Crown Castle Inc. (CCI) Q3 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Crown Castle International Q3 2013 Earnings Conference Call held on the 21st of October 2013. [Operator Instructions] I would now like to turn the conference over to your host, Fiona McKone. Please go ahead, ma'am.

Thank you. Good morning, everyone, and thank you, all, for joining us as we review our third quarter 2013 results and discuss our agreement to acquire the exclusive rights to approximately 9,700 towers from AT&T that we announced yesterday. With me on the call this morning are Ben Moreland, Crown Castle's Chief Executive Officer; and Jay Brown, Crown Castle's Chief Financial Officer. Ben is going to begin with a discussion of the AT&T transaction, and Jay will follow with a review of our third quarter 2013 results and our outlook for 2013 and 2014. To aid the discussion, we have posted supplemental materials in the Investors section of our website, crowncastle.com, which we will discuss throughout the call this morning. This conference call will contain forward-looking statements and information based on management's current expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurances that such expectations will prove to have been correct. Such forward-looking statements are subject to certain risks, uncertainties and assumptions. Information about the potential factors that could affect the company's financial results is available in the press release and in the Risk Factors sections of the company's filings with the SEC. Should one or more of these or other risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary significantly from those expected. Our statements are made as of today, October 21, 2013, and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, today's call may include discussions of certain non-GAAP financial measures, including adjusted EBITDA, funds from operations, funds from operations per share, adjusted funds from operations and adjusted funds from operations per share. Reconciliations of our non-GAAP financial measures are available under the Investors section of the company's website at crowncastle.com. With that, I'll turn the call over to Ben.

Thanks, Fiona, and thank you to all of you for joining us on this rather short notice call this morning as we discuss this very exciting news that we announced yesterday, as well as review our earnings release for the third quarter. First, let me start by saying this transaction we've announced is all about growth, pure and simple, and our belief in growth and accretion and AFFO per share relative to other potential investments we could have made over time. In acquiring the rights to these 9,700 towers from AT&T, we're continuing to execute our principal strategic objective: positioning Crown Castle as the leader in the U.S. market, the largest wireless market in the world, and one that we believe is the most continuable -- continuing profitable investment in wireless networks is most assured. These towers are well positioned to accommodate the demand we're seeing as network intensification, following the initial phase of LTE deployment, is driving macro site co-location in the market. This opportunity, with this portfolio with AT&T as the counter-party, is generational in nature. Post-closing, AT&T will be our largest customer at 26% of revenues, and the Big 4 U.S. wireless carriers will make up 84% of our consolidated site rental revenue, a clear differentiator among our peers. I want to take a moment here to acknowledge and thank our friends at AT&T for the confidence they have placed in Crown Castle over the years and, now, as we extend our relationship to cover these new sites. Turning to Slide 6. Importantly, as noted in our press release, from a financial perspective, we expect this transaction to be slightly accretive to AFFO per share in 2014 and expect that it is meaningfully accretive to our expected growth over time. As is our practice, we were disciplined and focused in our financial assessment of this transaction and believe it will be more accretive to our long-term growth rates in enhancing the shareholder value relative to other potential investments, such as buying back our own stock. In fact, we expect the transaction to be approximately 5% accretive to our long-term expected AFFO per share. While this transaction increases our tower portfolio by 33% in the U.S., the consideration represents only 15% of our enterprise value, illustrating the significant growth opportunity we have secured on these relatively young assets, which currently have, on average, only 1.7 tenants per tower. Further, as is customary in tower transactions with carriers, the rent we receive from AT&T includes access to additional space on the towers for its future use, subject to certain restrictions. Additionally, we have the right to lease space to additional tenants, which is the essential element of the value creation in this transaction. Further, we believe the AT&T towers have sufficient capacity to accommodate at least 1 additional tenant per tower without significant further investment. We have a long track record of integrating assets and creating value from our customer relationships, solutions and services. Turning to Slide 7. Let me run through some of the details of the transaction and some of the reasons why we believe this is a terrific transaction for Crown Castle. Under our agreement with AT&T, we will have the right and responsibilities to operate the asset like any others that we own. We will take $4.85 billion to AT&T for the exclusive rights to lease and operate these towers for a weighted average life of approximately 28 years, and we will have the right to purchase such towers thereafter. As part of the transaction, AT&T is contracted to maintain its communications facilities on the towers for a minimum of 10 years across all of the sites. We expect to fund the transaction with cash on hand and equity and debt financing, including borrowing under our existing revolving credit facility. And we expect the transaction to close in the fourth quarter of 2013. Turning to Slide 8. At almost 40,000 towers pro forma with 71% or 28,000 sites in the top 100 markets, this transaction furthers our strategic objective of being the leader in shared wireless infrastructure in the U.S., which we believe is the largest and fastest growing and most profitable wireless market in the world. As you can see from the graph, the U.S. is the global leader in average revenue per user, and yet, there is still a considerable amount of expected growth in mobile data traffic still to come. This transaction comes at an opportune time for co-locations as all 4 major wireless carriers are actively upgrading their networks for LTE 4G, and these sites are well positioned to accommodate the cell splitting that we're already seeing as carriers focus on improving network quality. At recent industry conference keynote addresses, wireless carriers continue to voice their commitment to network upgrade as the price of admission to compete in the U.S. market. With networks already supply-constrained in the face of broadband data growth estimates of 6 to 8x over the next 4 years, it's very clear to us that the U.S. market is one where we will see significant growth in the years to come. The top U.S. markets are where wireless traffic is heaviest and where wireless carriers traditionally focus their efforts to deploy new technologies and upgrades to existing technologies, such as the current LTE deployment and network densification. Turning to Slide 9. We believe that the U.S. market represents the most compelling risk-adjusted returns for capital investment in wireless infrastructure. These AT&T towers represent a unique opportunity to acquire a large, urban-centric portfolio and further our strategy. On a pro forma basis, we will have 71% of our towers listed in the top 100 markets and 96% of our total sites located in the U.S. One of the areas that also bolsters our belief in the U.S. market is the ability of infrastructure owners to control the ground beneath their assets for very long periods of time. Our team has been focused on this for years, and I believe we have the most secured ground profile in the industry as we control land under our sites for more than 20 years, generating 72% of our site rental gross margin. Turning to Slide 10, I also believe the quality of our tenant base is the best in the industry with 84% of our pro forma consolidated site rental revenues coming from the Big 4 wireless carriers. As a result of the transaction, we will have more than $21 billion of future contracted revenue from our existing customer leases, which represents approximately 8 years of run rate site rental revenue. Shown on Slide 11, our demonstrated track record of growing site rental revenue and allocating capital productively has enabled us to grow AFFO per share by a 20% compound annual growth rate dating back to 2007. I would point out that we've been able to achieve our annual growth -- AFFO without increasing our risk profile by focusing our capital allocation on the U.S. market. As shown on Page 12, we have gotten over the short -- we've proven over the short and long term that we're able to transact, integrate, lease and operate carrier assets in ways that create significant value. Our transaction with AT&T is the sixth wireless carrier portfolio transaction that we have done in the U.S. On the left-hand side of the page, we've shown the growth in yield before these transactions that date back over a decade. These assets continue to increase their cash flow and resulting yields. I will also note that our T-Mobile transaction that we completed just under a year ago is fully integrated and tracking ahead of our original acquisition model. We believe, like the value we have created from the 5 other carrier tower transactions we've done, we will continue to drive shareholder value through our operation of these towers. Fundamentally, this is a real estate business, and our experience has been that carrier-built towers are in the best locations time and time again. In addition to the carrier transactions, we've seen tremendous growth in our NextG acquisition in the small cell business that we completed in April of 2012, where we have more than doubled the adjusted EBITDA since closing the transaction. Leveraging our experienced management team, customer relationships and services offerings across this unrivaled tower footprint, together with our leadership in small cell networks, positions us to be the provider of choice as carriers continue to enhance their networks to meet ever-increasing wireless demand. So let me conclude on this topic of the transaction before I call -- turn the call over to Jay by offering the following observation. Over the last 18 months, including this transaction, we've invested approximately $9 billion in the U.S. market, adding over 17,000 towers and 10,000 small cell nodes that we believe materially enhances our growth opportunity as these assets are essential to meeting carriers' network demands with the benefit of the shared infrastructure model that we deliver for carriers. We are bullish on the U.S. market, to say the least, and bring the execution capability to realize on our strategy. We believe the premier location of the assets, low existing tenant fees, high operating leverage and minimal incremental costs, together with the efficient capital structure we have in place, strengthens our position as a leader in facilitating wireless network deployment in the U.S. while enhancing our long-term growth rates and AFFO per share expectations. With that, I would like to turn the call over to Jay to walk through our results and outlook, and thank you again for joining this call this morning.

Thanks, Ben, and good morning, everyone. As you've seen from our press release this morning, we had an excellent third quarter, delivering 38% growth in AFFO per share compared to the same quarter last year. The strong leasing activity continued during the third quarter. Further, as you would expect, this high level of leasing activity from all 4 major U.S. carriers resulted in continued strong performance in our services business, which outperformed our expectation for the third quarter. On Slide 14 and 15, we highlight some of the results for our third quarter. During the third quarter, we generated site rental revenue of $621 million, up 15% from the third quarter of 2012. We have seen a significant shift towards higher revenue growth because of the composition of our leasing activity during 2013 compared to 2012. As we've previously disclosed, a portion of the leasing activity we have seen in recent years is the result of agreements we have made with certain carriers, whereby they commit to pay us for the right to add equipment to their existing arrays on our towers and then utilize that predefined right over time. As a result, we recognized revenue beginning at the firm commitment dates of these agreements. We have often described these arrangements as presold leasing agreements. Notably, during the third quarter of 2013, only 20% of our leasing activity was covered by these presold leasing agreements. Conversely, presold leasing agreements accounted for almost 70% of the leasing activity in the same quarter last year. This change in the composition of our leasing activity reflects the carriers' focus on deploying their equipment on additional sites, commonly referred to as site densification, an amendment activity to their existing arrays that exceeds what was contemplated in the presold leasing arrangement. I would also note that we are seeing tremendous leasing activity in our small cell networks as carriers look for ways to improve their networks in areas not served by traditional macro sites. With regard to our other metrics for the quarter, site rental gross margin, defined as site rental revenues less the cost of operations, was $439 million, up 9% from the third quarter of 2012. Adjusted EBITDA for the third quarter of 2013 was $441 million, up 10% from the third quarter of 2012. As shown, AFFO for the third quarter of 2013 was $318 million, up 38% from the third quarter of 2012, and AFFO per share was $1.09, up 38% from the third quarter of 2012. Moving on to investments and liquidity. During the third quarter, as shown on Slide 16, we've spent $131 million on capital expenditures. These capital expenditures included $18 million on our land lease purchase program, $10 million on sustaining capital expenditures and $103 million on revenue-generating capital expenditure, consisting of $74 million on existing sites and $29 million on the construction of new sites, primarily small cell networks. Additionally, during the third quarter we borrowed $800 million of incremental Term Loan B under the existing senior-secured credit agreement with terms substantially the same as our existing Term Loan B. The proceeds were used to pay a portion of the outstanding revolving credit loan. As of September 30, 2013, we had approximately $219 million in cash and cash equivalents, excluding restricted cash, and approximately $1.3 billion of availability under our revolving credit facility. We ended the third quarter of 2013 with total net debt the last quarter annualized adjusted EBITDA of 6x, at the high end of our targeted level of leverage. On Slide 17 and 18, we have reflected our updated outlook for 2013. Importantly, we have not included any impact from the AT&T tower transaction in our 2013 outlook. Our revised full year 2013 outlook suggests annual site rental revenue growth of 17% and AFFO growth of 39%. Also shown on Slide 17 and 18 is our 2014 outlook. Let me spend a minute walking through the key assumptions that we included in our 2014 outlook. We anticipate the AT&T towers will contribute approximately $245 million to $255 million to our 2014 AFFO before financing. Further, we expect approximately $175 million to $185 million of organic cash revenue growth in 2014, ignoring the impact from straight-line revenue adjustment. We expect this $175 million to $185 million of organic cash revenue growth to be comprised equally of new tenant activity and cash escalators. As we noted in the press release, we expect 25% to 30% more revenue from new leases in 2014 than we saw in 2013. Further, we expect that only about 10% of our leasing activity will be covered by the presold leasing arrangement that I mentioned earlier in this call. In addition, our 2014 outlook for site rental revenue includes the negative impact of churn of approximately $50 million or 2% of our site rental revenue. Approximately half of this amount is typical churn activity and half is from Sprint's decommissioning of their legacy Nextel iDEN network. Based on Sprint's stated intention to decommission their iDEN network and our contractual terms with Sprint, we expect approximately 3% of our run rate site rental revenue to be impacted by the iDEN decommissioning over time. These iDEN leases have effective term end dates spread evenly throughout 2014 and 2015. As a result, we expect the reduction of site rental revenues from the iDEN decommissioning to be approximately 1% in 2014 with the remaining 2% impact coming after 2014. In essence, our expected impact from churn for 2014 is approximately 60% of the cash revenue growth from our contracted lease escalation during the calendar year 2014. With respect to 2014 adjusted EBITDA, we anticipate that site rental direct expenses and G&A on our existing portfolio of sites will grow approximately 1% from 2013, and the contribution from services gross margin will be approximately $25 million lower than the contribution in 2013. For 2014 AFFO, we expect that the contribution from prepaid rent, net of amortization, will be approximately $20 million higher than that of 2013, reflecting the expected increase in leasing activity and the 33% larger asset base as a result of the AT&T tower transaction. Further, our forecast for 2014 AFFO is negatively impacted by approximately $17 million in expected sustaining capital expenditures to remodel and expand certain of our office facilities, which we would not expect to recur in the foreseeable future. In summary, we expect AFFO per share in 2014 pro forma for the AT&T tower transaction, including the impact of the related expected financing, to be slightly accretive to what our expectation for AFFO per share would have been without this transaction. Moving to Slide 19. In September, we announced our plans to elect real estate investment trust status commencing January 2014. We are making good progress on the tasks necessary to make this happen. Pursuant to our anticipated REIT conversion and subject to the successful completion and financing of the AT&T tower transaction, we're excited to announce this morning our intention to initiate a quarterly dividend of $0.35 per share beginning in the first quarter of 2014. Given the significant anticipated cash flow from our existing business and future cash flows from the AT&T tower, we expect to be able to continue to make significant investment with our cash flow after dividend in activities we believe will maximize long-term AFFO per share. These activities include: investing in acquisition; the construction of new sites, including small cell networks; land purchases; and the purchase of our own securities, including common shares. Based on our expectation for growth in our business, we believe that we can grow our dividend over the next 5 years by at least 15% annually while consuming the vast majority of our net operating losses. In summary, we are excited about Crown Castle's leadership role in wireless infrastructure. Our announced AT&T tower transaction furthers our focus on the U.S. market and expands our portfolio in the top 100 markets while increasing our expected growth rates of revenue and cash flow. Given the significant pro forma cash flow we expect to generate, we plan to be able to continue to make meaningful investments while providing investors with a regular dividend. We believe we have positioned our company to benefit greatly from the tremendous consumer demand for mobile Internet and data services in the U.S., and the Crown team is ready to deliver the high level of customer experience that the carriers have come to expect from us. And with that, operator, we'll turn the call over for questions.

[Operator Instructions] And the first question comes from Ric Prentiss from the company Raymond James. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: In a week and the deal's finally official, huh? A couple of questions on it. First, the assumptions on having it be slightly accretive after the financing. Can you talk to us a little bit about how you're looking at cash and the debt, the form of debt and the equity and timing for all those different offerings, given that you want to close it by yearend?

Sure, Ric. I think there's a wide range of options here in terms of what would make the transaction accretive in the short term and also in the long term. For purposes of this call, we're not going to get into any specificity about the portion of the consideration split among cash, equity and debt. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: And how about the timing as far as when you would -- the deal closes in fourth quarter, which we're already a good bit through. Would the equity operating be done as well within the fourth quarter?

Ric, we're not going to get, again, to allot specificity around timing or amount, but obviously, we'll need to raise the capital prior to closing the transaction. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: Okay. And then when you guys did the T-Mobile transaction, you mentioned that there would be some G&A impact but also some benefit on your services business. Any need to ramp up G&A, given the size of this portfolio?

There will be. We would expect about $6 million of additional G&A during calendar year 2014 related to staffing the business in order to handle these additional assets. We would expect, at least, as we gave the guidance, that to be completely covered by services. We very well may be able to do better than that, but our assumption was that services gross margin offset the G&A when it gets the EBITDA impact. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: And I'll try the defending question right away. Any thoughts about how fast you would want to get back into your target zone of 4 to 6? You mentioned that you're at, obviously, the high end right now.

Yes. I would describe our 4 to 6x as a long-term leverage target ratio, and I think you've seen us operate in and around that level. At times, we've been above it. At other times, we've been slightly below it. So I think it's exactly that. It's not a bright line, but it's a target level of leverage that we would expect to maintain over a long period of time.

And our next question comes from David Barden from the company Bank of America.

This is Stephen Douglas standing in for David. One question on iDEN. I think in the past, you talked about 3% of revenue exposure coming down kind of ratably over the last 2 years. But it looks like you're expecting that, about 1/3 of that, in 2014. So I guess could you just talk about some of the moving pieces there and maybe just your conversation with Sprint? And then second, just more of a housekeeping item. What is the kind of maintenance CapEx assumptions that you're baking in for that $245 million to $255 million AFFO contribution from the AT&T deal?

Sure. Stephen, on the first question, as we think about the iDEN exposure that we have, Sprint has the right, ratably, as you stated correctly, over 2014 and 2015 to not renew leases as they come to their effectual term end date. We won't know ultimately how many of those get renewed or not until we reach those dates. So purposes -- for our purposes, what we've assumed -- when I speak to the 1% in calendar year 2014, we've assumed that none of the leases, none of the iDEN leases that come to their effectual terms end date during 2014 are renewed. Obviously any lease that is renewed in the latter half of -- that is not renewed in the latter half of 2014, we don't see a full year impact. So there's a bit of a laddering of the impact to revenues during calendar year 2014 than 2015, and then we would see a tail of it in 2016. It's the licenses that are canceled in the latter half of 2015. If they are, we would see the full impact of the site rental revenue line in 2016. With regards to your second question, we've assumed about $6 million roughly of maintenance CapEx related to the asset. I mentioned in my prepared remarks the investment that we're making to expand some of our office facilities and remodel. Those costs should be for -- only in calendar year 2014. I wouldn't expect those to recur, at least in the foreseeable future. But $6 million increase that you can see in the forecast, we would expect that to recur and that's related directly to these assets.

And our next question comes from Simon Flannery from Morgan Stanley.

Jay, a quick one on the guidance. Services gross margin, you have that down $25 million in '14. Are you just being conservative there? Obviously, you had another strong services quarter. How should we think about the visibility into that? And then, Ben, I know you talked a bit about densification. We've heard a lot about this at the tower show the other day. Can you get into a little bit more color on what you're seeing from some of the carriers? Verizon talked a lot about AWS just last week, and Sprint's progress on Clearwire.

Sure, Simon. First of all, it is October, and our tradition is being conservative on services guidance, and we've been wrong for a number of years on that, I'm happy to report. But I would remind everybody that, that is a business that, while has grown significantly, is different than the recurring site rental business. So we have necessarily taken a little bit of a haircut to 2013 levels. And as we mentioned, about $25 million year-over-year down would be our assumption in this guidance. Your question I'll anticipate would be, "Well, gee, with this additional portfolio, wouldn't that augment probably your opportunity on the services side?" to which, I would acknowledge. But at the same time, we do are seeing a significant mix change towards co-locations, as Jay mentioned. So we're a little conservative on that outlook right now, and we'll continue to see how well we can do. On the Verizon and AT&T and other -- the Big 4 carriers, in terms of the leasing mix this year and what we're seeing, we have seen a dramatic shift this year in leasing. And as Jay mentioned, our outlook for 2014 is about 90% of our revenue going forward, of our incremental revenue is occurring on either through co-locations or amendments that are falling outside of these presold agreements that we have with several of the carriers. A significant portion of that is made up through co-location activity or network densification, if you will, as the initial path of LTE goes through these markets and as the carriers have eloquently explained, these networks are supply-constrained, if you will. And so as soon as a site is essentially turned up very shortly thereafter, they're looking at network densification or cell splitting, which, in many times, is co-location on an existing tower, where they have not previously been. So we're continuing to see a significant and ramping component of that, like we saw years ago, as other generations of technologies rolled out, and it's nice to see. It has started, principally, with Verizon and AT&T but we would expect over time as the Sprint LTE and T-Mobile LTE build, go through the markets, that they will see a similar experience where they'll need to densify these networks and come back and cell split. And certainly the capital commitment that all 4 companies are making to the industry right now would suggest that we're going to see significant growth in that regard for some time in the future.

And any Clearwire activity?

No. No, that's basically yet to come at the Clearwire's spectrum being re-purposed from the Sprint Network Vision upgrades, if you will. That's still in the planning stages, but something that we anticipate is coming very soon through the upgrades on the Network Vision sites.

And the next question comes from Brett Feldman from Deutsche Bank.

I'm going to take another stab at Ric's just for fun. You put in place a $3.4 billion bridge loan that was disclosed in the 8-K this morning. Should we be thinking about that as the upper end of how much debt you're thinking about for this deal? Because you also mentioned you still have cash in the revolver. I'll start with that one and see how far I get.

Brett, I think at that upper end from the disclosure in the 8-K, I think that is the upper end, which is basically our leverage ratio that we have in our existing debt agreement. And you could run through that calculation. I think that's the upper end. I think beyond that, well, I'll -- as I did with Ric's question, I think I'll pass on being any more specific around our financing plan.

That's fair enough. Just a point of clarification, the additional usage rights that AT&T has in tower, that's covered by the payment term, it's 1,900 and 2%, correct? They don't pay extra as long as they stay within that scope of usage?

That's correct, Brett. We're not going to get into all the details, but I would say that it's consistent with other transactions we've done where they have existing capacity on the site plus some reserve for future growth. But at the same time, they've requested and we've negotiated a rate card for equipment that they would contemplate potentially adding over time that would result in additional equipment beyond this reserve capacity and the additional rent to go with it. So for planning purposes, to be honest, in the near term, I wouldn't suggest to you that's going to be a significant revenue event for us, but longer term, we'll have to see what their needs actually are on the sites. And most importantly, in a transaction like this, we have not encumbered the sites that we'd be leasing to prevent us from adding co-location to these sites, whether on the tower or on the ground. So we are very confident in our ability, as we have with the other transactions we've completed over the years, add additional tenants to these sites, and that's obviously where the real value driver is in these types of transactions.

So one last one, if you don't mind. How did you settle on the 2% escalator? I think you've most recently been doing CTI in large deals. And historically, you've been more 3.5%. I'm just wondering if that's something you're going to be looking to apply to more leases going forward.

I wouldn't anticipate it. This was a competitive process and a requirement that AT&T wanted to see in their MLA here with us on this transaction specifically. And so we were -- we, obviously, priced that into how we thought about the economics of the transaction. But I wouldn't anticipate that would be the case going forward.

And the next question comes from Amir Rozwadowski from Barclays.

Just a follow-up on Brett's prior questions. On the reserve capacity, I guess, what I'm trying to understand is do you feel comfortable that there's additional upside potential longer term here based on the scope of the reserve that you've struck with AT&T? Just trying to understand sort of what you've seen historically with these types of contracts and how we should think about further opportunities down the line.

Sure. The short answer is yes, we do see additional upside, and that has been our experience over time when we have reserve capacity or presold agreements or however they've been structured over time, is that there's certainly a period where they use the reserve capacity that they've negotiated, and then over time depending upon what equipment requirements are and subsequent generations of technologies. And that's the very reason why we have a preexisting rate card negotiated in this transaction. Both parties know what the pricing on that would be to the extent they need capacity above their reserve capacity, and that's been our experience over many years. So that ultimately does come into play.

Great. And if I may, one more follow-up. What type of investment may be required on these types of assets in order to drive additional co-location opportunities? It seemed like from some of the discussions at the recent tower trade show, there have been some varied opinions in terms of the qualities of the towers. So I'd love to hear sort of your viewpoint there.

Sure, Amir, the -- and thanks for that question. That's -- our experience has been very positive on these carrier-located towers. As I mentioned in my opening remarks, fundamentally, this is a real estate business in our view. And location of the asset is the primary driver along with the ability to execute for customers and do all the other things that we work on very hard every day. We've gotten pretty good at adding capacity to these towers. As Jay mentioned, our expectation on this transaction is there's at least one tenant of additional capacity on these sites without significantly more investment. But even where there is additional investment required over time, as there has been in others that we've acquired, those turn out to be fantastic investments. And as you can see depicted in our slides, well, I think for the first time in a long time, we've broken out the yields that we've accomplished, the growth in yields from the original transaction with carrier towers. They're roughly quadrupled what we originally acquired the sites over a decade ago. And so the experience has been one where we add yield. We certainly add net -- structural capacity where required. That takes additional investment. Very often that is significantly shared with the carrier adding that tenant on the tower. But over time, we have a track record of adding significantly to the yield on these sites, and we'd expect that to be the case here.

And the following question is from Jonathan Schildkraut from Evercore.

Two, if I could. First, in terms of the AT&T towers, is it fair to assume that the rate that AT&T is paying is equivalent or in the range of what the other 0.7 tenants per tower is paying? That is, if we think about the 1,900, can we extrapolate out to figure out what the site leasing revenue from the entire portfolio would look like, maybe somewhere in the $375 million range? And then a second question, is there any iDEN or PCS exposure or different MLAs that applies to the AT&T towers that we should be aware of?

Sure, Jonathan. On your first question, in terms of the other tenants that are on the tower, their terms do look like market rates both in terms of the amounts they pay per month, as well as their escalation provision. There is approximately, including AT&T's, the rent we would expect to collect from AT&T next year, there's approximately a little over $400 million of total revenue from the AT&T towers portfolio. And as I mentioned the terms of the other tenants are on market terms. That would be true also for the iDEN exposure that is there. There is a little bit, but it's fairly minimal. We think maybe over the next couple of years, that would be about $5 million roughly, would be our impact from that. I would point out to you in the comments that I made earlier around our churn, both in calendar year 2014 and beyond, those numbers that I gave you in terms of the impact include any churn that we would expect from these AT&T towers with regards to iDEN.

Great. And maybe even one last shot at the financing. Do these towers look like they are prepared for securitization?

Certainly anytime that we negotiate these agreements, we think about long-term financing capabilities of the assets. And this structure is one that we are able to finance, if we should choose to go down the path of doing a secured transaction like what we've done in the past. And obviously, we've done securitizations on assets that are in a similar structure as to what these are.

The next question comes from Kevin Smithen from Macquarie.

You've got into an initial 1.8% dividend yield and 15%-plus, 5-year dividend growth. I was wondering if you could elaborate on the impact of your remaining NOLs on that and how that will -- how we should think about the compounding of the dividend and the growth. Is this going to be a hockey stick once the NOLs expire or are utilized, can get to significantly greater than 15% based on a 70% payout on 2016 x NOLs, AFFO?

Yes, Kevin. This is Ben. We had to start somewhere. And this payout is a little bit less than 1/3 of AFFO guidance for 2014. We think it's a meaningful start on the dividend path, as you suggest, but gives us plenty of flexibility to allocate capital for growth-enhancing investments over time. We've put the 15% -- at least 15% growth out there as a target, as an expectation. But as you rightly point out, over time, as we consume the NOL, as it's currently sheltering that income, but as net income rises and we consume the NOL, once that's close to exhausted, we would have a much more significant payout over time. And if you extrapolate that out, you can pretty easily get to the 15% growth over time. And that final payout ratio, once we're a full dividend payer with no NOL shelter, is probably in the 75% range of AFFO. So a very significant payout coming. It was just a lively debate that we had among ourselves and with some friendly shareholders who were not shy about giving us their opinion on where we should start this dividend and the path that it should take as we get to the inevitability of a very high payout ratio probably in the next 3 or 4 years.

So will you grow dividends 15% while you still have some NOLs, let's call it, 2015, maybe 2016? Or is that 15%, a 5-year CAGR number?

It's meant to be a 5-year CAGR, so it would be compounding over time. That's our anticipation as we start this process.

And the next question comes from Tim Horan from Oppenheimer. Timothy K. Horan - Oppenheimer & Co. Inc., Research Division: Jay, a couple of questions. It looks like you're guiding next year for organic cash revenue growth around 8%, if you were to normalize the iDEN. Am I thinking about that right? And maybe what was your organic cash revenue growth here this quarter? And then just a rough idea on that future option payment that -- how you're kind of thinking what the net present value of that is.

Sure. On your first question, Tim, you've got it exactly right. Our embedded organic growth -- if you think about it on a same tower sales basis, was right at about 8%, that's about 25% to 30% more than what we expect for our full year 2013 outlook and is a reflection of both an increase in absolute level of activity, as well as the mix shift that I spoke about in terms of what percentage is covered by our presold leasing arrangement. And as we expect, in 2014, only 10% of that activity, we think, is going to be -- come from this presold leasing arrangement. So there is a significant amount of additional growth in that 8% organic growth, about 4%, about roughly or a little over 4%, 4% to 5% is coming from new leasing activity; and then the balance coming from cash escalations, a little over 3% coming from cash escalations. And then, as I mentioned, the offset to that, the churn amounts are about 60% of the cash benefit from escalations. So that should bridge the growth we expect in organic cash revenues in the next calendar year. Timothy K. Horan - Oppenheimer & Co. Inc., Research Division: And the net present value, how you're thinking about the future payment, 28 years out or so.

Yes. I think there's a bunch of different ways to think about it. Depending on how you view the cost of capital, whether you use a blended rate or if you assume we keep balance sheet appropriately levered over the term, I think it will add about, if you want to bring it back to present value, about 1/2 the churn, a little over 1 churn to be -- to the purchase price that was paid is probably the right way to think about it. Timothy K. Horan - Oppenheimer & Co. Inc., Research Division: Great. And lastly, are you seeing much interest from REIT investors at this point given the announcement? Have you had an acceleration there?

Certainly since September, we've had a number of conversations with REIT investors as we put out our announcement that are -- we intended to convert -- we intend to convert in September. It's a little early this morning to get any feedback on our dividend announcement but I would imagine that over the coming days, we'll be having significant conversations over the coming month.

And the next question comes from Michael Bowen from Pacific Crest.

Just a couple questions, if I may. With regard to the tower portfolio you acquired, I think a press release said that nearly half are in the top 50 markets. If I recall, T-Mobile, those towers that you had acquired, 72% were in the top 50. Can you help us in -- what is the significance of that from either a current or a future site leasing revenue opportunity, and how did you guys think about that? And then secondly, I think you said in the release that AT&T has an average term commitment of 10 years for their monthly rent. Can you give us an idea of what the average term is of the other tenants on the site?

Sure, Mike. The concentration of the top 100 markets and the top 50 markets is sort of a fundamental driver in our business. And it goes to the statement I made earlier about location being the primary driver of leasing. And so as we look at our company pro forma, we'll be about 72% in the top 100 or about 28,000 sites. And a little over 50% of this portfolio was actually in the top 50 markets. So it certainly met our criteria for concentration in urban markets, where network enhancements are obviously most required, where the population lives and where the consumption of network capacity is the greatest. And so this certainly met all of those hurdles for us internally. The -- their -- you're correct. Their -- AT&T's commitment on their communications facilities on these sites will be 10 years, and the co-locations that exist today, the 0.7 additional tenants per tower are on a variety of terms, 5 to 10 years, with typically multiple renewal options that would be customary in the industry.

And just as a quick follow-up. Do you think that given this portfolio is in a lower percentage of the top 50 markets, is there any difference do you think, in the future growth of the site leasing revenue versus the T-Mobile portfolio?

We don't think so. We think at some level, you get down to sort of splitting hairs, and we think these are certainly well-located sites, with an urban and suburban concentration that, given our experience in our own portfolio, it would certainly suggest that there's significant leasing opportunities still to come.

I think, Michael, you could also look at the 4 carriers transactions that we presented on the slides and that Ben was -- during his prepared remarks. You could see on the slides the 4 carriers transactions that we did going back a decade ago. The percentage in the top 100 markets is very similar to what we acquired here in this AT&T tower transaction. And so I think that would be a good comparison, if you're trying to do it on an apples-to-apples basis.

And the next question comes from Batya Levi from UBS.

A couple of follow-ups. One, on the 2% escalator, can you provide what percent of your total revenues have a CPI or a lower fixed escalator at this point? And how does that compare to the ground lease increases you see every year?

Sure. On our tenant revenue side, we have about 10% to 15% of our consolidated leases that have some types of CPI. Either they may have an absolute outright CPI, some of them may have a CPI with a cap or CPI with a floor. On the ground lease side, it's about 25% of the leases that have a CPI-type escalator. Again, many of those would have a cap or have a floor embedded in them. Over the last several years, just in terms of the cash component of that, at the cash level with regards to revenue, we've been averaging over 3.5% of benefit from the escalation, and that would be total escalations including CPI. And then on the ground lease side, those have been right at about 3% over the last several years.

Okay. And one question on Clearwire. You mentioned that Clearwire activity is yet to come. Should we assume that you did not include much of that in your '14 guidance?

We did not include that in our 2014 outlook.

The next question comes from Colby Synesael from Cowen and Company.

For guidance for this year, you had indicated that you're expecting prepaid rents of $167 million to $182 million. I was wondering if there was a comparable number for 2014. And then on that same topic, I was wondering if you could talk about your expectations for augmentation for the AT&T in towers in 2014, and I guess, even beyond, just recognizing that there's only availability for 1 tenant. And then the just as a quick follow-up, in terms of interest rates on debt, I wonder if you can just give us an idea of what you would expect, whether it was unsecured or secured debt, the type of interest rate you would get, so regardless of how much you ultimately end up raising, since I know you don't want to talk about that right now, maybe just what the interest rate you would assume would be.

Sure. On the first question, the prepaid rent component is a direct function of the leasing that we do on the assets and the need for investment of CapEx in order to improve the asset for additional co-location. And so the increase, which we've shown in the -- inside a press release, the increase that you see there is a result of those 2 components, including the AT&T assets. As I mentioned in my prepared remarks, in 2014, we expect the benefit from that to be about $20 million roughly. And that ties really to your second portion of your question around the augmentation CapEx that we would expect on the AT&T assets. It's very similar. We've made an assumption that's very similar to what we had seen on our own portfolio. And we would expect, as Ben mentioned earlier in the conversation, we would expect the vast majority of that to be reimbursed by the tenants, let's say, as they go on to the site, a component of the leasing arrangement that we have with them is that they provide and reimburse us for any capital necessary to improve the site to hold their equipment. On the last question, I think you can see from our public filings where our cost is under our revolving credit facility today, given where rates are, the cost of that between 2.5% and 2.75%. Our holding company bonds are trading just over 6% currently or around 6%. So I'll leave it to you to make your own assumptions around the various components that we use, but that's the range of where our debt instruments are. And obviously, depending on the type of structure and the duration, the numbers could move, but that at least should bound it some level of ranges.

There's one last question, coming from Jonathan Chaplin from New Street Research.

Two quick questions, if I may. Firstly, on the iDEN decommissioning is -- we're hearing from Sprint now talking about more openly about needing a lot more core Network Vision sites than the 38,000 that they had initially targeted. Is there any benefit for them extending existing iDEN leases that they have with you, maybe in different locations from where those initial leases were situated as opposed to letting those leases expire and striking brand-new leases with you? And then the second question is just on the sort of composition of revenues and the composition of the opportunity on the towers you've just acquired. It seems like if we assume that the towers are capable of carrying 4 tenants, that AT&T has reserved -- either it has consumed or has reserved about half of the capacity on those towers for themselves. I just wanted to make sure I'm thinking about it correctly.

Yes. Let me start with your second statement first, just so we can clear that up. No, we wouldn't -- we didn't and haven't suggested that: Number one, that these are 4-tenant towers; or number two, they've consumed half the capacity. So let's just start over with that. I think it's important, and we can even go back to Colby's question previous. Our assumption for modeling purposes and planning in a medium-term accretion analysis is sort of what does it take to believe [ph] to get an additional tenant per tower over time. But that, by no means, is the outside boundary. And you look at what we've done on the sites we've owned over the last 12 years, and they have significantly more than 1 additional tenant per tower in many, many cases. So it's -- as we affectionately refer to right here, there's nothing that an additional capital investment won't cure, typically at a very high return on investment when you have additional revenue coming on the sites. And we would not suggest to you that the AT&T reserve space is the equivalent of effectively half the tower over time. But, Jon, let me go back to your first point because I think it's a good one, and it's -- it would be -- it's a little bit speculative on our part because, as you know, Sprint right now with Network Vision and we as a counter-party are working very hard to get their Network Vision sites upgraded on their existing sites for their LTE launch that's ongoing. And so that is really our focus, and I think it's their focus for the time being. As you move out through 2014 and potentially into 2015, it's logical to assume, based on what we're seeing with other carriers that are further along in their LTE deployment, that you'll see network densification requirements, and they're talking about needing additional cell sites. Are those typically -- would those happen to be some LTE, I mean, some iDEN installations that they currently have? Potentially. I can't, for the moment, tell you what that would be or how many. And for planning purposes, we've given you the full amount of the scope of what we think that churn event could be over time. That's 3% of revenue, starting with 1% in 2014 and rolling forward, as Jay mentioned. But certainly as you think about it in the back of your mind and walking through the sequencing of events, you could see some of the sites, perhaps, in the latter part of that 2 years be re-purposed. And we'll just have to wait and see on that one. But I think we need to wrap up this call. We're right on an hour. Again I really want to express my appreciation to those of you who jump on the call early with us this morning on very short notice. It's not our custom, as you know, but we wanted to get the news out quickly over the weekend and then -- and follow it up with our earnings call and '14 guidance and the dividend. And so we've got a lot for you to digest this morning and the merits of this very large and significant transaction that we've announced today. We are thrilled to death to be going forward and expanding our relationship with AT&T. Again, I want to extend my appreciation to the professionals on the AT&T side that worked with us to get us to this announcement last night. We've got a lot of work to do internally. We're getting pretty good at integrating assets, and we are really excited to move forward into this environment of expanded relationship with AT&T and look towards closing in the fourth quarter. So thanks again to everybody for joining us this morning, and we'll talk to you soon.

Thank you, ladies and gentlemen. That does conclude the Crown Castle International conference call. Thank you for your participation and you may now disconnect.