SBA Communications Corp at Citi Global TMT West Conference 

Jan 10, 2018 AM EST
SBAC.OQ - SBA Communications Corp
SBA Communications Corp at Citi Global TMT West Conference 
Jan 10, 2018 / 05:30PM GMT 

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Corporate Participants
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   *  Brendan T. Cavanagh
      SBA Communications Corporation - CFO and EVP
   *  Mark DeRussy
      SBA Communications Corporation - VP of Finance

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Conference Call Participants
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   *  Michael Rollins
      Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst

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Presentation
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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [1]
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 Our next fireside chat discussion. We do have disclosures available at the registration desk. And for those of you on the webcast, I'm Mike Rollins, I cover telecom and communications infrastructure services here at Citi.

 It's a pleasure to welcome back SBA Communications to the conference. Joining us today is Brendan Cavanagh, Chief Financial Officer; and Mark DeRussy, Vice President of Finance. Thank you both for joining.

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [2]
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 Yes, great. Thanks for having us, Mike.

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Questions and Answers
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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [1]
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 Great. Well, maybe just to kick us off, it is the new year. So maybe can you just give us a sense of your operating and strategic priorities for 2018?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [2]
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 Yes, sure. Thanks again for having us. It's nice to be out here with you again. Really, our priorities are very similar to what they've been over the last couple of years. I think as we enter into 2018 in particular, we look forward to taking advantage of the more robust U.S. operating environment that's out there and maximizing the organic growth on not only our U.S. towers, but also our international towers. In addition, we expect to continue to keep our same leverage targets in place, maximizing our balance sheet and raising capital as a preferred issuer in many of the markets and investing that capital, as we've done over the last few years, with an eye towards primarily expanding our portfolio. That's been our goal over the last few years and remains our goal again going into this year, to expand our portfolio 5% to 10% over the course of the year in terms of tower count. We expect to be able to hopefully do that again in 2018 as we did in 2017 and take advantage of our status as a preferred issuer and raise money at cheap rates, hopefully, notwithstanding today's increase, and put that money to work in good quality assets, as well as share repurchases. Over the last couple of years, we've obviously done a mix of both asset acquisitions and stock buybacks and I think you'll continue to see that being our MO as we go forward. So those are the primary areas. We'll, of course, continue to try and take advantage of buying the land underneath our towers and looking for opportunities that others don't see in terms of assets. But it's pretty much business as usual.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [3]
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 So maybe starting in reverse order. So in terms of the expanding the portfolio and trying to find some of those opportunities that others might miss, can you frame for us how you're looking at the domestic versus the international environment? And I think there was a point in time where there -- maybe a few years back, where there was a little hesitation to expand internationally. So can you frame for us what you see now as compelling, both domestically and globally?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [4]
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 Yes, I mean, our goal -- our first preference, all other things being equal, is to expand our portfolio in the U.S. I mean, we still see the U.S. tower market as, by far, the best in the world, the dynamics around that market, the exclusivity of the assets and obviously, the operating environment with the customers, the carriers, is unlike anywhere else in the world. So that would be our first preference. However, the reality of the situation is that there are not as many opportunities for additional assets here in the U.S. Carriers aren't building out as many new sites. They're doing a lot of upgrades and overlays and rolling out new spectrum bands, which hits a lot of their existing networks, which we'll talk about, I'm sure, in a minute, leading to a lot of amendment activity. But in terms of new sites being built, there's just not as many of them. And so what happens is the sites that are out there and available for sale, obviously, are very competitively bid and the pricing is very, very high. And so we're going to remain disciplined as we look at those assets. And as we've gotten bigger, we have a lot more capital to put to work and it's unlikely that we're able to use all that capital on domestic assets. So that is our first preference, but it's probably limited in terms of its opportunities. So that leaves us with international and share buybacks being our other 2 primary sources of material capital allocation. We would prefer to add assets as opposed to buying back shares if the value return proposition is relatively equivalent. But again, we're going to be very targeted. And internationally, we've focused historically on Latin America or Western Hemisphere markets. We are open to going to other markets, but really, it is about the specifics of that particular situation, what's the value, the price potential on those deals, what are the dynamics around the particular market that we're going into, what does the growth look like, all the obvious things that kind of go into the assessment. And we've had some success. Last year, we added a decent number of sites internationally and I expect that we'll probably do something similar this year. But it's going to be a matter of the opportunities and the pricing that's available. And if we don't see that, then share buybacks is a good alternative for us and has obviously worked out well over the last couple of years.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [5]
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 So the second point you had was on the leverage targets and retaining the same leverage targets. Can you review for us where you see that target leverage range? And as you look at using the capital that's available to you in 2018, is there a pause on buybacks while you try to figure out the M&A side of the equation? So buybacks might be more of a back-end weighted opportunity? Or is it something that you kind of do it quarter by quarter and try to stay pretty smooth with that?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [6]
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 Yes, well, first of all, our leverage target is the same as it's been now for almost a decade, which is a target of 7x to 7.5x of net debt-to-LQA adjusted EBITDA. And we set -- just for everybody's benefit, I think a lot of you know this, but just to be clear on why that's our target and why we set it there, we've always felt that you could theoretically lever the business higher and generate greater returns than that, but there is a point at which you need to balance risk as well. And so after kind of the fall of 2008, when the market had its dislocation, we settled on 7x to 7.5x. And the reason was that we've always been able to and expect to fully always be able to finance our business with secured financing at a level of 6-ish times, 6x to 6.5x. And we know that at any given point, we can delever a 1x to 1.5x in the course of a year organically. So that means at any point in time, if we're levered in that 7x to 7.5x range, we know that within a year, we can comfortably move into a level where we don't even need unsecured debt. So that's why we target at where we do, as an aside. But -- so within that target range, we do look to obviously invest, as we talked about, into new assets or stock buybacks to maintain that leverage level. We don't have a goal of trying to be smooth throughout the year in terms of share buybacks. It's really more a function of just kind of seeing where we are at any given point in time in terms of the other opportunities for assets. So you might have a period where it appears that our leverage has dropped off and we've not maintained that target. Well, we may be looking at different opportunities and so we're holding capital aside in order to potentially put it towards those opportunities. They may or may not happen and then you subsequently go back and maybe you buy back shares the next quarter in a bigger way. So it's never going to be exact. We've tried to be somewhat opportunistic in our share repurchases over the years. We still think that we're very much a good buy. We really thought we were a good buy if you go back a year or so ago, and fortunately, that's worked out very well. But we'll be opportunistic, because unfortunately, as stable as our business is, there is some amount of volatility in our stock price, which doesn't really fit with the stability of the underlying business. And so while it can be a little bit painful at times to see it move up and down, it does allow for opportunities to actually buy shares back opportunistically. And so we'll continue to do that to some degree, but we're not going to be so cutesy that we miss the opportunity to buy altogether.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [7]
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 And so maybe getting back to the first point that you described, which is taking advantage of a robust operating environment. Can you walk us through the outlook and how you think about what contributes for 2018? And are there certain things that are also happening that just might take longer to come through the numbers?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [8]
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 Yes. Well, we obviously haven't given our guidance yet for 2018 and we'll be doing that on our next earnings call and so I'm sure we'll have more color at that time, plus we'll have another 1.5 months between now and then to have even more information at our fingertips to sort of guide how we think about that. But from a general standpoint, obviously, there is a lot of activity building in the U.S. specifically among our customers. I think a number of them are fairly obvious to folks now, that are incremental to what we've seen before. So you have AT&T rolling out FirstNet, in addition to obviously deploying their WCS and AWS-3 spectrum. We are starting to see activity with AT&T around FirstNet. We've had amendment applications come in. We've even signed a few amendments. I would say that it's at the fairly early stages of that, but it is building and we feel very confident that we will start to see more and more of that activity as we move through the year. The other one that is somewhat incremental to previous years is Sprint kind of revisiting and returning to network spend and investment. We are seeing activity levels with them increase as well. And we feel confident that they definitely will be spending on their networks, certainly well beyond what they've done over the last few years, which wasn't much. And so those are both incremental opportunities as we move into the year. The question is really more -- less about whether it's happening and if it's happening. It's when it's happening. That's always the key question, is what's the timing and when does it start to affect your financial statements. And I think we'll have a better, clearer view that we'll put forward when we give guidance, but this will be something that probably progresses throughout the course of 2018 and you'll see it build, in all likelihood, as we move through the year. And it probably benefits next year, actually, more, because you will have activity that as it happens now, there's some delay between when stuff gets signed and when it starts to hit your financial statements, when they actually start paying. And so that progress will lead to a steady climb, but ultimately will be probably more robust in terms of its impact to next year.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [9]
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 Are the conversations that you're having with the wireless carriers broadly leading to more of a discussion of a broader MLA agreement? Historically, you've been very selective about doing large-scale MLAs with your national carrier customers. Can you give us a little insight to maybe if this is going to be similar to your history and practice or whether there might be an opportunity to do something different with your carrier customers this time?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [10]
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 Yes. I mean, we've never been opposed to an MLA structure and we've done them in the past. I think the difference was -- with us is really more about the type of MLA. We've never been comfortable with an open-ended MLA, where equipment rights were not defined, where anything can be done for a set price. That's what we weren't comfortable with in the past and we would not be comfortable with in the future either. So I think our customers -- I don't think it's necessary to do an MLA. I don't think there's any efficiency gains to be had or anything like that. We've been doing this for a very long time. We have very good working relationships and mechanisms and processes in place with our customers. So I don't think that there's any administrative gains to be had. It's really just a matter of whether the definition of it is valuable to them as well as to us. And if we can come to some agreement and that's what they would like to do, we're open to doing that. Whether that happens or not, we'll let you know. But I don't think that it, in and of itself, is necessarily going to be a deciding factor in terms of how much or how valuable these projects are to us.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [11]
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 And are you seeing, in these negotiations, any tension in terms of the way escalators are structured, term or the cost of the amendments, especially for some of the higher-cost towers that might have just emerged because of the history over which these companies have been investing and the amount of equipment that they've put on some of these towers?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [12]
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 Yes. I mean, there's always some amount of tension, but that's really not that new. I mean, forever, since the first lease we signed, carriers obviously would prefer to pay the lowest price they can and we'd prefer to charge the highest price we can. But we tend to, I think, typically agree on levels that are appropriate for the value of what's being provided. And that really isn't any different. There's not been a lot of pushback on the escalators. I think that it gets some attention, but it's not -- when it gets right down to it, it's one factor that figures into overall valuation when you're pricing one of these agreements, even an individual lease agreement or amendment agreement. And if the escalator was going to be lower, well then, the upfront price is probably going to be higher, because there's a certain value that we think is appropriate for whatever it is that they're using the tower for. And there might be some give-and-take in how it's structured, but at the end of the day, we're going to hopefully kind of triangulate around what that value proposition is. We've not had really any changes to our escalators in the U.S. at all and I don't foresee that being the case going forward.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [13]
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 And on the international side of the business, what's happening there? If you could talk about the process that Oi, one of your larger international customers, has been going through and help us frame the growth opportunities in the international markets.

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [14]
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 Yes. Well, it's been -- it's actually been pretty good as a whole. We've seen -- our biggest international market, of course, is Brazil and we've actually seen pretty nice organic leasing growth down there over the last couple of years and that's in a time period where the economy has actually not been very good, it's still been pretty steady. And I think that actually bodes very well for us, because as the economy starts to improve, and we're seeing that happen, we expect that we'll actually start to see probably potential for improved leasing activity in Brazil. We've seen good results in our other markets as well. Central America as a whole, we're in 5 markets there, has been tremendous over the years and continues to be very, very strong in terms of the organic leasing activity we've seen. So as a whole, it's been very good. We deal primarily with a couple of specific customers in these markets, our largest customers being Telefónica and Claro, in general, across most of our Latin American markets. So good credit quality, very active and competitive carriers. So it actually sets up very well. To address your reference, I believe you were referencing Oi when you were talking about one of the customers that had an issue. In Brazil, as I'm sure most of you know, Oi had filed for bankruptcy protection a little over 1.5 years ago. And really since that time, it's been business as usual with them. I mean, they've paid all their rents. We've actually signed some additional agreements with them throughout the process, amendments and so forth. So from an actual operating standpoint, it's not been -- not really had much of an impact. The positive news is that just recently, the restructuring plan was approved by the creditors a few weeks ago. And just yesterday, the judge has signed off on that plan as well. So it looks like they've got a plan now that will allow them to come out of bankruptcy and return maybe more to business as usual. But I don't expect that it has a huge impact on us. On the positive side, we should actually -- it looks like we'll probably be able to recover the amounts that were owed to us prefiling that we took a write-off for back in 2016 over a period of the next several years. But it's not that material, but it is a positive that looks like we'll even be able to get that recovered as well. So we feel good about it. I mean, the one side note I'll make on it is that I think it was actually less impactful to us from the standpoint that they were our largest tenant down there and they're on virtually all of our sites, and as a result, they were never the ones we were counting on for additional leasing activity because they were already there. So most of the leasing activity was going to come from the other carriers in the market and that's the way it's been playing out. So I don't think that it really had any impact on our organic growth down there.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [15]
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 And is there a way that you think about the longer-term growth of the international market, just in percentage terms versus what the domestic business will operate at?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [16]
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 Yes. I mean, we expect it certainly to grow faster on average. Every market is a little bit different. And even as good as Central America has been, it's becoming more mature in some of these markets, so of course, eventually the growth starts to slow. But yes, it's generally been, I would say, excluding escalators, because escalators sometimes muddy things, because you have a lot of, particularly in Brazil, you have CPI-based escalators, so they can move up and down, but if you look at it excluding escalators, it's growing at a pace that's probably 50%, 60% faster. I think in Brazil over the last 3 years, our non-escalator growth has averaged around 4% down there. Of course, when you layer on the escalators, it's been much, much higher, versus the U.S., which has been closer to 3%. So over -- and I think if that expands in Brazil the way we're thinking that it will as the economy recovers, you'll see that relationship possibly expand a little bit, too.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [17]
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 And that's net of the churn?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [18]
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 I'm sorry?

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [19]
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 That's net of churn?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [20]
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 Well, yes. Internationally, we really have almost no churn, so basically yes.

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 Mark DeRussy,  SBA Communications Corporation - VP of Finance   [21]
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 The other part of international that's attractive to think about in terms of growth, in addition to what Brendan said, is the horizon, right? There's a much longer horizon where we see growth because a lot of these markets are 5, 10 years behind the U.S. in terms of some of them are still in the 3G world, some of them are starting the 4G world. And there's a past -- there's a process in place that gives us visibility that they are going to do what the U.S. has done.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [22]
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 So as we're talking about domestic and international, investors seem to increasingly be comparing the growth in returns of where tower companies can deploy their incremental capital between international markets, small cells and fiber. How does SBA think about which business has the better return on capital over the next 5 years? Of course, you've been invested and are still investing in a number of these different opportunities.

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [23]
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 Yes. You can obviously tell from what we've chosen to do that we've generally preferred international towers as opposed to small cells or fiber. And it's really a function of the fundamental nature of the business that you're investing in. Obviously, it's all about returns. But that fundamental underlying premise within the business ultimately informs what those returns will look like over a long period of time. And when it comes to the fiber/small cell/DAS business, the lack of exclusivity in most of those cases has been kind of the key factor that has led us sort of to move away from that. While I'm sure that it's a good business and it will be a fundamental part of wireless network deployment over the coming years, we never -- we don't deny that, that's probably the case, particularly in dense urban areas. It's really a matter of what do we bring to the table that allows us to generate the kind of returns we can get in our macro business. And I'm not sure that if you have assets that are not exclusive in nature, which these are really not, you're in more of an RFP type of business. We're afraid that it actually isn't -- the synergies are not really there, but dis-synergies perhaps exist, where you now have a situation where your pricing and your ability to be leveraged on your exclusive business, your macro tower business, is now influenced by the fact that you are -- have made an investment in another business which you're desperate to get volume on. And so we don't like that dynamic and we've not been comfortable with it, as well as other factors. We don't really care for the high overhead and we're not totally comfortable with the technology risk down the road, just a number of things that have not made it as attractive as the tower business. And so I don't know that it's necessarily a comparison between that and international towers, but we've chosen to certainly focus more on international towers than small cells. And I think on the international tower side, I wouldn't paint that with too broad a brush to say international towers is -- there's a lot of different locations and a lot of different situations that are out there. To buy towers in India is different than buying towers in Europe. It's different than buying towers in Latin America. And so you have to look at each situation on its own. And they can all be good if acquired at the right valuation point. And it's not the same across all of those markets. So for us, it's really a matter of identifying opportunities at a valuation point that we think is appropriate to generate the kind of returns we want. And we will do it if we see that, and if we don't, we're comfortable pushing back from the table. We don't have to be the biggest.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [24]
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 Are there any churn risks to highlight in either the domestic or international markets as you continue to survey the previously completed mergers, some of the regional deals in the U.S., network cleanup, et cetera?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [25]
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 Yes, I don't think there's anything really internationally. Domestically, really it's stuff that we've been talking about for a while, what's left of it. So you have kind of legacy Metro, Leap, Clearwire revenues. I think on our last earnings call, we said at September 30, we had about $28 million of annual revenue among those 3 that we expect will probably churn off over the next couple of years and that may even actually be less than that when it's all said and done. But that's sort of the exposure there. And that's been coming down as we've moved through the year. It was actually heavier in the early part of last year. Beyond that, we have a little bit of iDEN exposure that's left. We've talked about, I think before, that there were some fourth quarter '18. It's about $1.5 million of quarterly revenue that would churn off at the end of this year in October of '18. But beyond those things, there's really nothing out there that's apparent to us that would be beyond the normal kind of churn that we've seen throughout our history. And if you look in -- we provide in our supplemental materials each quarter and have a breakdown of our sort of same-tower churn rate and what's coming from Metro/Leap and Clearwire, what's coming from iDEN and what's coming from other stuff, and the other stuff has been tracking around 1%. In fact, it's been below 1% recently. And as we deal with those other items and they kind of happen and then they're gone, I would expect us to be somewhere in that 1% range as sort of more of a normal level going forward.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [26]
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 And just to level set, so you mentioned it was $1.5 million per quarter from iDEN in the fourth quarter, so $6 million annualized. The $28 million, that's an annualized number?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [27]
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 Yes, that's an annual number. That was back in September 30. I won't share with you now what the number looks like. But when we give our next earnings update, we'll give you an updated number and that will be much less, actually, than that at that point.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [28]
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 And so maybe taking a step back, I think one of the things that investors have been trying to figure out, if you look at the different things that can happen over the next 3 years domestically, so new spectrum deployments, antenna upgrades that can come, densification and just the category holistically investing. How do you frame how good -- if you want to look at it on an industry level or if you want to look at it on a multiyear level, but how would you frame where the industry growth rate is today, domestic, organic and where it could peak at some period of time? Because I think it's the sensitivity in the scenarios that we get a lot of questions about and just trying to frame how this cycle might compare to the last 4G cycle that we went into.

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [29]
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 It's hard to say absolutely because we're still in some of the early stages of what some of these things look like or might look like. But I don't think it's going to be what it was back in 2013, early '14, that time frame, in terms of the 4G growth. I mean, that was -- we were growing organically in the U.S., I think, at like 14% -- 13%, 14%. It's not going to get back to that level. That was sort of a -- felt like a little bit of a once-in-a-lifetime type of time frame. There was some extreme investment levels going on, particularly by one customer at that time. I do -- it certainly should be better, obviously, than it's been, because you'll have all 4 carriers active. You'll have -- I touched on earlier a couple of the incremental things specifically, such as FirstNet and Sprint coming back to the table deploying 2.5. So there's no question that we'll see an increase in the organic leasing activity that we had. It's hard to put a number on where it peaks out because you have to also remember that as we get bigger, every period that goes by, when you look at it in terms of percentages, you have to do that much more to keep the same percentage. So I'm going to stay away from trying to pick a number, but certainly an increase over what we've seen is a reasonable expectation.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [30]
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 And just the exit rate based on guidance for 4Q '17, what's the -- could you level set us what that organic guidance implies for the domestic business?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [31]
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 Specifically to the U.S., the fourth quarter guidance implied a gross organic growth rate of 6.9%, I believe, 6.8% or 6.9%, just under 7%. That's before churn, though. So -- and that's a little bit below where it was in the early part of the year and basically that would be a similar steady amount of leasing activity towards the end of the year that we had at the beginning of the year last year. But it comes down slightly because the base is growing. So I think there's opportunity, certainly, to see that move higher as we get to the end of next year and into '19.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [32]
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 How does tax reform affect capital allocation, future dividend policy?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [33]
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 Well, in our particular case, it doesn't have much of an impact at this point. There are certainly some indirect impacts. Obviously, it's been very positive and will be very positive for our customers, which I think is ultimately positive because some of that excess capital that they have available, we would expect to see invested into the network and so we will benefit through that. In terms of the direct impacts though, the tax reform, our situation is a little bit special in that we're a REIT with a large amount of NOLs. We're not paying dividends today so we won't be limited in our ability to continue to use the NOLs. And we're continuing to study all the ramifications of the tax reform bill. But right now, I don't think it's going to be particularly material in terms of its impact on us. And as a result, I don't think that it will influence the way we think about our future capital allocation decisions.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [34]
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 And so with obviously, the lower federal tax rate on a C Corp., you're a REIT now, so is it your view that this doesn't extend the life of these NOLs because you're already into the REIT structure? Is that the thought process?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [35]
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 Well, it's not so much about being a REIT. I mean, the NOLs are really based on the amount of taxable income that's generated -- they're gross. The rate doesn't necessarily change the amount of the NOLs you have, but it changes maybe their impact to the end, or what you would have otherwise paid that you avoided. But the absolute time frame that we have, the runway that we have to use them, really isn't impacted by that change in rates. So we expect that to be very similar to what we had going forward. As a real estate company, we are fortunately able to avoid the interest deductibility caps, which is important to us because we're obviously highly levered. And so we don't see any material changes. There are small things that probably affect us, but nothing material. And so I think our current thinking is that the plan as we've talked about it in the past, to continue to use our NOLs up before we would become a dividend payer, remains intact. We probably will be into 2021, under our current projections, before we would use up our NOLs. And at that point, we would have a dividend obligation and I think, hopefully, the goal is to pay the biggest dividend possible, because we will produce the most AFFO per share possible.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [36]
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 And just on, just accounting real quick. There are some accounting changes coming over the next -- for '18 and for '19. Are there any meaningful impacts that you'd want to flag for investors?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [37]
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 No, I think the biggest accounting change that's going to affect us, there's obviously a lease accounting change. As a business that is heavily tied into leasing, there will be some impact, which would be on our financial statements in a year from now, I guess, or really, the 2019 financial statements, I guess. That -- there are still some specifics that have to be worked through on that, but the biggest change that comes as a result of that is that you basically end up having to put your liability, in our case, associated with our ground leases for our future ground lease payments that we're obligated to, would end up on our balance sheet as a liability. So you have a big debt, I'll say, "debt item" that would now be on the balance sheet. But as you get to looking at cash flow and at all of our operating metrics, it really shouldn't have any impact.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [38]
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 I have a few more questions, but if anyone else wants to ask a question, you could light up the button on your microphone and we'll get to you. So if we take your commentary kind of altogether and you think about the aspiration and goal that the company has set to get to $10 per share of -- is it greater than $10 per share or to $10 per share in 2020?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [39]
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 Yes, at least $10 of AFFO per share by 2020.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [40]
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 So can you talk about your confidence, based on what you see operationally, in getting there? And if the environment is more robust, particularly in the U.S. business, does that create significant upside opportunities for that goal?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [41]
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 Yes. I mean, we feel very confident in our ability to achieve that goal, as we sit here today. There are factors that influence it, one of them you mentioned certainly can positively influence it, which is increased organic leasing growth. There are others that are risks, interest rates rising. We think we have that pretty much fully covered because we've assumed increases in underlying benchmark interest rates within our model. But if we didn't account for those adequately, it can have an impact. And the other factor that can have an impact, frankly, is actually valuation on our stock, because the base model assumes a lot of stock buybacks as a default use of capital. And the interesting thing is the higher the price is, the less shares you can buy and that actually does have an impact as well. But sitting here today with everything the way that it's lining up, we feel very comfortable in achieving that goal. So we'll see whether it's higher or lower based on a couple of those factors, but I -- we feel comfortable that we'll get there.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [42]
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 How much time is the company spending on some of the kind of emerging growth areas for towers like the idea of the mini data center at the base of a tower or looking at shared backup power generation?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [43]
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 Yes, I mean, we are actually spending some time on particularly the edge data centers. I think that it is an opportunity, although I think it is probably several years away from really being a true practical opportunity of any scale. But we are talking to anybody that's involved in that right now. We are involved with them in some form or fashion and we're continuing to explore those possibilities, but I don't think that's a near-term item. But it's good to be in a position where you are the key locations. So having been in the real estate business for all this time, location matters. And I think as you extend it to these particular uses, it continues to be important to be located where we are, and in this case, it's at the edge in the network.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [44]
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 What do you make of the valuations right now internationally and domestic, just in terms of some of the deals that have traded? And do you ever get to the point where, based on where multiples are, in part or in whole, you look at being a possible seller than a buyer?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [45]
------------------------------
 Yes. I mean, we've been in that situation at times over the last couple of years, which is why we bought the stock back at the levels that we did because some of the deals that we were looking at, the valuations to us just didn't make sense. So pricing is very high. I mean, in the U.S., it's really, really high. It's at least 5x higher than it is in the international markets on average. But anywhere, tower assets are heavily sought after and therefore, it's very competitive when anything of size is brought to market. And so you have to be very diligent about making sure that the assets that you're paying up for are ones that deserve to be paid up for. So we'll continue to, I think, be disciplined around that and you'll see us do a mix of both. As for being a seller, it's not how we run the company. It's not what we think about as a driver in most of the decisions that we make. But it's always been the same answer. I guess if somebody made you the proverbial offer that was too good to refuse, we'll, of course, consider it. But we're not in it for any other reason than to try and drive the best return proposition for our shareholders. And if that were the way to do it, then that would be the way to do it. But we don't -- we're not making any operational decisions or even capital allocation decisions at this time with that being a key factor.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [46]
------------------------------
 And finally, as you speak with investors, is there anything that you find to be underappreciated about your story?

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [47]
------------------------------
 I don't -- I've been asked that question a lot over the years and I tend to give the same answer and I think it still applies, which is I don't know that it's totally underappreciated, but it feels like it is when you watch the stock, and I kind of alluded to it earlier, which is with the volatility in the stock. It doesn't really make sense because the business is so steady and stable and I think that sometimes people miss that. Everybody wants to find the item that is that edge as to what's going to push this thing higher or push it lower, whatever it is that's going to influence it. But the reality is there's a band that we're going to operate within that's not that wide and it's going to be very steady and stable, and we're going to continue to grow EBITDA every single quarter and generate nice returns. We're not going to be growing 50% and we're not going to be growing 0%. So you know where we are and you know what range we're going to be in and it seems that we should expect valuation to kind of track with that and it doesn't always. So perhaps it's a little bit surprising to some. But really, I think that's what's probably missed more than anything, it's just how steady it is.

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 Michael Rollins,  Citigroup Inc, Research Division - MD and U.S. Telecoms Analyst   [48]
------------------------------
 Thanks for your time.

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 Brendan T. Cavanagh,  SBA Communications Corporation - CFO and EVP   [49]
------------------------------
 Absolutely. Thanks, Mike.




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