Q4 2020 SBA Communications Corp Earnings Call
Yes.
Yeah.
Ladies and gentlemen, and thank you for standing by and welcome to the SBA fourth quarter results. At this time all lines are in a listen only mode.
And we will conduct the question and answer session. If you wish to ask a question over the phone lines. Please press one zero it and.
During today's call.
If you need assistance from an operator, Please press Star then zero.
And as a reminder, today's conference is being reported.
I'd now like to turn the conference over to Vice President of Finance Mark <unk>. Please go ahead.
Good evening and thank you.
And turning us for SBA is fourth quarter 2020 earnings conference call here.
Here with me today are Jeff Stoops, our President and Chief Executive Officer, and Brendan Cavanagh, Our Chief Financial Officer some.
Some of the information we will discuss on this call is forward looking including but not limited to any guidance for 2021.
And for Julien.
And today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today February 20, and 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 the reconciliation of and.
And other information regarding these items can be found in our supplemental financial data package, which is located on the landing page for our Investor Relations website with that I'll now turn it over to Brendan.
Thank you Mark good evening.
The non SBA had a very strong and of the year with fourth quarter results near the high end of our outlook for all key financial metrics.
Total GAAP site leasing revenues for the fourth quarter were $493 million and cash site leasing revenues were $492 8 million.
Foreign exchange.
We're a $3 5 million tailwind to revenues when compared with our previously forecasted FX rate estimates for the fourth quarter.
We're again, however, a significant headwind on comparisons to the fourth quarter of 2019 negatively impacting revenues by $17 $7 million on a year over.
The rate basis.
The same tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis was 4% over the fourth quarter of 2019, including the impact of 2% of churn of.
On a gross basis same tower growth was 6%.
The year domestic same tower recurring cash leasing revenue growth over the fourth quarter of last year was five 7% on a gross basis and three 4% on a net basis, including two 3% of churn.
Domestic operational leasing activity or bookings representing new.
And of your placed under contract during the fourth quarter was at the highest levels of the year.
We saw continued increased activity levels with T mobile during the quarter and our domestic application backlog continues to grow.
During the fourth quarter amendment activity represented 88% of our domestic bookings.
<unk> with 12% coming from new leases.
The big three carriers represented 94% of total incremental domestic leasing revenue signed up during the quarter.
Internationally on a constant currency basis same tower cash leasing revenue growth was six 5%, including.
Including 0.6% of churn or seven 1% on a gross basis.
Our international leasing activity was similar to the third quarter still up slightly over the first half of 2020.
International leasing activity remains impacted by Covid related spending slowdowns and some of our markets.
And Brazil, our largest international market, we continued to see steady leasing activity.
Gross same tower organic growth and Brazil was seven 3% on a constant currency basis.
During the fourth quarter 85, 4% of consolidated cash site leasing revenue was denominated.
S dollars.
The majority of non U S. Dollar denominated revenue was from Brazil, with Brazil, representing 11, 2% of all cash site leasing revenues during the quarter and eight 2% of cash site leasing revenue excluding revenues from pass through expenses.
Tower cash flow for the fourth.
And Europe was $402 2 million.
Our tower cash flow margins continue to be very strong with the fourth quarter domestic tower cash flow margin of 84, 2% and and international tower cash flow margin of 71, 5% or 91, 1%.
Excluding the impact of pass through Reimbursable expenses.
Adjusted EBITDA and the fourth quarter was $386 million.
Our industry, leading adjusted EBITDA margin was 71% and the quarter.
Excluding the impact of revenues from pass through expenses adjusted EBITDA.
The quarter, Jim was 75, 4%.
Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business and the fourth quarter.
<unk> and the fourth quarter was $281 million <unk>.
<unk> per share was $2 49.
The margin increase of 14, 2% over the fourth quarter of 2019, and and 18, 8% increase on a constant currency basis.
During the fourth quarter. We also continued to expand our portfolio acquiring 104 communication sites for total cash consideration of.
And a $33 $5 million and building 106 sites in the quarter.
Yeah.
Subsequent to quarter and we have purchased 25 communication sites for an aggregate price of $8 $4 million.
Last week, we also closed on the majority of our previously announced the acquisition from Pacific.
<unk> gas and electric the PGA and <unk> transaction adds almost 900 existing wireless tenant licenses on over 700 utility transmission and distribution structures to our portfolio.
We are entitled to 100% of all additional revenues generated from these tenant licenses through future contracted rental escalator.
100, <unk> and any amendments to the to the existing license agreements.
In addition, we have the right to market. These structures two additional tenants with the substantial majority of any additional rents retained by SBA and the balance shared with pega.
As part of this transaction SBA has also been granted the.
Escalation of right to market over 28000, additional <unk> structures with any resulting rents to be shared by SBA and <unk> under a pre determined revenue sharing arrangement.
When the full transit full transaction is closed the anticipated cumulative purchase price is approximately 970.
Excluding <unk>.
And we expect the asset to generate approximately $39 5 million and tower cash flow during the first 12 months and our portfolio.
Our first quarter net debt to adjusted EBITDA leverage ratio is expected to be above our target range. As the result of this transaction, but we anticipated.
The pace organically, reducing our leverage ratio of comfortably back within our target range by year end.
We are very pleased with this acquisition and we look forward to a long relationship with PGE to the enhanced benefit of the wireless carrier industry P G&A and SBA.
In addition to the assets we have purchased subsequent to year.
The three we've also agreed to purchase 299 additional sites and our existing markets for an aggregate price of $72 $7 million and we.
Dissipate closing on the majority of these sites by the end of the second quarter.
In addition to new tower assets, we also continue to invest and the land under our sites.
And during the quarter, we spent an aggregate of $16 4 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 of approximately 71% of our towers and the average remaining life under our ground leases, including renewal options under.
<unk> control is approximately 35 years.
Looking ahead now this afternoons earnings press release includes our initial outlook for full year 2021.
Our outlook reflects another year of solid growth and our leasing business, although the slower pace of new leasing activity, we experienced in 2020 ways.
Arkansas and the organic contribution to our anticipated reported leasing revenue for 2021.
We expect a higher level of domestic operational leasing activity in 2021 than we experienced in 2020. However, much of the increased activity is anticipated to occur in the latter half of the year due to ramping <unk>.
And related investments and the timing of C band activity from some of our largest customers and.
And initial leasing contributions from dish under our newly executed Master lease agreement.
This project projected increase and leasing revenue and the second half of the year is expected to provide minor contributions to our 2021 leasing revenue.
Ways of it set us up well for the next several years.
Our domestic outlook does contemplate increased revenue churn levels due largely to projected sprint network rationalization by T mobile.
Internationally, we are projecting a similar level of organic leasing activity in 2021 as we saw in 2020.
And as we continue to see impacts the carrier spending and these markets from COVID-19.
We have also incorporated of projected increased level of international churn, which represents both the impact of carrier consolidation and Guatemala, and a network reorganization and reduction by one of our customers and one specific central American country.
But we have been working closely with to address their operational needs.
These items along with normal projected churn are estimated to negatively impact total 2021 leasing revenue by approximately $10 million.
With regard to our services business, we have seen increased activity levels and the latter part of 2020.
And we expect this increased activity to continue into 2021 and be sustained by the increasing domestic leasing activity. We project for the second half of this year, which will be ahead of the positive leasing revenue financial statement impact from such activity.
As a result, we are guiding to about a 17% increase and services.
<unk> revenue volumes over last year.
Our full year 2021 outlook includes the projected impact of the PGA acquisition, but it does not assume any further acquisitions beyond those under contract today.
The outlook also does not assume any share repurchases other than those completed as of today.
<unk> range. However, we are likely to invest and additional assets or share repurchases or both during the year.
Our outlook for next for net cash interest expense and for <unk> include the impact of our recently completed unsecured notes offering but do not contemplate any further financing activity in 2021.
Our outlook for <unk> per share is based on and assumed weighted average number of diluted common shares of $111 7 million, which assumption is influenced in part by estimated future share prices.
With that I will now turn things over to Mark who will provide an update on our liquidity position and balance sheet.
Final and and we ended the year of $11 2 billion of total debt and $10 8 billion of net debt our net debt to annualized adjusted EBITDA leverage ratio was seven one times.
Our fourth quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was four.
Thanks for time.
After year end on January 29, 2021, the company issued $1 5 billion of unsecured senior notes due February one 2029 of.
These notes accrue interest at a rate of three one and two 5% per year and interest is due semi annually.
On February one and August one of each year beginning on August one 2021.
The net proceeds from this offering were used to fully redeem all of the outstanding 4% senior notes to pay up premiums and costs associated with such redemption to repay the amounts outstanding at the.
The time under our revolving credit facility and for general corporate purposes as of today, we have $630 million outstanding under our revolver and pro forma for the January unsecured notes issuance. The weighted average interest rate on our outstanding debt is three 1% with a weighted average maturity of approximately four.
Seven years during the fourth quarter, we repurchased one 7 million shares of our common stock for $480 million four and average price of $290 89 per share subsequent to year, and we have repurchased 549000 shares for 144 million or.
For which price of $262 16 per share all of the shares repurchased were retired.
As of today, we have $500 million of repurchase authorization remaining under our $1 billion stock repurchase plan.
The company shares outstanding at December 31, 2020.
Or and at $109 8 million.
<unk> $111 8 million at December 31, 2019, a reduction of one 8% that is our greatest percentage share count reduction and seven quarters.
In addition, during the fourth quarter, we declared and paid a cash dividend.
Will the $51 5 million or <unk> $46 five per share.
And today, we announced that our board of directors declared a first quarter dividend of 58 per share or an increase of 24, 7% over last quarter payable on March 26, 2021 to the shareholders.
And third as the close of business on March 10, 2021, and with that I'll now turn the call over to Jeff. Thanks, Mark and good evening, everyone. We had a strong finish to 2020 with solid financial and operating results for the fourth quarter was our best quarter of the year in terms of organic leasing activity and services results.
As of right added a number of high quality assets to our portfolio. We produced $2.49 of <unk> per share of one penny short of an annualized rate of $10 per share or <unk> <unk> per share for the quarter represented material growth over the prior year period and demonstrates the value creation capability.
And with this business. We also continued to invest and our company through material share repurchases and buying back one 7 million shares and the fourth quarter and we did not slow down as we've moved into 'twenty and 'twenty one.
Since year end, we have signed up and closed on our large and exciting transaction with PGA.
<unk> reached an additional 5 million shares of our stock and signed up of Master lease agreement with dish and all.
All of these activities will have long lasting and positive implications for SBA.
And we've demonstrated our ability over the years to find specific targeted opportunities, where we can add assets and accretive prices and.
The <unk> expertise to bear and extracting and maximizing value.
We're particularly pleased with the Pea G&A transaction, we've added a large number of high quality of exclusive locations and northern California to our portfolio of what we believe is an attractive price.
We believe our experience and operational expertise will allow.
And bring out and maximize the potential for wireless use of these assets for the benefit of both of our wireless carrier customers and P. J.
With regard to our domestic leasing business our customers are all turning their attention towards their <unk> network the investment plans and the.
And the significant investment and the current C band auction as evidence of the.
Allow us to roll the mid band spectrum will play and the deployment of next generation networks and as a result of the importance of macro tower sites and the next wave of network investment and.
We believe it has been well settled and the primary use of C band spectrum will be on macro sites outside of urban markets activity levels.
The critical cruising with T mobile as the accelerate the integration and upgrade of their network to meet their <unk> coverage goals upgrading their sites with either two five gigahertz of spectrum, our 600 megahertz spectrum.
And it's been widely speculated that Verizon AT&T and to some degree of T mobile and our material participants.
As I mentioned and the C band auction, which we believe will drive increased organic leasing activity levels with each of those carriers. Beginning later this year and we're very pleased to announce today our entry into a new long term master lease agreement with dish, our new agreement with dish includes the standardization of processes and certain terms.
And so or to improve this is the ability to efficiently access SBA signs in order to Liza and network deployment and commitments and also provides for commitments to SBA services business and a substantial new minimum lease commitments over the next several years securing SBA is of major infrastructure provider for dishes new.
And were fueled nationwide <unk> network, we're pleased to further our long standing partnership with dish.
Internationally, our leasing activity remains steady and the fourth quarter, we signed up 48% of new international revenue through new leases and 52% through amendments to existing leases notwithstanding the steady activity.
Green levels, we continue to see some impact and our Latin America, and South African markets from the COVID-19 crisis impacting our return to greater historical organic growth levels. In these markets. However, wireless usage remains high and critical across all of these markets and economic conditions are improving.
The eventual recovery from COVID-19, paired with a number of upcoming spectrum auctions across our international markets should result in and returned to more normalized investment by our customers and we believe will bode well for our long term international organic revenue growth.
From the balance sheet and capital allocation.
Asian perspective, we remain and are very strong position the.
The current low interest rate environment has provided us with opportunities to continue to reduce our weighted average cost of capital. Our recently completed unsecured bond offering as evidence of our ability to take advantage of these opportunities as we were able to lock in the lowest cost unsecured.
With net pricing of our company's history.
Markets remain very strong today, and we have the number of available financing sources. As a result, we intend to stay fully invested and our business continuing to target leverage of <unk> 7.0 to seven five times net debt to adjusted EBITDA.
While we will.
The security actually above our target range temporarily as a result of the PGA and any deal we expect to easily delever back into our range. Later this year, given our <unk> generation capability, even after our materially increase the dividend.
As noted earlier, we have been active and both portfolio investment.
Share repurchases.
Even with these activities, we still have capacity for incremental investment throughout 2021, while achieving our leverage targets are strong.
Balance sheet and optimism about the future has allowed us to again announced the significant increase to our dividend.
Growing at approximately.
25% over the per share rate, we paid and.
2012 of.
On an annualized basis this new dividend represents less than 23% of the midpoint of our 2021 <unk> outlook per share leaving.
Leaving a substantial capital for additional investment opportunities.
And.
So before I wrap up I would like to also briefly mentioned one other topic at the end of the year, we issued our inaugural corporate sustainability report, which illustrates our commitment to sustainable and for <unk>.
<unk> business practices and enhances our communication of our efforts to our stakeholders.
And I'm very pleased with this report because it highlights our corporate wide focus on sustainability issues that are most material to our business shareholders and the communities and which we operate.
While our assets have a relatively small geographic footprint, we are continuously seeking ways to address climate related risks and reduce our greenhouse gas.
Submissions across our markets, our environmental initiatives span all of our assets from towers to the rest of our wireless infrastructure to data centers all of our offices and commercial vehicle fleet.
Our policies and culture also ensure we conduct business important to the highest ethical standards.
And socially responsible business practices and that we actively promote diversity and both of our workforce and supply chain.
Our long standing philanthropic and advocacy efforts reflect our continued commitment and engagement with our local communities and.
And we look forward to communicating with you about our growth and continuing improvement and these are.
And for years to come.
Notwithstanding the challenges posed by the COVID-19 pandemic, we had a solid year and 2020 growing <unk> per share 11, 2% of over 2019 and why.
To again, thank our team members and our customers for their diligence and commitment during these difficult times.
Areas of contributions to our success.
We look forward to another solid year, and 2021 and sharing our results with you as we move through the year.
And with that Ryan we are ready for questions.
Okay, ladies and gentlemen to do with the ask a question. Please press the one zero on your touch.
And our phone book.
Again, it's one of the business.
Our first question is from the come from the line of Ric Prentiss with Raymond James. Please go ahead. Your line is open.
Great. Thanks, Good afternoon guys.
And Rick.
Right.
Couple of questions.
Obviously.
On the G&A and transactions are pretty major transaction can you walk us through a little bit about 'twenty, one guidance and how much revenue there is associated with the tower cash flow and I assume not much operating expenses and third sites, but then also take us down maybe the EBIT because I'd also expect not of lot of.
Below the line costs.
Really the peak Youre right on both counts.
Brendan Yeah, Rick so.
If you look at our of bridge for 2020 of 2021, we've got about $40 million of Nonorganic revenue coming in.
I'd say.
And the majority of that 35 ish million dollars of that is coming.
Coming from <unk>.
Okay, and how about on the EBITDA area.
And that kind of 30 and $35 million range on yes, it's within a couple of million dollars. Because there is no. The key thing is obviously the ground rents they own the majority of land or have rights to it. So theres really no ground rent expense at all so the margins are extremely.
On this so the vast majority of the revenue drops through to the bottom line.
It makes sense.
And then Jeff obviously, one of the big debates out there and the marketplace. Right. Now is is the growth rates of <unk> and the U S. Same tower revenue net organic cash as we call. It right given the law of large numbers churn.
Long term NAV.
To give you of $10 number like you had years ago, but.
Can we get back into the mid single digits. What's your view is kind of where the state's sustainable kind of long term growth rate is in the U S side on a net organic cash basis.
Yes, I do think we can get.
I don't know if we can get to double digits, but I do think we could get to.
Upper <unk>.
Single digits I think whats happening. This year is if you think about it.
You got a couple of major.
Major carriers, who.
Are rumored to be.
Heavy into the C band auctions, which means that there's going to be a lot to do.
And if theres going to be a lot to do and you know there's going to be a lot to do and you might push off.
What you can do today until tomorrow and then.
And you have one carrier and.
And the name of dish has already told you.
And very clearly when they're going to start doing things.
And the kind of mix I think it's pretty clear as to the pace of things and the timing of things and 2021, the bad it sets up for a very very.
Attractive 2022, particularly over of 'twenty 'twenty.
Comparable.
Okay makes sense and then how should we think about the churn and fact dish also on their call today was talking about T. Mobile had given the dish notice that they would turn off the C D. Nate and I don't think they said faulty, but they said they would turn off the CDMA network January of 'twenty, two how should we think about the the T mobile sprint relation.
One of you guys have and what the churn outlook looks like.
Yes, Rick so.
We've already I think we announced on our previous call that we have already received some non renewal of notifications from T mobile.
And just to give you some numbers for next year of 2021. The next year that represents about $4 million to $5 million of the the.
The impact to our revenue loss and.
In addition to that and our outlook, we expect based on when leases come up and communications, we've had already that will probably be somewhere and an additional $3 million or so.
From them as we look out over the future years.
And at this point, we're basically measuring of based on.
And where we have overlapping sites and what the timing of when those leases come up.
And that puts the majority of the terminations in terms of their financial impact for us and 2025 and 2026.
We'll see probably about 30% of the total exposure over the next three years.
Yes.
And so that will be will be well suited to.
Talk to dish about any of those sites.
T mobile decides they no longer want.
Thanks, Dan Thanks, guys stay well.
Our next question will come from the line of Jon Atkin with RBC. Please go.
And I heard your line is open.
Thanks very much.
Yes, I just wanted to get a sense of some of the organic U S growth drivers. This year that you alluded to around C band and dish.
Anything that youre seeing kind of so far this year around.
Application activity.
That gives you a sense.
Sense of when the timing would be around around the rent commencement.
And then.
If you don't mind also addressing.
Some of the smaller.
Central drivers U S cellular cable.
And as well and in the context of the C band.
Yes.
And we really have not included any C band revenue and our.
2021 guidance.
Leasing guidance.
And the same with dish now there certainly our arguments and.
And.
Optimism.
That could change and.
And things could happen and where.
We do realize that but its not and there today.
Okay.
And then on the on Rick's question about the sprint T mobile on the on the keep sites. The projects are you getting any sense.
As you think about churn.
And the guidance that you gave but and.
Any variability around where youre getting get informed about about the sides of the get kept as part of that.
How does that kind of play into your thinking and where are they and that process.
Well, we've received we've received quite a bit of information already which we've been able to share with you and.
And our outlook.
We don't know that we've received at all.
Right.
But we've had last day.
Mkay based all of the timing of of notices.
And as and things.
I would tell you that I think we have.
The the lion's share of the information already at this point.
Okay.
Later this year as it relates to China as it relates to the point of 'twenty one yes.
Got it and.
Indeed on SBA edge.
Yeah, we continue to.
A number of opportunities that we're pursuing to.
Actually move forward and tie what were what were focusing on John is the.
Is the areas around.
And.
The data centers to work on the direct ties between true mobile edge at the tower site type of facilities, which have direct connections back and we've got a number of different things that we're working on there and we would just ask you to stay tuned there because we.
And we think there continues to be a lot of exciting opportunities and.
And and things that we can do there.
But I mean it thank you very much.
It will be not a material contributor to 'twenty and 'twenty one.
Got it thanks, so much.
And our next question will come from the line of Walter Piecyk with the White shirt. Please go ahead.
Hi, Jeff.
And on past calls.
Thank you and I.
Kind of.
Dialogues about like timing of orders versus revenue and like how long it takes to execute.
So I'm just curious in terms of C band.
Sure.
By the end of the second quarter.
Have orders if we if you should.
And be able to get any type of revenue.
And calendar 'twenty 'twenty, one I mean, if not even by the end of the.
Can you just refresh our memory on.
The timing of that because the reason I ask obviously, if because of horizon. It is out there telling people I think historically that Oh, yeah, we can get cheap and built part of it really quickly.
And I think we have to back up to those days and actually see orders.
Like nine months, maybe more.
And when they would be.
And the activate and generating revenue for you.
And if you prefer not to talk about the customer just you can submit AT&T or T mobile or whatever.
The you know what the question on why its not quite nine months, we'd probably have.
But the absolute minimum four more likely ships.
Okay. So if we're to believe the ability to light up of cement market.
And then we should be hearing from tower company, and so whether you or someone else.
The C band of orders by June 30 is that fair.
Okay.
You also mentioned the substantial.
The minimum lease agreement.
Is there.
And how does that work is it meaning they agree to X dollars in 2022, and how does that work or is it just over the life, they're going to pay you X.
Which is the.
It is a number of leases it is not and it.
You could look at it.
Because there are certain dollar parameters that we've agreed to hurdle per lease but it is a.
Minimum site.
Got it so that doesn't give us any sense on timing and just like <unk> told you will put up X thousand sites at some point.
It is why years.
Well, we do have some time.
The brakes and there. So there are it's a little more defined than that but.
Sure.
So over the life of the contract before all of the commitments are ultimately do.
But there it's not it's not.
Only until the end or they do there are some dual channel.
And then just last question have you seen that the one of my favorite topics have you seen any of them.
Initial deployments of massive mimo antenna and I think there was some issue in terms of ramping.
And the backup production with certain spectrum bands.
Maybe that's the way for Steve and I don't know see.
We've been seeing that work for a while with the T mobile sprint on the two and a half day.
Got it so well.
Sorry, I guess I could be more specific I think I might've been issues in terms of the mimo.
And tenants, having port force see man, but I guess, it's why would that be occurring and told the auctions over so I'll reserve that question for future quarters. Thanks, Jeff Yeah.
[laughter].
And our next question will come from the line of.
The net they'll deal with them off of Nathan Nathan. Please go ahead.
Hey, Thanks for taking my questions.
And so you guys noted that your leverage is going to be above your target post P. G&A, but the trend down organically over the course of year does that mean that any share repurchases room and activity youre going to be somewhat restrained through year end.
Or would you be willing to stay above your target leverage for longer if the stock is attractively valued and you buy some more or if other M&A opportunities surface.
Sure.
Well it means we don't have to rush.
But we would like to be you know.
At the high end of the target.
Or below by.
And you're right, but the Ed but that statement gives us quite of bit of flexibility.
Yeah, we have just to be clear and I mean, we have plenty of capacity to continue to do Tim.
Typical levels of M&A and buybacks and still be within our target leverage range at the end of the year.
Okay got it.
So the answer to your question is are you going to rush to do it and one quarter are you going to wait until the end of the year to preserve maximum flexibility and the answer is the latter.
Okay. Okay. That's helpful.
And then related to two of the dish deal.
And obviously one of your peers is talk.
Talked about getting.
More than their.
Proportionate share of business from dish by virtue of their deal.
Do you feel like you're well positioned to get your fair share of new business and do you feel like you were well served by waiting.
Some extra time to sign the deal.
Based on the the firm commitment that we.
We have the answer is yes, so I guess the answer the second question is yes.
Okay. That's good to hear yes, maybe one more if I could squeeze it in and has T. Mobile's leasing activity been recovering and the way you had expected it would of quarter two ago or has it come and a bit slower.
No.
I think T mobile is.
And just as we thought they're very busy and very active very deliberate very very.
There are there of force.
The.
So.
All very busy and.
And.
We see.
We see a strong year ahead for them.
Okay. That's helpful. Thanks, Jeff.
Yeah.
And our next question will come from the line of David Barden of Bank of America. Please go ahead.
Uh huh.
Hey, guys. Thanks, so much for taking the questions.
I guess.
First share now that you've kind of done this P. G. Any deal you know the there's been a gulf between the tower sector and the utility sector for a long time that this deal seems to kind of cross and I'm wondering if there.
And there's a there's a new kind of total addressable market opportunity.
And of course here.
As a function of that.
The second question Brendan would be.
From the maybe two for you Brendan would be first on the international churn is this the number of around 10 million of year, that's the new normal that we.
We should expect on a go forward basis, and then with respect to the P. G any deal specifically relative to the 35.
That going to be run rating of eight to nine and the first quarter or does it kind of <unk>.
Graduate up to that 35 over the course of the year. Thanks.
Yeah.
And once you go first then I'll wrap.
So it's more philosophical share yeah, well I'll take the last one first on the PGA and a piece it does step up a little bit during the year, but it's relatively small.
David I would expect it to not be non.
Be significant steps up there are escalators that are built in and we would expect.
Modest amount of.
The lease up obviously, we just brought the sites into our portfolio. So there will be some step up but it'll be generally run rate and at the same pace of course, the first quarter, we will obviously be materially lower than the other quarters as we only have it and our portfolio for half the quarter.
But on a run rate basis will be very small step ups throughout the year.
On the international churn side of the $10 million is definitely not the new normal.
And there are some specific things that are driving that number up I do expect it though to be elevated.
Probably next year as well it is hard for us to say exactly what the number will be because we are.
The midst of discussions with the carriers, where theres been some consolidation as well as the other customer where we've had some work with them to try and help them through some issues that they have.
So I do expect that there will be additional impact next year, but but the exact amount remains to be seen but eventually we will get through those issues.
<unk> and I would not expect to be at that level long term.
Yeah in terms of whether this opens up of new.
Yeah.
Sure so of relationships between tower companies and utilities, David I mean, I think of it remains to be seen.
It's not the first there have been a couple.
The other transactions between tower companies and utilities.
Not involving any of the public's however.
So this might be the third.
And this one was fairly unique and particularly as to which the geographic location.
But we'll see.
It's actually had a.
More than a couple of inquiries.
Utilities have have very different.
The primary considerations that they have to think about and it has to fit their needs.
But we.
And we found certainly indication of P G&A of the.
It did and and.
And I'm sure that those.
Characteristics should be met again and.
Because it's never the.
<unk>.
Primary and.
And frankly.
It can't be the primary focus of.
And the utility company too.
Okay.
Tower leasing.
Top of mind or.
The number one thing they think about.
Theres always going to be an element of improvement.
And it can be and arbitrage there for the for the benefit of every.
And so we will see most of it.
Great. Thanks, Jeff I appreciate Brian Thanks sure.
And our next question will come from the line of Colby <unk> with Cowen. Please go ahead of your line is open.
And I just actually have on.
And two points to clarify.
Clarification, and then just one quick question first of all points of clarification, Jeff when you were saying.
And you think you can get back the high single digit.
Domestic growth I've said.
And I think I should admit but go ahead.
And then ask if you're speaking about gross or net.
And then.
And then my next question here real quick and when you said, you're expecting T mobile churn.
For 2021, and I heard four and five and I heard the 70 or anything with the leasing thinking four to five announced seven to eight.
And then my last question the 299 sites that you've already committed to acquire can you give us some color on where the cycle. Thank you.
Okay on the sprint T mobile piece it was $4 million to $5 million is the number of based on what we've already specifically received notices on the incremental $3 million and estimate that we've included in our outlook and the churn assumptions that we put forth and our bridge for instance.
That has not yet been specifically notice to us, but we are estimating based on what we see in terms of the timing.
And when those leases come due.
The 299 lease or I'm, sorry of sites that are under contract from an M&A standpoint, the vast majority of those are located internationally.
They're spread out.
There are some and I think the biggest country of South Africa, but theres some throughout Latin America as well.
And your first question is on the growth rates.
Yes.
Yeah.
I think the question was about net.
And we're thinking we believe that there is an opportunity to see that go back up to.
Levels of.
Above five I guess, you could consider more than mid but.
We think theres opportunity with all of the growth that's out there the biggest challenge frankly on that Colby is really about the churn the sprint T mobile churn I mean, if you figure that and that's certainly going to weigh on it but if you put that aside.
There certainly is an opportunity from the.
The mid the growth set that's in front of us.
Sure I thought rich question was growth, so alright, well there.
And so so so mid levels of plus 5% net long term domestic you think is a reasonable expectation.
Yeah, and obviously higher growth.
And yes and.
And then just actually one other quick one you said the PG and need you Havent closed completely what what else is still left to close.
There is a small number of sites. So the total purchase price of about $973 million, we've closed on $954 million of that so the vast majority of it.
Some number of sites that have certain specific issues that have.
The address but we expect them to.
The cleaned up and the next six months and those sites will just closed later.
Thank you very much.
And our next question will come from the line of Brookfield Min Goldman Sachs. Please go ahead of your line is open.
Yes, thanks for taking the question. So you know when we look at the expected leasing from the major wireless carriers and virtually all of the spectrum that they will be deploying that they haven't used is that of frequency range and thats higher than what they have and their networks today and so what that would imply is that their existing psych rates are insufficient.
Efficient to fully utilize those bands and so with that as context that sort of leads to the two questions. One as you look out and expect that leasing activity is going to ramp and some of the spectrum bands get deployed you've been very amendment heavy for a while with your leasing and I'm wondering if you expect or and maybe you can have visibility into that being more balanced between.
And your co locations versus the amendments and then the second is I'm wondering do you think that perhaps the nations power grid is insufficiently dense such that there might be and emerging opportunity for you to step up your development of the U S towers, because historically I think that has actually been your highest return of investment.
Yes.
I think you know amendments will always play a big role breath, because they are the most efficient and I think economically beneficial for our customers and then I think existing structures will.
Get co location, because the existing regulatory regime.
E vapors.
Papers that.
But yes, there'll be some more towers. So there is no question not only because of the spectrum propagation, but because I think.
The.
Perhaps totally unrelated reason theres going to be a fair amount of.
Emphasis on closing the digital divide and just bringing broadband to everyone, which is clearly going to require that and some more towers because bill.
Got it if I could ask a quick follow up just around the same concept of of Densification.
Your opinion around small cells, but.
And I'm wondering if there's any other emerging areas of infrastructure and maybe rooftops, where the economics could potentially become more favorable as these mid band spectrum ranges are being deployed versus historically.
And I think it has to depend on the facts and circumstances.
Aye.
And I believe that wherever you can get a true tower and macro site that always gives our customers. The most bang for the book, but I do believe you will see.
The spectrum used in conjunction with.
Small cells as well and areas, where you just don't.
Of course.
It doesn't mean those areas aren't going to be serve theyre going to be served by alternate architecture.
Alright, thank you.
And our next question will come from the line of Phil Cusick with J P. Morgan. Please go ahead. Your line is open.
Hi, This is EMEA for Phil Thanks for the time, Brendan can you help us by talking about the pace of activity and <unk> 21, and should we expect slower activity in <unk> and <unk>.
And yes can you talk about how much and built into this guidance for the announced this deal and you've had expected.
The material this year.
Yes.
So our outlook for 'twenty, one does assume our pace of activity that is increasing throughout the year. So it's definitely a little bit slower as our assumption here at the beginning of the year and it picks up and the latter half of the year, that's consistent with our comments we've been.
Brown.
C band and and the dish M. L. A all of those things will certainly drive more leasing activity and the latter half of the year, but even then the impact of that to our financial statements will be limited because of the timing of of signing up new agreements to when they actually start to recognize revenue so I.
Don.
And it will step up I believe throughout the year, but I think youll start to see the benefits of that increase next year or late this year and.
And in terms of specifically of dish, while we could see some leasing revenue theres, none really contemplated in the guidance and you.
Very little.
All contemplated in the services revenue guidance, although again.
Depending on timing of it could be could be better.
And what we know we've heard with business of slow, but this is the lower activity. Then we kind of expected can you talk about the pace of activity over the last day plums and what you expect.
Got it and going forward.
Yes, the Brazil has.
Had a couple of issues that have been impacting it are the overhang of the <unk> transaction, which is working itself through.
Which we think long term will be favorable.
For us it looks like.
And we'll get.
Most of those well not most but the predominant amount of those assets with Claro next and then telefonica and up the third.
The last at least amount, which bodes well for us from an overlap of perspective.
And then.
Obviously, the if they've had their issues with COVID-19, so as those things settle out.
Brazil's of.
Brazil is actually expected to have a.
Quite a material jump and their G and moving from one of each one of the clinic.
One of the one.
So as those things kind of play themselves.
Yes, we do expect.
Brazil to get back to it.
Best growing yourself.
And one final one if I may with the PG and the recently through bankruptcy and what's kind of the protection and <unk>.
And you guys have if that happens again.
Yes, we've got.
Pages and pages and.
Legal fees and legal fees that were.
Addressing that point.
The structure of the deal the regulatory posture of where we sit.
Versus where P G&A shifts.
Loans the steel.
Steel.
I could spend quite a bit of time with you on that or I can also just say we're we're covered.
And that's helpful. Thank you very much.
Our next question will come from the line of Eric <unk> co.
With Wells Fargo. Please go ahead your line is open.
And.
Great. Thanks for taking the question I just wanted to follow up on the <unk> acquisition, obviously the.
The 700 sites you acquired and then the additional 28 and you have the right to market.
I'm wondering kind of the tenants per tower and that portfolio and then on that 28000.
How many of you really think realistically tenants per tower and.
And drive and co located ability of perhaps some of those sites in terms of <unk>.
Growing that portfolio from where it's at today.
That'd be helpful. Thanks.
Yes, there are not many tenants per tower on the 28000 today.
I don't think they've ever frankly, Ben.
And marketed.
The.
On the existing ones I think I mentioned in my prepared comments that we have approximately 900 tenants of little more than 900 tenants across those roughly 700 alright. So.
It's been a totally kind of.
Do you think you could.
Carriers have had the seek out the.
And the appropriate PJM day folks too.
Which is.
The way it works.
With that type of relationship which is why we think we can bring additional value and to be honest with you.
Kent has.
And the guests of the 28000, but I can promise you it will be something.
Okay, No that's fair.
And then just just one more for me it sounded like you at least had some additional capacity, perhaps bigger and the year for either share repurchases or additional acquisitions, so kind of where you sit today the.
The stock.
Hazards of per cent or so down from from where you were at last year. I mean, do you think potentially share repurchases versus acquisitions, how would you think about it it.
It seems like tower cash flow multiples continue to be greater than 30 times in many cases and your stocks trading well under that so wondering how you kind of balance.
Balance of your thoughts on cash.
Tina location given those those dynamics thanks.
Well if you if we saw those type of dynamics as you described it would bear in favor of stock repurchases. If we saw more opportunities like <unk>.
Okay. Thank.
Capital.
Our next question will come from the line of Simon Flannery. Please go ahead. Your line is open.
Great. Thank you very much.
I wanted to come back to Brazil, I think you'd made a comment about some important spectrum auctions and the international markets.
And as to Brazil have some coming up and what are the other.
Thank you.
And we're focused on and then coming back to C band.
Given the the bidding.
Concerns about the amount of leverage the carriers of taking on and do you think that might change any behavior of either and how fast they can deploy C band or.
They're the kind of outsourcing strategies et cetera.
Canada has three five gigahertz currently scheduled for June and South Africa has an entire suite of <unk> spectrum tentatively scheduled for next quarter.
Peru is a.
And once and for later this.
The first half.
Chile.
Colombia.
And.
Brazil.
Of.
In terms of the the.
Money being spent.
The big Wood, I'm and I.
I see that and I read that.
I have to assume that.
Our customers.
No exactly what they're doing and I'm sure that they do and and toward that spectrum to have value to them and has to be deployed.
<unk>.
I don't know exactly what the cost.
We will change for them.
But ultimately it's going to have to get put out there.
And that's kind of all we can.
We can work with and why.
Whether it's one quarter of two quarters or three quarters.
For the city and the overall scheme of the value creation for us it really doesn't matter.
Yeah.
Okay.
Great. Thank you.
Yes.
Our next question will come from the line of <unk> Levi with UBS. Please go ahead great.
Great. Thank you.
Or is there one in terms of the the Jamie deal can you talk a little bit about the wireless contract how they compare to your portfolio and maybe in terms of the tenancy mix the length of the contract and if we should assume there could be some T mobile sprint churn and there and then a follow up on the churn domestic churn. This.
Here is the indication that youre getting from T. Mobile is mostly on the overlapping sites, but is there also in the coming from sites that are in close proximity. Thank you.
On the tenant mix for PGE and need the vast majority almost all of the revenue comes from.
The big three wireless carriers, there is some sprint overlap, which we obviously included.
Any exposure to that and our underwriting assumptions, it's not particularly material.
Where we have both T mobile and spread on the same site and.
And the average remaining term.
For those tenants is about seven years. So there's quite an extensive time runway left on that.
Alright.
And the the sprint T mobile and turned this year.
All of those sites on those science and for this year, we're not really expecting to see any sprint T mobile.
I'll turn this year. So our numbers that we gave you and our outlook doesn't include anything for P. J D.
I'm sorry for your existing portfolio. The about 8 million that you decided is that mostly coming from overlapping sites.
Expectation for <unk>.
Okay, Yeah and also so the.
$4 million to $5 million that we've already been noticed.
And on almost all of that is non overlapping sites the remaining $2 million to $3 million is predominantly overlap sites as well.
Got it and one more thing maybe on the.
And how did they take out some of the equipment for the narrowband Iot network that they had put on the order towers would that show up.
The best churn or would that be captured within the new deal that they have with you.
Well it depends on what happens with those leases there is a potential under our deal with them that they would transition those sites too.
To their new architecture in which case it would just simply be an amendment depend.
And depending on what the change was.
And so on the original lease.
And if they are actually going to cancel the lease altogether and not use that site than it would show up as churn.
Got it okay. Thank you.
Our next question will come from the line of Michael Rollins with Citi. Please go ahead of your line is open.
Thanks, and good evening.
Couple of questions, if I could on slide eight.
And the supplemental deck.
So there's been a few different questions around how you may allocate capital.
In 2021, and just curious.
And I look at.
And for the last four years the range of capital allocation of dollars and try to have been about one four to $1 5 billion and just curious given everything that you discussed on the call and the guidance that you outlined is there a range of dollars for 2021 that we should keep in mind.
And then you've also put the period ending leverage on this chart over the last few years and just curious how you look at the influences of what would get you comfortable to keeping net debt leverage at that higher end of the seven five times range you mentioned versus.
Versus the lower end of of seven times.
And just finally, I heard that $10 per share <unk>.
The goal mentioned that you set out to reach five years ago, and just curious if you have a new five year.
Expectation that you are considering or you may share with us just to provide of.
And sort of of compass of what that future direction might look like thanks.
Yes, the I'll take the last of the first Mike the answer is no.
Because of the.
Notwithstanding how close we came and how proud we are understanding and.
The projecting the the operating components of our business.
When at least at least through the <unk> per share why we found that the movements and interest rates and FX were well beyond our prognostication capabilities. So.
And we.
So we have declined to do that just the.
Just as of yet in terms of in terms of the amount of potential capex.
But we could spend.
And I don't.
I can tell you.
We can all get to it fairly easily buy.
Looking at the.
The EBITDA.
Contribution that is and our outlook.
And then if you bought some things versus box.
And some stock back and you ended up with the seven five times net debt to.
Adjusted EBITDA that would.
And the amount of capital that would fill filling and your answer.
And I don't know if thats, how its going to end up or not it will depend on whether we choose and stock repurchases or acquisitions.
Acquisitions or whether in fact, we actually choose to and the year at seven five times when they choose not to do that.
Whether we do choose to do that or not will continue.
Continue to depend on whether we see a very continue to see a very benign interest rate environment and whether we continue to feel as optimistic as we do today about.
Carrier activity ramping as we move through the end of the year and into two.
And going to.
Okay, and just in terms of the leverage what factors get you comfortable with that high and versus low end of the range and not just maybe in the moment, but but overtime.
Well I mean over time that would come down.
And.
And the moment it would be because we found things that based on everything I've just talked about we thought would be.
The very value creative.
We took advantage of that this year, rather than letting and robust.
Thanks.
And our next question will come.
And from the line of Spencer Kurn, New Street Research. Please go ahead of your line is open.
Hey, guys I wanted to follow up on the trajectory of new.
The new leasing activity and organic growth and the U S and.
This year.
So.
And you exited or you ended the fourth quarter.
With the gross organic growth of about five 7% and it looks like you're guiding to five 9% for the year and 2021 and that should sort of steadily.
You expected organic growth to plus growth, which has steadily increased throughout the year could you just help us.
Understand the cadence of sort of when you expect the low point to be and what we should expect for an exit rate.
For 2021.
So.
To help us understand and sort of you know.
And what growth we could anticipate in 2022.
Yes, the sensor I mean.
It certainly.
And.
Will be lower and the first part of the year of the first couple of quarters, we definitely expect to exit the year and a higher rate not really prepared to say exactly what that is but at a rate that is starting to ramp back towards where we've been in the past. Obviously, we're kind of out of law you can tell by looking.
And our charts of the trajectory of where it's gone to and we've talked a lot and I think about having a slower year than anticipated last year. That's certainly.
And what we report for instance, and the first quarter and second quarter of 2021.
But based on our expectations for the increasing activity and the latter part of the year I would expect.
And we will exit the year and the fourth quarter at a rate that is higher than the average that's implied by our guidance and.
And it will build into next year.
Awesome, Thanks, and just one more.
It looks like you've got churn increasing next year largely as a.
Result of the sprint and T mobile churn, but it still seems like normalized churn excluding the mergers.
Hovering around and what and a half percent.
And I've always thought of the long term opportunity for churn to fall below 1%.
Do you see the runway to getting there over the next couple of years.
Well, we've been there actually before if you go back a couple of years ago, we were below 1%, but our our historical range is typically between 1% and 2% right now we're towards the higher end of that and.
I would expect that there'll be times, and the future of where were higher and times where were lower but the.
It tends to fluctuate.
Actually based on what's happening with specific carriers of specific times.
Yeah.
Okay got it thank you.
And our next question will come from the line of Tim Long with Barclays. Please go ahead of your line is open.
Thank you.
Two if I could.
Number one and maybe just the higher level question given the.
Dish is kind of a new a new player and the established players it looks like they've spent a bunch on.
The the C band auction.
Anything different that we're seeing or that you would expect from pricing or terms of of.
Of the of new activity or amendments.
And then second on.
On the C C B R S and private side have you seen any.
Activity, there are starting to tick up to to help them.
As we go through 'twenty and 'twenty, one and into 2022. Thank you.
Yes, so Tim on the dish question I mean, you say anything different on.
Terms well it's actually.
Very different.
Net work, it's kind of the.
The card from the the the whole whole cloth and of clean sheet.
The paper, so no amendments and there'll be brand new installations of brand new cell sites different different kind of equipment. So it's really.
It's very hard to.
The compare is different.
And so I'm not quite sure whats your what Youre looking for in terms of comparing.
And what the dish terms and particularly.
Particularly rates are compared to say and AT&T and Verizon or T. Mobile is just different.
In terms of Cvr's actually we are.
And it's and it's where it's.
And.
Showing up more and more frequently as as a solution to governmental and municipal and.
School district providers as a.
And elegant and cost effective solution to bridge some of these digital divide issues that we've all been reading.
Reading about and.
And these are some things that we've been participating in and actually are.
And quite a bit excited about again not not material this year in terms of.
Financial contribution but.
Technically and certainly from a community perspective very exciting.
Okay. Thank you.
And.
Yes.
Our next question will come from the line of Brendan and Michelle with Keybanc capital markets. Please go ahead. Your line is open.
Okay, great. Thanks for squeezing me and Jeff I was hoping you could quantify the year over year change.
And the backlog number that you referenced at the start of the call.
The year over year, while that was Brendan and I believe yes.
Brian It's hard for me to put an exact number on it but our backlogs today are much higher than they were a year ago at this time.
I can't give you a specific.
Percentage on that and obviously the makeup of the backlog has a lot to do with how that plays out in terms of its financial impact.
They are definitely off there's a lot more.
A lot more applications received.
Fair enough.
Different question, Jeff maybe could you walk us through your thoughts on potentially re.
<unk> and expanded and L, a with T mobile or or even reaching one with Verizon and.
And I guess that goes above and beyond the T mobile agreement today, and really what what's keeping your business from.
And being more heavily index and two of Verizon and given your exposure there is relatively low.
We're not opposed to any any MLA with any customer or just and we never have but it's just the question of.
Mutually mutual agreement.
So and we do have.
And I'm glad you corrected yourself, we do have an agreement with T mobile today.
It's not.
I think.
Uh huh.
Fully holistic and at some point.
It may get there and we would certainly be.
Very open to those discussions of T mobile one of them.
Let me just as we were with the.
Day would dish and have been historically with sprint and <unk>.
T mobile and others so thats.
It just takes two to tango right.
Just just from my perspective, and it seems that there is the carrot and that you guys have.
70.
Of your.
T mobile or strength leases rolling off of it after and the next three years and that's 70% of their churn are there synergies.
Yes, do you see a win win coming and in the near term, where you can get more clarity on what the potential churn and booking.
And our backlog activity might look like and and.
And just to add more near term.
Well there are probably a lot of.
Mutually beneficial outcomes that that could happen there Brandon.
Thanks for taking my question and I don't think I wont I don't think I wanted to negotiate with you.
Yes.
And I'll go over to the earnings call.
Yeah.
And our next question will come from the line of.
The Budgeree with credit Suisse. Please go ahead of your line is open.
Hi, Thank you for squeezing me and I.
Just wanted to make sure and get the numbers right.
For the current and for 'twenty and 'twenty, one and I think.
And you said $8 million churn from the T mobile sprint dynamic and that's just the Tom Youre currently informed view does this mean that.
And could potentially come in and a little bit higher than that of T mobile and decided to accelerate some of its cost rationalizations and the.
The synergies.
Yes, that's unlikely Sami because our estimates contemplate pretty much the the only things that they can do there may be small differences, but if it's going to be different and it probably would be slightly lower.
Got it got it and then my other question has to.
To do with M&A and I know you've targeted very specific developing markets for your M&A mandates, but given the recently one of your peers, making a push into Europe is this change where you may potentially be looking to do deals.
No we actually look everywhere.
But we only act, where we think it's.
And it's clear that we can create.
The substantial.
Substantial value relative to the to the costs and the risk of the investment.
And we will continue the two.
Look broadly and widely and probably act.
<unk>.
Got it thank you.
Ryan we have time for one more question.
Okay and that will come from the line of David Guarino with Green Street. Please go ahead.
Hey, Thanks, guys just on that comment on acquisitions can you comment on how competitive bidding and per tower assets and Latin America.
And the reason I ask and it feels like the past few tower transactions. We've seen in developed countries are really sought after and that's been reflected in the full prices that are paid so are you seeing a similar dynamic and emerging countries.
I would say, it's a little bit less.
Huh.
Pricey.
David but it's still pricing.
We have to be very very disciplined and very very careful and understand.
What what you're buying.
And you have to start with the premise that.
And it's only in the United States that you.
The tax shield provided by the REIT.
Architecture, which use of everywhere else share taxpayer.
Okay.
Alright, thanks for that.
And.
So Ryan and I think we're done.
Okay, ladies and gentlemen, and that does conclude today's conference like the <unk>.
And for your participation you may now disconnect.
We're sorry your conferences ending now please hang up.