SBA Communications Corporation

Thank you for standing by and welcome to the SBA communications third quarter results conference. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If you should require any assistance during the call today, please press star then zero. And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Vice President of Finance, Mark DiRussi. Please go ahead, sir. 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 Cavanaugh, our President and Chief Executive Officer, and Mark Montagnier, 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 28th, 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 TAB, Mark McIntyre, they join this release your website with that I will now turn it over to Brenda to comment on the third quarter.

TAB, Brendan Miller- Thank you mark good afternoon. TAB, Brendan Miller- 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. TAB, Brendan Miller- 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 year. All of these items combine to allow us to increase our full year 2024 outlook across all of our key financial metrics. In the U.S., 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 customer's 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 consolidation and network rationalizations. 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. 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 U.S. 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 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 power 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's 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 U.S. 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, Milicom 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 Milicom have also entered into a new bill to suit agreement under which SBA will exclusively build up to 2,500 new sites in Central America for Milicom 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 bill-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 bill-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 refinancings 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 1000 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 seed tower revenue growth over the third quarter of last year was 5.3% on the gross basis and 2% on the net basis, including 3.3% of churn. Of that 3.3%, 2% was related to spring consolidation. International same-tower recurring cash leasing revenue growth for the third quarter, which is calculated on the constant currency basis, was 3.1% net, including 4.3% of churn, or 7.4% on the gross basis. In Brazil, our largest international market, same-tower growth, organic growth, was 6.5% on the constant currency basis. We continue to see solid organic lease-up in our international market. Total international return remain elevated in the third quarter to mostly to previously announced carrier consolidation. For today's announcement with Milicom, approximately 80% of cash side leasing revenue and 84% of adjusted EBITDA are expected to be denominated in US dollars. Let's now cover our without outlook for 2024. Even excluding the impact of better-than-expected foreign currency change rate 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 AFFO per share as compared to our prior outlook. With regard to site development revenue, we're increasing the full-year outlook by $5 million mostly to support third quarter outperformance in that business. Please also note that the outlook does not assume any further acquisition beyond those which, as of today, are under contract and expected to close by year end. We also do not assume any share we purchase beyond what was already completed so far this year. However, it is possible that we invest in additional assets or share we purchase or both during the year. Our outlook for net cash interest expenses and for FFO and FFO per share now assume the recent ABS financing and repricing of our terminal B. Additionally, we enter into a new fold starting interest rate swap starting in April 2025. It would have no impact on our 2024 outlook. We're quite busy with our balance sheet in the last two months. During the third quarter, the company issued to an existing trust two tranches of power revenue securities totaling $2.07 billion. This includes a tranche of $620 million issued at 4.654% with an anticipated repayment rate of October 2027 and a final maturity date of October 2054. This also includes a tranche of $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 will be used to repay the $620 million total maturity that will be used to pay back the $1.165 billion ABS maturity in January of 2025. Cash proceeds to repay the January maturity will sit in the NESCO account until then. at which time the $1.165 billion will be repaid. Our next maturity is a $750 million million dollar ABF due in January 2026. Let me now turn the call over to Mark.

Thanks, Mark. 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 hedged 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 31st, 2025, and a maturity of April 11th, 2028. Together, the blended one-month term SOFA 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 in accrued interest at one month term SOPR 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 AFFL. 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 refinancings, 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 12th, 2024 to shareholders of records as of the close of business on November 14th, 2024. This dividend represents an increase of approximately 15% over the dividend paid in the fourth quarter of 2023. And operator with that, we are now ready for questions.

Thank you. And ladies and gentlemen, if you would like to ask a question at this time, please press one then zero on your phone. You may remove yourself from queue at any time by pressing the 1, 0 again. And if you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, on the phones, if you do have a question, it is 1, then 0. One moment, please, for our first question. And we'll go to the line of, excuse me, one moment. , your line is open.

Great, thank you. A couple questions. First, domestically, you mentioned that carrier activity is increasing from the first half levels and it's shifting to more collocation 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 NILCOM deal, can you provide more color on the ASFO per share creation in year one and maybe the lease of opportunity on these sites? Thank you.

Sure. So on the carrier activity mix, we have seen an increase in carrier activity in the U.S. in terms of new business signed up. The third quarter was higher than the first half of the year, really than 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 Paul Cecala, Now, as we start to see more new leases it's starting to it's starting to shift a bit and I guess what that really means is that we're obviously getting more points of presence with those carrier customers, which is a good thing for future growth as a baseline. Paul Cecala, It does mean I guess slightly on the negative side is that there's 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, you know, 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 Milicom deal, I think it's a little premature for me to give you the exact ASFO 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're 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. You know, as we get a little bit further down the road and we have a better sense of timing, you know, we'll share that more specifically with you about you. Yeah, you asked one other question too, which I don't think I answered, which is about the lease up potential on those sites. You know, the current tenancy ratio on those sites is 1.2 with the one obviously being Millicom's lease back. So they're, they're fairly under penetrated in terms of co-location. So we think it actually will set them up pretty well. to see some nice growth in the future.

Sounds good. Thank you.

And next, we'll go to the line of Rick Prentice with Raymond James. Your line is open.

Thanks. Good afternoon, everybody. Hey, Rick. Hey. I'm glad you all made it through the hurricane, okay, and got the networks back up and running. As a Florida-based firm, we feel you there. Glad everybody's doing well. I want to follow up Patya's questions on the TIGO deal. Can you help us understand kind of maybe a rough magnitude of EBITDA? I know you said it would be limited added overhead, but trying to get at an understanding. It looks like the multiple on tower cash flow was about 11 times for the initial payment. Just trying to get a sense of what the EBITDA multiple might have been ballpark.

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

Yeah. Yeah. So still something, you know, kind of in the sub six times for EB, the EBITDA multiple paid for the assets?

No, the 11. Yeah. Yeah.

Yeah. Yeah. Right. 11 and a half. Sub 12, like 11 and a half. Sorry.

Yeah.

Okay. So help us understand maybe a little bit more about, you know, 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 so we can understand the leasing potential given the multiple is kind of like 11 and a half times.

Yeah, so Rick, first of all, let me just kind of go to the overall premise, which I tried to lay out a little bit in my scripted comments, but we're operating throughout Central America today. We're one of the leading tower companies there, but as we kind of and I talked about this earlier in the year, as we kind of looked through each of our markets and where we're operating, we tried to kind of say, what's the future look like? What's the potential look like for us? And we came pretty early on to the conclusion that you need to be a leader in the market in terms of your size and scale to be of the most relevance and importance to the carriers that operate there. And not only that, you needed to be aligned as closely as you could with the leading carriers in the markets so that you weren't as subject to some of the challenges that we faced when we've been indexed to maybe some of the weaker carriers in certain markets that we've been in. And it obviously has created churn and some disruption to the stability that this business is well known for. And so with that in mind, this was an opportunity to, one, take a leadership position where we're clearly the largest, most dominant tower company across the region and to to partner with the leading carrier across the region. So that was really the biggest driver we could. And the fact that we could do it at a price point that was good for us and good for Tigo, I think made it work very well. You know, obviously it's a way for them to unlock value and assets that are not core to their operations. And for us, it's a way to make the most of our skill set, which is delivering these types of infrastructure assets at the highest quality and making them available not only to Tigo, but also to the other carriers in the region. Now, when we look at the growth potential across the markets, we have, you know, a number of these markets. One of the good things about where we are today as we look forward is that many of them have already experienced the consolidation that kind of disrupted things for a little while over the last few years. And because of that, we feel very good about the remaining carriers in each of the markets. So each one's a little bit different. Each country's a little different. Some only have two carriers that are fairly well-balanced, with Tego being one. Others have more carriers than that. But the fact that there's only 1.2 tenants on these sites and looking at where a number of them are located, with Tego as the leading provider in many of these markets, we believe it leaves a nice opportunity some additional growth in the market.

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, you know, there's no required CapEx other than to the extent we see fit that it's appropriate in connection with the lease-up opportunity. Okay. Thanks.

And next, we'll go to the line of Jim Schneider with Goldman Sachs. Your line is open.

Good afternoon. Thanks for taking my question. I guess first question would be relative to the Milcom deal. Clearly, you're doubling down on the Central America footprint. What should we draw away from this in terms of anything it 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 It necessarily means anything as it relates 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 into 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?

TAB, Mark McIntyre, yeah i'd say it's a little bit of both Jim I mean it's it's fairly early that we started to see this shift we've really just seen an uptick in the sheer number of brand new leases that we're signing relative to the pace we've seen over the last two years. TAB, Mark McIntyre, So some of that is definitely in more rural markets as at least one of our customers has an initiative regulatory requirement frankly to build out some of those areas so that's a part of it. But other parts of it are definitely densification as well in some of the more suburban markets. And I think, you know, this is our best guess based on what we're seeing in the conversations we're having with our customers. But I expect both of those things to actually continue into the future, particularly given the lack of new spectrum that's going to be made available.

Great. Thank you.

And the next we'll go to the line of Brandon Mispell with Key Bank Capital Markets. Your line is open.

Thanks for taking the question, Brendan. I'll try the leasing activity question a little different way. 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, you know, Mark, just looking at the guide implied by 14 leasing looks like something just shy of $9 million. Is that the bottom? And when do you actually think there is inflection in the leasing activity? Thanks.

T. yeah brandon i'm sorry just to you, but it was a little hard to hear you, I think I think you were asking about the organic growth and the timing of the inflection is it possible for you to just.

T. repeat it a little yeah I can try again I was hoping you can take the activity question a little different direction and hoping you could quantify the application. T. backlog in terms of signs, but not commenced new leases and then just looking at for cues implied by guidance. TAB, Mark McIntyre, seems like new leases and domestically it's just shy of $9 million is that correct and when is the bottom for that leasing metrics thanks.

TAB, Mark McIntyre, yeah so the application backlog is of a similar shift and mix that we talked about your number for the fourth quarter is pretty close, I would say, within you know half million dollars or so of what we estimate. TAB, Mark McIntyre, And you know the timing of the bottom, I think. You know, 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 to 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 TAB, Mark McIntyre, On timing, these are you know the two different things are obviously related one is what we sign up and two is when does it commence and hit the financials. TAB, Mark McIntyre, 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 to the balance of the year it's hard for me to say exactly, but you know we're seeing an uptick in the overall leasing activity so i'm pretty confident we'll start to see it move upward.

TAB, Mark McIntyre, Great Thank you.

And next, we'll go to the line of Simon Flannery with Morgan Stanley. Your line is open.

Thank you very much. Good evening. I want to come back to the Milicom deal. You did an additional bill 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-sixes. How are you thinking about Robert Marlayson, Where you want leverage to go over the next year or two, as you, you balance and m&a and buybacks and keeping flexibility on the balance sheet thanks.

Robert Marlayson, So yeah the bill to suit agreement was actually a piece of it that we're we're very excited about because it allows us to continue to expand our partnership with millicom. Robert Marlayson, You know, basically, what it is, is we are their exclusive provider of. bill to suit opportunities over that next seven years up to a total of 2,500 sites. We underwrote that with, you know, 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 You know, there will be plenty of opportunities to see second tendencies 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, you know, it'll be certainly additive over time. In terms of the timing of it coming in over that seven years, you know, there isn't an expected timeframe. It may come in evenly over that or it may come in quicker. So we'll report that as it progresses. There's no requirement in that regard. On the leverage front, yeah, you know, 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. 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, you know, 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.

Next, we'll go to the line of Jonathan Atkin with RBC Capital Markets. Your line is open.

Thanks. Thank you. A couple 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 quarters under your belt as a CEO? And does the Milcom transaction change that at all?

Yeah, 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 funneled 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 in 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. Um, so I don't expect to change that going forward. Um, and even with this, uh, Millicom deal, we'll obviously have to have a few more people in the field and maybe one or two more here. Uh, but I think the general structure will stay the same.

Um, 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, uh, impacts that you might expect to see in the industry with a Verizon portfolio sale changing hands into an independent operation?

Yeah, we're not really seeing too much on the reload stuff anymore. It was a little bit hotter a couple of years ago, but it's largely died down. We see, you know, very limited situations for that. And I think most people have come to realize that building towers next to other towers is kind of a a way to mutually assured self-destruction in those particular situations. So we're seeing a lot less of that. In terms of the Verizon sale, yeah, I mean, there was a nice size portfolio here in the U.S. There's obviously very few portfolios of that size available in the U.S. market. And it looks like it went for a very nice price, which I think is representative of the value of towers here in the U.S. and we think is supportive of the fact that SBA has a very high-quality, high-value platform and portfolio.

Thank you. Next, we'll go to the line of Richard Cho with JP Morgan.

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 collocation and new leases? Or is there something else going on there? And how should we think about it as we roll into next year?

Yeah, Richard, it is a little bit. We had actually a better quarter than we had anticipated when we gave guidance three months ago, which is why we're moving our outlook up for the year. And I would say a lot of that There's a couple of carrier customers that were particularly busy. And it does seem to be because of this shift to more new leases and the fact that actually we're doing a lot more of the full turnkey work than we used to. So there's a heavy construction component to it. Doing that heavy construction piece drives the total volume up even on the same number of agreements. I do think that's one of the contributing factors, and I would expect, as we move into next year, we'd see the same types of drivers for it.

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 accreted. Do you think there's more of these smaller deals to kind of build upon, or is it just a one-off type thing?

Yeah, unfortunately, I would say it's somewhat limited. You know, we do our best to look at everything that's available, and the volume of opportunities in the U.S. 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. Yeah, 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 or 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. And we'll go to the line of Matt Nicknam with Deutsche Bank. Your line is open.

Hey guys, thanks for taking the question. Just to dovetail on some of the questions that have been asked around the U.S., can you talk maybe a little bit more on 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 to follow onto 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.

Sure. Yeah, 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 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 they're 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. You know, what they've done here is they've raised the funding, they've got themselves, you know, a schedule that they can work with, but I do think it'll take some time. for them to go through that. And so, you know, 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 just throw in one more follow-up. In terms of COLO relative to amendment in the U.S., what's the mix now, and how did, I mean, because you mentioned, you know, more of a mix of COLO, but I'm just curious, at least in the third quarter, what that mix was in the U.S.?

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

Great. Thank you.

And we'll go to the line of Nick DelDeo with Moffitt Nathanson. Your line is open.

Hey. Thanks for taking my questions. First, a couple of clarifications on Milicom. The Milicom press release highlighted the potential for them to get earnouts over time if you meet certain financial milestones? Are those likely? Would they be material to the purchase price? And from a churn perspective, is it fair to say that the 15-year MLA kind of locks Millicom in without any opportunity to get off any of the towers over time?

Yes, on the second one. It's a 15-year committed term. On the first question on the earn out, there are some potential earn outs 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 overly 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 of a share of your business is 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 that allows for a lot more flexibility in terms of what you could 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 lease back.

Okay.

Great. Thanks, Brendan.

And next we'll go to the line of Eric Lubichow with Wells Fargo. One moment, please. And your line is open.

Okay. Can you maybe touch on kind of how you see non-sprint churn in your domestic markets looking, you know, beyond this year? I think you've talked about getting that down to the low 1% range, but any update on kind of timing to when you guys think you could get there?

Yeah, I think that, and guys in the room, correct me if I'm wrong, I believe we were, for this quarter, it's at about 1.3% the non-sprint churn. So it's already down into the lower ones. And I think it will probably improve from there. So I think that next year I would expect that we're going to get somewhere close to 1% or so. So it continues to dwindle in terms of overall numbers and impact.

Gotcha. Good to hear. And then just to follow up on the Millicom MLA, you noted it's mostly U.S. dollar denominated. Any kind of color you can provide on kind of the escalator structure, whether, you know, are those fixed and are the new leases with them 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 U.S.?

Yeah, I can't get into too much detail on all of it. First of all, on the dollar piece, the MLA is 100% U.S. dollars, a reference to significantly all of the cash flow has to do with a few other small oddball things, mostly around expenses. But the MLA is all in U.S. dollars. And it's got all of the typical things you would see. There are escalators in it, but I'd rather not get into all the detailed structure on that if I can avoid it.

Great. Thank you.

And we'll go to the line of Walter Pysak with LightShed Partners.

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

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

Got it. So if the order flow is kicking in now, then obviously, that revenue should kick in in conjunction with the capital plans for these operators in 2025. And then on the dividend, obviously, you stayed to what you're doing in the fourth quarter. Last year, the growth was 20%. This year, it was 15%. It sounds like the outlook in terms of growth might be a bit better, maybe not. Is the expectation, or when you look at the investor base out there that's available to you on the yield side, is there kind of like a floor that you think about in terms of growth in the dividend year over year as we contemplate 25 and 26?

Not explicitly. I would expect that we will be certainly the fastest growing dividend within our small industry here and one of the fastest among REITs broadly. It is 15% this year, which is the lowest it's been actually at any point in our history. Obviously, we're starting with relatively small numbers, so the percentage growth can be higher. Part of it, Walt, is that we're triangulating a little bit towards our REIT obligation. We have NOLs that we've been burning off, and so we've been able to use those you know, as kind of a supplement to limit us from having to pay the full REIT dividend. But as we burn those NOLs, that starts to kind of lock in more and more what our number needs to be. But I would expect, I don't really want to jump ahead because we're going to look at our dividend increase next quarter. We typically do it with our fourth quarter earnings. But I would expect it will still be very healthy growth relative to the rest of the industry.

Got it. Thank you.

And we'll go to the line of David Barden with Bank of America.

Hey, guys. Thanks for taking the question. And apologies to ask, you know, when power companies do something new and exciting, we have to ask about it. So I'll have to ask about the Millicom deal. Brendan, Millicom, I think, is operating in nine markets in Central America, and you guys bought, I think, five. Is there some sort of potential that there's something more that's going to evolve out of that? Or can you explain a little bit more about why you bought what you bought and didn't buy what you didn't buy? And then I guess another question for the marks is if I'm kind of reading this right, you've kind of swung. from a worldview where having a 15% to 20% variable rate debt portfolio was the right mix, now your 98% of non-revolver is fixed. Can you talk a little bit about why you chose now to make that decision? And you had a lot of activity in the quarter. A lot of it had to do with the $2.3 billion term loan expiring in 2025. Are there more moves to make, or is this kind of the balance sheet that SBA is going to have for the next, you know, 12, 24 months that we can kind of just chew on and put into our models. Thank you.

So on the Millicom markets, we, I believe, bought every market that they operate in in Central America. I think when you're referring to their extra markets, you're including South American markets. True. David. And so, you know, what we focused on is the places where We had operations and frankly, where we have a good size presence and this was a meaningful enough transaction to put us in a much stronger go forward position. Some of the markets where they operate, we are not currently in some of those markets and others were well below scale and it didn't really seem like it was going to change things. And it was actually a much cleaner separation to do Central America versus South America. There's nothing that you should read into that in terms of future additional items. This was one specific deal, and it stands on its own merits. And then your other question on the debt, which, Mark, you can take if you want. But I don't think there's any change, though, in our philosophy. You mentioned the fixed versus floating as though it was a change. We actually already had hedges in place for the vast majority of our floating debt. Sometimes it changes because of the amounts outstanding on the revolver, which is obviously floating. And part of the reason it's 98% is because there's zero outstanding on the revolver. But we already have most of our term loan, which is the other floating instrument, fixed today through hedges. And what we've done is enter into some forward starting hedges to continue that fixing to provide some certainty. TAB, Mark McIntyre:" And we did that more to be opportunistic around the rate environment that we saw locking in rates that were materially below where the rates are today will require significant reductions in rates. TAB, Mark McIntyre:" And so it's really to provide the certainty, but also to take advantage of what we thought were actually pretty good rates, you know mark you want to add anything.

uh no i think the the existing hedge on the term loan for 1.95 billion dollar uh expires in uh in april of 2025 so we just put two new hedges in place a billion dollar each one a few months ago at 3.8 and another one on the top at three percent that we did last month so the average uh or the max interest rate on SOFR now for the $2 billion of the terminal B would be 3.41%, and SOFR is at 4.7% now. So I think we just took advantage of a dip in interest rate to lock in a cap on the max interest rate we're going to pay on the terminal B, starting in April of 25.

TAB, Mark McIntyre, yeah I mean they're really just replacements of what existed when it when they're set to expire. TAB, Mark McIntyre, And I think you know going forward, yes, the 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. TAB, Mark McIntyre, And that's in January 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, you know, 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 to be the same.

Okay, great. Thank you, guys. And, excuse me, we'll go to the line of Mike Rollins with Citigroup. Your line is open.

Brian, thanks for taking the questions. 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 multi-year 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.

Yeah, so we have, as you know, we already have a comprehensive MLA that we signed with AT&T about 15 months or so ago. So that is already set in place and isn't really impacted by what's happening. Now, I think as we have continuing conversations with our other customers, if we can find a way to agree on things that work for both parties that are comprehensive in nature, we're open to doing that. In either case, I would expect us to have what I'll call regular MLAs, meaning things that define the overall merits of the relationship. They don't necessarily have to be the all you can eat structure. That really just depends on if it's something that works for what their needs are in the short term and what we think is the best way to monetize value. So I don't really know. Honestly, Mike, we'll continue to talk to our customers and whatever structure works the best for both parties is what we'll go with. But we don't have a disposition towards trying to do more of those. In terms of the escalators, you know, they don't really change much, because even when we negotiate new agreements, sometimes we'll look at what the escalator will be for the brand-new co-locations that they sign. We don't touch the ones that are in the embedded base, and that's obviously the bulk of our business, so there's little impact on the base escalators. For the new ones, we will discussed it, but we usually end up focusing on a fixed rate as opposed to a CPI. But really, that's a matter of just negotiation on each individual case.

Thanks very much.

And we'll go to the line of Brendan Lynch with Barclays.

Great. Thanks for taking my questions. A couple of quick ones on Milicom. 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?

TAB, Mark McIntyre, The vast majority of these are towers and even the ones that are rooftops, which is a fairly small percentage are typically towers on rooftops so it's basically all effectively towers. TAB, Mark McIntyre, I don't know the exact number off top my head I think it's somewhere around 90% is ground based towers and the other 10 to 12% or so is is. TAB, Mark McIntyre, rooftop based. And then on the tenancy side, they did have these in a they had established a tower company entity that they called Lottie. That's where these towers resided. And the intention was to leave space on them to other parties. So they did do some efforts around that. However, it's our belief that a number of these sites were held back because they were better sites and therefore, for competitive reasons, for their wireless business. They did not make them available. Even in other cases, competing carriers were not as inclined to go on the sites when they were owned by one of their competitors. So we do think there's an opportunity to unlock lease-up value here.

Great. Thank you.

And we'll go to the line of David Garino with Green Street Advisors.

Thanks. I just wanted 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 disclose potential obligations on prior transactions, but those don't end up being shown up on your balance sheet. So I guess if we kind of think about when the deal closes, should we assume that line item in your queues is going to increase materially, or is the earn out not that material? And then also just an idea of the timeframe for when those earn outs would be payable. Thanks.

Yeah, I don't think it's going to change on our balance sheet. There may be some disclosure around potential earnouts. But honestly, David, the deal was just signed today, so I'm not 100% sure what the disclosure will look like in our financials. But that's something that maybe our guys could look at and just get with you offline on that. In any case, it's not that material to the overall picture. I think even if you see what it might look like, I don't think it's going to change the way that the deal looks. And as I said, to the extent that anything is paid, it will actually be a success because it means that we've added more revenue than perhaps we even expected.

Thanks.

Sure. And again, if we do have any questions at this time, it is 1 then zero on your phone.

Colin, I think we're probably ready. I think we've already used up our allotted time. So I just want to thank everybody for joining the call, and we look forward to catching up with you next quarter to share our year-end results.

And ladies and gentlemen, that does conclude our teleconference call for today. Thank you for your participation and for using AT&T conferencing services. You may now disconnect.