Q4 2019 Earnings Call
[music].
[noise], ladies and gentlemen, thank you for standing by and welcome to the American Tower fourth quarter and full year 2019 earnings call. At this time all participants are in listen only mode. And later you will have an opportunity to ask questions.
To ask a question on todays call you May press, one and then zero and an operator will gather your name off line in place you in back into the queue.
If you should require assistance during the call you May Press Star and then zero as a reminder, this conference is being recorded I would now like to turn the conference over to where host Vice President of Investor Relations you going because lebowski. Please go ahead.
Thanks Carol.
Good morning, and thank you for joining American tower's fourth quarter and full year 2019 earnings conference call.
We posted a presentation, which we will refer to throughout our prepared remarks under the Investor Relations tab of our website Www Dot American tower dotcom.
Our agenda for this morning's call will be as follows.
First I'll quickly summarize our financial results for the quarter and full year.
Next Jim take up our chairman President and CEO will provide a brief updates on our standard deliberate strategy in our key priorities for 2020.
And finally, Tom Bartlett, our executive Vice President and CFO.
We'll discuss our 2019 results in 2020 outlook.
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 that involve a number of risks and uncertainties. Examples of these statements include.
Or expectations regarding future growth, including our 2020 outlook capital allocation and future operating performance.
Our expectations regarding Indian carrier consolidation driven churn in the impacts of the eight GR decision in India.
And any other statements regarding matters that are not historical facts.
You 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 30, Onest 2018.
Updated in our form 10-Q for the quarter ended September Thirtyth 2019.
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 the information contained in this call to reflect subsequent events or circumstances.
Additionally, many of our comments around fourth quarter and full year 2019 results will be focused on growth rates normalized for the impacts of the nonrecurrence over Q4, 2018, Tottus settlement and carrier consolidation driven churn in India.
We view these normalized results as important indicators of the underlying trends of our business.
We have included reconciliations of these normalize metrics to our GAAP results in the back of our earnings presentation in our press release and in our supplemental package.
Now please turn to slide four of our presentation, which highlights our reported normalized financial results for the fourth quarter and full year 2019.
During the quarter, our property revenue declined 9.3% to 1.9 billion, while growing 8.2% on a normalized basis.
Adjusted EBITDA declined by 14.6% to 1.2 billion, while growing 11.3% on a normalized basis.
Consolidated AFFO and consolidated AFFO per share declined by roughly 20% to 859 million and $1.93 cents, respectively with normalized growth over 14%.
Finally, net income attributable to American Tower Corporation common stockholders increased by roughly 103% to 563 million or one dollar and 26 cents per diluted common share.
From a full year perspective, our property revenue grew 2.1% to 7.5 billion or by 9.1% on a normalized basis.
Our adjusted EBITDA grew nearly 2% to 4.7 billion or nearly 12% on a normalized basis and our consolidated AFFO declined by 0.5% to 3.5 billion, while consolidated AFFO per share declined by roughly 1% to $7.90.
On a normalized basis consolidated AFFO growth and consolidated AFFO per share growth were 12% and more of an 11% respectively.
Meanwhile, net income attributable to American Tower Corporation common stockholders increased by 53.9% to nearly 1.9 billion for the year or $4 in 24 cents per diluted common share.
Finally, before I hand, it over to Jim I'll note that we are now reporting operating results in six segments. After separating the EMEA property segment into Africa property in Europe property.
Historical segment results are included in our supplemental package on the website.
And with that I'll turn the call over to Jim. Thanks for your in warm welcome to everyone Who's joining us on the call. This morning.
Recent developments with respect to the T mobile spread transaction ill begin todays remarks with a few high level thoughts on the potential effects on American tower.
Since the proposed merger between Timo less rent was announced back in April of 2018, we have consistently stated that we expect a merger to be net neutral to net positive for our company over the mid to long term.
This optimistic perspective has been driven by our belief that the combination with speed up the deployment of multiple bands of spectrum, including a number of mid band assets and then the accelerated nationwide fiveg coverage requirements associated with this transaction will drive further demand for tower space.
In addition, we believe the case for US business long term upside is even stronger with dishes commitment to building a new for nationwide network.
We do expect to see some churn associated with network rationalization, but we anticipate that it will be more than offset by incremental industry network investments in coverage capacity indemnification over time.
We're excited to partner with all of our tenants, including the new Timo Blendish to help speed the deployment of fast efficient fiveg broadband service to consumers throughout the country.
With that I'm going to focus the rest of my comments on our progress towards our standard deliver strategy overall as well as our specific priorities for 2020.
Confident that executing on this strategy will position HTC, even better to support the deployment of Fiveg networks in the us and advanced mobile broadband networks and all of our markets worldwide.
As Igor noted a few minutes ago, we had another great year in 2019, and we expect to build on our current position of strength.
Continuing to focus on our standard deliver strategies Fourg pillars.
The first of these is to drive operational efficiency throughout our own business as well as the wider mobile industry.
We believe that optimizing application cycle times, improving the tenant experience and driving operational efficiencies throughout our internal regions and functions will lead not only to faster and more efficient deployments for our tenants, but also higher margins and better returns for our company over time.
We're making tangible progress on a number of dimensions and efficiency. For example, we've invested around $100 million in Green energy solutions, such as advanced batteries solar installations and other initiatives primarily in our African an Indian markets as part of our commitment to reduce our fossil fuel usage.
These advanced energy management solutions May also reduced a pass through fuel cost to our tenants overtime, while enhancing their network reliability.
Meanwhile, in the US we've worked closely with our tenants to optimize service levels to support their ongoing fourg and accelerating fiveg investments, leading to reduce cycle times and more efficient network deployments for that.
Among the contributors to this our master lease agreements that provide for more streamlined administrative processes for site applications and our highly capable in house zoning and permitting and structural engineering teams.
Throughout our global footprint, we continue to drive down our run rate SDMA expense as a percent of revenue, while we add scale grow revenues and improve business processes.
Growing our portfolio and capabilities across our served markets is this second pillar of standard deliver and we've added more than 38000 sites through acquisitions and Newbuilds since we unveiled the strategy in 2018, while expanding into three new markets. In 2019, specifically this included the acquisition of nearly 50.
800 sites through our recent eating towers acquisition, another 2400, or so sites in Chile, and Peru, and more than 400 in the U.S.
We continue to see attractive acquisition opportunities globally, and our pursuing those within the context of our proven capital allocation strategy.
Addition, we're seeing demand for newbuilds accelerate across a number of our markets as incremental network Densification becomes a necessity and many more places.
With highly attractive returns on new build towers, even on day, one we expect to see our Newbuilding program, playing an even more prominent role in our standard deliver strategy going forward.
Our focus on innovation, the third pillar stand and deliver is continuing to gather momentum.
In 2019 for example, we acquired an interconnect facility in Atlanta to help optimally positioned ourselves in and better understand the elements in demands for edge computing. We've also made strides in the CVR space and continue to believe that the market opportunity there is likely to be concentrated indoor venue based facilities.
At least initially in addition, we're in that process of ramping up our own use of drone technology internally, particularly in the us to help us better survey our sites and optimize powermate.
And as I alluded to earlier, we're also helping lead the way on renewable energy solutions and the asking in India Telecommunications industries, working with technical experts both in the U.S. and abroad as we do so.
Finally, we continue to evaluate a number of other innovative opportunities looking for business models that are either based on or complimentary to our existing macro towers.
A critical component of these models is that they are secured by owning or controlling local franchise real estate rights at characteristic that has made our existing business. So there are more profitable over the last 20 plus years.
Our focus remains on commercially shareable assets supported by long term contracts with high operating leverage.
Our commitment to enhancing American tower's industry leadership is the final pillar of stand and deliver.
We are pursuing this in numerous ways to that.
This commitment starts with our dedication to sustainability and be a constructive for us and the communities in which we operate.
To this and we continue to enhance our sustainability program governance practices and our commitments to diversity and inclusion throughout the business.
Further in August 2019, we signed onto the business round table statement on the purpose of a corporation as we believe we have the ability to deliver sustained value across the range of our stakeholders.
From an operational perspective, our work with leading universities and academics and the field of distributed power generation continues with the goal being a material reduction and carbon emissions and a corresponding leaf inefficiency in our African and Indian operations.
And at the same time, we're expanding the presence of our digital village initiative and now have installations in five different countries, where underserved populations are gaining access the critical broadband connectivity and the resources and opportunities that come along with it.
Most notably this includes E learning for both children and adults that enhances their educational opportunities beyond what can be offered by the local village schools.
Further we are members of the Navy Executive Board the World Economic Forum Digital communication Board of Governors and co chair the USA, India, CEO Forum, which has the goal of improving economic collaboration and increasing employment and both the us and India.
We're also participants and numerous other industry government and NGL interactions designed to enhance our understanding of the world around us and position American tower to continue to make a positive global impact through the transformative nature access to wireless technology.
These interactions include Indepth dialogue with existing tenants and potential new tenants both in the us in overseas and in 2020 executing on the key elements of standard deliver across the board will be the priority of our dedicated employees throughout our global operations. A few specific items stand out to me as some of the biggest.
Opportunities.
First on the operational efficiency front, we continue to explore and identify new and more efficient ways of driving our business for while enhancing the levels of service, we're providing to our tenants. We expect to continue to improve our margin performance in 2020.
As we simultaneously integrate newly acquired portfolios in Africa, and Latin America.
We're also creating shared service centers to support much of the lease extraction and other administrative elements of our business, which we believe will further drive down Rs DNA as a percentage of revenues over time.
We expect that are increasing use of drones and continued investment in few on power solutions will also help reduce costs costs Amos simultaneously, providing a better overall value proposition for our tenants.
Expanding our portfolios another key focus for 2020, and our new build program is perhaps the biggest point of emphasis we constructed a record of more than 4500 sites in 2019, and we expect to exceed that by around an additional 2000 sites in 2020 at the midpoint of our outlook.
Importantly, we expect average day, one and NOI yields on these new bills to continue to be at a double digit range.
On the innovation front, we expect to see more near term momentum in the deployment of commercial fiveg in the us as more cell sites antennas and spectrum bands are optimized for fiveg the surrounding ecosystem should become incrementally more dynamic which is likely to present us with additional commercial opportunities.
From our vantage point today, the use of CVR at spectrum and execute our two areas that may be especially interesting for us in 2020. We also expect to continue to make meaningful investments and clean energy and few innovation. This year concentrated mainly in India in Africa.
Finally in terms of industry leadership, we expect to augment our current positioning throughout 2020 by building on existing relationships with numerous NGL as an industry groups at the same time, we set a target to build another 15 to 20 digital villages. This year and look forward to polishing and even more comprehensive sustainability.
Board.
Better reflects the many initiatives we have underway in this area.
In closing, we're excited about what the future holes and we're fortunate to find ourselves in a very solid position as we enter 2020.
Our board of directors senior leadership team and dedicated employees around the world are all committed to executing our standard deliver strategy and our energized by the dynamic growth trends and mobile technology.
So with that let me turn it over to Tom for a review of our 2019 results and our detailed expectations for 2014, Hey, Thanks, Jim Good morning, everyone. As you can see 2019 was another very strong year for American tower, or we generated double digit normalized consolidated AFFO per share growth and leading us organic tenant billings.
Growth rates, while building a record number of 4500, new sites acquiring over 9000 more and entering two markets. We also grew our common stock dividend by 20% again and drove our average cost of borrowing down while extending our average center by over a full year.
In addition, as Jim has discussed we continue to execute on our stand and deliver strategy expanded our normalized margins and made tangible progress with regards to our innovation initiatives before we discuss our 2020 outlook. Let me first highlight some of our financial and operating results from Q4 and the full year 2019.
Turning to slide six.
You can see that our underlying Q4 growth trend showed continued strength across our operations, we generated consolidated normalized organic tenant billings growth of 6.5%, including 6.2% in the us nearly 7% in our international markets led by Africa, 10% in Latin America at 8% as expense.
Did you use growth rate decelerated from prior quarters as new business Commencements continue to pull back from record levels. We generated earlier in the year. This is largely due to the slowdown of new business from sprint and T. Mobile is a navigated their merger approval process for the quarter offsetting a portion of this was an increase in gross new.
This generated across our international markets, particularly in Brazil, and Mexico.
As we expected our international operations returned to positive organic tenant billings growth in Q4 as the impact is India carrier consolidation churn largely some cited for the quarter. Our consolidated normalized property revenue growth rate was more than 8%.
In addition, and get a normalized basis, we generated adjusted EBITDA growth of more than 11% in quarter, expanding our adjusted EBITDA margin by over 200 basis points.
Finally, we converted nearly 90% of that adjusted EBITDA growth to consolidated AFFO, resulting in normalized consolidated.
Or share growth of 14.5%.
Moving on slide seven for the full year, our overall normalized property revenue growth was over 9% driven by normalized organic tenant billings growth of 7.4% on a consolidated basis.
About 6% and this was driven by volume growth from gross new co location and amendment activity with another 3.4% being generated from escalators normalized turns around 2%.
For the year, we commence globally over $30 million in new monthly recurring revenue across our tower and das assets on par with 2018.
For both organic Colo amendment activity as well as newly those sites.
Our reported US property segment revenue growth for the year was nearly 10% supported by organic tenant billings rose, 7.3% and around $167 million in straight line benefits from the us MLP, we sign in the third quarter.
I am growth from Colocations amendments contributed 5.7% to the full year growth rate, while pricing escalators contributed just over 3%. This was partially offset by churn of about 1.5% and negative impact roughly 20 basis points from some other items.
Industry experts suggest wireless carriers as gains spent upwards of $30 million and capital during the year to support their wireless network performance small data usage grew by more than 30%.
Our reported international property revenue declined by about 6% given the non recurrence of last year's how to settlement, while growing nearly 9% on a normalized basis normalize international organic tenant billings growth was about 7.7% driven by significant network spending in key market segment.
MCO, Brazil, and South Africa.
Location Amendment revenues grow roughly 6.5% of a growth while escalators contributing nearly 4%.
Other run rate items, a 70 basis points, while normalized charge for the year was around 3%.
Finally, the day one revenue.
Associated with the over 38000 sites. We've added over the course is the last two years contributed more than 2% or $120 million to our global tenant billings growth.
These new assets included the construction of more than 4500 sites in 2019 as well as 9000 acquired sites in the US Latin America in Africa.
Slide 8000 of which closed in late December.
And therefore do not really have any impact on our 2019 operational results.
Turning to slide eight we also generated double digit normalized adjusted EBITDA and AFFO growth in 2019, driven by strong underlying revenue growth and diligent management, our operating costs for the year normalized adjusted EBITDA grew by nearly 12% and the corresponding adjusted EBITDA margin increasing to roughly 63.
Percent a year over year expansion of nearly 200 basis points on an FX neutral basis, we exceeded our initial 2019 outlook for normalized adjusted EBITDA by over $300 million. These adjusted EBITDA results included significant progress in our fuel management operations, particularly in Africa.
Where we've saved over 20 million liters of diesel fuel for our tenants over the last two years ended the ended the year, we had around 3600 sites weve lithium ion batteries and more than 800 with solar.
We also grew normalized consolidated AFFO by 12% and a corresponding in AFFO per share by over 11% through the year, reflecting our 12 straight year of generating double digit consolidated AFFO growth.
In fact, since 2009, our consolidated AFFO per share and grown indicating or 14%.
With our adjusted EBITDA performance, we outpaced our initial outlook expectations for normalized consolidated AFFO by around $120 million on an FX neutral basis or over 25 cents per share.
Moving to slide nine, let's now take a look at our expectations for 2020.
Before we dig into the numbers I'd like to summarize a few of the key high level assumptions. We've included in our outlook first as expected and as I mentioned earlier, we saw a deceleration in our us new business Commencements and pipeline in the back half of 2019.
And that is carried over into the early part of 2020.
Much of this deceleration was attributable to lower activity levels from T mobile and sprint as they progress through their merger approval process.
Given the recent court affirmation of the deal we've now assuming that for the purposes of our 2020 outlook activity levels with the new Tivo will re accelerate but not until the back half of either.
We expect the exact timing of the re acceleration to depend upon when the merger closes but at this point, we view unlikely that a significant rebounded activity will occur in the first half the year.
And again as Jim highlighted we believe the current lower activity levels in the marketplace temporary.
All of the carriers will need to continually invest in their networks to meet the expanding usage patterns and their customers.
In addition, we have assumed any new activity from potential new entrants into the market.
Meanwhile, in India, while India carrier consolidation, driven churn is largely subsided as anticipated and planning perspective, we've layered in some additional churn for 2020 as a result in the uncertainty created by the reason in the Supreme Court ruling on the definition of adjusted gross revenue.
And the corresponding incremental liabilities being placed on the legacy wireless carriers.
I'll note, however that to the extent and incrementally positive solution is reached with respect to the HGR issue is possible that this included churn will not materialize.
Additionally for the same reasons, we've assumed lower levels of gross new business in India for 2020.
As we expected carriers may be less able to make near term network investments.
Taking these assumptions into account at the midpoint of our outlook, we expect consolidated property revenue to grow by 7.8% or 9% on FX neutral basis.
For the by solid overall levels of new business, lower churn and contributions from new assets of acquired and build.
Are you at property revenues expected to grow the mid 5% range, while we expect our international property revenue growth to be more and 11%, despite an anticipated, 3% or $85 million negative impact from FX translation.
Turning to slide 10, we expect organic new business to again be a critical component of our overall growth in 2020, driven by significant network investments being made by our large multinational tenants.
In the us we're projecting organic organic tenant billings growth of around 5%. His carrier spending on Fourg continues in fiveg related activity picks up.
There are few principal factors driving our us organic tenant billings lower than we have seen over the last few years.
First as I alluded to earlier and as we expected our new business Commencements and pipeline trending down in Q4 2019.
Attributable primarily to Timo will in spreads activity levels.
Given that trend and similarities lower activity levels expected in the first part of this year, our us organic tenant billings growth rate is expected to be lower than last year.
Also impacting the growth rates in fact in our base business is now significantly larger creating overall drag on 2020 grosses.
And finally churn in 2020 is expected to be 1.8% around 30 basis points higher than in 2019, although most although still well within our historical 1% to 2% range.
For the year total monthly commenced organic business, new as expected to be a bit lower.
In 2000 in 2019, as I mentioned and timing of the new business in 2020 is expected to be more backend loaded in the year.
With all that said, we remain incredibly constructive on the long term demand trends for tower space in the us and anticipate that new business activity will ramp up to higher levels in the back half of this year and into 2021, given the forecasted demand growth anticipated spectrum deployments and opportunities associated.
With Fiveg.
Moving on to Latin America, we expect organic tenant billings growth of around 7% for the year broadly consistent with what we saw in 2019.
Demand trends are solid with carriers increasingly focus on improving and extending fourg networks as mobile data usage accelerates.
After incurring some items decommissioning in Brazil last year elevated churn in the region. We expect our lab came churns and declined to around 1.7% in 2020.
Partially offsetting these positive trends our initial gross new business expectations for the year to slightly lower as compared to 2019.
Escalators are also expected to be down nearly 1% given lower inflation rates.
Over the longer term, we believe we'll have excellent opportunities to grow our Latin American business is carrier investments continue.
That regard to continue to see strength in our new build program in the region as network Densification initiatives take hold and consequently expect to build between four and 500 sites in 2020.
Overall, we expect last and tenant billings to grow by close to 12% in 2020.
Switching to Africa, 2020, organic tenant billings growth is expected to be around 11% up from 9% in 2019.
This is being driven primarily by our expectation that given our significantly expanded regional portfolio gross new business contributions to growth will be up substantially as compared to 2019.
In addition, escalators are expected to be slightly higher at around 6%, while churn is projecting to remains steady at around 1.8%.
On the new build side given continued strong demand we expect to construct of 2000 sites in the region in 2020 as compared to around 700 in 2019 isn't represented a record level. So newbuilds for us in Africa.
Meanwhile, in Europe, we expect organic tenant billings growth of between one and 2% down slightly from 2019 based primarily on higher levels of churn due to some carrier consolidation in Germany.
Longer term, particularly in France, where we recently signed a deal with orange to acquire up to 2000 sites over the next few years, we would anticipate higher levels of activity is fourg and fiveg coverage initiatives accelerate and the corresponding necessary spectrum is allocated.
Finally in India, we expect organic tenant billings growth to be essentially zero in 2020 versus a roughly 20% decline in 2019.
This includes churn assumptions around 12% for the year as compared to 33% in 2019.
Given that the impacts of the carrier consolidation process are largely over.
With that said, we still anticipate chairman in India to be quite a bit higher this year than historical levels and what we would expect in future years. As a result, a few legacy ITC impacts provisions we've made for the potential impacts of the recent Agee. Our decision is I mentioned earlier in the last tranche of contractual churn is.
Good where their 2018 acquisition of the Vodafone in idea sites.
Gross new business activities expected to be quite strong at about 9% and in fact would be the highest of all of our international markets, although not quite at historical levels again, given some of the likely funding challenges facing certain carriers due to the Supreme Court HCR decision.
Longer term, we continue to expect India mobile network operators to deploy significant levels of capital into their networks as fourg penetration grows in mobile data usage continues to expand.
And again to the extent of a more favorable resolution to the Aer issues reached it is possible that we the outperform our current expectations.
Overall, a consolidated basis, our outlook assumes commencing more than $27 million of new monthly recurring business across our tower das assets of which between four and $4 million will be from newly constructed sites with the balance coming from more traditional organic co location amendment activity.
So while our organic tenant billings growth in certain regions, maybe under pressure due primarily to broader industry events and timing issues. We have the ability to supplement that growth through our global build to suit growth engine.
Moving on to slide 11.
At the midpoint of our outlook, we expect adjusted EBITDA to grow by $390 million, 3.2%.
This includes continued high margin flow through of organic growth as well as the impacts of accretive M&A transactions built to suit activity and a full year of our new emulate agreement with 18 team.
We expect to target areas in our business, where we can take additional efficiencies, including power and fuel, where we're continuing to invest in more efficient equipment and renewable energy solutions.
In fact, we expect to save upwards of 40 million liters of few utilized by our tenants in 2020, leading to reduce emissions and costs.
Our cash Sta expense as a percentage of revenues expected to be around 7.6% down from over 8% in 2019.
We anticipate being able to further reduce that metric over time.
And finally, our adjusted EBITDA expectations include an estimated negative impact of around $45 billion from unfavorable FX translation effects.
Turning to slide 12, we expect to convert our adjusted EBITDA growth in the strong consolidated AFFO growth as well.
Before taking into account the onetime previously disclosed 65 million dollar cash interest expense impact of purchasing MTN stake in our Guyana and you've done a joint ventures consolidated AFFO is expected to grow by 9.5% or 9.4% per share basis, including that one time MTN relate.
Cash interest expense payment at the midpoint of our outlook, we expect consolidated AFFO to grow by a total of nearly $270 million or roughly 7.6%.
As compared to 2019. This includes the contribution of $413 million from FX neutral cash adjusted EBITDA.
Offsetting this increase is $23 million or so and higher cash taxes, a roughly $41 million drag from unfavorable FX translation and $15 million and other items.
Share basis, we expect consolidated AFFO growth to be over 7% for the year and projecting AFFO suitable to American tower common stockholders per share to grow by over 8% into midpoint.
His first share growth rate would be over 10% to onetime $65 million cash interest expense in fact.
Triggered by the end CFA buyout.
Looking at Slide 13, we remain committed to our consistent diverse return based capital allocation strategy in 2019, we deployed deployed over $1.7 billion for our growing common stock dividend, while spending over a billion dollars on capex with nearly 85% of that spending being discretionary in nature.
Around $367 million or that discretionary spend was to fund the construction of more than 4500 sites throughout our global footprint, a new record for American tower.
Finally, we spent around $3.3 billion, including the assumption of debt to acquire new assets and another $426 million on the first set of puts in India earlier in the year.
Total we applied we deployed more than $6 billion throughout the year, while staying well within our leverage targets and simultaneously strengthening the balance sheet.
We expect to deploy capital inconsistent balanced manner in 2020, including allocating just over $1.1 billion at the midpoint of our outlook for capital expenditures with roughly 5% of this spend again being discretionary.
Proximately $200 million of that Capex is planned to be spent investing in our business on innovation related initiatives, including further additions of limit lithium ion batteries and solar in certain international markets as well as selective expansion of our fiber infrastructure largely in Latin America.
Once again, we expect to grow our common stock dividend by 20% or so to more than $2 billion subject to board discretion.
In addition, we've allocated roughly $523 million by entering ends minority Stakes and our joint ventures in Guyana in Uganda, and first half the year and also expects to spend roughly $348 million at year end 2019 exchange rates to pay for the final Tata put in India.
Our latest expectation is that the Tata foot will be completed the first half of 2020, but the process remains subject to regulatory approval.
Pro forma for these transactions, we would own roughly 92% of R&D operations and a 100% in both Donna and Uganda.
What this will mean going forward is that the absent any additional transactions impacting our minority interest the gap between our consolidated AFFO and AFFO attributable to American tower common stockholders will shrink.
As you can see on this slide our comprehensive asset base investment discipline and ability to deploy capital to attractive opportunities around the world has helped us drive compelling mid teens growth in consolidated AFFO per share over the last decade.
Further despite adding more than 150000 sites to our portfolios. Since 2009, we've also been able to increase our return on invested capital over that time period to 10.6% as of yearend 2019.
We continue to believe that growth across the combination of consolidated AFFO per share and ROI C is critical to our creation of long term sustainable stockholder value.
Turning to slide 14, I wanted to spend a few minutes and our international build to suit program, which is I alluded to earlier at a record year in 2019.
We expect to raise the bar to an even higher level of activity in 2020.
Most of our new build sites continues to be focused in our international markets and as you can see we've ramped the program from building around 2000 sites back in 2017 to an expected 6500 sites in the midpoint of our outlook for 2020.
We have purpose built this global engines to support significant tenant driven inorganic growth importantly, not only are we building more sites, but we're also maintaining the attractive day one economics.
Generated historical with one tenant our initial average annualized yield on international Newbuilds over the last three years has been around 11% increasing further overtime as we generate additional colocations to give you sense of our historical coalesced co location success, we've added roughly a happened tenet on average.
Sites built in 2000 15.4 decides built in 2016 Interide 0.3, the sites both in 2017.
Given this growth profile, we continue to deploy significant capital towards our new build initiatives and expect to spend almost $400 million at the midpoint of our 2020 outlook on development Capex.
Finally, as you continue to chart in the right sided page newly constructed sites is contributing meaningful lead to our overall book of monthly run rate additions over the last three years with a total of nearly $7 million added.
We expect at another $4 million is so in 2020 is our new build activity accelerates.
Turning to slide 15, and in summary, 2019 was another strong year for American tower with solid organic growth accelerating new build activity meaningfully accretive M&A continued strides and increasing margins are driving operational efficiency throughout the business the underlying secular growth trends in mobile on a global.
Basis continue to act as a catalyst for consistent sustainable growth in our revenues and cash flows and we are dedicating resources to ensure that we are optimal in position to take advantage of those trends.
Looking to 2020, we expect another solid year of revenue and cash flow generation fueled by new business growth and margin expansion across our portfolio.
Complemented by a record year of Newbuilds with consistent growth in our common stock dividends and are continuing capacity to fund opportunistic accretive M&A.
In the US, we're well positioned to benefit from a revised wireless industry structure and look forward to working where our existing potentially new tenants to accelerate the deployment of fiveg throughout the country.
In our international markets underlying trends are solid with increasing smartphone penetration and mobile data usage continuing to drive strong demand for our taxes.
Looking slightly longer term, we are fully committed to our stand to deliver strategy and are confident we're on the right path to deliver attractive sustainable long term total returns to our stockholders for years to come.
With that turn the call over the operator, so can take some questions.
And ladies and gentlemen, if you do have a question on the call todays press, one and then zero on your phone and operator, we will gather your name offline in place you back into the queue to ask a question. Our first question comes from the line of Michael Rollins from Citi.
Please go ahead. Thanks.
Thanks, Good morning.
Curious if you could talk about this ignyta begin and segmenting the European business from the African degrees.
And based on your historical.
Aspirations to be a leader in each in the regions that you serve.
How did the segmentation play into the goals of what you might want to achieving Europe versus Asia, sorry, Europe versus that Africa, and then just secondarily, if you could talk a little bit more about how.
We should think about the slow growth over the year in the domestic business.
Given the commentary for the activity to be back half weighted and the annual growth goal that that you provided thanks.
Mike Good morning, it's Jim I'll take the first on and Tom can speak to the trend on the second.
As far as Europe, and Africa, separating we essentially took the opportunity with the Eaton transaction to really focus.
More transparency on both markets given the significant differences that they have and then secondly, as I suggested you know with Eaton coming on Africa is actually a sizable region at in of itself. Now. So that was just high time to separate them just for those reasons, there's really nothing else behind it.
As far as leadership aspirations, they take sometimes years or many years to achieve and for US. It has to do have the discipline of our investment program.
Right now and for the last couple few years, I'd say that the match of asset pricing and growth rates has not met our investment criteria and so we haven't felt the.
Need or really the attractiveness to by large asset portfolios in Europe, but those prices, but things change and whether whether the growth rate surges or the asset pricing moderates.
As of the times, you'll see US act more decisively, but we think it's really important to have the beachhead in that part of the world in France, and Germany. The two largest continental economies and so we think that it's an important business for us.
But just asset pricing and growth need to come veteran to line for Us to act more decisively.
And Michael and New York on the second one.
Versus kind of last year I promise, you kind of a 40 plus percentage in the first half there and kind of 60% in this second half of the year within new analyze that we have in place there could be.
The organic tenant billings growth rate might be a bit higher in in Q1 actually.
But overall, we would expect kind of the new T mobile.
Well spent roughly the same that we.
Generated last year, because this at all kind of second half of the year.
Driven which will prove to be positive actually heading into to 21. We believe I'll also remind you that we havent assumed any activity.
From any new entrants windisch into the outlook for the year.
Thanks very much.
Your next question comes from the line of David Barden from Bank of America.
Merrill Lynch. Please go ahead.
Hey, guys, it's Josh in for Dave Thanks for taking the questions to fight could.
Can you just provide any additional commentary on the Indian Supreme Court ruling and when you.
When you think this will all be behind us and any thoughts you have on reports the government has been intervening in the market to raise prices and then secondly, what are your expectations for the gross related impact related to the 18th Telefonica deal and you think there other markets, where this type relationship could evolve. Thanks.
Sure Josh This is Jim again, and I'll go ahead, and starting Tom can add additional commentary so as far as India. The Supreme Court there in that country.
This is taking its independent action as independent judiciary tend to do.
For us to predict what those actions are going to be in how they rollout is something we're not going to do but I will tell you that.
Part of the history of this company is to adapt to changing conditions and it's not by accident. We've built a company that way through our portfolio diversification, our long term contracts our compound for hence of MLS days and afford dimensional strategy that we sort of call stand and deliver in the current timeframe. So we'll adapt to this.
As it unfolds and soda predict how it will unfold I can't offer much in the way of content, but our adaptability I can assure you will be putting it to play however verticals.
As the government intervening.
We just see what happens in the market, we're not involved in those us.
Discussions are internal government.
Decision, making processes in India, but the pricing rationalization I would call. It was long do Theres no way to continue to provide the kind of gigabit multi gigabit service from month to kind of prices that were being charged and now that some common sense us come into the market that was just overdue.
Secondly on in Mexico, with 80, and Tia telephone under new arrangements. We've got a significant amount of telefonica leases was with long term lease commitments that will we expect will be honored.
And we are also having about four years on average with those leases and as far the TNT it to a large and well integrated customer with us and Mexico as well as the U.S. and whatever traffic moves from the telephone Bonaqua network over time and to the ATM networks going to have to be served.
And then acorda great position as a partner with ATM in Mexico to meet that demand with them. So we don't expect us to be materially adverse scenario to our Mexico business.
Got it thanks for taking the questions.
Our next question comes from the line of Batya Levi from.
Please go ahead.
Great. Thank you question on India can you provide more color on the 12% churn assumption you have is that based on some early notification from the carrier or you're just assumption that as you progress is they could.
Hey calls from equipment and on the gross activity side. It looks like it was too strong throughout the end of last year have you seen a slowdown since then and does the 9% assume activity from all players and maybe just finally in the event that there is a restructuring there can you talk about what kind of protection you have.
Thank you.
Sure by Jay on the first couple of questions.
We had a little bit higher churn.
In Q4, which is I consider India carried consolidation churn, which is kind of kicking in into 2000 Teus couple percent the kind of the overarching planning provision that put in place relative to the Aer decision is probably another 4% or so.
So when you kind of back out this I kind of look at that kind of the normalized churn rate is probably in that 4% rate for the year, it's still a little bit higher than I would expect longer term with that kind of give you a sense of what we think is being the kind of the normalized rate.
Relative to the kind of the gross new business is around is around 9% and again because of the aer decision, we've kind of scope that back a little bit for 2020 planning purposes.
Carriers continue to work through a lot of these HGR decisions, we thought it might slow down a bit the the overall rate of growth.
The build program continues to be very very strong and.
70, 80% of our total build program will be in India.
I've seen the kind of the really terrific and Hawaii yields that we've had in that marketplace. So again as I mentioned, while the overall gross.
Is a bit slower than last year is our highest across our international footprint in debt, 9%. So we're really positive constructive longer term audit, we seem to kind of get through kind of this aer processor and digest, Jim just add to that.
In the larger context, we're going through in India in the mobile industry, a reordering of that industry. It was long overdue thats for the consolidation came in and now the actions of certain.
Government agencies in courts, and the impact of those which will be.
We hope fairly short lived but at the end of today, we look at the long term technical demand for tower space in every market that we're in and if you just step back and look at India as a market for mobile service.
Because of 1.3 billion people plus there.
At the end of the.
Decade, if not sooner there will be using probably 10 gigabits amount on fourg if not fiveg.
Across that population that is the network infrastructure. This there today is woefully inadequate to do that so there's a reordering of the industry and some shaking out as happened, but at the end of the day no matter what carriers are serving that population, they're going to have to have a significant amount of equipment added to sites in that country and a six.
Getting amount of sites added over time, and we'll be there for that.
Again, we'll adapt to the industry structure, who the customers are who the customers ownerships are.
With the competition is to get our fair share of that and monetize it in the way we typically done.
Okay. Thank you.
Next question comes from the line of Simon Flannery from Morgan Stanley. Please go ahead.
Thank you very much just coming back to the sprint T. Mobile is it your your hope to sign a holistic melee here too.
Sort of flattened out some of the the churn on the sprint network and how long do you think that would take two to execute and then just on the new build so perhaps you could just give us a little bit more color about the key markets you are targeting in 2020.
Assignment as Jim Good morning, I'll take the mobile spread income can talk to the build program.
As far as our negotiations with T mobile our other carriers are ongoing constantly at various levels of we've found ways with all of our major customers. The two at the end of the day come to an arrangement with them, whether its retail or wholesale you could characterize it.
That allows us to have a strong growth rate in them to feel like they have an efficient way to deploy their network I'm extremely confident that we'll continue to.
To have those kinds of interactions with the T mobile management and at the end of the day, if it's a holistic or a wholesale type agreement that is best for both parties will enter into that as we've done with others and if it's a more retail establishment with more flexibility for within that as well the remaining term.
Just two years, so that gives us time on the spread leases to work with T. Mobile sprint closely to figure out what the best answer is for all of us on that so I am very confident that we're going to find and arrangement that works for both.
Yes, just on just in terms of the split of the 6500 size are looking that upwards of 2000.
In Africa, 600, plus and in Latin America in about 5000 in India.
Great. Thanks, so much.
Our next question comes from the line of Colby Synesael from Cowen. Please go ahead.
Hi, Great two questions. Jim you mentioned in your prepared remarks as part of your strategy that will focus more on TBR ads and edge in 2020 I was wondering could expand on that and then just Tom one question as it relates.
Just I guess.
The number that you have straight line your assumption now for 2020 $185 million.
Last quarter on your supplemental for 2020 103 million.
The 18 TLR happened in early September as I assume that was already reflected just curious what the explanation is for that Delta versus what you guys were guiding for last quarter. Thank you.
Sure Colby on on the innovation initiatives.
They are in early stages, we actually hope to be a pioneer in both of these in our industry both unclear, how they're going to develop and at what rate, but we're out in front, we think with the right partners. So as far as CVR Escos. We expect the next few years that will be mainly an indoor small cell solution that way.
Will reduce the cost.
Delivery of service inside of venues and that would therefore widened dramatically the number of venues that the adapt system. If you will makes economic sense. So thats the path we're on there.
As far as edge compute might envision long term is that there is incredible sense and they'll be.
A lot of value and being able to interconnect at the cell site at the tower site multiple mobile operators and multiple cloud providers to really enhance the latency improvements and the throughput.
And responsiveness of Fiveg in the future and again, we're working we think with some of the very best partners and Trialing. This we've set up.
Really.
A lab, if you will with Colo Hcl in Atlanta, and we'll have six sites up and running a tower locations in the southeast US. This year to go ahead and test this out with a cut with a few very well regarded parties in those fields that I discussed. So I think that were again in the front of this week.
To help.
Lead that infrastructure definition of what is going to take to do these kinds of edge compute solutions.
And we'll keep updating you all as we as we go forward.
And call and calling on the second phase you're right I mean, we add some adjustments that we may.
The straight line counts on the M&A and then we just have we have natural extensions in our other kind of non related leases kind across the portfolio and then is there anything specific I mean, it seemed like a fairly large.
Jump versus last quarters, when they're 90 point out.
No nothing nothing specific.
And I just point out in India is really a true up into 2028, and just remind you that we do expect again another pickup of around 30 million Bucks straight line in our outlook, but but relative to Q4 and finishing up the year nothing specific just kind of river landing on that calculation.
Okay. Thank you.
Our next question comes from the line of Brett Feldman with Goldman Sachs. Please go ahead.
Thanks, and firstly I just want to follow up on the question about your outlook for India, If I heard Tom's answer correctly. It sounds like your pipeline for gross new activity may indeed be better than the 9% growth, but in light of the uncertainty market, you're choosing to take a degree of conservatism and it sounded like Thats also the way you thinking about.
Turns I just wanted to clarify whether it's what you actually seeing your funnel for both of those metrics that caused you to guide as you did or if it was also heavily influenced by an appropriate degree a conservatism and then just secondly, we're starting to see the C band process move ahead, and we might get an FCC authorization that reasonably soon what's your latest updated thinking in terms.
The impact you'd expect that to have in your business me you, mostly assuming this could be a huge amendment cycle from your existing customers or do you think that this could be a catalyst for a significant amount of new site deployments owing to the propagation differences in the frequency. Thank you.
I'll take the first one Jim will take the second one knocking on your question on India I think the to the extent that the our decision is is resolved quickly and appropriately the pipeline could increase but relative to my comments on.
Conservatism is more largely in the churn side.
And so I don't I wouldn't expect I don't know that we have significant increases on the on the growth side.
But they're very well could be possibly benefits on the churn side.
And Brad on the C band spectrum availability personal and just as a reminder to everyone is probably a few years to allocate through auction or otherwise and then clear that spectrum and really get ready to deploy so we're looking forward to that because as you sort of suggested that certainly for our existing customers if that.
Spectrums available and you won't have the same sort of signal strength using that spectrum. As you have in six 700 to sites absolutely have to be closer together, which inquires densification. The other issue is that that spectrum won't go through obstructions, such as walls and foliage and things like that quite as well, so thats going to kind of add to the destocking.
Nation requirement and.
For new customers, we're working with a number of industries in a preliminary fashion.
The fact that this spectrum might be available and if you see the impact of an auctions I think when well very good position to carry that forward, but it's hard to predict right now, but existing customer base. We expect is going to need to use the spectrum.
And we'll deploy it and denser fashion over the next number of years.
Thank you.
Last question comes from the line of Ric Prentiss with Raymond James. Please go ahead.
Hi, good morning, guys.
Hey couple of follow up questions.
On the CBRN spectrum side, Jim would you imagine yourself participating in the spectrum auction or just acting as.
The host of spectrum.
We expect to refer to act as a host of spectrum and allow our customers and other industries to secure the spectrum.
Go ahead and.
Deploy it.
At there and within their plans now there is some.
General access spectrum, that's out there too and that's kind of.
Bands that anyone can use.
And low density venues might make a lot assess the used because.
The availability this spectrum.
For large significant quantities of volume is not going to be required, but just having enough availability of spectrum to augment the outdoor network with the valuable so the generals available to all and some of our customers and other clients may come with the with the more.
Prioritize spectrum, but we don't intend, Minnesota bid and options makes sense and Jim you mentioned or Tom you mentioned 5000, the Newbuilds in India Who's your anchor tenant there just so we can understand kind of as the industry.
Rationalize is there would you might be expose yourself with.
It's Rick is largely airedale.
Okay.
And a couple of obviously quick was here in the TNT New M.L.A. what was it that got addressed in that one was the first that project was preparing just trying to think that was a fairly large win at what drove the new ml a there was a TNT.
Greg It's Jim Art art practices, we don't speak to specifics of any customer agreements, but what I can say is that look we've been working with a TNT and its predecessors and spectra side, but the.
As VC towers in the late 19 nineties I believe so.
This is just another cycle in the pattern of collaborative agreements with that executive team as it's evolved over time and.
Were the largest tower company in the country and they are one of the largest mobile operators in the country and assist and natural cycle evolution of how we do business together.
And last one for me is obviously you mentioned that no new ones. Like addition, the guidance what would it take.
Just wanted to take over some of the decommissioned spreads size. If they found that as Dave said on the recall that some of the Rad centers are at good Heights, what would be involved in dish, taking a look at the some decommissions for insights.
Records, Jim broadly their obligations on the part of T mobile spread on those sites already.
Varying terms, we try to work closely with both dish and T mobile spreads to figure out what makes the most sense really for the industry and for the companies.
To put each site and the proper hands. So that this deployment can be successful for really all on both of those customers. So we sorted out but it'd be a very detailed negotiation based on the facts and the volumes and the locations.
Excellent thanks, guys.
Correct.
Great well, thank everybody for joining this morning and have a great debt.
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