Q3 2019 Earnings Call
As a reminder, today's call is being recorded no I turn the conference over your host Youre Koslowski. Please go ahead.
Good morning, and thank you for joining American Tower's third quarter 2019 earnings conference call.
We posted a presentation, which we refer to throughout our prepared remarks under the Investor Relations tab of our website Www Dot American tower Dot com.
Our agenda for this morning's call will be as follows.
First I'll quickly summarize our financial results for the quarter.
Next Jim take off our chairman President and CEO will provide an update on some key technology trends on the U.S., particularly around Fiveg.
And finally, Tom Bartlett, our executive Vice President CFO will discuss our third quarter results and realized 2019 outlook in more detail.
After these comments, we will open up the call for your questions.
Before I begin I'll remind you that this call will contain forward looking statements spend involve a number of risks and uncertainties.
Examples would be statements include our expectations regarding industry trends as well as our future growth.
Putting our 2019 outlook capital allocation pending acquisitions and future operating performance.
The pacing in magnitude of the Indian carried consolidation process and its impact on American tower and any other statements regarding matters that are not historical facts.
We should be aware about certain factors may affect some of the future and could cause actual results to differ materially from those expressed in these forward looking statements.
Such factors include the risk factors set forth in this morning's earnings press release, those set forth in our Form 10-K for the year ended December 31st 28 scene.
And then other filings we make with the FCC.
We urge you to consider these factors and remind you that we undertake no obligation to update me information contained in this call trueflex subsequent events or circumstances.
Now please turn to slide four of our presentation, which highlights our financial results from a third quarter of 29 team.
These results as well as our year over year growth rates were positively impacted by our new agreement with agency in the U.S. and negatively impacted by Indian carried consolidation driven sure.
During the quarter, our property revenue grew 9.7% to 1.9 billion.
Our adjusted EBITDA grew over 12% to 1.2 billion.
Our consolidated at Buffalo, and consolidated AFFO per share increased by 8.5%, an 8.1% to 891 million and $2 respectively.
Finally, net income attributable to American Tower Corporation common stockholders increased by nearly 36% to 499 million were one dollar and 12 cents per diluted common share.
Additionally, like the last few quarters, many of our comments around third quarter results and our updated 2019 outlook will be focused on growth rates normalize for carrier consolidation driven churn in India and the tough settlement in Q4 2018.
We view these normalized results as important indicators of underlying trends in our business.
Reconciliations of these normalize metrics to our GAAP results are included in the back of our earnings presentation in our press release and in our supplemental package.
And with that let me turn call over to Jim.
Thanks for your and good morning to everyone on the call consistent with our past practice for third quarter affords my remarks today will be focused on the evolution of mobile technologies.
I'll spend most of my time on the U.S., where we generate roughly two thirds of our cash flows and where many exciting and potentially impactful developments, particularly on the Fiveg front are beginning to emerge.
We continue to believe that the technology cycle is driving our business in the U.S. will be largely replicated in our international markets overtime, thereby lengthening and strengthening our global growth trajectory.
Longstanding trends in U.S. mobile continue unabated unlimited data plans advanced devices, and increasing mobile video consumption consistently result, and 30% or more growth in annual mobile data consumption per year.
To keep up our mobile operator customers have added significant additional equipment to existing transmission sites, while driving forward with incremental spectrum deployments to support today's forging not worse.
These factors have led to a sustained period of robust domestic organic tenant billings growth for American tower.
And average monthly U.S. smartphone usage now stands at roughly 10 gigabytes per month, nearly doubling in less than three years.
And by 2020 810 years roughly from now industry estimates suggest that the total U.S. mobile data usage will be around six times 2018 levels.
We recently concluded that the need to efficiently manage the network cost challenges the discontinued explosion and mobile traffic growth creates will actually be the main driver for the deployment of Fiveg.
Simply put the cost per gigabyte delivered must continue to decline at roughly the same rate as the growth in aggregate traffic carried across the network that's needed to sustain our carrier tenants margins.
We've seen this pattern historically it with each successive generation of technological evolution two to three to four g. with carriers using tools like more efficient radio technology advanced network design incremental spectrum deployments and additional network density to drive down those operating costs.
For Fiveg, we believe the equation will be similar but with some new aspects.
The technology is expected to enable the broad usage of newly developed techniques, such as massive mimo dynamics spectrum sharing and self optimizing networks as well as wider spectrum allocations. All these will help enable wireless carriers to efficiently manage the cost of their exploding network demand.
The deployment of new spectrum bands for Fiveg will be tailored to both coverage and capacity and eventually as nationwide coverage is achieved we expect to fiveg will pave the way towards a variety of interesting next generation products and services that may offer profitable opportunities not just for mobile operators.
But also across a variety of industries.
So from a cost efficiency and practical perspective, fiveg is the logical and necessary next step and network evolution.
With that said for did he is still carrying nearly all the usage in the United States today, and we'll continue to be the primary network technology here for years to comp.
And at the same time with faster speeds Fiveg is already being deployed and limited coverage areas with device is beginning to enter the market now.
So for the rest of my comments. This morning, I'll focus on three specific areas of that five GE migration.
One of spectrum. The second is what Fiveg networks are likely to look at any anticipated timeline of that topology.
And then thirdly, some of those advance potential products and services that won't be ultimately enable by Fiveg technology.
So on the first point.
We expect Fiveg it'd be accompanied by a significant deployments of new spectrum assets across the full range of low mid and high bands.
We've already seen 600 megahertz low band spectrum selectively deployed on our towers T. Mobile is stated publicly that they expect 600 megahertz to serve as a significant component of their fiveg coverage plant across the country and our portfolio of nearly 41000 U.S. sites is positioned very well to support that deployment.
Well it maybe even more impactful for us over time is a widespread rollout of mid band spectrum. These bands generally between 2.5 and six gigahertz offer an intriguing gland of low band coverage benefits and high band capacity benefits.
Both of these are expected to be critical attributes of Fiveg networks.
So spectrum assets in this range includes sprays 2.5 gigahertz spectrum, the 3.5 gigahertz CBR S band and the C band Spectrum currently held by satellite operators between 3.7 and 4.2 gigahertz.
Importantly, given that propagation characteristics of this spectrum aren't as favorable as low band, we expect that more transmission sites will be necessary to deliver and ubiquitous fiveg level signal.
In turn this should lead the incremental amendments and co locations across our nation wide portfolio.
What's today has ample capacity support to support additional carrier equipment.
Additionally, we continue to evaluate the potential a significantly expanding the addressable market for neutral host and private endorse systems by utilizing CBRN spectrum.
And they see it was one of the earliest members of the Crs alliance to help facilitate that process.
Finally, there has been considerable discussion around millimeter wave spectrum small cells in their apoquel applicability to Fiveg Army remains at millimeter wave spectrum in small cells will serve pedestrian hot spots and other predominantly fixed location applications and urban dense urban areas.
Less than 1% of our U.S. macro tower sites are located in areas with high enough population density.
Economically support such outdoor small salaries.
Consequently, the impact the macro tower sites from Fiveg millimeter wave spectrum deployments are expected initially to be minimal both from a risk and an opportunity perspective.
But over time, there maybe some macro related uses for Fiveg. These millimeter wave bands for products, such as wireless backhaul fixed wireless service, the homes and enterprise and other applications.
As we've previously discussed we do not believe that fiber fed outdoor small cells and their cartiform offer sufficiently attractive economics in the U.S. for us to make material investments in that business and.
Instead, our aim throughout the Fourg to Fiveg evolution is to maximize the value of our existing macro tower and indoor Das real estate.
We're also seeking to add to this core growth by selectively deploying capital through our innovation program towards complimentary technologies and initiatives that offer similarly attractive returns as our tower business.
As the same time, we continue to look for ways to expand our tenant base and augment the value of our existing portfolio.
And our view Fiveg will likely have a number of layers since any given geographic area will have specific topographic and population characteristics.
In rural locations low band spectrum, and perhaps a mid band will likely be the main components and suburban areas and highway, Florida ours, where there are more people and more usage.
We believe that mid band spectrum is likely to be an important component of fiveg with low band coverage also broadly deployed.
And finally in dense urban areas, all three types of spectrum, including high band millimeter wave are likely to be deployed through a combination of rooftop antennas indoor and outdoor systems and other small cell solutions.
The net result is likely to be likely to be and even more complex radio access network architecture, requiring more density considerably more compute power and more intelligent designed to deliver a consistent user experience to all of us.
These deployments are likely to take a significant amount of time.
Past technologies have lasted at least 15 to 20 years from inception to sunset.
Given the scope and intricacies involved with Fiveg, we would at a minimum expect a similar timeline.
Moreover, in the near term Fourg will continue to serve the vast majority of mobile usage across the country.
Currently industry estimates suggested fourg will still represent more than 50% of the embedded U.S. device market share even through the year 2025.
Consequently investments by our tenants into augmenting their existing LTE networks are expected to continue well into the 20 twond its with incremental fiveg related spending progressively being added to the mix.
This is further reinforced by currently projected timeline of when mid band spectrum assets will be available to be deployed.
Spreads two and a half gigahertz spectrum is ready today, the CV Rs Austin for license spectrum has yet to occur in the C band is likely years away from being made available for terrestrial use.
Consequently, wait HCC anticipate of five to 10 year period ahead of us.
Will be driven by a combination of ever increasing data consumption and a long cycle evolution from four to Fiveg technology.
Therefore, we are exploring through our innovation program opportunities to use our assets to support this transitory period.
And then turn to maximize the revenue from our macro tower sites that are in building systems capabilities.
As confused solutions a tower sites are one example.
As data demand increases on both wired and wireless networks, our macro tower sites have the potential to access convergence points for wireless access networks cloud services, the internet of things and enterprise not worse, given the towers positioning on the edge of today's mobile networks.
As fiveg supported applications that require minimal latency develop there could be a further opportunity for edge compute the play even more important role, especially in the establishment of autonomous air and ground vehicle management and control systems.
Adam as cars and drops.
To better understand the potential of this and other industry developments or already moving forward with trial as data centers at several of our U.S. tower sites and also acquired a mid size interconnect facility in Atlanta earlier this year.
We're limit your we're using this limited scope architecture to learn as much as possible about potential future business models and to work together with some perspective future tenants as they evolve their approaches to this type of distributed data storage and compute technology.
Drone out because the applications or another promising area, where we continue to focus efforts within our innovation program as well.
We're already using drones internally, which promotes safety and enhances our site monitoring and maintenance functions.
Similar to what we anticipate from our mobile operator tenants, where first using this technology to reduce our unit cost of operations as well as increase the quality and the cycle time of our site inspections and structural analysis.
In the longer term, we continue to believe that our tower sites could play a significant role in a fiveg enabled drone air traffic control system, and we're working towards that goal.
Already EPS, Google and some others have receive regulatory clearance to begin drone deliveries for limited purposes, and specific geographic areas, which we see as an indication to us that progress is being made.
Then there was augmented and virtual reality autonomous long haul trucking smart factories and buildings and a myriad of other next generation applications that are also in the Fiveg pipeline.
Many of these will be deployed by existing mobile operators industry verticals or even by the government.
Some may ultimately fail to gain traction or scale, while there may be others that we aren't even thinking about today there will be introduced by creative entrepreneurs, just like the founders of Hoover and lifted when a robust fourg platform became available to that.
All these developments are important for American tower, as we expect our towers and indoor das assets to play even more critical role in the Fourg and Fiveg networks of both the near term in the longer term future.
Given the spectrum bands that will be utilized in the much heavier data throughput of Fiveg networks.
We anticipate that transmission sites apologies will be denser and there will be more equipment for tower.
Further we are striving to pursue a well organized and integrated innovation program. The we hope will enable us to expand our tenant base and deliver additional value to our investors from our extensive asset portfolio.
Importantly, this is a global expectation over medium to long time horizon as we believe our properties outside the U.S. will serve similarly critical roles and technology evolution across our 16 international markets.
And our primary conclusion of my remarks today that fiveg will become imperative to mobile operators.
Reasons of per gigabyte cost management should.
Should apply both in the U.S. internationally as well.
And with that I'll turn it over to Tom for more detail in the quarter and our revised for your expectations. Thanks, Jim Good morning, everyone.
You are just mentioned, we again generating stronger than expected financial results in the quarter sign a new master lease agreement with 18 to be built a record 1300, or so sites and acquired another 600.
We also continue to opportunistically and refinance and extend our debt maturities during the quarter further strengthening our balance sheet and we continue to make progress on a number of internal initiatives, particularly around innovation and process improvement as a result, we're raising our expectations across our key metrics for the year with that let's dive into the details of our.
Third quarter results and updated full year outlook.
If you please turn to slide six.
During the quarter, we generated consolidated property revenue growth and organic tenant billings growth normalized for the impacts of India carrier consolidation, driven churn out 11.9, and 7.4% respectively.
Volume growth from Colocations independence, as we've seen all year contributed about 6% of the organic tenant billings growth driven by continued elevated levels of tenant investments in a number of markets.
Our us property revenue grew over 14% to $1.1 billion with organic tenant billings growth of 7.1%.
Volume growth from co locations and amendments drove close to 6% of this growth and escalators contributed just over 3%.
We also recorded approximately $87 million incremental straight line revenue during the quarter as a result of our new agreement with 18 today.
This was roughly $20 million more than our initial projections, resulting from the finalization of straight line calculations associated with the agreement.
These items were partially offset by churn of roughly 1.6%.
Similar to the last few quarters most of the activity. We saw in the new business I was amendment driven with carriers actively investing to keep pace with a rapid growth in mobile data usage.
Our reported international property revenue growth during the period was about 4% after factoring in the negative impact of approximately 4% from India carrier consolidation driven churn.
Normalized international organic tenant billings growth, which adjusts for the impacts of that churn was just under 8% in the quarter, including 7.5% in Latin America and around 8% in both EMEA and India.
New business revenue from core locations and amendments drove nearly 7% of this growth while escalators contributed another 4% or sell other run rate items added nearly 1% with normal course churn offsetting these items by about 3%.
Importantly, gross new business commitments were up across the board in international markets with around 1.8 million a run rate added in the quarter coming from India close to 700000 in EMEA and roughly $1.4 million in Latin America.
These run rate additions of nearly $4 million were roughly 50% higher than in the year ago period.
And finally as expected the tenant billings and back and then Dia carrier consolidation driven churn to organic growth was $8 million lower sequentially and we anticipate even more significant drop in Q4.
Similar to last quarter. We also recorded some higher than average positives non run rate revenue items, including roughly $18 million intended settlement payments in India and around $13 million in positive items in the US combos, primarily of revenue reserve reversals and some backfilling.
And lastly, the day, one revenue associated with the over 6000 sites. We've added over the course of the last year contributed more than 1% to our global tenant billings growth.
Around two thirds of these sites were constructed internally, including nearly 1300, new sites in the third quarter almost exclusively in our international markets.
Both the number of new builds in the over $1 million in run rate revenue added from them or nearly double that of Q3 of last year.
In average day, one and Hawaii yields on Q3 builds were around 13% illustrating the attractive return profile. These sites and we expect to sustain strong new build momentum into the fourth quarter.
Turning to slide seven we also generated solid adjusted EBITDA and consolidated AFFO growth during the quarter fueled by the strong revenue growth I mentioned as well as our continued focus on operational efficiency.
Adjusted EBITDA grew by over 12% with our adjusted EBITDA margin coming in at 62.9% up 30 basis points sequentially.
This refrac reflects strong gross margin conversion as well as the benefits of the ATM outlay, which helped to offset the margin impacts of India carrier consolidation driven churn.
The adjusted EBITDA growth attained also factors in the negative impacts of around $16 million in slow pay related bad debt reserves, we booked during the quarter as well as roughly $10 million in negative FX impacts.
As a result in this strong cash adjusted EBITDA growth in the quarter. We also drove strong consolidated AFFO and AFFO per share growth, we've consolidated AFFO growing by half percent and consolidated AFFO per share up over 8% to $2.
Meanwhile, FFO attributable to common stockholders grew 10.4% or nearly 10% per share.
On a normalized basis consolidated AFFO and consolidated AFFO per share grew by approximately 11% continuing our long track record of delivering double digit growth in this key metric.
Now moving to slide eight let's now take a look at our updated expectations for 2019.
In the us we're raising our full year organic tenant billings growth outlets to now more than 7%.
This increase is based on a stronger than expected third quarter and continuing expectations that growth will be around 6% in Q4 based on some tougher comps slightly higher churn in some deceleration in new business activity relative to the record levels, we've seen over the last 18 months.
Meanwhile, trends in Latin America in India are consistent with our prior assumptions and we are reiterating organic tenant billings growth expectations of 7% to 8% in Latin America, and 89% in India on a normalized basis for the year.
Unlike in the US we expect the year to be slightly second half weighted across our international markets in terms of new business run rate additions.
Finally, and as we said in the past we continue to expect a return to positive organic tenant billings growth in our international business next quarter on a reported basis as a negative impacts of the carrier consolidation process wind down.
But before moving on I do want to briefly touch on last week Supreme Court ruling in India and the definition of adjusted gross revenue for the wireless carriers and what a potentially means for our 2020 growth expectations in India.
Prior to the ruling we anticipated that organic tenant billings growth rates in the market would approach historical rates at some point 2020 after coming out of 2019 was solid gross new business in this new business trends and ITC related churn impacts trading.
Today due to the court decision and the lack of certainty with how and when the carriers and the government may respond it's too early to determine whether those growth expectations are still reasonable but its highway as you are 2020 outlook in February of next year, we anticipate having significantly more information available to provide a much more complete view.
But having said that though I'd also note that over the long term, we continue to believe that for ubiquitous fourg to become a reality in India significant incremental network density and wireless capital investment is necessary and we would expect and benefit from that given our comprehensive Indian footprint.
Looking at slide nine we're raising our expectations for 2019 consolidated property revenue by $180 million or 2.5%.
These items are expected to be partially offset by around $32 million from unfavorable FX trends, primarily in the fourth quarter. Additionally, I would note that as a result of continued strong demand for our real estate and carefully constructed master lease agreements our book of Noncancelable tenant revenue stood.
Nearly $46 billion at the end of Q3 up from $34 billion last quarter.
Turning to slide 10, we're also raising our expectations for adjusted EBITDA by 4% or $180 million. This reflects the straight line revenue benefit from the 18 Mallay and the conversion of the other property revenue upside from Q3 as well as the benefits from the continuing direct costs outperformance, particularly in India.
This is being partially offset by the bad debt reserves around $6 million in Uxc IP write offs, we expect in Q4 and around $16 million, an unfavorable FX translation impacts consistent with our prior assumptions, we would expect our adjusted EBIT in Q4 to be down sequentially as the positive non rate items, we saw in.
Q3 are not expected to recur.
This is primarily being driven by the cash adjusted EBIT outperformance in Q3, as well as $5 million and additional expected interest income, partially offset by around $5 million incremental cash taxes across our international operations and roughly $13 million FX headwinds. Additionally in size and as you can see on the slow.
Hi, our revised outlook includes roughly $14 million in distributions to PGGM, our JV partner in Europe , which was not contemplated in our prior outlook as well as the assumption that year to date understand of maintenance Capex reverses in the fourth quarter.
For the year, we continue to expect to once again delivered double digit AFFO per share growth on a normalized basis of roughly 11%.
Turning to slide 11, our capital allocation plans for the year remain consistent in our governed by the same investment discipline weve used historically.
We expect our dividend in 2019 to grow by around 20% to a total of 1.7 billion subject is always to board discretion.
In addition at the midpoint of our outlet we plan to deploy $1.1 billion of Capex rone, 85% of which is discretionary focused on augmenting the capacity of existing macro sites building, new ones and buying land under our sites in the United States.
This is up $50 million as compared to our prior expectations driven in part by a 750 site increase in our projected build program to suits to 40 to 50 in the midpoint.
In total we anticipate that these sites will add more than $3 million in monthly run rate revenue.
We've had tremendous success with our land program over the last five years, leading to margin benefits of over 50 basis points for us business.
And as the ended the quarter, 73% of our land in the us with either owned or under lease of at least 20 years.
Further we continue to add incremental scale through acquisitions with about $700 million being spent on the nearly 1000 sites acquired year to date and another 1.8 0.1 0.8 $5 billion are so including the assumption of existing debt committed to eat and tower transaction in Africa, which we are targeting to close by year.
End.
And as we noted in our press release. This morning, we're now working with NTN on buying out there Stakes in our joint ventures in Guyana, New gone to which we would expect to happen in the first half of 2020, assuming the closing of the eat and transaction.
And finally, we paid $426 million for the first set of India puts in March and expect to pay an additional $350 million for the second set by the end of the year subject to regulatory approval.
While increasing return on invested capital by 140 basis points over the decades.
Looking forward, we expected prudently deploying capital towards growth initiatives globally, as we enhance and further diversify our business.
Although the business today is far larger than it was in 2009, we continues into target double digit annual consolidated AFFO per share growth and an increasing return on invested capital.
Turning to slide 12, we believe that our balance sheet is a key differentiator for American tower and has been a critical component supporting our historical growth.
Since becoming investment grade a decade ago, we've been focused on optimizing our capital structure from a cost of capital investment funding perspective.
This has included more than $25 billion in debt issuances composed of unsecured secured local currency denominated instruments as well as select issuances of mandatory convertible preferred stock supporting large strategic M&A transactions through this process and taking advantage of the market rate environment, we've reduced our weighted average cost of.
That from roughly 5.1% as at the end of 2009 to Rob to around 3.5% today, including our latest issuance in early October .
At the same time, we've moved the weighted average tenor of our dad out by roughly one year.
And this along with the tremendous underlying cash generation capabilities of our business has enabled us to deploy over $40 billion, two combination of dividends capex acquisitions and share repurchases over that timeframe, while maintaining leverage levels solidly in the investment grade range.
This balance sheet strength and flexibility is facilitating the expansion of our portfolio from around 27000 sites in 2009 to more than 171000 today and a nearly fourfold increase in AFFO per share over the same period.
Today, we are more focused than ever on maintaining enhancing our balance sheet and continue to believe that it positions us well to drive continued portfolio expansion make investments in growth absorb and manage risk and achieve attractive total returns for our shareholders.
Internationally, we continue to capitalize on the demand for denser and more ubiquitous mobile networks by constructing record levels of new towers for large multinational tenants and attractive day one yields.
And finally, we continue delivered strong consolidated AFFO per share growth extended our long track record of meaningfully growing our dividend and Opportunistically added around 400 towers to our foundational us footprint.
As a result of our year to date performance and consistent expectations for Q4, we raised our outlook for all of our key measures and look forward to finishing the year strong and positioning the company for continued success.
With that I'll turn the call over to the operators, we can jump into some QNX.
Thank you, thank you and ladies and gentlemen, if you do wish ask the question. Please press Star then zero on your Touchtone phone, if you've already spoken with an operator and press star one.
Our first question is going to come from the line of Ric Prentiss from Raymond James. Please go ahead.
Good morning, guys.
Correct.
Couple of questions first let me equipment companies and tower companies have noted.
The T mobile sprint dish deal decision being delayed an uncertainty on the approval has caused that maybe a temporary pause in the marketplace. So what you talked a specific customers, but in aggregate and you guys seen any similar trends as far as.
Maybe a pause they are slowing down as people try to figure out which way the roads going forward.
Rick It's Jim good morning.
Over the years and you've been watching this as long as I have the conventional way to deploy wireless networks in any market is a build out period grooming period to follow and that results in more or less of kind of assign wave type of.
The deployment schedule.
With some ebbs and flows and that I think as all thats happening now in the US it's very typical.
The carriers will eat of whichever one will we will adjust that.
Sine wave to to their particular circumstances of the time. So we look at this is normal course.
Much of our new business was pull forward and we believe in the first half of the year, which has generated outperformance from a revenue perspective, but.
Our expectations for this year from a new business perspective, our second only to 2018.
And the Crs that auction scheduled right now for June of 2020, how do you see indoor systems, what role would American tower play, what's kind of the level of opportunity in the ability to put your balance sheet to work.
Sure. So we've got 400 indoor das traditional indoor Das systems up and running today, we've got rights for thousands of properties in the United States and we've got a similar kind of portfolios in whether its Brazil, India and other countries. So we've got to what we think is a leading independent physician in most of.
Our markets on indoor installed systems. The goal is to expand the addressable market of the buildings that can actually economically support such as system.
Are you using traditional.
Even neutral host architecture that we have today under kind of a fourg regime with license spectrum. The carriers have to put a base station in the building there has to be fiber wired throughout.
Once the 3.5 gigahertz phones are deployed.
That's correct. So so we'd work with the landlord do the install operate the shared part of the system and then there'll be different ways of conductivity back out to the cloud and back out to the mobile networks.
Very good thanks, guys.
Thank you.
Our next question will come from mine of Jonathan Atkins from RBC. Please go ahead.
Thanks, So I wanted to ask about the innovation program and how much capital you would look to kind of deploy in terms of rough ranges on an annual basis.
And maybe related to that although I think it would be bracketed separately, but appetite for further fiber investments in Latin America or prospectively in Asia.
Yes, John Yes.
Largely on some of the investments that we've made in Latin America as well as in South Africa as well as the investments that we've made in the United States relative to the the datacenter meet me room, there will be at Atlanta.
So I would say probably over a billion dollars and the future will depend upon the return profiles of each of these initiatives.
And right when it comes to.
John when it comes to added.
Again, it's going to be return based but the real goal of our fiber deployments for HCC is to increase the lease up rate and the value of our macro tower assets in those markets because unlike the U.S., there's not a vibrant fiber optic cable industry and most of these countries and whether its ourselves doing funding bringing in part.
There is to bring fiber to the tower, we got to solve that issue ticket a viable fourg signal back into the cloud. So we've got about 600 towers that we've.
Literally wireless fiber in Mexico.
50 in India as we're just getting started in 25 in Brazil. So far that's the real goal of the fiber investments now what comes along with that which is pretty brilliant Olivier Quest runs our international business and has led this development, which is weakening to be a neutral host provider as we're running by neighborhoods were running by enterprises to get.
Through our tower and we're now working with some of the mobile operators in those countries that want to do fiber or fixed wireless to the home that we're passing or the enterprise that we're passing and we have nothing to do with that commercial arrangement between the enterprise the consumer in the am I know, but they are leasing that fiber run.
From us that we're going to probably do anyway for our tower. So.
Thank you and then and then with the Eightseventy towers, having recently traded.
So just wondering how you view the puts and takes around.
Just a carrier built towers in the U.S. either related to that or prospectively. Other other portfolios that so exist.
Yes, we can we continue to look at everything that might be available in the United States and there are some smaller portfolios that are.
There are being put together and just as part of our normal investment Committee business development process will will take a good hard look at them and see what kind of value can be graded and whether that's a good use of our capital Ken and there aren't any.
Sort of game changing sized portfolio is less than the United States anywhere.
Held by carriers or even smaller private companies, they're definitely worth going after as Tom said, we accomplished one of those transactions already this year.
Really augmented our portfolio nicely.
And we'll continue to do that.
Improvements on that side operationally.
John I would say, we're very much in the earlier innings of of that I mean, we started these initiatives.
Particularly in Africa with a lot of the newer based technology Gen sets and things like that and.
But we're really stole the early innings of being able to.
And again it all comes down to the customer and the viability in the performance of their site.
We're very customer focused on that when we put investments into.
Energy management. They are designed to increase the uptime of the site above and beyond any of our competitors in the country you're speaking of.
It's also designed to.
And we're really excited about a lot of the solar battery enhancements that are coming.
Thank you.
Thank you.
First I guess not to get into guidance, yet, but with a 6% exit run rate in for Q is there a reason that you can help us with that we should consider an acceleration in the U.S. in 2020.
So I will talk through that and.
In February we will the reason that we do wait until February is that we're really looking for a lot of the guidance is being delivered by our customers.
In the markets that we're spending that markets that were in the carriers are last couple of years, it's been upwards of $40 billion to $50 billion.
And and so we want to make sure we understand where that's actually going to be spending who's going to be spending and what are they going to be spending on to really then come out to our investors.
To really get real clarity in terms of what we would expect for for the year. So I would hold off that question for a few months and we'll clearly addressed it in February .
And maybe one more of that so I know stretch I know, it's early but the India tax ruling.
Surprise, there's no impact of that on the value of the put the you have to pay this quarter anything we should think about there.
Going forward and it's a rupee based payments so the currency actually is a benefit to us.
Given where it is today so the put will be accomplish we'll we'll get our ownership up where we want to keep working with Macquarie in the market and grow the business.
Got it thanks guys.
Thank you.
Our next question then come from line of David Barden from Bank of America. Please go ahead.
Hey, guys. Thanks.
A few questions I could just the first one.
Following up on on the India situation, I mean, I think that with or without the Supreme Court ruling in the big with the Supreme Court ruling it gets tougher idea Vodafone courts that speed. This doesn't out the capital to continue spending on the network through all of 2020. So when you kind of how to base case expectation that 2020 irrespective of the Supreme Court ruling.
We actually grow at some kind of normal rate.
Where do you get the comfort level that idea Vodafone is going to have the capital spend.
How do you see that situation resolving itself that'd be the first question be helpful and.
Second question would be.
Sprint's been doing some kind of innovative things with ltvs in terms of trend will impact their capital intensity strand miles.
Network architecture and.
It could go to Comcast to go to charter you kind of talk about how you see that approach to network deployment impacting macro tower to me and and then my last question I guess with renewed Jim.
In particular is on one of this finding things that happen. This year in the sector is that a.
Big on families of the changing their benchmarks to include towers.
And.
From your purge the need report you sensed that there's any movement there.
To think again about where tower sit in terms of that need we benchmark hierarchy. Thanks guys.
Sure. So we'll go over to hedge one at a time.
Vodafone is they've got a plan in place to spend 4 billion Capex through 2020, they did a $3.5 billion capital raise.
I'd and Vodafone are matched together they have merged on purpose to be able to get the wherewithal to compete in fourg and over the short to mid term period. We think they will continue to be competitive and work through their issues with the tax department and be a player. There is an interest I would imagine in the Indian GAAP.
Moment, whose top level political regime has a program called digital India, which is going to require at least three or four.
I will be mobile operators to pull that off and this this is something we expect to be worked through and we also expect idea Vodafone with everything we know now to be part of digital India going forward as they work through their issues. It will take some time to resolve and.
We'll continue to progress Meanwhile, Geo and Airtel.
Our moving a basin will continue to work with all three plus BSNL, which is a customer of ours. So we'll go forward with that industry structure before Jim takes the next pitch, David just wondering Miami needed in the third quarter, we generated 8% growth in the quarter on a normalized basis, but we've said that high single digit kind of low double digit growth was.
And then with essentially small cell type mounting season and.
Materially affect our macro business.
And then on fund benchmarking.
But a number the right type investor firms are moving towards technology real estate assets.
As far as when they read index will included or the RMC. It's it's their decisions and I don't have access to those discussions.
Okay. Thank you.
Thank you.
Hey, Thanks for taking my questions.
As you discuss a couple of financially distressed carriers there they still on stakes in towers that might get shaken loose.
Valuation ascribed to big Towerco their party Infratel things like five times EBITDA.
I really believe in India's future does this not present, an opportunity for a well capitalized player like yourself to really makes and big moves and create value overtime or the other considerations. We should bear in mind, we absolutely think thats true and we've moved very aggressively with ideas towers, Vodafones towers and that.
The 40 some percent of the.
Joint venture with Tata that we have an owned and so all those assets we've brought in and we're happy with our current footprint at the moment.
And we would look at those of course, but it as far as something.
More strategic we're going to operate what we have an integrated offer.
The short term and get it where exactly we want to be positioned to look at larger deals down the road.
And again it just in terms of the capital we're spending there we increased our our capital for Newbuilds.
In the quarter for the year and Thats exclusively India and so we're spending.
More capital there on build to suit programs, where those day. One returns are double digit so that seems to be a really effective way for us to be able to increase our exposure and expand our footprint the market.
Okay. That's helpful and then Jim in your prepared remarks, you noted that.
I think you said less than 1% of your U.S. sites are in locations with population density sufficient to support outdoor small cells. So that was really interesting statistic and it's pretty specific what's the population density threshold that you're using to define what sites fall into that bucket.
An understanding it's a small share your business have you actually observed any impact on new leasing.
Due to small cells on those 1% of sites are rooftops you might managing those in those areas.
The answer the second part is no there's been no impact on any of the sort of deployment on our on our macro site or rooftop management business. They must remember that base layer in urban suburban or rural needs to be there, it's not going to be taken away or our tried tied to be chopped up you just really shouldn't be taking that approach to network deployment.
On the first instance, we use it.
Metric of 10000 people per square mile as the economic threshold with current technology and current cost and we actually stress tested that if you were able to cut the input costs in half. It ends up being about 5000 people are square mile. So even at the 5000 person level, 85% of Americans.
Live in places lower than 5000 people per square mile and so thats the network architecture in the us that.
Is it is going to continue to be macro based just on that fundamental right. There is there's no way to cover 320 million people.
At under 5000 people per square mile topologies was small cells economically or even technically.
Got it thank you guys.
Thank you.
Your next question will come from line of Simon Flannery from Morgan Stanley . Please go ahead.
Thank you good morning.
On C band in Fiveg, I think you talked about having you know a five to 10 year runway of growth from that deployment.
When do you think this can really kick off if you take the C band lines proposals over the last few days they they're now looking to free up 100 megahertz within 18 months of report in order. So that potentially gives you leasing in the 2021 timeframe. So you might get it, particularly if it goes to multiple carriers some decent volume in the.
Fairly near term I just wanted to see if you think that is feasible and then around that and around Crs. One interest are you seeing beyond the big four carriers in terms of.
Looking at potentially deploying that thank you.
Yeah, Thanks, Simon and the next couple of years ago. Early 2020 is you know we expected to have some commercial activity and it'll be a long term view us as you've even described a moment ago.
We've got some trials really interesting one is up and running now with some property owners actually so.
Without disclosing who they are what specific business there and if you think about.
What venue owner could leverage five what type of venue owner can leverage Fiveg technology, you would think of retail potentially any kind of sports or entertainment venue.
Those kinds of things and then there's the whole building management side as far as an owner of the commercial piece of real estate, whether it's a fact warehouse of factory.
Office building just to manage again cost down.
And operating those buildings. So those are the kinds of.
Verticals that.
So to speak the we are working with on trials and other initiatives right now.
In some of them are actually you may not may or may not know it but the but they are up and running on fourg and license technology and certain trial sites already so that's how we're going after this very methodical ROI is on everything add naps are fantastic CTO and he.
Watches over the viability and sustainability in the business cases for these projects and Tom of course has got the financial side and we have.
Innovation Council that actually has to run through our investment committee when there's a sizeable.
Proposal that comes comes down so that's how we're going to go about it. We think there is real prospect there will take some years to look to to play out and there's a lot of this activity in CBRN us.
Not necessarily right now, but again, we're trialing it was with either licensed spectrum.
Hi, private Fourg LTE kind of set ups and things like that at the moment, because when CVR as frees up and that spectrum.
The the general access is here.
And then the priority access as you describe what will be auction, but.
Since that becomes available in both sides of it, especially if you have.
A commercial building that you can use the.
General access network to serve that because it's unlikely that the general access.
We'll be burdened.
Within your building unless it's you that is controlling it. So that's available what we think on a wide scale and.
The last point I would say is.
Yes.
Again, it's going to take some time and the devices need to rollout as well and that's going to get again take its own pace.
Great. Thanks.
Thank you.
We have a question line of Michael Rollins from Citi. Please go ahead.
Thanks, Good morning.
She is partnering the change to or acute domestic state meeting that there is a pickup in churn can you expand and what you're seeing on the churn right and is there anything that on the horizon just from past mergers or integration events that we should be thinking.
Thanks.
Michael I mean, it's it's up from a bit from from Q3, but it's de Minimis you know.
It's.
Still below 2% I think it gets up to 1.7 or something like that from the 1.6.
So that we had in Q3, so its interest in minimis across the footprint that we have in the United States is this mostly timing records the win.
For.
Certainly the contracts come due or certain we have other verticals that are consolidating and other things that are networks and its size as Tom said, it's it within the 1% to 2% we've had for 20 years, so really nothing different.
Thanks.
Thank you.
Our final question will come from line of Colby Synesael from Cowen and company. Please go ahead.
Great. Thank you.
Turning to go back to that to the India thing, but just so I would ask one more question around that.
Just given the local law in India to the extent.
One of your customers was to do declared for bankruptcy would you expect to be paid through that process and I guess are all of your attendance in India currently.
To date, if you will in terms of payment and then secondly, going back to the first question you got from Rick as it relates to T. Mobile on your response being added in flows is getting how long.
We might be at at a slow down from summer.
You asked providers.
Would you anticipate that just because of that link you could actually the material enough that we would see some moderation in your growth rate for some.
Period of time measured in quarters, if you will as a result of what you're seeing now when you think about the book to Bill.
As you go into 2020, thank you.
Okay, we're getting multiple phases again to finish up here, but lets call we will take them again, one other time.
There is a bankruptcy law in India that was put it in a couple of years ago sort of nationwide.
And.
The network still going to be needed to subscribers still gonna have to be served if theres a financial restructuring.
As we had another selected other international markets over the years.
The networks tend to operate and they need to pay the.
The electric Bill and the lease to keep that network going and that tends to be what happened. So thats our historical experience when there's a financial restructuring that goes on.
Our customers by and large in India as far as their payment schedules and.
On time, if you will is not materially different.
Than it has been in the past and that in that market BSNL, which as I think our smallest customers a little bit behind what is typically doing but thats going to catch up we expect and then thirdly.
Cycling back to the U.S. with T mobile.
Look the data rate usage is still going up 30%.
A year.
T mobile.
It's got a bit of a delay so its merger or not is trying to take share trying to stay relevant and adding customers and data usage. So it's going to be up to them to answer that question, but.
We don't expect that don't be a long cycle sort of hiatus from any of our customers going into 2020, but as Tom said.
We'll look for the Capex guidance, we'll look for the public statements and we'll add up what we see in our field operation as far as applications and interest in the Salesforce with our sites and we'll go from there and create the guidance for you in February .
Great. Thank you.
Good.
Alright, well. Thank you everybody for joining this morning and have a great that yes, happy Halloween to everybody and good weekend to all of us.
Thank you, ladies and gentlemen that does conclude or conference for today for your participation fusing TNT executive teleconference. You may now disconnect.
Yeah.