The paragraph is a transcript from the SBA Communications Third Quarter 2024 Earnings Conference Call. It begins with the operator welcoming participants and explaining the proceedings. Mark DeRussy, the Vice President of Finance, introduces the call, mentioning the presence of Brendan Cavanagh, the CEO, and Marc Montagner, the CFO. DeRussy notes that some discussions will be forward-looking and emphasizes the risks detailed in their SEC filings. He also mentions the use of non-GAAP financial measures, with additional data available online. Brendan Cavanagh then comments on the quarter's performance, stating that it met expectations in leasing results and exceeded expectations in services results, with strong foreign exchange rates and increased domestic carrier activity, leading to an improved financial outlook for 2024.

The paragraph discusses an increase in new business activities and inquiries in the US, with a notable shift towards new lease co-locations compared to amendments of existing leases, a trend expected to continue into 2025. It highlights the growing network demands due to increased mobile consumption and limited new spectrum availability, which will necessitate additional equipment deployment and site densification, benefiting their macro tower portfolio. Other growth drivers include fixed wireless access, AI integration into handsets, regulatory build-out commitments, and ongoing 5G expansion. The company emphasizes strong customer relationships and consistent service as key to long-term success. Internationally, the same approach has led to valued partnerships with carrier customers, with international leasing performing as expected, and a solid year-end outlook.

The international market presents challenges due to customer consolidations and network changes, but there is optimism as stronger customers emerge, poised to invest in wireless offerings and 5G upgrades. The company expects its international business to contribute positively to growth and is reviewing operations to enhance market leadership. An agreement has been signed with Millicom International Cellular to acquire over 7,000 sites in Central America for approximately $975 million. This acquisition will make SBA the largest tower company in the region and reinforce its partnership with Millicom, aiding business growth across five countries.

The paragraph describes a transaction where SBA Communications and Millicom have agreed on a leaseback arrangement for Millicom to be tenants on each site with an initial 15-year term. Millicom will extend approximately 1,500 existing leases for another 15 years, and SBA will exclusively build up to 2,500 new sites in Central America for Millicom. The transaction, expected to close by mid- to late 2025, aims to enhance SBA's market scale and establish long-term customer relationships. However, SBA is considering divesting in markets where they are subscale, like the Philippines, due to changing market conditions and competition in large build-to-suit opportunities.

The article discusses the strategic moves of a company with less than 1% market share in a competitive market of over 30 independent tower companies. Due to this limited market presence and lack of near-term growth opportunities, the company plans to exit through a sale of its existing business. They aim to stabilize cash flows and focus on maximizing organic growth across markets, with some markets potentially growing while others may be exited. The company's services business performed well in the third quarter, with revenue and gross profit increasing significantly due to heightened construction activity from carrier customers. As a result, they have raised their full-year revenue and adjusted EBITDA outlook. The company managed its balance sheet effectively, benefiting from favorable capital market transactions, which highlight its strong financial position with low leverage and substantial liquidity, including a fully undrawn $2 billion revolver. They maintain a targeted approach to capital allocation.

The paragraph discusses the company's recent refinancing, which offers flexibility for strategic investments such as the Millicom transaction. During the third quarter, the company acquired high cash flow sites in the US and plans to continue growing its asset base and repurchasing stock at favorable valuations. The business is performing well, with strong customer network enhancements, setting up for a successful year-end. The operations teams are commended for their quick response and resilience during recent hurricanes in the Southeastern US, despite over 1,000 sites being affected. Brendan concludes by handing over to Mark Montagner for more on the third quarter's results, which showed a 5.3% gross and 2% net same tower revenue growth compared to the previous year, with 3.3% churn, 2% due to Sprint consolidation.

The paragraph discusses the financial performance and outlook of a company for the third quarter and the upcoming year. The company reported a 3.1% net growth in international or same-tower cash leasing revenue, with a churn of 4.3% on a constant currency basis. In Brazil, the growth was 6.5%. Elevated churn was observed due to carrier consolidation. Following a recent announcement with Millicom, most revenue and adjusted EBITDA is expected to be in US dollars. The company raised its full-year outlook across several metrics, including site leasing revenue and adjusted EBITDA. An increase in site development revenue outlook was also noted due to strong performance. The outlook does not consider further acquisitions or share repurchases beyond current commitments. The company has made adjustments to net cash interest expenses and assumes no impact of future interest rate swaps on the 2024 outlook. The company has been actively managing its balance sheet in recent months.

During the third quarter, the company issued two tranches of tower revenue securities totaling $2.07 billion. The first tranche of $620 million was issued at 4.654% with an anticipated repayment date in October 2027 and a final maturity date in October 2054. The second tranche of $1.45 billion was issued at 4.831%, with an anticipated repayment date in October 2029 and the same final maturity date. The net proceeds were used to repay a $620 million maturity and will be used to pay back a $1.165 billion ABS maturing in January 2025, with the cash held in escrow until then. The next maturity is a $750 million ABS in January 2026. Additionally, the company repriced a $2.3 billion term loan by reducing the spread above one-month term SOFR, saving approximately $6 million in annual interest expenses. They also entered into a new forward-starting interest rate swap to hedge future rate changes, fixing the rate at 3% for $1 billion, effective March 2025.

The paragraph outlines a company's financial strategies and updates regarding its debt and dividends. Starting in April 2025, a $2 billion fixed portion of a term loan will incur an all-in interest cost of 5.165%, while the remaining unhedged portion will continue to accrue interest at a variable rate. Approximately 98% of the company's non-revolver debt will be fixed, offering stability against interest rate changes. Current leverage is at a low of 6.4 times net debt to adjusted EBITDA, and the cash interest coverage ratio is 5.3 times. The weighted average maturity of debt is four years with an average interest rate of 3.2%. The company has fully paid down its $2 billion revolver using cash on hand. Additionally, a fourth quarter dividend of $0.98 per share has been declared, signifying a 15% increase from the 2023 fourth quarter dividend.

In the paragraph, Brendan Cavanagh discusses the increase in carrier activity in the U.S., noting a shift from amendments to more new co-locations, which indicates potential future growth despite a delay in revenue realization. The third quarter showed higher activity than earlier in the year, and if this continues into the fourth quarter, it could positively impact next year's performance. However, he refrains from making specific predictions for leasing in 2025 compared to 2024 due to various uncertainties.

The paragraph discusses the financial implications of the Millicom deal. It mentions that while it's too early to provide exact AFFO (Adjusted Funds From Operations) accretion figures, the transaction is expected to be accretive to AFFO per share once closed, with minimal overhead increases. The speaker acknowledges potential income tax implications and addresses a question about the lease-up potential on sites, noting current low tenancy ratios that provide growth opportunities. Ric Prentiss then asks for rough estimates of the EBITDA impact and multiple, to which Brendan Cavanagh responds that the incremental SG&A would be between $3 million and $5 million, potentially increasing the EBITDA multiple by about half a turn.

In the paragraph, Brendan Cavanagh explains the rationale behind the company paying an 11-times EV/EBITDA multiple for assets in Central America. He highlights the importance of being a market leader in size and scale to maintain relevance with leading carriers and to minimize exposure to weaker carriers, which can lead to churn and instability. The acquisition was seen as an opportunity to establish dominance as the largest tower company in the region and to partner with the region's leading carrier, ensuring stability and potential growth in the market.

The paragraph discusses a strategic move by a company to acquire infrastructure assets from Tigo, aiming to benefit both parties. The company sees this as an opportunity to use its expertise in delivering high-quality infrastructure to Tigo and other carriers in the region, particularly as market consolidation has settled. Although the number of tenants per site is relatively low at 1.2, the company sees growth potential with Tigo as a leading provider. CapEx requirements will be considered as new leases are signed. Jim Schneider from Goldman Sachs questions them about expanding their Central American presence through a deal with Millicom.

Brendan Cavanagh discusses the company's focus on strengthening its position in existing markets rather than expanding into new geographic areas, such as Europe. He emphasizes that the primary goal is to improve or exit current markets based on viability. Jim Schneider then inquires about the nature of new leasing activities in domestic locations, particularly in rural versus suburban areas, and any trends related to densification. Cavanagh responds by indicating an increase in new leases, especially in rural areas due to regulatory requirements, and notes that there is also densification occurring in suburban markets. He predicts these trends will continue due to the limited availability of new spectrum.

In the article paragraph, Brandon Nispel asks Brendan Cavanagh about the growth of lease applications, specifically the backlog of signed but not yet commenced leases. He also inquires about the expected bottom for leasing metrics in the fourth quarter, which seems to imply numbers just shy of $9 million. Brendan Cavanagh responds that the application backlog reflects a similar shift in mix previously discussed and confirms that the fourth-quarter figure is close to their estimates. He suggests that the leasing metrics might be near their bottom, although timing can be uncertain due to mix shifts in lease-ups and ongoing leasing activity as the year progresses.

The paragraph discusses a build-to-suit agreement with Millicom, where the company will be the exclusive provider of up to 2,500 build-to-suit sites over the next seven years. The agreement is expected to yield high returns, surpassing double digits, even without additional leasing. There is potential for increased tenancy since these sites will often be in areas lacking current coverage. While the exact timing of site completions over the seven years isn't specified, the expansion is anticipated to enhance the partnership with Millicom. Additionally, the paragraph touches on financial considerations, such as maintaining leverage within a certain range while balancing mergers and acquisitions, buybacks, and financial flexibility.

The paragraph discusses a company's financial strategy and leverage position. It mentions that the company's leverage is at a historically low level of 6.4 times and that a recent deal, the Millicom transaction, will have a minor impact on leverage, increasing it by an estimated 0.2 turns. The company plans to use excess capital for investments that add value, such as asset acquisitions or share repurchases, rather than reducing leverage further. Additionally, it mentions that the company manages its Latin American portfolio's back-office functions, like accounting and HR, centrally from Florida, a strategy that remains unchanged despite leadership changes and the Millicom transaction.

The article discusses the company's strategy of maintaining a centralized system for its international operations to enhance cost-effectiveness, insight, and consistency across markets. Despite acquiring Millicom, the company plans to keep its organizational structure largely unchanged with minimal additions to its workforce. In the U.S., the demand for building relocation towers has decreased significantly as stakeholders recognize the downsides of constructing towers near existing ones. The Verizon portfolio sale is noted as a significant transaction, with few similarly large opportunities available in the U.S. market.

The paragraph discusses the uptick in site development revenue, attributing it to better-than-expected performance, particularly due to increased new leases and full-term fee work, which involves heavy construction. This has led to a guidance increase for the year. Looking forward, similar factors are expected to continue driving revenue. Additionally, there was a mention of a smaller, cash flow-accretive domestic M&A deal, but the potential for more such deals in the future is considered limited.

The paragraph discusses the limited volume of opportunities available in the US market, leading to high valuations due to more buyers than sellers. Despite these challenges, the speaker remains optimistic about occasionally finding unique opportunities for value. When asked about the increase in activity during the third quarter, Brendan Cavanagh explains that it was broad-based rather than driven by any single carrier, with activity varying from quarter to quarter. Regarding DISH, there is positive news concerning regulatory relief, which is seen as beneficial for future developments.

The paragraph discusses a positive outlook for a company's financial strategy, emphasizing the successful funding through the sale of a satellite business. There is a focus on the company's strong commitment to expansion and the anticipated long-term positive impacts, albeit with some uncertainty about short-term effects. The conversation shifts to discuss the mix of colocation relative to amendments in the US, noting that over 60% of revenue comes from new leases. Additionally, questions are raised about Millicom's earnouts, which would only be paid if certain financial milestones are met, and about a 15-year Master Lease Agreement (MLA) that commits Millicom without an option to disengage from any towers.

In the conversation between Nick Del Deo, Brendan Cavanagh, and Eric Luebchow, Cavanagh discusses a recent deal involving Televisa Univision, highlighting that broadcast services are a small part of their business. The portfolio in question allows for organic growth without significant changes, bolstered by a long-term leaseback commitment from Univision. Additionally, Cavanagh updates on the progress of reducing non-Sprint churn in domestic markets, noting that it is currently around 1.3% and is expected to decrease further, potentially reaching close to 1% next year.

The paragraph involves a discussion between Eric Luebchow and Brendan Cavanagh about the Millicom MLA, focusing on its US dollar denomination and escalator structures. Brendan clarifies that the MLA is fully in US dollars and includes typical escalators, though he avoids detailed structural specifics. The conversation shifts to Walter Piecyk asking about the timeline from order to implementation for a colo, which Brendan estimates at about six months. The expected revenue from current orders is linked to operators' capital plans for 2025. Walter also touches on the company's dividend growth, noting last year's increase of 20% and this year's 15%, and questions future growth expectations in relation to the investor yield base.

The paragraph comprises a discussion during a conference call where Brendan Cavanagh, likely an executive, talks about the company's approach to dividend growth and strategic decisions. He indicates that while there isn't an explicit growth floor for dividends in 2025 and 2026, they aim to maintain one of the fastest-growing dividends among REITs, despite relying partially on NOLs to manage REIT dividend obligations. Brendan also hints at a possible healthy dividend growth announcement in the upcoming quarter. The second part involves David Barden from Bank of America inquiring about a Millicom deal involving tower companies in Central America, questioning the choice of markets acquired and a shift in debt strategy from variable to predominantly fixed rates.

The paragraph discusses SBA's recent decision to focus on acquiring Millicom's operations in Central America due to its stronger presence in that region, and avoiding South American markets where it lacks scale. This transaction stands alone and doesn't indicate future acquisitions. Additionally, SBA's financial strategy concerning debt remains unchanged, with the majority of its floating debt already hedged, ensuring stability and certainty.

The paragraph discusses financial strategies related to hedging interest rates on a term loan. The company, faced with rising rates, has locked in favorable rates through hedges to provide certainty and take advantage of lower rates from earlier. A hedge on a $1.95 billion term loan expires in 2025, and two new hedges, each worth $1 billion with rates around 3% and 3.8%, have been put in place to manage interest costs. These changes aim to cap the maximum interest rate at 3.41%, despite SOFR currently being higher. Looking ahead, the balance sheet is expected to remain stable, with only one maturity of $750 million in early 2026. The overall structure may only change if new opportunities arise that warrant capital adjustments.

The speaker addresses two main topics: the potential for new multiyear deals with domestic national wireless carriers and the approach to updating escalators in the domestic business. Regarding new deals, the speaker mentions that an existing agreement with AT&T is in place and that future agreements with other carriers will depend on mutual benefit, with no specific preference for comprehensive deals. On escalators, there's minimal change, as they mostly affect new agreements rather than the existing base, which constitutes the bulk of the business. The approach will depend on what structure benefits both parties, with CPI-based escalators being considered due to inflation concerns.

The paragraph details a discussion about Millicom's communication sites, focusing on the mix of towers versus rooftops and tenancy strategies. Brendan Cavanagh explains that the majority of these sites are ground-based towers, with a small percentage being rooftop-based. Millicom had established a tower company, referred to as LOGI, to lease space on these towers to other parties. However, many sites were not made available due to competitive advantages for Millicom's wireless business. Competitors were also hesitant to lease sites owned by Millicom, presenting an opportunity to unlock lease-up value.

In the conference call, Brendan Cavanagh addresses a question about the impact of earn-outs from a recent deal on the company's financial statements. He mentions that there might be some disclosure related to potential earn-outs, but they are not expected to materially affect the balance sheet. Cavanagh suggests that any eventual earn-out payments would be a sign of success, as they indicate better-than-expected revenue generation. He acknowledges the disclosure's uncertainty as the deal was just signed and offers to provide further details offline. The call concludes with Cavanagh thanking participants and looking forward to sharing year-end results in the next quarter.

This summary was generated with AI and may contain some inaccuracies.