SBA Communications Corp at Goldman Sachs Communacopia Conference

Sep 17, 2015 AM EDT
SBAC.OQ - SBA Communications Corp
SBA Communications Corp at Goldman Sachs Communacopia Conference
Sep 17, 2015 / 05:15PM GMT 

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

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Conference Call Participants
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   *  Brett Feldman
      Goldman Sachs - Analyst

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Presentation
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 Brett Feldman,  Goldman Sachs - Analyst   [1]
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 All right, if everybody could please find their seat, we're going to go ahead and begin our session here with Jeff Stoops, the President and CEO of SBA Communications. Jeff, welcome back to Communacopia.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [2]
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 Thanks, Brett.

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 Brett Feldman,  Goldman Sachs - Analyst   [3]
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 So if we think about what you've done over, say, the last three to four years, you've executed several large transactions, both in the US and in Latin America primarily. And you've essentially doubled the size of the Company's (inaudible) portfolio. I think you've more than doubled the size of the portfolio. Before we dig into the details, can you just talk about the key trends that you see unfolding in the US market and in the markets that you've made investments that have encouraged you to allocate your capital that way?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [4]
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 I will, but let me first thank you for slotting me now and not at 2:00 PM with the Fed decision coming out. Because I feel bad for the poor presenter who follows me. Just a little aside, I've been doing this a long time. Eight years ago, I was here back when the Lehman collapse was going on and my presentation was from 3 PM to 4 PM. That was the hour that the market fell 500 basis points. There wasn't a single person paying attention to a word that I had to say. So hopefully, I get out there ahead of the Fed.

 We look for things that we learned through the US, vibrant demographic markets that will support future wireless growth. So you want good age demographics. You want good economics. You want some zoning protection, some land use rationality. You definitely, in our business, need to be in a jurisdiction where they observe the rule of law. And you want multiple carriers that are reasonably competitive because you really need to -- our business is based on a multi-tenancy underwriting and capital allocation. So you need to have that.

 And when all those things come together, those are markets that we're going to be interested in. And what we've found over time going internationally is that the operational side of our business is pretty consistent around the world. Towers are not operated differently in Brazil than they are in the United States. The real issues for us when we go to international markets are more tax, regulatory, certainly currency issues like that. But operationally, we found that the business transports pretty well.

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 Brett Feldman,  Goldman Sachs - Analyst   [5]
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 And what about in terms of the underlying trends in some of the international markets from a wireless standpoint? What did you find attractive in Brazil, for example?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [6]
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 Well, Brazil, huge demographic attraction. The average age in Brazil is well below the United States. Population is growing faster. The existing network coverage is sparse compared to the United States. Brazil currently averages about 4,000 people per cell site compared to about 1,000 in the United States. It was an environment and a country where we thought wireless was going to be well adapted and data use would continue to grow, absolutely. And we found all that in Brazil. We continue to believe that over time, the Brazilian market will prove to be a very, very good one. Obviously, currently we're fighting through some currency issues. The economy down there is not as strong as I think anyone would like it to be. But over time, the things that attracted us to Brazil will, we believe, continue to be a source of growth and value creation long-term.

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 Brett Feldman,  Goldman Sachs - Analyst   [7]
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 All right, we'll come back to Brazil in a little bit. You mentioned you've been doing these for a long time. I feel like I've been listening to you or interviewing you at these things for a long time. And --

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [8]
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 You started when you were like 12, I think.

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 Brett Feldman,  Goldman Sachs - Analyst   [9]
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 I was 11, but yes. From time to time, we always get a little nervous. You say, oh is there a threat to the outlooks of the industry and I feel that you've always had a pretty good answer. You said that ultimately, the biggest risk is the health of your customers.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [10]
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 Correct.

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 Brett Feldman,  Goldman Sachs - Analyst   [11]
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 So investors right now look at the wireless sector and they see it getting more competitive. And so they worry about the wireless sector. What's your view on that health of your customers or really the wireless industry in the US that you serve?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [12]
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 I think the four primary carriers in the US all for the most part, I think with perhaps one exception, are all very healthy and all pumping money back into their networks. We clearly would like to see as strong a customer as possible because we have seen the connection between increased cash flow growth and network investment.

 So the current price wars that are going on I think are having some impact around the edges. But at the same time, and you've probably all seen the recent Verizon ads where they talk about the tower, and the generators, and the -- it's still all about network, all about network quality, and the amount of money that's being spent on the networks is great. And we're obviously a beneficiary for that. But I do think they're healthy. I think they'll continue to invest in a positive way that will be good for our industry. But clearly, the healthier they can be financially, the better it will be for us because the operational ties are so direct between use and infrastructure need.

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 Brett Feldman,  Goldman Sachs - Analyst   [13]
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 For those of you that haven't seen it, Verizon is literally featuring towers in their advertisements. So you can go watch those ads on YouTube, which is what we do for fun. All right, so let's talk about what's driving the leasing market in the US right now. You said in your second quarter report that leasing activity increased materially from first quarter levels. What's driving that and is this continuing as we go into the back half of the year?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [14]
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 That was a relative comment and it was all about the level of AT&T spend, which had dropped to a level in the first quarter that frankly, I had never seen. It has since rebounded. It continues to grow. We're having a lot of dialogue with AT&T and of course, all the other customers as well, and activity levels have picked up. Are they going to be back to where they were a year ago? No, that was a special time when the first half of 2014 was just off the charts in terms of customer activity. But the genesis of that comment was really about the relative spend, AT&T Q2 versus what we saw in Q1. Verizon continues to be extremely steady. T-Mobile continues to be very active. They were our largest incremental source of US revenue in Q2, very busy. Perhaps even busier than we expected out of them when we put forth our initial guidance. And Sprint, we haven't seen a whole lot. We're optimistic that their new next generation network plans crystalize and we really get some good traction going, but so far not yet.

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 Brett Feldman,  Goldman Sachs - Analyst   [15]
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 Do you have a feel with regard to Sprint how they think about that next generation plan? They talk about densifying. They talk about small cells. Do you have any visibility as to how much macro factors into that at this point in time?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [16]
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 There's going to be a fair amount of macros. I don't have exact numbers but I was actually in Kansas City on Monday meeting with their senior leadership team, and they're committed to three things. They're committed to adding 2.5G to their entire network, and that's going to be an opportunity for us because of the number of sites that they're -- to their existing sites. So wherever you have an existing Sprint site that doesn't have 2.5G now, you're going to have an opportunity.

 They're going to do a large, small cell rollout and they're also going to do a large number of macro sites. They didn't really shade those three buckets in terms of numbers, but they're working on those plans and I believe we're close to actually getting out and doing some serious work.

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 Brett Feldman,  Goldman Sachs - Analyst   [17]
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 And as you noted, they really haven't been giving you much new business recently. So while you may not know when that's going to happen, so long as they do decide to move forward with that plan, that would almost presumably be an uplift versus what you've (inaudible).

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [18]
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 Has to be on a year-over-year basis, yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [19]
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 And then with regards to AT&T, we know that they were above run rate last year. It feels like they're below run rate this year. How much visibility do you really have into when they may get back to normal levels, if that's even the right way of thinking about it?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [20]
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 Well, I think they're returning to those levels now. They're not there yet and normal levels, we could probably quibble over what that means. But it's something between what they did in Q1 and what they did in the year earlier period. And we have all of our historical data as to what AT&T spent with us, and I do think it's somewhere in between.

 They're busy now. We're having conversations about future levels of busyness. We're talking about AWS-3. I continue to think we continue to climb from the bottom that we saw in the first quarter.

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 Brett Feldman,  Goldman Sachs - Analyst   [21]
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 Got it. So if we think about your biggest customers, you sort of talked through where you are with T, where you are with Sprint. Verizon is a steady customer in the industry. T-Mobile has really emerged. Do you feel like what T-Mobile is doing now is a reasonable run rate if their business continues to grow as it has? Or could it be they're having their AT&T moment where there's a reason why for a short period of time they're at an excessive level of investment?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [22]
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 I don't think they're at a peak or a disproportionate peak, so to speak. I think between the 700 megahertz that's yet to be deployed. They have some additional coverage desires that I don't think Verizon and AT&T had already satisfied. And they have the AWS-3 spectrum that hasn't -- none of that's been deployed yet. So I feel they'll be a continued good source of business for us for years to come.

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 Brett Feldman,  Goldman Sachs - Analyst   [23]
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 So as you just sort of sit here and think about the visible timeline, it feels like the current level of demand is a pretty safe level of demand and there are reasons to believe it could get better, and the timing of that is really what we are hoping to get some more color on.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [24]
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 Yes. And I'll do you one better. I'm not going to get too far into specific 2016 guidance, but five weeks now or whatever the right date is, we'll be putting that out. And I know that we'll be putting forth a higher level of US leasing revenue activity per tower than what we will have experienced in reality in 2015. And the primary difference for that being our visibility and actual levels of activity with AT&T as we move into the back half of the year and close out 2015.

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 Brett Feldman,  Goldman Sachs - Analyst   [25]
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 Just define that metric leasing activity. What specifically are you referring to?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [26]
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 Revenue added power tower.

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 Brett Feldman,  Goldman Sachs - Analyst   [27]
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 Will be greater.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [28]
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 Will be greater. We'll have to see what that means on a percentage basis, but the absolute levels of activity we will be guiding to higher in 2016 based on our current work in the field conversations and the fact that a large portion of where we end up in 2015 was driven by AT&T's activity in Q4 of last year and Q1 of this year, both of which were at what we believe are trough levels.

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 Brett Feldman,  Goldman Sachs - Analyst   [29]
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 Got it. You mentioned how you haven't seen the AWS-3 build-out yet. We really have two chunks of spectrum that are going to require development over the next five years or so, the AWS-3 licenses that were just optioned and then the 600 megahertz licenses that the FCC intends to option early next year. How do you think about what that means for the demand for your sites over that time period where they really have to make these builds?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [30]
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 I think it adds more years of growth for us. First, of course, will be the AWS-3 because that should begin to be cleared and ready for development, I don't know what quarter of next year, but say middle of the year. And based on the comments from Wheeler at CTIA, the 600-megahertz auction looks full steam ahead. That spectrum, will, though, take a couple years to clear. So we're not thinking internally that there's much action coming out of that before 2018. But between that, you'll -- in that period of time, something we would expect to be done with the Dish Spectrum, First Net, we're actually pretty excited about the continued growth opportunities organically in the US.

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 Brett Feldman,  Goldman Sachs - Analyst   [31]
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 Because if you think about the low band spectrum, as much as we've been talking about site densification as a direction for the industry, that spectrum really is not suited for densification. It's suited for coverage. It's suited for tall towers and so when you look at the carriers who you know are light on low band spectrum and you see where they are on your towers, or where they're just not on your towers, does that give you a reasonable degree of conviction that that auction is likely to yield nice, full, macro deployments coming on over whatever time period the clearing occurs?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [32]
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 Yes, I think our portfolio is particularly well suited to capture the new cell sites that are going to come out of the 600 megahertz.

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 Brett Feldman,  Goldman Sachs - Analyst   [33]
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 Okay. So let's talk about the opposite, which I just refer to as densification in really small cells. And unlike your peers, you've really decided not to make a big investment in the small cell space. You did have an investment. You were a minority investor in ExteNet and you ultimately decided that it made sense to exit the investment when you had the opportunity. Can you just walk us through sort of what you learned and how you came to the conclusion that that was the right capital allocation to (inaudible)?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [34]
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 Well, it started with a deep understanding of who we are, and who we are is a company that is focused on long-term maximizing capital appreciation, not dividends, not other types of offerings to shareholders, but long-term capital appreciation. When we looked at the ExteNet opportunity, obviously we were there for five years. We had an inside seat at the table. We had the opportunity to buy ExteNet, but we chose not to because at $1 billion, we would have substantially increased our SG&A. It would have been dilutive to our AFFO per share growth for several years. And that size deal and that size SG&A, for us, would have required probably another couple billion dollars devoted to that space in what would have had to be, to invest that kind of money, a fiber-based, urban small cell solution. And we just, frankly, don't want to be a fiber company. We believe that our proposition for our shareholders long-term capital appreciation was better served, and it's not -- this is not really binary that it's a good business or a bad business, but for us, our decision was that we had better uses of capital to maximize what we believe our long-term shareholder value will be doing other things.

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 Brett Feldman,  Goldman Sachs - Analyst   [35]
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 And I assume that the other things broadly would be making more acquisitions in towers in markets you find attractive, or returning the capital through buy backs, meaning both of those in your mind would be a better use of capital than making that scale --

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [36]
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 Yes, and that's exactly how we behaved this year.

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 Brett Feldman,  Goldman Sachs - Analyst   [37]
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 Okay. So then let's talk a little bit about your international business. So 17% of your revenues come from outside the US. Not all of that is in foreign currency, but it comes --

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [38]
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 12% Brazil.

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 Brett Feldman,  Goldman Sachs - Analyst   [39]
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 Exactly. So let's talk about Brazil because that's really where you've concentrated your international investments and you've made some decent sized portfolio acquisitions over the last few years. So let's just get an update here. How are those portfolios performing since your acquired them?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [40]
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 Put currency aside for a second, because we'll talk about that, they're performing ahead of plan. We've actually reduced the multiple on those aggregate acquisitions as a function of price to tower cash flow below 12 times. Very pleased with the growth. As you might have recalled from our second quarter results, Brazil was our fastest growing market. Might have been also tied for the lead in Q1. We expect Brazil to continue to lead in organic growth for the rest of this year and into next year.

 So operationally, it's all doing very, very well. The issue has been the currency and that, even as fast as we're growing, the currency has been devaluating quicker. So our current approach to Brazil is we like the market. Long-term, we are confident it's going to be a very good source of value creation for our shareholders. But as a company that is levered at 7.5 times, which we believe is also a key driver to our value premise, and accessing all of our debt capital in the US markets, in US dollar denominations, that puts a certain box and a certain limit around how much additional money we want to invest in Brazil, where we're at a time where I'm not sure how much more the currency is going to devalue.

 So our current approach in Brazil is we -- no additional material US-dollar denominated investment going into Brazil. But instead, we want to take every dollar, or every reais that we generate down there, we're actually big enough to be generating, next year could be BRL350 million of investable capital back into the business through new builds and acquisitions. And we're actually dollar cost averaging down quite nicely our assets in Brazil. Given where the reais is, we're basically building towers down there at 40% of the cost of what a new build would be in the United States in US dollar equivalent.

 So that's our strategy with Brazil. Our appetite for material additional US dollar denominated investment or US dollar sourced investment going into Brazil will vary based on our view of the stability of the currency and the economic conditions down there. So for right now, we're reinvesting everything we earn, but not necessarily looking to invest in Brazil material amounts of new money that would be coming from the United States.

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 Brett Feldman,  Goldman Sachs - Analyst   [41]
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 All right. So then you do generate material amounts of new money in the United States.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [42]
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 Yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [43]
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 So if you're not going to be deploying that in Brazil, which has consumed a lot of it over the last few years, how do you see yourself deploying it? Do you see opportunities in new international markets? Or should we look at the buyback that you announced as a good flag of where you think your dollars are going to go?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [44]
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 I think you'll see a combination of continued US growth. I think you'll be surprised when the year is said and done, we will have grown the portfolio at least 5%. Most of that will be in the United States. We continue to see good opportunities for additional growth in the United States. Actually, there have been a number of opportunities that we passed on for price reasons, and chose instead to repurchase our stock. But there will also -- the United States market is going to be a good source of additional investment for us for years to come, foreseeable future.

 There are a number of good international markets that we're evaluating. I do believe by year-end, we'll have one more country at least to announce. So we'll be looking there. And then to the extent there's money left over, we'll be looking at opportunistic stock repurchases. Our baseline starts with where we want to capitalize the Company. And we believe that in the current environment of interest rates and organic growth, even if the Fed raises 25 basis points that 7 to 7.5 times is the right place to be. That's where the value creation sweet spot is. That's going to generate between the amount of additional leverage that you put on EBITDA growth, plus what we generate in cash. I mean we're going to have $1.5 billion of investable capital for every year of growing going forward.

 So we continue to believe that the best use of that is good portfolio growth, but it's not any portfolio growth. It's good portfolio growth where the targets are attainable, the countries are right, you've considered the currency issues and everything else. And if we can invest outside the US and inside the US, and use all that and meet our targets, that's what we'll do. I suspect we may not be able to use all that capital and we'll continue as we have so far this year found opportunistic times where we see our stock is materially undervalued, and we'll buy that.

 But the way people should think about SBA is we're committed to our capital structure, currently, based -- unless interest rates change really dramatically or organic growth drops off a cliff, neither of which I expect. And then that money is going to be used either for portfolio growth or for stock repurchases.

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 Brett Feldman,  Goldman Sachs - Analyst   [45]
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 All right. Then since you brought up the Fed and interest rates, and you said if rates go up materially. How much would you have to see a change in the rate environment in order to revisit what you thought the appropriate leverage levels were for the business?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [46]
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 The 10-year would have to probably be around 5%. I mean if you look at the 2004 to 2007 period, we grew pretty well and I believe the 5-year or the 10-year was, I don't know if it was at 5% but I think it was certainly closer to 5% than it was to where we are today. So we have prospered and the carriers have continued to invest in periods of much higher interest rates. And I hold that 2004 to 2007 -- well, even though rates came down dramatically because of the cash in 2008, carriers continued to spend money.

 So as long as you have that base organic level of activity, we could continue to create value for our shareholders, still staying a debt financed company at materially higher interest rates. Obviously, we make the most money for our shareholders by rates staying as low as possible. But the positive delta of value creation still exists where it would continue to make sense to stay levered, stay invested at much higher interest rates before that math says, okay, it's time to take your leverage down.

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 Brett Feldman,  Goldman Sachs - Analyst   [47]
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 And just as a frame of reference because we're not near 5% anyhow, but how substantially do you augment your leverage target if you're a little above 5%? Several turns or you sort of -- it's a sliding scale?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [48]
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 Yes, it's a sliding scale. It's not a step function.

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 Brett Feldman,  Goldman Sachs - Analyst   [49]
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 So the risk that you say, oh my God, we just have to massively delever, that's a fairly sizable macro event outside of the scope.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [50]
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 It would be well outside of anything that we see. Go back to the worst times that any of us can remember, the 2008 period of time where everybody thought the world was going to end and nobody else could ever borrow another dollar. We went from 8.5 times levered going into that, to coming out at -- we originally delevered down, I believe, to 6, 6.5 times. And then as things stabilized, took leverage to 7.5. And our ability to manipulate certainly a turn in a year is very, very easy. I mean basically you would -- you'd slow down your discretionary spending and you'd delever.

 So we feel we're a long, long way off in the current environment, both interest rates and activity levels, before we think it would be prudent or necessary to revisit our leverage targets.

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 Brett Feldman,  Goldman Sachs - Analyst   [51]
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 It certainly sounds like share repurchases are probably higher up the menu right now based on the way you described your options. But you also did mention that you think you're going to be in a new country reasonably soon. The last big country you went into, Brazil, was a huge use of capital. I know you're not quite ready to reveal what the next one is, but would it be another situation where you could pivot away from capital returns and have to put a lot in to make that market scale up?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [52]
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 It could. This particular one I'm thinking about won't do that, but that won't be the end of our review in looking around the world. There could be other markets that we decide to invest that much capital in. Not sure that there's the ability to name a whole lot right now, but potentially. But I want everyone to understand that if that decision ever gets made it's because we've thoroughly vetted and decided that that particular use of capital was going to be the thing that maximized long-term value for our shareholders.

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 Brett Feldman,  Goldman Sachs - Analyst   [53]
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 Okay. So let's just talk a little bit more --

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [54]
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 So that's a long winded way of saying okay, do you really think you're going to use all your money going forward on portfolio growth, all your investable desired capital? No, I don't think that. I think stock repurchases are going to play a continued role in our capital allocation. I don't think anybody should think we're going to be formula driven. I think we're going to continue to be opportunistic around price. We have the ability to do that. And then we'll see. We'll see where the capital gets allocated.

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 Brett Feldman,  Goldman Sachs - Analyst   [55]
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 So then let's just, as an extension of that, we've asked for years at what point does paying a dividend make sense for the business. And it seems that you've wanted to preserve the flexibility to put all your capital back into the business if the opportunity made sense. And so you haven't made that call whereas your peers have. Where are you in the thought process around that right now?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [56]
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 We continue to believe that over time we can compound growth in AFFO per share at 15% to 20%. And I can't get past the mathematical wisdom of keeping the money in the business to do that versus paying it out as a dividend.

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 Brett Feldman,  Goldman Sachs - Analyst   [57]
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 So if we think about potential risk factors to achieving that goal, you noted some of your recent investments have been outside the country and we've had some currency pressures. And so that's changed the ability to, in the near term, live up to some of the growth objectives you maybe would have set earlier in the year. So one of the questions would be, are there any hedges that emerge in your currency exposure? I'm interested in your CPI escalators, for example. We've had a lot of currency headwinds this year. We've also seen some inflation. Does that start to moderate a bit as we catch up on the escalators?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [58]
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 Well, it certainly helps. Our escalators in Brazil , I think there's a different date for each of our four major deals down there, and I think they're all in the fourth quarter or first quarter. But if we were pegging that today, and setting that escalator, which gets set once a year, today we're looking at about 9.4%, 9.5%.

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 Brett Feldman,  Goldman Sachs - Analyst   [59]
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 That's what the CPI escalator would be. So as we go into the fourth and first quarters, you may actually have meaningful lease portfolios step up.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [60]
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 Oh, we will.

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 Brett Feldman,  Goldman Sachs - Analyst   [61]
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 Where are they now on an escalator basis? Is that how much they would step up by or (inaudible)?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [62]
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 I think the last time we escalated, the number was in the sixes.

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 Brett Feldman,  Goldman Sachs - Analyst   [63]
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 Okay. So a fairly meaningful increase in the escalator.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [64]
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 Yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [65]
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 All right. And so the other question would be, and we had this discussion with Jim Taiclet earlier, which is as you risk adjust the prices you're willing to pay for assets outside the US, a component of that are the assumptions around currency. And so how do you think about the risk to currency devaluation as an input to your model when you're looking to buy portfolios? Well, I'll start with that.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [66]
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 Well, we've changed all those and we've continued to tighten those as we've watched the emerging market currency devaluation over the last year. Now, we're currently targeting -- before, we used to target around 500 basis points over our US desired returns. That's now more like 1,000. And even having said that, we're adding levels of currency depreciation and solving everything back into US dollars in terms of justifying and setting our bogies.

 So risk return requirements in certain markets where warranted are going up.

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 Brett Feldman,  Goldman Sachs - Analyst   [67]
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 And presumably that's one of the reasons why you aren't putting as much of your dollar based cash flows into the markets right now.

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [68]
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 Yes. We haven't found exactly the right opportunity relative to where we saw opportunity in stock repurchases. I want to make sure that everyone understands that this is a dynamic process that we look at daily and that could change tomorrow if the right US or international opportunity came up.

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 Brett Feldman,  Goldman Sachs - Analyst   [69]
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 You talked about 25% to 35% of your revenues being outside the US, or maybe it's in foreign currency. I'm not sure the exact --

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [70]
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 Non-US dollars.

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 Brett Feldman,  Goldman Sachs - Analyst   [71]
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 Non-US dollars. That would be essentially doubling if not slightly more than a doubling of your foreign currency exposure today. Outside -- I mean do you think it's realistic that you could get there? Or is it just saying that's where you wouldn't want to go over?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [72]
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 I think over time, it's realistic. I do think that it would be unlikely now given what we've seen the dynamic in Brazil that we would want all of that exposure to be in a single non-US currency or a single country. But sure, I mean we could get there over time. I do think while we will continue to grow well in the US, I do think we're going to fully invest our ability and we stay levered the way we are, it's going to have to come in international markets.

 But we're going to be selective and we're going to weigh those against US investments and stock repurchases. One thing that you know us over the years, this isn't about being the largest tower company. This is about maximizing the return for our shareholders. We'd much rather be known as the company that produced the most returns for shareholders rather than being the largest.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [73]
------------------------------
 So I'll ask you about a specific international market. Over the years, you've been unsure of whether Mexico made a lot of sense. Brazil checked a lot of boxes. Mexico didn't quite do it, but we look at what AT&T is doing in that market, consolidating some of the weaker operators, committing $3 billion. American Mobil is one upping them with $6 billion, but of course spinning out a new competitor.

 So if you think about all those dynamics, does that on net make this a more interesting potential market for SBA to operate in?

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 Jeff Stoops,  SBA Communications Corp - President and CEO   [74]
------------------------------
 You're first half of your explanation was great. AT&T going into the market, boy, that certainly improved the attractiveness. The tele-site spinout, though, is very concerning to me just given the -- as a competitor, the ability to compete against those assets. And we've already seen news reports. I think they're rumors. I don't know that they're hard and fast yet, but AT&T and Telefonica looking to cut massive deals with telesites, to rapidly build things out. So I just think that is a very tough proposition to go into Mexico and compete against (inaudible).

==============================
Questions and Answers
------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [1]
------------------------------
 We do allow questions and we actually have one back there. If you could just wait one moment for the microphone, that would be helpful. They're going to bring it over to you.

------------------------------
Unidentified Audience Member   [2]
------------------------------
 Hi, maybe I'll even try two. Did I hear when you were talking about your 2016 projection -- guidance or about to change guidance, did you include something for Dish in there, a Dish build out? And could you talk about that a little bit?

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [3]
------------------------------
 Yes, I'm not going to get too far into what's included and what's not other than to just stick with my general statement, which I think is the important one that it's going to be more in our -- for 2016 outlook than our 2000 actuals will have been. Speaking to Dish, we haven't seen a lot of activity from Dish. They really have not approached the tower industry to explore their own builds. I don't think that they're really thinking about that.

 They have one deadline that is coming up soon, but if they miss it, it's not quite that punitive. It basically just accelerates their second deadline, which I think is what they're really focused on. So we'll see and give you some better color on that, but I -- we didn't include anything in Dish this year and I don't know that anything will change in the next five weeks that will cause us to think about their being active next year.

------------------------------
Unidentified Audience Member   [4]
------------------------------
 Okay, thank you. And then on the leverage versus interest rate question, is that just essentially a coverage ratio that you're trying to target? So if interest went up, your coverage level wouldn't (inaudible). Is that how you --

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [5]
------------------------------
 It's primarily coverage. It's impact on AFFO per share growth. At some point, there's a delta between leverage versus lower leverage at lower rates. So there has to be some assumptions about how much more could you save if you were lower levered. We primarily are running those analysis based on maximizing AFFO per share but we do have certain coverage requirements and limits that, from a risk perspective, we don't want to go below.

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Unidentified Audience Member   [6]
------------------------------
 Thank you.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [7]
------------------------------
 There's one.

------------------------------
Unidentified Audience Member   [8]
------------------------------
 Hi. A follow-up to Brazil. You mentioned aside from the (inaudible) effects, the fact that you have the escalation clause, which is a benefit to you, but of course a big drag for the operators themselves, as well as some fact that some operators are in a financially challenged position. Is there a possibility that we see you renegotiating terms with them? Or is this set in stone? It shouldn't be a surprise.

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [9]
------------------------------
 We've learned that nothing is set in stone in Brazil. But we have come off of a -- part of our entry into the country was the regulation -- regularization of the relationships between each of the four major customers. And we've just completed all that. So we have just spent the last year negotiating master agreements, which covers all those points plus many others. So I don't think there's any reason that they should be revisited any time soon. I'm not sure we would have an interest in doing that. But it always takes two to tango.

 But we have just come off of that process where we have kind of negotiated all those things out.

------------------------------
Unidentified Audience Member   [10]
------------------------------
 And just another thing. The escalation clause are basically CPI basis or --

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [11]
------------------------------
 Yes, ICPA.

------------------------------
Unidentified Audience Member   [12]
------------------------------
 Okay. Thanks.

------------------------------
Unidentified Audience Member   [13]
------------------------------
 A question. Besides telecom or cellular clients, do you think or do you see other type of possible clients or tenants like, I don't know, TV stations now that they're (inaudible), or radio stations, or other kind of [CLECs], wireless CLECs that can be considered as possible tenants?

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [14]
------------------------------
 Yes, we have all those as tenants today. In the US, about 85% of our revenue comes from the big four, but the rest of it is made up of many different types of tenants. We do have TV stations. We have radio stations. We have the FBI, the CIA, police, fire, all kinds of different users. But the majority are the main wireless customers in the markets in which you operate.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [15]
------------------------------
 We had a question back there.

------------------------------
Unidentified Audience Member   [16]
------------------------------
 Hi, Jeff. I apologize, I walked in a little later, if this has already been addressed, but [IDEN], how much of a headwind has that been to the business over the past few years and what's the outlook for that? And then First Net, are you seeing any signs of activity and could you give us a sense of maybe when that starts to flow?

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [17]
------------------------------
 IDEN has been a pretty large headwind for the last couple years. It's, I think, on our Q2 number it took 2.5% off of our organic, is that right, Mark, 2.5% off of our organic growth rate. So that's going to end this year. That will have some comparative lingering effect as you compare quarters in 2016 over 2015. But the actual ability to terminate additional leases ends December 31.

 Second question? First Net. There's action there. There's organization. There's movement. I think before they actually become customers on towers, they will need to address their commercial partnering strategy, which I think is their top priority at this point. So we'll see how much they, if any, they are in our 2016 outlook when we give you more detail on that in five weeks.

------------------------------
Unidentified Audience Member   [18]
------------------------------
 So Verizon started talking about 5G. So beyond the current LTE deployment, maybe you can just talk about how you expect 5G to eventually be implemented into leasing trends longer term. And then separately, for international exposure, are you still primarily looking in the Western Hemisphere? Or would you be open to other opportunities?

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [19]
------------------------------
 Primarily Western Hemisphere, but looking past, perhaps in years to come. In terms of 5G, we're following everything we can about how that standard is getting or how it's evolving. I'm pretty sure there's no unified acceptance of what 5G actually is. I think that's some issues for some of the other carriers as to why they're not trialing it yet.

 In our experience, and my comment will be based on historical experiences, any time you increase speeds and you are working within limited amounts of spectrum, you must have more infrastructure. You must have more points of service. I think the laws of physics are pretty immutable when it comes to that. So I don't know exactly what it's going to look like, but I think it's going to add infrastructure needs that are going to be good for our industry.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [20]
------------------------------
 I'd like to go back and revisit some transactions you did in the US a couple years ago. Before you were buying Brazilian towers, you did the deal with Mobility. You did the deal with Tower Co. Those portfolios had substantially fewer tenants per tower than your underlying assets. And part of the thesis was they were underweight AT&T and Verizon at the time, and we were expecting big LTE bills. And so I'm curious to get a report card how those portfolios performed.

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [21]
------------------------------
 Those have done well and those have outgained their US counterparts in terms of new tenants added power tower, which is what we would have and did expect. Now, they did not get as much of the amendment revenue because most of that came from Verizon and AT&T. So on a revenue added per tower basis, they didn't materially outperform the existing portfolio. But from a new tenant added perspective, which is what we were thinking was going to happen, they have outleased the rest.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [22]
------------------------------
 And how do you feel they're positioned at this point going forward?

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [23]
------------------------------
 I think the same continues to apply. I think AT&T, extremely focused on amendments for a while. Then there was a period of time where they did open up for new cell siting. That's now closed a little bit again and they're back to primarily amendments. Verizon has been fairly steady, a combination of amendments and new cell sites. So I think we'll continue to see good growth, particularly on those towers from those two customers, AT&T and Verizon.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [24]
------------------------------
 All right. So then, I'll end with my standard REIT question. Your peers have all converted to REITs. Where are you in terms of NOLs that you can take advantage of? And has your thought process around converting changed?

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [25]
------------------------------
 We have several years of NOLs left. We believe the capital allocation balance sheet strategy that we're employing is best for us. And I'm not sure that is ideally suited to the traditional REIT investor. So we wouldn't want to kind of artificially do something that we thought was less value creating just to go seek a new investor base, which actually had different kind of desires than what we're offering. So we're not probably going to do anything there for a couple years, unless we see some real threat that there is going to be legislative change that is going to revise the qualifications for REIT status, which we don't believe can happen prior to the next election.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [26]
------------------------------
 So in other words, you can do it whenever but it's your preference to utilize your NOL?

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [27]
------------------------------
 Yes. If we were to convert today, we'd have to bifurcate out the requalifying subsidiaries versus the non-requalifying subsidiaries. We have a pretty strong and profitable services business that would not qualify. So to convert today would actually increase our tax bill.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [28]
------------------------------
 Got it. Jeff, thanks so much. Appreciate it.

------------------------------
 Jeff Stoops,  SBA Communications Corp - President and CEO   [29]
------------------------------
 Thank you.




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