American Tower Corporation (AMT) Q3 2012 Earnings Report, Transcript and Summary

Good morning. My name is Tanisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Tower Third Quarter 2012 Earnings Call. [Operator Instructions] After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] Thank you, Ms. Leah Stearns, Vice President of Investor Relations and Capital Markets, you may begin.

Great. Thank you. Good morning, and thank you to everyone for joining American Tower's Third Quarter 2012 Earnings Conference Call. We have posted a presentation, which we will refer to throughout our prepared remarks under the Investors tab on our website, www.americantower.com. Our agenda for this morning's call will be as follows. First, I will provide a brief overview of our third quarter and year-to-date results. Then Tom Bartlett, our Executive Vice President, CFO and Treasurer, will review our financial and operational performance for the quarter, as well as updated outlook for 2012. And finally, Jim Taiclet, our Chairman, President and CEO, will provide closing remarks. After these comments, we will open up the call for your questions. Before I begin, I would like to remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include those regarding our 2012 outlook and future operating performance, including AFFO growth and dividend per share growth, our pending acquisitions, our stock repurchase program and REIT distribution and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's press release, those set forth in our Form 10-Q for the quarter ended June 30, 2012, and in our other filings with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. And with that, please turn to Slide 4 of the presentation, which provides a summary of our third quarter and year-to-date 2012 results. During the quarter, our rental and management business accounted for approximately 98% of total revenues, which were generated from leasing income-producing real estate, primarily to investment-grade corporate tenants. This revenue grew 13.5% to approximately $698 million from the third quarter of 2011. In addition, our adjusted EBITDA increased 15.7% to approximately $464 million. Operating income increased 29.5% to approximately $296 million, and net income attributable to American Tower Corporation was approximately $232 million or $0.59 per basic and $0.58 per diluted common share. During the quarter, we recorded unrealized noncash gains of approximately $46 million, due primarily to the impact of foreign currency exchange rate fluctuations related to over $1.6 billion of intercompany loans denominated in currencies other than our local currency. The intercompany loans have been utilized to facilitate the funding of our international expansion initiatives and general operations. For accounting purposes, at the end of each quarter, these loans are remeasured based on the actual FX rate on the last day of the quarter end. As a result of a weaker U.S. dollar as of September 30, 2012, compared to June 30, 2012, the remeasurement of these loans generated noncash gains for accounting purposes. Turning to our year-to-date 2012 results. Our rental and management revenue grew 18.2% to over $2.06 billion for the 9 months ended September -- from the 9 months ended September 30, 2011. In addition, our adjusted EBITDA increased 19.3% to nearly $1.4 billion. Operating income increased 25% to approximately $840 million, and net income attributable to American Tower Corporation was approximately $502 million or $1.27 per basic and $1.26 per diluted common share. And with that, I would like to call -- turn the call over to Tom, who will discuss our results in more detail.

Thanks, Leah, and good morning, everyone. I'm pleased to report that we had another solid quarter and are on pace to complete yet another very strong year. Our signed new business exceeded our expectations, driven by continued global leasing momentum, and revenue growth was augmented by the construction or acquisition of nearly 1,500 communication sites. In addition, we signed a new MLA with T-Mobile, which extended our average remaining lease term with that customer to 9 years and locked in a significant amount of incremental contractually guaranteed revenue, which, on a consolidated basis, now stands at nearly $19 billion. As a result of these items, we've increased our full year 2012 outlook for total rental and management revenue and adjusted EBITDA. This morning, I'll begin with more detail on our third quarter financial and operational results and conclude with a discussion of our updated expectations for the full year. If you'll please turn to Slide 5 of our presentation, you will see that for the third quarter, our total rental and management revenue increased by over 13% to $698 million. On a core basis, which we will reference through this presentation as reported results, excluding the impacts of foreign currency exchange rate fluctuations, noncash straight-line lease accounting and significant onetime items, our consolidated rental and management revenue growth was over 18%. This 18% growth includes core organic revenue growth or same-tower growth of just under 7%, which was driven by the strong new business commencement activity experienced on our existing sites. The balance attributable to growth from the addition of almost 13,000 new sites to our portfolio since the beginning of the third quarter of 2011. Our growth from new sites has primarily been generated from our investments internationally, with over 95% of our 2012 new communication sites located in our international markets. We believe these sites will continue to see solid demand as new technologies are deployed, new spectrum is issued and wireless carriers support the growing demand for wireless data on their networks. Turning to Slide 6. During the third quarter, our domestic rental and management segment's revenue growth was driven primarily by an increase in cash-leasing revenue from our legacy properties complemented by a $4 million straight-line revenue boost from the signing of our new MLA with T-Mobile. Reported domestic revenue grew by 10% to approximately $480 million, and core revenue growth was about 9%. Our domestic core rental and management segment organic revenue growth was approximately 6.2% in the quarter, which reflects new cash-leasing revenue on existing sites in the U.S. This leasing activity continued to be primarily generated by AT&T and Verizon as they continue to expand their 4G footprints. Notably, our total signed new business in the quarter, which we would expect to commence over the next year or so, was the highest we have seen since 2008. Similar to the trends we saw last year and in the first half of this year, the split between signed amendments and new leases in the third quarter was about 70% and 30%, respectively. The remainder of our core growth, about 3%, was generated from the nearly 500 new communication sites and approximately 1,800 property interests we've acquired or constructed in the United States since the beginning of the third quarter of 2011. Also for the quarter, our domestic rental and management segment gross margin increased approximately $42 million or over 12%, representing a year-over-year conversion rate of about 98%, which reflects our strong ongoing property-level cost management. As a result of our growth in gross margin, operating profit increased over 13% to $368 million and grew to 77% of U.S. rental revenues. Turning to Slide 7. During the quarter, our international rental and management segment reported revenue increased 22% to $217 million. This segment's growth met expectations despite being negatively impacted by 0 margin pass-through revenue coming in approximately $5 million lower than originally anticipated. International core revenue growth was over 40%, and international core organic growth or same-tower growth was about 8.4%, which continued to be driven primarily by strong leasing activity from tenants such as Telefónica and América Móvil in Latin America, Vodafone and MTN in South Africa, as well as Vodafone, Bharti and Aircel in India. Year-to-date tenant leasing activity in our international markets continues to exceed our international expectations, initial expectations, and we expect 2012 to be the best year of international lease-up in the company's history. Over 90% of our signed new business internationally continues to be in the form of new leases, rather than amendments. We continue to pursue our diversification strategy by making significant investments internationally. During the quarter, we constructed 580 sites and acquired an additional 850. In total, we have added over 12,000 communication sites to our international portfolio since the beginning of the third quarter of 2011, contributing 32% to our international core growth. As we add new sites to our international portfolio, our pass-through revenue continues to increase as we are able to share a portion of our operating cost with our tenants. During the third quarter, our international pass-through revenue was about $57 million, which is up about 6% from the year-ago period. From a reported gross margin perspective, our international rental and management segment increased by nearly 20% year-over-year to $136 million, reflecting a 59% gross margin conversion rate. Excluding the impact of pass-through revenue, our gross margin and gross margin conversion rate would have been 85% and 63%, respectively. This conversion rate is somewhat lower than historical trends due primarily to the addition of our newly acquired Uganda sites, which have lower day-one margins than the legacy portions of our international portfolio. Our international rental and management segment SG&A expense increased by approximately $3 million from the third quarter of 2011. This increase was attributable to costs associated with establishing our presence in our new markets, primarily Uganda. As a result of our international rental and management segment gross margin growth, our International segment operating profit increased almost 21% to roughly $111 million, and our International segment operating profit margin was 51% and, excluding the impact of pass-through revenue, exceeded 69%. Turning to Slide 8. Our reported adjusted EBITDA growth relative to the third quarter of 2011 was nearly 16%, with our adjusted EBITDA core growth for the quarter at over 19%. Adjusted EBITDA increased by approximately $63 million, primarily as a result of an increase of about $83 million in total revenue, which was partially offset by an increase in direct expenses, excluding stock-based compensation expense of approximately $17 million. Finally, SG&A, excluding stock-based compensation expense, increased $3 million from the year-ago period. For the quarter, our adjusted EBITDA margin was 65% as compared to approximately 64% in the year-ago period. Excluding the impact of international pass-through revenue, our adjusted EBITDA margin for the quarter was about 71%, and our adjusted EBITDA conversion rate was nearly 80%. And during the quarter, adjusted funds from operations, or AFFO, increased by approximately $26 million or over 10% relative to AFFO in Q3 2011. Core growth in AFFO, which excludes the impact of approximately $11 million related to onetime start-up CapEx in our new international markets and the impact of foreign currency exchange rate fluctuations, increased by over 20%. I'd like to point out that our levels of nondiscretionary capital spending, thus far, in 2012 have been somewhat higher than historical levels and, consequently, have impacted our AFFO growth. This increased year-to-date spending has been primarily attributable to over $18 million in onetime market start-up capital expenditures in Colombia, Ghana and Uganda, where we are investing in network operations centers in a number of our newly acquired sites as we bring them up to our standards. These costs were contemplated in our acquisition DCF valuation analysis, and we expect capital improvement cost per tower to revert to more normalized levels in these markets once the majority of the upgrade projects have been completed. As outlined on Slide 9, we deployed over $150 million via our capital expenditure program in the third quarter, split about evenly between our domestic and international rental and management segments. We spent about $79 million on discretionary capital projects associated with the completion of the construction of 644 sites globally. Of these new builds, 64 were in the U.S. with the remainder throughout our international markets. We continue to utilize our discretionary land purchase program in the U.S. to acquire land interests under our existing towers and increased spending under this program to approximately $21 million in the third quarter. Year-to-date, we have either acquired or extended over 600 leases, which is in line with our initial expectations despite deploying less total capital than we originally anticipated. This is a reflection of our ability to continue to close land transactions at attractive multiples and a testament to our dedicated land acquisition team. As a result of our land acquisition activities, we've typically been able to reduce land expense growth in the U.S. by about 2% to 3% per year, and the same has held true in 2012. As of the end of the third quarter, we owned or held long-term capital leases under nearly 30% of our domestic sites and have purchased land under 2,500 of our properties and extended the lease term on additional 2,700 by an average of approximately 20 years over the last 5 years. We will continue to selectively acquire land when we can meet our risk-adjusted hurdle rates while also proactively extending our end-of-term maturities. Our third quarter 2012 spending on redevelopment capital expenditures, which we incur to accommodate additional tenants on our properties, was $18 million. Redevelopment spending continues to be slightly higher than historical levels due to spending in our legacy Latin American markets, where we are seeing strong lease-up trends, and are redeveloping some of our sites to ensure that we are well positioned to capture this incremental demand for our tower space. Finally, our capital improvements in corporate capital expenditures have increased in tandem with our increasing tower assets, in addition to the start-up maintenance CapEx in Ghana, Uganda and Colombia I discussed earlier. In aggregate, our capital improvement in corporate capital expenditures came in at approximately $33 million during the quarter. From a total capital allocation perspective, year-to-date, we have deployed nearly $1.5 billion including distributions of over $260 million to shareholders, over $375 million on capital expenditures and more than $800 million for the acquisition of over 3,500 communication sites globally. Finally, we have spent about $17 million year-to-date to repurchase shares of our common stock, pursuant our stock repurchase program. Moving on to Slide 10. We are increasing our outlook for total rental and management segment revenue. This is driven primarily by outperformance in our core business, as well as the $17 million of incremental revenue that we will record in 2012 due to the signing of our new MLA with T-Mobile, of which approximately $15 million is attributable to straight-line revenue. The core business outperformance that we are seeing is attributable to continued strong new leasing trends in many of our served markets, as well as contributions from newly acquired sites that we've integrated into our portfolio. Partially offsetting some of this revenue outperformance is approximately $8 million of lower than previously forecasted pass-through revenue. Although this impacts our top line revenue growth, the impact of the reduction in pass-through is essentially 0 to EBITDA, and as a result, positively impacts our margins. In summary, we now expect to grow total rental and management revenues nearly 17% year-over-year at the midpoint, and our core growth expectations remain at about 20% for the year. Additionally, on a core organic basis, we expect the U.S. to grow at approximately 7% for the year with our international segment core organic growth expected to be in the low double digits. Turning to Slide 11. We are increasing our outlook for adjusted EBITDA by $35 million. This increase is driven by the increase in revenue outlook attributable to our signing of the new T-Mobile MLA and the additional EBITDA outperformance of approximately $16 million in the U.S. and about $2 million in our International segment. As a result, we are now expecting adjusted EBITDA to increase to $1.87 billion at the midpoint, driving reported growth to 16.9% and core growth to nearly 20%. For the full year, we expect our EBITDA margin to be nearly 66%, which is about 300 basis points higher than 2011 despite the addition of more than 5,400 new assets in 2012. Moving on to AFFO. We continue to expect AFFO to increase to nearly $1.2 billion at the midpoint, driving reported growth of over 13% and core growth of over 17%. The conversion of incremental EBITDA in our outlook to AFFO has been impacted by a few different factors. First, of the $35 million increase in EBITDA, approximately $20 million is attributable to noncash straight-line impacts largely due to the new T-Mobile MLA, which are excluded from AFFO. Additionally, we have increased our outlook for nondiscretionary capital expenditures by $13 million as a result of 2 key capital projects that we've decided to commence and accelerate spending on during the fourth quarter. These 2 projects include the deployment of a network operations center and corresponding lighting system upgrade in the U.S. and an upgrade to our disaster recovery systems in the U.S. With respect to the installation of our NOC and lighting system upgrade, over the next 12 months, we are now planning to spend about $20 million, which includes the installation of monitoring equipment and the replacement of approximately 2,500 tower site lighting systems across our U.S. portfolio. We now expect that up to $10 million of this spending will be incurred in the fourth quarter with the remainder in the first half of 2013. We expect this project will yield significant benefits, including: reducing site operating expenses by approximately $4 million on a run rate basis, beginning in the second half of 2013; increased efficiencies with our operations personnel; and lower energy usage by our lighting systems, due to the replacement of incandescent bulbs with energy-efficient LED bulbs. In addition, we are planning to upgrade our disaster recovery systems in the U.S. and are expecting to spend approximately $3 million in corresponding corporate capital expenditures during the fourth quarter. We've decided to begin spending on both initiatives during the fourth quarter as we believe they will drive long-term benefits for our business. As a result of these capital spending initiatives, our continuing start-up maintenance capital projects in several foreign markets and the seasonality of our international cash tax payments, our outlook implies that fourth quarter AFFO will be relatively flat compared to the same period last year. And as I said early though, we expect reported full year AFFO growth of over 13% and core growth in AFFO of over 17%. Turning to Slide 12. We continue to pursue our disciplined approach to capital allocation. We now expect to deploy between $500 million and $550 million in CapEx during 2012, which includes spending on the construction of between 2,000 and 2,200 new sites. Year-to-date, we spent over $820 million on acquisitions and are currently projecting total expenditures for acquisitions for the full year of between $900 million and $1.1 billion. This includes deals closed year-to-date, as well as additional capital we have committed to fund the acquisition of between 500 and 700 new sites we believe we will close by year end. Considering these investments, and coupled with our expected build program, on a pro forma basis, we expect to have well over 51,000 sites by year end. Finally, in 2012, we continue to project that our primary method of returning capital to shareholders will be our regular dividend, which, for the full year, we now expect will be between $0.89 and $0.90 per share or approximately $355 million at the midpoint, reflecting an AFFO payout ratio of about 30%. In addition to the dividend, we also utilize our share repurchase program as another means of returning capital to shareholders and currently anticipate the pacing of that program over the last couple months of the year to increase. By year end, we are targeting a net leverage range of approximately 4x fourth quarter annualized adjusted EBITDA, which reflects spending for our pending acquisitions, capital expenditures, our fourth quarter dividend and the impact of this accelerated buyback pacing. We remain firmly committed to our operating target leverage range, and we'll continue to manage our capital deployment strategy, including share repurchases, within our targeted range. Given our robust acquisition pipeline, if other accretive capital deployment opportunities arise in the next few months, we may adjust the pacing of our buyback. Turning to Slide 13. We continue to be extremely focused on deploying capital while simultaneously increasing AFFO and return on invested capital. Since 2007, we've invested nearly $10 billion in capital expenditures, acquisitions and stock repurchases. Concurrently, we've increased both our AFFO and AFFO per share on a mid-teen compounded annual basis. In addition, using the midpoint of our 2012 outlook, we are projecting a 2012 return on invested capital of approximately 10.7%, which represents an increase of 170 basis points since 2007. We believe these trends demonstrate our ability to take advantage of the operating leverage inherent in our business model to drive rapid profitable growth on a global basis while simultaneously acquiring higher-growth assets to complement our existing portfolio. We have been successful at driving this growth through our disciplined, consistent, long-term capital allocation strategy, which is managed with the construct of both the required return hurdles thresholds and our targeted capital structure. We believe this proven capital allocation strategy will continue to create significant value for our shareholders. Turning to Slide 14, and in conclusion, we've had a very successful year so far and are excited about finishing 2012 strong. We've continued to deliver solid growth in revenue, adjusted EBITDA and AFFO as a result of robust leasing activity throughout our served markets. We successfully completed our MLA with T-Mobile USA and, as a result, have an average remaining lease term with our top 4 U.S. customers of over 8 years. Exiting the quarter, we had nearly $19 billion in contractually obligated revenue backlog globally, representing nearly 7 years worth of revenue. For the remainder of 2012, we expect global demand for our sites to provide strong momentum as we close out the year, and our balance sheet remains strong with our liquidity position at $2.4 billion as of the end of the third quarter. Looking forward to 2013, consistent with our historical practice, we'll be providing you with our official 2013 outlook on our year-end call in February. However, I'd like to close out my remarks with a few expectations we have for the business. First, we expect the current leasing trends to continue with our major customers in the U.S. remaining focused on their LTE deployments. Internationally, in markets like Brazil, Colombia and South Africa, we are expecting strong demand as our customers continue making investments in their initial data networks and begin to spend on the heels of recent spectrum auctions. Second, we continue to maintain a robust M&A pipeline, and we'll manage our capital allocation consistent with prior years, targeting our leverage at year-end 2013 in the 4x range. We believe that there will continue to be meaningful opportunities to increase our scale across many of our served markets and expect to utilize our experienced local teams to drive significant growth. Given the trends we are seeing now and expect to see over the next 2 years, we believe that we will drive continued double-digit core growth in leasing revenues, adjusted EBITDA and AFFO as we move into 2013 and beyond. Internally, we've set our sights on achieving core AFFO growth in the mid-teens. And while it is up to our board's discretion to declare dividends, we expect dividend per share growth of about 20% per year over the next 5 years and believe that we are well positioned to do so. With that, I'd like to turn the call over to Jim. Jim?

Thanks, Tom, and good morning to everyone on the call. First, we hope that everyone joining us and their families are safe and sound in the wake of Hurricane Sandy. As of this morning's U.S. operational report at American Tower, all of our employees are safe, and none of our towers are down. The most significant effect of the storm has been loss of grid electrical power. Of the roughly 4,600 American Tower sites in the affected area, approximately only 200 have lost grid electrical power as a result of the storm. While the loss of power does not adversely affect the tower directly, except for the interruption of aviation lighting at the top of our taller structures, it does render the wireless carriers transmission equipment inoperative in cases where they have not installed backup power systems. However, in those cases where the carrier has elected to subscribe to our shared generator service, we have had 100% uptime, which is a credit to our operations teams. But in any and all of these cases, our field technicians are currently working closely with their customer counterparts to get wireless service back up and running for everyone, everywhere that power outages have been experienced. As in their response to the hurricane and now turning to the business more broadly, American Tower's talented and dedicated employees continue to demonstrate their ability to execute on the promise of the tower leasing business on a global basis. Once again, our teams from Boston to Johannesburg delivered great results in the third quarter with over 18% core growth in tower revenue, adjusted EBITDA and AFFO per share. Our strategy is straightforward, and it's working. This is to be the worldwide leader in mission-critical real estate leasing for the fast-growing mobile communications industry. Our company's foundation is the U.S. market. And based on how the domestic mobile communications industry is developing, as Tom said, we expect many years of increasing demand for our tower space. All of our original hypotheses about the U.S. are playing out. First, the American consumers will drive smartphone and advanced device penetration toward 100%. Second, that leading U.S. wireless carriers can profitably progress toward this penetration rate. And third, these carriers will continue to invest in network quality and capacity to sustain their competitiveness. For example, AT&T just reported an 18% increase in data revenues last quarter. And based on the recent agreement with SOFTBANK, Sprint is receiving an infusion of cash that will help accelerate its technology modernization program. T-Mobile should garner cost, scale and capital markets benefits from its planned merger with MetroPCS. Verizon, for its part, continues to push deployment of its advanced LTE network, setting the pace for the industry. Notably, we recently completed the new master lease agreement with T-Mobile in the U.S. And the result -- as a result, we now have 3 out of 4 of our major U.S. customers or nearly 60% of our current U.S. revenue under non-cancelable comprehensive leases with a weighted average remaining current term of over 8 years. These contracts have enabled us to lock in medium-term committed cash revenue growth from amendments related to our customers' network upgrades while also mitigating any potential churn risk from these customers. In addition, the contract structure leaves open the opportunity for us to achieve revenue growth in excess of the original commitment levels, in cases where our customers exceed established tower sites loading limits or entitlements. As a result, today we are even more confident in our U.S. segment's ability to continue to steadily generate 6% to 8% core organic growth into the future. We've also observed an evolving development that should enable all 4 of the national U.S. carriers to compete successfully in very high-speed LTE-based services with high penetration of the population. We're starting to see each of these major carriers to be increasingly matching specific categories of spectrum holdings to align with variations in population density and the resulting capacity requirements for their advanced mobile networks. We currently expect our largest customers in the U.S., those with the greatest depth and breadth of spectrum assets, to eventually prioritize their lower-frequency cellular band spectrum holdings for an overall coverage brace across their served territory and for the bulk of capacity needs in rural and lighter suburban environments. This is the base network. And as the base spectrum bands become more heavily used, over time, they can be augmented by targeting mid-ranged spectrum bands, such as 19 megahertz, to be more focused on denser suburban environments for additional capacity. And for very high concentrations of capacity demand, such as in dense urban environments, higher-frequency spectrum above 2.0 gigahertz can be brought online ultimately and effectively deployed to further strengthen the base of coverage as 4G networks get more and more heavily loaded over the next few years. Over a period of time, this matching of spectrum brands towards their optimal population density assignments should assist our wireless carrier customers to effectively and efficiently increase capacity to profitably then offer advanced services to an ever-increasing number of users across a full range of geographies. This will then support strong demand for our tower sites well into the future in urban, suburban and rural environments. Over time, we anticipate that this phenomenon may translate to some of our international markets as well. That is, carriers matching spectrum to capacity requirements based on population density and capacity concentration. Furthermore, as time goes on, when unit cost for smartphones and LTE transmission equipment declines, emerging markets with more modest GDP per capita will also be able to enjoy the benefits of these advanced technologies, even with lower wireless ARPUs. We, therefore, continue to believe our international diversification strategy will sustain core organic growth rates 200 to 300 basis points above the growth rates even generated by our U.S. segment. During the third quarter, we continued to see solid leasing with the majority of our international signed new business coming from multinational investment-grade tenants, such as Bharti, Vodafone, MTN and América Móvil. Our international presence has positioned us to benefit from the network investments of these telecom leaders and other wireless service providers that are being made globally. Even that, our -- given that, our international markets tend to be earlier, or even much earlier in the technology cycle, the growth opportunity for ATC should continue even further into the future. The potential for us to attain an extended growth trajectory is one of the main motivators of our global strategy. Another key motivator is the much broader array of asset acquisition and investment opportunities that we have available to us. American Tower can, therefore, pick and choose among numerous target markets at any given time to secure the best value opportunity. This has contributed significantly to our ability to expand both AFFO per share and, importantly, return on invested capital simultaneously over a multiyear period. Before I wrap up and we take your questions, I'd like to highlight our commitment to delivering compelling total returns to shareholders through a combination of growth in both AFFO per share and our recurring dividend. On one hand, we do intend to move our financial leverage ratio towards 4.0, the midpoint of our established target range through asset acquisitions and share repurchases when the pipeline's a little bit lighter. Today, we're also projecting as Tom said, and given our anticipated REIT tax position and corresponding dividends requirement going forward, our expected average compound annual growth rate in those dividends over the next 5 years will be 20%. Each dividend distribution of the company will, of course, be determined and declared by our Board of Directors based on the circumstances pertaining at the time of each dividend proposal to them. So thank you for joining us on the call today, and we'll now open up the line for questions.

[Operator Instructions] You have a question from the line of Ric Prentiss. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: First question for you, on Slide 11, when you talk about the adjusted EBITDA and AFFO guidance, it shows that the T-Mobile deal added $17 million in EBITDA, but you had a straight-line changes of $20 million. So I'm wondering, were there's some land lease changes also in the straight line, or can we think about what the cash benefit on an EBITDA basis was for T-Mobile in 2012?

Yes, sure, Ric. I mean, of the $17 million, $15 million of that was straight line. So $2 million was from cash, and then there's an additional $5 million broken into 2 pieces. We had an -- some additional straight line in one of our international markets of a few, and a couple million dollar lower straight-line impact, if you will, from land in the United States. So that's how you got in the... Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: And then, obviously, spending money on disaster recovery system sounds like a very good idea right now, as well as the other projects. As you think about the AFFO spending in 2013, I think you mentioned more normal levels in the international arena once the updates or upgrades are done. What should we think about as the kind of normal maintenance CapEx level in the U.S. and then internationally?

Well, as you know, I mean, our maintenance in corporate CapEx has historically been highly correlated to our tower base, which is what you would expect. And historically, it's been in that kind of $1,300 to $1,500 per tower per year. This year, the rate is just about $2,000, just under $2,000, given those onetime CapEx spends in the field and on our systems. I'd -- I would expect, Ric, that rate to approach back to those more normal levels, say, over the next 18 months or so. I mean, as I mentioned, we have some of the U.S. spend is continuing in the -- into the first half of 2013. We still have some additional spending that we're doing in -- on some of the NOCs, in particular in Colombia and down -- and over in Ghana. So I guess what I'm saying I think over this -- to the second half of next year, you'd see it start to come back to more and more normal levels as we've seen in the past. But we contemplated all the capital that we're currently spending now in all of our models, and it just happens to come through and impact AFFO. So for the year, we're still expecting reported over 13% growth, and on a core basis, over 17%. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: Right. And that $1,300 to $1,500 per tower maintenance, should we split that between U.S. and international? Because I assume international is a probably lower maintenance cost, given the heights are lower and the costs are probably lower.

Yes, and that's exactly right. I mean, in the U.S., we're $1,500 probably to $1,700, and in the international markets, in the $1,000 to $1,200 kind of range and depending upon the market. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: And then just one more quick cleanup. On the straight line for T-Mo, was T-Mo in for the full third quarter? So as we think about that annual adjustment of $17 million and $15 million for T-Mobile, how many months should we think about was equivalent to?

Yes. What we're talking about there is roughly 4 months. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: 4 months.

Your next question comes from the line of Phil Cusick of JPMorgan. Philip Cusick - JP Morgan Chase & Co, Research Division: Just, first, to quickly clarify on the extra investment in the third quarter, Ghana, Uganda, et cetera. Is that going to be repeated at all in the fourth quarter?

Well, that was -- the numbers that we've talked about there, it's roughly $25 million. That was for the whole year. So there'll be continued spending in the fourth quarter, Phil, as we continue to pass it out, and probably about $7 million of that will be spent in Q4. Philip Cusick - JP Morgan Chase & Co, Research Division: Got it.

And the balance, the other element of it, which was the up to the $13 million, a good piece of that will be spent in the fourth quarter and continue up to -- in the first half of the year. And that's why I mentioned the additional $10 million that will be spent in the U.S. on some of the network operations spending in the first half of 2013. Philip Cusick - JP Morgan Chase & Co, Research Division: Right. And then can you give us any visibility into next year? What do you see from carriers in terms of cell splitting as they come to the later parts of their amendment activity?

Phil, it's Jim. We expect for the next couple of years that, again, the majority in the U.S. of network development by the major carriers is going to be in the form of amendments, by and large. In the 3- to 5-year timeframe, it's going to move back towards more of a 50-50 split for what we see amendments versus new leases. And that will be when the co-locations really materially start to kick in. So there are obviously time differences here. Verizon's got sort of an earlier start in some markets than, say, a T-Mobile. So you'll see this migration probably begin to happen late next year into 2014. But I think it really becomes significant in 2015 and beyond.

Our next question comes from the line of Jonathan Schildkraut.

Yes. I'd like to ask a follow-up question on the international investments. This year, you're putting about $25 million of incremental CapEx in. As we look into next year, you've talked about some projects in the U.S. But in terms of the start-up costs on the international side, will they ramp down as we go into 2013? Or should we be thinking about some continued spend there in terms of the impact on AFFO? And then secondly, on the dividend growth. It was great to give that incremental color today, to hear about the 20% annualized growth rate. I'm wondering if you think that's going to be a fairly steady growth or, potentially, it's slower growth in the first couple of years and then accelerates as some of the D&A rolls off from the early 2000 acquisitions.

Yes. No, first, Jon, on the international side, that's exactly right. We would expect that spending to decline clearly in 2013. It was largely as we stated, the kind of onetime start-up CapEx as we brought those sites into our portfolio. And with regards to the dividend, and as we mentioned, it's obviously subject to board declaration. We would expect fairly steady growth over the 5-year period.

Your next question comes from the line of Simon Flannery of Morgan Stanley.

Tom, I just want to go to the international profitability, if I could. I think you said that the underlying EBITDA margin was about 71%, after adjusting for pass-through, versus 77% in the domestic business. How should we think about that gap over time? Is that something that we can sort of narrow over time, or is that going to be fairly stable kind of profitability? And I think you talked about a $5 million lower pass-through revenue in international. Perhaps you could just give us more color on that. And is that something that was more of a onetime, or is that something that we will see extending forward?

Okay. No, sure, Simon. On the profitability, we've talked about this a bit in the past. I would absolutely expect that gap to become smaller over time. There's no reason to expect that it wouldn't. I mean, the tenancy on international markets is about 1.5 tenants per tower versus our U.S. market, which is up in the 2.7. So as we continue to see demand in those markets and additional lease-up in those markets, we should absolutely expect to see increased profitability to getting closer to the U.S. levels. And with regards to the pass-through, as we continue to bring these towers into our portfolio in the international markets, we've estimated when we're actually going to be taking them over and being able to manage them. And so we would expect that pass-through, those towers to be coming over into our portfolio and us to manage them over the next 3 to 6 months. So that pass-through, we should absolutely see going forward.

Your next question comes from the line of James Ratcliffe.

Two, if I could. First of all, maybe housekeeping. But looking at the AFFO core growth, I think in 2Q, you cited there was about a $12 million gain in 1Q '12 that was an offset core growth, and I'm not seeing that mentioned here. I'm just trying to align the 2. And secondly, the 4x, I assume that's net leverage. And that certainly would imply if you've -- given the EBITDA growth you've talked about and either a pretty significant step-up in CapEx or acquisition or capital return. I mean, how are you seeing the acquisition environment now versus, say, 6 months ago and your ability to find attractive ways to deploy that in terms of assets versus capital return?

Sure. Jim, let me give you a couple. First of all, on the onetimer, that's exactly right. In our core growth, which we expect to -- as I said before, to be north of 17%, it's really made up of kind of 4 elements of it. First of all, there is some FX impacts in there, which is roughly about 3.5% of growth. There are -- is this spending that I've talked about, which is the onetime capital spending in those 3 markets, and that's about 2.5%. And there's the refund, which we backed out, which is what you've talked about before, and some onetime items, which we've also backed out. So we look at core AFFO the same really way that we're looking at core EBITDA or core revenue, in that we are reflecting the taking out, in essence, the impacts of FX, the additional spending, as well as those onetime items, which you talked about before. On a -- on the net leverage perspective, you're right. I mean, we do expect some activity. We did -- as I mentioned in my remarks, there's a couple of hundred million dollars that would -- that we would expect to close an additional 500, 700 sites in the fourth quarter. We did talk about the increase in our buyback program, which we would expect in the last couple of months of the year. So our pipeline remains robust around the world, in the U.S., as well as in our international markets. And what we have in the guidance right now, in terms of the remarks we had, is what we contractually have committed to be able to close by the end of the year, which will yield, as I mentioned before, well north of the kind of the 51,000 sites, which we would expect by the end of the year.

Your next question comes from the line of Steve Sakwa of ISI Group.

Well, my first question was really the one that was just asked on, I guess, how you're looking at acquisitions and sort of the pipeline. Can you just maybe elaborate a little more, Tom, as to -- as you sit here today versus, say, this time last year and you sort of look at the number of deals that were maybe bubbling up, I mean, do you sense that there's more potential activity looking forward over the next 12 months, more or less? Or -- that's kind of one. And then two, maybe, Jim, could you talk just about India? And are there any resolutions to some of those auctions? And how do you sort of think about the deployment in that market?

Sure, Steve. It's Jim. I'll go and take both of them here. Year-to-year, the pipeline, I would say, is roughly the same. But we've got 3 gates that we go through, especially on international acquisitions, and a lot of things get eliminated. And sometimes, they get eliminated at the very end because we just can't get there on acquisition price or our value doesn't meet the sellers' interest or some other bidders' levels. So we've got plenty of activity, really, in every region, and so I would say that there are similar opportunity sets out there. It's a matter of which ones that we can get to the right value, and then you'll see us consummate those. And then in India, as far as the auction situation goes, there is progress. There's a January 2013 expectation of this auction being conducted. Our view is that -- and those bidders that have announced that they're going to participate are our major customers, those with the financial wherewithal to actually deploy this. And so those include Bharti, Vodafone, IDEA, Telenor, which is a Scandinavian operator that's in India a big way, as well as Tata. So all of these carriers are serious about expanding their business. They are among our biggest customers, and we're looking forward to them to get some more spectrum to keep rolling out their network.

Our next question comes from the line of Batya Levi of UBS.

Just wanted to ask about the international organic growth. I think you mentioned 8% in the quarter, and that seems to be a big drop from the double digits that you talked about in the second quarter. Is that mostly explained by the lower pass-through revenue that you talked about? And what do you think will drive it back to double digits in the next quarter?

Batya, that's exactly right. I mean, if we take a look at international, the range over last couple of years has been 200 to 300 basis points higher than the U.S. It reflects the growth in those markets and lower tenancy. In Q3, as you said, we generated an 8.4% growth rate, expect double digits for the full year. And the rate is being impacted by some of the different pass-through, if you will, on our legacy sites. So as I said, we would expect that to continue -- that growth to kind of continue into next year, particularly as we see those lower tenancy sites start to pick up additional leasing activity.

And you also mentioned the lower gross margin conversion was because of entering the new markets. When do you expect that to get to normal levels?

Well, I mean, I would expect that in 2013 to start to back -- get back up to approach the more normal levels. This particular quarter, we had the impact of -- kind of that initial impact, if you will, of bringing Uganda into the portfolio. So we should start to then see that come back up.

Your next question comes from the line of Jason Armstrong of Goldman Sachs.

Maybe first question, you've talked about, and we've heard other tower companies talk about this as well, in terms of excess on top of MLA, so I guess overage. How do we think about that? Does that show up as sort of an amendment to the MLA? Or how does that flow and how meaningful could that be? And then second question, just getting back to share repurchase activity. I think, Tom, you talked about it accelerating in the next couple of months. What sort of framework should we think about for pacing you might be willing to step up to now?

Jason, it's Jim. On the master lease agreements, you characterized it exactly right. There's an overall comprehensive payment that happens every month, every quarter, under these holistic MLAs, as we call them. And those are for certain limited rights across the portfolio and tower by tower. So any excess, whether it's the number of sites that are eligible for a certain upgrade or it's an additional equipment above and beyond the limits that were established in the MLA, there will be amendments for that particular activity that will be over and above, as we call it.

And on the buyback, Jason, we've, I think, year-to-date are in the kind of that $15 million to $20 million range. I would expect that clearly to double, if you will, before the end of the year. So we put, as you all know, 10b-5 programs in place, and it's a function of where the stock price is at a given point in time. But I think there'll be a meaningful growth in that and the balance of the year.

Your final question comes from the line of Kevin Smithen of Macquarie.

I wondered if you could discuss the terms of the T-Mo MLA in a little more detail. How does it compare the -- to the other MLAs you've signed historically in terms of structure or what Crown and SBA have announced on their -- over the last couple of quarters?

Kevin, it's Jim. We don't speak to specific parameters of our master lease agreement. But I think, in general, what we can say is that we've extended the remaining term of all the T-Mobile leases with American Tower out to approximately 9 years. Secondly, that it is a holistic-type structure that's going to help enable T-Mobile to operationally speed up its rollout. It takes out a lot of the administrative back and forth and allows them to speed up the process and the cycle time with us, which is great. Interestingly, the 4G upgrade is not for all of their sites they asked for, and it's for a portion of those. And if they extend the number of sites they need to ultimately touch, we'll be talking to them again about that. So I think it's a very good deal for both companies. We're already off and running on the introduction of that to our field teams, and we're going to help T-Mobile get the 4G up and running with it.

Okay. Well, I think that concludes our call. Again, as Jim said, we hope that all your families are well and that you've all -- are making it through the hurricane that's affected us on the east coast, and we wish you well. Thanks again for all of your interest here.

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