SBA Communications Corp at Bank Of America Merrill Lynch Media, Communications & Entertainment Conference
Sep 10, 2015 AM EDT
SBAC.OQ - SBA Communications Corp
SBA Communications Corp at Bank Of America Merrill Lynch Media, Communications & Entertainment Conference
Sep 10, 2015 / 04:30PM GMT
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Corporate Participants
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* Brendan Cavanagh
SBA Communications Corp. - CFO
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Conference Call Participants
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* David Barden
BofA Merrill Lynch - Analyst
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Questions and Answers
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David Barden, BofA Merrill Lynch - Analyst [1]
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With that, I'd like to welcome our second Tower presenter of the conference, the Chief Financial Officer of SBA Communications, Brendan Cavanagh, thank you very much for coming.
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Brendan Cavanagh, SBA Communications Corp. - CFO [2]
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Thanks, David.
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David Barden, BofA Merrill Lynch - Analyst [3]
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Brendan, sorry you couldn't come yesterday, and be a part of the festivities, the wine tasting, the golf. You're working too hard.
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Brendan Cavanagh, SBA Communications Corp. - CFO [4]
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It's always work, yeah, no time for any of that stuff.
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David Barden, BofA Merrill Lynch - Analyst [5]
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So, I guess, like the -- first of all, I would say, if we kind of talked about something ripping from the headlines, I think right now with the movement in Brazil, with the downgrade to [junk status] on a sovereign basis, I guess, and also the pretty significant movements in the Real, however you choose to pronounce it, have kind of put a spotlight on companies with exposure to the Brazilian market. Maybe you could kind of, for the sake of setting the table, give us a rundown of, what is your Brazilian exposure, kind of how are you managing it from a currency, from a fundamental standpoint, and what's your attitude now? Is it, if you liked it at BRL300 to the dollar, you've got to love it at 400? And, are there more opportunities coming available, or not?
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Brendan Cavanagh, SBA Communications Corp. - CFO [6]
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Yes, well you know, I mean, it's obviously disappointing for us and unfortunate, because in all areas, really, down in Brazil, we've had great success with the exception of the exchange rates. Our operations are performing well, we're seeing good leasing activity, we're actually ahead of our own internal projections on leasing activity for this year. So, we -- unfortunately, it all gets kind of overshadowed by what's happening there with the currency. The general economy down there is not great, as well. I think everybody can read that for themselves, look at the headlines every day. That has a little bit of an impact, certainly, on carriers and their behavior, but nonetheless, we've still had pretty good success in terms of our leasing growth.
So, when you look at the currency, unfortunately it's undoing all of the good that's otherwise happening down there. When you look back in retrospect, we've never put any operational hedges in place. We've done some hedging around acquisitions, but never done anything to hedge our ongoing cash flows down there, and certainly in retrospect I would have liked to have done that, now, seeing what happened.
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David Barden, BofA Merrill Lynch - Analyst [7]
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Just got to get in that time machine.
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Brendan Cavanagh, SBA Communications Corp. - CFO [8]
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Yes, you know, if only I was that good. Of course, if I was that good at predicting those kind of things, maybe I should do something else. But nonetheless, we've had kind of historical moves in terms of where the currency exchange rates have moved here over these last, really last year, down there. So, to your question of whether you love it now because it's so weak, in terms of the exchange rate, seems like there's more opportunity to maybe take advantage of that. You know, we've looked at that, but it's the old proverb of whether you catch a falling knife or not. And, there's some uncertainty. I think a lot of folks still feel that there unfortunately, probably, is a little bit further weakening to go. When you look at the forward curves, and most of the projections of the economists that follow those things, they all suggest that it will continue to weaken some.
So, that leaves us in a difficult position in terms of looking at whether to do hedging today, for instance. It's very, very expensive. It's so expensive that frankly, it's really prohibitive, and you're betting that it's going to weaken significantly, which you don't feel great about. Because, if it improves, then you lost on the hedge. If it doesn't, you don't necessarily benefit from that unless it really, really moves against you.
So, our view has been and continues to be, that we're in there for the long haul. Operationally, we're doing well. We're not investing any additional US dollars into Brazil today, and haven't really for the last, almost a year now. We're generating plenty of free cash flow in local currency, which we are re-investing in some smaller acquisitions, as well as doing new tower builds for the carriers down there. So, we're able to put that cash to work in the same currency that it's generated in, and it doesn't become a real, tangible issue until the time comes that we're ready to take money out of the country, which will come at some point
But, today, we're not in that position. There's still plenty to do in Brazil, and so, we're in it for the long haul, and we'll keep monitoring it, I think.
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David Barden, BofA Merrill Lynch - Analyst [9]
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So just a few clarifications.
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Brendan Cavanagh, SBA Communications Corp. - CFO [10]
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Sure.
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David Barden, BofA Merrill Lynch - Analyst [11]
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So, number one would be, so there is no cash flow repatriation at this stage? So, all the issues are really optical? They're translational, rather than any kind of --?
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Brendan Cavanagh, SBA Communications Corp. - CFO [12]
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Yes. Well, today, they are. I mean, I don't want to under-sell it, because obviously, it's real. It is what it is today, but that doesn't mean that this is where it will be five years from now, either. And if you look at the history of where the exchange rates have been, we're kind of getting to a peak point here of all-time highs, and they've been volatile at times in the past, as well. So, it's certainly reasonable that it could be better, and I would expect that it will hopefully be better years from now.
So, to your point, that's true. It's purely a translational issue today, it's what we're reporting, which is, as a fact -- certainly, as you put out your numbers, and you miss numbers potentially because of this one issue, when otherwise, everything's going well.
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David Barden, BofA Merrill Lynch - Analyst [13]
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So, are you saying you're missing numbers?
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Brendan Cavanagh, SBA Communications Corp. - CFO [14]
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No, no, no, no. I'm saying, if you look back at our -- what I'm really referring to, is if when you look back throughout the last year, here, we've had to unfortunately adjust our guidance downward from when we originally gave it for 2015. And the only reason that we've adjusted it downward is this issue solely, because without this we would've actually increased it from when we originally gave it last year. So, everything is going well, excluding this particular issue, and that's really what I'm referring to.
Having said all that, the leasing revenue from Brazil as a percentage of our total leasing revenue, is only about 12%, so it's not so material that it's going to be the main driver of what happens with the Company. I think the business is just so predictable, and we've all become so used to being able to nail it, and outperform routinely, that when you introduce an element like this that's somewhat out of our control now, it introduces some level of uncertainty. And we predict it with such a fine-tooth comb, that a couple million dollar swing suddenly stands out, but in the grand scheme of things is really not that material to the total numbers.
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David Barden, BofA Merrill Lynch - Analyst [15]
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So, what is the break-even rate on the Real now, that would make hedging different for your business based on the cost?
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Brendan Cavanagh, SBA Communications Corp. - CFO [16]
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It's really more about how far out you want to take that hedging. If you only want to hedge out a month, you're looking at assuming about a 1% weakening in the currency. That's about -- that's what the curve would tell you. If you want to go out five years, you're looking at a forward curve that suggests 10% or more.
Now, the forward curve is extreme, and has never really been right. It's always been inside of that. But, unfortunately when you're pricing hedging, it's tied to those numbers. And so, it leaves you in kind of a difficult position that if you want to do that, now all of a sudden you're spending significant amounts of money, really to hedge against what is, again, a reporting issue, not an actual economic issue today. So, we haven't seen the wisdom in that at the pricing for it, and I think it will work itself out over time.
But you know, it certainly has made us a little more cautious as we look at assets that are denominated in other currencies. And maybe one other last point on this, and hopefully then we can move on to some of the good stuff that's happening, here, but when we're looking at potential investments in places like Brazil now, we've taken an approach -- because we're financing everything here in the US, we've talked before about how that impacts limits that we've set on how much exposure we would have to foreign denominated currencies. But, beyond that, we're setting hurdle rates now, really tied to spreads over what we would calculate as our local country WACC which we think will more -- it won't be perfect, certainly, but will better-represent what the cost of operating in that country and financing that business would be locally, if in fact we were borrowing there, and were capitalized solely there, and that -- setting those hurdle rates higher, I think, implicitly will cover some of this exposure risk.
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David Barden, BofA Merrill Lynch - Analyst [17]
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I mean, that would be, in the case of Brazil for instance, that would be a pretty monumental change in the hurdle rate, right? If you're using the baseline rate here, 2% plus the SBAC spread, or the Brazilian sovereign rate, like [8%, 9%], plus the spread, that's going to change your --?
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Brendan Cavanagh, SBA Communications Corp. - CFO [18]
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Oh, it's a big, it certainly is a big difference. But, we weren't at the SBA base rate to begin with. So, in terms of the incremental change locally and looking at investments down there, it's not as significant as what you're saying. But, it is a big difference in terms of what's needed here in the US versus there. But again, it's really because of this issue. I mean, it's inherent within there. At the end of the day, you're ending up in the same kind of target place, if the currency moves in conjunction with those assumptions that are based in those rates.
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David Barden, BofA Merrill Lynch - Analyst [19]
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So, it's interesting. Obviously, I think most people are familiar with the towers and their hierarchy of investments in the business, and in land and growth opportunities, be it domestic, international, and then if there's cash left over, then there's opportunities for stock repurchase, etc. So, it sounds like, my gut reaction to what you're saying is, if I think about SBA, there's an increasingly limited, hard-to-mine-out opportunity set in the domestic arena. There's been probably more opportunities internationally, if you're raising the international hurdle rates, it sounds like there's going to be more money left over for stock repurchases at the margin?
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Brendan Cavanagh, SBA Communications Corp. - CFO [20]
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Yes, I mean, we have a tremendous amount of available capacity at our current leverage levels. Every year, we will have well-north of $1 billion available to spend, and when you look at the opportunities, our preference has been and continues to be investing in assets that are EBITDA-additive to the Company, but that's assuming all things are equal. If we see better value in buying back our stock, because we like our own portfolio, frankly, we know what's there, we know that -- what the growth looks like. We know what we're buying it at. There certainly are opportunities to invest in our company, we think, and make nice returns. And if those returns are better than where the external opportunities set their returns, in terms of where the pricing and the terms of the deals come out, we're more than happy to buy back our stock, too.
So, I think practically, what you'll see, though, is a mix of both. We're having a good year in terms of adding assets through smaller deals, domestically, specifically, but internationally as well, and I think we'll continue to find ways to do that and to take deals under the radar, and find good opportunities. But, you know, it is limited. It's not -- there's not as much as there used to be, obviously. A lot of stuff has been rolled up. So, I think stock buybacks will also be a meaningful component of our capital allocation.
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David Barden, BofA Merrill Lynch - Analyst [21]
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And so, I think that this is something that Jeff talked about at the beginning of the year, about mining out the opportunities in the domestic market. Historically, you've looked at 5% to 10% portfolio growth. As you kind of look at 15%, as you look at 16%, is it a function of it's going from kind of 7% to 10%, to 6% to 8%, to 5% to 7%, and might gradually go down? Or, is there just a limit at some future time or have we reached that limit right now?
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Brendan Cavanagh, SBA Communications Corp. - CFO [22]
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Well, when you look back at the last few years, we've far exceeded that in most of those years. I think the last three years, we've exceeded it. Some years way beyond. Of course, those are a function of some larger deals that we've done, both domestically and internationally. We don't have any deals of major size this year, so they're not there to add to that. We will still, we're quite comfortable [view] in our 5% to 10% range for 2015, that we expected. We've got a number of deals that we're working on, and between the new builds that we're doing and the acquisitions we've done to date, we'll hit that target growth level.
As we look out into the future, we'll talk about what our projections are on our next earnings call for next year, and what we're thinking there. But, I'm quite comfortable, there's plenty of opportunities to grow our portfolio 5% to 10% next year. Again, it will be a matter of looking at the terms of those deal opportunities against what our stock buybacks, frankly, look like. And if we found the buybacks to be more attractive, we may choose to do that. It's really more of a guide, it's an internal goal that we set in terms of portfolio growth. I think we're good at it. We're able to find good opportunities, and so, I would expect we'll probably be able to maintain that for a while.
But, I don't think there's any trend, necessarily. I mean, we are getting bigger, so to do 5% every year means you'd have to do more towers every year. So from that standpoint, I guess it's more challenging, but we really don't see that as an issue in terms of opportunity set.
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David Barden, BofA Merrill Lynch - Analyst [23]
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One of the new places that has kind of emerged to deploy capital has been small cell site deployments, fiber assets in support of those small cell site deployments. I think that you had a longstanding relationship with ExteNet. Someone came in and kind of agreed to kind of re-capitalize it, and kind of take it off your hands. I imagine there must have been a window of opportunity where SBA could have been that company that wanted to do that.
Could you walk us through the financial and strategic rationale for why kind of making an incremental investment, or taking over ExteNet or making a bigger play for the small cell site business was the wrong thing to do for SBA?
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Brendan Cavanagh, SBA Communications Corp. - CFO [24]
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Yes. First of all, we think that there are good opportunities within the small cell arena. There are places where you can do things that are somewhat tower-like in terms of having multiple tenancies, and some exclusivity to your assets that will allow you to generate returns that are similar to towers. And so, as long as you're able to focus in and hit those areas, we think it's a good business. I think that it's not as consistent across all small cell areas as it is across towers.
But, just to be clear, we haven't exited, necessarily, the small cell business. We actually have dedicated some resources to looking at ways to capitalize on the existing 30,000 sites that we own and manage for small cell opportunities, as well as looking at potential opportunities and venues and other things. What we really have steered away from, is kind of the urban fiber-based model, because we just simply didn't see it as good as the other options that we have available to us through towers. As we just talked about a second ago, there's plenty of tower opportunities out there, both in the US and internationally. And, I think our ability to generate higher returns through those investments is greater than what our ability to generate those returns would have been through a bigger investment in ExteNet.
And frankly, it was $1 billion dollars, it was going to be a lot of additional overhead. We like those guys, they did a great job, it's a great company, but in terms of its fit for what we see as our bread and butter, and the future opportunity set for us, it wasn't as good as what we think we can do on our own putting those capital dollars elsewhere.
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David Barden, BofA Merrill Lynch - Analyst [25]
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Okay, so I want to kind of continue that conversation a little bit, but to get the levels set in terms of your domestic business, which has been doing really well, in terms of your baseline same-store sales, apples and apples, growth rate excluding the portfolio expansion, what do you think the baseline growth rate is for SBA?
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Brendan Cavanagh, SBA Communications Corp. - CFO [26]
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Well, when you look at this year, it's a little bit of an anomaly because we have a couple of things that have happened, in particular the iDEN terminations domestically, and then of course when you look at the whole company, you've got the exchange rate issues as well. But, I think when you kind of get beyond all that stuff and you look at it on a normalized basis, we would think somewhere in the high single digits domestically is reasonable on a gross basis. So, I would say 7% to 9% on average is probably a reasonable expectation. But, from period to period, that can vary. Obviously, in a certain quarter, against the previous year's comps, you may see ups or downs. But, generally in that range.
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David Barden, BofA Merrill Lynch - Analyst [27]
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So, this is something that's interesting to me, because the market gets -- for a long time, the tower business all seemed to be fairly homogenous, and it was easy to understand, and there was no -- everyone seemed to be singing from the same song sheet. And now, there seems to be some internal discord, with respect to who's growing, how fast, and why, and what's happened to the wallet of spending that goes to tower stocks. And so, over the last couple days, I've heard Verizon operational head say that as he's deploying capital dollars to the network, it's not a matter of more dollars or fewer dollars, it's a matter of where those dollars go, which seems to suggest that if you're densifying a network, that within the finite pie of wireless spending that goes to towers, a growing share might be going to other solutions than macro. And, we've got one of your competitors who has a position in small cells making the argument that they're holding share in macro, and taking share in small cell, and therefore are arguing that net, they're taking share in the market of tower spending.
What would you say about that position, that there's a finite pie and that we're having to wedge a bigger and bigger slice of that pie into the small cell site arena, and therefore there's just simply, is less and less for macro?
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Brendan Cavanagh, SBA Communications Corp. - CFO [28]
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Yes, I mean, we haven't seen that, certainly, to date. The only company that's really spent thus far on small cells at all has been Verizon. I know Sprint is talking about doing something fairly sizeable, but hasn't happened yet. And when you look at what Verizon's done, it's been a relatively small percentage of their overall CapEx spending. Not (technical difficulty) amount of time that's spent talking about it. It's actually a very small percentage of their total spending.
So, we're seeing as much activity from Verizon this year as we've ever really seen in the past, on our towers, and upgrading at macro sites. So, I'm not sure that that's necessarily the case. I think part of where, maybe, there is a shift, is that when you look at where the small cells are focused, they're definitely an urban-focused solution, and often those are not the places where towers are really a solution, have ever been a solution. There may be some displacement, or impact on rooftop type of macro sites, but that's very small for us anyway. It's probably 1% of our revenue comes from rooftop locations. So, we haven't really seen any impact in that regard.
Now, as they move forward, and spend in theory, more money on small cells, I don't expect that it's going to affect the core type of sites that we have, which are mostly suburban markets, highway corridors, those kind of things. And, as has been shown in previous generations of technology rollouts and spectrum rollouts, they ultimately hit all of their sites in terms of the upgrades. So, we feel very comfortable that our locations and our existing lease base with all these carriers, is still what it was before, and we still have the same opportunities to capitalize on that. Plus, we're seeing in-fill in all those markets, too. I mean, those are really the tower markets. That's really where mobility is perhaps more critical than in downtown Manhattan or something. So, we haven't -- we haven't really seen that as a big risk, you know.
As to what happens in terms of making a bigger investment in these types of solutions or not, and frankly, it'll be years before anybody could really say for sure.
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David Barden, BofA Merrill Lynch - Analyst [29]
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So, it sounds like -- so, irrespective of Verizon being the leader in small cell, it's not like they've been kind of a steady-Eddie kind of demand profile for SBA. I feel like I've heard the same kind of message from T-Mobile. T-Mobile is also a relatively strong small cell site deployer. I feel like they've been kind of a steady-Eddie capital spender demand, macro cell site (inaudible - multiple speakers) --
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Brendan Cavanagh, SBA Communications Corp. - CFO [30]
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This year, certainly. See, I mean, this year our two biggest contributors, domestically, to leasing has been Verizon and T-Mobile, certainly. So, this year feels like a very off year to us because the previous few years have been so strong, and so, when you look at it, though, and you dig into the specifics of why that is, and who's contributing, it's really all about AT&T.
AT&T was --
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David Barden, BofA Merrill Lynch - Analyst [31]
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That was my next question, you're ruining it!
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Brendan Cavanagh, SBA Communications Corp. - CFO [32]
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Oh, sorry, go ahead.
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David Barden, BofA Merrill Lynch - Analyst [33]
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(laughter)
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Brendan Cavanagh, SBA Communications Corp. - CFO [34]
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You want to ask it? I mean, AT&T was so dominant in terms of the amount of leasing percentage that they represented for us over the last couple of years, that all of a sudden they pulled back, which I think is no secret to anyone this year. It doesn't mean they're doing nothing, they've certainly been active, and actually it's steadily increased a little bit each quarter as we've moved through the year with them, but it's nowhere near what it was two years ago. And so, if you strip them out and you look at the other carriers, really the activity's as good or better than it was even a year ago.
So, we feel very good about it, because we can see and we know that AT&T is going to come back, and spend at greater levels. Probably not what they were spending at in 2013 and 2014, but certainly greater than what they've spent at here in 2015. So, we feel very good about our opportunity there. But the bottom line is, overall, our leasing activities domestically have been very strong with that one exception this year, and again, notwithstanding all the small cell talk and all that, we haven't really seen that having any negative impact on our business.
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David Barden, BofA Merrill Lynch - Analyst [35]
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So, usually, the track goes that within say a three to six month time frame of kind of the search rings coming in, and kind of executing on deployment, you start to turn this into revenue. You say AT&T's been kind of slowly ramping each quarter. I guess we're expecting there to be a more substantial acceleration, with the WCS spectrum deployment and some incremental densification on the part of their network. Is that something you're starting to see come through the pipeline today, or is it more of just a kind of slow improvement into the future?
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Brendan Cavanagh, SBA Communications Corp. - CFO [36]
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I'd say more the latter, right now, although history says that these things sometimes tend to happen in waves, where all of a sudden you'll see a meaningful pickup because the word will be sent out throughout the organization. You know, here's the next plan, or objective, and you'll start to see that pickup happen very quickly. I don't think we're at that point, yet. So, I wouldn't expect things to materially change for 2015, in terms of its impact on 2015. And as we get into 2016, and turn the calendar, we'll look at that closer over the next month-and-a-half, and when we give guidance for next year I think we'll have a view on how it looks based on where we sit a month from now. But you know, today, I wouldn't say there's any material changes from what we've been seeing over the last couple months.
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David Barden, BofA Merrill Lynch - Analyst [37]
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So, I guess I have to ask a follow-up on that, which would be, if you were setting guidance today for 2016, given that you're saying you're starting to see a slow increase in ramp from AT&T, would it be safe to say that you would probably guide to some incremental rate of contribution from AT&T on a run rate basis for next year?
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Brendan Cavanagh, SBA Communications Corp. - CFO [38]
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I think we'll have to just wait and see.
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David Barden, BofA Merrill Lynch - Analyst [39]
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You can go ahead and just do it now.
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Brendan Cavanagh, SBA Communications Corp. - CFO [40]
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I know, you want me -- I could just give it to you right now, the whole thing, right?
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David Barden, BofA Merrill Lynch - Analyst [41]
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(laughter)
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Brendan Cavanagh, SBA Communications Corp. - CFO [42]
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No, but I think it's better that we wait until -- you know, it's only a month or so from now, and we'll give a more fulsome view on that. But suffice it to say, their activity levels are a little bit higher now than they were for instance in the first quarter.
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David Barden, BofA Merrill Lynch - Analyst [43]
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So, I mean, another kind of moving part in this analysis, it has been Sprint. They've been fairly quiet, it's my understanding, for the last year or two, and yet I think at the second quarter result in particular, Masa and Marcelo articulated a plan, or at least the outlines of a plan, that they had, which would be thousands of macro cell sites, tens of thousands of small cell sites. On the [soft bank] call, Masa outlined a timetable where the plan is finished this year, it's implemented next year, and by 2017 the network will be fixed. And it kind of sounds like that's a lot to get done on that timetable, so I'm assuming you're amazingly busy and engaged with Sprint at this moment in time, hustling around to get all these cell sites updated and what not. So, how amazing is the incremental contribution from Sprint about to be, based on their accelerated timetable towards network upgrade?
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Brendan Cavanagh, SBA Communications Corp. - CFO [44]
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Sounds like kind of a loaded question, David.
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David Barden, BofA Merrill Lynch - Analyst [45]
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No, no, no.
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Brendan Cavanagh, SBA Communications Corp. - CFO [46]
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We have had some conversations with Sprint. We will actually be having some additional conversations with them next week around their network plans, but as of today, there's not been a lot of actual activity. There's been conversations, and that's really been the extent of it thus far. But, those conversations are continuing, and I'm sure that they want to be the ones to talk about more of the specifics of what they're doing with their network, so, we'll let them do that. But, as of right now, it's not -- there's no meaningful impact to SBA's numbers for this year, certainly, and we'll see how these conversations go over the next few months, and how that impacts our thoughts on guidance next month.
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David Barden, BofA Merrill Lynch - Analyst [47]
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I mean, it's obvious that Sprint has this as a priority. I mean, strategically they want to do it, it's inevitable that it'll get done, but I guess let's just say for the sake of argument, based on what you saw from the last time we did this with Sprint, which was the Network Vision plan. You know, once you -- when you were at this stage of conversation with Network Vision, how long did it take before the Network Vision became reality and it was actually affecting -- you know, there were puts and takes with the iDEN stuff and takedown, but when did things actually happen? Was it a year?
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Brendan Cavanagh, SBA Communications Corp. - CFO [48]
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I mean, I don't -- it's hard to say that, because I think it was totally different. I mean, you mention they had the iDEN issue, which was a part of those conversations. They were talking about partnering with LightSquared at the time that we were initially having those conversations, so there were a variety of things that were going on then that I think impacted how that rollout took place. But you know, it still happened efficiently over time, and was completed over a two-year or less period. I think in this case I would assume, just this is based on purely what they've said publicly, I think that they're going to move quickly once the plans and agreements are set. How long it takes to get those agreements set with each of the counterparties they need to deal with, including the tower companies, I guess that remains to be seen. But, I would assume that they're ready to move quickly, based on their commentary. Other than that, it's hard to really point to a specific time frame.
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David Barden, BofA Merrill Lynch - Analyst [49]
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Are there, as you think about their -- they've been pretty creative, to this point and time certainly, in the financing, innovating on leasing. Do you sit down and say to yourself, boy, I wonder why no one's ever coming to me with idea XYZ? That would be a creative and amazing solution for that company? Do you have -- can you think out of the box about ways that Sprint could get things done faster than historically normal?
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Brendan Cavanagh, SBA Communications Corp. - CFO [50]
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I can't imagine that I can offer something that they haven't considered. This is what they do every day. In our case, they know where we are, what we have, and what we provide to them, and they've known for years. We've been dealing with them as one of our largest customers, really, from the beginning. So, we have a long-standing relationship there. We've talked about many different possible ways of doing things in the past, some of which have made sense for both parties and we've done, and other things that maybe haven't. But, we're always discussing ways to try and help them as best that we can, but still have it be good for our business and take advantage of the quality assets that we have in terms of monetizing the value in those assets.
So, I think this will be pretty much the same, and I expect we'll have very good conversations about it, and be a good partner to them going forward.
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David Barden, BofA Merrill Lynch - Analyst [51]
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So my last question on this, and it's kind of a little less Sprint-specific, but it feels like at the margin, the most creative incremental architectural evolution is this cloud-RAN structure, where it's a little bit like a small cell with a RAN at the center, and fiber optics to kind of nodes, and then wireless backhauls to those nodes from endpoints. Is there a way, if that were to become the infrastructure mainstream, is there a way for SBA to monetize that cloud-RAN architecture?
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Brendan Cavanagh, SBA Communications Corp. - CFO [52]
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Well, I don't know if we'd be monetizing that architecture in and of itself. Often times, the question comes to me is, as though it's some risk to our business, as opposed to an opportunity, which it's not. Our review of all of it, we expect that'll still require the same -- still require radios on the towers, and so forth. And so, we would expect we'll continue to share in that amendment opportunity that exists through it. I don't know that there's necessarily an opportunity to be a provider, other than having potentially locations that are well-suited as central hubs for that technology to be rolled out, because of the existing infrastructure in fiber and power that exists at some of these locations. But, we haven't seen a lot of that, as of yet.
So again, we're basically landlords. We have real estate properties that we offer, that provide something unique in most of the markets that they're located in, and most of these technologies have required the use of those properties one way or another. And we would expect to continue to offer those solutions up, however they best fit into the network architecture that's next being rolled out.
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David Barden, BofA Merrill Lynch - Analyst [53]
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So, I wanted to ask another question about just on terms of kind of capital allocation. We're talking about small cells, talked about kind of international, talked about the domestic portfolio. Just as we think about interest rates and their movement up, and the potential for refinancing and their impact on AFFO, how are you looking at the balance sheet and kind of interest rate risk, and refinancing opportunities, and how that impacts AFFO growth?
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Brendan Cavanagh, SBA Communications Corp. - CFO [54]
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Well, we still would have a lot of cushion in terms of potential interest rate moves up before it would meaningfully impact the way that we think about where we lever the business in our capital structure, and the strategy that we've employed now for the last seven, eight years, which is to lever the business at 7 turns to 7.5 turns, and to deploy all of that available capital into either new assets, or now even potentially stock buybacks as well. And so, I would expect we'll continue to do that, our average costs of debt financing today is about as low as it's been in our history on average, when you look at the weighted average cost of our debt.
So, it would take a number of years for interest rate moves to really have any meaningful impact. Most of our debt is fixed-rate. The maturities are laddered out over many years, and so the impact of small move in interest rates today really will be almost inconsequential to anything we're doing. And, it also is relevant how that impacts the rest of what's happening, the investments that we're making, how are those impacted? Does pricing stay the same for smaller mom-and-pop M&A deals, as it is today, if you see interest rates coming up? It may not. And so, they can still work in concert, where the spreads that we're making over the cost of our capital can be as good and not necessarily change the way that we think about where we set our leverage.
But, I would say, until you see a couple hundred basis point move, at least on a 10-year treasury, it's not really going to have much of a meaningful impact on our strategy.
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David Barden, BofA Merrill Lynch - Analyst [55]
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Remind us what the biggest tower is over the next five years?
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Brendan Cavanagh, SBA Communications Corp. - CFO [56]
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Well, you know, we're pretty well spread out, I guess. We have somewhere probably between [$500 million] and [$1 billion] every year starting in 2017, for three or four years. I'd have to kind of look at my schedule, but basically our plan is that every financing that we do, we try to slide it in where we have open slots. And so, if you look at our maturity schedule, there's basically chunks in each year. There's nothing until 2017 right now, so we have some space there, and then pretty much each year there's some refinancing obligation, but very manageable.
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David Barden, BofA Merrill Lynch - Analyst [57]
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And you know, just kind of lastly, within the confines of the tower industry CFOs, you're the only one that isn't pursuing investment grade or seems to be very unapologetically committed to using that comfort level at 7 times, 7.5 times, for the benefit of maximizing growth or maximizing shareholder returns. Is there anything about the interest rate environment or the volatility globally that makes you feel like maybe if you had an opportunity to be on the lower end, or shave that down a little bit, that you'd be willing to make a little bit more conservative statement?
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Brendan Cavanagh, SBA Communications Corp. - CFO [58]
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Not today. We're quite comfortable. When you look at this business, and the core of what it is and how predictable and certain it is, and the fact that your EBITDA just grows every period -- I mean, even if you're having an off year, some would consider this an off year. We're still seeing very nice growth in our operating results, and so it's very well-suited to carry slightly higher leverage. We de-lever organically, a turn to a turn-and-a-half every year, and so long as we see good investment opportunities we believe the best way to maximize shareholder returns is through that. And, if we ever needed to, we can de-lever pretty quickly, is the bottom line. So, I wouldn't see anything that would change that. Being investment grade wouldn't have a meaningful impact on our cost of debt. In fact, if you look at our weighted average cost of debt versus our peers, ours is as good or better in some cases as theirs, and that's because we're very comfortable using secured financing to be an investment-grade company. Rating agencies aren't thrilled with secured debt. They like unsecured debt, which costs more. And so, we can actually manage our cost of debt at similar levels to our peers, and not be investment-grade. And so, if you can do that, for us it's really all about the growth numbers and the returns.
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David Barden, BofA Merrill Lynch - Analyst [59]
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Great, that's a good place to leave it. We ran out of time.
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Brendan Cavanagh, SBA Communications Corp. - CFO [60]
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Great.
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David Barden, BofA Merrill Lynch - Analyst [61]
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Thank you so much, Brendan. Appreciate it.
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Brendan Cavanagh, SBA Communications Corp. - CFO [62]
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Hey, thank you. Appreciate it, thank you.
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David Barden, BofA Merrill Lynch - Analyst [63]
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Cheers. Thanks for coming out. Thank you, everybody.
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