American Tower Corp (AMT) — Q1 2016 Earnings Call Transcript

Thank you, Tony. Good morning everyone and thank you for joining American Tower's first quarter earnings conference call. Our agenda for this morning's call will be as follows: First, I will provide some brief highlights from our financial results. Next, Tom Bartlett, our Executive Vice President and CFO will provide a more detailed review of our financial and operational performance for the first quarter 2016, as well as our full year 2016 outlook. And finally, Jim Taiclet, our Chairman, President and CEO, will provide a brief update on the US mobile market and our strategy. 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 expectations regarding future growth, including our 2016 outlook, foreign currency exchange rates and future operating performance, technology and industry trends, anticipated closings of signed acquisitions and the impact of recently closed acquisitions, 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-K for the year ended December 31, 2015 and in the other filings we make 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. In addition to this morning’s press release, we’ve posted a presentation which we’ll reference throughout our prepared remarks under the Investor Relations tab on our website. In addition, on our IR website, you will also find our quarterly supplemental package which includes expanded disclosure on the components of our revenue and revenue growth including historical trending of our run rate revenue, which reflects revenue associated with tenant leases that are typically non-comparable and include renewal options as well as annual escalation provision. We believe this disclosure will provide investors with greater visibility into the key drivers of our revenue model and a simple baseline on which to model our business. Accordingly, we have introduced a new metric to track the currency neutral growth of the organic components of our run rate revenue, which we will refer to as property revenue run rate organic growth. To the extent you have any questions on the new disclosures, please don't hesitate to reach out to myself or another member of our Investor Relations team. So, with that please turn to slide four of the presentation, which highlights our financial results. During the quarter, our property revenue grew over 19% to nearly $1.27 billion. Total revenues grew over 19% to nearly $1.29 billion. Adjusted EBITDA grew over 15% to approximately $833 million. Adjusted funds from operation increased by over 17% to approximately $602 million and net income attributable to American Tower Corporation common stockholders increased by over 35% to $248 million or $0.58 per diluted common share. And with that I would like to turn the call over to Tom.

Thanks Leah. Good morning everyone. As you can see from the results we released this morning, we had a strong start to 2016 with solid organic core growth in revenue and good margin performance across our global asset base. We also distributed our first quarter common stock dividend of $0.51 per share, which was up over 21% from the prior year period. And just last week we closed our previously announced Viom transaction in India. Our teams in India are now working hard to seamlessly integrate Viom’s more than 42,000 towers into our portfolio. This transaction is expected to be immediately accretive to AFFO per share and we expect it will help us continue to deliver strong growth across our key financial metrics. If you please turn to slide six, let's take a look at our quarterly results. You can see that we drove strong growth in all of our key metrics in the first quarter, all in the 23% to 25% range on a core basis. Our total property revenue core growth of about 25% included consolidated organic core growth of nearly 9% or over 8% on an organic run rate basis, which excludes the impact of decommissioning revenues. This strong revenue growth combined with our disciplined expense management led to double digit growth in adjusted EBITDA, AFFO, and AFFO per share. Turning to slide seven, our US segment generated organic core growth for the quarter of about 7.1%, which includes the positive impact of $31 million of decommissioning revenue as compared to approximately $17 million recorded in Q1 of last year. On a run rate basis, again which excludes the decommissioning revenues, US organic growth was in line with our expectations at about 5.9%. Our international markets generated organic growth over 600 basis points higher than the US and over 350 basis points higher than it generated in Q1 of 2015 at over 13% on a consolidated basis, the highest rate in the last two years. On a run rate basis, organic growth was about 14% with escalators associated with rising local market inflation contributing about 7% to our international run rate growth and organic new business commencements were even larger components of the growth at about 8%. That growth was partially offset by some churn of less than 1%. There was broad strength across our international property segments with all three posting double digit organic core revenue growth rates. Our Latin American organic core growth was over 13%, including 10% and 13% in Mexico and Brazil respectively as network rollouts remained consistent throughout the region even with some macroeconomic challenges. In India, we generated organic core growth of over 12% as large incumbent Indian wireless operators continue to spend aggressively to support the deployment of new technologies and spectrum. And in our fastest growing region, EMEA, organic core growth was over 14% or 18% excluding our more mature German market. These strong growth rates continue to highlight the benefits of our diversification across countries, customers, and technologies. On a global basis, there are nearly 2.5 billion people in the markets that we serve and our largest customers will be investing tens of billions of dollars in those markets just this year to meet their customers' rapidly growing wireless needs. Complementing our organic growth on a consolidated basis were contributions from more than 25,000 sites built, leased, and acquired since the beginning of last year. Including the Verizon, Airtel, and TIM portfolios as well as the roughly 3,700 sites we built ourselves. Collectively, these new assets contributed over 16% to our core growth rate in the quarter and we are especially encouraged by the performance of our Nigerian assets which have so far exceeded our expectations for new business. Of the 3,700 new built sites, about 500 were completed this quarter generating average day one NOI yields of over 10%. In addition, we also built 14 new indoor DAS or small cell networks in the quarter, many in our international markets. Within the US, where the indoor networks have been in place the longest, our tenants per node stands at approximately 2.3 driving gross margins in the 70% to 75% range. Our return on these investments is about 15%; including those of Viom, we now have over 700 indoor DAS venues globally.

Thanks Tom and good morning to everyone on the call. The first quarter results we have just reported today again demonstrate continued solid demand for tower space both in the US and in our diversified international markets. In the United States, consumers’ ever-increasing appetite for mobile bandwidth has supported cumulative wireless carrier CapEx of nearly $180 billion over just the last five years with approximately another $95 billion in spectrum auction spending as well. The deployment of 4G technology at higher spectrum bands has driven significant collocation during this period due to the need for a more dense network array. In addition, each new spectrum band acquired and deployed into the network has driven additional amendment activity in the form of more antennas and remote radio heads on our towers. In the United States, the four major wireless carriers are at or close to the completion of their phase one coverage deployment of 4G technology. So what does this mean for the level of demand for tower space going forward domestically? The primary message of my remarks today is that we expect demand for macro tower space to remain robust as mobile operators progress through their subsequent deployment phases for 4G and then onto 5G deployments thereafter. Our conclusions are based on a combination of internal and external analysis that we have conducted over the past two years. Now, in the past, you have heard us describe many of the technical and economic factors that support the continued use of towers as the optimal citing solution for mobile transmitters especially in suburban and rural environments and along transportation corridors such as highways. Today I would like to focus the discussion at a much more personal level. The factors that drive a satisfying user experience on our mobile devices. Each of us is very familiar with these performance factors as we use our smartphones every day. These factors are first coverage, second capacity and third and more importantly as time goes on peak speed. So coverage, capacity, and peak speed. So let's say you are taking the metro North train for your commute for a ride to grand central station, a ride of about 45 minutes or so along that route most of your trip would be served by wireless transmission sites on macro towers including our towers in Arizona, the Meronek, and in the Bronx. While on the train you want to watch CNN.com video clips for the day's news on your phone. Coverage would be represented by the number of signal bars you see in the upper left hand corner of your screen, and by the way it's just coverage. Capacity, meanwhile, would determine how many people on the train could watch streaming video at the same time as you. If capacity isn't sufficient even if the coverage bar is there then many viewers will experience buffering; they will start to see the spinning wheels that we all dread instead of the video we want to watch. And finally, peak speed will determine the quality of that video experience. Does it come across crisp or is it grainy, choppy, and pretty much unwatchable? So coverage, capacity, and speed all need to be there to give you a good user experience. Based on the level of investment by your particular wireless service provider, your experience could vary drastically on each of these dimensions as you progress along your commute. We are now at the stage where most US wireless carriers have deployed the majority of their 4G coverage sites. Therefore, in practice, the vast majority of US mobile subscribers have access to 4G bars when we look at our phones. The anticipated six times increase in mobile traffic from 2015 to 2020, however, can't just be solved through these phase one coverage sites. Wireless carriers are continuing to make significant investments in their networks to increase capacity across most of their sites including in suburban and rural areas and also along those transportation corridors. This capacity augmentation happens in two ways. First, carriers can add new spectrum bands often resulting in amendments on our sites through new or larger modest frequency antennas. We are seeing this with bands such as AWS 3, WCS, and 2.5 GHz already and second wireless carriers are actively re-farming 2G and 3G spectrum into 4G to gain better spectral efficiency across all of their spectrum. This is currently being implemented across the sale of the 800 MHz band by some carriers, as well as PCS bands and also drives amendments on our towers as other antennas are typically swapped out for larger, more advanced antennas when the re-farming of spectrum occurs. In addition to their focus on coverage and capacity, you have been seeing in their advertisements that carriers have also now started to shift their marketing towards an emphasis on peak speed. This shift drives further investment into cell sites through technologies such as carrier aggregation as well as adding new cell sites to reduce the transmission radius and therefore the quality improvement for each signal. This increase in cell site density is expected to drive incremental collocation opportunities on macro towers as customers like us demand higher and higher peak speeds to enhance our user experience. All this points to not only significant continuing 4G LTE investments, but also to the subsequent deployment of 5G, which is not expected to be widely available until at least 2020 timeframe, though some free standard or trial deployments are possible over the intervening next few years. So, similar to 3G and 4G deployments in the past, 5G is likely to start in those dense urban environments in which capacity and signal strength challenges are the greatest, and then spread to suburban rural locations over time. While very high frequency bands of spectrum such as millimeter wave might be effective for 5G in dense urban mobile environments and maybe as a fiber to home substitute, it's our view that lower band spectrum will continue to be used for mobile 5G service in suburban and rural areas where our towers are located given the need for broader coverage and the requirement for peak capacity. Coincidentally, the 600 MHz spectrum currently being auctioned should be cleared in the same general 2020 timeframe as the commencement of large scale 5G deployment. The newly available 600 MHz spectrum could be used for 5G rollouts outside of dense urban locations without disrupting 4G spectrum bands already in use or causing significant interference. As a result, carriers will once again need to install additional or larger multiband antennas on towers, which we would expect to result in incremental revenue growth for us. Even that more than 80% of the US population resides outside of urban areas, we view this as a long term opportunity for our 5G portfolio as 5G gets implemented down the road. So to summarize, even in a 5G world we believe that macro towers will continue to be a foundational building block for mobile network deployment in the US and globally. Consequently, we are confident that the demand for tower space will continue to remain robust for many years to come.

Thanks good morning guys.

Good morning, Rick.

Lots of puts and takes in the quarter, so I just want to make sure I understood everything you laid out for us there. In the first quarter the $31 million of decommission revenue, how is that compared to what you expect for the year in decommission revenue? I think last quarter you mentioned you might have been $37 million for the year and was that expected in guidance?

No Ric, 37 is exactly as you stated we expect that for the full year, we don't give quarterly guidance. So as last year we also recognized $36 million or $37 million. We had about $17 in the first quarter. This year we recognized more but the balance we recognized throughout the rest of the year and year-over-year of the relatively flat just as we expected in guidance.

Got you. So in the quarter was high, was that already expected in guidance for the year?

Yes, exactly.

Okay. And then, on the puts and takes on the AFFO increased in revenue it looks like the revenue increase was really straight line impact so it’s not really any paced business. EBITDA was cost cutting of about 10 million plus some straight line and on the AFFO, the straight line of the cost cutting continues and then there was 5 million for was it the cash tax and the interest just trying to understand what that extra AFFO benefit was?

Yes, that's exactly right. Some lower interest expense, some lower cash taxes than previously thought and the services is down a little bit and so we have a couple of million dollars less of services AFFO there as well.

And just to clarify, Tanzania is not in the guidance yet?

Yes, we expect to close that probably then hopefully by the end of the second quarter.

Great, okay that helps to clear a lot. Thanks.

Hey guys, thanks a lot. Tom, I think you pointed in this closure so organic growth rate domestically in the US was 5.9% and then in the prepared remarks I think you said that by the end of the year you expected the run rate existing near to be 6%. Any update guide for the full year as 5.5%. Could you kind of bridge how we get down to 5.5% rate with those kind of two end points in the chain and then just second I understand that you are consolidating Viom for purposes of the AFFO presentation could you kind of comment on its contribution for instance we back out for the 49% that's not yours what that would be and kind of what your strategy is for bringing the rest of it in-house? Thanks.

Sure David, on the first question two different metrics the kind of the run rate metric that Leah talked about in her opening remarks is a new metric that we are adding. We talked about it last time we were together but it isolates just the kind of recurring lease base run rate revenue that we generate on an FX neutral basis and we think it provides more transparency into the components which really drive the tenant run rate growth. And so, that's what is driving the 5.9%, so it excludes the decommissioning revenues and those types of things back billing amortization, revenue those types of things and we think it gives more clarity in terms of what really is the run rate growth in the business. The 5.5% is our traditional core organic growth which is the one which we have historically talked about which represents the kind of the same tower store growth on those assets that we have owned for at least 12 months. And so that's what’s really driving the difference between the two metrics. And on the Viom piece in 2016, we now expect to generate about $555 million revenue from Viom about $245 million in gross margin contribution I think around $215 million in EBITDA and that represents the closing as of April 21. Going forward over the next 12 to 18 months we will look to merge our existing legacy business which is our 15,000 sites that we have within ATC India generates a couple hundred million dollars a year with the Viom business. And then, over time and that will take our ownership interest up from the current 51% to the mid 60s and then following that period of time we will look at whether how financially what makes sense in terms of bringing the rest of the business in. I mean, it's our objective that we would want to own 100% of the business with some very strong partners within the business including TATA and Macquarie, and so we are really excited about controlling the business running the business with that kind of participation and so I would expect over the next three to four years we will have more clarity in terms of just what we ultimately end up with from the ownership perspective of the business, but our immediate goal is to merge the two businesses where then we can really start to recognize what we believe will be some synergies.

And David, I think the first step of this to summarize is we will go from 51% to the mid 60s or high 60% just by merging the existing asset and Viom together. And then that's sort of incremental piece will be implemented via a more traditional investment process over a number of years actually.

Thank you very much. Just following on my prior question sort of US growth there has been some discussion earlier this year with select carrier looking to perhaps save some money with respect to some of their tower leases. I was wondering if you could give us any clarity in terms of what you are hearing from the operators at the moment because we are seeing some tampered CapEx trends coming out of the operators than similarly some of the component suppliers at the macro site are talking up sort of the demand environment so some mixed data points there I would love to hear your thoughts on sort of overall US trends from that perspective?

So, Amir first of all this is Jim. First of all, the overall CapEx from year to year in the wireless industries are expected to be flat around $30 billion. So, if there are moderated ups and downs in individual carriers, that total is looking to be about the same which means our aggregate new business opportunity among the major tower operators looks similar from 2015 to 2016. That’s how we introduced our guidance and informed our guidance and at the end of the day we’re looking more at the overall markets now, especially with the segment reporting we’ve moved. And so, the US run rate leasing metric that Tom talked about, we expect 6% of sell in the United States which is very solid. The other thing I would like to say about the run rate metric, we’re giving you yet another lens to look at the business. I think it’s a good lens because it actually, it is very similar to the way a lot of real estate investors look at the assets which is what are your rate increases and rent pricing overtime and what your occupancy increases overtime. And that really just encapsulates solid bets in the run rate and it takes out some of these amortized contributions and other one-time settlements and things like that, that cause you to have to pull them apart to figure out what the real run rate is, so we’re just going to give that to you. So, when you take the US 6% run rate and then the other part of our strategy is diversification across carriers, technologies, continents etc. and our international run rate leasing is 14% this year. So, the weighted average is about 8% and this is what we’re trying to preserve over many, many years, which is a weighted average smooth rising curve of revenue growth which then drives the double-digit expectation and objective we have as a way to share growth. So, individual carriers within the US are really important, but we’re looking at more to market level now and when you look at the aggregates we still got $30 billion spending and 6% of run rate growth out of domestic business. And then, the last thing I’d say and Tom referred to it a couple of times is, we’re really starting to focus on efficiency especially in the domestic business to get costs out of it, performance to be at or above as far as revenue and top-line growth and that’s going to help us with the AFFO per share contribution from the US over time as well. So, I really think it’s important if you want to understand the carriers’ individual plans to refer to their public statements specifically you’ll talk to them individually, but we’re really going to be looking at market-level and region-level trends from this point on.

Thank you very much for your additional color.

Yes, thank you very much. I was interested in the chart that you had in your supplemental going to the international portfolio and I was wondering if you could just walk us through a few of the examples. If I’m reading this correctly few of the examples would have literally, even over 100% gross margin, maybe that’s what showing in the chart if I’m reading it right in Mexico. And beyond that, if you could give us a little bit of your thoughts as to which of these countries do you think these metrics are going to move the most going forward? And thanks for the chart, but I want to make sure we understand it.

Yes Mike, I’m not sure exactly which chart you’re referring to, I think you might be talking to the conversion rates. So, it’s the percentage of that incremental revenue that’s actually coming down to the margins. But, I’ll highlight though that the margins in our international business, particularly in those that we’ve had some history, Mexico and as well as in Brazil, where we’re passing through the land cost in the business, the margins there are actually higher than those in the United States. So, we’re achieving higher margins there than, as I said, than in the States because of some of the incremental pass-through. I don’t know specific chart, maybe after the call you can just give Leah a call, just in case I’ve misstated that. But, my sense is that you might be talking about those conversion ratios which is the ratio of revenue that we’re bringing back down to margin.

Yes, good morning. So kind of keeping things at a market level for the US at this point, if you see any interest in removing or entering into spending holistic NOIs and probably related to that on the international, I wondered if you could talk about the in-building a little bit more, do you have exclusivity, what are some of the main markets, do you face a lot of competition that will be my question? Thanks.

Okay. And what was the second part again please?

And the second one related to in-building internationally and what are some of the most target-rich markets, do you have that exclusivity that faces a lot of competition, just a little bit more color on that in-building internationally where there seems to be – you’re focusing more on in-building internationally rather than US?

Sure. Jon, if I think, we don’t speak to individual contract negotiations or even outcomes with the mobile operators relay anywhere. We have described that we have offered holistic type of agreements when mobile operators are in server ramp-up or high spend mode, and that just helps them in a couple of ways: one is to budget more accurately and understand what their costs will be going forward, and secondly, it reduces the cycle time and therefore increases the security of when their deployment will be implemented from a schedule perspective. So those benefits are still there; some of the mobile operators are taking advantage of those now, some of them have decided to either stay on or move toward or away from a more retail type of operations. So without specifying any of those, those are the range of options and carriers move among those options based on their investment cycles which again speaks of the benefit of diversification when you can do those multiple type contracts. So secondly, on the in-building side I would like to think we are a bit of a pioneer in a way especially in Latin America introducing technology that will come into EMEA and especially Africa next on our part. But Mexico and Brazil have been really strong for us in building and Viom to its credit is more of a pioneer in in-building in the Indian market where the couple of hundred venues are much more than we even have so it's actually a very good match on the small cell size as well as Viom and ATC India. But those are probably the three places with the most opportunity right now: Mexico, Brazil, and India.

Great. You got a lot of the key issues already, but I would love to say you can spend just a few extra minutes talking about the Mexico market, it does seem like that's one that seems really acceleration and investment seems to be broadening out in terms of the carriers there? Thanks.

Sure Jonathan, it’s Jim. What’s happening in Mexico right now is something again it’s happened in the US and other markets ahead earlier and that is the rate of 4G adoption can be sort of governed if you will by two things in any market: one is service pricing and the other one is handset pricing. So the lower the handset pricing and lower the service pricing, the more people can afford it will sign up and start using it and grow overtime in their usage. So in Mexico, the government successfully increased the level of competition in that country, service pricing moved in a constructive way for the population, we’re able to adapt to their service more rapidly than they could before. And globally, handset pricing for 4G is also reducing at the same time so you have these two complementary cost reductions in handset and service pricing and people in Mexico are signing up. So that then is as we by seen every other case increase smartphone penetration, 3G usage and ultimately 4G drives gigabytes from month on a network and that network demand needs to be serviced and a large part of that is often by adding equipment to real estate including towers. So it's the typical cycle we have seen but I would say the two drivers are reduced handset pricing and reduced service pricing for data.

Hi, two questions: one is on escalators. So historically we have thought about escalators as being something north of 3% for your business, particularly in the United States. But escalators, as we all know, both when we look backward and I think when you look forward is much left in that right now. And I am curious if because of that you are starting to see some push back on the escalators on new deals you are signing in the United States and if you are still able to achieve the 3 plus percent that actually now something closer to, for example, 2%? And then, my second question goes back to some of the comments Jim made talking about the US market. I think one of the things that's going to be different with the build-out of 5G relative to previous generation builds is the use of outdoor small cells. And it looks like from the topology perspective, particularly when you think some of the higher band frequencies are going to be used small cells are going to command a great portion of the overall investment dollars for network build-out and stand out to historically happened. And I am curious if you think that that's going to win the level of macro tower growth you are going to see in the United States tied to 5G versus the growth rate we have seen in previous generation build-out. Thanks.

So, let me start with the escalators. The traditional service 3 plus percent escalators are really not solely tied to inflation in the US, it's tied to real estate rent increases overtime, which have sort of been around the 3% level when it comes to land rents upon which towers are built. So there of course, is an inflation kind of concept second order behind that, but land rent costs are the largest cost in volume going into tower operations and ground lessors have been able to secure 3 plus percent escalators off and out of ground. So those are mirrored in the tower list. Moving to the outdoor small cell 5G issue, I would invite you to get a hold of Leah separately because we have got some pretty in-depth technical assessments on how this works whether it's 3G, 4G, or 5G. And yes, in dense urban networks, dense urban environments, networks do have to have much shorter transmission rates; small cell makes sense for them for 3G, 4G and ultimately they will make sense for 5G. But what we serve is the suburban rural and transportation corridor market; not urban or dense urban. 97.5% of our towers are in non-dense urban environments and the reason that carriers use towers predominately in those environments is because that is the optimal height power setting and transmission radius for suburban rural and transportation corridor use cases. The proportion of small cell spending, our projection is that yes as a percentage of CapEx we will double over the next five years from 5% to approximately 10%. That's our estimate; therefore we think 90% of the spend rate is or so is going to continue to be on macro sites mainly towers and also rooftops and more of an environment. So that's how we see going forward again if you want more depth in some of the detail we can provide a separate session for anybody that wants that just contact Leah.

Hey guys, thank you for taking the questions. Two if I could, one on Viom, how soon do you sense you can integrate these assets with the existing ATC India portfolio and just wondering really where the margins on the Viom portfolio can go from the roughly 40% that's tied by the current guide? And then just secondly on the Verizon portfolio of towers; can you just give us an update on what you are seeing on the demand front and latest expectations for list of activity in 2016? Thanks.

So this is Jim. I will speak to the Viom integration; the most important part of the integration from the commercial standpoint is one sales force face to the customer which is in the process of being implemented right now and that's on a fast track. The second largest piece from a customer and revenue point of view will be the integration of multiple master lease agreements between the two portfolios among many customers that's going to take probably 12 to 18 months to really get those consolidated but those things have already started. As far as the leaseability of the sites, Viom has been run as an independent third party tower company already and therefore the documentation and the systems as the data to be able to quickly release sites is largely already there; that's a difference than say a carrier portfolio like Verizon where at least collect a lot of that from the field officers as such. So the Viom integration from an effective feasibility standpoint is going to be I think on a very fast track. This entire portfolio this combined portfolio is going to be jointly marketed to our customer base early on and we are already in discussion volume discussions with many of them as to how they can take advantage of the now number one independent tower company in India along with our traditional sub-operating capabilities that they come to service back. So I think the Viom integration takes 12 to 18 months to get it completely renegotiated around the master contract and have some of the field work done and the organizational alignments fully completed. As to Verizon, we have said just recently in our last call and it's still the case we have 9% to 10% long term sort of cumulative average growth rate expectation over ten years for that portfolio and we still do so every month or two it's not going to change I can imagine materially. We are seeing new business on the sites and really great shape as far as the carrier portfolio for capacity ground space the documentation I referred to earlier so we are progressing through our plan and expect to be able to deliver what we have stated in the past.

Thanks and just going back to Colby’s question about network design even before we get to 5G; one of the things that's happening now and this is something Verizon discussed when it met with analysts earlier this week is that carriers are moving to centralized win designs so they are taking some of the equipment that has historically been at tower locations and moving them to central locations. However, Verizon also said that in many cases those central locations are other macro sites and so since this is happening now and I imagine you seen some of it going on your site how does this affect your business? I mean are you seeing some reduction in footprints in other places, but meaningful increases in a carrier footprint in other locations and on net what does this mean for you?

So, the net effect is changes in ground equipment and installation and locations spread is not material. There are some offsets like you said but generally the way our contracts are structured the vast majority of the lease rates if you will and none of it is separable or severable if you will. But the vast majority of the pricing calculation is really what goes on the tower not necessarily on the ground again none of it is severable; so because you took one cabinet off of your ground space you are still paying for the square foot footprint of that ground space. And you can put whatever you want or not on it so we don't tend to reduce prices because someone moved the cabinet from one place to another took it off the site. One of the benefits of central ran or cloud ran in our view is that it frees up more resources for the radio access network that transmission equipment that goes up on the tower, which again we charge for and that's what most of the amendments have to do with. So over the long term we think centralized ran or cloud ran is going to be constructive for our lease growth on our sites because if much less and I think a couple of mobile operators have said this is reducing their core network costs fairly significantly that more resources could then be potentially devoted to the radio access network which again 90% of what we think will be spent on tower and related rooftops sites.

Yes, and this is a quick follow-up since they are using carriers using certain macro locations to be the centralized hubs; are finding that tower sites to happen to have a lot of ground space all of a sudden maybe have more revenue potential than they would have because that place is useful for the data centers that they are running?

I agree with Brett on the margin aspect. Our sites usually have a lot of ground space, and it has been beneficial for us to move from having a full tractor trailer of equipment on site to just a couple of smaller cabinets. The miniaturization of our base station equipment has allowed us to use more ground space efficiently over time. There are instances where we need additional space because we now have multiple customers, which is a positive trend. We believe we will be well-positioned to host and serve extra cloud-ran equipment on sites closer to the edge of the network, and we see potential for distributed storage caching, particularly for large data volumes like entertainment, at tower sites to minimize content transmission latency. Looking ahead, the ground spaces could offer additional utility, and we have examples from our international markets where we've implemented fiber docks and other closely related and solar applications. We aim to maximize every dollar on every square foot of ground, but it’s a long-term trend that will evolve over time.

Hey guys, thanks for getting me in. So, the first our peer sponsors are doing a month can you give us any flavor of conversations you are having with the potential bidders for this?

Our interaction with the mobile operators on this is that we will support you set you have a part in first and they know that we will, we are not a sort of designated sub-contractor in a bid to any particular mobile operators so our view of first that is there is spectrum to be put to work there is a national security or homeland security need to be filled. It's very unclear as to how that's going to be filled but at the end of the day they are going to need to transmit off of largely towers and we will be there to serve that need depending on who wins how they are structured if it's take wise versus national etc. So, we are going to have our real estate asset ready and by having good operational practices and good structural capacity on the sites available for these kinds of things that's the best we can do right now and just get ready for this wave if and when it hits the lease on to our towers.

I think, a bidder will have to have some idea of what he is going to pay for towers. Do you have some levels of view on what those amendments might cost if a carrier were to add like that capacity?

We don't know the bill of material as yet first of all what equipment will go on we don't know the redundancy and hardening factors it might need to be put in place for example, what is the generator dedicated to this need at every site so until we know the bill of materials and the specifications of the loading and the ground requirements we can't price it. Now I think you are absolutely right that bidders are going to have to make estimates of this but there is market pricing out there for them to draw from today and imagine that's how people are doing it but we are not committing pricing because we don't we can't do it until we have a bill of materials. We remain committed to our capital deployment strategy and continue to focus on our goal of simultaneously funding growth, returning cash to our stockholders, and maintaining a strong balance sheet. To this end, we declared over $240 million in common and mandatory convertible preferred stock dividends and deployed nearly $160 million in CapEx in Q1. We believe that the combination of our growth and AFFO per share and consistent return of capital to stockholders from our REIT distributions will create meaningful value for our stockholders. In 2016, this includes expected growth in our REIT distribution subject to board approval of at least 20%. We are also committed to maintaining a substantial basic liquidity and a solid balance sheet. As of the end of the first quarter, our net leverage ratio stood at 5 times net debt to annualized Q1 adjusted EBITDA with liquidity of over $3 billion. We continue to expect to end the year with 5 times net debt or below and longer-term our target leverage range remains between 3 and 5 times. As a result of our consistent capital deployment strategy, we expect to extend our track record of delivering strong financial results in 2016 as is detailed on slide 13. And even more importantly, positioning ourselves for strong sustainable growth going forward. In fact, at the midpoint of our outlook we will have grown property revenue, adjusted EBITDA, and AFFO at a mid-teen percentage clip since 2007 while at the same time maintaining return on invested capital between 9% and 10%, despite adding over 25,000 new sites since the beginning of 2015. We expect these new sites to enhance our future growth trajectory over the long term while enhancing total returns. Turning to slide 14, and in summary, we started 2016 with a strong operational quarter, announced our entry into Tanzania, built nearly 500 sites, and closed our acquisition of controlling stake in Viom networks just last week. Our top priority remains driving continued operational excellence while focusing on the integration of our recently acquired portfolios. As a result, we believe we are well positioned to sustain strong growth in all of our key metrics in margin performance and are raising our 2016 outlook for property revenue, adjusted EBITDA, and AFFO. Similar to last year, we expect core growth in all three to be above our long-term targets. By year-end, we expect to have nearly 150,000 sites worldwide with a solid balance sheet, ample liquidity, and leverage back within our target range. Due to our disciplined and consistent global capital allocation program, we continue to generate strong organic core revenue growth supported by a high-quality asset base diversified across geographies, carriers, and network technologies with a global portfolio more than triple the size of our closest U.S. publicly traded peers. Our significant exposure to high growth markets in our carefully cultivated asset base positions us to not only benefit from significant near-term network investments, but to also deliver strong and steady growth over the long term. As a result, we expect to continue to generate consistent recurring growth in AFFO per share in a highly compelling total return to stockholders.

Great. Thank you everyone for joining us today and if you have any follow-up questions on the results please feel free to reach out to myself or another member of our IR team and we are here to help. Thanks.