Q2 2022 SBA Communications Corp Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by welcome to the SBA second quarter results Conference call. At this time, all participants are in a listen only mode.
Later, we will conduct a question and answer session.
<unk> will be given at that time.
If you should require assistance during the call. Please press star zero.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to our host.
Mark <unk> VP of finance. Please go ahead.
Good evening and thank you for joining us for SBA second quarter 2022 earnings Conference call here with me today are Jeff Stoops, our President and Chief Executive Officer, and Brendan Cavanagh, Our Chief Financial Officer.
Some of the information we will discuss on this call is forward looking including but not limited to any guidance for 2022 and beyond 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 August 1st and we have no obligation to up.
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 information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website.
With that I will now turn it over to Brendan to discuss our second quarter results.
Mark Good evening SPE.
SBA continued building on our strong first quarter with an even better second quarter with across the board results ahead of our expectations and backlog supportive of an equally good or possibly even better second half of the year.
Total GAAP site leasing revenues for the second quarter were $582 million in cash site leasing revenues were $574 million.
Foreign exchange rates were largely in line with our previously forecasted FX rate estimates for the quarter, but were a tailwind on comparisons to the second quarter of 2021 positively impacting revenues by $3 $4 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 four 4% over the second quarter of 2021, including the impact of three 7% of churn.
On a gross basis same tower growth was eight 1%.
Domestic same tower recurring cash leasing revenue growth over the second quarter of last year was seven 1% on a gross basis and four 1% on a net basis, including 3% of churn.
Domestic operational leasing activity or bookings, representing new revenue placed under contract during the second quarter was very strong again and incrementally higher than the first quarter of this year.
In addition, our domestic new lease in New Amendment application backlogs remain very healthy as well.
The combination of our strong second quarter leasing activity level, and our backlogs have allowed us to increase our outlook for new 2022 domestic site leasing revenue from organic lease up.
During the second quarter Amendment activity represented 66% of our domestic bookings with 34% coming from new leases.
The big four carriers of AT&T T mobile Verizon and dish represented 96% of total incremental domestic leasing revenue signed up during the quarter.
Internationally on a constant currency basis same tower cash leasing revenue growth was five 6% net including seven 1% of churn or 12, 7% on a gross basis.
International leasing activity was very good again and also higher than we saw in the first quarter. We continued to see strong customer activity levels in many of our markets as well as increased contributions from inflation based escalators and.
In Brazil, our largest international market, we had another particularly strong quarter.
Same tower organic growth in Brazil was 14, 2% on a constant currency basis.
International churn was elevated in the quarter as anticipated due primarily to carrier consolidations and other customer financial challenges, mainly in Guatemala and Panama.
During the second quarter, 86% 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 13, 1% of consolidated cash site leasing revenues during the quarter and nine 9% of cash site leasing revenue excluding revenues from pass through expenses.
Tower cash flow for the second quarter was $459 6 million.
Our tower cash flow margins remained very strong with the second quarter domestic tower cash flow margin of 84, 9% and an international tower cash flow margin of 67, 2% or 93%, excluding the impact of pass through Reimbursable expenses.
International Tower margins were impacted on a year over year basis by our new less mature Tanzania assets.
Adjusted EBITDA in the second quarter was $437 $8 million. The adjusted EBITDA margin was 68, 2% in the quarter, excluding the impact of revenues from pass through expenses adjusted EBITDA margin was 73, 3%.
Approximately 96% 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 fifth quarter in a row with $71 $8 million in revenue and $17 3 million of segment operating profit.
We also continued to replenish and build even higher our services backlogs, finishing the quarter once again at a higher level than the prior quarter, notwithstanding our record second quarter results.
Based on this backlog, our strong second quarter and the continuing high activity levels by our customers. We have raised our outlook for full year site development revenue by $40 million.
Adjusted funds from operations or <unk> in the second quarter was $335 3 million.
<unk> per share was $3 seven and.
An increase of 16, 3% over the second quarter of 2021.
During the second quarter, we continued to expand our portfolio acquiring 210 communications communication sites and one data center in Brazil, which we previously disclosed with our first quarter results for total cash consideration of $127 3 million.
We also built 100, new sites in the quarter subsequent to quarter end, we have purchased or under agreement to purchase approximately 200 sites in our existing markets for an aggregate price of $85 million.
We anticipate closing on these sites under contract by the end of the year.
In addition, during the quarter, we entered into a contract with Grupo Torras, Sir or GTS to purchase the remaining approximately 2600 tower sites in Brazil for $725 million.
We anticipate closing on this acquisition during the fourth quarter of this year and expect these assets to produce approximately $68 million of tower cash flow. During the first full year. Following closing based on our current estimates of future exchange rates.
These are assets, we know well in a market, we obviously know well and this acquisition will be immediately accretive to <unk> per share upon closing.
Jeff will share a little more about this acquisition in a moment.
In addition to new tower and other assets. We also continued to invest in the land under our sites during.
During the quarter, we spent an aggregate of $9 9 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 72% of our towers and the average remaining life under our ground leases, including renewal options under our control is approximately 36 years.
Looking ahead now to the rest of the year. This afternoons earnings press release includes our updated outlook for full year 2022.
We have increased our outlook across all of our key metrics based on a combination of outperformance in the second quarter strengthening activity levels in both services and leasing lower churn expectations and anticipated contributions from the pending GTS acquisition.
These items were partially offset by weaker foreign exchange rates and higher interest costs from the outlook previously provided with our prior quarter earnings release.
We are excited about the current operating environment I'm pleased with how our team has been able to execute in order to produce better than expected results and support our customers at a high level with all of their network initiatives.
With that I will now turn things over to Mark who will provide an update on our liquidity position and balance sheet. Thanks, Brendan we ended the quarter with $12 6 billion of total debt and $12 3 billion of net debt our net debt to annualized adjusted EBITDA leverage ratio was 7.0 times, which is at the low end of our targeted range our SEC.
Quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was five three times equaling last quarter the highest in the company's history.
As of the end of the quarter the weighted average interest rate of our outstanding debt was two 9% with a weighted average maturity of approximately four three years and the interest rate on 93% of our outstanding debt is fixed.
And as of today, we have $480 million outstanding.
Outstanding under our $1 5 billion revolver.
During the second quarter, we did not repurchase any shares of our common stock as we chose instead to pursue that Brazil acquisition. We currently have $504 7 million.
Of our repurchased authorization remaining under our $1 billion stock repurchase plan. The company shares outstanding at June 32022 were $107 9 million compared to $109 5 million at June 32021, which is a reduction of one 5%.
In addition, during the second quarter, we declared and paid a cash dividend of $76 6 million or <unk> 71 per share and today, we announced that our board of directors declared a third quarter dividend of <unk> 71, a share an increase of 22, 4% over the third quarter of last year.
The dividend will be payable on September 22022 to shareholders of record as of the close of business on August 25, 2022 with that I'll now turn the call over to Jeff. Thanks, Mark and good evening, everyone. As you have heard we had another great performance in the second quarter all areas of our operations, we're very busy.
And executed at a very high level, producing better than expected financial results.
Setting us up well for the second half of the year, despite higher interest rates and weaker FX rates, we have meaningfully increased our full year outlook in all areas, including a $64 million increase in anticipated total revenue.
Our strong results and increased outlook are driven by the current network investment initiatives around the globe. While there is a range and the degree of activity from each of our customers around the globe collectively they are producing very high levels of demand, which we expect will keep us very busy for the remainder of this year and well into 2023.
As of this moment, we are not seeing any material adverse impact on our activity levels from supply chain labor or COVID-19 issues.
In the U S. Each of our carrier customers remain busy during the quarter signing up new leases and amendments primarily associated with the build out of their networks through the deployment of new spectrum.
T mobile was very active during the quarter and continued their nationwide deployment of two five gigahertz and 600 megahertz spectrum, Verizon and AT&T each increased their <unk> related signings with us from the first quarter with each focused on C band deployments at AT&T, beginning to incorporate $3 $4 five gigahertz spectrum.
And to their deployments as well and dish also contributed to the quarter continuing to sign up new lease agreements in support of their nationwide <unk> network buildup. We are excited about the upcoming two five gigahertz auction, which will result in even more spectrum being deployed.
Internationally. We also had one of our best organic leasing quarters in a while coupled with increased CPI based escalators and a number of our markets.
International leasing activity was again led by strong new lease and amendment activity in Brazil, but we also saw significant executions in a number of our other markets, including South Africa, and El Salvador during the second quarter, we signed up 51% of new international revenue through new leases and 49% through <unk>.
<unk> two existing leases so almost evenly balanced the combined U S and international New leasing revenue signed up during the second quarter were the best we have produced in about seven years.
On top of these outstanding leasing results our services business had its best quarter in company history, producing record services revenue and margin results for the fifth quarter in a row.
Our services backlog finished the quarter at its highest level ever increasing our confidence in U S carrier activity for the balance of the year and allowing us to increase our services outlook by 33% over the initial guidance we provided in February .
I am extremely pleased with the job our team has done to deliver outstanding support to our customers. During this critical time.
In addition to our strong operational performance during the second quarter, we maintained our disciplined and opportunistic approach to capital allocation. This quarter, we pursued a very attractive portfolio growth opportunity evidenced by our agreement to buy the remaining 2600 towers owned by GTS in Brazil.
<unk> is one of the longest tenured independent tower companies in Brazil run by industry Veterans, we have known and respected for many years individuals who know how to properly run a tower company the.
The majority of these sites are located in Sao Paulo State and most are located in urban or suburban areas.
Sites have two one tenants per tower and we believe there are opportunities for growth, particularly with recent <unk> spectrum auctions in Brazil as the driver. This will be our second acquisition of towers from GTS, we like the current dynamic in Brazil quite a bit and we are pleased to incorporate these high quality assets into our portfolio.
So at a very accretive price.
On this portfolio Oi and legacy Nextel leases represents 17% of the business.
So while these towers presents some variability around future churn outcomes. We believe we are uniquely positioned to maximize the future of these assets. This acquisition will increase sba's total portfolio in Brazil by over 25% to over 12500 sites and we expect the towers will be integrated.
With little to no incremental SG&A expense, we believe this increased size and scale will be an asset and upcoming OE consolidation discussions and we will also position us well to capture more of the necessary incremental network investment that will be required of the remaining three legacy <unk>.
Finally, we will be able to.
Absorbed this transaction, while still maintaining leverage in our target 7% to seven five times range. We expect this will be a very complementary value enhancing investment in a market that we know very well.
With regard to our balance sheet, we remain in good position, we have only one debt instrument, representing 5% of our outstanding debt maturing in the next two years, 93% of our debt is fixed rate and our weighted average interest rate remains very low at two 9% with respect to that one instrument due March 2020.
Three our plan is to refinance that in the next six months as we watch and stay opportunistic around the credit markets, while incremental interest rates are higher our access to capital remains very strong and we continue to be a preferred issuer in the debt markets. We have historically used we're really very well positioned.
To weather the challenging broader macro environment.
In addition to our strong balance sheet growing <unk> and steady and growing operational environment of our industry. The majority of our largest costs are fixed or increases are capped as a result, we believe we are not only able to withstand the current inflationary environment, but we are able to continue growing our <unk>.
Share, creating additional value for our shareholders.
In closing we are very pleased with our first half of 2022, our team performed well against the very strong demand environment I expect more of the same throughout the rest of the year and into 2023 I want to thank our customers and team members for their support and contributions to our success.
I want to take a brief moment to recognize and thank both Kurt Bagwell, our president of International and Tom <unk>, Our general counsel for their decades of service to SBA, both will be retiring at the end of this year, but each has left an indelible mark on SBA and the industry I appreciate their sacrifices and contributions.
And wish them all the best in retirement.
And with that Moses we are now ready for questions.
Okay.
Yes.
Ladies and gentlemen, if you wish to ask a question. Please press <unk> zero and telephone keypad you.
You may withdraw your question at any time by opinion the ones Euro command.
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First we go to the line of Michael Rollins with Citi. Please go ahead.
Thanks, and good afternoon.
First curious if you could give us.
An update on the domestic leasing environment. In particular are you seeing any change in activity from AT&T. After you announced some of the progress made on mid band spectrum deployments and also what Youre seeing out of dishes build and then just secondly.
With regards to the acquisition can you talk a little bit more about.
How the valuation might be contemplating.
At 17% of leasing that could be subject to some future rationalization. Thanks.
Well clearly I will take the last one first Mike clearly.
10, five times is extremely attractive price that takes into account exactly that.
We don't really believe any of the Nextel Rev.
Revenue will will stay on and we have heavily discounted the oi.
Revenue as well in our underwriting so.
Yes, all that was taken into account when we when we arrived at the price in terms of AT&T I listened to their call and.
Heard their comments and based on our.
Observations in our markets, which are mostly suburban highway corridor and rural I think the.
The numbers that they were talking about mostly came from dense urban markets, which makes a lot of sense because thats, how all new generally thats, where all new generational upgrades start so we still have in our opinion, a very very long way to go.
With AT&T in their C band and <unk> Dot four five work and dish is.
A very active contributor.
They would represent most all of the new leases that we are signing domestically. So there will be some.
<unk> and flows as they work around there will have they have already worked around their 2022 regulatory requirements and are now going to be working towards their 2023 regulatory requirements, but still a very very active participants.
Thanks.
Mhm.
Next we'll go to line of <unk> Levi with UBS. Please go ahead.
With the leasing activity ramping up towards the end of the year do you think that bodes well for the activity. We should expect for 'twenty three I know youre going to provide formal guidance later, but in terms of trajectory. Some comments would be helpful to think about puts and takes into next year and another question.
On churn it has been coming lower than you had expected is that pushed out to next year are you seeing lower decommissioning that you had.
Prior to that.
Expectations. Thank you.
Yes, I think the most we can say about the trajectory is that the fourth quarter of this year, we believe will be the highest growth rate of the year and we will let you.
Extrapolate what that means going forward and obviously, we will give a full review when we give our 2023 guidance.
Brendan I'm going to let you take the.
The churn question, yes, the churn is.
It is mostly you should think of it is rolling into next year or future year, it's largely timing related as opposed to below our expectations. It's just.
The timing primarily around the sprint T mobile decommissioning says a little bit.
More deferred than the estimates that we have made but we don't expect the total to really be any different.
Maybe just a follow up on that Brendan I think you had originally said maybe 30 million in 'twenty two.
Should we assume that they would.
Closer to 27 now and then if you could give us a guidance for 'twenty three that would be great.
Yes, it was well last quarter, we actually brought it down about $3 million and we brought it down about another $3 million this quarter. So this.
This year is probably closer to 24, that's what's assumed in our numbers right now for 2000 through 2022.
And next year.
We're probably somewhere in the $15 million to $25 million range, it's a fairly wide range, but obviously there are some uncertainties around exact timing, but somewhere in that.
<unk> million dollar level.
Level.
Got it thank you.
And next we'll go to the line of Ric Prentiss with Raymond James. Please go ahead.
Hey, guys good afternoon.
Okay, a follow up question on Michaels questions.
Why was now the right time.
Or is it just the right price as far as doing the GTS deal and help us understand maybe as we should think about total exposure.
And timing for Oi to affect your international operations I've got a follow up.
Yeah, I mean, it was the right time, because the opportunity presented itself.
At <unk> at a time and on terms, where we thought it was very attractive for our future value creation I mean, what's going on in Brazil, right. Now is they've got a fairly hawkish central bank.
They.
Have I think they are a little bit ahead of the U S in terms of that.
Our economy.
Being dancing around a recession.
Demand notwithstanding that for cellular and five G.
Continues to mushroom in Brazil, you have.
<unk> rationalization going on with the Oi transaction for three carriers, who now.
We have bought a lot of new spectrum that needs to be deployed.
And are in a better market share position to do all of that so we like the dynamic a lot Rick and we know these assets well.
And we know the seller as well in it.
All things kind of came together in the right way.
Okay.
John .
Yes, Rick I mean, we've we've been kind of ballpark it on our portfolio of about $20 million to $30 million U S over the next.
So many years.
This portfolio actually reduces our exposure to oil on a percentage basis in Brazil, but would probably add somewhere in the three ish million dollars of incremental oil churn would be our current estimate.
Okay.
You All know me I really harp on this whole amortization of prepaid rent I don't like it I know you have to account for it. It's just it's not cash.
This has been very plenty I think about $25 million Crown did acknowledged and provide a table this earning season on where their level was at $560 million drop it to maybe $450 million, maybe going into lower there can tell we've talked about there had been maybe a 140 million dropping to $110 million should we think of your kind of 25 million years ago.
Good number because again, we really think cash.
Oh and funds available for distribution is the right way to do evaluations.
Yeah, I mean, that's that's obviously, it's been trending down part of the reason, it's trending down Rick is because.
As we've done amendments and had longer terms to some of our.
Tenant leases you amortize it over a longer period of time, so it's actually had a reducing effect.
It really is just a function of how much augmentation work, we do that we get reimbursed for and which leases that relates to how much time they have.
I think based on the way that it's trended that that number that you just mentioned of $25 million or so is probably a reasonable.
Estimate, but it's been higher in the past it's been lower so we'll see how it goes but I think that's a reasonable estimate yes, I mean, we're always going to disclose it very specifically wreck, but I mean, it's not necessarily a bad thing.
I mean, I love getting paid right yeah yeah.
I understand it for what it is.
So it's not it's not something we we look to discourage but U K I mean, you can depend on us it's always going to be clearly marked out.
I mean, it's a great return on capital I, just like to think of it as net capital return loan yields kind of thing as opposed to an <unk> number I just don't like it and Oh, Yeah, No I hear you.
Alright, cool everybody stay well.
Thanks, you too.
Next we'll go to the line of Simon Flannery with Morgan Stanley . Please go ahead.
Great. Thank you and good evening.
On the.
The M&A market. Obviously this the transaction multiple you said it's accretive.
Any lower than we've seen elsewhere do you think this was a particular situation.
Given the Oi exposure, given the Brazil market or do you sense, a time that maybe it's going to be easier to be a buyer in the private markets than it has been for the last couple of years anything changing there either in towers or forum Brown ground leases et cetera, and then on the leverage came down to $7.
Times, obviously rates have been rising and you've got a great liquidity profile, but any updates you want to stay more towards the lower end are you still happy right within that 7% to seven and a half going forward in this rate environment.
Yeah, I think as long as we can continue to produce the organic growth Simon we're fine.
In the seven.
7% to seven five times.
But if we don't find good things to buy it'll obviously be trending lower in.
In terms of your first question I think there are some breaks on the margins that are <unk>.
Happening around the world in terms of seller and buyer expectations coming more together, but in this particular case. This was more a situation of these particular assets our familiarity with them. The fact that it was the last tranche of towers that the cell.
All our had then needed to sell them to.
Basically liquidate some funds and do some things that you know private equity needs to do.
So I would attribute it more to this deal that I would add.
Wholesale change in the buying environment, although I do think that is improving.
And what sort of clarity can you give us somebody or what have you assumed on the timing of the nextel and annoy churn for these assets.
It's over the next several years I mean, some of it is specific to the timeframes of the terms of those agreements Simon and Theyre, all right out to different dates.
But you should assume over the next.
Three years roughly.
On average, but it won't be even it'll be you know.
Certain amount each sub tiers, so that $68 million includes presumably some churn in the next 12 months after closing.
A little bit yes, yes, okay. Thank you.
Next we'll go to the line of Nick del Dow with MOSFET Nathan. Please go ahead.
Yeah, Hey, thanks for taking my questions.
First two quick clarifications first for Brendan Brennan.
You said that you expect about $3 million OE churn from the GTS towers can you share what your expectation is for the Nextel churn.
Yes, I don't want to give the exact number.
But they're there.
Well as Jeff said, we're assuming that all of the Nextel revenue goes away. The total for Oi and next tells about 17%.
So nextel's roughly half of that so you can probably do the math from there.
Okay. Okay, that's great. Thanks, and then.
Your expectation for other revenue in the U S and 22 went from zero last quarter to $5 million this quarter.
What is that a function of and was that realized this quarter.
Yes. It was realized this quarter, it's basically there's a few different things in there, but it's essentially what we consider cash basis revenue, which is stuff that we're collecting kind of one off sometimes there's extra.
Extra fees that are paid or holdover fees things that are not part of the recurring.
Ongoing lease so we classify it as other but the increase is really that we got more of that than we expected. So almost all of that is.
Stuff that we realized in the second quarter, there may be a small amount of projected for the second half of the year, but most of it was actually realized.
Okay. Okay, great. So it doesn't go in the $66 million bucket right because we.
We want to be careful as to how folks think about that year after year after year.
Got it great. That's that's terrific and then one more substantive question.
And any change in behavior from I'll call. It non traditional customers like cable that might be worth calling out that would suggest either they are more likely or less likely to be a meaningful customer in coming years.
No real change no real change that comes to mind.
Okay great.
Great well, thank you guys.
Thanks for that the line of Phil Cusick with J P. Morgan. Please go ahead.
Hey, guys. Thanks, just to go back to the U S. For a second can you tell us is there sort of slot and running steady from here or is there.
So an acceleration happening in that one I'm just trying to get an idea of what's driving.
The back half strength and the durability there Jeff It was interesting you mentioned.
Continuing strength in 'twenty, three and maybe 24, so anything you can add to US there and then second what's driving this service revenue growth and anything you can sort of help us on there if it's shifting at the margin thanks very much.
Well I mean, the services revenues pretty straightforward is just more activity.
More stuff going on in our services business.
Is almost entirely gained gleaned from our own towers. So.
It's just there's just a lot of activity Phil and in terms of.
You know the.
Remember we report those growth rates on a trailing 12 month basis, so a lot of what you're going to see.
Our <unk>.
<unk> financial reports for the second or the third and the fourth quarter, we already know it's already kind of.
On the books.
So that part of it.
There is much less.
Risk so to speak then.
Those and as we move through the year as a calendar year company you know the risk.
Robson drops and drops so here we are in August .
Our year isn't entirely baked yet, but it is pretty close and so to your question on dish being a part of it I mean, there are certainly a part of it because they've been a big part of our leasing activity success over the last really last year and so the timing of when those leases commence as a driver.
So it's certainly a contributing factor to the increasing.
Growth that we expect in Q3 and Q4.
Yeah, Jeff, Jeff you sort of cautioned us from taking that fourth quarter exit run rate from this year and extrapolating that onto next year. Each quarter do you think that that's starting to look more reasonable as you get closer to 'twenty three.
I think I'd like to say, if all that till about 2023 guidance Phil.
Thanks, Jeff.
[laughter].
Okay.
Right.
Next we'll go to the line of Matt <unk> with Deutsche Bank. Please go ahead.
For taking the question I have one follow up and one other question. The follow up is just on the last question on services any color you can share just in terms of the breadth of carrier contributions across the big four in terms of what's driving the upside on services and.
Then just secondly in terms of the edge strategy any thoughts updates in terms of how youre thinking about it many different in terms of how youre thinking about the opportunity domestically relative to any potential use cases internationally. Thanks.
Well internationally.
Recall and we've talked about this last quarter. The data center, we bought in Brazil, we are having.
More advanced discussions there around <unk>.
C ran and other carrier deployments that will tie into owning a data center and data center expertise.
So that's encouraging but in terms of the.
The edge itself.
Adding cup.
Couple 345, maybe as many as 10, new many facilities a quarter, but it's still.
We're not yet prepared to say.
The edges here and it's at the tower site.
It's all going in the right direction, but it's still needs more time add it.
Certainly is still a ways off from being.
Material now in terms of the services.
Contribution to I believe in our 10-Q, we disclosed through our top services customers are so.
Bill.
You know accelerate that for Ya, Matt and his.
T mobile Verizon and dish are going to be the top three right.
Brendan.
Quarter mobile.
Number one yes.
Great Alright, I appreciate it thanks guys.
And next we'll go to the line of Eric Love Child with Wells Fargo. Please go ahead.
Oh, great. Thanks for taking the question.
I wanted to check real quick you mentioned the two five gigahertz auction that's going on right now.
Generally most people think T mobile will be the only meaningful better there, but just wondering if you have any thoughts and kind of surface overlap with some of the some of the licenses that are up for auction and whether you think that could maybe be a meaningful contributor for you.
Looking out to next year or two.
Well I mean, a number of folks in addition to T mobile registered.
I would agree with you only based on what I read.
Most folks expect T mobile to be the big winner.
Any kind of spectrum for US is new spectrum is going to prove valuable in one degree or another now if its folks who don't have existing two five gigahertz spectrum to deploy that's going to generally mean, new radios and antennas. So that that can be a little more impactful than not but just <unk>.
Having more spectrum and greater Densification.
But that will permit is a good thing.
So I'm not really going to speculate as to who else is going to put in.
Bids that ultimately win the day.
We're just happy that there is another auction of very valuable mid band spectrum that we know ultimately gets deployed.
Fair enough and just related to T mobile it seems like they've been running at a pretty fast pace.
But based on what they've said it sounds like they'll be mostly done, but there are two and a half and 600 overlays at some point maybe by mid next year. So I'm wondering if you've seen any sign that they could moderate activity or do you think maybe theres still some opportunity, especially with the C band licenses in the $3 45 that they've yet to deploy.
Yes, I think there'll be opportunities and I think when all of our customers talk about you.
When this spectrum gets deployed there you're generally talking about coverage.
And that's just really I mean, the end of coverages at the beginning of Densification and all the infill and other things that will ultimately be driven by consumer uptake of <unk> apps and products. So.
When we think about.
These peer.
Periods of additional investments they have always in our history gone well beyond the dates that folks talk about achieving their pops their desired Pops coverage. Because then then you just that it gets the densification, which is much different.
Okay. Thank you.
Next we go to the line of David Corina with Green Street. Please go ahead.
Thanks, just a quick one for me on the financing markets. So you guys mentioned how are you planning on funding the GTS transaction, maybe for Brendan if you could just comment on the relative attractiveness of secured versus unsecured markets today.
Yes.
GTS as of right now.
We plan to be opportunistic in the financing markets debt financing, we haven't been specific about that.
We do have the capacity on our revolver and with the cash that we're generating from operations.
To handle it if if necessary, but we do.
Intend to be opportunistic we do have a.
Maturity, our next debt maturity actually comes up in March of next year, and so that will be refinanced at some point between now and then and.
There is capacity within our ABS structure to actually raise more money so that might be a contributor. So we'll see how that goes in the general sense.
Secured versus unsecured.
They're obviously all up right now in terms of pricing.
For us, there's still availability and any of the markets that we typically use so it's not a question of access it's really just a question of pricing and so we intend to be.
Take our time and be opportunistic and as was mentioned in the script. We have other than this one maturity that I mentioned, which represents about 5% of our outstanding debt. We don't have any maturities for over two years. So we have the flexibility to be a little bit patient with that but yeah. I think you should expect will continue to use the secured markets as we have in the past.
But a mix of both will likely be.
The path for us.
And while we may be opportunistic David and.
Raise the money.
From somewhere else for purposes of our outlook it assumes cash on hand, and our revolver draw.
Yes.
Makes sense, thanks for that guys.
Yeah.
Next we'll go to line of Greg Williams with Cowen. Please go ahead.
Great. Thanks for taking my questions first one is just on the mix of Colo versus amendments I think you noted you're at elevated levels like a third of the U S. As new Colo and two thirds amendments I think international is a 50 149 split I'm curious to hear your thoughts on where that could go from here.
Peak ish levels. Geoff you mentioned, we're going to go from coverage to to Densification I would imagine that you'd see more amendments that way. So I'm curious to hear your thoughts. There second question is on the service margin.
If you are seeing is five quarters in a row record in and Youre going to more of a construction phase would that mean the service margin could decline a bit as you shift away from my planning and designing towards construction.
Well the short answer to your last question is yes.
So that that could very very well happen.
And I'm, sorry, what was colas versus amendments and the mix in <unk>.
Terms of a shift.
If you kind of go back.
Really the Colo side of it in the U S is heavily driven by dish.
So.
As you have a little less dish contribution you see the percentage shifting more towards amendments and I think with that and the mix towards infill as we've talked about amendments will probably be trending higher as a percentage.
Yes, I mean, when you think about how this is going to go.
And the initial and there'll be exceptions of course to this but for the most part the rollouts.
<unk> T mobile Verizon and AT&T are going to be heavily amendment.
For dish is going to be more Colo and then when we get to the Densification part Greg.
You kind of lean towards amendment, but I believe that you will see.
I think a higher percentage of brand new leases when we get to the Densification stage.
Got it thanks.
Mhm.
Is there any additional question. Please press one zero at this time.
At this time, there's no one in queue, okay, well I want to thank everyone for joining us we had a great quarter and we look forward to our next report.
<unk>.
Yeah.
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