American Tower Corporation
Q4 2015 Earnings Call Transcript

Published: 26 Feb 2016

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower Fourth Quarter and Full Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode and later, we'll conduct a question-and-answer session and instructions will be given at that time. And as a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Ms. Leah Stearns. Please go ahead.

[Leah C. Stearns:]

Thank you, good morning. Thank you for joining American Tower's fourth 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

[James D. Taiclet:]

Thanks, Leah, and good morning to everyone on the call. American Tower's 2015 results reconfirmed yet again the fundamental strength of the tower business model, the value of our portfolio diversification strategy across geographies, our focus on partnering with the leading mobile network operator tenants in the U.S. and around the world, and our disciplined approach to capital allocation. Before introducing Tom, who will provide the details of our 2015 performance and 2016 outlook, I'll begin with a very brief update on the company's overall strategic direction, which should then leave plenty of time for your questions following Tom's remarks. For many years now, we have consistently and relentlessly focused on advancing American Tower's leadership in communications real estate. And we believe that the resulting long-term performance of the business tells a compelling story. We have been able to drive double-digit core growth in property revenue, adjusted EBITDA, and AFFO per share for six consecutive years now, while at the same time growing our common stock dividend at well over 20% annually since introducing it in 2012. We anticipate continuing to build on this track record, which remains based on our company's long-standing three strategic pillars. In 2015, we achieved a number of accomplishments to position the company for future success in each of the three pillars. Our first strategic pillar is building the asset scale to exceed our return on investment goals in select major markets. In this, we made tremendous progress in 2015. In our home U.S. market, American Tower secured the exclusive right to lease or acquire nearly 11,500 sites from Verizon Communications. We also acquired over 4700 sites from Airtel in Nigeria, and nearly 5500 sites from Telecom Italia in Brazil. We also built over 3,000 towers and DAS networks across our markets. And in India, the largest free market democracy in Asia, we have signed a transformational deal with Tata and its current partners in Viom, which will take our tower count there from 15,000 to over 57,000. This transaction is strategic for ATC, not simply because it increases our tower count, but because it enables us to build even deeper business relationships with high quality, multinational mobile network operators, such as Airtel, Vodafone, Idea, Tata, Reliance and Aircel, which will all be bringing the mobile Internet to India's 1.2 billion people. Our second strategic pillar is to focus on operational excellence to maximize the cash flow generated from each and every property. Among the most significant achievements in 2015 delivered by our operating units, were containment of churn in our U.S. business, due to skilled master lease contracting, the rapid and effective integration of assets in the cases of Verizon and TIM transactions, and the efficient establishment of our new organization in Nigeria. This new market, staffed with both experienced ATC veterans and local professionals delivered outstanding performance in new leasing business and in power and fuel management, well in excess of its original business plan. And in India, our sales and operational teams generated the strongest tenant leasing growth we've seen in that market in a number of years. Our third and final strategic pillar is to maintain a strong balance sheet in order to have efficient and consistent access to the markets to support our capital allocation program. Given the company's long and consistent record of operational performance and financial discipline, American Tower was able to maintain its investment grade rating, and thereby efficiently and effectively access a broad and deep range of capital sources. In 2015, we executed capital markets transactions, which included refinancings and new issuances totaling $21 billion in order to fund our acquisition pipeline, while at the same time reducing the average cost of our debt and increasing its average duration. In summary, and as many of you may recall, three years ago, I laid out an aspirational goal to again double the size and performance of the business by 2017. We have already more than doubled the number of assets we own or operate worldwide, and pro forma for the Viom transaction will be at over 140,000. At the same time, throughout this portfolio expansion, our investment evaluation discipline has enabled us to maintain a return on invested capital above 9%. Despite adding primarily lower initial tenancy and cash flow sites to the base. As a result, on a currency neutral basis, our outlook for 2016 implies that we will have more than doubled our AFFO per share by 12/31, which would be a year ahead of schedule, which keeps us on a likely trajectory to achieve our aspirational objective on a reported basis, by the end of the planning period in 2017. With that, I'll turn it over to Tom for a detailed review of our 2015 financial performance and our 2016 outlook.

[Thomas A. Bartlett:]

Hey, thanks, Jim. Good morning, everyone. The fourth quarter wrapped up another year of strong global organic core growth in revenue, accretive acquisitions and new tower and DAS builds for American Tower. As Jim just highlighted, we believe that our success in 2015 has positioned us well for not only 2016, but also for many years to come. But before we get into the details of our 2016, expectation, let's dive into our operating results for the fourth quarter and full year of 2015. So, if you please turn to slide six, we achieved strong growth in all of our key metrics in the fourth quarter. Our total property revenue core growth was nearly 26%, which included another solid quarter of organic core growth at over 7%. As expected our U.S. organic core growth was about 5.2%, which excludes the positive impact of a one-time settlement of $7.8 million. On a run rate basis, organic growth was about 6% in the U.S. for the quarter. Internationally, we generated organic core growth of over 12.5%. Consistent with our revenue growth, our adjusted EBITDA growth in the quarter was over 21% on a reported basis and over 26% on a core basis. Likewise, we converted the bulk of that adjusted EBITDA growth into AFFO with reported AFFO and AFFO per share growth of nearly 23% and over 15% respectively. On a core basis, AFFO growth was about 30%. Moving on to slide seven, our strong fourth quarter propelled us to exceed the high end of our previously issued outlook for property revenue, resulting in reported growth of 17% or 23% on a core basis. This revenue outperformance was driven by double-digit organic growth internationally and another year of solid activity in the U.S. For the year, in our U.S. market, our organic core growth was near the middle of our five-year average target range at about 6.6%, excluding the positive impact of the one-time $7.8 million settlement received in the quarter. Our international markets generated organic growth rates significantly in excess of that of the U.S., coming in at nearly 11% on a consolidated basis. Our Latin American markets generated organic core growth of over 10% where network investments remain a top priority despite some macroeconomic challenges. In India, we generated organic core growth of around 10% for the full year, as large incumbent Indian wireless operators ramped their spending to support the deployment of new technologies and spectrum. And in our fastest growing region, EMEA, organic core growth was over 13%. Our strong finish to 2015 is a prime example of the strength of our diversified growth strategy, which leverages the benefits of operating in 13 different countries, where our top dozen large multinational wireless customers are deploying a variety of different wireless technologies over different spectrum bands at different times. We believe that this diversification will support steady rates of growth for many years to come. In complementing our organic growth was the impact of the 22,000 sites we added from Verizon, Airtel, and TIM, which contributed about 11% to our core growth rate for the year. Activity on these sites is right where we expected it to be, and we are especially encouraged by the performance of our Nigerian assets, which are already significantly exceeding our expectations for new business demand and are poised for strong growth going forward. 2015 was also a record year in terms of international new build activity, with nearly 3100 new towers completed by our global teams, which generated day one NOI yields of nearly 11%. In addition, we built more than 50 new DAS networks, largely indoor, globally in 2015, which generated day one of NOI yields of over 12%. Moving on to slide eight, our solid revenue growth, coupled with tight cost controls resulted in strong margin performance across our business. Our gross margin, excluding pass-through for the year remained above 80% despite the addition of over 25,000 new sites with an average initial tenancy of just 1.4 times. This was the result of our strong organic gross margin conversion rate of about 97%. In fact, adjusting for the impact of our recent acquisitions, our gross margin would have expanded to almost 83%. In addition, our adjusted EBITDA margin was essentially flat year-over-year, despite the impact of our acquisitions, as we recognized the benefits of our global scale. And excluding the impact of acquisitions, we would have grown our adjusted EBITDA margin to 66.5%. Additionally, cash SG&A as a percentage of revenue declined over 40 basis points, year-over-year, to 8.6%, demonstrating a trend which we believe will continue. Our goal is to drive this metric below 8% into the future. Our adjusted EBITDA and AFFO growth in 2015 is detailed on slide nine. Our teams delivered double-digit growth in adjusted EBITDA and AFFO per share for the sixth consecutive year, despite the recent volatility in the currency markets. Adjusted EBITDA grew nearly 16%, or nearly 23% on a core basis, to approximately $3.1 billion. Reported AFFO grew by over 18%, and 27% on a core basis, and AFFO per share grew by about 12% to $5.08 per share. This was driven by a strong adjusted EBITDA to AFFO conversion ratio of over 80% and like property revenue, both adjusted EBITDA and AFFO per share exceeded the high end of our previously issued outlook. Turning to slide 10, let's now take a look at our expectations for 2016. In 2016, at the midpoint of our outlook, we are projecting property revenue growth of about 20% on a reported basis and about 22% on a core basis. These numbers reflect our sizable new business pipeline coming into the year and our expectation that the positive demand trends underlying our 2015 organic growth will continue in 2016. For example, we expect international organic core growth and revenue to accelerate to just under 12%. As in 2015, we are poised to benefit from the diversification we have built in our asset base, with the acceleration of site leasing activity in markets like Mexico and India being offset by some moderation in Brazil. Our 2016 international organic growth rate is also expected to benefit from rising escalators, linked to the increasing local market inflation in many of our markets. Not only do these escalators help drive organic growth, but they also help offset foreign exchange translation effects over the long term. In the U.S., we expect organic core growth in revenue to be in the mid-5% range. As we have discussed previously, there are a few items impacting this rate in 2016. While aggregate new business commencements are expected to be up year-over-year, the pacing of new business commencement activity in 2016 is expected to be distributed more evenly throughout the year, while it was more front-end loaded in 2015, which has a negative impact on the growth rate, as you would expect. Second, we expect our decommissioning revenue to be essentially flat year-over-year, which also puts pressure on the growth rate, but is largely offset by less churn forecasted in the U.S. for the year. So, while the rate is down for the year, we are excited about the increased new business activity on our portfolio in the U.S., as we finish up the year. On a cash run rate basis, as of year-end 2016, which normalizes for the impact of timing differences and non-run rate items, we expect growth to be approximately 6% in the U.S. Consequently, on a global consolidated basis, our overall organic core growth rate is expected to be about 7% for the year. The components of our property revenue expectations for 2016 are outlined on slide 11. In addition to the 7% or so of organic core growth that I just spoke about, we expect our new assets to contribute an additional 15% of core property revenue growth. This includes our pending Viom transaction, which we expect to contribute about $595 million to revenue during the year, assuming a contribution of nine months from the portfolio. New property revenue in 2016 also includes an incremental $265 million associated with the Verizon, TIM and Airtel assets we acquired in 2015. Bringing the total incremental new asset growth in 2016 to about $860 million. About $280 million of this incremental $860 million in revenue is pass-through related. Non-core items are forecasted to offset growth by about 6% and including an expected step down in straight line revenue of about $50 million, and by foreign currency translation effects of around $180 million on our tenant revenues. Moving on to slide 12, we expect to convert our strong revenue growth into another year of double-digit adjusted EBITDA and AFFO per share growth. Our consolidated adjusted EBITDA is expected to grow over 13% for the year, or about 21% on a core basis at the midpoint. This reflects cash SG&A as a percentage of total revenue of just 8%, which is down over half a percentage point from 2015 levels. While our consolidated adjusted EBITDA margin for the year is expected to be down around 3.5% from 2015 levels, this is entirely attributable to the addition of new assets, which initially have lower tenancy and cash flow, but are poised to drive strong growth for the business well into the future. Excluding the impact of our new assets, our 2016 adjusted EBITDA margin will be growing by about 2% at the midpoint to over 66%. Meanwhile, AFFO and AFFO per share growth are expected to be about 12% and over 10% respectively on a reported basis and core AFFO is expected to grow approximately 18%. This includes strong contributions from our recently closed Verizon, TIM Brazil and Airtel Nigeria transactions, as well as our pending Viom acquisition. At the midpoint of our outlook, 2016 would represent the ninth straight year of double-digit AFFO per share growth for American Tower. Turning to page 13, we expect to maintain our disciplined capital allocation strategy to drive growth, and improve yields across the business in 2016. Our first capital allocation priority continues to be our dividend, which is grown by an average of 26% since our REIT conversion just five years ago. In 2016, subject to the discretion of our board, we expect the dividend to continue to grow at least 20% and as a result, we expect our payout ratio as a percent of AFFO to increase from current levels. Next, we expect to selectively deploy capital to build between 2,500 and 3,000 new sites. Primarily in our international markets, where we generated day one new build ROIs of nearly 11% in 2015. In addition, we expect to continue to evaluate acquisition opportunities, while at the same time maintaining our path towards achieving a five times net leverage ratio by the end of the year. We currently expect to be able to achieve our deleveraging goals by the fourth quarter, including the impact of funding our Viom acquisition with borrowings under our revolver and cash on hand. This is a result of strong growth in adjusted EBITDA, as well as our continued repayment of debt throughout the year from our cash flow from operations. Moving on to slide 14, illustrating the effectiveness of our capital allocation strategy and driving growth, we have a long history of generating double-digit growth rates in all of our key financial metrics. As a result, in just four years, as you can see in the slide, we have nearly doubled our property revenue and adjusted EBITDA and more than doubled our AFFO, while at the same time growing our REIT distribution 26% on average each year since its inception. The combination of share price appreciation resulting from this strong financial performance and the growth of our REIT distribution has delivered our shareholders a total return of over 100% since 2011. Turning to slide 15, our capital allocation has also driven significant improvements in NOI yields across the business. As you can see, our investments in lower initial tenancy sites are paying off with 300 basis points to 600 basis points of yield improvement over a four-year period. This type of NOI yield growth supports our ability to generate the cash flows we need to simultaneously fund our rapidly-growing dividend, as well as continue to invest in new growth assets. We expect to be able to drive similar NOI yield expansion on our recently acquired portfolios, which will further enhance our distribution potential for the long term. Moving on to slide 16, and in closing, we generated strong operating results in 2015, highlighted by another year of double-digit AFFO per share growth, while also significantly enhancing the company's long-term strategic positioning in several key markets through selective acquisitions and new site construction. Further, we meaningfully reduced our SG&A as a percentage of revenue, while at the same time boosting our common stock dividend by nearly 30%. In 2016, we are focused on strategic priorities which support our vision of being a premier independent owner, operator, and developer of communications real estate globally, while driving similarly strong financial results. Operationally we are focused on our daily execution, including driving strong growth across our existing asset base, and leveraging the scale we've built across our global business to drive margin improvement. Strategically, we are taking a significant step towards achieving greater scale in India with the pending Viom transaction, which we expect to close by the end of the first quarter. And the integration of that portfolio will be a significant focus for our management team. As a result of this transaction, we expect to end the year with over 145,000 sites globally with annualized revenues of just under $6 billion. Further, we remain on track to get back to five times net leverage or below by year-end, while maintaining our leading investment grade balance sheet. This path contemplates the funding of our pending transactions, as well as the capital spending outlook that we issued this morning. So, taken together, we believe that we are well-positioned to continue to generate meaningful AFFO per share growth, in combination with the materially growing dividend. As a result, we expect to deliver a compelling total return to our stockholders for many years to come. With that, be happy to take your questions. Operator?

[Operator:]

Our first question comes from the line of Batya Levi. Please go ahead.

[Batya Levi:]

Great, thank you. I want to focus on the U.S. organic growth as it is getting a lot of attention from the investors. If you exclude non-run rate benefits that you had in 2015, it looks like growth is still in line with your long-term guidance 6% to 8% at the low-end. You mentioned that there is some increased activity in the U.S. Can you provide a bit more color on what you are seeing from the carriers and if you would still think that the long-term guide of 6% to 8% holds for the next few years? Thank you.

[Thomas A. Bartlett:]

Well, Batya, this is Tom, I'll start and Jim will talk more broadly about some of the customers. You are right; that was the point I was trying to make. Our year-end run rate that we had before is in that 6% – right in that 6% range. As would you expect, we also brought on the Verizon tower portfolio. So you would expect us to be generating more new commencements that will end up the year. But as I mentioned in my remarks it's just more evenly distributed throughout the year. So as a result, that has the impact of driving the overall growth rate down.

[James D. Taiclet:]

Right. And so broadly on deployments, Batya, we are sort of migrating to talking about markets in accordance with our new sort of geographically based segment reporting, and so we'll just take the U.S. in aggregate and basically the trend is still there of 30%, 40%, 50%, CAGR expectation and the burden on the mobile network in the United States. And with spectrum coming in at a sort of moderate rate over time, and spectrum also being generally at higher frequencies with the exception of 600 Mhz, which will probably come on board three years to four years from now, sites are going to have to be closer together. They are going to have to have more equipment on them and based on the topology and the population distribution in the United States, macro towers are primarily the way to get that done. And so, as we had talked about in 2012, our five-year expectation was that 6% to 8% CAGR over that period of time in the U.S. domestic organic core growth, and we still see that as being fulfilled over this five-year period. And we have had a couple of really outsized high years in the middle of the period and these last couple of years are on the lower side, but the expectation, we are completely confident is going to be fulfilled on a CAGR basis over the period.

[Batya Levi:]

Great. One follow-up on that. What we are hearing from the carriers is that they are looking to potentially add more alternative methods to their deployment, and you have mentioned before that every technological update and replacement of old technology, you see an upside to the overall load or rented space on the towers. Are you seeing anything different right now in terms of the carrier activity or how they are negotiating with you?

[James D. Taiclet:]

When you look at the topologies and population densities where towers are the primary source of the infrastructure, those places tend to be suburban, rural, and corridor type areas of transportation. Dense urban and urban environments are not a tower heavy sort of environment, because of the real estate costs existing for commercial and residential buildings are going to take that real estate. Therefore, you have rooftops primarily serving urban and dense urban. So, we are not in the dense urban environments. Where it does make a lot more sense to install alternative technologies. But in suburban, corridor, and rural environments where 95% of our tower base is located and 85% of the U.S. population lives, the traditional upgrade cycle that you described is still in place and will continue to still be in place over the next number of years we think.

[Batya Levi:]

Okay. Great. Thank you.

[Operator:]

Your next question comes from the line of Amir Rozwadowski. Please go ahead.

[Amir Rozwadowski:]

Thank you very much. Good morning, folks.

[James D. Taiclet:]

Hey.

[Amir Rozwadowski:]

Dovetailing on those prior questions, we have also had heard as some of these carriers look to augment capacity on their networks, they do seem to be looking for ways and means to perhaps place less of an emphasis on the macro side in terms of investment. And there has been some discussion that this could be a potential way to rethink their current contractual obligations with you folks. Would love to hear your thought process around that type of process and discussions that are going on with the carriers.

[James D. Taiclet:]

Our view and we have internal and external analysis that supports this, is that in the environments that I described, Amir, that the macro tower site is going to make the most sense and the existing infrastructure base, again, adding additional equipment to existing tower sites is the most effective way to do this at any kind of scale. So we still believe that's going to be the case. If you look at spending on the radio access network, based again on our internal and external analysis, sort of our view is 95% or so of that radio access network spending is on the macro, the tower base macro site scenarios and rooftops. So, again, 5% on alternatives today. We see that actually growing to 10% over the next number of years, say four years to five years, but that still leaves 95% of the RAN spending in the U.S. in our view remaining on the tower sites. It's the most effective and efficient way, again, we believe, to continue to build up the 4G network that everyone is going to need to do things like voice-over-IP, to do nice solid 4G video but using much higher spectrum bands. The only way, again, tangibly and feasibly to do this in the field, we believe – and where 85% of people live in the United States is still on the macro tower. Yes, there will be some increased spending, mainly in dense urban and urban, maybe 5% to 10% of the total RAN spending, but we still see plenty of upsides for towers and long lease (34

[Amir Rozwadowski:]

And then if I may, as a follow-up, if we think about some of the contracts that you had in place, the MLAs that you have in place, I know that some have recently ended at least portions of them and there is always constant negotiations. As some of these conversations have come up, have the carriers tried to utilize some of these new network technologies as a means to renegotiate lower rates on some of these? And I know that there is one in particular that has brought that up as a potential means to do so. And so any color around that would be helpful.

[Thomas A. Bartlett:]

Well, we don't discuss specific negotiations with specific carriers Amir; we never have. But I think you could just turn to the results. Our guidance this year shows double-digit AFFO per share growth, almost two-thirds of our revenue is still coming from the United States. I think the guidance speaks for itself as to what at least our view is of how networks are really going to get deployed in this country in 2016 and for the next number of years.

[Amir Rozwadowski:]

Thank you very much.

[James D. Taiclet:]

And Amir, that's clearly reflective of the activity that we have seen ending the year and beginning the year of 2016.

[Amir Rozwadowski:]

Thank you very much.

[Thomas A. Bartlett:]

You bet, Amir. Take care.

[Operator:]

Our next question comes from the line of Jonathan Atkin. Your line is open.

[Jonathan Atkin:]

Thanks. So slide seven is interesting where you give the growth rate last year by region. And if we were to look at 2016, are you expecting that LatAm is going to be roughly on par with Asia in terms of core organic growth and then EMEA still to kind of outpace the other two? How do you kind of think about regionally the organic core growth rates over the coming year? Then in the U.S., I was interested in just what types of projects you are seeing either in your backlog or that you are expecting to see that would lead you to anticipate a second half ramp? Thanks.

[James D. Taiclet:]

Hey, Jon. Overall as I mentioned before, our international growth is going up by about 100 basis points on a 15 to 16 basis. And there's a bit of a mix. I'd see the LatAm, we expect it to go up a bit overall. And again, that's reflective of moderation in Brazil, but a bit of a pickup as you would expect, as we expect in Mexico. EMEA is also up a bit. Again, as we said, it was our strongest – our fastest growing market, if you will in 2015 and we expect it to be our fastest growing market again in 2016. And India, India is pretty flat. It's right around that 10% level and we are optimistic about what we have seen coming out of the year in the fourth quarter. It was up close to 11%. So I'm hoping that there might be some upside, actually, in some of those growth rates. And so overall as we mentioned before, the 2015 consolidated growth rate was in that 7.5% to 8% and the 2016 is forecasted to be in that 7% range. So hopefully that gives you a little color on how we expect the regions to pan out in 2016.

[Jonathan Atkin:]

And then just before you turn to the U.S. then, so on India, can you kind of refresh us on Viom, versus non-Viom and how the leasing velocity might differ and just sort of the nature of activity on legacy American Tower versus Viom, once that's under your belts? How qualitatively can we think about the leasing drivers for each of those sets of assets?

[Thomas A. Bartlett:]

Yeah, we finished the year in India in fourth quarter 10% to 11% growth on a core organic basis in the market on our legacy business. We expect to, as I mentioned, to close this transaction before the end of the quarter. And so there will be an integration period that's going to be going on and the management going on for the balance of the year. We are expecting consistent growth, probably not in the first year at the same level that we have in our legacy business as you would expect, but clearly going forward, we expect it to be at that rate. And as Jim mentioned, it really changes the positioning that we have in the market relative to the relationships that we'll have with the major carriers in the market. And so, we would expect overall to be able to pick up the pace of both of those businesses going forward.

[Jonathan Atkin:]

Thanks. And then the second half, ramp in the U.S., if you can sort of comment on what you are seeing in your pipeline or what you expect to happen?

[James D. Taiclet:]

Again, across the portfolio, across the carriers largely what's happening is on one hand, additional spectrum and additional equipment's being from an amendment basis, placed on to existing contracted tower space. And as you see AWS spectrum and now we are hearing about WCS spectrum, even a higher band, if you will, having plans to be deployed in this country. You are going to see those amendments continue and we've got a really nice pipeline of those already. It does take a few weeks and months to get deployment schedules in place and equipment actually installed and billing, but the pipeline is really strong as Tom said. On the other hand, as you go into these higher bands, and you apply carrier aggregation and other approaches to adding those bands to your network, ultimately, you are going to need a more dense network, sites closer together, because, as you go again higher up in bands, you go shorter in effective radius. And if you are trying to create a consistent customer experience and you want to use 700 MHz and 1.9 GHz in the handoff or even on the same transmission site, you are going to have to design to that highest band. And therefore, sites ultimately are going to have to be closer together over time. Again, we have a pipeline of new leases as well as amendments and those leases are driven on one hand by the densification that I just described, and also, by some carriers, also expanding their actual deployment footprint, geographically, based on the benefits they now see of a bigger customer base, versus roaming. So there are a couple of factors that are supporting the new lease side of the equation as well as the amendment side.

[Jonathan Atkin:]

Makes sense. Thanks very much.

[James D. Taiclet:]

You bet.

[Operator:]

We have a question from Phil Cusick, your line is open.

[Philip A. Cusick:]

Hey, guys, thanks. Let's dig into a little bit the Mexico and Brazil markets. Can you talk about what is going on in those markets?

[James D. Taiclet:]

Sure, I will give you an overview and if there's any more specifics, we can address those in follow-up, Phil. Mexico is becoming a much more competitive mobile operator market with the new entrant AT&T, of course. And our position in the country is the largest truly independent and operational provider of communication real estate in that country. So, we are well positioned to serve both the incumbents that are already there, Telefonica and of course America Movil, as well as AT&T as it brings together the Nextel and Iusacell businesses and makes those networks much more robust. So, Mexico is a great environment for us. We are incredibly well strategically positioned to take advantage of it. And so, as Tom said, it's going to be a positive contributor to us this year. Brazil is still strong. Last year was actually quite robust, as far as new leasing. It's going to be robust in 2016, just not at the same level, but there are four, again very competitive well-funded mobile operators there. Three of four – three of the four operators are multinational leaders. Those are Telefonica and America Movil and Telecom Italia, of course. And Oi is sort of the country incumbent – the local country incumbent, also with a very large market share. So, it's probably one of the most evenly-distributed market shares among major operators. And then you have Nextel still operating with its higher ARPU postpaid business as well. So, five carriers competing, I would say, aggressively. The macro environment is a little unsteady right now, but these are companies that are taking, I think a much longer view as well of that market. 200 million people, large and fairly stable middle class. Those of us that operate in that country have a pretty strong conviction that it is going to come out of its current situation eventually a much more healthier and stronger trajectory. So we feel good about where we are at with Brazil. The leasing is going to be robust. Not as robust as last year, though.

[Thomas A. Bartlett:]

Yeah. I would just add – just looking at kind of the core organic growth over the last three years. Brazil in 2014 was generating core organic growth of about 15%. In 2015, it was just over 12% and we are expecting about 11% in 2016. So still very strong, strong growth. In Mexico, though, it's a different trend. In Mexico in 2014, it was about 7%, grew to 8.5% or so in 2015 and we expect it to be over 10% in 2016. So, again, it just kind of demonstrates the diversification that we have in the marketplace and reflects the comments that Jim just mentioned.

[Philip A. Cusick:]

If you look at Mexico, the pace of upgrading networks from one of your competitors, is that still accelerating and can it accelerate even further in 2017 as they get everything together?

[James D. Taiclet:]

We don't comment on specific competitors' state of business or readiness. I think you should go to Telesites, I believe you are referring to for their results. Tom was pretty specific in laying out our results. And Mexico is going to be a very strong contributor to our nearly 12% core organic growth rate for the coming year. So I'd just invite you to ask them what their plans are and we are going to continue to operate our business plan. We are very confident that our sites are lease ready right now. We have been operating there for well over 10 years, going on almost 15 years. And so we're ready and open for business and we are getting lots of it and the competition can come and we will focus on our business.

[Philip A. Cusick:]

Thanks, guys.

[Operator:]

Our next question comes from the line of Brett Feldman. Your line is open.

[Brett Feldman:]

Thanks. Just a couple of quick housekeeping questions on Viom. Since it is in your guidance, are there any remaining approvals or financings or anything else that you need to accomplish in order to get the deal closed? Or is it mostly a back-end exercise at this point? And then you had broken out the contribution of revenue and EBITDA. Are you expecting any material contribution to AFFO from Viom this year?

[James D. Taiclet:]

So I'll speak to the process and Tom, can speak to the contribution, Brett. Good morning. We have one final government approval that we're seeking and expecting. The timing of that we can't necessarily control, but we do feel that it's trending towards a near-term approval. But until we receive it we can't really give you a specific. But it's really essentially down to one remaining government approval and the other closing conditions are essentially met.

[Thomas A. Bartlett:]

And relative to the deal accretion question, Brett, we put in place a capital structure to support all of the transactions that we've closed over the last 18 months. So it's really difficult to isolate any particular transaction. But if you take a look at kind of the EBITDA contribution that they are making coupled with then the incremental benefits from the other three transactions that we closed in 2015, we believe probably the AFFO per share contribution from these businesses is probably in the $0.15, $0.20 range.

[Brett Feldman:]

Okay. And then just another question and maybe I'm over-thinking this, but I heard you guys refer to your focus on communications real estate a few times and not specifically wireless infrastructure, you are now talking about property revenues not site revenues. Should we be thinking that maybe you are looking more broadly than just traditional wireless infrastructure as you are looking to deploy capital or am I really just over-thinking your terminology?

[James D. Taiclet:]

Well, Brett, we are simply in the multi-tenant communication real estate business. And in large part, over the recent history of the mobile deployment, and the industry, that has been largely tower based. We continue to seek other multi-tenant real estate opportunities in the communications space. And I would also offer that we are in the multi-tenant small cell business. At this point in time, based on the spectrum involved, the cost of deployment, the difficulty – relative difficulty on the small cell side of managing the network and the higher operating costs for the carriers, when it comes to actually siting costs and power, electrical power and especially backhaul costs. That's a modest part of at least our business today, because on a multi-tenant basis, our DAS business which we are very proud of actually is about 3% of our U.S. tower operations revenue right now. We'd love to grow that. It is growing fast and 30% growth last year, which was terrific. Secondly, we have rooftops which are also serving urban environments and are a multi-tenant offer and those are about another 3%, Brett. And then we have other multi-tenant offerings like generators and such at the sites, which are about 1% of the U.S. revenue base. So all-in, we are about 7% today in the U.S. This is U.S. revenue percentages, in non-tower multi-tenant leasing, and we would love to grow all portions of that, but we are going go after the ones that we think have the best return and the best AFFO per share growth trajectory. And that's why you see us in the proportions that we are today. But we – those could be adjusted over time if the conditions for multi-tenant leasing improve, because we will take full advantage of them when they do.

[Brett Feldman:]

When you say adjusted, you mean maybe the mix of certain of those assets could change or there would be new asset categories?

[James D. Taiclet:]

It could be both. We're in this for the long haul. And we can't predict what the next technology is necessarily going to be or what the carrier adoption of those will be in the United States. But we are completely positioned to cross the waterfront that we're aware of right now to participate in these things. We are the number one indoor small cell independent operator in the United States with over 300 locations as you know. And we're ready to grow that business. We have already grown it 30% last year. So we're positioned in the place that we actually think has by our own experience has the most multi-tenant opportunities in the small cell space is the indoor small cell space. And our data that we do have Brett, just as a reminder that supports that is, our indoor or venue-based small cell which include racetracks and stadiums, et cetera have a tenancy right now of 2.3 tenants per system. We do have a limited set of outdoor DAS properties which we feel are going to become multi-tenant, but they are slower ramp up. They are a little over one right now, so we are very, very focused on two things at the moment in the small cell space. Those are primarily indoor DAS systems and secondly outdoor systems in specific locations where we think there will be enough tenancy demand because of the situation. And those are very limited, we think at this point that will get us to the ROIC objectives that we have. So we are playing on all the bases, Brett, but we're really focusing on where we think the tenancy ramp up is highest and that's towers and indoor small cells right now.

[Brett Feldman:]

Very clear. Thank you.

[Operator:]

Our next question comes from the line of Michael Rollins. Please go ahead.

[Michael I. Rollins:]

Hi. Thanks for taking the questions. A couple if I could. First, I think the first pillar that you talked about was the scale of market and as you survey the global portfolio that you have, are there markets where you feel you are not at that scale position that you want to be at and so you either have to scale up or scale out of that market? And then the second question I would ask just on the property side, can you give us an update of where you are in terms of your control of property and how investors should think about the growth of the cash cost of property for you over time? Thanks.

[James D. Taiclet:]

Sure, Mike, it's Jim. I'll take first one and Tom will second. When it comes to scale of market, I look at it at two levels. Level one is what's the market position we need in a given country to cover our SG&A base, and hit our risk adjusted return on invested capital hurdle rate for that country? And I would say the vast majority of our markets and all of the markets – in fact all of the markets that are of large population, we have already attained level one scale. All right? In other words, we are in a position where we can cover SG&A and hit our return or already have hit our risk adjusted return for the market. What we would really like to get to in the major markets and I will go through those in a second, is what I like to call level two scale, which means not only can you cover your SG&A and meet your return on investment targets or exceed them, you can far exceed them because you've got an asset position that puts you in a situation where you can be more of a strategic partners to the mobile operators in that country. And so let's just walk quickly through the biggest markets. In the U.S., we are clearly at level two scale. We've got the biggest tower portfolio. We've got the leading multi-tenant indoor small cell portfolio. We've got a great position here and master lease agreements of one sort or another with all the carriers. If you go – if you move south in Mexico, again as I mentioned clearly the number one independent tower operator there by revenue and readiness of assets if you will, down to Brazil. Again, clearly the number one operator serving all of those mobile operators in a partnership level, I would say, approach. And moving to the other large markets very quickly, in Germany, we believe we are the largest independent. Even though for us, it's a relatively small market, it's an important country. In Nigeria, I would say we probably could use another acquisition to get the level two scale. But we are off to a really great start with Airtel right now and in South Africa, we're at least at level one and if we could get another asset, we would clearly be at level two. And finally in India, pre-Viom, we were squarely in the level one category and doing really well in that market with the assets we had, but the Viom transaction sort of launches us well into level two territory, we will be the number two independent operator. And that's if you sort of count Indus as an independent. So therefore, I think when you go across the landscape of the major markets globally, that we have elected to be in and we have selectively chosen those, Mike, as you know, we are at level two scale or getting there, in the case of Viom.

[Thomas A. Bartlett:]

And Mike, just to follow, just to add to what Jim said. I mean, to the extent that we don't see a path or a runway to getting to that scale, we will move out of that market. Panama is an example. Relatively small market, but we didn't see a path or runway to be able to get to the kind of scale that we felt we needed to, and so we exited that market and redeployed that capital in other markets where we do feel we have the scale or clearly have a path to get to that scale. On the second question, relative to the investments that we have in the controlling interests, there are really three. Two are really very small. Uganda and Ghana, relatively small. We have controlling interests. We manage the properties very well. Strong partners. Don't anticipate any changes there. If we did, it would be immaterial to our overall results. The one would be on the – Michael, were you talking about land or were you talking about our ownership of our properties?

[James D. Taiclet:]

Minority interests.

[Thomas A. Bartlett:]

Minority interests?

[Michael I. Rollins:]

On the second question – well, actually if you want to go through the minorities, that is great. I was actually asking about the property owner of the towers, but we would welcome both.

[Thomas A. Bartlett:]

Okay. Well, let me just finish, then, on – since I'm on the path and on the minorities, the other one is clearly the Viom, because we are going to be picking up 51% interest there. And as we talked about the last time when we talked about this particular transaction, the path there is then to be able to merge our two businesses in the market, as you would expect. And then ultimately see what happens with the remaining share to the extent that we did then invest to be able to get to that 100%, clearly we believe that the integration or the synergies that we would be able to generate from that business would more than offset any of the incremental costs that we would be incurring to pick up that 100% ownership. On the properties themselves, on the land themselves in the United States, we said a record year in 2015 in terms of the properties that we affected. We affected about 3,000 of our properties and about two-thirds of those were ones that we actually extended for periods up to 25 years to 30 years to 40 years. The balance were properties that we actually did acquire. I think the statistic right now is that 63%-65% of our properties we either own or have for over 20 years. The average term on it is about 22 years. So we remain very active in that marketplace and you can see from our CapEx, we expect to actually step up a bit in terms of the overall land with the Verizon tower portfolio that brought in a sizable number of new properties that we're looking to extend to the extent possible. So, yeah, very active in the U.S. and very focused. The benefits of what we had done last year from an acquisition perspective, I think is generating a $5-plus million run rate benefit on the cost line. So, it's definitely not just shoring up the property underneath the towers, but it's also giving us a bend and a curve if you will, from a cost perspective on the land side.

[Michael I. Rollins:]

Thanks very much.

[Thomas A. Bartlett:]

Sure.

[Operator:]

And our last question comes from the line of Ric Prentiss. Your line is open.

[Ric H. Prentiss:]

Thanks. Good morning, guys. Thanks for fitting me in.

[James D. Taiclet:]

Hey, Ric.

[Thomas A. Bartlett:]

Hey, Ric.

[Ric H. Prentiss:]

A couple of quick ones I think they will be. Piggybacking on Brett's question about property, would you consider going into data centers? Second question is I think Tom mentioned the DCOM (59

[Thomas A. Bartlett:]

Ric, that's an easy one, it was about $37 million and it's about the same in 2016, Ric.

[Ric H. Prentiss:]

Okay.

[James D. Taiclet:]

And on the data center question, Ric, that's not in our wheelhouse, if you will. We're operating on the radio access network very effectively. We think that's where our customer contract and relations are. And our expertise, and it's a really deep expertise in this management team, and broadly through the organization. So I think we will focus on the radio access network communications real estate.

[Ric H. Prentiss:]

That's what I was hoping to hear. Then the other two quick ones, there are some towers left on your TIM transaction. Any thoughts about where you are in that acquisition? And Tom, on Viom, you mentioned that you might roll American Tower India in. Would there be a contribution to you from the other Viom owners that would help the balance sheet or would it just change the ownership stake?

[Thomas A. Bartlett:]

On that one, just change the ownership stake, Ric, is I would view. So, it would increase our overall share of the business.

[Ric H. Prentiss:]

And the remaining TIM towers?

[Thomas A. Bartlett:]

Oh, yeah. There just under 1,000 sites that are left on that and that will happen over time where we are looking at kind of one at a time to make sure that we are interested in the site. Some we are, and some we are not but there are about 1,000 that we would expect to pick up – to move on if you will, probably over the next 12 months or so.

[James D. Taiclet:]

And Ric, those largely have to do with accessing landlord consents and if the consents don't come as Tom said, the operator will retain those but generally those consents come and we don't want to rush the negotiation of those individual sites. We would rather play it out, get the best transaction for ATC de Brazil or turn the site back.

[Ric H. Prentiss:]

Perfect. Thanks for those quick answers.

[James D. Taiclet:]

Yeah.

[Leah C. Stearns:]

Great. Well, thank you, everyone, for joining us. And you can reach those of us in the IR team or at ATC this afternoon, if you have any further questions.

[James D. Taiclet:]

Thanks, everybody. Have a great weekend.