American Tower Corporation
Q1 2017 Earnings Call Transcript

Published: 27 Apr 2017

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower First Quarter 2017 Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. as a reminder this conference is being recorded. I would now like to turn the conference over to your host, Leah Stearns. Please go ahead.

[Leah C. Stearns:]

Thank you, and good morning. Thank you for joining American Tower's first quarter 2017 earnings conference call. We have posted a presentation which we will refer to throughout our prepared remarks under the Investor Relations tab on our website, americantower.com. Our agenda for this morning's call will be as follows

[Thomas A. Bartlett:]

Okay, thanks, Leah. Good morning, everyone. As Leah just highlighted, we generated another quarter of strong results posting double digit growth across our key metrics. In addition, our Consolidated Organic Tenant Billings Growth accelerated to 8.6%. We continued to delever naturally to 4.6 times net debt to its annualized adjusted EBITDA. We grew our common stock dividend by about 22% and with the resumption of our share purchase program during the quarter, we bought back more than $400 million of our stock so far this year. We also closed on our acquisition in France, which enabled us to launch operations in our 15th global market and built over 460 new sites globally. With that, let's dive into the details around our first quarter performance and updated outlook for the year. If you'll please turn to slide six, consolidated property revenue grew by nearly 26% in the first quarter, including Tenant Billings Growth of about 22% and Organic Tenant Billings Growth of 8.6%. Our U.S. Property segment revenue growth for the quarter was about 5% including Organic Tenant Billings Growth of 6.5% representing a 70 basis point sequential acceleration from the fourth quarter of 2016. This strong growth reflects a healthy demand environment, which drove our third consecutive quarter of record new business levels and the cash impact of our recently signed MLA amendment. Volume growth from colocations and amendments contributed just over 5% and pricing escalators just over 3%. This was partially offset by churn of around 2% on an annualized basis, just 40 basis points of which was associated with operational churn from the big four core networks. International Organic Tenant Billings Growth was over 14% on a consolidated basis, with all three international segments growing double digits. This growth was supported by the significant geographic technological and tenant diversification embedded in our global portfolio as well as positive secular global trends in wireless, including rising smartphone penetration. Contractual pricing escalators, driven primarily by local CPI indexes in most international markets, contributed nearly 7% to our growth while volumes from colocations and amendments drove an even greater contribution at over 9%. Other run rate items contributed an additional 60 basis points and this was partially offset by churn from about 2.4% primarily resulting from continued carrier consolidation in India. On the inorganic side, the day one revenue associated with the over 46,000 sites we added since the first quarter of 2016, including the Viom portfolio and our new French and Argentinean assets contributed another 13% to our Global Tenant Billings Growth. Our new build program also remained active and we constructed over 460 sites globally this quarter, predominantly in our international markets where average day one NOI yields were nearly 12%. And as you can see on slide seven, our strong revenue trends led to double digit growth in both adjusted EBITDA and consolidated AFFO for the 16th consecutive quarter with both metrics growing nearly 20%. Growth on a per share basis was similarly strong with consolidated AFFO per share and AFFO attributable to common stockholders per share growing over 19% and over 15% respectfully (sic) [respectively] (06

[James D. Taiclet, Jr.:]

Thanks, Tom, and good morning to everybody on the call. The highlight in my view of our first quarter results was the increase in our U.S. Organic Tenant Billings Growth to a robust 6.5%, further complemented by a 14% Organic Tenant Billing Growth in our international segment. Given these results, our recurring quarterly theme for today's call, the state of network deployment in the U.S. wireless industry and its implications for our domestic organic growth, is very timely. I'll spend the next few minutes summarizing our logic, but our conclusion is that based on our current technical and economic assessments, the U.S. macro tower market should continue to experience strong, stable growth many years into the future. A fundamental factor that drives high confidence in our conclusion is the continuously expanding consumer demand for mobile services here, especially video and other high-bandwidth applications. Another important factor for future macro tower demand is our belief that 4G technology will continue to be the only viable scalable solution for ubiquitous mobile service in suburban and rural areas well into the 2020s at the very least, with the first iterations of 5G being devoted to fixed wireless and later iterations still being mainly in dense urban and urban areas. U.S. mobile data usage continues to skyrocket, and the average U.S. smartphone user now consumes more than 4.4 gigabytes of mobile data per month, up over 400% from just three years ago. Further projections suggest average smartphone consumption growing another 200-plus percent, reaching more than 14 gigabytes per month by the end of this decade. To serve this demand with 4G technology, which is largely delivered through macro tower sites, our tenants continue to collectively invest around $30 billion per year to improve the quality and expand the capacity of their mobile networks. So we expect similar levels of wireless-industry network investment to continue for many years to come based on the limited options for wireless operators to address the exploding demand for mobile bandwidth and signal quality, which are inherently limited by the physics of radio-wave-frequency transmission. There are three levers available – really only three levers available – to operators to address improving bandwidth and signal strength. The first is adding spectrum; second, increasing the spectral efficiency of the transmission technology, such as 4G; and adding transmission equipment to the network grid in either new locations, which for us are colocations or new towers, or new equipment at existing locations, which for us result in amendments to tower leases we already have in place. As for the acquisition and deployment of incremental spectrum, the just included 600-megahertz incentive option is likely to be the last significant sub-3-gigahertz spectrum asset to be made available by the U.S. government for many years. So while we expect mobile operators to drive amendment business, both with current unused 2 or 2G, 3G re-farm cellular PCS, AWS, WCS, and BRS spectrum, and with 600 megahertz as is progressively cleared over the next 39 months, ultimately the amount of spectrum available to deploy is finite in these bands. So while we see large swaths of very high frequency millimeter wave spectrum being made available and ultimately these being deployed in dense urban and urban areas, the incremental spectrum options for improving coverage and capacity for 4G in suburban and rural areas beyond that 600 megahertz span just options are going to be limited. So the second of the three network enhancement methods is to increase spectral efficiency through technology improvement. The major technology being 4G itself which enables tools such as carrier aggregation; multiple input, multiple output antennas and other techniques to increase the spectral efficiency of mobile networks. But as with the new spectrum option, the ability to drive incremental gains in spectral efficiency is also inherently limited, and we believe that we're getting close to the upper bound on these opportunities in today's 4G environment. Consequently, as new spectrum resources and efficiency enhancements to 4G subside, we believe that the carriers over the years will increasingly need to rely on the third and final tool to address mobile data usage growth, and that is the addition of incremental cell sites and transmission equipment on existing sites within their networks. Given our comprehensive nationwide footprint of approximately 40,000 U.S. towers, our average U.S. Organic Tenant Billings Growth has been around 6% across this time period. And as you saw in our revised outlook issued this morning, we now expect our 2017 U.S. Organic Tenants Billing Growth to be slightly higher than that, at over 6%. Since we anticipate that 4G will remain as the cornerstone of suburban and rural networks well into the 2020s, we also expect this type of strong growth can be continued into the future. Our confidence is further underpinned by the basic topography and population characteristics of the United States. More than 80% of the U.S. population lives in rural or suburban areas where macro towers remain by far the most economically and technologically efficient communications infrastructure solution. Not coincidently, this is where over 95% of our U.S. towers are situated. In these types of locations, it's simply impractical to broadly deploy high band spectrum, especially on small cell architectures given that spectrum's short range propagation radius. This is why we've seen that carriers, given the option, continue to primarily deploy low band spectrum assets like 700 megahertz in these suburban and rural areas selectively complementing those deployments with mid band spectrum like AWS. Simply put, low band spectrum deployed on towers is the most cost and technologically efficient way to cover suburban and rural topographies. Importantly, we do not believe that the upcoming initial rollout of 5G alters this equation at all. We certainly expect 5G utilizing millimeter wave spectrum for fixed wireless to be paired with newly constructed high capacity fiber networks by the early 2020s. But the key point is that these deployments will be highly concentrated in dense urban environments and often built by our tenants and other industry players such as cable companies for their own proprietary use. Further, it is our understanding that the 5G standard as currently defined will require significant spectrum depth on the order of 100 megahertz. The low and mid band spectrum assets of any given mobile carrier today that are well suited for suburban and rural mobile use each tend to be just in the 10 to 50 megahertz range, below the current design requirement for 5G technology. And, therefore, 5G in its currently envisioned form is not readily applicable to macro site environments. Moreover, given the wide spectrum bands needed, it's also our understanding that the initial releases of 5G technology may not even be designed for any spectrum band below 6 gigahertz. Thus, 5G for its first years of wide scale deployment in the 2020s is likely to be limited to an effective transmission radius of 100 to 200 yards. Consequently, while it may support pedestrian type mobile utilization in urban environments, 5G probably will not be a viable full mobility solution for some time, especially in the rural and suburban areas where our towers are situated. As a results, in the near term to the medium term at the very least, we believe 4G will continue to be the predominant network of choice outside of densely populated cities and consequently, will attract most of the mobile network investment in these areas. And again, given limited available spectrum and the limited incremental efficiency potential of remaining 4G technologies, we expect an increasing focus on equipment deployment on macro sites over time. So in summary, we view the growth profile for the U.S., our largest market and the driver of ATC's valuation to be extremely durable, fueled by the continuing proliferation of mobile technology in all phases of our daily lives. So with that, we're ready to open up the call for your questions.

[Operator:]

Thank you. We'll go to the line of Ric Prentiss. Please go ahead.

[Ric H. Prentiss:]

Thanks. Morning, guys.

[James D. Taiclet, Jr.:]

Morning.

[Ric H. Prentiss:]

Hey, thanks for all that color, Jim, and it's nice to see the U.S. growth rate accelerating, certainly. Tom, you mentioned that the guidance does not include anything from FirstNet, the broadcast auction or the Mexican wholesale network. I assume that also means that the MLA amendment that you announced back in March doesn't address those items also. But my real question is can you help us size and time kind of what these opportunities are that you've called you here? FirstNet, broadcast auction, T-Mobile's talked a lot about it; Mexican wholesale network, a lot of us are trying to figure out – nice to see the inflection point, the second ordered derivative (29

[James D. Taiclet, Jr.:]

Yeah, Ric, good morning, it's Jim. Hey, first of all, we don't comment on specific customer deployment plans as you guys know. And each of the projects that you've described is essentially tied to one of our individual customers, you know, as you mentioned. But in general terms, let me speak to FirstNet at the outset here. A national public safety network should be constructive to the U.S. leasing environment no matter how it's deployed or when it's deployed, and since coverage is an important aspect of this program, our extensive suburban and rural tower profile should have really high relevance. So we need to figure out when we get applications and a schedule and a bill of materials what that really means for our future business. And once we do that we'll lay it into our outlook probably in 2018 and beyond. It's similar with the 600 megahertz deployment. You know, each carrier that has won that spectrum have to go through a clearing plan. Then they'll have to match that with their existing architecture, and then they'll come up with bills of materials schedules and sites that they want to work on. They'll put those applications into us and then we can include them again, 2018, really by 2019 and beyond even. And finally the network in Mexico, which is being built by Altán is also in the process of being designed, and it will lay into our, most likely again, next year and the following year's results. So these are really important and very constructive endeavors and projects, but for us to try to quantify them now really should be left to the operators to give you their plans and then we can tell you in aggregate how those affect our outlook numbers in the future

[Ric H. Prentiss:]

Yeah, so if we think in aggregate, historically you guys might have thought U.S. 6% to 8% very long-term. Sounds like there's comfort and visibility for a long-term here. Is that get you comfortable that the 6% to 8% is still valid? Some people have speculated, could it go beyond 8%? Just trying to think, in the aggregate, what are we looking at? And when would you think about doing MLAs with these type items? When should we expect that happening?

[James D. Taiclet, Jr.:]

So just to go to the top level, Ric, and to frankly avoid speculative specificity, because we don't have the data yet, we don't have the applications yet to aggregate, to answer that. Our view over the next number of years that we've said publicly is, we're going to try to drive AFFO at double digits per share into the future, and augment that by a 2%, ultimately moving to 3% plus, dividend. We'll of course be taking advantage of each and every piece of the opportunity set on the revenue side to drive that, and that's pretty much, I think, all we can say at this point, is to how to bound and quantify these things, because we just don't have the data to do it.

[Ric H. Prentiss:]

But MLAs would be your preferred method maybe, to approach these?

[James D. Taiclet, Jr.:]

It depends on the circumstances and the customer, frankly, you know. But we'll give you the guidance year to year, and Tom's just raised it by a couple percent, so I think you can see that our confidence level's pretty high.

[Ric H. Prentiss:]

Yeah, it makes sense, and certainly feels good to have the U.S. back growing again at faster pace. Okay. Thanks.

[James D. Taiclet, Jr.:]

Thanks, Ric.

[Operator:]

And next we'll go to the line of Colby Synesael. Please go ahead.

[Colby Synesael:]

Oh, great. Thank you. Just going back to the MLA that was signed earlier, I was just wondering if you could just speak more broadly about reasons that a customer might want to go and sign an MLA. I guess, to Ric's point, there's been speculation that it might have been for some of the things that are upcoming. But it sounds like that may not have been the case, and just maybe more broadly, just why that might have been. Then also, just a question on FX. If current FX rates or spot rates hold true, what's the difference between, in terms of upside, that we could maybe expect relative to what you've assumed in your guidance right now? Thanks.

[Thomas A. Bartlett:]

Yeah, Colby, I can take – the last one is easy. From an FX perspective, if the spot rates stay for the rest of the year, the math works out to be an incremental $66 million of property revenue, $31 million of adjusted EBITDA, and $22 million of consolidated AFFO.

[James D. Taiclet, Jr.:]

And on the first question, Colby, it's Jim here. Our latest MLA that we've signed, in accordance with our policy not to discuss the parameters of individual contracts, it's really hard to address specifics again. But what I will say is that, when a customer decides to make a MLA commitment over multiple years, that means they've created visibility internally into their plan of how they think they want to deploy their network, their spectrum, and their technology over, say, a two- to five-year period. Once they do that internally, then they can work with us because they've got a multi-year plan, and we can come up with a customized solution to address that. Our goal in doing these MLAs is to, first of all, give the customer the lowest cost per square foot of real estate for towers, based on their deployment plan in the market, but in exchange for that, we try to get as much volume as we can, as little churn risk as we can, and the best guarantees that we can of rising revenues. So that's the construct of these agreements, and that applied, I think, very cleanly to our last announced transaction.

[Colby Synesael:]

Great. Thank you.

[Operator:]

Thank you. And next we'll go to the line of Walt Piecyk. Please go ahead.

[Walter Piecyk:]

Thanks. Wanted to go back to the guidance, I guess, where you talked about 15% growth, and that's kind of that second derivative number on the domestic business. So if you look at that first quarter, obviously that rate of growth was much higher. So is that colocation and amendment business basically going to be down sequentially? Or are you guys just being conservative on the growth? I realize that Q1 last year had a much lower level of colo and amendments, but 15% seems a little conservative, given how strong this first quarter was.

[Thomas A. Bartlett:]

Actually, we'd expect the colos and amendments to be pretty consistent from a dollar perspective throughout the year, as well as, obviously, escalations. So we're looking at the overall...

[Walter Piecyk:]

But if that's the case, then you're going to be putting up closer to 20% growth on that number.

[Thomas A. Bartlett:]

No, I would expect, on a full-year basis, 2016 versus 2017 on a colo and amendment basis, to be up probably – it's over 15%, I think, is what we had actually said.

[Walter Piecyk:]

It's 20%, right? Okay.

[Thomas A. Bartlett:]

Yeah, but it's going to be pretty consistent. Maybe down $1 million for the next Q2, Q3, Q4, but at least based upon what we see right now, and to the extent that we see something differently next quarter, we'll update our outlook at that point in time.

[Walter Piecyk:]

Okay. Okay.

[James D. Taiclet, Jr.:]

Yeah, I think to maybe – I'd add to the foundation here for U.S. demand. In aggregate for 2017, as Tom stated and Walt, you've reiterated, you know, we've got higher outlook for new business in the U.S. this year than we did in 2016. But I think one of the foundational issues there is, these unlimited plans that are now pervasive across the U.S. industry on the operator side, they're going to put network capacity and quality back at center stage, and everybody's going to be competing on this sort of unlimited basis going forward. And the churn risk for subscribers will begin to increasingly be on the coverage that you have and the capacity where these people tend to live, work, and travel. So we think that this is going to be a constructive trend for some time. What we see in the pipeline so far gives us the ability to derive the kind of growth rates that Tom is talking about, sort of 15%, 15% plus this year, but we'll see how the rest of this year rolls out, and if any other agreements similar to the one we had early in the year are signed, we'll update you.

[Thomas A. Bartlett:]

And by the way, if you go back and take a look at I think the supplemental, you'll see that we actually had quite a strong Q3 and Q4 of last year as well. So we had a rising growth coming into the end of last year, which gave us more confidence even in terms of looking at 2017. So I think that's how you get the math to work.

[Walter Piecyk:]

I hear you. I'd rather you be conservative. I just wanted to make sure I was looking at that properly.

[Thomas A. Bartlett:]

Yeah.

[Walter Piecyk:]

Why do you think that Crown is not seeing the same type of second derivative growth on their colo and amendment business in the macro tower business? Is it possible that customers are just kind of looking at them for small cells now and it's kind of diverting maybe some of the activity that they would see in the macro towers? Or shouldn't this basically be that a rising tide lifts all ships and that, you know, all three of you should see some strong colo and amendment activity? Is there anything unique about your portfolio that would be seeing better growth than what they are?

[James D. Taiclet, Jr.:]

Well, I wouldn't necessarily compare portfolio strategies or certainly agreements because we don't have access to anybody else's. But what I will tell you is that we focused on two or three things to make our portfolio attractive over a long time cycle and a planning horizon. One is that we focused in our commercial agreements around that portfolio on two things

[Walter Piecyk:]

Great. Thank you. If I could just sneak one, if you want to skip it, that's fine, but international that churn rate of 3%, can you give us any sense like what's the long-term target there even 2018, 2019, what it can come down to after this kind of consolidation plays through?

[Thomas A. Bartlett:]

Yeah, I mean, historically, I think it's a good benchmark for the future. I mean, both in our U.S. as well as in international we look to the churn being, on an annual basis, in that 1% to 2% range. So I think what we're seeing in some of the international markets, particularly as we talked about in India, is a slightly higher rate of churn due to this consolidation that's going on in the market which we think at the back end is going to prove to be a much stronger market from a wireless perspective. And I would expect the churn, the higher elevated churn in India probably to exist for the next several quarters, probably into 2018. But I would expect overall then going forward the international churn to be back down into that 1% to 2% range.

[James D. Taiclet, Jr.:]

Yeah, and this points to our diversification strategy because our business is very steady over time in aggregate because each market is going to run its own cycle. So some years there's elevated churn in certain markets and other years there's elevated growth. In some of our foreign markets the currencies are strengthening and others they may be weakening. And so when you aggregate all of those markets and diversification plans together, you get the steady, stable growth that we've been talking about. And again, the U.S. base of business we have, we've tried to make that as stable and growing as possible. And then when you add on these other pieces, and there's a fairly elevated level of churn, let's say, in India for a year or two, the U.S. may be beginning a new investment cycle, for example. And so that diversification is actually proving out in today's results even.

[Walter Piecyk:]

Got it. Thank you.

[Operator:]

And next we'll go to the line of Batya Levi. Please go ahead.

[Batya Levi:]

Great. Thank you. I wanted to follow up on the domestic growth. Can you provide a little bit more guidance on the acceleration that came more from new leases versus amendments? Or has the split been similar to the trend? And also it looks like the escalator went up a little bit in the quarter. Is that driven by the new MLA? Would you share what the escalator in that new contract is?

[Thomas A. Bartlett:]

Yeah, thanks, Batya. I think in terms of – it obviously varies by carrier, but given kind of the 4G deployments that we're having, we're still largely amendment driven in the market which differs slightly from some of our international markets which are driving colo which is really just driving new coverage. So, I would expect us to continue to be overall largely weighted to amendment activity. But as I said, it varies by carrier. From the escalator perspective, it's pretty consistent I think throughout the year. I would expect for the year it to be in that 3.1% area, just north of the 3% which is really where we landed in Q1. So it's quite consistent throughout the year. And, again, it's somewhat predictable because 95% of our contracts are actually fixed rate in the United States. So I would expect consistency throughout the year.

[Batya Levi:]

And the new MLA, should we assume it was 3%, 3.5%?

[Thomas A. Bartlett:]

Yes.

[Batya Levi:]

Okay. Thank you.

[Operator:]

And next we'll go to the line of Amir Rozwadowski. Please go ahead.

[Amir Rozwadowski:]

Thank you very much, and good morning, folks. I wondered if we could chat a bit about your enthusiasm around the pickup in colocation activity. Clearly there's been a lot of discussions about potential opportunities with small cell and densification initiatives in the marketplace. And based on the activity levels that you folks are seeing, how do you gauge sort of the investment capital going towards that versus the demand trends for the macro sites? Clearly you guys are seeing increased activity levels, but I'm just trying to understand sort of how we should think about carrier strategies going forward at this point?

[James D. Taiclet, Jr.:]

Again, Amir, it's Jim. To speak to budgets and deployment plans by carrier, you're best to ask them. As you know, we're – 95% of the U.S. revenue roughly is in suburban and rural environments; in other words non-urban towers and we have a roof-top business and a DAS business as well, mid-single-digit percentage of our revenue. So we have huge visibility into the macro sites; a little bit less so into the small cells. And I can get into the small cell strategy later if anyone on the call would like. But the pickup in colocations in suburban and rural areas which drives the upside that we're talking about here today, there's a few underlying reasons. One is that VoLTE deployment continues, and two to three years ago when we did our initial technical analysis of what we thought VoLTE would mean for the sector, for our sector, was a prediction down the road as time went on that you need density of cell sites 15% to 25% greater to deliver VoLTE because of the signal loss, not in the air link but in the ground link, using the IP based ground link versus a circuit switch ground link. That seems to be a factor that continues to play out. A second factor technically is carrier aggregation. And so when you have original 800 megahertz design topologies, layouts of sites in suburban and rural areas, and you end up adding additional higher spectrum bands to that original layout, the layout has to get denser to use those spectrum bands efficiently over time. And so again, there'll be cell splitting. Not necessarily instantly when a new band like AWS is added to a original 800 megahertz site, but potentially down the road over time. So I think those two things are technically driving a lot of the colocation activity that's going on now. Plus the demand of capacity in rural and especially suburban areas and along commuting routes is going to drive just basic, old fashioned cell splitting just to break up the capacity requirement and improve the signal on the edge as well. So it's those three things I think that are really pushing this.

[Amir Rozwadowski:]

That's very helpful. And then if I may, in terms of capital allocation, Tom, how are you guys thinking of going forward sort of potential M&A opportunities in the marketplace? Clearly there's been a recent focus on the buyback. I'm just trying to understand or gauge sort of the appetite. We've heard a lot of discussions about potential assets coming for sale internationally. So would love any update. Should we think about the focus is still on the buyback in the near term? Or how should we think about sort of capital allocation?

[Thomas A. Bartlett:]

Amir, our playbook for capital allocation has been the same for the last ten years, and it's really where can we allocate the capital to drive the highest NPV and the highest value. And so we have development teams around the globe looking at every opportunity that's out there, and there is a pipeline of activity in every market that we're doing business in. And we'll continue to evaluate and to the extent that we can drive higher value from those types of things versus a buyback, we'll continue to do it. You see we just announced another transaction in South America which fits nicely within our total portfolio. My sense is that there'll be a lot of little carve-ins like that type of a transaction. I've mentioned this before, but we own less than a third of all the inventory in the markets that we're doing business in. So our focus would be continually to look at the markets that we're in and look at the opportunities for M&A in those markets. And to the extent that it makes sense for us and exceeds, obviously, our risk adjusted cost of capital and we think that we can get better NPV there than buying back a share at this point in time, we'll move down that path. So there really are several legs to the capital allocation pool, but we're looking to do both, just as we did in the first quarter. Year to date we've bought over $400 million of shares but we did close on the transaction in France, and as I mentioned, just announced this other transaction in Latin America. So we're doing all of these things at once, and we'll continue to look at transactions in that light.

[Amir Rozwadowski:]

Great. Thanks for the incremental color.

[James D. Taiclet, Jr.:]

Yeah. Basically – Amir, it's Jim, just to add one final point is our process and our criteria haven't changed at all. And that includes us remaining quite price sensitive on asset prices upfront.

[Amir Rozwadowski:]

Excellent. Thanks very much.

[James D. Taiclet, Jr.:]

Sure.

[Operator:]

And next we'll go to the line of Nick Del Deo. Please go ahead.

[Nick Del Deo:]

Hi. Thanks for taking my question. India looks like it might be a bit of a tough market over the next couple years (49

[Thomas A. Bartlett:]

No, I think that's a very reasonable expectation that we should see in that market over the next several years. We expect at the end of this year, we'll be actually merging our existing legacy business into the Viom business. We would expect even synergy opportunities there going forward. And as we continue to lease up in the market, we'll continually, just as every other model that we have around the world, continually see opportunities. We think now with the 50,000 plus sites that we've got in the marketplace, we've got that type of scale in the market that we think is important from a carrier perspective. So I think you're thinking about our future in that market exactly as we're thinking about it, and the reasons that we're so excited about the opportunity.

[Nick Del Deo:]

Okay. Maybe one quick follow-up. You mentioned that you thought churn from India might sort of settle back to more normalized levels in a matter of quarters. How do we square that with the idea that network integrations tend to take multiple years and you've got contracts that run on for quite a bit of time?

[Thomas A. Bartlett:]

Well, let me clarify. I think you're going to see the – because it's higher level of churn as a result of this consolidation, into 2018. So we would expect to see this for probably the next 12 to 24 months. Really, just as you said, because of the industry consolidation going on and the network deployments, we should see this higher level of churn. But what I mentioned in my remarks, what we're very excited about seeing is, we're also seeing a much higher level of colocation and amendment activity going into the marketplace. And so I think, kind of to your first point, given the demand that we see in the marketplace, it really is driving the growth in the market, given kind of the amount of capital that the carriers are putting in. But we'll see the churn probably for the next 12, 24 months in the market.

[Nick Del Deo:]

Okay. Thanks, Tom.

[Thomas A. Bartlett:]

Sure.

[Operator:]

And next we'll go to the line of Spencer Kurn. Please go ahead.

[Spencer H. Kurn:]

Hey. Thanks for taking the question. I was just wondering if you could comment on how the Verizon tower portfolio is growing relative to the rest of your U.S. portfolio. And also, how much of a factor has that portfolio specifically been in the step-up in organic growth you're seeing for – you just saw from Q4 to Q1 of this year?

[Thomas A. Bartlett:]

Okay. Thanks. It's really hard to isolate at any one specific time. But given the long-term holistic agreements we enter into are supported by all three assets, the demand from our customers, really over the last several years has been more heavily weighted towards amendments, as we mentioned before. And as a result of the technology and spectrum upgrades, our customers really have been investing across the entire footprint. The legacy ATC and GTP portfolios have certainly benefited, given their high existing tenancy compared to the Verizon portfolio. So I'd say that, over the last three years, our legacy ATC portfolio has grown right in line with the average of our U.S. business. And the GTP portfolio has probably grown slightly more than our legacy base. And regarding the Verizon's portfolio lower existing tenancy and the demand (53

[Spencer H. Kurn:]

Got it. Thanks. And if I could just follow up on the small cell topic that you mentioned before. Earlier this year, you said you were sort of evaluating some potential new strategies for outdoor small cells that could improve, I guess, the colocation of those sites, or improve the returns. And I was wondering if you could just update us on your thought process there.

[James D. Taiclet, Jr.:]

Sure. It's Jim. With regard to our small cell strategy, where we're at the moment coming out, based on that assessment that you described, is really a focus on expanding our indoor small cell business, because we've been demonstrating, and we're reconfirming with our latest analysis, that we can get tower-like returns in indoor systems. We have about 350 now in the U.S., and those are proving out to be just as effective as far as leasing, performance, and also the sort of franchise real estate value as towers. We've also been seeking specific outdoor small cell opportunities with those same characteristics, and those characteristics again are some sort of franchise real estate, right? And a homogeneous RF environment where we think we can get really good lease up. So we have about 30 or 40 of the outdoor sort of venues. A couple of examples of those are jurisdictions where we've partnered with the jurisdiction or the town itself to have an exclusive opportunity essentially to do small cells in those jurisdictions. Another is in – many NASCAR racetracks that happen to be outdoors, but you can get an exclusivity on small cells with the venue owner. Those make sense for us, and we're exploring ways to further reduce cost on the outdoor and the indoor side, because we'd like to expand the addressable market of both. But really focusing on expanding the addressable market for the indoor small cell, but also continuing to evaluate the outdoor.

[Spencer H. Kurn:]

Great. Thanks so much.

[Operator:]

And next we'll go to the line of David Barden. Please go ahead.

[David W. Barden:]

Hey, guys. Thanks for taking the questions. I guess my first question was, Tom, I think you're calling out that you're not including FirstNet build in your guide. AT&T's very specifically said that their plan is to roll out their network upgrade alongside FirstNet, so I was curious if you are including some of that AT&T in the guide, or not including it? That would be kind of helpful to understand how those things fit together. The second question would be just on the MLA, what the length of that contract would be, would help us figure out, using the accounting, kind of how much that's going to generate per year on a cash basis. And then I guess the last piece is on the Viom portfolio. As we do feather that into the year-ago period, could you talk about the relative growth rates of the legacy ATC versus the Viom portfolio on a year-over-year basis? Thanks.

[James D. Taiclet, Jr.:]

So, David, it's Jim. Let me take the first one here. As far as any individual mobile operators' network plans, we need to refer you back to either their public statements or them directly, to get a sense of those. As far as any inputs to the current outlook, that is based on existing pipeline of amendments and colocation applications, along with our new build plan and the assumed escalator, et cetera, for 2017. We haven't done 2018 outlook yet, obviously, or signaled it. And we'll do that when we have that data. So all of this input we have for 2017 is prior to the FirstNet award at all. And so we really can't comment on how FirstNet may or may not affect a pipeline of applications from any given carrier, including the announced winner of FirstNet. So we just can't address it. We don't speak to MLA terms and conditions specifically either. But, again, if you want to understand the rollout plan for FirstNet, I think AT&T is the best source for that.

[Thomas A. Bartlett:]

Yeah, David, on your second question, there will be now – it's just math in terms of including the Viom base into the calculation for organic growth going into the second quarter. And so that's kind of that natural stepdown that I know you're very familiar with. But when you take a look at kind of our legacy India business which I think was what the question was, we've been looking at kind of double digit growth rates and organic growth in those particular markets. And so as I said on a consolidated basis, we're probably looking in India in the 7% range in terms of total growth going forward for the year. And, again, that's versus the high growth rate that we saw in the first quarter. And a good piece of that is a function of the math (58

[David W. Barden:]

Great. Okay. Thanks.

[Operator:]

And next we'll go to the line of Michael Collins (sic) [Rollins] (59

[Michael I. Rollins:]

Hi. Thanks for taking the question. Was just curious if you could share with us your average remaining contract length in the U.S. and internationally at the end of the first quarter, and maybe compare it to where it would've been either in the fourth quarter or in the year-ago period. And then second, as you look at pursuing additional MLAs and eventually extending and renewing contracts with your customers, are you taking a longer-term approach in terms of the types of contract duration you'd like to see for the business? Or should we expect the same type of renewal terms that we've seen in the past? Thanks.

[James D. Taiclet, Jr.:]

Mike, it's Jim. When it comes to mass lease agreement discussions and negotiations, we're going to try to customize the answer for what's best for us and that particular carrier given their rollout plan and their architecture. So I wouldn't say we're necessarily going to change, lengthen or shorten our objective. It's always to get the longest commitment we can, but that's got to be balanced with rate and escalation and rights and things like that. So every one of these discussions is multi-month or multi-quarter and very, very customized to the specific circumstance. So we will definitely keep the same framework because it's worked for us well over the last 10, 15 years. But the general objective is to lengthen commitments and contract lengths.

[Thomas A. Bartlett:]

And Mike, on your other question, just in terms of average remaining lease term. On a consolidated basis, average remaining lease term at the end of Q1 is 5.6 years and that's been very consistent for the last several quarters. In the U.S., it's 5.7 years, which again, very consistent, and obviously varies by market, but in that five to six years remaining on a consolidated basis.

[Michael I. Rollins:]

Thanks very much.

[Thomas A. Bartlett:]

Sure

[Operator:]

Thank you. And at this time, I would like to turn the call back over to Ms. Stearns for any closing remarks.

[Leah C. Stearns:]

Great. Well, thank you, everyone, for joining us today. And if you have any follow-up questions, please feel free to reach out to the Investor Relations team here.

[Operator:]

And ladies and gentlemen, this conference call is available for replay starting today at 10