Q1 2023 SBA Communications Corporation Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the SBA first quarter results Conference call. At this time all participants are in a listen only mode and later, we will conduct a question and answer session and instructions will be given at that time.
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And as a reminder, this conference is being recorded.
I would now like to turn the conference over to our host Marc that Rusty Vice President of Finance. Please go ahead.
Good evening and thank you for joining us for Sba's first quarter 2023 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 2023 and beyond today's press release.
Our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today made first and we have no obligation to update any forward looking statements that we may make in addition, our comments will include non-GAAP financial measures and other key operating metrics the reconciliation.
And other information regarding these items can be found in our supplemental financial data package, which is located on our landing page of our Investor Relations website.
Thank you Mark good evening.
We started the year off with a solid first quarter. Our results were slightly ahead of our expectations and allowed us to increase our full year 2023 outlook for most metrics.
Total GAAP site leasing revenues for the first quarter were $617 $3 million in cash site leasing revenues were $610 4 million.
Foreign exchange rates represented a benefit of approximately $600000 when compared with our previously forecasted FX rate estimates for the quarter and a headwind of two and a half million dollars when compared to the first quarter of 2022.
Same tower recurring cash leasing revenue growth for the first quarter, which is calculated on a constant currency basis was four 7% net over the first quarter of 2022, including the impact of four 2% of churn on.
On a gross basis same tower recurring cash leasing revenue growth was eight 9%.
Domestic same tower recurring cash leasing revenue growth over the first quarter of last year was eight 5% on a gross basis and five 1% on a net basis, including three 4% of churn.
Domestic operational leasing activity or bookings, representing new revenue placed under contract during the first quarter remained steady and it was similar to the fourth quarter we.
During the first quarter amendment activity represented 51% of our domestic bookings and new leases represented 49%.
The big four carriers of AT&T T mobile Verizon and dish represented approximately 95% of total incremental domestic leasing revenue signed up during the quarter.
Domestically churn was in line with our prior quarter projections at our full year churn expectations remain the same as we provided last quarter, including $25 million to $30 million of sprint merger related churn.
Internationally on a constant currency basis same tower cash leasing revenue growth was two 5% net including seven 8% of churn or 10, 3% on a gross basis.
Inflation based escalators also continued to make healthy contribution for organic growth. Although these inflationary rates have begun to decline from their 2022 hives.
In Brazil, our largest international market, we had another good quarter, although the impact of the previously discussed Tim agreement weighed on our first quarter same tower organic growth.
This growth rate in Brazil was four 7% on a constant currency basis, including the impact of five 9% of churn.
International churn remains elevated but in line with expectations and our previously provided outlook.
Excluding <unk> consolidation related churn, we believe 2023 will be the high watermark for international churn.
As a reminder, our 2023 outlook does not include any churn assumptions related to the oil consolidation other than associated with the term agreement, but during the year, we were to enter into any further agreements with other carriers related to the order consolidation that have an impact on the current year, we would adjust our outlook accordingly at that time.
During the first quarter, 78% 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 15, 5% of consolidated cash site leasing revenues during the quarter and 12, 4% of cash site leasing revenue.
Excluding revenues from pass through expenses.
Tower cash flow for the first quarter was $491 million our tower cash flow margins remained very strong as well with the first quarter domestic tower cash flow margin of 84, 3% and an international tower cash flow margin 69, 9% or 91, 8% excluding the.
The impact of pass through Reimbursable expenses.
The adjusted EBITDA margin was 68, 7% in the quarter exclude.
Approximately 97% of our total adjusted EBITDA was attributable to our tower leasing business in the first quarter.
During the first quarter, our services business had another strong quarter with $58 $2 million in revenue and $14 $1 million of segment operating profit.
Our carrier customers remained busy deploying new <unk> related equipment during the quarter and our services backlogs also remained healthy at quarter end.
Adjusted funds from operations or <unk> in the first quarter was $341 $7 million.
<unk> per share was $3 13 and.
An increase of five 7% over the first quarter of 2022.
<unk> growth was hindered by increased interest rates, which are anticipated to impact growth rates throughout the year.
During the first quarter, we continued to invest in our portfolio acquiring 14 communication sites for total cash consideration of $8 $6 million during.
During the quarter, we also built 52 new sites.
Subsequent to quarter end, we have purchased or under agreement to purchase <unk>.
All in our existing markets for an aggregate price of $63 $7 million.
We anticipate closing on these sites under contract by the end of the year.
In addition to new towers, we also continued to invest in the land under our sites during the quarter. We spent an aggregate of $11 6 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 70% of our towers and the average remaining life under our ground leases, including renewal options under our control is approximately 36 years.
With that I'll now turn things over to Mark who will provide an update on our balance sheet. Thanks, Brendan we ended the quarter with $12 9 billion of total debt and $12 7 billion of net debt our net debt to annualized adjusted EBITDA leverage ratio was six nine times below the low end of our target range, our first quarter net cash interest cover.
The ratio of adjusted EBITDA to net cash interest expense remains at a strong four seven times during and subsequent to quarter end, we borrowed and repaid certain amounts under our revolving credit facility and as of today, we have a $595 million outstanding balance under our $1 five.
Current weighted average interest rate of our total outstanding debt is three 1% with a weighted average maturity of approximately three eight years at the current rate on our outstanding revolver balance is six 5% the interest rate on 93% of our current outstanding debt is fixed.
During the quarter, we did not repurchase any shares of our common stock and we currently have $505 million of repurchase authorization remaining under our $1 billion stock repurchase plan.
The company shares outstanding at March 31, 2023 were $108 3 million.
In addition, during the quarter, we declared and paid a cash dividend of $93 9 million or <unk> 85 per share and today, we announced that our board of directors declared a second quarter dividend of <unk> 85 per share payable on June 21, 2023 to shareholders of record as of the close of business.
On May 26, 2023, this dividend represents an increase of approximately 20% over the dividend paid in the year ago period.
And only represents 27% of our projected full year <unk>.
I will now turn the call over to Jeff Thanks, Mark and good evening, everyone. Our first quarter represented a very good start to 2023, our team continued to execute at a very high level and we produced solid year over year growth in each of our key metrics each of our largest U S customers remain busy and they contributed relatively equally.
Through our organic leasing activity during the quarter. The focus of their activity was a balanced mix of adding equipment to sites in support of <unk> through the deployment of new spectrum bands and in fill and coverage expansion through brand new co locations. While we believe domestic activity in 2023 will fall below the peak levels of that.
Activity in 2022, we expect our carrier customers to stay relatively busy with additional network deployment over the next several years for a number of reasons.
Some of the AT&T and Verizon C band licenses will not be cleared until later this year.
The C band and $3 four or five gigahertz license Theres, one by T. Mobile has been delayed due to the lapse of the FCC spectrum authority.
Band radios that our customers are planning to use in their deployments supporting three four or five gigahertz on C. Band frequencies have just been approved by the FCC and dual band radio supporting C band and C. Brs are still pending approval.
Dish will be moving forward with additional co locations to meet their 2025 coverage requirements. We believe all of these developments will drive multiyear continued development activity.
Also encouraging about the prospects for future network development activity as the letter sent last week from <unk> to the Whitehouse imploring the president to free up 500 megahertz of additional mid band spectrum currently held by the department of defense and other governmental agencies. The request is for the spectrum to be made available.
On a full power license basis, which obviously would have positive implications for additional macro site activity. The request from CGI a demonstrates the industry believes that more network resources will be necessary to handle increasing demand from volume quality and new applications and to stay competitive with the rest of the.
World.
Just as the last 20 years has demonstrated the need for continuous network investment. We believe the future will be the same. We believe this will provide continued a continued positive environment for SBA.
Internationally, we also had a solid quarter with continued steady organic leasing activity during the first quarter, 42% of new International business signed up in the quarter came from amendments to existing leases and 58% came through new leases with particularly strong contributions from Tanzania in South Africa.
Brazil also had a strong quarter ahead of our internal expectations with contributions from each of the big three carriers in that market as well as good sized contributions from CPI based escalators.
The integration of the GTS assets has gone very smoothly and these assets are performing well, thus far and we have seen a stabilization in the currency exchange rate that has contributed to our increased full year outlook. We remain excited about our opportunities in Brazil over the coming years as we build on our strong customer relationships.
So would expect meaningful <unk> related investments and continued expansion of wireless services throughout the country.
Moving on now to our balance sheet, we remain in a very strong position as we have stated before we continue to be a preferred issuer in the debt markets. We currently participate in with extremely good access to capital.
With respect to the current interest rate environment. Fortunately, we do not have any debt maturities until October 2024.
Thus, we do not need to issue incremental debt today, unless we see a compelling use of capital that we expect to be additive to long term shareholder value.
We finished the quarter with 93% of our debt fixed and thus we are only modestly exposed to significant interest rate fluctuations our.
Our exposure to floating rate debt is also expected to decline further as we anticipate further paying down our outstanding revolver balance throughout the year absent other more compelling capital allocation.
While our first choice for capital allocation continues to be portfolio growth.
Today, the market is pretty slow globally, and lapping attractive opportunities that of course can change quickly and we will be ready when it does we ended the quarter with a net debt to annualized adjusted EBITDA leverage ratio of six nine times below our target range and giving us flexibility, if we see value enhancing investment opportunities.
As a result of our strong financial position and our optimism about our future today, we announced our second quarter dividend consistent with our first quarter dividend, which represents a nearly 20% year over year increase.
This dividend represents only approximately 27% of our projected AFL and our 2023 outlook, leaving a substantial capital for additional investment and portfolio growth stock repurchases and revolver payments our financial condition remains very strong last quarter I mentioned in the fourth.
Ratings upgrade we received from standard <unk> Poor's to just below investment grade since our last earnings release, we received another ratings increase this time for Moody's. These upgrades are indicative of the comfort the rating agencies have in the strength and stability of our underlying business.
The future of our business remains bright our customers continue to have significant network needs and we are committed to supporting them efficiently and effectively meeting those needs I want to thank our customers and want to thank our team members for the significant effort put in by all to.
So the contribution to our shared success, we look forward to sharing with you our progress as we move throughout the balance of 2023 and with that Eric We are now ready for questions.
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Zero and first we will hear from Nick del Deo with Moffett Nathan said. Please go ahead.
Hi, Thanks for taking my question guys.
It looks like you did about.
20 or $21 million in leasing in the first quarter guidance implies maybe 51 or so for the rest of the year should we think of the.
Some of the deceleration from here being fairly linear or is it going to have a bit of a different shape to it.
That should be fairly linear Nick the $21 million that you mentioned is about right for the first quarter and.
I would expect it to be kind of a gradual step down throughout the year.
Okay, Okay, good and then.
With respect to new builds overseas it looks like the pace stepped down quite a bit versus what you were doing in 2022.
I was just wondering if that's kind of normal noise or if theres something more substantive that we should be cognizant of.
Yeah, I think it's just a little bit of a slow getting out of the gate for the year.
I don't think it's any more than that and we're not.
Making any material adjustments to what we think we're going to do this year.
Okay, which countries are you most focused on from a new build perspective.
Oh really attracts our largest markets. So I would say outside the U S. It would be Brazil, South Africa.
Xenia.
But where we will build towers I believe in every country in which we are.
We're currently operating this year.
One thing Nick is that in Brazil, a little bit of that slowdown is with the merger that took place among the carriers.
There's some focus on that so that's put a little bit of a slowdown on the new builds temporarily but we would expect over time that will obviously come back and pick up.
Okay, great well thank you both.
And next we'll hear from Jonathan Atkin with RBC.
Thank you.
So given the comment that you made Jeff about I think it was Jeff you made the comment about lack of.
Relative lack of compelling portfolio of growth opportunities wondered why stock buybacks didn't kind of rank higher on the pecking order.
In terms of capital allocation and then secondly.
As you think about U S leasing specifically.
Wondering if you could maybe give us some of the puts and takes around.
What kind of rate of change to the expense. Thank you.
Yeah in terms of the stock repurchases John they are definitely high on our priority list as we've demonstrated over the years and they will continue to be weak.
We just feel like at this moment in time.
And and get to the point, where we see that.
Interest rates have stopped going up because of the rate that they're wrong.
Increasing has a direct impact on the cost of our revolving credit facility. So we think during this particular period of time and given the rate that we're paying on the revolver that is absolutely the best use of the.
Of our temporary capital allocations, but rest assured we will be buying <unk>.
Material amounts of stock back over over the coming years.
In terms of the rate of change is of.
The carriers.
<unk> cash that.
Who was who is spending the most money last year and who was the most active.
T mobile and dish.
Well the two big ones last year for the industry Verizon AT&T, we're busy.
And you know that.
That really hasnt changed.
Whole lot this year other than the relevant.
The aggregate amounts when you add it all up what we expect for this year.
Terms of the volume of activity is going to be a little bit off from last year.
Thank you.
And next we'll hear from Walter Piecyk with light shed.
Thanks.
I guess, a follow up and sorry for not knowing this but.
What is the size of that loan.
When how much more do you need to pay down obviously, given the rate environment understood.
Why you would Alex our revolver as a revolver is 595 wall and.
And.
Absent some other use of capital allocation that will be paid off by the end of this year.
Got it so.
I mean I don't know.
The rates have been so volatile obviously, but.
Can we assume there's just no reason to keep any of it meaning that like we should just assume zero share repurchase until thats done and then when it's done.
Unleash on the share repurchase or is there other.
Elements in your cap structure that I'm not remembering.
That would impact the timing of when the share repurchase would kick back Jim.
I think your intuition is directionally correct.
Right now we're using dollars to pay back six 5% debt pay down we wont be earning six 5% on our cash so.
We will be looking for other uses.
And then.
Similar I guess question on the dividend method I'm ever complaining about steady dividend growth, because obviously that helps us broaden the investor base, but.
I guess I'll have to ask the question on why increase the dividend to that amount if at all if it makes more sense to maybe get rid of that.
That element of your of your debt.
Yeah, we're very confident that the debt.
But unless we spend additional money on something that will be.
Obviously better.
We'll be gone this year, so we didn't want to get off of a long term.
But dividend trend that we're.
Trying to establish here just for the sake of less.
Less than a year.
Understood and just one last question.
I think the.
Cable companies have been this is my opinion.
Opinion.
I'm not saying this effect, but maybe you have been.
Been delayed in building infrastructure, maybe cause some vendor issue associated with.
Some of the spectrum that they have and I'm just curious it.
And it seems like that may be coming.
That might be loosening up going forward I'm just curious if.
If you can kind of characterize any relationships with.
However, I wanted to describe them are basically I'm asking about the cable companies in terms of as their subscribers and usage ramp.
Do you see an appetite for starting to add.
More assets on your on your towers.
Yeah, you know I think I think they will for sure, but they rely very heavily on outsourcing to verizon's network at.
At least the charter and Comcast.
So.
With that in mind is kind of there are built in default system, what they have to do around their other spectrum that they can develop is is more limited we are getting some business from them, but of course it it pales in comparison to the fore.
Traditional wireless service providers.
Got it thank you.
And next we'll hear from David Arden with Bank of America.
Hey, guys. Thanks, so much.
I guess two questions if I could.
I guess, maybe Brendan this is for you.
Sure.
We're all kind of looking at dish exposure and worse.
And your commentary and in others. It feels like we're going to get to the to the mid June buildout requirements.
Clear.
Much beyond that we're going to go.
At dish, so I guess two questions would be.
Number one if we take the.
The 15000 cell sites that they said that they were going to need to build this first stage of getting their licenses all locked down and we multiply that by your percentage of domestic towers, and we assume that you've gotten roughly that percentage. It would seem like that would be roughly a 40 million.
Dollar or so number.
Uh huh.
Is your kind of run rate annualized exposure to dish. If you could kind of validate that or tell me, where I'm wrong. It would be helpful and then.
With respect to kind of the second half of the year.
Given kind of where dishes finances stand what have you assumed in the guidance exit rate.
Heading into 2024, thank you.
Yeah, David first on your <unk>.
Estimate of approximately how much they represent on a run rate that's in the right ballpark today.
We still continue to have activity, though with them. They are still signing up new business not at the same pace they were a year ago.
And so.
We'll exit the year at something obviously greater than that would be our expectation given the fact that we're constantly signed up new business.
And then really it's a question of as they turn their sights towards their 2025 obligations.
How much more will be required.
And we are pretty confident based on our conversations with them that there will be a good bit more required. So we'll have to see but I think for the balance of this year a lot of it is focused on deployment.
A lot of what they have already signed up.
Yeah, we'll see how much more variable terms for 2025 objectives by the time, we get to the end of the year.
Yeah, I would just add that I think that's that's unknown at this point as to how much of the 2025 obligations will actually.
Be booked or signed up in 2023.
Yes.
Right I think that yeah, that's a good point.
And if I could follow up real quick maybe Jeff just on your comments regarding Brazil.
Or maybe this was also Brendan.
You've mentioned that if there is some sort of new agreement that evolves as a function of the Oi situation that you would.
Change your outlook, obviously should the market be expecting that that is a likelihood or should the market be expecting that that's unlikely to happen in 2023, alright. Thank you.
Yeah, it's mark.
<unk> should expect that it is.
More likely than not but the market should take comfort in that it's it will fall well within our estimated churn for Brazil that we've we've been putting forth now for <unk>.
Quite some time.
Perfect Alright, great. Thanks, Jeff.
Yeah.
And our next question comes from Michael Rollins with Citi. Please go ahead.
Yes.
Thanks, and good afternoon.
Two questions if I could first just curious for your current thoughts on sustaining Sba's Ala Carte leasing framework for the domestic business and if you have any new thoughts on the possibility of some date pivoting to a structure.
Around comprehensive leases.
Comprehensive malaise and then just secondly, if you can unpack.
In the first quarter churn the amount that's specifically came from the sprint merger decommissioning. Thanks.
Yeah on the Ala carte versus the what.
I'd say, our most commonly called holistic MLA.
We were.
We're very open to whatever makes the most sense for our customers and for us.
We have not we've done mla's, we've not done the <unk>.
<unk> provide a customer with.
Kind of all you can eat equipment rights up to a specified amount in exchange for some kind of.
Pricing.
Although we almost did back in.
2013, 2014, we came very close to doing that so I think you should take all that Michael as.
Kind of our view that.
It continues our kind of opportunistic way of running the business and we will do what's right for us and our customers at that time and that you should not assume that you won't ever see that kind of agreement from us in the future.
And Mike on the sprint churn question in the first quarter six $5 million of return incremental turn to Q1 was related to scrap.
Thanks.
Yes.
And next we'll hear from Brandon <unk> with Keybanc capital markets.
Great.
<unk> part question for you Jeff.
Can you talk about bookings activity in terms of adding signed lease applications and how that's trending this quarter from a year over year perspective, then you had mentioned a number of drivers in terms of.
Why are we should still be bullish on <unk> investments, including Verizon AT&T C band not being cleared T mobile licenses.
Band radios and dish, which of these is the largest potential driver for leasing for you over the next couple of years. Thanks.
Yeah, I think the.
Well the biggest drivers will be the ones that.
I believe our most likely it's going to be the dual band equipment.
And obviously, we need to get the T mobile licenses that they want and paid for.
Freed up out of the absolute <unk>. So those those will be drivers that really get in and we know that the C band spectrum will be.
Clear by the end of this year, which just particularly.
Particularly at At&t's case will coincide with.
When they'll see good availability of the dual band.
$3 four or five.
And C band radios. So all of those things I think are going to be positively impactful.
Late 'twenty three certainly enter into 2024.
And because I answered your second question first log.
The backlog the backlog is probably down a little bit from where it was a year ago, but it's been it's been holding steady for the last quarter or two.
Great. Thanks, and one follow up when do you expect to see lease applications for some of these dual band radios.
I would say second half of the year and then pick it up as you move through the year, we at the end of the year.
I mean, they just they.
I believe it might've, even then just last week that the FCC approved by waiver of the.
<unk> got four or five.
And the C band dual radio equipment from Ericsson.
Got it thank you.
Okay.
And next we'll hear from Rick Prentiss with Raymond James.
Thanks, Good afternoon everybody.
Right.
I'll follow up on Walter's question about the dividend.
I'm, saying that the long term trend in the dividend.
Do you think dividend payout ratio caps off and does that kind of imply.
20% growth is here for a good foreseeable future subject to board approval.
Yeah, I would I would think it's not going to be a steady 20%.
I would think it will as it has since we started the dividend it will decline a little bit.
Each year or so.
Over time, so we can ship, but while still increasing at.
What may be the REIT industries fastest growing dividend.
Still growing at a very fast clip, while we maintain.
A relatively low relative to our peers <unk> payout ratio.
Right.
It's been a very good allocators of capital is there a cap I guess, obviously, you've got some international properties. They are probably not covered by the.
The weak exclusion in the U S and just kind of where it was is it cap out like at 70% 80%.
It should be much less than that I mean, maybe weigh out long term I would say, it's closer to $45, 50% because ultimately when we're through our Nols. It will obviously match our net income our taxable net income.
No.
At this stage the relationship of the taxable net income to <unk> somewhere in that 40% to 50% range.
Okay.
Mentioned to David's question on the Orchard can you just remind us of what the total oil churn is that still left to be addressed possibly and how that's factored into what your total Brazil true number was.
Yeah. So.
Specifically for their oil consolidation risk I think youre asking the total exposure, we ballpark in the 25% to $35 million range.
We have through the <unk> deal that.
About $10 million of churn that we've locked in that's in our 2023.
Guidance, there's nothing in there for anybody else at this point none of those leases are up so if it were to be additive to this year through an agreement it would be pulling some of that forward, but but the total range. We still think is a fair estimate over time of 25 to 35 of which 10 is already in.
Finally for me on the sprint churn off of Mike's question.
He was in the first quarter 'twenty.
25 to 30 million spent in 'twenty. Please remind us of what's left out there in terms of the timeframe is what you expect maybe in 'twenty four.
So we have those carrier consolidation, that's going to make sure that the market has met those so in our models.
Yeah, it's pretty much the same as it's been in the past are big years, or 25, and 26, where we would estimate somewhere about $45 million to $50 million in each of those years next year as we sit here today, we think will be a little bit lower in the $15 million to $20 million range.
And then as I said, 45% to 58% following two years and then there's some marginal amount after that probably $10 million to $20 million that kind of dribbles out into the future. So that's that.
The full exposure of what's left after this year.
Great appreciate it thank you and stay well.
Okay.
Next we'll hear from <unk> Levy with UBS.
Great. Thank you.
As you move forward with holistic deals.
Can you talk about if that would change your view on.
Leverage targets.
We're getting pretty close with investment grade and 25 seems to be a year, where you had a bunch of issues coming in can we expect you to put that as a top priority.
In the near term and then another question on the activity.
It suggests that lighting up more C band spectrum has not gone to.
Required new antenna.
What's your deals more C band spectrum coming in what do you think that that would create more activity. Thank you.
On the spectrum that the CGI wrote to the White house about.
Okay.
And new spectrum.
Yeah, I mean, there are some antenna.
Efficiencies that may allow that to happen depending on the spectrum, but there are no radio efficiencies there.
There has to be new radios that are frequency specific they could be dual band or multi band, but they're not and they are not in any of the equipment today or the spectrum that has not yet been auctioned.
So that's a real opportunity should that spectrum become available.
In terms of our leverage.
One of the reasons that we there are several reasons, but one of the reasons that we're using are.
Free cash flow to pay down the revolver is exactly to your point that to you which is to see how the fed.
But you know how they do in their war against inflation.
If they succeed we believe rates will come down and we will.
Got it.
Go back exactly to the way we have done business for 20 years, if it looks like it is more.
Yes.
Permanent that we're going to be in a in a higher rate environment and inflation doesn't come under control than we.
We will take a much more serious.
Look at turning a investment grade, which we're actually positioned to do.
Really well.
And over a manageable period of time, if that's in fact, what we choose to do.
The.
The macro world will play itself out in the next year, and we will be able to tell you with much more specificity exactly.
Which of those paths, we're going to take.
Got it thank you.
Yeah.
And next we'll hear from Simon Flannery with Morgan Stanley .
Great. Thank you very much Jeff you said the M&A market was pretty slow I Wonder if you could just expand on that is it that there's just not much available or not much available at attractive prices and then I was wondering if you could just also just expand on the infill comment and we've heard a lot of bullish.
From the telcos SWA and I was just wondering if you are having more conversations about if they wanted to add capacity for that what that might mean for their build programs over the medium term.
Yes in terms of M&A, it's a combination of both for both of those things Simon There is there's just not a lot that's being offered for sale or shopped around and that's that's a global comment.
Relative to two <unk>.
<unk> times I think it's a combination of the interest rate environment and I think it's a combination and added to that would be the.
It's a closing gap, but theres still a gap between buyer and seller expectations. So yeah, there's really.
And we keep pretty close tabs on all opportunities out there and there's really there's really not a lot and even fewer that we would find.
Active as evidenced by the fact that we didn't announce anything this quarter.
I know you're mostly looking in your existing markets or would you be open to new markets.
We'd be open you know for the for the right opportunity similar to our past practices.
We would.
Obviously be careful and thoughtful but we're not we're not foreclosing new markets.
Great.
And then Phil you could share on that.
Decided to back yes.
Our customers have all been very and they haven't said anything different to us have all been very.
Careful to describe fixed wireless as a product.
<unk>.
That really is just for excess capacity on the <unk> network.
Network.
And I don't know if that will change or not I mean, they're all they're all you know well.
Well the ones that are offering it.
More intentionally are doing very well so I mean, you could see at some point that there is a specific capital allocation purely justified also the fixed wireless.
But I cannot tell you today that any any activity that we're seeing is predominantly.
They're because of fixed wireless.
Alright, I'm, perhaps your comments around the <unk> study that might be a place that some of that spectrum might be good for fixed wireless as well.
Oh, yeah, it absolutely would be.
But but you got to have to deploy it you're going to have to dip.
At a minimum radios for that.
In most cases, probably new antennas too.
Great. Thank you.
Mhm.
Our next question comes from Phil Cusick with J P. Morgan.
Thanks, guys.
Two different subjects, if I can first there's been a lot of discussion of dish credit markets are concerned with what happens there can you remind us where at dish and your contracts lie.
And if dish were to.
Stop building.
What your sort of.
Remaining security looks like.
And then second completely different South Africa, there has been a lot of power issues and growing power issues any changes in how you addressed this on your towers interest and involvement in and supporting the country and power in your carriers. Thank you.
I'll take the South Africa question.
Brendan.
You could take the dish question.
[laughter].
We know what's at the spectrum holding level, Phil I mean, that's that's probably about as best as we can that we'd get back to you with the.
Zach.
Legal entity, if you'd like but.
It's with the entity that has the spectrum.
So on the South Africa question.
However, as an issue and there is a.
A movement afoot bye.
By some carriers, particularly well.
I'm not going to name them, specifically, but to outsource.
Power on the towers and it is something that we were looking at the.
The bigger issue in South Africa, and one that we're working on and hopefully we'll have something meaningful for both us and our customers in the future is security and really don't want to spend a lot of money on.
Our supply of solving those issues until you have the.
The site.
Facility secured and that involves a wide range of potential solutions fill which we've.
Got a lot of a lot of folks looking at and studying.
We will be able to share more with you on that over the coming year.
Thank you.
And next we'll hear from Brett Feldman with Goldman Sachs.
Hi, Thanks, two questions. If you don't mind for many years now in the U S. A lot of the new towers that are being constructed had been done by privately funded operator is cheap access to capital or signing.
Leases with their carrier tenants with terms that you just were never going to match and as a result, we just havent seen develop a lot of towers in the U S. For a number of years now I'm curious what the the market for a new site development in the U S looks like it would seem that with the carriers using higher frequencies than they've ever used before there'd be some need for densification of the actual infrastructure.
Sure.
But I really don't know is I'm curious whether that could be an opportunity for you and then on a separate topic American tower, so their Mexican fiber business.
That is really just ended up being a more difficult business and they thought <unk> been pretty selective in terms of where you've invested in fiber in your international markets. I'm curious how those businesses are performing and whether maybe you are considering any portfolio, we're gonna be there as well. Thank you.
Well other than some.
Assets, which are very de minimis to the operation of our data center in Brazil, Our towers internationally, we don't have any fiber.
Businesses internationally, Brett so nothing nothing really to divest there in terms of new builds.
Over time, there should continue to be a.
A steady although I don't know if it will be growing number of newbuild opportunities.
The new build market in the U S.
Has slowed somewhat as carriers have.
Focus more on.
Amending their.
They are existing.
They may have may have doubled over that period of time, So I think thats.
That's providing a bit of a damper on on activities as well.
Are you still seeing those same private operators out there bidding for what's available or is that cool down to some degree.
You know the same names are still out there, but the volumes are.
Well down.
Thank you.
Mhm.
Our next question comes from Brendan Lynch with Barclays.
Great. Thanks for taking my question, Jeff You mentioned the dual band radios I was wondering if you could give us a little bit more color on that and what you're expecting from the carriers.
Have they been holding back in anticipation of this or.
What do you really expect them to change starting in the second half once you get those applications.
Yeah, I don't want to.
Speak for our customers, but I will tell you that the.
Uh huh.
The literature, that's available on this topic from from organizations like like Reading for example, really go into quite a bit of detail as to what our customers' plans are with respect to those dual band radios, including.
One of our customers.
As said too.
<unk> not deploy any of certain amounts of spectrum that they already have until those dual band radios are available so.
I mean, that's that's what what I know.
And I don't want to really kind of talk more about specific customer discussions but.
I think if you look at that literature, you will see a picture that is very clear that there is there has been.
Hold back in terms of what.
Our customers would otherwise do pending the availability of that.
That type of equipment.
And in particular, you know right now the deployment is.
A separate radio and antenna for C band at $3, four or five it'll be a more efficient form function. When they are combined and to the extent that you know.
They work.
Doing that in one truck roll with the two different radios. They would have the efficiencies of a single truck roll.
So that's a long winded way of saying, Yeah, we think it's going to be a positive development when when that equipment is available.
Yes.
Great. Thanks, that's helpful and maybe one balance sheet question for Brendan.
<unk> receivable was flat quarter to quarter around $183 million, but it's up quite a bit relative to the trailing 12 month average prior to that.
Is there anything specific that is causing that to occur.
No not really.
Because we obviously focus on aged accounts receivable, which are not what we're doing fine on collections. So a lot of that is really just timing around some of the services contracts generally services related in terms of fluctuation on leasing.
Great. Thanks for the color.
Sure.
Next question comes from David Go are no with Green Street.
Hey, Jeff I wanted to talk about that CCI. A report you mentioned, what do you think would happen to U S macro tower in new leasing activity.
D C was unsuccessful and they couldn't get access to new mid band spectrum do you think we'd see growth trail off from the 5% rate a pretty significantly once the C band spectrum is installed.
Well I think you'd see a tremendous amount of increased densification because that will be the only way to.
Satisfy demand.
Spectrum constrained environment.
The question is you know it's the age old question.
Who's going to pay for that and our customers by going to find a good enough return on investment, but I mean, if theres no more spectrum, David it has to be cell splitting and.
Densification.
Okay, and I guess, maybe the debt and the Densification side there.
Ample opportunity within your portfolio for that to happen right. It wouldn't be fair to say during the <unk> build out the majority of that already occur.
Sure.
I I would say that in two to densify within the existing spectrum.
And to have no additional spectrum introduced into the system. If you were going to truly build out to the Max suite to achieve the Max five G capabilities I would tell you we have a whole lot a lot of opportunity and a lot of room on our towers that that would need to be filled for our customers.
To achieve that.
Okay.
Maybe stepping outside the U S and it's been I guess, it's been over a year. Since you guys set up operations in the Philippines could you just maybe update us on how many sites do you own in the country now and then I know there was a lot of it and I know tower asset sale are there any.
Rumors of that on the horizon, maybe the M&A was looking to sell some more assets.
Yes, we've got about 130, or so sites right now, but a bunch more in construction. So we would expect to end the year in the high one hundreds somewhere.
Yeah in the M. N O have followed up I mean, there are two real.
Real <unk> there is three two that really own assets over there in those.
Customers have continued to Hy.
Hi, vol chunks of their portfolios.
Not sure that they've done it more.
Too many times, but I know there have been follow ups I think from each of the two big ones there.
With additional asset sales.
But nothing else on the horizon.
Yeah.
Not that not that we're aware of.
Okay. Thank you.
And next we'll hear from Eric Loop child with Wells Fargo.
Okay.
Great. Thanks for taking the question.
Just curious for the two large U S carriers that are already deploying C band today any kind of rough estimate on how many of your sites has been upgraded just to give us a sense for how long the the growth will be in the next few years.
Below 50%.
Okay.
Paul.
And I guess.
When you think about the dual band radios is there any real difference in your ability to monetize.
Whether they are a separate C band and freed up <unk> five radio or if it's a dual band is it relatively.
Quick one in terms of your amendment revenue.
Yeah, I would say, it's roughly equivalent although the form factor.
Going to be less from a from a weight perspective in the dual band.
Unified.
Piece of equipment.
Got it makes sense and just last for me I know you've made a couple of smaller data center investments kind of study in the U S.
Compute market I guess have you had any learnings from those.
Or anything to report that.
That may be you could.
Giving you some confidence to get bigger in that space over time through new development or M&A.
Well, we're we've continued to grow is in the is in the edge and the fiber regeneration facilities, where we're now up to somewhere between 40 and 50 of those so what we found Eric is that there is there is high demand for quality location.
Where you have power and permitting.
And fiber what really has not happened yet.
To our knowledge anywhere.
The globe is the direct tie in at the edge at the cell site to the wireless networks, which.
When that comes.
That will.
Unleash tremendous amount of demand at the cell site, but we're learning a lot along the way through you know primarily real estate.
Demand as opposed to demand for this computing to be tied in to the wireless networks.
Yeah.
Okay, great. Thank you.
And next we'll hear from Greg Williams with TD Cowen.
Great. Thanks for taking my questions first one on services.
That development came in a bit stronger should we expect that also to sort of come down a little bit linearly and second question is just on the dual band radio opportunity on network services.
T mobile and AT&T start deploying that could we see an uptick in network services above and beyond your guidance. Thanks.
Yes, Greg we would think that services will be there.
Climbing slightly into the second half of the year, but I think at a lesser pace. I mean, you can see what our outlook looks like and where the first quarter ended up at.
It's only slightly ahead of that full year pace. So.
Probably similar in the second quarter may be slightly less in the second half of the year, but.
Relatively flat.
Yeah, and and when when the dual band.
Deployments start Greg.
Certainly that's going to benefit our services business.
Got it thank you.
Yeah.
And we have no further questions at this time.
Great well, we want to thank everyone for joining us. This evening. We appreciate your participation and we'll we'll talk to you in a quarter. Thank you.
That does conclude our conference for today. Thank you for your participation you may now disconnect.
Yeah.
Yes.
Yeah.