verizon's mentioned that they started re-farming some of their PCS spectrum from EVDO to LTE, and AT&T has also mentioned that they are pulling some of their AWS spectrum from Leap onto their own sites. Could you just remind us, are these activities that you can generate revenue through amendments? Or what are the parameters around that?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [79]
------------------------------
 It would depend on the specific ask. Typically when the re-farming is done, there are antenna swaps. And sometimes we don't charge anything for that and sometimes we charge more than de minimus amount, depending on what is leaving and what is being swapped out. To the extent remote radio heads are being added where none existed previously, that, of course, is a new weighty piece of equipment that goes on the tower that will generate additional amendment revenue.

------------------------------
 Spencer Kurn,  New Street Research - Analyst   [80]
------------------------------
 Got it. I don't know if you've seen any of this activity yet, but if you have, had you been able to monetize it?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [81]
------------------------------
 We have seen it and we have been able to monetize some of it when it met the characteristics I just described.

------------------------------
 Spencer Kurn,  New Street Research - Analyst   [82]
------------------------------
 Great.

------------------------------
Operator   [83]
------------------------------
 Walter Piecyk with BTIG.

------------------------------
 Walter Piecyk ,  BTIG - Analyst   [84]
------------------------------
 Thank you. I just want to come back to the T and thank you for the historical perspective, that was helpful. They've talked on their conference call about how they are trying to use spectrum more than sites. I would assume that you would see that, if that was actually the case. That they would actually be coming back to the sites and gaining access in order to have this spectrum.

 Can you comment on that, whether you can validate that statement that they've made? And also same kind of question, have they been deploying this WCS spectrum that I think they've been planning to put into service?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [85]
------------------------------
 On the latter, Walter, I don't think we've seen much of that yet. And we track all that, because part of our process, even though we don't charge on a frequency-specific basis, we do track very diligently what frequencies are being used at particular sites.

------------------------------
 Walter Piecyk ,  BTIG - Analyst   [86]
------------------------------
 Any sense -- can I just interject, any sense on what's going on with the delay in that? Because I think they originally said 2014 and then it went into 2015. Any -- from the engineers that you talked to, what the issue is with WCS and why it's not getting deployed?

------------------------------
 Mark DeRussy,  SBA Communications Corporation - VP of Finance   [87]
------------------------------
 I would have no insight about that.

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [88]
------------------------------
 In terms of the -- your other question, we are seeing them, but we're just not seeing them anywhere close to historical levels. And I'm not even talking about the off-the-charts activity that we saw in the four quarters ending Q3 of 2014. I'm even talking five years prior to that. And what I believe is going on is very smart guys there.

 They run a great organization, and they are managing their free cash flow based on a number of initiatives that, if you probably look at what is going on there, it's a pretty big year of cash uses between DirecTV, the AWS spend, Mexico. That's really, simply, all I believe it is. I would be very surprised if AT&T has changed its long-term views on wanting to always be a network leader. I hope they have changed that, and I think that will bode well for future investment.

------------------------------
 Walter Piecyk ,  BTIG - Analyst   [89]
------------------------------
 Sure, and in the ebb and flow comment that you had answered, I think it was to Simon's question about that will really last longer than a year or so. Is that specific to AT&T, or is that a general comment to any operator that starts to pull back on CapEx in a given year?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [90]
------------------------------
 I think I would say that would be more -- you might limit that comment to Verizon and AT&T.

------------------------------
 Walter Piecyk ,  BTIG - Analyst   [91]
------------------------------
 Got it. One last question on Verizon, because you did mention that you kind of tracked their spectrum usage and what's getting out there. PCS, the last commentary that they made was they had put it in a dozen markets, additional markets after they had put some of that AWS spectrum in. Have you seen any additional activity on them being more active in deploying PCS in additional markets in the past, let's call it three months to six -- three to six months?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [92]
------------------------------
 I know they are doing some of that with us. I don't have the specifics, though, Walter, as to which markets and whether it's more or less than what you might have thought.

------------------------------
 Walter Piecyk ,  BTIG - Analyst   [93]
------------------------------
 Great. Thank you for your comments. Sure.

------------------------------
Operator   [94]
------------------------------
 Ladies and gentlemen, that does conclude our Q&A session. Do you have any closing remarks?

------------------------------
 Jeffrey Stoops,  SBA Communications Corporation - President & CEO   [95]
------------------------------
 Yes, I want to thank everybody for being on the call today, and we look forward to our next call where we talk about our third-quarter results and our views around 2016. Thank you.

------------------------------
Operator   [96]
------------------------------
 Thank you, and ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.




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