SBA Communications Corp at Moffettnathanson Media & Communications Summit

May 18, 2016 AM EDT
SBAC.OQ - SBA Communications Corp
SBA Communications Corp at Moffettnathanson Media & Communications Summit
May 18, 2016 / 08:00PM 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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   *  Nick Del Deo
      Moffettnathanson LLC - Analyst

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Presentation
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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [1]
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 Well, good afternoon everyone, thanks for joining us. The Third Annual Moffettnathanson Media & Communications Summit. I'm Nick Del Deo and I'm joined by Brandon Cavanagh, the CFO of SBA Communications and I'm especially excited to have Brendan here because it's the first time we've had SBA at our conference so --

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [2]
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 Yeah, glad to be here, thanks for having us.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [3]
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 At this time I think it's important that I also state that we have cocktails after this presentation in the ballroom so please join us for that.

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [4]
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 I'm going to need one probably huh?

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Questions and Answers
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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [1]
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 Well, I thought it made sense to start off by discussing the goal you recently established of generating over $10.00 a share in AFFO by 2020 which I believe is the first time you've set out long-term guidance. So give us some context around that decision, why did you decide to put that goal out there and why was now the right time to do so?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [2]
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 You know, it was as much based on the fact that we felt that the focus from the investment community in particular was becoming very short-term, too short-term for our taste and ultimately our business is a long-term business. The underlying nature of it, the stability of the recurring cash flows, it's built for long-term value creation and so we put out that goal as a way to try to kind of turn the focus back to the long-term value creation opportunity but to put a number around it that helps kind of put it into context where people could understand it and say, okay, I can now take this as something I can think about and put my own math around it and understand what it means.

 So really the focus was to try and kind of shift the discussion a little bit from what's happening this quarter with one particular carrier, for instance, to something that was more of the core of what we think about and focus on internally.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [3]
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 Okay, and would you describe the input that underwrote that number as being relatively conservative, or are they your honest best guess as to how things will transpire?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [4]
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 Yeah, I probably wouldn't use the word conservative but I would use the word achievable. We've made assumptions that obviously consider things like what's the leasing activity going to look like, we've set those at levels that are similar to the kind of levels that we see today which are certainly not by any means high, they're near our historical lows in terms of activity levels. We're made some assumptions about staying levered fully and deploying that capital. We've made some assumptions around consistency and foreign currency exchange rates which is one that obviously has some risk associated with it but for the most part they're all things that should just naturally occur based on the, again, the underlying stability of the contracts that we have and the nature of what we provide and so I would say very achievable and frankly we wouldn't have put out a number or target that we weren't very comfortable we'll be able to achieve.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [5]
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 Okay, in terms of Brazil, what sort of real growth rate do you assume in that market?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [6]
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 Well, when you say real growth rate I assume you're excluding both FX and the inflationary adjustments? We, have experienced recently around 5% growth that has come from items excluding escalators. Our actual growth, I think, in the first quarter on a year-over-year basis was about 13.5% but a big percentage of that, 8.5% to 9% of that was from escalators which have been elevated as inflation has been elevated. We would expect that to be a fairly consistent rate in terms of that 4.5% to 5% growth rate on a go-for basis. We would expect that to stay fairly consistent for years to come because they are well behind the U.S. in terms of their wireless network deployment. The economy has not been great down there so if anything there's probably upside if that could get turned around and the carriers could feel sort of free to spend, again, on their networks which I think right now they've been a little bit constrained but our assumptions is that it will stay relatively flat. So, if anything, I think there's some upside perhaps.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [7]
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 Okay. And you know, one of my favorite topics, prepaid rent or [augmentation] reimbursement, is that a material contributor to the outlook or not really?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [8]
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 To the long-term outlook? No, I mean we do have it in there. We expect it to be relatively flat with what we'll have in 2016 for the balance of the years between now and 2020 but it's certainly not material.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [9]
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 Okay. Now, on your earnings call earlier this month you also reduced your growth outlook from the balance of the year from 9% gross to 8% gross. Do you see that reduction as coming from new business you had expected that would never transpire or from businesses that's been deferred? Or stated differently, should we read anything into the longer-term growth expectations based on the changes that you outlined?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [10]
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 Yeah, I wouldn't read anything into it. I think I would have to say differed. You know, much of the spending that we expected to see was around spectrum bands that are either in their early stages of deployment or haven't been deployed at all yet and so those things are still going to occur ultimately. So, I certainly think differed I probably the better way to say it You know, we lowered our assumptions that for growth to accelerate throughout the year, I mean, that's basically what we did and we've kind of come now to more of a position where we say, you know what, we expected to stay flat with where it is instead of expecting to change. The changes we expected not to change and so when you think about the drivers that would have had it accelerate, they still exist and it probably just happened later would be our expectation; that will just happen later.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [11]
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 Okay. Now, with respect to the domestic growth outlook, investor sentiment seems to have [turned] a lot more cautious than it has been historically. You know, my personal view is that a lot of the underlying drivers of the concerns will fade with time and not end up being big issues but that's probably not very helpful. So I thought if we could play devil's advocate instead and talk about some of the main issues.

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [12]
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 Sure.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [13]
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 You know, so new leasing activity from the carriers has been lower than typical levels as you've noted before, despite the traffic growth that they've seen. And the carriers point out, seemingly sensible explanations as to why that's been the case in terms of being able to reform spectrum and existing sites or the fact that they now have very dense macro-grids that they don't need to augment anymore or add additional sites to that anymore. So why can't this be a new normal?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [14]
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 Well, I think this is not that different than what they've done in the past. We have had periods where growth was extremely high. I mean, just to be clear, some of this idea of it being very, very low growth is driven off of the fact that by comparison it was very, very high during 2013, first half of 2014 and so certainly by comparison it feels like a material drop-off and it was, from those levels.

 We did not expect, nor do we expect today, that we will see those types of levels again. It's not impossible but highly unlikely and so when you look at our business historically you've seen growth rates that, and periods of time, where they've been very high and where they've been very low and this isn't the first time that we've had lower growth rates. If you go back five years ago or eight years ago to when the market crash happened; sometimes there are other factors that affected it but the reality is we've seen slower growth at different times in our past and so our focus is really more on the things that they have to do, the places that they have to spend money, the spectrum that sits on the sidelines [fowl] and is not worthwhile if they don't invest it and deploy it, they lose the value of that investment.

 So, as long as those things exist today we feel very confident that they will have to come back and spend the money on doing that, they can't just work their way around through software changes or carrier aggregation or whatever the case may be, you know, that allows them some efficiencies but it doesn't deal with the overall issues which is the rapid growth in mobile data traffic.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [15]
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 Okay. Now, there have been complaints from some of the carriers that pricing per towers is too rich and the escalators are too high at a time when profitability is under pressure and if the present regimen doesn't change, they're going to start looking for alternatives. So, is the way towers is priced an anachronism and do the carriers have any alternatives that they can use to back up that threat?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [16]
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 This is -- while there seems to be a little more talk about it publically, things are really no different today than they've ever been. I mean, the reality is that the carriers have always wanted the best pricing, they've always asked for the lowest price, the lowest escalator, the best terms, as you would expect that they would and in cases which aren't that common where they do have alternatives because there's another site nearby or a building across the street or whatever the case may be, that's always been considered in the pricing that we've established with them to begin with. So, they've gotten better pricing in those situations. But in most cases, they don't have alternatives which is why we've been able to charge higher prices.

 And so, that dynamic is really no different today. I'm not aware of new alternatives that have come up but to the extent that there were alternatives that they legitimately have, then that would obviously be a consideration, a factor, that we would look at and any pricing of new activity at those sites. So, summary, it's not that different than it's ever been, it's just getting a little more talk I think than it has in the past.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [17]
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 Okay, now from a technology perspective, you know, the carriers are looking at things like combined remote radio heads, [multi-band] antennas, or moving towards C-RAN which involves taking some equipment out of the compound. If they go this route, what would changes like this warrant a discussion about lower rent at the end of the lease terms?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [18]
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 Well, we haven't seen too many situations where the equipment loading at the sites has come down, notwithstanding those changes. They do gain efficiencies through some of these things and that does impact, sometimes, the incremental equipment that they need to add at the sites which we do consider in the pricing but we set pricing based on a variety of factors and the primary one is the location. I mean, for those of you that aren't familiar with the tower business, it sounds like we're in the technology or the telecommunications business. Well, we are to some degree, but ultimately we're really a real estate company. This is a real estate business, we're a landlord, they're tenants and just like in any real estate business, you -- if you have a prime location you are able to price that higher. Location is the main driver and so for us equipment loading and competitive sites and all of those things are certainly factors into it but the location is the primary factor and we're not pricing things just based on each individual piece of equipment, we're pricing it based on their need to use a prime piece of real estate and none of these things really change that. But they certainly are considerations in the overall negotiation of where to set pricing for sites and new amendments and leases.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [19]
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 Okay. Maybe we'll touch on one last bear point which is Sprint T-Mobile. That's certainly been a source of concern in a lot of the meetings I've had and if we look at other deals where there's been significant geographic overlap like T-Mobile, Metro PCS or AT&T Leap or even what AT&T wanted to do with T-Mobile, the sale side decommissioning have been a lot greater than what the tower overlaps that industry discloses would have suggested. How would a merger of Sprint and T-Mobile affect your bottom line if it were to be consummated?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [20]
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 Well, the -- first of all, to your preface, it is true that you do sometimes experience merger related churn that is not just a direct overlap but that statement leaves out, I think, what is an important part of the puzzle which is that when you have a combination of carriers, they still have to serve the same subscriber base depending on the spectrum that each holds. There can be incompatibility that requires a lot of effort to integrate those networks and through that whole process there typically are a tremendous amount of amendments that take place to the existing and remaining leases that you have and through that we actually see a tremendous offset to any potential losses that we've experienced in the past.

 And so you don't go from two carriers to one or two leases to one, you go from two to say 1.8 on average. So the impact, I think, is not quite as great and if you take it and you apply it to Sprint and T-Mobile as a hypothetical case certainly their spectrum holdings are somewhat disparate and are not going to be easily integrated and so I think through that we would see a very similar type of outcome where, yes, there would be churn but there would also be a significant amount of positive upside through the investment that would need to take place, especially when you consider the number of end subscribers that they would have to satisfy as a combined entity.

 I will just, as a side note, comment that I'm not sure that that combination is necessarily so certain. There's obviously the regulatory hurdles that's been tried before. That can, of course, change but there are other factors that affect a potential merger like that and I'm not sure that it's necessarily as attractive to all parties as it may have been in the past and I wouldn't go to the bank that that's definitely going to happen. But, even if it did our overlap, the statistic you don't like, is about 5% to 6% of our leasing revenue. So exposure is not particularly huge and would be spread over a very long period of time.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [21]
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 Okay, fair enough. You -- small sales -- and there's been a real step-up in investor interest over the last year or so. From the tower perspective, the idea that they could either draw investment away from traditional macro sites or in extreme case perhaps to [plant] macro sites in some markets. And you're unique among your peers in that you don't have any direct small cell exposure at this point, having sold ExteNet, your [stake in] ExteNet last year. Has anything transpired since that transaction that makes you think, you know, gee, maybe we should have hung on to it or upped our stake?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [22]
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 No, I mean we're very comfortable with the decision we made around ExteNet. We -- you know, our structure, our model, is a leveraged capital appreciation model. We believe that by staying levered and investing in new assets that are faster growth assets, frankly even buying back our stock, will create a greater growth in AFFO per share than expanding into businesses that simply don't have the same growth profile, that don't have the same exclusivity that towers do and the bottom line is with the small cell business, while it can be good if your approach is just to simply want to add revenue and to be more of a yield type of stock, for our model it didn't fit well and we felt like we would be diluting the value of what we had because it is becoming more and more of an RFP-driven business has been our observation and you need to have fiber to be successful in that business but a lot of people could have fiber and you don't have the same exclusivity that you have in the tower business.

 And so without that exclusivity, now you're just competing with anybody and everybody else who has the capital to put into it including your customers potentially and that we just didn't feel was a good place for us to be. So, to each his own, I guess we'll see a few years from now how that plays out but we're very comfortable with the decision we've made.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [23]
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 Okay. How would you compare and contrast the return and lease-up profiles of the small cell projects you saw versus your tower business?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [24]
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 Well, honestly I'm a little bit limited in terms of what we saw from a confidentiality standpoint as a shareholder in ExteNet so I can't necessarily get into how that varies but I would say that that business does require certain things that did not fit well in terms of their accretion to our business if combined including very high SG&A or overhead in order to run that business to the point where you have to have really meaningful scale in order to make that work within the context of producing an accretive value valuation because it does eat up most of the EBITDA.

 So, I'll just leave it at that but, you know, we're very comfortable, again, that we made the decision that we made.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [25]
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 Okay, understood. You know, one of the primary challenges for the carriers with respect to small cell is the cost; it's very expensive to deploy. How does the cost of the small cell, say for customers served or some similar (inaudible) compare to a tower?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [26]
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 Well, I think that varies quite a bit based on location, depending on the markets that you're in it can probably vary very widely but I think the real core point is that I've not seen, in any case, where carriers are moving off of macro sites to go to small cells. So what you have is really a business that is complementary to the existing macro site and is not an idea solution for economic reasons, as you pointed out, to be an alternative to the existing macro world. And so where it fits well is in dense urban environments like, for instance, here in New York City you don't see towers here. It's not a tower market. It may be well suited to small cells as a solution because of the nature of this particular environment but as you start to get outside of the dense urban markets, that's just not the case anymore and macros are certainly more economically efficient and, as I said, we've not seen anybody moving off of towers to go to a small cell solution because it's just simply not cost effective.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [27]
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 As you noted in that example, where small cells are suitable is not necessarily where towers tend to be located. Can you give us a sense as to what -- what portion of your towers are in markets where small cells might conceivably start to make sense?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [28]
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 I really think in any markets. I think to the extent that there are small cells in markets where we have towers, again, they are serving a specific need. I mean, they're called small cells because their coverage objective is, in fact, small. They have a very specific targeted focus and so if you want to cover a particular location, a particular intersection let's say, a small cell may be a solution that helps you fit in under your larger macro network where you're not getting the kind of penetration in that location that you need but that helps support the existing macro environment that sits on top of it. And a macro site might be overkill in that particular situation. SO those are the cases where I think you'd see small cells in environments where we have existing towers but not, again, as an alterative to the tower.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [29]
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 Okay, there's a somewhat common narrative out there that in dense urban areas like New York or Los Angeles are responsible for the overwhelming majority of wireless traffic and as a result, those markets are going to see a disproportionate amount of investment going forward whether it's in small cells or some other form to the detriment of suburban or more rural markets sort of fit your portfolio. Is there any truth to that thesis?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [30]
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 I think it's more about timing and order of things happening than it is about one gets done and one doesn't get done. If you look at the history of all of these technologies that have been rolled out, maybe take LTE, the most recent one, it started in the core NFL cities, in the urban markets in the New York's and L.A.'s but that doesn't mean that it just stops there because a lot of those folks live in suburban markets outside of those cities and they travel on highways or trains that connect these different pockets and they expect that their devices are going to work and produce the kind of network quality that they are paying for in all of those places as well.

 And so, the typical process that you see carriers follow is to invest in those urban centers initially, those NFL cities, if you will, and then it starts to expand out from there. So I think this is really the next wave of this type of spending is not going to be any different than the past.

 And maybe just as a side note because I think it's interesting is when we look at our portfolio from a historical lease-up standpoint and we isolate based on BTA's, you know, how we've done within different groups, the towers that sit in BTA's, 400 to 500 versus those that sit in BTA's 1 to 100, the volumes have not been any different overtime and not only the volumes but the actual prices per site have not really been that different either in terms of the lease values that we've been able to generate which, you know, can vary from individual site to individual site but as a general average, we think is very telling as to the fact that they -- these are truly nationwide networks and they may come in phases but overtime they hit the whole country.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [31]
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 Okay. You know, let's [turn] to capital structure for a moment. You have the highest leverage of the group and this year investors seemed to be more tuned to leverage than most years. Do spasms like what we saw earlier this year worry you at all? Would debt capital have been available to you on reasonable terms as you needed it?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [32]
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 Oh, absolutely. Yeah. There's no -- I don't have any concerns from a risk standpoint about our leverage at all, in fact, we could refinance today we could call all of our high yield notes, for instance, today or this summer at very attractive rates much lower than what we're currently paying now. So, the opportunity is there, the market is there for us in each of the markets where we're routine issuers. So, from a risk standpoint I don't have any concerns about it at all. I think it's more of a -- in certain environments with equity investors at various points in time, you know, higher levered companies kind of all get thrown out together as a concern but it misses the underlying stability of the cash flow in our business and why this business is very well suited to higher leverage and the fact is we've generated much higher returns in the past by being higher levered.

 We're in a time period where we're being punished a little bit for being higher levered but ultimately over time while interest rates remain low, and we expect that they will continue to remain low for some time, we believe it's absolutely the right way to go in order to generate the greatest AFFO per share.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [33]
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 Okay, [let's dig into] the long-term domestic growth outlook a bit. You know, if we step back and think about what really drives your business over time, if the carrier is wanting to maximize the throughput of their bottleneck resource [which is] spectrum, so through that lens what is the growth outlook appear to be today versus, you know, in the past?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [34]
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 Yeah, I think over time a lot of the things that we've talked about are still relevant here and that the carriers have a lot of spectrum that's not been deployed yet in order to capture the value of that investment that they've made, they have to deploy that spectrum in order to do that they typically have to make equipment changes or upgrades at their existing sites and that's where we benefit. And that's not really that different than it's been in the past. I think what's different is sometimes the timing of when they feel compelled to do that.

 You know, the reality is that our customers have been competing very recently more and more on price which is not great for us because it reduces their profitability and therefore reduces their willingness to invest at the same levels on their network because they're competing on something different. But, overtime, that will change as it has in the past because an end-user, an end subscriber, as data consumption continues to rise and there's more mobile video and all of these things, you're going to start to get to the point where you go, well, this quality is no good. I'm not going to stand for this, I'll switch to someone else who will provide it or I'm willing to pay more for it in order to get better quality and so it's a virtuous cycle that as the end user demands more and more, the carriers, in order to deliver that, are able to, or have to, invest in their networks more and more.

 So I think, you know, the basic underlying metrics and principles of this business are really no different than they've ever been, I just think you go through periods of ups and downs as we have throughout history.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [35]
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 Okay. You mentioned before about how as carriers deploy new spectrum or augment the network, the start at the NFL cities and sort of spread out. You know, so when we think about AWS 3 which is probably the next big spectrum deployment that's out there, that would argue for you've seen the benefits perhaps but later than your peers. The flip side is that you have more equipment specific pricing which could play to your advantage in that process. How do you think that shakes out?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [36]
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 Yeah, we do -- I cant' really speak to our competitors and the structure of their agreements but in our case our agreements are very equipment specific so as changes are made we always have the opportunity to address those one-on-one, one-by-one with the carriers and negotiate an appropriate rental change. I don't know that we're necessarily any more disadvantaged though because of the, again, the build-outs hit ultimately everywhere and they expand, I think, throughout the country and so I don't think we're necessarily hurt by our portfolio but certainly the value of having our agreements being very equipment specific and the way that we've structured everything I think has allowed us to maximize what we're able to capture through all of these rollouts.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [37]
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 Okay. Are you at a point where you can talk about what a typical amendment for an AWS 3 upgrade might be on a site where AWS 1 has been deployed, or is it too soon to say?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [38]
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 Yeah, I'd say it's too soon to say. I mean, we -- there certainly will be a need for new radios or different radios, I guess, than what's there. Again, going back to the equipment specific nature of the agreements, it allows us the opportunity to monetize that even if it's a swap-out but that we're very comfortable is in fact going to be necessary and in some cases we think we will see new antennas particularly from certain carriers who are maybe deploying new mimo antenna's to address multiple different frequency bands and those that we've seen thus far are fairly large, but I'd say it's really pretty early to say here's the dollar amount, I don't think we can do that yet.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [39]
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 Okay, fair enough. You know, people are starting to focus more on FirstNet that's been funded in RFP's out there. You know, recognizing that the carriers are still putting together their bids, where do you think pricing shakes out for FirstNet and how big of an opportunity do you think it is for SBA?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [40]
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 Well, there's another one that's too early to say what the pricing necessarily shakes out to be. But, for context, you know, this would be a situation that most likely the government would be partnering with an existing carrier where they would be running their network through an existing carriers network and somehow sharing that existing network using their spectrum that they have and so forth.

 We've had -- we did have a negotiation in the past years ago when Sprint was looking at doing something similar with LightSquared and through that deal we did negotiate an agreement with them that would have allowed them to do this similar type of sharing and it was a very meaningful amendment. I would imagine that the structure to this would be somewhat similar to that and so we kind of have a template, if you will, as to how that might work but, you know, to say absolutely what the dollar value of that will be yet, it's just too early because we don't have the specifics on what they're going to do. As you mentioned, the RFP is still in process so who they even partner with and the specifics of how they work that agreement out logistically, we just don't know yet. But, it is upside, no question.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [41]
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 Can you remind us what the terms were for LightSquared?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [42]
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 Well, I don't think we ever disclosed the absolute dollar amount for that because it didn't come to fruition but it was a very sizable amendment in the higher hundreds range across the vast majority of Sprint sites, at least 80% of their sites were going to be upgraded for that. So, you know, the question will be what percentage of the network has to get touched by a partner or FirstNet, how many sites are they on? What exactly are they going to want to do at the site? Is there additional equipment that's required that probably would be, would be our guess, but again, that remains to be seen.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [43]
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 Okay, now VoLTE was a hot topic for a while but we haven't heard much of it lately except for maybe T-Mobile. If the industry eventually wants to reform its 3D spectrum it's going to need to move to VoLTE. Where do you think the carriers are in terms of their ability to flip over to VoLTE or is there a lot of work that would still need to be done on that front?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [44]
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 Yeah, I mean, I don't think they're that close at this point but a lot of the activity that we've been seeing is really [re-farming] of spectrum today and is driven towards this AFFO as one component of it but this is certainly a part of what they're trying to do, I think is move to that. So, while there hasn't been as much talk about it, it's still very much a part of the carriers plans as far as we can see and we've seen activity, again, a lot of what we've seen recently is really more in line with that so I think we'll continue to see that but I don't think that they are that close and I think we will see, you know, a continuation of this for quite a while. It's a multi-year process, there's no question about that. So I think the runway is long.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [45]
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 Okay. Maybe we'll talk about churn for a moment. You know, when we think about growth --

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [46]
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 I'd love to talk about churn, you know that.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [47]
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 We tend to think about growth simply through the lens of leasing activity and escalators. The churn, you know, point for point matters just as much.

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [48]
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 Sure.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [49]
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 If I'm not mistaken, the bulk of your churn is actually from deals that happened years ago in sort of (inaudible). If we set Sprint and T-Mobile to the side, there doesn't seem like there's that much M&A that could take place at this point, mostly consolidation that's happened, would that argue for lower churn going forward than what we think of as normalized churn rates?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [50]
------------------------------
 You're definitely right about that. I think right now the churn is primarily from merger related activity which, of course, includes Cricket, Clearwire, Metro but it actually still also includes, believe it or not, ALTEL, Centennial and even Singular which gives you some idea of the tail to kind of work through the integrations of these networks and the terms that exist on the leases and when they can roll off.

 In the past it used to be, you know, you lost your paging customers, that kind of stuff. A lot of that is behind us and now it's primarily a vestige of this kind of stuff and so while we've had somewhat elevated churn, excluding (inaudible), we've had elevated churn anyway just recently largely because of the Metro's and Crickets and so forth. We probably continue to see that for the next couple of years based on the time period over which their rights exist to continue to roll off those agreements but once you get beyond that, to your point, there really isn't any overlap or there isn't any merger opportunity or very little merger opportunity that's left so we probably would see a material drop-off in the churn percentage several years from now and I don't think that's an unreasonable assumption at all for anyone to make.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [51]
------------------------------
 Okay. Yeah, more broadly speaking, we tend to think of carrier capex as being the proxy for leasing activity. As the carriers shift more towards amendments as opposed to these sites, they move to virtualizes their networks, are we going to see a breakdown in that linkage?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [52]
------------------------------
 I think there will always be some connection there because certainly what the carriers are spending on their networks is embedded in their wireless capex and we are a component of that. I think from period to period it certainly can fluctuate. They may have a particularly high period and we saw lower lease up and vise versa depending on where their focus is and where the dollars are going, but I don't know that it's necessarily broken in terms of its linkage and if you look at wireless capex; while it is down right now which does correspond with when we've seen lower leasing activity, so it does fit together, I think in that regard, based on where it is from a historical standpoint it's down a little bit from the last couple of years but it's higher than anytime prior to that in history.

 So, there's certain customers that have significantly cut their capex. Most of the impacts in terms of cutting capex I think are driven by carriers focus on capital considerations that they have, [calls] on their capital, or just general [hot sheet] issues. But over time, the network is the primary asset that they have and they need to continue to spend to keep the quality of that asset at a level that is marketable and so I think at its core we'll continue to see a decent correlation with capex but we'll get our share, you know, over a longer stretch of time.

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [53]
------------------------------
 Okay. Let's talk about Brazil, you've made a big push into Brazil a few years ago. Having been in the market for a while, what are some of the things that have surprised you whether positive or negative and I don't mean macro or FX but rather, you know, operational stuff?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [54]
------------------------------
 Yeah, well you can't totally put aside the macro because it actually affects the operational side of it. You know, we -- when we went into Brazil we made certain projections around each of the investments that we were making that we underwrote those investments on and we've done, on a currency neutral basis, we've done fine, we've been inline with those assumptions that we've made for the most part around lease-ups. So we've done okay in terms of hitting our numbers on, again, a currency neutral basis. However, I felt and I think others within SBA really felt that it could be substantially better because there were certain drivers in that market, many which still exist today, but we saw a market that was well behind in terms of its wireless development. You have four very active competitors, actually more competitive than they are here in the U.S. in terms of there dispersion of subscribers. You had, you know, a growing economy at the time it seemed. We had a greater move towards prominence on a world stage; events like the World Cup and the Olympics coming.

 There were so many things that we found to be very, very positive and attractive about Brazil. We really felt like it could be extraordinarily higher than even what we were modeling and that has not been the case but that's really been a function of the macro economy and political issues that they face down there which have put tremendous pressure on our customers because there's been pressure placed on their customers and so you have a situation where they've not been able to be as profitable as I'm sure they would like and therefore they're not as able or willing to spend on their networks. While they spend on them, they can be very choosy about where they're spending. They have so much to do, they're not going to get to all of it anytime in the near future so they'll spend where it's most cost effective for them. And I think, as a result, the environment hasn't been ideal for us but on the positive side, all of this growth that we felt needed to happen still needs to happen and over the longer-term I think we will see a nice piece of organic lease-up down there and hopefully we'll see a settled exchange rate, maybe improving would be nice, which [had] a little bit recently but, you know, that's been the biggest bane to our existing has been that. So --

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 Nick Del Deo,  Moffettnathanson LLC - Analyst   [55]
------------------------------
 Okay, in the U.S. you've consistently acquired through the mom and pop portfolios over time, it's been your bread and butter I could say. And you talked about how an industry is starting to develop in Brazil that could give you the same opportunities. Update us on the environment down there from that perspective?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [56]
------------------------------
 Yeah, there is -- there's certain -- especially when you see SBA and American Tower go into some of these markets like Brazil, you tend to have private equity backed and others sort of follow and say, okay, this is a good place for me to be because there's some logical exit opportunity [for me] ultimately and so we've seen that start to happen down there. We've seen local folks also get into the business of developing towers but the economy that we just discussed, the issues there, have weighed on all of those folks too and they're not seeing the growth probably in the short-term that they had originally hoped for.

 And while that's not good for anyone, in some ways I think it may actually accelerate the timeframe for some of those people to look for exits earlier than we might have otherwise expected. So there are opportunities for us but as of yet we haven't -- we've done some small deals but we haven't done anything too material as we're cautious of how we deploy our capital in Brazil.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [57]
------------------------------
 Okay, on the reverse of the churn question I asked you about the U.S., in Brazil your basic business is brand new basically so your churn is essentially zero. As we go out a number of years, what do you think a normalized churn level is for that business?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [58]
------------------------------
 Well, I think it stays very low for a very long time because for one basic reason, in all of our lease agreements are typically 10 or 15 or even in some cases longer lease agreements so the practical ability to even cancel a lease is extremely limited in Brazil but beyond that because the networks are so under developed, the odds of reaching a point at which they're looking at kind of consolidation or moving away from shrinking networks is much less likely than you would have even here in the U.S.; they have so much to do to continue to expand the networks that they're somewhat at a bear bones today. So, I think from that standpoint I wouldn't expect any churn of any, well, not maybe at all but certainly not material churn for many years.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [59]
------------------------------
 Okay. Maybe talk a little bit about capital allocation. So you generate a lot of investment capital every year, so an obvious question is what do you do with it? Given where your stock is trading today and what that [implied] valuation is, why not allocate more money towards repurchases as opposed to acquisitions?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [60]
------------------------------
 I think that's what we've done. If you look at the last year or nine months or so, we've spent more capital on share repurchases than we have on new assets for that very reason. And I think going forward you should expect a decent mix. We would prefer, all things being equal, to invest in new assets consistent with what we've done over the past so many years, we've created a lot of value by doing that but the opportunities are a little bit less, the pricing is considerably higher in the private tower markets where there's a huge disconnect from where we trade versus some of these portfolios that frankly are no better and in some cases worse from a quality standpoint than our portfolio. It just doesn't make any sense and so in those cases we have shifted more toward the buybacks.

 We've done a little bit less this year through the first quarter announcement that we made but that's more an issue of constraint from a leverage trying to keep a certain leverage level. But overtime we have a lot of capacity and a lot of capital put to work and I would expect it's probably a mix of both. You'll see stock repurchases and additional asset investment.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [61]
------------------------------
 Okay. In the past you've noted a strong [preference] for keeping the business in the Western hemisphere so you could be close to the assets, you could leverage your back office costs. Are there still a (inaudible) opportunity to expand in Latin America in places where you're operating in new countries or is it getting harder to find deals that make sense?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [62]
------------------------------
 I think some of our return hurdles are a little bit higher so that makes it a little bit harder to do deals but I think it's a more disciplined appropriate approach and we've learned some things from the Brazil experience that have informed that. But, we are interested in other markets. So we're basically open to opportunities anywhere. We've primarily focused on the Western hemisphere and Latin American markets and we would have interest, in particular, some of the Pacific Coast, South American countries; Colombia, Peru, Chile, we've gone into Ecuador very recently.

 So we would have interest in all of those markets in addition to expanding in the existing markets that we're in but it's really mostly an economic decision at this point and so, you know, I think you'll see some expansion into some of those places, probably somewhat modestly so, nothing too big, but every investment decision being done at an individual level that we know will be accretive to our value and so we'll continue to explore those opportunities and keep your eyes open for that I guess.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [63]
------------------------------
 Okay, now there's been a lot of activity taking place in Europe, Africa, Asia. I think in the past Jeffrey suggested that you found it harder to get comfortable with those assets versus either domestically or in South America. Does that remain the case today or has your thinking evolved at all?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [64]
------------------------------
 I think it's generally the same. We -- as I mentioned before I mean we're open to any opportunities and we've looked at opportunities in a number of those areas of the world so we don't foreclose them just out of hand but there are factors that have made them less attractive to us. In Europe we've even bid on assets in Europe and come woefully short compared to what others were willing to pay because it's really a low-growth market. You don't have the same kind of organic growth opportunities, you have some [rand] sharing and other things that take place there and so it needs -- in order to meet our return hurdles, you have to pay a lower price. Others that are more willing to look at it on a yield basis and expect if you're an infrastructure fund and you're willing to except something less, then maybe it's more of an opportunity for you and so it's hard for us to be competitive there.

 You know, Africa has got a lot of positive things about it but there's also considerations there. One of those is that the power issue is a huge one, you're as much in the power business as you are in the tower business and you're now subject to other fluctuations, the cost of oil prices affects your earnings, all kinds of things that are sort of outside of the norm of what we do and the stability that we ideally would like to look for.

 So, you know, all of these places I think there are possibilities but as a whole we're trying to focus on finding markets that as closely as possible mirror what we have here in the U.S. or frankly what we had in Central America. If we can recreate that, which is very hard to do, that would be ideal but if we're not going to recreate it we want to make sure that the pricing appropriately considers that.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [65]
------------------------------
 Okay, we've got a few minutes left. I thought I'd close with two more open ended questions. So, first, what do you think people most underestimate or misunderstand about SBA?

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 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [66]
------------------------------
 Well, I think it goes back to what we talked about at the beginning which is while it sounds obvious to everyone, I think there really is a lack of appreciation for the underlying stability and security of the business and the cash flows that it generates and the growth that just naturally happens; putting aside all of the noise, there is really a very strong stable business underneath it and because of that, you know, the opportunity for improved value creation over time is tremendous and I think sometimes the focus gets too much on the short-term stuff and people really miss the true beauty of the business which is that.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [67]
------------------------------
 Okay. And, you know, when we're sitting here three to five years from now, what do you think is something that's not on investors radar screens today that will be important? Or, conversely, what's sort of a hot topic today that you think will prove to be not so hot?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [68]
------------------------------
 Well, I think the death of the macro site, much like Mark Twains death will become -- will be considered greatly exaggerated when we get there. So that's probably the biggest thing. You know, it's hard to say what the newest topic du jour will be a few years from now but I do think that people will look back and say, yeah, I guess these things were still pretty important to the carriers network and delivery of their services and we're quite confident in that. I think time will show that to be the case.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [69]
------------------------------
 Do you think the narrative around small cells will play out the way people anticipate?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [70]
------------------------------
 Well, I don't know what everybody anticipates. I think that small cells will certainly be a meaningful component of the delivery of wireless by our customers. I think the question for us is really more about from where we sit is it an ideally suited model for an independent infrastructure provider, what do you bring to the table that allows you to add value in that mix? And I don't think that that will be nearly as good as towers certainly but I don't know what people's expectations are. I think it's very real but is it real for a company like us; we don't think it's so valuable but we'll see.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [71]
------------------------------
 Okay. Maybe I'll cheat and I'll throw in one more. If you have a question I'm happy to take it?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [72]
------------------------------
 -- here come all of the [cards].

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [73]
------------------------------
 Okay, how will 5G impact your business and quantify how the Internet of Things can help your business?

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [74]
------------------------------
 Okay, well 5G, to be quite honest, I think it's a little early to say for sure how 5G directly impacts us. I think from a macro standpoint certainly the continued evolution of new technologies that will require the deployment of additional spectrum will be positive for us because ultimately the carriers do look at it as a nationwide coverage issue. In the early stages, if it's focused primarily on high frequency spectrum that is focused only on certain very limited coverage objectives it may be more of a small cell suited, you know, rollout but I think the answer is really it's just a little to early to say for sure.

 I'm sorry, and what was the rest of it, what did I miss?

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [75]
------------------------------
 And the second part was, you know, help us quantify how the Internet of Things --

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [76]
------------------------------
 Internet of Things -- It's probably pretty much the same answer. I mean, anything that drives additional data traffic over the wireless networks is ultimately positive for us because the carriers can only handle increasing traffic through having additional spectrum that they deploy or through incremental infrastructure, new additional antennas, radios, etc. And so in either of those cases we benefit because even as they're deploying new spectrum that typically requires new equipment in order to do it and given our structure of our agreements we're able to monetize that.

 So I think Internet of Things, any sort of machine to machine, you know, communications, anything you can think of, connected cars, whatever it may be, all of these things that drive additional data traffic through the existing networks are need -- expansion of the networks, is a positive for us because ultimately additional infrastructure will be a requirement of that.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [77]
------------------------------
 Okay, well great. Well I think we've gone through our allocated time so --

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [78]
------------------------------
 All right.

------------------------------
 Nick Del Deo,  Moffettnathanson LLC - Analyst   [79]
------------------------------
 Thanks again for joining us.

------------------------------
 Brendan Cavanagh,  SBA-Communications Corp. - CFO   [80]
------------------------------
 Thank you very much, appreciate it everyone for coming. Thanks Nick.




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