Q2 2021 SBA Communications Corp Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the SBA second quarter results call. At this time all participants are in a listen only mode. And later you will have an opportunity to ask questions instructions will be given at that time. If you should require assistance. During the call you May Press Star and then zero as a reminder.
Under this conference is being recorded and I would now like to turn the conference over to your host Mark <unk> Vice President of Finance. Please go ahead, thanks, Caroline and good evening, everyone and thank you for joining us for SBA second quarter 2021 earnings Conference call.
Today are Jeff Stoops, President and Chief Executive Officer, and Brendan Cavanagh, Our Chief Financial Officer. So the information we will discuss on this call is forward looking including but not limited to the EBITDA guidance for 2021 and beyond in today's press release and in our SEC filings, we detailed material risks that may cause.
Our future results to differ from our expectations. Our statements are as of today on the second and we have no obligation to update any forward looking statements. We may make in addition, our comments will include non-GAAP financial measures and other key operating metrics a reconciliation of GAAP.
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 and with that I will now turn the call over to Brett.
Thanks, Marc good evening.
SBA had a tremendous quarter with results for the second quarter ahead of our expectations in most key areas.
Total GAAP site leasing revenues for the second quarter were $524.1 million and cash site leasing revenues were $514.6 million.
Foreign exchange rates were ahead of our previously forecasted FX rate estimates for the quarter contributing $3.1 million of incremental site leasing revenue in the second quarter.
They were also a tailwind on a comparison to the second quarter of 2020 positively impacting revenues by $3.5 million on a year over year basis.
Same tower recurring cash leasing revenue growth for the second quarter, which is calculated on a constant currency basis was 3.4% over the second quarter of 2020, including the impact of 2.5% share on.
On a gross basis same tower growth was 5.9%.
Domestic same tower recurring cash leasing revenue growth over the second quarter of last year was 5.5% on a gross basis and 3% on a net basis, including 2.5% of share.
Domestic operational leasing activity or bookings, representing new revenue placed under contract during the second quarter was up significantly from the prior Corp, and represented the highest quarterly level since 2014.
Even with this high level of executions are domestic new lease on New Amendment application backlog finished the quarter at a multiyear high.
These backlog support our expectations for continued strong domestic operational leasing activity throughout the balance of this year.
During the second quarter Amendment activity represented 34% of our domestic bookings with 66% coming from new leases. The first time in many years that bookings from new leases outpaced that from amendments.
The big 4 carriers of AT&T T mobile Verizon and dish represented 97% of total incremental domestic leasing revenue signed up during the quarter.
Internationally on a constant currency basis same tower cash leasing revenue growth was 5.3% net including 2.2% of churn or 7.5% on a gross basis.
International leasing activity increased modestly from the first quarter and.
In Brazil, our largest international market, we had an improved quarter of leasing activity gross.
Gross same tower organic growth in Brazil was 8.9% on a constant currency basis.
During the second quarter 84, 8% of consolidated cash site leasing revenue was denominated in U S dollars.
The majority of non U S. Dollar denominated revenue was from Brazil, with Brazil, representing 11, 5% of consolidated cash site leasing revenues during the quarter and 8.4% of cash site leasing revenue excluding revenues from pass through expenses.
Tower cash flow for the second quarter was $421.2 million, our tower cash flow margins continue to be very strong with a second quarter domestic tower cash flow margin of 84, 7% and an international tower cash flow margin of 78% or 91.
<unk> percent, excluding the impact of pass through Reimbursable expenses.
Adjusted EBITDA in the second quarter was $402 million the.
The adjusted EBITDA margin was 77% in the quarter.
Excluding the impact of revenues from pass through expenses adjusted EBITDA margin was 75%.
Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the second quarter.
During the second quarter, our services business produced record results for the company with $51.4 million on revenue and over $11 million of segment operating profit.
The very high activity levels, we saw on the first quarter strengthened further in the second quarter, resulting in a quarter and services backlog that was 30% above first quarter levels and was also the highest in our company's history.
We expect to see continued high levels of services activity throughout the rest of the year and as a result have increased our full year outlook for site development revenue by $25 million from last quarter and by $40 million from our initial outlook.
<unk> in the second quarter was $293.5 million <unk> per share was $2.64.
An increase of 15, 3% over the second quarter of 2012.
During the second quarter, we continued to expand our portfolio acquiring 57 communications sites for total cash consideration of $67 million. We also built 98 new sites in the quarter.
Subsequent to quarter end, we have purchased or agreed to purchase approximately 400 additional sites in our existing markets for an aggregate price of $95 million and we anticipate closing on the majority of the sites under contract by the end of the year.
In addition, during the second quarter, we announced that through our new joint venture arrangement, we have entered into a contract with Airtel, Tanzania, a subsidiary of of Airtel Africa to purchase there are approximately 1400 towers in Tanzania.
Under this agreement Airtel will leaseback space on each of the towers and we will also provide a fixed minimum number of build to suit towers. During the first 5 years following the closing of the acquisition.
The total purchase price for the acquisition is expected to be approximately $175 million.
On the acquisition is anticipated to close in stages, starting in the fourth quarter.
For our updated 2021 outlook, we have assumed that the acquisition closes at the end of the year and thus we have included the entire purchase price and our outlook for discretionary cash capital expenditures, but we have included no revenue or tower cash flow associated with these events.
We expect the assets to produce approximately $18 million of adjusted EBITDA. During the first full year of operations under the joint venture.
SBA will be the majority partner of the joint venture and we are partnering with paradigm infrastructure limited a UK company founded by former senior executives of American tower, which is focused on developing owning and operating shared passive wireless infrastructure and selected growth markets.
We believe the combined international tower industry operating experience of SBA and paradigm will allow us to maximize the opportunity in this new rapidly growing market.
In addition to new tower assets. We also continued to invest in the land under our sites during the quarter. We spent an aggregate of $11.8 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 37 years.
In this afternoons earnings press release, we included our updated outlook for full year 2021.
Our update.
<unk> expectations for site leasing revenue site development revenue adjusted EBITDA, <unk> and <unk> per share.
These increases are driven by outperformance across our business increased network investment activities by our customers improved foreign exchange rates reduced non discretionary cash capital expenditures and reduced cash interest expense as a result of timely refinancings.
Notwithstanding our strong domestic leasing bookings during the second quarter, which were ahead of our expectations. We have not increased our 2021 outlook for incremental organic domestic leasing revenue.
New bookings typically begin to accrue revenue at the earlier of a date certain or commencement of construction.
For outlook purposes, unless we have received notice of construction commencement, we only consider the date certain which for the second quarter bookings outperformance generally ranges from late in the fourth quarter to sometime in the first half of 2022.
As we mentioned last quarter, we anticipate our reported gross domestic same tower revenue growth will begin to increase in the second half of the year and that we will exit 2021 at the highest rate of the year.
As is always the case, our full year 2021 outlook does not assume any further acquisitions beyond those under contract today and the outlook also does not assume any share repurchases other than those completed as of today.
However, when opportunities present, we are likely to invest in additional assets or share repurchases or both during the rest of the year.
Our outlook for net cash interest expense does not contemplate any further financing activity in 2021.
Finally, our outlook for <unk> per share is based on an assumed weighted average number of diluted common shares of $111.5 million, which assumption is influenced in part by estimated future share prices.
With that I'll 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 $12 billion of total debt and $11.7 billion on net debt.
Our net debt to annualized adjusted EBITDA leverage ratio was 7.3 times, our return to our target range of 7 to 7.5 times faster than originally anticipated after the <unk> acquisition during the first quarter.
Our second quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 4.4 times on may 14th the company through an existing trust issued $1.165 billion of secured tower revenue Securities series 21 Dash, 1 C, which has an anticipated.
Repayment date on November 9.2026.
A final maturity date of May 9.2051 day.
These securities have a fixed annual interest rate of $1.63, 1% payable monthly.
On net proceeds from this offering were used to repay the entire aggregate principal amount of the 2017 Dash <unk> tower securities and for general corporate purposes.
Then on July 7th the company amended its existing revolving credit facility. Among other things. This amendment increased the total commitments under the facility from $1.25 billion to $1.5 billion.
In addition extended the maturity date of the facility to July 7.2026 lowered the applicable interest rate margins and commitment fees under the facility and incorporate a sustainability linked targets into the facility, allowing for interest rate and commitment fee adjustments based on how we perform against those targets.
We are pleased to be 1 of the first companies to include such sustainability focused provisions in our credit facility.
As of today, we have no amounts outstanding under our revolver and the weighted average interest rate of our outstanding debt is 2.9%.
With a weighted average maturity of approximately 4.5 years.
During the second quarter, we did not purchase any share of our common stock as of today, we have $475.1 million of repurchase authorization remaining under our $1 billion stock repurchase plan.
The company shares outstanding at June 32021 were $109.5 million compared to $111.9 million at June 32020, a reduction of 2.1 percentage.
In addition, during the second quarter, we declared and paid a cash dividend of $63.5 million or <unk> 58 per share.
And today, we announced that our board of directors declared a third quarter dividend of <unk> 58 per share, which is payable on September 23, 2021 to shareholders of record as of the close of business on August 26, 2021 today.
Todays dividend announcement represents a payout ratio of 22% of second quarter air flow per share.
Which leaves us ample room for material future dividend growth and with that I'll now turn the call over to Jeff. Thanks, Mark and good evening, everyone. As you have heard we had a very strong performance in the second quarter 1 of our best in quite some time domestically our customers were extremely active this quarter, we signed up more new leasing revenue than we have in any quarter.
Order in 7 years, we believe the second quarter was the start of a multiyear increase in U S. Wireless carrier Capex, our backlogs of lease amendment applications ended up near record highs at the end of the quarter notwithstanding the high levels of bookings.
Which obviously bodes well for activity levels throughout the rest of the year on into next our customers are focused on building out their <unk> networks with a particular focus on upgrading their macro networks leasing activity levels were driven by initial C band initiatives 2.5 gigahertz deployments first net amendments.
Coverage expansion and then beginning of dishes network Buildout.
These initiatives also drove our services volumes to record highs last quarter I was pleased to discuss how our first quarter services results were the best in 7 years, while that didn't last long as we reported 18% more services revenue in the second quarter than we did in the first quarter producing over $51 million of quarterly revenue.
The highest in our company's history. We also finished the quarter with the highest services backlog in our history. These results allowed us to increase our full year services outlook by $25 million.
As you could tell our domestic customers are very busy right now and it sets us up for a very good 2021 and 2022.
Internationally. The second quarter was also very solid for us with quarter over quarter sequential increases in new lease amendment executions, and increasing CPI based escalators and a number of our markets. During the quarter, we signed up 45% of new international revenue through new leases and 55% through amendments to existing line.
Our increased leasing results were driven by our 2 largest markets, Brazil and South Africa. These markets are still being affected at a greater level than here in the U S. By the COVID-19 pandemic, our local teams, though continue to perform very well and we believe we remain well positioned to benefit from increased network.
Investment from our carrier customers as conditions improve and new spectrum auctions take place over the next year, including for example, the just completed 3.5 gigahertz auction in Canada, which raised proceeds well above expectations similar options of 5 G. Suitable spectrum are planned in the near term on a number of our markets including.
Brazil.
Even with this positive momentum, perhaps the most exciting international news from the quarter was regarding our pending acquisition from Airtel, Tanzania, We have partnered with paradigm infrastructure for this opportunity paradigm was founded by and is run by several former American tower executives, well known to us, including those that were responsible.
For their initial African expansion in operations paradigm will be both the financial Investor and an operational partner in this venture as a market Tanzania provides many opportunities the country has a large growing population and has consistently produced good GDP growth and the new President has indicated a greater commitment.
To policies that encourage foreign business investment.
Tanzania's growth the mobile penetration rate is still only 41% today, creating significant opportunity for incremental wireless investment and expansion.
Ireland market is predominantly made up of 3 major carriers, who are relatively well balanced in terms of market share Photocall airtel and actually on 2 recently bacci those operations in Tanzania. Each of these <unk> are focused on expanding their infrastructure in Tanzania <unk>.
We'll be using a substantial amount of the proceeds from the sale of its sites to increase capex spending.
Likewise actually on as an African focused and experienced operator, whose plans include a strong investment in the country to improve the existing Tivo network.
We are purchasing Airtel is approximately 4500 wireless towers, which have a current tenancy ratio of just under 1.5 tenants per tower, including Airtel and the majority of the existing revenues are denominated in U S dollars approximately 3 quarters of the sites are located on the power grid and for those that are not <unk>.
Wire provision of energy the cost will be passed through to the tenants. We believe there will be opportunities to not only organically grow our revenues on existing towers, but also to expand our tower portfolio in Tanzania, including through a build to suit commitment from Airtel over the next 5 years, which was part of the transaction.
Combination of our partnership with paradigm the attractive price paid for the assets and the growth characteristics of the Tanzanian markets support our belief that this will be a value, creating new market for SBA and the same way we have created material value in South Africa, and Latin America on a country specific basis without any requirement on <unk>.
Other regional or geographic expansion, we're very excited about this new SBA market.
In addition to our strong second quarter operating results our balance sheet is in a very strong position. We ended the quarter at 7.3 times net debt to annualized adjusted EBITDA in the middle of our target range of 7% to 7.5 turns 1 quarter after absorbing the large first quarter PGA transaction.
Demonstrating the ability of our business to rapidly organically delever.
During the quarter, we completed a new asset backed financing at the lowest fixed cost interest rate for any non equity linked security in our history.
Shortly after quarter end, we increased the size of our revolving credit facility by $250 million and extended the term of these.
These activities continue to drive our liquidity position higher than our weighted average borrowing cost lower from the first time below 3% to 2.9% we have no debt maturities until 2023, and we continue to have access to low cost debt with additional opportunities to continue to improve our overall cost of debt.
Financing, our liquidity position and balance sheet on our approach with regard to leverage have allowed us to drive incremental <unk> per share in incremental value for our shareholders. We feel really good about our capital structure.
Things are going very well right now here at SBA, our customers are busy our financial position is strong and our team members are the best in the industry. We are excited about the opportunities that lay ahead.
On a thank our team members on our customers for their commitment and their contributions to our success.
And we look forward to sharing our results with you as we move through the year.
And with that Caroline we are ready for questions.
Yes.
Thank you and ladies and gentlemen, if you wish to ask a question on today's call you May press, 1 and then zero.
You are using a speakerphone please pick up the handset before pressing the numbers and once again if you have a question you May press, 1 and then zero at this time.
Our first question comes from the line of Ric Prentiss from Raymond James.
Your line is open. Please go ahead.
Good afternoon guys.
Great.
Couple of questions first.
Obviously, the <unk> was a big transaction, we saw a story come out last few weeks that they plan to Barry like 10000 miles of electric line is there going to be any changes to the sites, you've got where they might be taking electric lines down, making it obviously easier to call on them and what kind of interest activity have you seen on those sites.
We've seen great activity, we're ahead of plan.
There's a lot of demand in terms of application backlogs and in terms of that story Ric that relates primarily to the lower wood poles. The ones that are closer to the end user as opposed to the high power transmission Poles that are on.
On the ones that we.
Really are part of our transaction.
So we don't we don't see a lot of.
Of issues related with that but if in fact there are.
The polls are assets that were part of our transaction.
There is a fairly elaborate.
If anything should happen to those in terms of being no longer needed or used by P. G&A, there's a fairly.
Complex set of rules that deal with that so something that were.
Covered all and feel very good about but for the most part it's going to be the shorter wood poles theyre talking about.
Makes sense, Okay also.
Tanzania joint venture 1 of your peers recently.
Doing a big private equity transaction in Europe has started giving consolidated <unk> per share as well as attributable to common <unk> per share have you guys considered as now you get a little more joint ventures going that you might move to obviously your EPS stories. They are always take out minority interest, but they thought about moving towards a measure.
More proportionate <unk> to come on.
Brendan.
Yes, Rick to this point, obviously nothing has been material enough to to do that we do always back out.
<unk>.
Previously identified when we haven't consolidated something.
Obviously, the JV piece of the <unk> <unk> per share, but it's something we'll look at it if it becomes material we'll highlight it for you guys. We just havent had any really to date.
Makes sense final 1 obviously, we make that adjustment from <unk> to funds available for distribution. We've been watching I think you guys call. It amortization of capital contributions, which is still very low I think it was $13 million in the first half of this year $33 million all of last year..1 of your peers is almost 2 times debt level of <unk>.
Non cash.
Items that get put into <unk>.
Any thoughts.
Any changes coming from you that would take it up higher or is it fairly low because it's obviously 1 of the big non cash items that kind of is different between the tower companies.
Yes.
Don't think so the things that would drive it up as obviously more augmentation activity of the towers, which is certainly possible given the increased.
Mount of activity in general that we're seeing but the offset to that is that as we have longer.
Terms to our leases, particularly the Verizon MLA, which we.
<unk> talked about last quarter and some of the new agreements that come with longer terms that tends to stretch out the period over which you're amortizing it actually reduces the amount.
Just it's a factor of which towers are getting hit whether work needs to be done at the side. How much is cost is being reimbursed all those kind of things so.
I don't expect it to actually move up.
Materially at any point in the next year or 2 yes.
It's very different Rick when Youre not doing.
Small cell fiber work, where it's more common debt your customer contributes a large amount of the.
Initial capex upfront and then you amortize it into that amount I mean, that's never really been a big issue.
Macro tower side of the business other than just the regular augmentation stuff, which is.
We don't we don't foresee any material changes in that.
It makes sense, obviously I was like going back to cash on the ability to pay dividends. So I appreciate that and you guys stay well.
Thanks, you too.
Our next question comes from the line of Simon Flannery from Morgan Stanley. Your line is open. Please go ahead.
Great. Thank you very much.
I was wondering if you've had any more clarity from T mobile about their plans for the.
On the sprint towers do you think the the churn is going to be consistent with.
The current contracts or do you think there's potential to either keep some of those towers or have been pushed out and any updates on the or your restructuring on how we should think about the impact.
Maybe opening up the potential for more investment in Brazil once that goes through thanks.
Yes in terms of the debt.
On the T Mobile sprint question Simon.
T mobile is very organized and vary.
I think ahead of what people thought in terms of their network planning.
So there is a lot of Chris communications going back and forth, but I don't know that it materially has changed.
Prior statements on what we expect in terms of decommissioning.
And we don't have any additional news on the on the uptake of the potential spreads sites, but I would just say that.
T Mobiles is very <unk>.
Very prepared and their work in this area.
Okay.
And in terms of a way.
I believe the latest is that we're not expecting anything until at least the fourth quarter of this year maybe into next and on.
Our prior statements.
In terms of our exposures to both or all 3 of Tim vivo and clear of those have not changed.
Okay, Great and do you think theres an opportunity for you to do more on built to suit I think you did about 100 in the quarter and then it sounds like it's part of the Tanzania story as well, but you haven't done a huge amount relative to what we've been hearing from some of your peers.
Yes, I think theres always an opportunity on the question is does it represent the the terms and the financial returns that we're looking forward.
I think.
On the universe of opportunities would allow us to do more.
Great. Thanks, a lot.
Our next question comes from the line of Bill <unk> from J P. Morgan. Your line is open. Please go ahead.
Hey, it's Phil Cusick.
Start with the paradigm deal was this the team you worked with from South Africa or is this a different team.
No we didnt work with any.
The guys in South Africa, Phil This is.
This is Steve Marshall.
And how has and Steve Harris guidance that I've known forever.
<unk>.
Very closely with Steve Marshall at Waa So.
That's really just for the industry. This all came together.
Okay, what's your potential capital commitment over time for this.
So it's not much beyond.
The 175, Brendan that's the total purchase price the 175, plus few incremental costs. So that represents everything so it.
It wouldn't be materially more than that I mean down the road, we'll have to see.
How things.
We've modeled in some upgrade capex and some refurbishment capex, but yes talking about material numbers there Phil.
Okay is it sounds like if youre going to do something like this on a whole bunch of new countries.
I would think you'd have a sort of number that you'd be willing to invest alongside them.
Sure.
Make these more interesting.
Yes, the JV fill it's specific to Tanzania, Theres no obligation to do anything alongside them going forward. So.
There is no commitment as far as that goes.
Yes, we could.
If we could find more opportunities like Tanzania, though we'd be excited right.
Got it okay. Thanks, guys.
Sure.
Our next question comes from the line of Michael Rollins from Citi. Your line is open. Please go ahead.
Thanks, and good afternoon with respect to the domestic leasing activity that you were highlighting just earlier in the call. How does this compare with the internal expectations that you've had and what does this mean to the levels of <unk>.
We've seen growth that you can achieve in the domestic business over the next couple of years and then just separately explaining to follow up on another thing that was said earlier and was just curious if you could unpack why the mix of leasing activity had a greater amount of new sites versus.
And then.
And the domestic business.
The last 1 is an easy 1 to answer Mike and it's dish.
Because dishes coming on.
Online in the form of entirely new leases and they are very busy.
So that's the answer to that in terms of the second quarter. We achieved results that were ahead of our expectations.
Did have some fairly.
Robust expectations, but even those were exceeded by the level of second quarter activity and.
In terms of the growth rate going forward I don't want to get too specific other than to say, it's going up.
In the past I think and you can correct me.
If I don't have this right when you're talking I think a high single digit to where you expected gross domestic growth to get over the next few years I'm. Just curious if you could just revisit that perspective.
In the future given what's going on now.
So when you are talking about going out a lot of years, obviously, we're getting bigger and bigger. So you have to add that many more dollars to make that happen but.
Given the activity levels today, I think as we get a year or so out youll start to see us return to levels that are similar to what we've reported in.
In the past when we were busier.
Thanks.
Yeah.
Okay.
Our next question comes from the line of Nick del Deo from Moffett Nathanson. Please go ahead. Your line is open.
Hey, Thanks for taking my questions.
First per the.
The question that Mike just asked it sounds like dish was really an outsized contributor to leasing this quarter.
Can you just if you back that out can you talk about how activity from the big 3 carriers in particular has changed over recent quarters. It was a dish in particular that really drove the outperformance in leasing versus your expectation or was that outperformance more broad based.
I would say that the the <unk>.
Ones that had kind of <unk>.
Step function changes in their levels of activity.
Dish and Verizon.
And the Verizon stores very understandable is coming off the <unk>.
The C band auctions their public statements at our MLA with debt.
Okay. Okay. That's helpful and then.
1 on the on Tanzania, and the partnership with paradigm given option to eventually buy out their stake or vice versa.
Is there no mechanism in place to do that no. There is a if there is a mechanism that gives us the right to buy them out.
Can you talk about the timeframe or any other parameters or is that debt proprietary.
Debt proprietary assets.
5 years ish.
Okay, Okay terrific might be a reason why it gets accelerated a year extended a year, but thats generally the timeframe that we're looking at.
Okay. Okay. Good day here Thanks, Jeff.
Our next question comes from the line of Brett Feldman from Goldman Sachs. Your line is open. Please go ahead.
Yeah. Thanks for taking the question.
On up a little bit on feedback now that youre starting to see what some of the carriers are dealing with C band how much visibility do you have into the extent to which that's mostly going to be a significant amendment project versus any visibility into a new site project because for all of the operators.
That you already have is tended to <unk> this would be a higher frequency than anything they've ever historically used on a macro site. So it would imply that they might need densification, but I don't know if you have that visibility at this point in time and then just following up on the services backlog I'm just curious on is on.
All of that services work being done on your towers, meaning is it a fairly good leading indicator of what Youre on leasing is where are you actually winning degree the business across other portfolios as well the answer to your last question is yes. It is mostly all on our towers, which is why we have the confidence we have and in terms of your first question Brad.
It'll be some some leases in there but for for T mobile Verizon and AT&T is going to be mostly amendments and for dish is going to all be new leases.
Yes.
Thank you.
Our next question comes from the line of Walter Piecyk from <unk>. Your line is open. Please go ahead.
Yes.
Thanks, Jeff I'll preface. This question by noting that last quarter you had your average.
Rice of your share repurchases I think 258 Bucks.
On the stock is now $343.42.
But in this quarter you didn't buy anything so I'm just kind of curious is this I mean I know this acquisition was whatever $175 million is kind of in the ballpark on what you spent last quarter.
The connection that we should draw or is it maybe where the stock price is in terms of the activity this quarter.
So we wanted to come down off the 76, and we came down quicker than we thought and by the time, we knew that we were blacked out.
Got it and then on on the domestic ramp when you look at your guidance for new lease activity. It's obviously very high so there's going to be a ramp.
Can you give us a sense of Q3 versus Q4, I mean, obviously, we're going to have to see some type of jump Q3, but.
Is it a bigger jump really going to occur in Q4 in terms of the new lease activity.
Yes, youre talking about the same tower growth rate well.
Alright, yes, yes.
I expect it to step up sequentially each of the next 2 quarters, but certainly the fourth charter would be.
A bigger step up as our expectation based on the timing of when this the stuff we're signing on orders and stuff came out yeah that makes sense and then and then I mean, if T. Mobile's gotta be a component of that I mean that business kind of speak to the timing of how the integration is going.
Is it still like a more of a Q4 event.
Yes, I mean, they're busy.
They're busy.
But theyre not getting them activated in Q3, right, it's still not happening until Q4.
For them.
They're getting they're getting stuff activated in Q3 as well so I mean, it got it okay.
It's a mix question, but but they're they're busy and activating stuff in but we expect in both quarters.
It's just interesting given that Steve Madden is right around the corner from Verizon and they are still kind of backend loaded, but whatever and then international.
That's also a big number so.
That's going to be a big ramp second half on for international as well Ryan to hit that $13 million target.
Uh huh.
Aye.
It'll be a slight ramp I don't know if I would call on a big ramp when we can walk through those non light relative to the overall company for sure but for Internet for what Youre, what youre levels have been in the first half of the year. It seems like it's kind of big now.
Yes, it's increasing I mean, certainly the lease up has been a little bit better just recently and we expect it to be better as we move through the year I don't.
Don't know that I would agree with your characterization that so we should probably talk about that separately share.
Okay, 1 last 1 sorry.
But T mobile's use of dishes.
On a megahertz spectrum.
Did that generate an amendment or a co location or anything.
Yeah.
Well when it happens.
Okay, great. Thank you.
Okay.
Our next question comes from the line of back to <unk> Levi from UBS. Please go ahead. Your line is open.
Great. Thank you a couple of follow ups first can you provide some color on the pacing of sprint churn for the share I think it was closer to $2 million in the first quarter, how do we think about it.
For the rest of the year on maybe a color is that $30 million still holds for next year and.
Another question on the services side, the margin coming in a little bit lighter than historical levels is there any opportunity to improve the services margins and.
How do we think about the 22 services revenues. Thank you.
Okay.
Sprint churn piece.
It's expected we had I think what we reported last time was about $1.7 million or so in the first quarter.
We expect the full year to be somewhere between 8 maybe $8 million to $9 million or so for the year.
Fourth quarter impact and this is again on a full year year over year basis will be a little bit bigger because obviously there are some of those leases that are going away as we move through the year.
In terms of next year.
Right now, we still think the 30, maybe 30% to $35 million or so is appropriate.
Have to hedge a little bit only because the timing of when we get notices what they specifically decided to do is a little bit of a fluid situation, but based on what we know today and lease expiration dates that we think thats a reasonable estimate.
Yes in terms of the services margins I mean, our services business is comprised of 2.
Distinct offerings, 1 is site acquisition zoning kind of software and then the second is construction construction typically produces about half the margin on <unk> and zoning.
So the mix shift between <unk> zoning and construction is what drives the margin.
And the margins have actually been <unk>.
Based on the type of work being provided.
Historically strong compared to our experience in terms of next year.
We'll give you.
Next year's guidance, when we get there, but there is no reason why the services business because it is primarily on our own tower should.
Materially slow down it's going to reflect its going to reflect leasing activity.
Got it okay. Thank you.
Our next question comes from the line of David Barden from Bank of America. Your line is open. Please go ahead.
Hey, guys. Thanks, so much just to follow up a couple of things So I guess first.
Jeff I think last quarter, you know when we were talking about the services business. You said you didn't see any reason for there to be a material change <unk>. Obviously, there was a change you kind of listed off.
A number of things that were contributing factors, but was it really like how quickly.
On the C band deployment came out of the gates or was it really how quickly maybe T. Mobile came out of the gates or was it just.
Everything just turn out to be better than expected.
Really more on the latter.
C band came out quicker dish came out quicker T mobile continues to be extremely strong.
Okay.
And just with respect to the disappointment, maybe you can comment on this maybe you can't but is it they've obviously publicly announced what their plan is to build up the biggest market is this.
Does this kind of bump that you saw.
Specifically related to that or is there something grander that's going on that maybe we haven't heard about yet.
Our works pretty well spread out David.
I'm not sure exactly how they geographically define those comments you made but we.
We're seeing a fair spread to the to the geography.
Okay interesting.
So just a couple of housekeeping ones.
Tanzania contract is that all denominated in non showings.
The purchase price.
Are you asking about the purchase price or the leaseback the leasing the leasing contract.
Roughly well this includes the other third parties. So I don't know the exact.
Breakdown, but the total leasing revenue that is contracted is about 67% in U S dollars.
When you exclude the pass through stuff.
So Scott yes, okay.
Most of the space this rented in U S dollars the energy pass through is off showings.
Got it got it Okay and then my last 1 if I could sorry.
Roughly $100 million $95 million, that's not tens on here that you guys investing where did you guys put that money this quarter.
I'm sorry, the what.
Okay.
Alright, the 95 to 100 million that you guys. That's not part of the turns on your deal that got spent this quarter where did that go.
The 95 discretionary capex.
Yes, yes went into a various acquisitions also some new builds we mentioned we built about 100 sites during the quarter. So the total capex was up for.
A number of deals the deals if youre asking where the deals are located it was a mix there were mostly deals in the U S.
And Thats what work flow.
Okay. Good alright, alright, thank you guys.
<unk>.
Our next question comes from the line of Eric <unk> from Wells Fargo. Your line is open. Please go ahead.
Great. Thanks for taking the question.
I was wondering on AT&T, you Didnt mentioned them as 1 of the customers that had a step change function in activity.
Have you seen any change from them since they announced the Warner media spinoff around C band urgency and you mentioned the first net as well on your comment.
We had presumed that was starting to wind down, but maybe you could comment how much longer you expect first debt amendment that persist.
Yes, AT&T is relatively steady.
<unk> did not have the same change in velocity that some of the others that.
We mentioned did.
On the first net stuff.
I think we are past.
Well past, the halfway point, but not not close to being finished.
Okay Fair enough and just wondering is there any.
Update or anything to point out on SBA as the data center.
Platform in terms of deal activity.
Any update on timing when that could potentially become a modestly more material part of the business.
Yeah.
I believe I just heard this today internally that we've now gotten our third contract for a true mobile edge.
Computing side, so that would give us 2 data centers on 3 or 4 mobile edge.
Facilities so.
Moving forward, but quite a bit a ways away from reaching net materiality point you referred to.
Okay. Thank you.
Our next question comes from the line of Colby <unk> from Cowen. Your line is open. Please go ahead.
Okay. Thank you you mentioned the Jv's 100, if anytime line I'm just curious what's your ownership stake of that and why they gave you you obviously can't afford to do that straight up on your own is that net.
Signal some type of shift in strategy is it simply that the ones that brought the deal to you and therefore.
We're allowed to take a piece of it and then secondly.
On the new AT&T dish partnership.
I'm curious if you view that as incrementally negative or positive.
To your business and I guess, just the broader tower industry. Thank you.
Yes.
On the paradigm folks who are responsible for bringing the deal to us.
Colby and had a long relationship with.
Airtel in Tanzania.
With their former employer.
So that's why we are where we are I don't think we're disclosing the exact splits other than we are.
Clearly the majority owner and all in all facets.
In terms of the AT&T dish deal.
It doesn't it doesn't really change.
Dishes requirements with the FCC, which is for their own fixed.
Network.
Arguably it could impact their growth beyond that.
To just.
2 just roam on.
At&t's network.
That will have to see I mean probing never as the first economic choice.
But I mean, it certainly hasnt.
In any way impacted dishes.
Cash out of the blocks here in 2021.
Can I just get a quick follow up 1 on.
The parts of that agreement is the ability for.
On this typically gives plenty of its spectrum AT&T to deploy on its behalf to which then dish can use.
Do you know if that would.
Meet the threshold that the FCC has in terms of are there.
So any plant coverage requirement by 2023 I E. They can effectively just go on At&t's towers, using their spectrum and that would yes.
Meet the requirement wherever they may choose to do that.
I don't know the answer to that.
Neither do I, but thank you.
Yeah.
Our next question comes from the line of Matt lithium from day.
Deutsche Bank. Your line is open. Please go ahead.
Hey, guys. Thanks for taking my question.
Just on capital allocation now that you're back within your <unk>.
Target leverage range I'm wondering how you're thinking about that.
Prioritizing uses of excess cash post the dividend and then specifically on the M&A front as well if you can talk about the latest you're seeing.
In terms of valuations and number of opportunities, particularly internationally. Thanks.
Yes.
Well the number of opportunities internationally as high prices are high you need to be very selective.
I don't know that we will be able to do a bunch of things like we're doing in Tanzania, I hope, we can but I don't I don't know.
The debt will be be the case in terms of capital allocation generally we continue to believe our shareholders are best suited by a lower dividend higher dividend growth strategy.
Gives us the most flexibility.
<unk> produces very good growth numbers. So that's what we will continue to pursue there and given our access to capital on interest rates, we will look to stay fully invested within our target leverage range, whether that be portfolio growth or stock repurchases.
Got it thanks, Jeff.
Our next question comes from the line of Jeff <unk> from Wolfe Research. Your line is open. Please go ahead.
Yes. Thank you for taking the question I guess first would you mind offering us an update on how close you are to bumping up against supply or labor challenges in this market.
So far so good we really.
I haven't seen any issues on the labor side I mean, the fact that.
We maintain a sizable in house.
True.
<unk>.
It gives us some flexibility there.
And in terms of the equipment side, we have not heard any.
Any issues around our customers delivering the equipment to the site for installation.
Now we read about all the same semiconductor issues that you read about so.
I guess that could change, but it has not manifested itself so far.
Okay.
And then secondly, I think Brent asked earlier about the potential for Densification on the higher frequencies is C band.
What are you hearing from your your carrier partners about their propensity to to add themselves or do you think that they will figure it out with better antennas et cetera et cetera.
No there'll be densification, but just like every every generational upgrade you go first year existing sites because thats the quickest the best Bang for your Buck. So this is happening exactly like it always does.
Okay.
You very much.
Our next question comes from the line of David <unk> from Green Street. Your line is open. Please go ahead.
Thanks can you remind us or the company's views on expanding into new markets and if theres any off limits and then assuming you are open extending into new markets, how do you determine whether or not to utilize a JV partner.
The last the last part of your question is based on what they would bring to the table.
And mostly operational and contacts as opposed to capital at least so far and in terms of there are certainly ones that are off limits.
Either by choice or by legal necessity places like Cuba on China, I mean, we're just not allowed to go there.
And then there'll be others, where the.
The analysis of the risks.
Outweigh the rewards.
On a country, where you'd have very little roll a wall and you have the.
The potential for nationalization of assets those are not going to be markets, where we are.
Sure.
Most excited about.
Okay makes sense and then how do you Andy cap the risk in those markets and I guess, particularly with the Tanzania acquisition is there a model you guys have internally that you use just how you look at that if I look at all kinds of things.
And when you get into markets in Africa.
Most of the work is not around the assets as much as it is around political regulatory tax.
Government and.
We spend a lot of time and taken a lot of resources before we make those decisions.
Okay. That's helpful. And then maybe 1 last quick 1 on on the unoccupied towers, but 28000 acquired on the T. J any transaction is any activity from those sites showing up on your service revenue yet or is it still too early for that.
Well it wouldn't show up in our services revenue.
The the way that that would that would be leasing revenue.
Just to touch I think I know, we have some interest I don't know if he is actually booked anything or not I.
I don't believe so not yet.
Okay. Thanks I appreciate it.
And our last question comes from the line of Brandon This fell from Keith Ken <unk> Keybanc capital markets. Your line is open. Please go ahead.
Great. Thank you.
And thanks for taking my questions you mentioned backlogs a couple of times, Jeff can you quantify the year over year change in backlog of signed but not commenced new leases this quarter and then.
More broadly on build to suit 1 of your peers is large scale build to suit program going on can you share with us how many towers you plan on building in Tanzania, and maybe how youre thinking about the suite more broadly over the next 2 to 3 years.
Brendan do we have the answer to that.
I don't have the exact number for you Brandon.
<unk> materially higher I can say generally, but we can we can actually look for something to maybe put a percentage increase or something on that for you after the call.
Yes, and in terms of the new builds and Tanzania.
We're committed to to build hundreds of towers over the next 5 years, the hope as we increase that.
I would point to South Africa, which we which is now I believe over 500 towers most of which.
We are built.
So theres a lot of opportunity there and we will continue to compression in those areas, where we think it's going to provide great returns.
And then remind us what you are looking for in terms of returns from like an NOI yield perspective on.
Build to suit sites.
Well, we're looking for.
Towers that ultimately.
Either with the first although that's more unlikely, but with the second get to 15%.
Cash on investment yields are higher.
All right.
Yeah.
Great. Thank you.
Well, thank everyone for tuning in today and stay tuned and we look forward to the next time, we're together with third quarter results. Thank you.
Yes.
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