American Tower Corporation
Q2 2015 Earnings Call Transcript

Published: 29 Jul 2015

[Operator:]

Good morning. My name is Sean and I'll be a conference operator today. At this time, I'd like to welcome everyone to the American Tower Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Leah Stearns, Senior Vice President, Treasurer and Investor Relations, you may begin your conference.

[Leah Stearns:]

Thank you. Good morning and thank you for joining American Tower's second quarter 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. Our agenda for this morning's call will be as follows

[Thomas A. Bartlett:]

Thanks, Leah. Good morning, everyone. As you can see, we had a solid second quarter, exceeding our earlier expectations for growth in revenue, margins and AFFO across the business. We are progressing well with the integration of the nearly 11,500 Verizon towers we added in the first quarter and are pleased with their performance so far. We acquired about 4,200 sites in Brazil from Telecom Italia at the end of April and, most recently, added around 4,700 towers in Nigeria from Airtel on July 1. We expect to acquire the remaining 2,300 or so sites in Brazil from TIM and up to an additional 200 sites in Nigeria from Airtel over the next 12 months or so. Our strategy of pursuing international investments to strengthen and extend our consolidated growth rate is delivering results and we are pleased with the benefits we are experiencing, due to the scale we have added to our international business. We believe these international investments will continue to help drive returns significantly above those of our U.S. business. If you'll please turn to Side 6, our consolidated Rental & Management revenue in the quarter increased by nearly 15% to approximately $1.2 billion. On a core basis, our total Rental & Management revenue growth was over 23%. And of this core growth, over 7% was organic, or about 8% excluding our U.S. decommissioning revenues. The balance of our core growth, or 16%, (7

[James D. Taiclet, Jr.:]

Thanks, Tom, and good morning, everyone. As demonstrated by those second quarter results and updated outlook, both our Domestic and International segments continue to perform well. This performance is a result of the combination of accelerating data demand across our markets and the scale, diversification and quality of our global tower and small cell Distributed Antenna System portfolios. As Tom mentioned, we augmented our U.S. operations significantly with the addition of the Verizon tower assets earlier this year. I participated in some of the initial site inspections myself and have been in close touch with our U.S. team. And the team has the integration of the Verizon portfolio solidly on track and the new business pipeline on the towers is shaping up nicely. Consequently, our experience to-date with the Verizon towers is confirming our valuation assumptions on the attractiveness of those site's locations, pent-up demand for both co-location and amendment activity and the quality of those assets. We expect that the addition of the Verizon portfolio will further strengthen our domestic growth profile and operational performance for many years to come. Consistent with my prepared remarks in past years' second quarter calls, my focus this morning will be on our International segment, where we're seeing outperformance relative to our initial projections for the year. After a very brief recap of our international investment philosophy, I'll discuss the key current and future trends in our largest international markets and then review our extensive track record of generating outsized growth and return on investment internationally, while discussing our confidence in being able to replicate this performance on our newly-acquired assets as well. This has been a long journey. Over the last 15 years, we've carefully selected a series of markets, interconnected through a strong core of common multinational customers, solid underpinning of rule of law and property rights and the long-term wireless industry growth potential. For markets where 4G is being deployed, like the U.S. and Germany, to markets where additional voice networks are still being built out, such as India, we're positioned to benefit from carrier investments in both the short and the long-term. In developing and emerging markets, this growth will be supported by several key factors. First, wireless carriers in these markets continue to generate healthy margins and return on investment, despite ARPU's, per average revenue, per user, per month, that appear to be low on the surface. For example, in India, where per SIM ARPU is around $3, average wireless carrier EBITDA margins are still over 30%. This is attributable to the typical customer behavior in that country, where individuals utilize multiple SIM cards to power their devices, often from different wireless carriers. Moreover, leading mobile operators in markets such as India also take full advantage of low-cost inputs, such as labor and modest, if any, handset subsidies. Similarly in Brazil, where the ARPU is $8, mobile operator EBITDA margins are also above 30%. This is especially notable, given that in the U.S. where ARPU's are in the $50 range, carrier EBITDA margins are similar to these much lower ARPU markets. As a result, we continue to believe that the mobile network operators across our served markets have the financial capacity to make meaningful investments in their network, resulting in incremental equipment on our towers and ongoing revenue growth opportunities for us. Simultaneously, the middle class in these markets, along with this buying power, is growing substantially, while, importantly, smartphone prices, as Tom said, are coming down. There are now a number of smartphones available internationally in the $100 range which have about 70% to 80% of the functionality of a device that would sell for $700 or $800 in the United States. With increasing incomes, more and more people are now able to afford one of these advanced devices, while also being able to pay more for data plans. As historical analyses have shown, getting more advanced devices in the hands of consumers' leads to more usage on wireless networks. In turn, as the carriers benefit from increasing ARPUs from those smartphone users, they're able to redeploy that cash into investments to further support network quality. India is a prime example of a market where we believe there will be a very long runway of wireless network investment, accompanied by strong organic growth for our 14,000 site portfolio there. With smartphone penetration at just 10%, a population of over 1.2 billion people and minimal access to wireline, cable, fiber or satellite-based alternatives, mobile is poised to be the primary method of communication and entertainment for the future. Today, 85% to 90% of Indian mobile phone users are still on 2G. And there remains a significant portion of the rural population with no access at all. We're working with public and private sector partners in India to develop innovative concepts like the Digital Town Square, with a tower as the centerpiece. The Digital Town Square concept brings together electrical power, Internet connectivity, site security, educational kiosks connected to the Internet, and mobile service via our customers to support the Indian Government's Digital India plan. We believe this can not only accelerate bringing mobile voice and Internet service to under-served rural populations, but it'll also provide us, at American Tower, with some great opportunities for incremental tower build investments, which have historically generated our highest return on invested capital. Brazil is another market where we expect to generate very strong growth in both the short and long-term. Clustered around key population centers like São Paulo and Rio de Janeiro, our more than 16,000 Brazilian sites provide our tenants with the real estate they need to respond to rapidly-growing usage across their networks. With over 4,000 SIM cards per cell site, or about double that of the United States, Brazilian networks are extremely congested and increasing mobile data usage is compounding the issue. As smartphone prices continue to drop, penetration climbs. And today, it stands over 35%, as compared to under 10% of smartphone penetration just five years ago in Brazil. Furthermore, industry projections call for mobile data usage to grow approximately eightfold in Brazil over the next five years, prompting the leading mobile operators in that country to recommit significant network investment. These include the local Telefónica unit, Vivo, and Telecom Italia Mobile, or TIM, from whom we recently acquired about 4,200 sites in April. The story is similar throughout the other markets within our international footprint. In Mexico, AT&T's recently-announced $3 billion investment and América Móvil's recently announced $6 billion investment should both be excellent opportunities for us, given our portfolio position there. In South Africa, Vodafone, Telkom and Cell C are all actively rolling out and augmenting their 3G networks as the population continues to increasingly consume mobile data in that country. And in markets like Nigeria and Ghana, both 2G and 3G roll-outs are happening concurrently. To be in a position to benefit from these types of trends, we have built a diversified international business with a long track record of generating compelling returns. It's important to hear some numbers, (29

[Operator:]

Thank you, sir. Your first question comes from the line of Ric Prentiss from Raymond James. Your line is open.

[Ric H. Prentiss:]

Thanks. Good morning, guys.

[James D. Taiclet, Jr.:]

Hi, Ric.

[Ric H. Prentiss:]

Hey. Two questions if I could, first, appreciate Slide 11 in the deck, think that was a very important slide for us to understand the AFFO increase in guidance. I just want to make sure I've got it clear. So $30 million from the external Airtel Nigeria acquisition, but then $17 million from organic legacy assets, and then $15 million from net cash interest taxes. Can you give a little color on that? Just to make sure – I want to understand that, and then also what the cash interest.

[Thomas A. Bartlett:]

Sure. You're thinking about it absolutely the right way. As I mentioned on the EBITDA side, with the adjusted outlook, the updated outlook, there was $22 million of outperformance there, of which $17 million is cash and that comes from Global. That comes from the International outperformance that we're seeing on the revenue side and some cost controls going on globally. So reduced cost versus what we had actually thought in the original outlook. And then on the net cash interest, the $15 million, my hat's off to Leah and the Treasury group in terms of how they've managed the portfolio, refinanced an awful lot during the second quarter in terms of the – also the GTP, we got slightly better rates than we had thought that we were going to get and termed out some of the revolvers better than we had thought. So net, that's actually generated some sizable interest savings and cash taxes is up a little bit versus our prior outlook, to net to the $15 million.

[Ric H. Prentiss:]

Okay, great. And then, Jim, for you, appreciate a lot of good color there on the facts about the International business, when we think about the International business, clearly, one of the key topics on everybody's mind right now is the Brazil economy. How do you feel about the push of wireless being able to push against the local environment?

[James D. Taiclet, Jr.:]

Ric, I've had some opportunity to interact at the very high levels of the Brazilian Government to try to understand the President and Finance Minister's plans. And we think that those plans are going to fully support the mobile operators, the continued deployment of 3G and 4G in the country. One aspect of this is that this emergent middle-class that has developed in Brazil over, say, the last five years or so, five to 10 year time period, is stabilizing. One of the government's major goals as was portrayed to us was that they didn't want backsliding from people who had made it in the middle class to backslide into a lower socioeconomic situation. And they feel that they've been fairly successful in that. And so that middle class is really the core customer for the 3G and 4G handset as it gets down to that $100 mark and the ARPUs go from, call it, $8 to $10 or $12, these people can afford that, which is really important. However, the government also recognizes that it's time to get back to business, if you will, and the global economic situation is stable enough for them to do that. And I think with the new Finance Minister in place and government policies that he and President Rousseff are implementing, you're going to see a comeback by Brazil over the next few years sort of on a larger scale. So we think it's very supportive. And the last point I'll make about Brazil is, who are these mobile operators? They are global multinational very well-capitalized companies with long-term views of their business. And they're stepping up their investment in this market, even while it may be sort of a downtick year on some of the in-country metrics.

[Ric H. Prentiss:]

Great. And then, in Mexico, you mentioned, I think, 2015 guidance includes just a minimal amount from AT&T in Mexico. Can you talk about what you think, how that transpires and now that you also have América Móvil's telesites coming into the business of Towers?

[James D. Taiclet, Jr.:]

Ric, there's a couple aspects to that. One is we don't put anything in the guidance until we see applications in the office in Mexico City or in (39

[Ric H. Prentiss:]

Makes sense. Hopefully AT&T gives us more clarity on their August 12 analyst day on Mexico as well. Thanks. Good luck, guys.

[James D. Taiclet, Jr.:]

Yeah, thanks, Ric.

[Operator:]

Your next question comes from the line of Amir Rozwadowski from Barclays. Your line is open.

[Amir Rozwadowski:]

Thank you very much and good morning, folks.

[James D. Taiclet, Jr.:]

Hey, Amir.

[Amir Rozwadowski:]

Wanted to just check with you in terms of the domestic market. I mean, obviously, there's been a lot of chatter about various spending initiatives, various technology deployments taking place to help augment and enhance capacity from the various carriers. I was wondering if you could give us a little bit more color in terms of the demand trends that you're seeing in the near-term when it comes to upgrade opportunities. You continue to see fairly healthy growth when it comes to domestic site rental, but how we should think about those trends playing out over the next 12 months, when you start to look at sort of the different carrier initiatives. Any color you can provide there would be very helpful.

[James D. Taiclet, Jr.:]

Sure, Amir. It's Jim. And again, I can sort of encapsulate the core elements of public statements our customers have made for you as they apply to our business. So indulge me while I just run down the four major carriers quickly and you can let me know if there's a follow-up you'd like. And I'll just start with Verizon. What they're in the midst of doing right now is enhancing their network and the burgeoning data load that it's carrying based on their 4G service products. By deploying AWS spectrum throughout the country and on many, if not most, and maybe someday almost all of their sites, AWS spectrum is a much higher frequency, of course, than the 700 megahertz spectrum that's the foundation of the Verizon 4G network. And so we're seeing, as a consequence of that, additional trend by Verizon towards co-locating on brand new towers that they hadn't had equipment on in the past with us. That means there's cell splitting going on, partly because of, I would imagine, capacity requirements, but also driven, in large part, by the fact that these sites just need to be closer together because the spectrum is higher and it doesn't travel as far. So I think that's one of the keys there. The next phase for Verizon will be to re-farm their 1900 PCS spectrum from 3G to 4G. I think that'll continue the phenomenon there. Their CapEx spending has been really stable. I do believe Verizon's network planning and operation team, which is excellent and we know well, has the confidence of the corporation to continue to spend at the levels they're spending and reinvest in that network, which is pretty high-performing right now. Turning to T-Mobile, they're going the opposite direction and aggressively deploying A-block spectrum of the 700 MHz band, which means additional equipment on a lot of sites they already are transmitting from, so we see relatively more amendments from them, as an example, because they're going from a network that was designed around higher frequency spectrum and augmenting that with the 700 and then they'll fill it in, I think, in phases two and three beyond that over the next few years, but that's much of what they're doing now. The other interesting thing in our space for T-Mobile is their success in gaining customers on their marketing site, so they're adding subscribers. Some of those subscribers are then bringing up the usage in places where T-Mobile used to roam on other carriers' networks. And as a result of that increasing revenue opportunity by being successful in the subscriber marketplace, the business case for T-Mobile is to now start building out their own network assets in places where they used to pay their competitors to carry their traffic. The jargon in our industry for that is a roaming overbuild. (45

[Amir Rozwadowski:]

Jim, that's very helpful. Maybe one more follow-up question, you had mentioned that AT&T is sort of in this grooming period and that Sprint is at the final throws of its next-generation network plan build, as you see your opportunity set with both of those carriers, any signs in terms of when either carrier or both carriers could sort of transition more from this current stage that they're in right now to a more accelerated investment cycle? Thanks a lot.

[James D. Taiclet, Jr.:]

Amir, that's really a question for those companies. We have really solid contractual arrangements in place right now, so while our trajectory with both customers ought to be fairly stable over the next couple of years, we're looking forward to that day, but, again, as I said, until we get applications in Woburn at our lease processing center, we're not going to try to make estimates as to when and the magnitude, but we will as soon as we can, when we have the data.

[Amir Rozwadowski:]

Thank you very much for the incremental color.

[Operator:]

Your next question comes from the line of Batya Levi from UBS. Your line is open.

[Batya Levi:]

Great, thank you. Just to follow-up on the prior question with all the color you gave on the carrier activity, where do you think you will exit the year in terms of organic growth in the U.S.? And how does that bode for just the outlook for next year, just some color around that? And the second point, I just noticed that the discretionary CapEx was lowered for the year. Is there a project that you thought you would spend on and no longer think it's visible or if you could provide some color there? Thanks.

[Thomas A. Bartlett:]

Sure. Hey, Batya. It's Tom. What we said last quarter is that in the U.S., we would expect our core organic growth in 2015 to be at the 7%. We were there in the first quarter. We're really there in the second quarter when you back out the decommissioning revenues in terms of what the trends are. And so we would expect that to be for the balance of the year. And on the discretionary, we see a bit of a mixed trend difference in terms of our Build-to-Suits. And so the biggest piece of the declining CapEx is in our development part of the budget. And while we're still going to be building, we expect in the kind of that 3,000 range, we expect more of those sites to be built outside the United States than inside the United States. And so as a result, given the cost to build is lower outside the United States, we are taking down our overall discretionary build.

[Batya Levi:]

Okay. Thank you.

[Thomas A. Bartlett:]

Sure.

[Operator:]

Your next question comes from the line of David Barden, Bank of America. Your line is open

[David W. Barden:]

Hey, guys. Thanks for taking the questions. If I could just ask a few, first, thank you for the disclosure on the Verizon asset take rate. I think if I'm not mis-characterizing it, when deal was concluded, the expectation that you guys laid out was that that portfolio could grow at or in excess of the core portfolio in the U.S. market. Could you kind of elaborate a little bit on whether this 900 site applications that you've kind of gleaned to this point in time is putting you on that trajectory? And if you have any greater color on when you might be able to get to some run rate growth on that Verizon portfolio, it'd be helpful. Second, it looks like this quarter, you took up the core organic international growth rate a little bit, half a percentage point. It sounds like that's not coming from Mexico. If you could elaborate on which international markets are driving that. And then the last one, if I could, it's just could you share any insights that you may have gleaned into the small cell site business and the multiples that you have to pay for it from the recent Extanet recap (51

[James D. Taiclet, Jr.:]

Okay. David, it's Jim. I'll try to get as much of that done in the time as we have left as possible.

[David W. Barden:]

Sorry.

[James D. Taiclet, Jr.:]

And still give time for someone else to pop in, but let me speak quickly on Verizon. As any other large asset acquisition in our space by any of the peer group, there's an integration period that needs to happen. We get the sites and the site's information and data on day one of the closing. And we get the right to market those sites to others, who may or may not have felt they've had access to them in the past. And so there is a ramp-up period to get to, if you will, full leasing speed. It's like accelerating a car from zero to 60, so what we are seeing is the first six months, or three to six months, of what we expected to happen during that initial launch and acceleration period is indeed happening. There's a lot of pent-up demand, both literally applications that were around Verizon's regions that were sort of in drawers and in files to be processed. We've gotten all those and we hope more speedily implementing those applications than otherwise had been. And then we've already got about another 400 or 500 that have come in through our sales force since we've gotten the sites. So for this stage of the zero to 60 acceleration, we feel are at or ahead of where we need to be. In addition to that, our initial SG&A review is showing that we'll probably come in under the SG&A we thought we needed to add at American Tower to manage these sites. So by, again, the end of the first full year of owning and operating the Verizon sites, we see ourselves bringing in the new business and revenue that we thought, at least that much. And we also see us under-spending on the cost side as well. We'll finish this integration process and be up to the sort of 60 miles an hour speed in the first half of 2016 some time. We've got 12,000 sites to do. I've been out to some of the site visits. These are extensive and thorough, as they should be. And when we get that site visit done and get all the information and drawings into our system, as I've seen done, we're ready to go and lease that site quickly. And that's our goal. So that's where we are in Verizon and I would say at or on the trajectory of speed that we had hoped for at this point. Core organic growth in the international markets, India and Brazil, are outperforming, as are some others, but those are the two biggest ones with the most impact. As far as small cells, I'm going to give you the short answer. I have a very expensive lunch someday for you when we're together, David, based on our entire strategy of the three strategic pillars that we put in place when I got here in 2001. And those are

[David W. Barden:]

Okay. Thanks, guys.

[Operator:]

Your next question comes from the line of Colby Synesael from Cowen & Co. Your line is open.

[Colby A. Synesael:]

Great. Thanks for fitting me in. I just wanted to go back to David's question as it relates to the International. I'm not sure if you answered that, but just wanted to get a sense of where the slight uptick in organic growth is coming from. And then, just a housekeeping question, you mentioned $15 million in U.S. non-cash straight-line impact, the change there in the guidance. What exactly, I guess, drove that? I guess I'll just stop there.

[James D. Taiclet, Jr.:]

Please start.

[Thomas A. Bartlett:]

So, Colby, beyond my mentioning Brazil and India as being the outsized drivers of the increase in International guidance, is this more color you're asking for here?

[Colby A. Synesael:]

No, I guess might have just missed that. So maybe if I could just pivot on my question then, also the strong margins, both in the U.S. and International, we saw, is there anything that was notable that maybe was one-time in nature that we should be taking into consideration when we're modeling out as we go into the third quarter?

[Thomas A. Bartlett:]

No. No. There isn't, Colby. I mean, I think what we've been able to demonstrate is demonstrating the beauty of the scale that we've been able to create in the market, excluding the past that when we went from 70% up to 75% margins. And again, it's just been a function of increased tenancy, which, as Jim said, is just an increase of what we're seeing organically going on in those markets. You had India, it grew at 14%. You've got EMEA overall grow 14%. In Mexico, while AT&T hasn't started its program, we saw a pick-up in Mexico, which, as I've said before, has been a little bit sleepy over the last couple of years and even the first quarter, it was about 5% and it went up to about 7%. So we saw an uptick in that market as well, so we're seeing it globally. And with regards to your second question on driving the straight-line, we reviewed contracts associated with some recent contract extensions that we'd done at the end of last year and determined that there were certain leases that were not straight-line-able and made the adjustment to our expectations for non-cash straight-line revenues. And we do that regularly and review the methodology and discovered that we just needed to make the adjustment for the year.

[Colby A. Synesael:]

Great. Thank you.

[Thomas A. Bartlett:]

Sure.

[Operator:]

Your next question comes from the line of Kevin Smithen from Macquarie. Your line is open. Kevin Smithen - Macquarie Capital (USA), Inc. Thanks. Given there's been a couple of recent IPOs in Europe, wanted to get your thoughts on strategically, do you think you have enough scale in that market to be competitive long-term and do you want to be the leader in that market? And I guess if the price was right, would you consider ever selling your asset? And then a sort of follow-up to that, with Deutsche Tel buying towers from Telefónica, does that impact your lease-up assumptions for the German sites?

[James D. Taiclet, Jr.:]

Kevin, it's Jim. So we've had a team evaluating EMEA and, specifically, Western Europe since 2007. And some of our conclusions so far, make the investments there for us a little more challenging, let's say. Some of those are structural issues. So without going into all of the technical details, the towers themselves in most of the markets and the German sites that we bought from E-Plus a year, year and a half, two years ago or don't fit in this category, tend to be very short structurally, really only designed for the individual one carrier that put it up. The other issue sometimes in some of these countries, the governments have mandated network swapping or non-commercial sharing, which then takes away some of the upside. So we have to put these kinds of structural and regulatory elements into our assessment. Therefore, again, it's a tougher investment case for us than many of the countries with a lot of the assets. The other side of the coin is because these are short, small, single-use towers, when there is industry consolidation in terms of carriers going from, say, five to four; four to three in a country in Europe, they're going to want to try to rationalize some of those towers, which makes the hurdle for investment in the towers potentially even higher. So the structural and regulatory issues raise the bar for us, so to speak, in many investment scenarios in Western Europe. However, the one exception we did find, so far, was the E-Plus sites in Germany. We anticipated the merger of Telefónica's asset there and E-Plus, kind of based out of the business model, we sort of knew it was coming, so it doesn't really affect the business case. In that situation, we were able to meet our growth and return on investment combination that we see, a little less growth, a little more return on investment up front, and all the math worked for us. So we're going to keep looking for those, but I'm not sure we're going to be sort of the market leader under current conditions in Western Europe, although we're going to keep at it. Kevin Smithen - Macquarie Capital (USA), Inc. Would you exit that market if you got a good offer for that asset?

[James D. Taiclet, Jr.:]

The right shareholder question is we would exit the market if we got an offer that was greater than the intrinsic value we put on that market if there is a combination or strategic integration with any other market, but in this particular case, there isn't one, so yes. Kevin Smithen - Macquarie Capital (USA), Inc. All right. That's helpful. Thank you.

[Operator:]

Your next question comes from the line of Michael Bowen from Pacific Crest. Your line is open.

[Michael G. Bowen:]

All right. Good morning. Thank you very much for taking the questions. Just wanted to ask you a question about DAS, I think you mentioned there were, on average, 2.2 tenancies per site at this point. What, ultimately, do you think might be the right figure for that long-term? And then, can you talk a little bit about what we have been saying will be most likely tailwinds from AWS-3 and then the 600 MHz auction, FirstNet, potential with DISH and T-Mobile? Can you talk about any of your expectations with regard to the benefits from each one of those four items? Thank you.

[James D. Taiclet, Jr.:]

We're really short on time, so I'm going to summarize both those topics for you, Michael. It's Jim. There's a differentiation between indoor DAS performance that we've seen and outdoor DAS performance. And so our tenancy is on the indoor DAS systems, which we view as much more co-locatable, for a host of technical reasons, which, again, we don't have time to get into right now. And that's been borne out in the actual feedback on the sites and systems we have up and running. So our tenancy on IDAS is over two, just like towers you'd expect them, if you've been running them for five or more years, to have over two customers per tower, say, in the U.S., and that's our experience with indoor DAS. Outdoor DAS is younger. It isn't there yet, but we're finding the lease-up rate, frankly, to be slower. There's not 100% overlap between all the carriers on an initial design, so you don't have 100% of the lease-up opportunity. And the ODAS systems tend to be much more expensive to put in. And they're, therefore, more expensive to the carrier from a rental perspective and it's a harder decision for them. Our gross margins with indoor DAS systems, again, right up there with tower, 75% in the U.S. and return on invested capital in the same ballpark as towers, 16%, so mid to high double-digit returns. So Indoor DAS for us is meeting our investment criteria, the same sort of investment criteria we have on U.S. macro towers and the international macro towers, and that's where we focus. We are seeking to find other types of small cell assets in the asset class that we can have confidence can reach these kinds of metrics. And we're going to continue to search for those. As far as the ultimate opportunity in indoor DAS, it's probably similar to the ultimate opportunity with towers. Can you get to three tenants over a period of time? It's a logical thing that you can. So that would be what we would see there. Secondly, you asked about a number of sort of additional opportunities to drive leasing. Those are all there. We don't put them, again, into our guidance until they're actually in place applications. Based on those that are coming in, it's hard to speculate on them individually, but they're all constructive for the long-term trajectory of U.S. tower demand, frankly. Tom, do you want to add anything?

[Thomas A. Bartlett:]

No, I think that's exactly right. I mean, we haven't baked them into the guidance and we wouldn't expect them to be hitting in 2015, but, generally, they're a very constructive positive for us going into 2016 through 2018.

[Michael G. Bowen:]

Okay. Thank you for taking the questions.

[Thomas A. Bartlett:]

You bet.

[Operator:]

Your last question comes from Jonathan Atkin from RBC Capital Markets. Your line is open.

[Jonathan Atkin:]

Yes. Thanks. I was wondering, so apart from Nigeria and Mexico, are you seeing any contributors so far in second half leasing that weren't present in the first half? And that's kind of a global question so it includes the U.S. And then I was interested specifically in Nigeria and India, what kind of opportunities that you see to supplement – in the case of Nigeria, the recent acquisition; and then, in the case of India, the build plan that you've been on in terms of increasing your assets in both markets?

[James D. Taiclet, Jr.:]

Jonathan, the first part of your question broke up a little bit, which means we need some more network investment in the U.S. apparently, but could you just repeat the first part of the question?

[Jonathan Atkin:]

So I was wondering if you're seeing any contributors to second half leasing that weren't present in the first half, excluding, obviously, Nigeria and Mexico?

[James D. Taiclet, Jr.:]

I'd say the trends are well-established and in place. It's the four carriers I talked about in the U.S. Verizon, very stable, long-term network plans, steady investment, they have spectrum that they're deploying in a deliberate fashion over a long period of time in a couple of different bands. Again, T-Mobile, very successful on the net add side, therefore justifying roaming overbuilds, (66

[Thomas A. Bartlett:]

And I would just add, Jonathan, on the second part of the question, I mean, Nigeria, we just closed. We're very focused on getting that asset integrated and getting it going forward. And we're, as Jim said, excited about the growth that we see there. There are other assets there, but I think our first priority is clearly just integrating that business into our portfolio. And as you well know, we have business development teams around the world. We continue to look at asset classes in every market that we're in. India is a significant opportunity. We have significant builds going on in the marketplace. There are a lot of other assets in the market itself. And we have a very disciplined process that we'll put each one of those assets through to see whether it meets our criteria and whether we're able to close on it, but it's clearly our strategy to get deeper and deeper into each and every market that we're in, to be the number one or two player in every market that we're at. And as we saw, even in the second quarter, as a result of the scale that we've been able to have in our international markets, we've really been able to increase significantly the operating margins and the leverage in the market. The model works and we just need to continue to put these different opportunities through the process that we have and to the extent that it meets our criteria, we'll hopefully be able to move on it. And we have the balance sheet to be able to do it.

[Jonathan Atkin:]

Thank you.

[Thomas A. Bartlett:]

Sure.

[Operator:]

That concludes today's question-and-answer session. Leah, I turn the call back to you.

[Leah Stearns:]

Great, thank you.

[Thomas A. Bartlett:]

Thanks, everybody. Any questions, please give us a call. Thank you.

[Operator:]

This concludes today's conference call. You may now disconnect.