SBA Communications Corp (SBAC) — Q3 2024 Earnings Call Transcript

Thank you. Good evening, and thank you for joining us for SBA's Third Quarter 2024 Earnings Conference Call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer; and Marc Montagner, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including but not limited to, any guidance for 2024 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, October 28, and we have no obligation to update any forward-looking statement we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page on Investor release on our website. With that, I will now turn it over to Brendan to comment on the third quarter.

Thank you, Mark. Good afternoon. Operationally, the third quarter ended up rolling out largely as we expected, with leasing results in-line with our outlook and services results a little ahead of our outlook. Foreign exchange rates were a little stronger than our estimates a quarter ago, and domestic new carrier activity was up from the first half of the new year. All of these items combined to allow us to increase our full year 2024 outlook across all of our key financial metrics. In the US, new business executions were up from the prior three quarters. And applications and inquiries have increased as well. We are beginning to see a shift in the makeup of our new business signed up and applications with a growing percentage coming from new lease co-locations versus amendments to existing leases. We anticipate this trend continuing into 2025. All of our major customers have significant network needs over the next few years as mobile network consumption continues to grow at a healthy pace. The limitation of new spectrum availability over the next several years will challenge our customers to meet the demands on their networks through incremental equipment deployment and densification of sites. Our macro tower portfolio should be a beneficiary of this dynamic. Other growth drivers, which we have discussed before, such as fixed wireless access, the incorporation of new generative AI capabilities into handsets, regulatory build-out commitments and remaining 5G coverage expansion will all contribute to a healthy network investment environment over the next several years. In addition, our customer relationships are strong. We are a trusted and valued partner to each of them. We are very focused on helping them to achieve their objectives through providing exceptional service and quality. As I mentioned on last quarter's call, we are in the business of long-term assets and long-term customer relationships. Things don't change much from quarter-to-quarter, but consistently delivering over time, as we have done for the past 35 years, is the best way to be our customers' first choice provider and ultimately, to maximize growth for our shareholders. Internationally, we have adopted the same philosophy. And as a result, we are seen as a valued partner to our carrier customers in each of our largest markets. The quarter was solid with international leasing results in-line with our expectations, and we expect a solid finish to the year. The broader market internationally, though, still presents some challenges as we manage through customer consolidations and network rationalization. However, we see light at the end of this tunnel as the surviving customers are stronger and better positioned to invest in growing their wireless product offerings and their ARPUs. To accomplish this, increased network investment will be required, and 5G upgrades across all of our international markets are really just at the very beginning. And wireless broadband consumption is growing across our markets just as fast, if not faster, than the US. Overall, we believe our International business will continue to be additive to our organic growth profile over time and the long-term prospects are still very good. As part of maximizing the long-term prospects of our International business, we continue to strategically review our operations and future potential in each of our existing markets. As I have shared with you before, we believe that in order to create the greatest long-term stability and the opportunity to maximize growth in a particular market, it is important to be of scale and positioned as an industry leader in that market and to be closely aligned with the leading wireless carriers in the market as well. In alignment with that effort, we are very pleased to share with you today's announcement of a purchase agreement signed with Millicom International Cellular, for the acquisition of over 7,000 sites throughout Central America, for an initial cash purchase price of approximately $975 million. Pro forma for this transaction, SBA will be the largest tower company across the region. We are very excited to increase our partnership with Millicom and to help them grow their business for many years to come. The assets are located across five countries in Central America, increasing SBA scale in four of those countries where we already have operations. The assets are anticipated to produce approximately $129 million in site leasing revenue and $89 million in tower cash flow during the first full year of operations after closing. And significantly, all of the cash flow will be denominated in US dollars. Millicom will be a tenant on each site under a leaseback arrangement in which they have committed to an initial 15-year term. In addition, as part of the leasing arrangement, Millicom has agreed to extend all of their approximately 1,500 existing leases with SBA that exist on our existing assets in the region for a new 15-year term. SBA and Millicom have also entered into a new build-to-suit agreement under which SBA will exclusively build up to 2,500 new sites in Central America for Millicom over the next seven years. The transaction is subject to regulatory approvals and customary closing conditions, and we expect it will close sometime in mid- to late 2025. The Millicom transaction demonstrates one way in which we are carrying out the learnings from our strategic review of each market, increasing our scale in existing markets and establishing long-term relationships with the leading customers in those markets. In some markets, however, we may conclude this type of opportunity is not available to us. In those cases, we will consider divesting markets where we are subscale. One example of this is in the Philippines. Our original strategy in the Philippines was to gain scale through build-to-suit arrangements with local carriers and continue to grow our portfolio through organic growth, smaller acquisitions and further builds. Unfortunately, over the past two years, the market has changed, with the leading carriers awarding large build-to-suit opportunities to tower companies as a component of significant sale-leaseback transactions with those tower companies at very high valuations. We have successfully built a valuable portfolio of tower assets in the Philippines. But today, there are over 30 independent tower companies in the market, and our market share is still less than 1%. Given our lack of broader presence in the region and a limited path to scale over the near to medium-term, we have begun a process to exit the market through a sale of our existing business. We will continue our strategic review of all of our operations and markets with a focus on stabilizing long-term cash flows and positioning ourselves to maximize organic growth opportunities in each market. Some markets may grow and others we may exit, but I am confident that each decision will strengthen SBA's prospects for the long-term. Pivoting now to our services business, we had a very good third quarter. Revenue was up over 23% from the second quarter and gross profit was up over 33%. Our carrier customers meaningfully stepped up their construction activity in the quarter, contributing to better results than we had anticipated. As a result, we have increased our full year outlook for services revenue from the outlook provided last quarter. And our full year adjusted EBITDA outlook also benefited from these strong results. Our services teams continue to execute very well, and they provide a true differentiation for SBA with our customers. During the third quarter, we also made significant progress in managing our balance sheet. With three very positive capital markets transactions, which Mark will discuss in a moment. These transactions demonstrate our access to attractively priced capital and our position as a preferred issuer across the debt markets in which we participate. Our leverage remains near historical lows. We have one debt maturity over the next two years, and our $2 billion revolver is fully undrawn. So we are in excellent shape in terms of capital structure and liquidity. In addition, we continue a targeted approach to capital allocation. Completing our recent refinancing, which provides us with flexibility to opportunistically allocate capital into strategic and value-enhancing asset investment, with a key example being the Millicom transaction. During the third quarter, we also acquired a portfolio of high cash flowing sites in the US, at an attractive price and we will continue to look for opportunities to grow our asset base at appropriate valuations, as well as to opportunistically repurchase our stock. Our business continues to perform well, and our customers continue to enhance their networks. As a result, we are set up well for a strong finish to the year. Before turning it over to Mark to share more specifics on our third quarter results, I'd like to thank our team members and our customers for their contributions to our success. Our operations teams deserve a special thank you for the tremendous job they did through the recent hurricanes affecting the Southeastern United States. Between the two storms, we had over 1,000 sites in the path of one or both storms. Our sites once again demonstrated their resiliency with relatively little structural damage. More impressive, though, was the quick and dedicated response from our team members to assess the damage, clear access and assist our customers in getting their networks up and running as quickly as possible. I greatly appreciate the dedication and commitment of our teams on the ground in these challenging situations. With that, I will now turn things over to Mark who will provide additional details.

Thank you, Brendan. Our third quarter results were mostly in-line with our expectations. Third quarter domestic same tower revenue growth over the third quarter of last year was 5.3% on a gross basis and 2% on a net basis, including 3.3% of churn. Of that 3.3%, 2% was related to Sprint consolidation. International or same-tower recurring cash leasing revenue growth for the third quarter, which is calculated on a constant currency basis was 3.1% net, including 4.3% of churn or 7.4% on a gross basis. In Brazil, our largest international market, same-tower gross organic growth was 6.5% on a constant currency basis. We continue to see solid organic lease-up in our international market. Total international churn remained elevated in the third quarter to mostly to previously announced carrier consolidation. Pro forma for today's announcement with Millicom, approximately 80% of cash site leasing revenue and 84% of adjusted EBITDA are expected to be denominated in US dollars. Let's now cover our results outlook for 2024. Even excluding the impact of better-than-expected foreign currency exchange rates in the third quarter, we increased our full year outlook across all key metrics, including site leasing revenue, tower cash flow, adjusted EBITDA, AFFO and FFO per share as compared to our prior outlook. With regard to site development revenue, we are increasing the full outlook by $5 million to mostly due to strong third quarter outperformance in that business. Please also note that the outlook does not assume any further acquisitions beyond those which are under contract and expected to close by year-end. We also do not assume any share repurchases beyond what was already completed so far this year. However, it is possible that we invest in additional assets or share repurchases or both during the year. Our outlook for net cash interest expenses and for FFO and AFFO per share now assume the recent ABS financing and repricing of our term loan B. Additionally, we enter into a new interest rate swaps starting in April 2025, which will have no impact on our 2024 outlook. We are quite busy with our balance sheet in the last 2 months. During the third quarter, the company issued, through an existing trust, 2 tranches of tower revenue securities totaling $2.07 billion. This includes a tranche of $620 million issued at 4.654% with an anticipated repayment date of October 2027 and the final maturity date of October 2054. The other tranche includes $1.45 billion issued at 4.831% with an anticipated repayment date of October 2029 and a final maturity date of October 2054. The net proceeds from the offering we used to repay the $620 million total maturity and will be used to pay back the $1.165 billion ABS maturing in January of 2025. Cash proceeds to repay the January maturity will sit in an escrow account until then, at which time, the $1.165 billion will be repaid. Our next maturity is a $750 million ABS during January 2026.

Thanks, Marc. In September, we repriced our $2.3 billion term loan by lowering the spread above one-month term SOFR from 200 basis points to 175 basis points. This improvement represents approximately $6 million of annual interest expense savings. In addition to lowering the spread on our term-loan by 25 basis points, we also further hedge the future floating rate component of the loan by entering into a forward-starting interest rate swap. This swap will fix the otherwise floating one-month term SOFR at 3% for a notional amount of $1 billion, significantly lower than today's current one-month term SOFR rate. Similar to the existing $1 billion forward-starting interest rate swap we entered into back in the fourth quarter of 2023. The new swap has an effective start date of March 31, 2025, and a maturity of April 11, 2028. Together, the blended one-month term SOFR rate, we will pay starting in March 2025 on $2 billion notional will be 3.15%. Inclusive of the new spread of 175 basis points, the all-in cost for the $2 billion fixed portion of the $2.3 billion outstanding term loan will be 5.165%, starting in April of 2025. The remaining unhedged portion of the loan will continue to float and accrue interest at one-month term SOFR, plus 175 basis points. Pro forma for the new swap, approximately 98% of our non-revolver debt outstanding is fixed, which will reduce the impact of future interest rate fluctuations and create greater certainty in our future AFFO. Our current leverage of 6.4 times net debt to adjusted EBITDA remains near historical lows. Our third quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was a very strong 5.3 times. Pro forma for the ABS refinancing, our weighted average maturity is approximately four years with an average interest rate of 3.2% across our total outstanding debt. We continue to use cash on hand to repay amounts outstanding under the revolver. And as of today, our $2 billion revolver is fully paid down. And finally, during the third quarter, we declared and paid a cash dividend of $105.3 million or $0.98 per share. And today, we announced that our Board of Directors declared a fourth quarter dividend of $0.98 per share payable on December 12, 2024, to shareholders of record as of the close of business on November 14, 2024. This dividend represents an increase of approximately 15%, over the dividend paid in the fourth quarter of 2023.

Great. Thank you. A couple of questions. First, domestically, you mentioned that carrier activity is increasing from the first half levels and shifting to more co-location versus amendment. Can you size that mix? And if this holds up into 4Q, how should we think generally about '25 leasing versus '24? Can it be flat to up? And on the Millicom deal, can you provide more color on the AFFO per share accretion in year one and maybe the lease-up opportunity on these sites? Thank you.

Sure. So on the carrier activity mix, we have seen an increase in carrier activity in the US in terms of new business signed up. The third quarter was higher than the first half of the year, really in the last three quarters, actually. And we would expect, based on the backlogs growing, that we'll continue to see that move up. It's not at levels of where it was during the height of a couple of years ago, but it's moving up in the right direction, and obviously that's favorable for the future. The mix of that shifting, we've begun to see, as I mentioned, a little bit more of that revenue coming from new co-locations as opposed to amendments. We've had such a large percentage from amendments over time that now as we start to see more new leases, it's starting to shift a bit. And I guess what that really means is that we are obviously getting more points of presence with those carrier customers, which is a good thing for future growth as a big baseline. It does mean, I guess slightly on the negative side is that there is a little bit greater delay from when those leases, when that revenue gets signed up to when it commences - the amendments typically commence a little bit quicker. But if we continue to see something similar in the fourth quarter to what we saw in the third quarter, we'll be in okay shape for next year, but I can't really comment on how it will look relative to this year. There's a lot of moving parts. So we'll see where we are when we get there. As it relates to the Millicom deal, I think it is a little premature for me to give you the exact AFFO accretion. I think you can look at the numbers that we released in our press release in terms of the Tower cash flow, it will be because we are in many of these markets, there will be limited overhead increases associated with that. In addition, I would expect we'll have some income tax implications, but it definitely will be accretive to AFFO per share once it closes. The issue is really just the timing of when it closes is so, as we get a little bit further down the road and we have a better sense of timing, we'll share that more specifically with you.

Sounds good. Thank you.

Hi, good afternoon everybody. Hey, I'm glad you all made it through the hurricane okay, got the network stack up and running as a Florida based firm. We feel you there. Glad everybody is doing well. I want to follow-up to Batya's questions on the deal. Can you help us understand kind of maybe a rough magnitude of EBITDA? I know you said it would be limited added overhead. Just trying to get a sense of what the EBITDA multiple might have been ballpark.

Yes, I would expect that the incremental SG&A will be between $3 million and $5 million, Ric. So maybe half a turn or so higher on a multiple.

Yes. So still something kind of in the sub-6 times probably for EV, the EBITDA multiple paid for the assets?

No. It would be 11.

Yes, right. 11.5%, so 12 like 11.5%?

Yes.

Okay. So help us understand maybe a little bit more about why that price. Can you talk a little bit about the quality of the assets how robust are they as far as adding tenants? And then just what's the carrier universe like in each one of those markets and we can understand the leasing potential, given the multiple was kind of like 11.5 times?

Yes. So first, let's discuss the overall situation. We're currently operating throughout Central America and are one of the leading tower companies in the region. As we analyze each of our markets, we aim to determine what the future holds and what potential exists for us. Early on, we recognized that to be most relevant to the carriers in these markets, we needed to be a market leader in size and scale. Additionally, it was crucial to align closely with the leading carriers so we wouldn't face the challenges associated with weaker carriers that can create churn and disrupt the stability our business is known for. This awareness presented us with an opportunity to take a leadership position, as we are clearly the largest tower company in the region, while also partnering with the leading carrier. This partnership is a significant motivator, not only because we were able to agree on a favorable price for both us and Tigo, but also because it allows them to unlock value from non-core assets. For us, it capitalizes on our expertise in delivering high-quality infrastructure assets, which we can offer to Tigo as well as other carriers in the region. In terms of growth potential, many of our markets have already gone through consolidation, which previously disrupted operations. This leaves us optimistic about the remaining carriers in each market, as each situation varies. Some countries have only two well-balanced carriers, with Tigo being one of them, while others have more. Given that there are currently only 1.2 tenants per site and many of our sites are in prime locations with Tigo as the leading provider, we see a promising opportunity for additional growth in these markets.

Okay. And any CapEx that's required kind of to get them up to handle that additional tenancy.

There may be some, but that would obviously be figured into the analysis as we sign those leases with new carriers. So there is no required CapEx other than to the extent we see that it's appropriate in connection with the lease-up opportunity.

Okay, thanks.

Good afternoon, thanks for taking my question. I guess first question would be relative to the Millicom deal. Clearly, you're doubling down on the Central America footprint. What should we draw away from this in terms of anything you may say about or not about foreclosing the possibility of a larger out-of-footprint deal in Europe or elsewhere?

I don't think that it necessarily means anything as it related to that. Our top priority was certainly to look at the markets where we already are operating and to improve our position in those or, frankly to look at exiting those if we don't see a clear path to doing that. But that in and of itself isn't a commentary on expansion into other places. I think the expansion in other places is simply secondary to strengthening the position in the markets where we already are.

Understand. And then in terms of the commentary on greater proportion of new leasing on the domestic sites, can you maybe just talk a little bit about qualitatively how much of that is sort of new leases in, say rural markets and sort of outside of urban, suburban areas? And are you seeing anything on the margin in terms of densification?

Yes. I would say it's a combination of both, Jim. It's still early in the process of this shift. We've noticed an increase in the number of new leases we are signing compared to the pace over the last two years. Some of this is happening in more rural markets, as at least one of our customers has a regulatory requirement to develop those areas. That's one aspect. Additionally, there is also densification occurring in some of the more suburban markets. This is our best assessment based on our observations and discussions with our customers, and I anticipate that both trends will continue into the future, especially given the lack of new spectrum that will be available.

Thanks for taking the question. Brandon, I'll try the leasing activity question a little bit away. I was hoping you could quantify the growth in lease applications in terms of the backlog of new leases that are signed but not commenced? And then Mark, just looking at the guide implied by 4Q leasing looks like something just shy of $9 million, is that the bottom? And when do you actually think there is an inflection in the leasing activity? Thanks.

Yes, Brandon, I'm sorry to hear this to you, but it was a little hard to hear you. I think you were asking about the organic growth and the timing of the inflection? Is it possible for you to just repeat it a little bit?

Yes. I can try again. I was hoping you to take the activity question a little different direction and hoping you could quantify the application backlog in terms of signed but not commenced new leases. And then just looking at 4Q implied by guidance seems like new leases domestically is just shy of $9 million. Is that correct? And when is the bottom for that leasing metrics? Thanks.

Yes. So the application backlog is of a similar shift in mix that we talked about. Your number for the fourth quarter is pretty close, I would say within $0.5 million or so of what we estimate. And on the timing of the bottom, I think that's around it. I can't tell you for sure yet as we get into next year, but I think we would expect to see that sort of represent right around the bottom area. I mean some of that is dependent upon what we continue to see happen here as we move through the balance of the year in terms of leasing activity. The other caveat to that, the reason I'm hedging a little bit is just that shift in the mix of the lease-up has some impact on timing. The two different things they're obviously related. One is what we sign up and two is when does it commence and hit the financials and that shift in the mix to some degree can push it out a little bit further. So until we see how that plays out for the balance of the year, it's hard for me to say exactly. But we're seeing an uptick in the overall leasing activity. So I'm pretty confident we'll start to see it move upwards.

Great. Thank you.

Hi, thank you very much. Good evening. I want to come back to the Millicom deal. You did a build-to-suit agreement with them. Could you just talk about how you think about underwriting that return on investment and so forth, and it's a seven-year deal. So is that ratable over that time period? And then I think leverage stayed in the sort of mid-6s. How are you thinking about where you want leverage to go over the next year or two as you balance M&A and buybacks and keeping flexibility on the balance sheet? Thanks.

Sure. So yes, the build-to-suit agreement was actually a piece of it that we're very excited about because it allows us to continue to expand our partnership with Millicom basically what it is as we are their exclusive provider of build-to-suit opportunities over the next seven years up to a total of 2,500 sites. We underwrote that with as we looked at what we expected the estimated costs and the pricing of it was tied into those estimated costs. We expect it to be a high returner, certainly north of double digits without any lease up. And again, we think that there will be plenty of opportunities to see second tenancies on a number of those sites as we add them over time because they're typically going in locations where there isn't any coverage today. So I think it will be certainly additive over time. In terms of the timing of it coming in over that seven years, there isn't an expected time frame. It may come in evenly over that or it may come in quicker. So we'll just report that as it progresses. So there's no requirement in that regard. On the leverage front, yes, our leverage is still hovering around the lowest level that it's been at for us historically at 6.4 times. Even with the Millicom deal pro forma for that, that's a fairly small impact. You're talking about 0.2 turns is what I'd estimate of incremental leverage when that eventually closes. So I don't really have the desire to necessarily see the leverage go lower. It's really more a function of good places to use the excess capital that it generates. This deal is an example of an opportunity that we saw, that we thought would be very value enhancing. And so having that flexibility to do that is a nice place to be. And that leverage being lower allows us the opportunity to do that. But going forward, we'll continue to look for places where we can invest in assets. And if we don't see asset opportunities, we'll invest in share repurchases. And if that doesn't seem like the best spot at a given time, we'll obviously continue to pay down debt. But my preference is to do one of the first two.

Great. Thanks a lot.

Thank you. A couple of questions. So as you manage your Latin American portfolio, my recollection is that you had somewhat of a centralized model doing a lot of it out of Florida. And is that still the case now that you've got a couple of quarters under your belt as CEO? And does the Millicom transaction change that at all?

Yes, John, it's basically still the same. And really, what it is, is the things that can be done centrally, we try to do centrally, meaning back-office functions, accounting, HR, legal, those types of things. We obviously have to have a presence, of course, in the markets for operational purposes, for sales purposes, interactions with our customers. those sorts of things. And we do have local representation of these other functions there. But we try to have everything kind of funnel back through our core systems here and our teams here. And the reason we do that is, one, it's cost effective. But two, it gives us a much greater insight into what's happening across all of our international markets by having it run that way. And three, it also allows us to have consistency across all these various markets and the way that we operate and the way that we approach our business. And I think, over time, that has generally benefited us relative to our peers. So I don't expect to change that going forward. And even with this Millicom deal, we'll obviously have to have a few more people in the field and maybe one or two more here. But I think the general structure will stay the same.

And then a couple of US questions. Just wondering if you're seeing any kind of different impacts or activity from some of the build to relocate tower development activities as well as any impacts that you might expect to see in the industry with a Verizon portfolio sale changing hands into an independent operation.

We're not noticing much activity in relocation projects anymore. A couple of years ago, it was more active, but it has mostly slowed down. There are very few instances of that now. People have recognized that constructing towers next to each other typically leads to issues in those situations. Consequently, we see a significant decline in such projects. Regarding the Verizon sale, it was a substantial portfolio in the U.S., and there are very few portfolios of that size available in the U.S. market. It appears to have sold for a strong price, reflecting the value of towers in the U.S. We believe this reinforces that SBA possesses a high-quality and valuable platform and portfolio.

Hi, I wanted to ask about the site development. The revenue picked up and the guidance was moved up slightly. Is that following that type of work following with the increase in co-location and new leases? Or is there something else going on there? And how should we think about it as we roll into next year?

Yes, Richard, it is indeed a bit better. We had a stronger quarter than we expected when we provided guidance three months ago, which is why we are increasing our outlook for the year. A significant factor in this is that several carrier customers have been particularly active. This activity appears to be linked to the shift towards more new leases and an increase in our full term fee work compared to the past. Consequently, there is a substantial construction component contributing to this. This heavy construction work raises the overall volume, even with the same number of agreements. I believe this is one of the factors at play, and I expect we will see similar drivers as we approach next year.

Great. And you talked a little bit about domestic M&A, but you did have a smaller deal that you said was highly cash flow accretive. Do you think there's more of these smaller deals to come and build upon? Or is that just a one-off type thing?

Yes. Unfortunately, I would say it's somewhat limited. We do our best to look at everything that's available and the volume of opportunities in the US is somewhat limited, which is part of the reason that they go for such high valuations because the folks chasing them outnumber the folks making them available for sale. But yes. I mean we're going to continue to look, and I think every so often, we're going to find opportunities to jump in and take advantage of something where maybe somebody else has missed it or we see value unlock opportunities that others don't. But I do think unfortunately, it's more limited than I would like.

Great. Thank you.

Hi, guys thanks for taking the question. Just to dovetail on some of the questions that have been asked around the US. Can you talk maybe a little bit more around what necessarily changed in 3Q that drove the uptick in activity? Was it one carrier in particular or more broad-based? And then maybe just a follow on to that. On the DISH front, any changes in activity and any thoughts you can offer up on some of the moves they've made of late? Thank you.

Yes, the change in the third quarter, I would say it's more broad-based. But in any given quarter, one carrier can be a little more active than another. So I don't know that as I kind of look at the pieces of it here in front of me, I don't see too much to highlight and we don't really like to get into the individual customers. I'm not sure that it would mean anything in anyway because the next quarter, that shift can turn around a little bit and just be a different carrier. It all depends on when they're hitting our specific sites, I think. With regard to DISH, obviously some positive news that I think sets us up well for the future, just the fact that one of our key customers, they have a lot to do. The fact they got some relief on the regulatory deadlines I think is clearly positive because it allows them to actually be able to achieve this build-out that they seem very, very committed to. And the funding that they've raised through the sale of satellite business, I think is also obviously positive. It's really just a question of timing. What they've done here is they've raised the funding, they've got themselves a schedule that they can work with, but I do think it will take some time for them to go through that and so it's a little early for me to know what the short-term impacts will be, but I do know long-term, it's obviously very positive.

Great. If I could ask one more follow-up. Regarding the colo in relation to the amendment in the US, what is the current mix? I'm curious about what that mix was in the US, at least in the third quarter, since you mentioned an increased mix of colo.

Yes. And this is based on dollars, but it was roughly 60%, a little over 60% from new leases.

Hi, thank you for taking my questions. First, I would like to clarify some points about Millicom. The Millicom press release mentioned the possibility of earning additional payments over time if they achieve certain financial goals. Would these earnouts significantly affect the purchase price? Also, from a churn perspective, can we say that the 15-year MLA essentially secures Millicom’s commitment without allowing them the option to offload any of the towers over time?

Yes, on the second one. It's a 15-year committed term. On the first question on the earnout, there are some potential earnouts for them. Those would only be paid if certain financial milestones were reached and that would be actually a great win for both parties. I don't think it materially will change the numbers, and it actually will be certainly enhancing to the overall multiple of the deal if it happens.

Okay. Okay. And then you cited a deal with a nice yield on it that you closed. I think you're referencing the Televisa Univision deal. Can you share anything about the expected contribution there or the degree to which that thesis is based on the existing broadcast revenue stream versus potential lease-up? And how big is share of your business of broadcast today?

Broadcast is a fairly small percentage of our business. We have some existing embedded broadcast towers that we've had for a lot of years in our portfolio. This particular portfolio was something that we spent a number of months with them on looking at each site and what its potential was. Obviously, the price point is well below where the typical wireless towers are trading here in the US. So that allows for a lot more flexibility in terms of what we needed to do from an organic growth standpoint. But we do think some of the sites have potential for some growth, but it doesn't really require much. And we have a long-term commitment from Univision on that leaseback.

Could you maybe touch on kind of how you see non-Sprint churn in your domestic markets looking beyond this year? I think you've talked about getting that down to below 1% range. But any update on kind of timing to when you guys think you could get there?

Yes, I believe for this quarter, the non-Sprint churn is around 1.3%, which is in the lower range. I think it will likely improve from here. Next year, I would expect it to approach 1%. Overall, the numbers and impact are continuing to decline.

Got you. Good to hear. And then just a follow-up on the Millicom MLA. You noted it's mostly US dollar-denominated, but any kind of color you can provide on kind of the escalator structure whether are those fixed? And are the new leases with more comprehensive or holistic in nature? Or will that growth be more subject to their kind of future activity levels, just kind of comparing it with what we typically see in the US?

Yes. I can't go into too much detail regarding the dollar aspect. The MLA is entirely in US dollars, and most of the cash flow relates to a few other minor factors primarily concerning expenses. The MLA includes all the typical features, including escalators, but I prefer not to discuss the intricate structure in detail.

Can you just refresh my memory on how long it does take from order to implementation for colo? I know you said it obviously takes longer than amendment, but just kind of a ballpark number of months.

Yes, I'd say ballpark, six months, Walt.

Got it. If the order flow is starting now, the revenue should align with the capital plans of these operators in 2025. Regarding the dividend, you mentioned your strategy for the fourth quarter. Last year, the growth was 20%, and this year it is 15%. The outlook for growth might be slightly better, or it might not be. When considering the investor base available on the yield side, is there a minimum growth expectation year-over-year for the dividend as we look ahead to 2025 and 2026?

Not explicitly. I would expect that we will be one of the fastest-growing dividends in our small industry and among REITs in general. This year, it is 15%, which is the lowest it has been at any point in our history. Since we are starting with relatively small numbers, the percentage growth can be higher. Part of this is that we are aligning more with our REIT obligations. We have been using our net operating losses, which has allowed us to limit our full REIT dividend payments. However, as we continue to use these net operating losses, we will need to determine what our dividend should be. I don't want to get ahead of ourselves since we will review our dividend increase next quarter, which we typically do with our fourth quarter earnings. But I would expect it to show very healthy growth compared to the rest of the industry.

Got it. Thank you.

Hi, everyone. Thank you for the question. I have to ask about the Millicom deal since tower companies always have exciting developments. Brendan, Millicom is operating in nine Central American markets, and you acquired five of them. Is there a possibility for further evolution from this? Could you clarify your reasons for acquiring what you did and not acquiring the rest? Additionally, for Marks, it seems you've shifted from a strategy with 15% to 20% variable rate debt to 98% fixed for non-revolving debt. Can you explain why you made this change now? You had significant activity in the quarter related to the $2.3 billion term loan maturing in 2025. Are there more actions planned, or is this the balance sheet that SBA will maintain for the next 12 to 24 months for us to consider in our models? Thank you.

We acquired every market Millicom operates in within Central America. When you mention their additional markets, I think you mean those in South America. Our focus has been on the regions where we already have operations and a significant presence, and this acquisition positioned us much better for the future. Some of the markets they serve are ones we aren't currently in, and others are too small for us to make a meaningful impact. It was cleaner to separate Central America from South America. This is a specific deal that stands on its own merits, and there are no implications for future transactions. Regarding your question about debt, there hasn't been a change in our philosophy. We already had hedges for most of our floating debt in place. Fluctuations can occur based on amounts outstanding on the revolver, which is floating. Currently, 98% of our debt is fixed because there is no balance on the revolver. Most of our term loan, another floating debt, is fixed through hedges, and we've established some forward starting hedges to maintain that fixed status and ensure certainty. We made this move to take advantage of favorable rates we observed, which are significantly lower than current rates. Mark, do you have anything to add?

No, I think the current hedge on the term loan for $1.95 billion expires in April 2025. We recently established two new hedges of $1 billion each, one a few months ago at 3.8% and another one on the cap at 3% last month. Therefore, the maximum interest rate on SOFR for the $2 billion term loan B will be 3.41%, while SOFR is currently at 4.7%. We aimed to take advantage of favorable interest rates by locking in a cap on the maximum we will pay on term loan B starting in April 2025.

Yes. I mean they're really just replacements of what existed when they're set to expire. And I think going forward, you asked a question about whether the balance sheet looks the same here for the next 12 months or so, I mean we only have one maturity during the next 24 months, and that's in January of 2026. And frankly, it's only $750 million, which is really not that much can be managed in many different ways. So I think the answer to that question is yes, David. It's going to stay very much similar to what you see today. The only caveat to that is other opportunities that come along that will require some shift in the way we're capitalized to take advantage of them. But otherwise, you should expect it would be the same.

Okay, great. Thank you guys.

Hi, thanks for taking the question. Two, if I could. First, as you're seeing more opportunity and leasing from your carrier customers, does that increase the likelihood that you would enter into new multiyear comprehensive deals with additional domestic national wireless carriers? And then second, philosophically, how are you looking at updating escalators in the domestic business when you have renewal opportunities with your customers? Do you still prefer a fixed long-term rate? Or just given some questions of inflation and future rates, are you considering taking a CPI-based approach with possible floors and ceilings? Thanks.

Yes, we have a comprehensive Master License Agreement with AT&T that we established about 15 months ago, so that is already in place and is not affected by current events. As we continue discussions with other customers, we are open to finding mutually beneficial agreements that reflect the comprehensive nature of our relationships. Regardless, I anticipate having regular Master License Agreements that outline the key aspects of our relationships, which do not necessarily need to follow an all-you-can-eat model. It really depends on what works best for their short-term needs and how we can maximize value. I’m not sure, honestly. We will keep talking to our customers, and we’ll go with whatever structure benefits both sides; we are not particularly aiming to do more of those agreements. Regarding escalators, they remain largely unchanged because, in negotiating new agreements, we may look at escalators for new co-locations but typically do not alter those in the existing base, which is the majority of our business. Therefore, there is minimal impact on the base escalators. For new agreements, we will consider it, but we usually focus on a fixed rate rather than a CPI approach. This will be determined through negotiation in each case.

Great. Thanks for taking my questions. A couple of quick ones on Millicom. The first release alluded to 7,000 communication sites. Can you talk about the mix of towers versus rooftops? And then also on the tenancy ratio being 1.2. Can you talk about whether Millicom was pursuing a strategy of co-location or perhaps they were trying to avoid, leasing to some of their competitors to maintain a competitive advantage in some of these areas?

Yes. The majority of these are towers, and even the smaller percentage that are rooftops are generally towers on rooftops. Essentially, they are all effectively towers. I don’t know the exact number off the top of my head, but I believe around 90% are ground-based towers, while approximately 10% to 12% are rooftop-based. Regarding tenancy, Millicom established a tower company called LOGI, where these towers were located, with the intent to lease space to other parties. They did make some efforts in that direction; however, we believe that some of these sites were held back because they were superior locations, which led to competitive concerns in the wireless industry. As a result, they were not made available. Additionally, in some cases, other carriers were less interested in leasing sites owned by a competitor. Therefore, we see an opportunity to unlock lease-up value here.

Great. Thank you.

Thanks. I just want to go back to that earlier question about the earn-out because it's really helpful for figuring out the valuation you paid. So I know in your SEC filings, you disclosed potential obligations on prior transactions, but those don't end up being shown up on your balance sheet. So I guess as we kind of think about when the deal closes, should we assume that line item in your queue is going to increase materially? Or is the earnout not that material? And then also just an idea of the time frame for when those earnouts would be payable? Thanks.

I don't believe this will have an impact on our balance sheet. There might be some disclosure regarding potential earn-outs, but since the deal was only signed today, I'm not entirely certain what that disclosure will entail in our financials. We can have our team explore that further and discuss it with you privately. In any case, it's not significant to the overall picture. Even if you do see a potential impact, I don't think it will fundamentally change the way the deal appears. Additionally, if anything is paid, it would indicate success, as it would mean we've generated more revenue than we initially anticipated.