SBA Communications Corp at Goldman Sachs Communacopia Conference

Sep 20, 2016 AM EDT
SBAC.OQ - SBA Communications Corp
SBA Communications Corp at Goldman Sachs Communacopia Conference
Sep 20, 2016 / 04:25PM GMT 

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Corporate Participants
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   *  Jeff Stoops
      SBA Communications Corporation - President, 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. Thanks, everyone, for coming out to the afternoon session. Very happy to welcome back to Communacopia, our 25th Communacopia, Jeff Stoops, the President and CEO of SBA Communications. Jeff, welcome back.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [2]
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 Thanks. Glad to be here. Is this working?

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 Brett Feldman,  Goldman Sachs - Analyst   [3]
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 Is he on? How about now?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [4]
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 Well, thank you. Nice to be here.

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 Brett Feldman,  Goldman Sachs - Analyst   [5]
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 All right. Let's jump right into it. I want to start off with a goal that you established just a couple quarters ago, which is that you were targeting to generate more than $10 per share of AFFO, adjusted funds from operation, which is your core cash flow number.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [6]
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 Right.

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 Brett Feldman,  Goldman Sachs - Analyst   [7]
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 By 2020; and if you just run the math, that's a midteens compound annual growth rate in the core value driver of the business.

 Just to start off, I've been following you since 2004; I don't think I've seen you establish this type of outlook before. What motivated you to provide this visibility to your investors?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [8]
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 I think we wanted to get people back focused on the long-term strength of the business. 2016 has been a challenging year for us with the iDen churn, some of the headwinds from the Brazilian real. I think in all fairness to the investment community, I think there were some surprises and disappointments with our full-year 2016 guidance, and folks had taken what I thought was a very short-termist view on -- gee, what was the next quarter going to look like or the next six months?

 And that's not ever really been the business that we have, Brett. It's a very long-term, very stable business, and we wanted to get folks back to understanding and appreciating that.

 It's a goal that we feel extremely good about. We think it's conservatively set, and we're hoping that it causes folks to take a longer-term view of what we have to offer.

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 Brett Feldman,  Goldman Sachs - Analyst   [9]
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 Okay. I actually thought that a nice way to walk through this is -- you laid out a couple of key assumptions that support your ability to get to that level of AFFO by 2020. And the first one is essentially an assumption about demand, which is that the amount of organic leasing revenue you would add per tower would remain materially similar to what you're seeing right now.

 So let's start off talking about the demand environment. I know we're trying not to be short-sighted, but it does feel like to a lot of investors that it took them a while to get their arms around what the current leasing environment is like. I think we've gotten to the point where everyone understands what's happening, but if you could just give us a quick update on how leasing feels now. Does it still feel fairly similar to what you articulated on your second-quarter call?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [10]
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 It does. And I can say here, since we're publicly transmitted, that we're expecting third-quarter results very, very similar to what we saw in the second quarter and the first quarter.

 It's been an extremely stable leasing environment. It's been at lower levels than historically what we've seen and certainly well off the 2013/2014 highs. But it's extremely steady and it's really -- this quarter and I believe the rest of the year is going to play out pretty much exactly as we had thought.

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 Brett Feldman,  Goldman Sachs - Analyst   [11]
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 And when you say similarly, you mean the leasing demand environment, the organic leasing environment, that's what's remaining similar?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [12]
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 Yes, yes, yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [13]
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 Is there anything that you can say about looking ahead into next year at all? Is your funnel telling you that there's going to be a shift in demand? Or it's too early to really comment on that?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [14]
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 You know, I think it's a little early to say. Our customers, for the most part, are between generations of technology. They have a little more latitude now in terms of infill and capacity spending, as opposed to the huge coverage pushes that we saw in 2013/2014 for LTE.

 AWS-3 has really not been deployed much to date. There's a number of factors behind that, not all of which I'm an expert on; but I believe you have a combination of clearing some technology issues and some equipment readiness that is pushing that off.

 A lot of money was spent for that, so we continue to believe that that will be deployed. It's now likely to be pushed back, certainly from when we first thought it would be deployed, which we were actually hopeful there would be some this year. And I don't think that will happen to the same degree as we initially hoped perhaps a year ago.

 But it's coming. We know that's coming.

 The signs around FirstNet are pretty strong. It looks like the odds are greater than ever. I don't know that they are 100%, but the odds are greater than ever that something is going to happen there and there's going to be a deployment.

 It's going to be a big deployment. It's going to be multi years.

 We'll know a lot more when they pick their partner later this year or early next. Don't know that we'll see a lot of revenue from that in 2017, but it will be a multiyear contributor.

 So we feel pretty good about the future, and I do think that there are more opportunities to see the base assumption in the $10 by 2020 goal improve rather than risks of the organic growth rate declining from where we are today.

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 Brett Feldman,  Goldman Sachs - Analyst   [15]
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 Got it. Just the last two near-term question. You're experiencing some iDen churn this year?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [16]
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 Yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [17]
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 Well, really what it was is you experienced it late last year, so the headwind is affecting this year.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [18]
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 Yes, that's the comparable. The comparable goes away with this third quarter.

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 Brett Feldman,  Goldman Sachs - Analyst   [19]
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 Do you feel that you're going to get back to your historical level? Because there is still some wind-down of some old networks that were acquired through deals.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [20]
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 Yes, we've got probably a couple, three years of elevated US churn. Now, certainly not to the same degree we had with iDen; but Leap, Metro, and Clearwire, all of which are pretty well known to us that this point. We're going to be looking at terminations over the next three years.

 In the overall consolidated churn number, it will probably push that to around 2%.

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 Brett Feldman,  Goldman Sachs - Analyst   [21]
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 Versus 1.5%, which has been more the historic level.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [22]
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 Yes, and maybe a tad higher. That would be more in the US -- or all in the US, frankly -- as opposed to international.

 But once that ends and we don't have any additional consolidation-related churn, which we also track very carefully, we think there is every opportunity for us to get back to the low end of our range and perhaps maybe even beat that.

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 Brett Feldman,  Goldman Sachs - Analyst   [23]
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 And that's -- the low end has been more like 1%.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [24]
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 Yes, yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [25]
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 Got it. Just from a modeling exercise, our sanity check is you lap your iDen, we know when that happens you back into the 2%-ish range for three-ish years, and then maybe (multiple speakers) --

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [26]
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 2016, 2017, 2018.

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 Brett Feldman,  Goldman Sachs - Analyst   [27]
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 Got it, and then after that potentially even lower?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [28]
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 Yes, that's the way we're looking at things today.

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 Brett Feldman,  Goldman Sachs - Analyst   [29]
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 I actually want to come back to the point -- or something you touched on -- which was spectrum. You mentioned AWS-3 hasn't quite happened yet.

 But if you look at the menu, the list, it's AWS-3; it's WCS; it's 600 megahertz that's being auctioned right now. FirstNet that you alluded to is in the 700-megahertz band.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [30]
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 DISH.

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 Brett Feldman,  Goldman Sachs - Analyst   [31]
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 DISH has spectrum, and meaningful quantities of Sprint spectrum still hasn't been deployed. So you're talking about --

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [32]
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 It's all true; that's right.

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 Brett Feldman,  Goldman Sachs - Analyst   [33]
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 2,000 megahertz of variety of spectrum. Typically carriers deploy new equipment, they augment their site grid, and they inevitably end up doing things that are accretive to the leasing revenues that they pay you. Is there anything that is changing in the way you're seeing your carriers design their networks or deploy equipment, or even your lease terms, that would mitigate your ability to monetize that as we see that play out over a number of years?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [34]
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 No. I just think our -- the largest carriers in the US have had other calls on their capital recently. They've moved past, as I mentioned earlier, the large coverage requirements, so they have a little bit more flexibility and cash planning ability to utilize that spectrum. But ultimately it will happen.

 And one of the things that we know is whenever new spectrum does get deployed you need new radios. There may be cases where you can share antennas, although a shared antenna typically would be larger than an unshared antenna. So we believe, as you well put out and laid out, the tremendous amount of spectrum that is yet to be deployed, that that will continue to be a very good source of underlying demand for us going forward.

 And we haven't change the way we contract for our business. Any time there is an add or a change at the tower site, we have the ability to discuss with our customers whether or not that's going to result in an increase in a monetary rent to us.

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 Brett Feldman,  Goldman Sachs - Analyst   [35]
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 Something you also just alluded to is the environment your carrier customers are operating in. There seems to be this sense among investors that there is a heightened degree of tension between tower companies and carriers, maybe more than we've seen in the past. I think there was even an article earlier today or last night suggesting that AT&T specifically has been leaning on tower companies to get better rental terms.

 So first of all, what's really happening behind the scenes? And why do you think this has become part of the conversation when maybe a year and a half ago it really wasn't?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [36]
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 Well, thankfully the heightened tension is at its worst around investment conferences, and I'm happy to say in the field that it's really business as usual. Our customers, God bless them, they are doing what they're supposed to be doing, which is trying to minimize costs at every step of the way.

 You guys know the financials of the carriers as well as I do. They continue to push hard to try and increase revenue. There's been some challenges to that; so they are turning their attention, as they should, to every expense -- which is not really any different than it ever has been.

 Our results this year have and I think will continue to show that there is a tremendous amount of activity going on. Where they have alternatives, our customers will seek the best low-cost option that meets their needs. I don't think that really should be a surprise to anybody.

 The ramifications of that to us are -- we're probably going to build a few less towers in the US because there are other folks where our customers have options who are prepared to provide price and terms that we don't think are the right return on invested capital for us. And again, God bless them, that's what you would expect them to do.

 But in terms of the basic relationship and the fact that there is such a substantial amount of network already deployed, and the best economics for our customers are always to come back to their existing sites and add -- because they've got so much of the existing infrastructure already paid for -- we continue to think that's going to carry good organic growth for us for a very long time to come.

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 Brett Feldman,  Goldman Sachs - Analyst   [37]
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 So despite all the saber rattling, you haven't actually seen carrier customers take stuff down and put it half a mile away?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [38]
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 No, no.

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 Brett Feldman,  Goldman Sachs - Analyst   [39]
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 Okay. The last question on this. Some of your peers have shown more flexibility with their master leases over the years. You guys have been very disciplined in sticking with a structure that has worked very well for the Company.

 Is there any new information you have about what your carrier customers want that suggests you could change your leasing structure to maybe diminish some of this perceived tension?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [40]
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 We can always agree at different prices; we can always agree on different financial terms. The part of the equation that we found difficult to agree to -- and we're fortunate and I'm thankful that we haven't agreed to it -- is the concept that from a certain point in time what a customer can -- they can freely add and change within a certain amount of square footage or a certain weight loading on the tower. That would have seriously diminished the revenue growth we had in 2013, 2014, probably 2012.

 It's that concept where I think as our customers go-forward they're going to do whatever they can, and they should, to deploy equipment that will increase their profitability. And there's going to be things that we can't even contemplate today, five, 10 years from now; and we believe that we should have the ability to participate in that whenever there is an add or a change. It doesn't mean that we charge in every case, and we don't do that today. But I think to give up a contractual right in advance where you really don't know what the future will bring, but you probably have a pretty good idea that it's an equipment-heavy future, we just don't think is the right thing for us to do.

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 Brett Feldman,  Goldman Sachs - Analyst   [41]
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 Do you think that they are actually holding back business to see if they can get better terms? Or you think they are just taking advantage of a lull to maybe have a conversation they didn't have time to have?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [42]
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 I think it's a little bit of all that. I think where they have the greatest flexibility would be in the newbuild area where they have -- it's a jump ball who they can choose to do business with there.

 But in terms of where you already have locations, and you already have zoning, and you already have high-quality assets, those are the things that really have got us this far. And I would view an unknown contractual entitlement as changing the basic business model that has been such a success for us.

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 Brett Feldman,  Goldman Sachs - Analyst   [43]
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 Let's just talk a little bit about international. It's a smaller business for you. It's a market where -- an area of your business you've invested quite a bit in, particularly Brazil.

 It's been a little harder than maybe you would've hoped in Brazil recently, if you think about the economy in particular. How would you frame the environment, the demand environment for your towers in Brazil right now?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [44]
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 It's medium good. And I think it would be a lot better if the economy were better down there.

 We're pleased with where we are, given where the economy is. We have improved our tower cash flow yield on a constant currency basis to 10% down there, well down from where we started.

 Operations are going well. I think they would go better from a lease-up perspective if the economy were better. But I'm actually pretty pleased given what's gone on down there, and I think that is a function of how much demand there really is for network improvement in Brazil, how much of a wireless market and demand there is and will continue to be.

 I think Brazil is going to be a good market for us for years to come. And we actually may have -- we'll see where the reais ends up for the quarter, and whether it's this quarter or next at current levels -- what has been a multiyear headwind with the real is actually going to turn into a tailwind.

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 Brett Feldman,  Goldman Sachs - Analyst   [45]
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 That's been probably one of the things that's been hardest for everyone, is that just on a reported basis you've had this headwind to deal with.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [46]
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 Right. It's taken away all of our operational results on a reported basis. But thankfully, knock on wood and exchange rates staying relatively the same as where they are today, that's about ready to change.

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 Brett Feldman,  Goldman Sachs - Analyst   [47]
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 Before we move past it, just remind us: What are you playing for in Brazil? What were the original trends, particularly in the wireless sector, that you saw that said, we want to be in infrastructure provider in that market?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [48]
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 A network 10 years behind the US. A healthy population, growing demographics: younger than the US, greater births, greater population growth. A market that is multicarrier, has good regulation from the government.

 And a population that was very much embracing of social media and video, which I think you still have light years to go in Brazil there. The video market, it's really very nascent down there because of the quality of the networks. But they love social media.

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 Brett Feldman,  Goldman Sachs - Analyst   [49]
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 Another area where you can find more demand over time is small cells. And we know that you have looked at the outdoor business, and you've made it fairly clear that it doesn't work for you right now.

 But at the same time you've identified indoor as having economics that you think are favorable. You just articulated what you're playing for in Brazil. What are you playing for in indoor small cells, here in the US in particular? What do you think that opportunity can be?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [50]
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 I think it can be great. I think where we will play will be where we have exclusive relationships, where we have been given the management oversight and ability for the telecommunications needs of a particular building, where we can deploy capital in a -- with some barriers to entry and some advantages that I think are lacking in the traditional outdoor market today.

 The places that we have these relationships, there are some schools, some hospitals, some large buildings. I don't know that it will ever be material.

 And I don't -- I think one of your questions is, well, how much do we need to rely on the development of that to get to our $10 by 2020, and the answer is none. But we will deploy capital there where we think we can make a great return on investment.

 And that's really the reason why we'll do that and not do -- or at least haven't moved forward to date in the outdoor business. It's all about where I believe and the rest of the executive team believes that we can get the best returns on invested capital.

 There is no doubt that small cells are going to be prevalent. They're going to be a top-line revenue driver.

 Some folks like that. But we're much more focused on the growth in the AFFO per share and the return on invested capital.

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 Brett Feldman,  Goldman Sachs - Analyst   [51]
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 So small cells aren't really a meaningful component of your long-term forecast. What about international? How successful do you have to be in Brazil to meet your $10 by 2020?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [52]
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 I think we have to basically stay flattish in terms of our growth. I think I feel good about that given how we've done in a very difficult economic environment. But we don't need any huge growth or addition of new markets to hit those goals.

 We've established some actually pretty conservative portfolio growth goals in our $10 by 2020, basically 5% a year which, given our history, we've pretty much -- we typically beat that. We were about at that level last year.

 So again, not any -- nothing heroic necessary to come out of Brazil or any new market for us to achieve those goals.

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 Brett Feldman,  Goldman Sachs - Analyst   [53]
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 You've already established that US is below historical levels. Brazil is not as strong as maybe (multiple speakers)

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [54]
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 It should be with a better economy, yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [55]
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 But your outlook is, if we stay at these levels, you can meet that long-term goal. So if things get better that would essentially be upside?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [56]
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 Yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [57]
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 Okay. I want to go talk about the portfolio growth, because this is your second assumption that you've made to get to the $10 by 2020. We went back and looked at it, and you've essentially hit or exceeding pretty much every year since 2006, which is when you first said you would try to grow your portfolio 5% to 10% a year; and your outlook is simply being 5% to get to the $10 by 2020.

 How do you think about the most probable way you get at least 5% portfolio growth? And I mean that in a few ways. Do you think you mostly acquire your way there, or do it organically? And how do you think about international versus domestic?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [58]
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 I think we'll continue to build a fair amount of towers, more internationally than domestically. I think newbuilds will be less than a majority of our total portfolio growth. So more bought than built, but still a fair amount built.

 And I think most of the growth over the next four years will likely -- and it's not 90/10, but maybe 60/40 will come in international markets.

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 Brett Feldman,  Goldman Sachs - Analyst   [59]
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 So if you're looking to do M&A as a component of it, and if we just start with the US, we keep hearing there's record valuations being paid for towers. And then you're telling me the developers are giving record good deals to the carriers to build new towers for them.

 Is there anything -- what's attractive out there? How do you decide what you want to buy? Because it would seem like they don't fit your criteria that you've historically used.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [60]
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 Well, we're still -- we're finding, because we've been at this so long and have such a deep network and such a healthy respect as an acquirer in the market, we have a lot of repeat sellers and folks that we do business with. But we're passing on more than we're buying.

 There is a healthy amount of activity out there. It has not yet hit the market in terms of some of these new carrier terms; they haven't been around long enough, and I'm not even sure they are actually being done. They're certainly being sought.

 So you haven't seen assets with those different and less attractive contractual terms come to market yet. And that's clearly -- certainly in our view -- going to have an impact on that.

 So with the lack of supply and the lack of good-quality assets in the US, you have definitely seen some price escalation. When we think the towers are good, high quality, good growth aspects we'll pay, and we'll do those deals. And in many cases, we won't.

 We always have as a sanity check our stock. We know what our portfolio is, what tenants per tower. And there's things going for 25 or greater times tower cash flow that we don't think are nearly as good as what we have.

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 Brett Feldman,  Goldman Sachs - Analyst   [61]
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 Got it. Two more questions about international, and then what we're going to try to do is actually open it up for questions.

 So if you think you might have a question, raise your hand. We'll bring a microphone over. I'll come back in just a minute and see if we have any.

 So, just as an extension of the M&A discussion, international: What's your appetite right now for doing international deals? In particular, you've obviously put a lot of effort into Brazil. Are you beginning to see an opportunity particularly as you delever the balance sheet, to move into adjacent markets?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [62]
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 Well, we just went into Chile. We have about 100 towers in Chile; and over the next couple years we have some arrangements in place where we think that that number will grow to maybe as many as 300.

 We like that market. It's a regulated market. It's hard to build towers there.

 There's not really much competition. There's some competition down there, but it's not a flurry of lower backed and lower appetite developers.

 We have done a little bit of work and expect to do more in Colombia. So we'll slowly, I think, expand throughout the South American continent.

 We're evaluating Argentina now. Argentina has a lot of the attributes that attracted us to Brazil. It's got a lot of concerns from a currency perspective and how you would denominate your contracts on both the revenue side and the expense side; so we're looking at that.

 But we're feeling very good about continued expansion in the Latin American markets, and those are markets that we do very, very well in. We've got a long history there. They are easy to get to from Boca Raton, same time zone.

 And then we will and we have been looking outside of those markets. We haven't done anything outside of the Western Hemisphere, but we'll continue to look and see if we can find the right opportunity.

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 Brett Feldman,  Goldman Sachs - Analyst   [63]
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 Because if you stay in the Western Hemisphere, particularly in Latin America, obviously you can leverage a lot of investment you've already made in teams and back-office. It would seem that deciding to go further away would be a not insignificant decision.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [64]
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 Yes. It would be a carefully thought-out decision with compelling reasons to do so, if in fact we chose to do that.

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 Brett Feldman,  Goldman Sachs - Analyst   [65]
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 Okay. I'm going to move on to your third assumption, which is a short one, and then we'll see if there's questions -- because it does relate to international, which is that you're assuming from this point forward FX headwinds would not be as severe as we've seen recently. And of course we've seen fairly severe headwinds.

 So I guess that's two questions. One, just remind us where we are on the CPI escalators. That's your key hedge. They reset every year, I believe, to help you keep up with (multiple speakers)

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [66]
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 Yes, they reset a couple times a year based on the date that we bought the portfolio. I think we have three reset dates in Brazil.

 And the current -- it's a trailing ICPA is the name of their index, and I think the current one is 8%-ish. But I don't think we reprice anything until November or December, so it will depend on what the ICPA is at that time. That will set the base for the escalation going forward.

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 Brett Feldman,  Goldman Sachs - Analyst   [67]
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 There could be a few hundred basis points of uplift in the escalator relative to this year.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [68]
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 Yes. Yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [69]
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 Is that going to be incorporated into your guidance when you give it? I guess you'll be giving guidance later than usual.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [70]
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 To the extent it's known, sure. Yes.

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 Brett Feldman,  Goldman Sachs - Analyst   [71]
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 Okay. Then the other one is just longer-term. You've now experienced the downside of FX volatility on some of the acquisitions you've made. Have you made any adjustments in terms of how you think about the risk profile of international assets and what you're willing to pay as a result of this experience?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [72]
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 We have. It's in fact been a limiting factor in expanding more than we have to date. We've gotten comfortable with that issue in Chile in terms of structuring contracts and pricing and looking at the returns.

 What it really does for us, Brett, is it causes us to -- in high currency volatility markets, causes us to solve for higher returns on investment. And given the large amount of capital around the world chasing towers, in some cases our heightened investment requirements -- which are because we think you need that for the currency -- has or may cause us to not be as competitive on those deals.

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 Brett Feldman,  Goldman Sachs - Analyst   [73]
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 Just like we're seeing in the US new developers come in and offer terms that we haven't historically seen, have you seen any of that in any of the international markets that you've entered into?

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [74]
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 Not so much terms as I think just mispricing of assets.

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 Brett Feldman,  Goldman Sachs - Analyst   [75]
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 Okay. All right; I will stop now and see if we have any questions. You can just raise your hand and please make sure you wait for the microphone. Very, very shy crowd today. All right, well I'll keep going.

 I want to talk about your fourth assumption that gets you to more than $10 per share of AFFO by 2020, which is that you would execute data refinancings using the forward interest curve. So essentially you're not assuming that there will be a meaningful problem in terms of refinancing your debt, even if rates were to potentially go a bit higher.

 You've obviously really benefited from a low interest rate environment. I think you just did a deal of just under 3%, secured yield of under 3%.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [76]
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 We did. And we also just did a $1.1 billion high-yield deal at 4 7/8% that we used to take out $1.3 billion of 5.75% and 5 5/8% debt. So you're going to see a material improvement in interest cost as we move into next year.

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 Brett Feldman,  Goldman Sachs - Analyst   [77]
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 How sensitive is your long-term forecast to that interest rate assumption? Because the working assumption a lot of investors have now is that we will likely see interest rates trend higher from here.

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 Jeff Stoops,  SBA Communications Corporation - President, CEO   [78]
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 Well, the question will be: Do they trend higher than the forward curve? Because the forward -- we have built in step-ups in interest rates as we move through the 2020 period. We only have about four refinancings, and they are all in the CMBS market, that will come due during that period of time.

 So we have -- it's not huge amounts of financing that are necessary between now and then; but some. And I think you'd have to see rates 100 basis points or higher above the forward curve, which already assumes an increase in rates when we get to those refinancing dates; and clearly it's going to have a direct impact on AFFO per share if you're paying more than your assumptions.

 But we feel pretty good that we're going to not get to that point in what feels to me -- and whether they raise the Fed rates 25 basis points or not -- it continues to, and we've said this now for some time, it continues to feel like we are in a lower-for-longer interest rate environment.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [79]
------------------------------
 The reason I brought this up is it actually applies to really two of your assumptions. One is that you would have existing debt rolled over on the rate curve that you talked about; and then, of course, another one is that you would really not see your leverage go meaningfully lower than where it is now. I think you talk about being in a range of 7 turns of net leverage; you're at about 7.5 turns today.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [80]
------------------------------
 Our $10 by 2020 assumes that we're just below the low end of our range as we exit 2020.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [81]
------------------------------
 So there would be some effective degree of debt paydown over that period of time, which would mitigate any increase in rates.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [82]
------------------------------
 Yes.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [83]
------------------------------
 Is that a fair -- okay, well, actually I think it's pretty clear. So you're at just above the high end of that range now. I think you were at 7.6 turns, your target is 7.5.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [84]
------------------------------
 And the assumptions take us to just below the low end by the end of 2020.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [85]
------------------------------
 So do you think about stable demand environment, improving currency, CPI escalators, iDen churn going away? All of that would certainly suggested that the reported rates of growth in the business will be improving relative to what we've seen this year which has been a relatively flat year, which would suggest that the business is going to begin delevering a bit more quickly as we go into in 2017 and beyond. That's aligned with your expectations right now?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [86]
------------------------------
 That would be true if we didn't buy any assets or buy our stock back. But those are the priorities for use of capital.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [87]
------------------------------
 So that gets to the next question which is you look at --

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [88]
------------------------------
 A critical part of our value creation over the years and a critical part of the $10 by 2020 is to continue to use leverage to buy assets, which continues to be our first choice, where we can find the right deals at the right returns; or buy our stock back when we believe it's undervalued.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [89]
------------------------------
 If we just think about all the things we've discussed so far, the market for towers, the private market has been a little bit mixed; the carriers have been pushing back, so you don't want to build as many.

 Your stock looks like it's probably closer to the high end of where you would allocate capital. And if you are delevering the business more consistently going forward, it would seem that your capacity to make that type of reimbursement for your shareholders would be growing. Is that fair?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [90]
------------------------------
 As we move forward, there will be increasing -- the plan calls for increasing amounts of discretionary capital to be deployed.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [91]
------------------------------
 So what would you have to be able to articulate to shareholders over the next four or eight quarters -- several quarters of time -- to say: I know buybacks look attractive, but we did something else? How are you thinking about the accretion you would prefer to see out of an M&A event as opposed to the type of accretion you would see from a buyback, which has the benefit of being immediate but not necessarily incrementally accretive over time?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [92]
------------------------------
 It will be incrementally accretive over time because you're buying in a share of stock that has associated with it an increasing, growing AFFO per share. It will all depend on how good the M&A deal is.

 And what people would expect to hear, and what I would need to say to justify it, is: This M&A expenditure is a better use of capital than what our current opportunities were to buy our stock back. And there are a number of reasons why you would say that. Obviously, AFFO accretion is first and foremost; but revenue growth, EBITDA growth, adding new assets to finance off of -- all those things I think have value.

 I think we've said for many, many years that in a jump-ball case where you could actually achieve the same AFFO per share through M&A or through per-share repurchases, we would prefer the portfolio growth, and that continues to be the same today. And that's how we make our capital allocation decisions every day.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [93]
------------------------------
 Just for the sake of completeness, if I didn't say it, this assumption which we've touched on is the leverage assumption; healthy stock repurchases, which we have covered; and no dividend.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [94]
------------------------------
 Correct.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [95]
------------------------------
 And the reason I bring it up, and you are obviously not a dividend payer now, but you have expressed an expectation that you will be converting to a REIT during this period of time.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [96]
------------------------------
 Yes.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [97]
------------------------------
 So I was just hoping we could just get an update on your thinking in terms of when you determine that it is the right time to become a REIT.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [98]
------------------------------
 Yes. We're driving that decision primarily off of when we go positive or we generate positive earnings and profits, which we would expect sometime in late 2017. So I would further refine our prior comments by saying that I believe it's likely that we elect to become a REIT sometime in the next year.

 We're ready to go at any time. We've been operating as a REIT now for at least four quarters, maybe six.

 And that would be to avoid the need to distribute out the earnings and profits, again because consistent with our current views around capital allocation, we think it's better to keep the cash inside the enterprise because we can compound it better. But then after that point where we would elect REIT status, our current models show that our NOLs are such that we would shield any dividend requirement through the end of 2020, which is why we assume -- the assumptions on our plan $10 by 2020 presume no dividends.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [99]
------------------------------
 Have you made any decision as to how far in advance you think you should notify your shareholders that that decision to become a REIT has been made? I think you can technically wait until you file your tax returns and say: Ah, it turns out we qualify; we're a REIT.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [100]
------------------------------
 We haven't. We haven't.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [101]
------------------------------
 You have made the decision on when you're going to notify?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [102]
------------------------------
 No, we have not. Not made that decision. We have not made that decision.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [103]
------------------------------
 Okay. Is there any -- what would have to change to make you decide that, we're a REIT, let's pay a dividend? I mean, that seems to be a big part of the investment thesis.

 Are you worried at all that by going into that asset class without a dividend it could somehow diminish interest in your stock? Or is that too shortsighted for you right now?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [104]
------------------------------
 You may not like to hear this but we've run a variety of models. If in fact you end up at a depressed multiple because you're not paying a dividend, and you buy more of your stock back, you actually come out much better on AFFO per-share basis in the future.

 We've run the Company ever since I've been there with a high degree, in my opinion, of financial modeling integrity. And the models are very, very telling as to -- by staying levered under the assumptions we have and the interest rate environment that we have, that is a more value-creating opportunity long-term for our shareholders to be buying back our stock.

 Now clearly, once we elect to be a REIT -- and we've talked about that is going to happen at some point -- there will be some point after that that we will be paying a distribution. But I'd like to see us with the highest possible AFFO per-share and cash flows going into that period of time.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [105]
------------------------------
 I'm going to ask you a question I haven't asked you in a long time, because it hasn't really been a topic for a long time. But there was a period where large and particularly public tower companies merged. We've been at three for quite a long time.

 What do you think would have to change to cause the existing operators to look and say: You know, there is in fact an incremental benefit associated with combining our businesses? Because it hasn't seemed like there really was one for a period of time.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [106]
------------------------------
 Well, I think the -- I mean the industrial logic still applies. You'd have greatly reduced back-offices, great synergies.

 But really for us we're focused on this midteens compounding growth and AFFO per-share. That's the track that we think is very attractive.

 And I think it was never really about operational reasons not to do it. It was more that there was no particular need from a value-creation perspective. And we continue to focus every day on providing and generating as much value as we can as an independent Company.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [107]
------------------------------
 So basically if you think you can compound at midteens on your own, that would effectively be the high hurdle that a deal would have to clear for you to say: Maybe there is a different course of action?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [108]
------------------------------
 Well, I would think that this is what you would want us to do if we were ever presented with that opportunity. If we feel that strongly about our $10 by 2020, which we do, that would be the plan against which other options should be evaluated.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [109]
------------------------------
 Okay. I want to do one last call for questions from the audience. All right. I'm going to squeeze in my last question then, and it's a very basic one. I've asked several people at the conference this, and it's simple.

 When you're coming back here next year, what do you think we're going to be focusing on?

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [110]
------------------------------
 I think you're going to be focused on a renewed appreciation of the stability and the predictability in the business. And a year from now, we'll be one year closer to our $10 by 2020 goal, and we believe you'll see the progress that's been made.

 Actually to those who think that's too far away to think about and take seriously, I think that's going to start to change.

------------------------------
 Brett Feldman,  Goldman Sachs - Analyst   [111]
------------------------------
 Great. Jeff, thanks so much.

------------------------------
 Jeff Stoops,  SBA Communications Corporation - President, CEO   [112]
------------------------------
 Great. Thanks, everyone.




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