Q3 2020 SBA Communications Corp Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the SPM third quarter results conference. At this time, all participants are in a listen only mode.
Later, well conduct a question and answer session and instructions will be given at that time.
If you should require assistance during the call. Please press Star then zero.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to our host Vice President of Finance Mark Derussy. Please go ahead. Thank.
Thank you rich good evening and thank you for joining us for <unk> third quarter, 2000, or 20 <unk> earnings Conference call.
Here with me today are Jeff Stoops, our President and Chief Executive Officer, and Brian The Cabot, All our Chief Financial Officer.
Some of the information we will discuss on this call is forward looking including but not limited to any guidance for 2020 and beyond.
In today's press release, and our SEC filings, we detail material material risks that may cause our future results to differ from our expectations.
Our statements are as of today November 2nd we have no obligation to update any forward looking statement, we may make.
In addition, our comments will include non-GAAP financial measures and other key operating metrics.
Reconciliations and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website.
With that I will now turn it over to Brendan to discuss our third quarter results.
Thanks, Mark good evening.
Okay. Once again had very strong results in the third quarter exceeding our expectations in all key financial metrics.
Total GAAP site leasing revenues for the third quarter were $486.8 million and cash site leasing revenues were 486.1 million.
Foreign exchange rates were a 1 million dollar tailwind to revenue when compared with our previously forecasted FX rate estimates for the third quarter.
They were again, however, a significant headwind on comparison to the third quarter of 2019 negatively impacting revenues by $20.1 million on a year over year basis.
Same tower recurring cash leasing revenue growth for the third quarter, which is calculated on a constant currency basis was 4.1% over the third quarter of 2019, including the impact of 1.9% I'm sure.
On a gross basis same tower growth was 6.0%.
Domestic same tower recurring cash leasing revenue growth over the third quarter of last year was 5.7% on a gross basis and 3.5% on a net basis, including 2.2% I'm sure.
Domestic operational leasing activity or bookings, representing new revenue placed under contract during the third quarter increased over the first half of 2020 levels.
It remains below levels, we were seeing in the year ago period that's.
The sequential increase in domestic new bookings was driven primarily by increased activity with T mobile.
Based on conversations with our customers and continued growth in our domestic application backlog, we anticipate seeing this activity continued to increase in the fourth quarter and into 2021.
During the third quarter Amendment activity remain the large majority of our domestic bookings with newly signed up domestic leasing revenue Colleen, 80% from amendments and 20% from new leases.
The big three carriers represented 83% of total incremental domestic leasing revenue signed up during the quarter.
Internationally on a constant currency basis same tower cash leasing revenue growth was 7.1%, including 0.4% churn or 7.5% on a gross basis.
Our international leasing activity was up modestly over first half 2020 levels, but still remains impacted by continued coven related spending reductions by our customers and a number of our markets.
This quarter, Brazil with again, the largest contributor to international lease up growth.
Gross same tower organic growth in Brazil was 9.0% on a constant currency basis.
During the third quarter, 86% of consolidated cash site leasing revenue was denominated in us dollars.
The majority of non U.S. dollar denominated revenue was from Brazil, with Brazil, representing 10.8% of all cash site leasing revenues during the quarter and 8% of cash site leasing revenue excluding revenues from pass through expenses.
Tower cash flow for the third quarter was $396.8 million Arts.
Our tower cash flow margins continued to lead the industry with a third quarter domestic tower cash flow margin of 84.3%.
International Tower cash flow margin of 71.0% or 19.1%, excluding the impact of pass through Reimbursable expenses.
Adjusted EBITDA in the third quarter was $373.3 million.
Our industry, leading adjusted EBITDA margin was 71.5% in the quarter up 90 basis points from the prior year period.
Excluding the impact of revenues from pass through expenses adjusted EBITDA margin was 75.8%.
Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the third quarter.
Hey, AFFO in the third quarter was $270.1 million.
AFFO per share was $2.38, an increase of 10.7% over the third quarter of 2019, and a 15.3% increase on a constant currency basis.
Our outperformance at AFFO was partially attributable to reduced net cash interest expense, resulting from the termination of the company's $1.95 billion notional value of interest rate hedge a portion of our 2018 term loan.
In exchange for one time cash payment of $176.2 million.
This termination in combination with a new interest rate swap entered into by the company on the same day fixing the interest rate at 1.87% on $1.95 billion of our 2018 term loan will result in annualized annualized cash interest expense savings of $37.2 million.
The impact to 2020 net cash interest expense as a reduction of $16.3 million.
During the third quarter. We also continue to expand our portfolio acquiring 44 communication sites and one data center for total cash consideration of $73.5 million and building a total of 75 sites in the quarter.
Subsequent to quarter end, we have purchased 54 communication sites for an aggregate price of $14.6 million and we have agreed to purchase 132 additional sites for an aggregate price of $85 million.
We anticipate closing on the majority of these sites by the end of the first quarter of 2021.
We also continue to invest in the land under our sites, which provides both strategic and financial benefits.
During the quarter, we spent an aggregate of $7.2 million to buy land and easements and to extend ground lease terms.
At the end of the quarter, we owned or controlled for more than 20 years, the land underneath approximately 71% of our towers and the average remaining life under our ground leases, including renewal options under our control is approximately 35 years.
In our earnings press release. This afternoon, we included an update to our outlook for full year 2012.
Providing increases in all key metrics.
Strong leasing revenue and services results in the third quarter were drivers of these increases in our outlook. In addition to lower SGN, a projections lower non discretionary capital expenditures and lower net cash interest expense.
These results on adjusted forecast along with the impact of our recent share buybacks, which mark will discuss in a moment have allowed us to increase our full year 2020 outlook for AFFO per share by 25 cents.
I will now turn things over to Mark who will provide an update on our liquidity position and balance sheet. Thanks, Brendan we ended the quarter with $10.8 billion of total debt and 10.5 billion of net debt.
Our net debt to annualized adjusted EBITDA leverage ratio was 7.0 times at the low end of our target range, our third quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 4.2 times.
On July 14th through Trust, we issued $750 million of 1.84% secured tower revenue securities, which have an anticipated repayment date of January 29 2026.
As well as $600 million of 2.3% to 8% secured tower revenue securities, which have an anticipated repayment date of January 11th 2028, the aggregate $1.35 billion of tower securities have a blended interest rate of 2.081%.
Weighted average life through the anticipated repayment date of 6.4 years net proceeds from this offering were used to repay the entire 1.2 billion aggregate principal amount of the 2015 dot one seat and 2016.
Dash one seat power securities with the remaining net proceeds being used for general corporate purposes.
As a result of this financing our next debt maturity is not until April 2022.
As of today, we have no outstanding balance under our revolver and the weighted average interest rate on our outstanding debt is 3.1% with a weighted average maturity of approximately 4.2 years.
During the third quarter, we repurchased 580000 shares of our common stock for $175.6 million or an average price of $302.63 per share.
Subsequent to quarter end, we have repurchased 415000 shares for $124.4 million or an average price per share of $299.54.
Today, our board of directors approved a new $1 billion stock repurchase plan effective immediately replacing the previous $1 billion plan, which had $124 million of repurchase authorization remaining.
The company shares outstanding as of September Thirtyth, 2020, our $111.4 million.
Compared to $112.6 million at September Thirtyth, 2019, a reduction of 1.1%.
In addition, during the third quarter, we declared and paid a cash dividend of $52 million or 46.5 cents per share and today, we announced that our board of directors declared an equivalent fourth quarter dividend of 46.5 cents per share payable on December 17 2020.
To shareholders of record as of the close of business on November 19th 2020.
With that I will now turn the call over to John.
Thanks, Mark and good evening everyone.
We had another strong financial performance in the third quarter, we produced leasing revenue tower cash flow adjusted EBITDA FFO and AFFO per share that we are all ahead of both our expectations and consensus expectations. The year has developed almost exactly as we predicted it would on our last earnings call.
US customer activity has increased due to T mobile activity increasing post merger.
Our national business remained stable to improving but still challenge due to the continued impact of COVID-19 in those markets and the capital markets remain very friendly to our company.
Because we see further increase us leasing activity in the future over 2020 levels at a time, where our international markets recover from today's COVID-19 challenges, we continue to invest capital in both portfolio growth and by repurchasing our stock, which investments we believe will help fuel future growth and AFFO.
Per share dividends per share.
We're very pleased with our results, particularly against the backdrop of continuing COVID-19 conditions in all of our markets. The majority of our employees and our customers employees are still working remotely, but yet continue to work efficiently and effectively to produce these positive results. We also have a number of the central field person.
At El working every day out at tower sites to meet our customers needs. We greatly appreciate the efforts of all of these frontline flows we have not only had to adjust to working in the new covert world, but also have been there to get hurricane and fire impacted sites back up and running for our customers and ultimately for their customers.
They've done a great job and I. Thank them for all they have done and we'll continue to do.
From a leasing activity standpoint in the US we saw an increase in new bookings during the third quarter to a higher level than we saw throughout the first two quarters of the year. This increase relates directly to T. Mobile activity post merger this increased activity as well as our strong services results at our growth.
The application backlog are positive signs for increased for continued increases in the pace of domestic organic leasing activity for the fourth quarter and into 2021. These.
These third quarter levels, while trending up are still below the levels of activity. We saw in the year earlier period. We believe that there are opportunities to see growing levels of new bookings on a quarter to quarter basis for the next several quarters. There are several drivers behind this anticipated trends first we expect T mobile to continue to act.
Celebrate their focus toward meeting their stated fiveg coverage goals, including upgrading the majority of their sites will either 2.5, gigahertz or 600 megahertz spectrum or both.
Second at the upcoming C band auction should see significant participation and we expect will be a driver of increased activity starting sometime next year with both rise and eight TNT as the deployment of the spectrum will require new equipment that many of their existing macro sites that third we continue our can.
Struck the discussions with dish and we anticipate that they will be actively engaged in building out a nationwide fiveg network over a multi year period.
All of these factors should create an increasing domestic leasing environment as we move through next year, which will bode well for domestic organic growth for the following several years.
Internationally, we saw slightly higher leasing activity levels that we saw in the first half of the year signing up 47% of international revenue under new leases and 53% under amendments.
Withstanding the slight increase in activity levels, we continue to see impacts in our Latin American and South African markets from the Cove in 19 crisis on the positive side most of our international wireless customers orders improved third quarter financial results sequentially compared to the second quarter as locked sales in their markets.
Started to lift however, they have also reported material year over year Capex reductions in the order of 10% to 25% as Lockdowns have made network deployment difficult and they have prioritized cash.
As a result, we expect international bookings may remain pressured in the fourth quarter and into early next year on the bright side some of our customers such as America Moldavia have discussed in their third quarter calls their future plans for increased more normalized capital spending, which we believe will be a positive for us wireless country.
When used to be critical to the access to the Internet and all of our international markets and significant network investment is still needed throughout all of these markets none with the possible exception of certain parts of Canada have as yet embarked on the type of Fiveg upgrade that we are starting to see here in the U.S I scope in 19.
Conditions improve we expect wireless capital spending in our international markets will improve considerably.
Consistent with the uptick in our us leasing activity our services business had a strong quarter seeing a material pickup in construction activity, particularly with T mobile.
We also continue to control our cash as shannay costs very well as a result, we again reported the highest tower cash flow and adjusted EBITDA margins in the industry, including an 84.3% domestic tower cash flow margin.
We also were able to control our non discretionary capital expenditures for the quarter, allowing us to again reduce our full year outlook for this capex and we were able to use available cash on hand to pay off and reset and out of the money interest rate hedge significantly reducing our future cash interest expense obligations.
For nearly the next five years.
Our solid performance up and down the lines of the TNL allowed us to produce our highest quarterly AFFO per share ever.
And while I'm hesitant to bring up this only by Golly. We will end 2020, just short of an annualized fourth quarter FFO per share of $10.
If not for the significant negative FX movements experience this year, which we believe were largely due to the relative strengthening of the US dollar and Federal Reserve Bank policy in response to Covance, we actually would have made that 10 by 20 target we set out almost five years ago.
Nothing else I think this is really indicative of the strength and predictability of our business and our ability to manage it.
Hello.
In addition to our operating and financial results. We also had a solid quarter allocating capital, we purchased or put under contract a number of very high quality tower assets. We've built a number of towers across our international markets. We invested in the Jack Snap data center as we discussed on our last earnings call a step, but our long term.
From edge data center strategy focused on being ready to monetize and capitalize on eventual data center demand at our tower sites.
We spent $300 million in the third and fourth quarters, Opportunistically repurchasing, our stock, which will positively contribute to FFO per share growth going forward, including this quarter.
And we announced today, our dividend at an amount, which represents less than 20% of our third quarter and the midpoint of our projected fourth quarter AFFO per share.
We anticipate that our expected increase AFFO generation will give us ample ability for material future increases in dividends, while maintaining plenty of capital for continued portfolio growth and stock repurchases net.
Next quarter in conjunction with the preparation of our 2021 outlook, we anticipate that our board of directors will be declaring a materially increased quarterly dividend, which as is becoming our practice will remain the same on a quarterly basis through the course of the year.
From a balance sheet perspective, we've been able to continue to manage our leverage effectively ending third quarter at 7.0 times a level I'm very comfortable with.
As I mentioned earlier, the debt capital markets have been very accommodative and.
And we have taken advantage of these opportunities several times this year.
In the third quarter, we were able to refinance 1.2 billion of securitization notes, reducing our overall cost of debt, which today averages 3.1%.
We have achieved that investment grade cost of debt on a levered balance sheet, which of course when properly managed greatly benefits our shareholders.
We currently have no debt maturities until 2022, and we continue to have very high liquidity, including our fully available undrawn $1.25 billion revolver strain.
The strength of our balance sheet continues to provide us with the flexibility and confidence to be opportunistic around investment opportunities and share repurchases, while still being able to comfortably support a materially grow our dividend.
We had another solid quarter than the third quarter.
Want to again, thank our team members and our customers for their contributions to our success, particularly during these challenging times.
We look forward to a strong end to the year and sharing our results with you next quarter.
With that rich we are now ready for questions.
Certainly ladies and gentlemen, if you wish to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one and zero command. If you are using a speaker phone. We ask that you. Please pick up the handset for pressing the numbers. Once again, if you have a question you may press one than zero at this time.
We will.
And with the line of Phil Cusick with JP Morgan. Please go ahead.
Hey, guys. Thanks, a lot.
So Jeff you discussed T mobile ramping and probably ramps further from the fourth quarter.
You see signs that other carriers could be slowing down in the next year that would sort of net some of that growth out.
I don't think materially.
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I'd say.
I think we will see a period of time, though in 2021 before.
We will see the highest levels of activity we expect.
Particularly with respect to the C band, because that's going to take a little bit of time.
But I don't know I mean of course anything can happen, but I don't see signs today.
T mobiles going one way and the other two are going in the opposite direction.
That's great and then what momentum do you see in the deployment of Mimo antennas business in both been talking about for a couple of years does that wait for C band to be deployed as well are you seeing that happen today.
Well, we're seeing it happen today, because we're seeing today.
2.5, gigahertz spectrum being deployed today.
And I mean that is so that is the that is the.
Preferred.
Way my in my understanding that is the preferred way and the most efficient way to get the most out of the mid band spectrum for Fiveg.
That makes sense and one more if I can what are you seeing in activity activity levels in Brazil.
And how does that compare to what you expected when you bought more sites in December.
Thank you.
Well, we did see code.
And we didn't see the.
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We did not see the.
Level of the FX.
Adjustment, which I think is in large part due.
But what we have seen as a steady.
Currency constant currency adjusted very good demand fill for those assets and we think over time and with some.
Improvements in those cobot conditions.
We're going to see tremendous improvement in the numbers coming out of Brazil, but.
We would certainly be telling you if we foresaw everything that has gone on in Brazil. This year back in December.
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I don't think anybody could say that but.
But it does sound like this there's still good demand in that market. Despite despite code.
Yes, there is I mean, if you were to strip back I mean, if you look at the demand.
And the growth rates that Brendan talked about you see in our in our numbers.
On a constant currency basis, we're we're very pleased where things are and thats.
Still on a.
On a year and in an environment, where these customers have pulled back.
Materially in their Capex in response to to cope with.
And they basically said that look this is temporary and we're going to need to spend more money coming out of this thing.
So we're we're very we continue to be very very happy with our Brazilian operations.
Great.
All right, we'll now go to the line of Simon Flannery with Morgan Stanley. Please go ahead.
Great. Thank you very much and good evening, you talked about dish and Timo, we didn't talk about much about cable they were very active in the CBR us. So I wonder Jeff do you think cable can be a contributor and 21.
How are those conversations going on on T mobile they have a real interest in.
Reducing some of the old item.
Spring sites.
Is there an opportunity you think to to work with them to come up with some structure to allow them to take down some of those sites quicker than the current contracts allow.
Well, we don't we don't really have any of the guide and less so.
What we have are just straight spreads leases that are of a more.
Regular sprint network deployment that have various.
Termination dates over time, and we're always open to discussions.
In terms of cable we do have we do have cable demand.
For some of our tower space I don't know that table will ever have been.
Desire to mail in a or the spectrum ability to now.
A greenfield nationwide build out the way.
The other four will have but we certainly do see some incremental demand and benefit from there.
Their spectrum holdings.
Great and then just one quick one from Brendan on the the leverage you are at the low end of leverage is seven times is that if you're going to keep out there with the buybacks. How should we think about your desire to stay at that seven times versus coming down lower depending on where the stock price is so if you don't have other M&A opportunities.
Yes, it's our desire to stay within that target range. We're at the low end of it now in.
In terms of the share buybacks and the asset acquisitions, it's really a matter of being opportunistic around what's available to us at a given time so.
Where they are today largely through share buybacks.
The third quarter and we've done some already in the fourth quarter. So you should expect will be somewhere around the same range going forward.
Great. Thank you.
Thank you, we'll now go to the line of Batya Levi with US. Please go ahead.
Great. Thank you.
And that's how we should think about the pacing of the T mobile churn I think on the sharing churn is coming in a little less than 2%.
Well, maybe some early color for next year. If there was anything that we should look forward to it.
When you think Tim to ramp up.
Yes, we so we have.
Seem a little bit of chart notifications from T. Mobile thus far around 100 leases are so that is relatively small probably in the $4 million to $5 million range in terms of its impact for next year. When you look at our overall term end dates so.
In terms of the overlap in particular, we have almost four years left on average for the sprint leases that are onsite for T mobile and as and when you look at the specific date most of it is out about five to six years.
So we expect that we're going to start seeing that stop heavily.
Heavily weighted towards the back end.
Got it thank you.
And we'll now go to line of Colby Synesael with Cowen. Please go ahead.
Great maybe just a follow up on that yes there.
There is a lot of talk obviously about on.
Leasing increasing the next few quarters, including the fourth quarter and then I guess you mentioned further into 2021.
But when you think about the net.
Same store growth rate 21 versus 2020.
Is there a risk that the churn could step up to such a level that effectively offsets the.
The increase in new demand that you're anticipating to point where the.
Same store growth rate in 2021 would actually be below.
That if 2020. Despite this increase in activity that you're seeing and I. Appreciate you don't want to get too much on 21, just yet but.
You might appreciate that that's a big focus from investors right now and then secondly.
I was just wondering about the.
Capital allocation.
You talked about that 5% to 10% portfolio growth over a long period of time it sounds like this.
Perhaps less to do internationally right now just given the economic situation down there.
Should we anticipate that you just continue to step up the buyback in the interim thank you.
You take the first one update cycle, Okay, yes, Colby so on the churn question.
Based on the way that it works and we give those same tower growth rates, it's usually driven mostly by stuff that's happening this year and into the first part of next year. So a lot of that is known so I don't expect the churn to be materially higher. Although there is some potential for some additional notices were not ready to give 21 numbers yet.
Thanks, when we get them, we'll have a little bit better view on whether there's certain plans from T mobile around some of that chart.
But the overall growth rate.
Also be influenced by the activity levels in terms of new leasing activity this year as well so.
The off station until next quarter to get the actual numbers, but.
What's happening today and the slowdown we saw the first part of the year. This year will have some impact on next year same tower growth numbers, because it is a trailing indicator.
Yes, and how soon we start seeing next year, which.
Actually we just don't know yet today, the benefits that will come from.
Dish really dig in and starting to deploy and the seabed deployments.
So on the.
No Colby the 5% to 10% that continues to be the goal is not going to hit it this year.
You add this year and last year, we will have averaged greater than 5%, but thats not going to be how we how we target things.
We just didnt see the number of.
Opportunities this year that we thought made sense from a pricing perspective, there were enough opportunities out there to hit those numbers. So I believe there will continue to be.
Enough opportunities out there, but for us it's it's not only the number it's the price and thats the quality and less it all comes together in the right way, we're not going to buy stuff just washed up.
And that's where we are this year, but I don't think this is indicative that.
There is not going to be 5% next year.
Okay. Thank you.
Well now go to line of Michael Rollins with Citi. Please go ahead.
Thanks. Good afternoon, just a couple of questions. One follow up could begin Lake you mentioned there is a delay between the booking and billings and so that lag effect.
Has impact going into 21 can you share with us what that current book to Bill duration is and maybe how that compares to.
Historically kind of range and then you take the.
Step back with the data center purchased this past quarter curious if you could share your learnings what you're getting from the data center model and how you see this edge opportunity playing out for SPD overtime.
On the book to billing lag, it's typically six to 12 months. It can vary a little bit depending on the mix of amendments and the type of activity that's being done by the carriers, but I would say, we're seeing that stretch out a little bit longer than it has in the past I think theres. So many major projects going on in.
Color with T mobile.
That the the delayed commencements are a little bit longer than they have been in the past, but six to 12 months of the typical range.
Yeah and on the data center by the we've now got two and the purpose is to understand the data center business data Center model. So that we can be in a position when.
The opportunity is right to know whether we're going to be operators of that many data centers on our cell sites or something less landlords or maybe something in between what we've learned so far is that it is.
Definitely a different sales business different customers.
But that there are a number of different.
Applications and needs where by having.
The larger regional data center that is well connected with fiber lot of interconnect a lot of maintenance type rooms there.
Is it attractive.
Offering to folks who may want to also smaller installations at the tower site that we call that the hub and spoke.
The theory at the end of the day.
For all of us to make sense it has to be on our land.
The tower site. That's that's what this is all about it's not it's not separately getting into and unconnected.
Data center business, but for us to understand how to maximize that we.
We saw that.
Some experience with and kind of experimentation with these two data centers one in Chicago, one in Jacksonville in the Jacksonville and has also some undersea cable connections.
Will give us the right.
The experience and skill set.
So more on that as it comes it's not going to be material to our financial results anytime for the next several years, but it could be a key to really unlocking some value in.
Frankly land that we've already kind of got the startup costs and sunk investment in so it's something that we're excited about over the long term.
And just with respect to that is there any sense of.
How many of these hub that you may need like is the hub need to be in the fall.
Yes, and Thats style and be a tight cities, where do you think that the hub need to actually be much closer to the eyeballs in the use cases and say you might have many hubs and spokes. How do you. How do you think about that at least from your initial learnings.
Yes, so far.
It doesn't it's more of a regional tier two tier three markets for the hubs. So it could be more rather than less but you got to have the you got to have the the spoke side of things.
More developed out for this to for me to be able to sit and tell you that.
Theres going to be more than two hubs. That's why we have the two to prove out now the spoke side of things. It and these are both areas, where we have a fair number of tower sites to do all kinds of different.
Types of business models.
But if there are enough.
Tower sites that connect and make sense. Then then you've got the creation of another hub opportunities.
And whether that needs to be older partner.
Yes, it doesn't have to be what are the other.
Thanks.
We'll now go to line of Brett Feldman with Goldman Sachs. Please go ahead.
Yes, thanks for taking the question Jeff during your prepared remarks, you mentioned to see banding you acknowledged that it could take a little bit of time for that to fully benefit the company. One of the questions. We've been getting is how do we think about the factors that actually determine what that timeline and subject areas because it seems like there's two considerations and I'm not sure how to wait them against Q1.
Of which is just where your towers are relative to the clearing timeline, because theres going to be a couple of tranches, there which is clear. The other is just which of your exceed hence into buying a lot of Steve and so I was hoping really you could just expand as best you can your thought process around when you think your assets are actually going to be positioned to start to benefit from that leasing activity.
Thanks.
Well I mean, you kind of answered informing you really won't know until the options are done and and what got taken by who and where the one of the benefits of giving the 2020 outlook when we give it is.
We hope to have some of that information.
By that so we will look at that and glean whatever we can from.
The results and be able to factor that into our outlook.
I do believe.
A large part of at least the early feelings will be based on the dollar spent.
And the belief that the folks who spend the large dollars and folks have indicated that they are looking to do that they will be looking to.
Deploy as quickly as they said so.
You know thats kind of how we're going to triangulate things right.
Perhaps not going to be.
It's hard for me to say with specificity now without knowing the first thing about.
Uhhuh, who won what and where.
Do you have enough towers in the market that are kind of in tranche, one such that it it actually could be a meaningful catalysts for you over the next 12 or 18 months or do you really need to wait until the majority of that spectrum is clear.
On that yet.
Yes, I think the spectrum clearing is going to go faster than folks think just like it did on the on the TV spectrum. Some of that's going to go faster some of that some of that may not there.
There is every incentive for the folks who.
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When that spectrum or purchase it I guess.
Cause they are purchasing it in some cases arguably to stay competitive with a rapidly deploying T mobile to get things done very quickly.
And I think that that's going to bode well for us and our industry.
Thank you.
We will now go to the line of Nick del Deo with Moffettnathanson. Please go ahead.
Great. Thanks for taking my questions.
Following up on Bretts seabed question, there, presumably at smaller share of towers on which the carriers can economically deploy seed and especially in rural areas just given the propagation attributes versus the traditional mid band how would you mentioned the share of towers that might not be well positioned to host C band.
I do not think thats, the right way to think about it.
Yes, I suspect there will be some.
But I think.
In large part where they have.
Mean anything except the absolute most laurel towers, which I don't think I think you're talking about areas, where you really don't have the same amount you don't have the coverage today. These are the areas that the government is.
Actually incentivizing through the Ardagh.
And the.
These these large amounts of.
Money to bring to these underserved areas I think for the most part where most of the carriers are today, where they have existing threeg and fourg coverage, we believe you're going to see five.
Fiveg brought in the form of the mid band spectrum.
Okay.
And then one on margins, which has obviously been very strong anything that's going to revert post coded where do you see kind of Kobe related extra costs about equal then eco it related savings.
No we haven't really.
Add any type of our travel and entertainment expenses have been down, but I mean, when you look at the margins in the business.
It's still such a small.
Overall amount for that come back.
I have just finished don't see it I don't think you're going to see anything material.
Okay. Okay. That's good to hear if I can just squeeze in one housekeeping item are you disclosing that BCS leap clearwire churn impact this quarter or are you stopping that right.
We basically stopped because it's become largely immaterial I believe that less than 2.3% of that.
Same tower churn number that we gave that on the domestic side, it's lower than that on a consolidated basis.
Okay terrific. Thank you guys.
Next we have a line of David Barden with Bank of America. Please go ahead.
Hey, guys. Thanks for taking the questions I guess first one would be for Jeff.
Is there any part of you that wonders if the American tower Millais will affect the.
Kind of cadence in tempo of the T mobile spend that you're anticipating this can come in 2021.
And I guess my second question is Q4, and then obviously great deleveraging over the last year I.
I remember when you guys instituted the dividend that we were talking about as the fixed kind of dividend cost crew. There was an inclination to bring leverage down below the historical targets, maybe even closer to six does that now no longer the game plan. Thanks.
Yes on the ml a.
Given what T mobile has committed to accomplish under the terms of the approval I don't really think.
Thanks, David.
No I don't think there is anything that is going to impact.
Yes.
David on good to hear it.
On the leverage plan right now given how low percentage of our AD for further dividend represents we don't think that calls for any material reductions in leverage I mean, we're naturally just organically de levering it turn into a turn and a half every year just through.
EBITDA growth and the cash that we generate so.
That if you keep it up requires us to be continuing to significantly invest in the business. So.
Our goal would be to keep it up and continue to see opportunities to invest whether in new assets or share buybacks.
Right now, we don't have any intention to lower it materially, but I think over time as the dividend grows it becomes a much larger percentage of our free cash flow that we would naturally see the leverage start to come down.
Yes, Okay. Good mine, we started that conversation when we were more regularly running at seven and a half times that it's up to us.
Right, Okay, great appreciate it guys.
Thank you and as a reminder, if you want to place yourself from the queue. The prompt is one and then zero on your telephone keypad. We'll next go to the line of Ric Prentiss with Raymond James. Please go ahead.
Yes, Hey, guys sounds like you and your.
The folks are doing well.
All good great. Thanks, so much.
Yes doing well further down.
Couple of questions if I could.
Can you update us on the status of the Firstnet.
Project than yours.
Yes, we continue to to be active.
And we still have.
We're probably about 50% to 55% of our sites with agency have been upgraded for first time Greg.
Still ways to go.
And do you expect to get to 100%.
Probably not quite but.
Higher much higher than where we are today.
Yes, Okay and are you, having any discussions with potential C band winters.
So they could run faster.
Then the clearing process might suggest.
We have had.
General conversations which give.
Basically for us and our customers they know that.
They could access.
Their gear our sites relatively quickly so.
And the parameters are in place to allow them to do that so we're we're the shortest pole in the tent and not the longest Paul in the tent correct. So.
I mean, there's there's just not a lot need for that I mean, we're we're here and ready to go and they all know that.
Thanks, and last one for you.
And you might not have gotten us with before.
We're getting questions about the.
New logos.
And our top auction.
Does that affect your customers at all either.
New logos or fiber deeper.
Well.
The you know we had a fair amount of leasing that occurred from the last.
Auction that went out to try and bring.
Service to the rural areas.
So we're hopeful that the art off will have similar impact, but when you mean, you mean and what do you mean by impact Mitch is going to be generally well.
We believe positive for incremental leasing.
Yeah, we get the question on wireless operators, maybe being impacted.
By Leo's Camille fiber going deeper into the network.
Well.
Yeah.
I think it's around the edges.
And if it were that material they'd be up doing it themselves.
Exactly where we just get that left field technology quest.
A question on them.
Thanks, guys stay well.
Thanks.
Thank you, we'll now go to line of David Gagliano with Green Street. Please go ahead.
Actually my question guys.
You can talk about general industry expectations for 21, non FDIC specific and the reason I ask is your when you appears provided a guidance range for new leasing activity next year that essentially going to be flat versus last year, which was somewhat disappointing is not as T. Mobile is going to be returning so just wanted to get your take is that with a company specific.
Vic issue are reflective of maybe a broader industry trend for next year.
Well, they actually gave out guidance for next year, which we're not going to do.
But.
Basically.
T mobile is going to be bid.
Busy we believe.
And the real issue as to what.
Will ultimately drive the financial results as opposed to the activity levels, but the financial results will be how early in the year.
Dish and the C band work really starts to get going.
And that's about all we're going to say about 2021.
Okay fair enough.
And then switching gears, maybe on the transaction market I just wanted to get your thoughts on how that's evolved since the start of the year. It certainly feels like Theres more eyeballs looking at the tower sector.
Relative to a lot of other property types.
If you've seen that translate into higher prices for towers that are being paid and maybe something that exceeds even what you guys are willing to pay for assets.
Well it clearly has which is why we will be expanding our portfolio by 5%, which will be the first time in.
Many many many years.
There is a.
Degree of interest in communications infrastructure, particularly towers, a lot of new players and.
That has pushed pricing up to two high levels.
Levels, such that we've taken a a pass on a number of transactions.
Would that be something you guys could quantify possibly in terms of just how much higher multiples are on specific deals in which you're comfortable with no nothing specific to.
Yes.
Yes.
No I'm not I'm not sure that's productive for for for our ability to compete and for others.
<unk> ability to take notes and compete against this.
Okay.
Fair enough Thanks city at the answers.
We'll now go to the line of Walter Paycheck with light shed. Please go ahead.
Thanks.
I am getting feedback on the slide.
Hold on.
Our next step to try and go through it.
So you know.
Basically indicated that there wasn't.
I can't do this you got to read to me, because I guess I'm getting too much feedback from Alan.
Mark Mark will reach out to you all.
All right. Thanks Ralph.
Okay.
Great well go the line of Brandon This spell with Keybanc capital markets. Please go ahead.
Okay, great. Thanks for taking the question one for Jeff on for Brendan If I could.
You mentioned in your remarks fourth quarter, you're going to be pretty close to your long term AFFO per share guidance $10.
Is there any interesting outlining long term targets for investors at some point in the near future and if so what might that look like and then Brendan.
You brought up the T mobile cancellations when specifically were those start to.
Going to the run rate and then as we think about churn for next year, you had a 2% level and you're not breaking out sort of one time churn. So maybe can you help us understand where where you are from like a run rate churn perspective annually. Thanks.
No Brandon we we feel really good about where things came out of that old 10 by play with the exception that the.
The FX proved to be.
All much more than.
The guys that we put out in 2016 anticipated so.
We probably won't be doing that on a multiple year basis.
Based on that experience.
And everything else actually was extremely.
Close and in many respects we beat it.
Quite handily.
Yeah, we'll think about maybe some sub components of that for for.
Or maybe longer term guidance, but to get right down to the AFFO per share.
I think there are parts of that particularly affects that Mike.
That.
Such a great idea, obviously not something we can control.
Brendan Yes, Brad so on the churn as it relates to the T mobile churn that I mentioned earlier, which is basically sprint churn.
What weve received notifications on as I mentioned is about four to four and a half maybe $5 million of impact.
And that would be the impact pretty much for next year beyond that we havent received any notifications if we were to.
Look at that and incorporate what might happen, we're still looking at a relatively small amount for next year only about 7% of the revenue in total which includes the amount that I just mentioned from sprint is at risk of churn for next year and that's highly unlikely to be at that full amount. So.
We don't expect.
We'll give you obviously more detail when we get to giving guidance next quarter, we'll have a lot more information at that point, but that's that's the impact that as it relates to the churn as a whole from a run rate standpoint.
We were at from a domestic level. This quarter, we reported same tower churn of 2.2% I mentioned earlier that about 2.3% or so that is.
Just naturally in Clearwire, so just under 2% that.
Probably about the range that we will see over the course of the next year, there's a variety of things in there we've talked about in the past on a couple of calls a lot of miscellaneous items, including some never on air stuff that some of our customers have cleaned up some smaller customers that have modified some of their older technologies.
And based on what we've seen already this year its impact to next year should keep us somewhere in that 1.5% to 2% range on a normal basis, and then we'll see what happens with sprint.
Great. Thank you.
Rich we have time for one more call.
Thank you we'll go to line well go to the line of Spencer Kurn with New Street Research. Please go ahead.
Hi, guys. Thanks for squeezing me there.
Wanted to just revisit amendment pricing.
Yes, historically I've always thought of higher frequency spectrum have smaller antennas.
Which would typically command lower on that run rate, but at the same time.
Mimo antennas I've heard a lot bigger so.
I would just love to get your thoughts on how amendment pricing.
Sort of trending.
So you're seeing more mimo antennas school deployed.
Thank you.
Yes, I mean is trending higher but not.
Trending differently than it has historically based on changes in weight and size. So it has been basically logical in terms of the way it has progressed.
Which is good because it's expected and it's consistent with.
So at least the way we have conducted ourselves with our customers over time.
Got it and just as a quick follow up.
As we've seen C ran being deployed.
Base station being.
Being pulled into data centers.
It doesn't seem like we've seen a big impact on pricing a towers, but I was just curious to get your thoughts on.
How big of an impact you've actually seen and whether thats been sort of.
Entirely offset by.
New no and tenants going up on towers that the C ran transition has played out.
Yes, we've not really seen much impact at all and I and I really don't think we will because at the end of the day. We are we are radio and add to location business.
And that's that's where we've got the we provide the high and the location and the entitlements and whether the the computer is there at the bottom of the tower or somewhere else.
It doesn't really matter as much as the ability to host the radio antennas.
Great.
Thanks again.
Yeah.
So we want to thank everybody for joining us on this call and we look forward to our next call where we report our fourth quarter results. Thank you.
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