American Tower Corporation (REIT)

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower Third Quarter 2022 Earnings Conference Call. As a reminder, today's conference call is being recorded. Following the prepared remarks, we will open the call for questions. If you would like to ask a question, please press 1, then 0. I would now like to turn the call over to your host, Adam Smith, Senior Vice President of Investor Relations. Please go ahead, sir.

Good morning and thank you for joining American Towers third quarter 2022 earnings conference call. We have posted a presentation, which we will refer to throughout our prepared remarks under the investor relations tab of our website, www.americantower.com. On this morning's call, Tom Bartlett, our president and CEO, will discuss current technology trends and how we are positioned to benefit from continued wireless technology evolution. And then Rod Smith, our Executive Vice President, CFO, and Treasurer, will discuss our Q3 2022 results and revise full-year outlook. After these comments, we will open up the call for your questions. Before we begin, I'll remind you that our comments will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding future growth, including our 2022 outlook, capital allocation, and future operating performance. our collections expectations associated with Vodafone Idea in India, the Stone Peak transaction and the expected value in future investment activities of our U.S. data center business, our expectations regarding the impact of COVID-19, and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's earnings press release, those set forth in our Form 10-K for the year ended December 31st, 2021, as updated in our upcoming Form 10-Q for the nine months ended September 30th, 2022, and in other filings we make with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. With that, I'll turn the call over to Tom.

Thanks, Adam. Good morning, everyone. As is typical for our third quarter call, my comments today will center on the key technology trends we're seeing across the wireless landscape and how our distributed tower portfolio is positioned to benefit from next-generation network deployment and generate sustained resilient growth despite ongoing macroeconomic volatilities. Additionally, I'll provide an update on the CoreSight portfolio of assets, our latest view on the evolution of the mobile edge, and the progress we're making in advancing our edge strategy, which aims to leverage our distributed tower and land assets in combination with our interconnected data center portfolio to drive incremental value as network technology evolves. Since the start of 2019, 5G spectrum auctions, mainly in the mid-band, have collectively driven over $155 billion in purchase price proceeds across our served market. These acquisitions of large swaths of new spectrum have kicked off what we believe will be at least a decade-long period of network investment, aimed at delivering on the promises of 5G's faster and lower latency applications. We anticipate this will result in $5 billion of incremental annual customer capex spend in the United States, on average, as compared to the levels we saw throughout the 4G cycle. Additionally, in the U.S., the visibility we gained through the comprehensive MLAs we put in place with AT&T, T-Mobile, DISH, and most recently Verizon, supports our expectation that these investments will drive a near-term acceleration of in organic new business growth and a sustained level of elevated tower activity over a multi-year period. As we saw during the rollout of 4G, we expect this investment cycle to play out in two broad phases, the first being a coverage phase, through which carriers prioritize upgrading their existing footprint to maximize the percentage of the population having 5G access and begin to benefit from the cost efficiencies associated with their network technology upgrades. Over the last year, we've seen carriers leveraging our presence in nationwide scale to efficiently and aggressively upgrade equipment on our sites, both here in the United States and in several markets across our international footprint, to meet those 5G build-out objectives. In the second phase, as consumers adopt advanced 5G-enabled mobile devices and applications, carriers will invest in additional capacity through network densification to facilitate increased mobile data consumption and optimized customer experience. We saw this second phase play out after 4G was launched in the United States around 2010. By coupling the provision of higher bandwidth speed and improved network capabilities with the proliferation of advanced, smart, connected devices with improved user interfaces, 4G unleashed innovative applications such as video streaming, mobile gaming, as well as industry-redefining applications, such as mobile-enabled ride-sharing and transportation. The introduction of these new data-intensive applications contributed to an annual consumption growth rate of nearly 50% from 2013 to 2018, requiring carriers to meaningfully invest in the densification of their network. Similarly, we expect our customers' 5G networks Anticipating delivery times of 5 to 10 times lower latency and increased download speed up to 100 times to further unlock new capabilities, facilitate consumer and enterprise innovation, enable use cases that will necessitate further proliferation of connected devices, and drive higher network throughput. Consider emerging augmented and virtual reality technology as an example. Video streaming exploded primarily because of the advancements achieved through 4G, driving extended destination investment in order to provide users with adequate network quality. Currently, video streaming bandwidth requirements range from a few megabits per second to about 8 megabits per second for HD, and up to 25 megabits per second for 4K, depending upon the resolutions. eventually working to 50 and closer to 100 megabits per second for 8K videos. Depending on compression schemes and the device requirements, looking ahead to the theoretical max specs for potential future applications of mixed reality, we would expect multiple gigabits per second. Again, that is gigabits with a G. Compared to 4G, 5G will offer enhanced resolution, rapid refresh rate, real-time raw bitstreams, low latency, and provide three times more bits per hertz spectrum efficiency in the 5G mid-band. Even when factoring in all these benefits, we believe rapid mobile data consumption growth, along with the shorter propagation characteristics of mid-band spectrum, will necessitate a massive 5G densification phase of network investment, greater than what we realized in 4G. As a result, we expect this future capacity phase to support sustained growth in our tower business. At the same time, we expect the applications driving these densification efforts to present new neutral host infrastructure opportunities aimed at minimizing latency and reducing traffic burdens on middle-mile networks. This is a good segue into a discussion about our CoreSight data center activity and the progress we're making in advancing our edge strategy to support these networks of the future. While the tower business certainly remains healthy, and staggered deployments of network generation rollouts across our geographically diverse footprint provide a solid runway for growth over the next decade, we remain focused on identifying new opportunities for value creation through the platform expansion pillar of our Stand and Deliver strategy. A key element of this pillar is identifying new opportunities that leverage our portfolio of communication assets and our capabilities in managing and redeveloping distributed real estate to provide new multi-tenant neutral host infrastructure models that support the demands of next generation networks and applications. As we previously communicated, the most apparent opportunity at scale that we see over the next decade is that of the mobile edge, which ultimately solidified our decision to acquire CoreSight at the end of 2021. We still believe this acquisition further positions us take advantage of the emerging digital transformation enabled by 5G. Having now owned CoreSight for more than three quarters, we couldn't be happier with the performance we're seeing across the business and the use cases driving leasing activity, which we expect to serve as growth catalysts well into the future. Importantly, we're extremely encouraged by the consistently positive customer feedback on this acquisition. customers continue to view CoreSight as a strong operator and hybrid IT solutions provider with a high-quality ecosystem, which under the American Tower umbrella can now provide more predictable scalability and future incremental value through our combined platform, capabilities, and expertise. So far in 2022, CoreSight has achieved solid new business volumes, a reflection of the strong demand for the company's interconnection, and cloud on-ramp rich ecosystem, where over 80% of revenues are derived by customers with a variety of interconnections to at least five different and independent customers. This strong demand demonstrates the differentiated value proposition and resiliency of these strategically located and well-integrated assets. We are pleased to see strong new business volumes from enterprises, prioritizing digital transformation to the implementation of hybrid IT solutions. leading to migrations from an on-premise data center to co-location data centers in major metrics. We are also encouraged to see accelerating demand from leading digital platforms, seeking to extend compute functionality closer to their users to enable automation, collaboration, and address latency-sensitive applications, an early indicator supporting our edge evolution thesis. Vertical to CoreSight's interconnection-rich ecosystem value proposition, is its Open Cloud Exchange Platform, or OCX. OCX provides CoreSight customers with quick scalability and represents an essential element as we seek to expand the ecosystem to more distributed points of presence as the edge develops. Today, through this automated Layer 2 Ethernet software-defined networking platform, we connect our customer communities within and between our U.S. data centers, and we connect cloud providers to CoreSight's nationwide portfolio. We continue to invest in improving the platform's features and building out the functionality and reach to enable high-performance hybrid architectures more quickly and securely and at a lower total cost of operation than alternative solutions. More recently, we launched Layer 3 enhanced network services, including virtual routing, cloud connect peering to service providers, and cloud-to-cloud connectivity to leading cloud providers. These enhanced functionalities simplify an enterprise's network hardware and management resources at a lower total cost of ownership. Through continued innovation over time, Foresight's vision is to provide customers with single port access to their entire digital supply chain, which we will also expect to be leveraged and extended as the distributed, interconnected edge ecosystem develops over time. While the distinctive characteristics of Foresight's portfolio including its enhanced capabilities afforded through its OCX platform, represent the critical attribute in advancing our edge strategy. We also see tremendous value in CoreSight's development pipeline. CoreSight continues to execute on opportunities to redeploy their cash flow towards high-yielding development projects. Customers require additional scale across our footprint, and consequently, over 20% of our data center development under construction is now pre-leased. We also recently announced the acquisition of a purpose-built data center in southern Florida, MI2, which will be connected to our existing Miami facility, expanding and strengthening our southeastern footprint, where we have also integrated our legacy data centers in Atlanta and Orlando into the CoreSight ecosystem. As we look further out, we expect workloads to become even more distributed and localized. Therefore, we see the importance of an interconnection hub like CoreSight increasing as customers look to future-proof their digital businesses through secure, flexible, and scalable solutions, enabling agile interoperability as businesses shift to more customized hybrid multi-cloud IT environments, and importantly, require an extended-edge computing presence to support evolving low-latency applications. In turn, the mobile edge is emerging as a critical area in the convergence of wireless and wireline networks. Over the past year, as 5G deployments in the U.S. have continued at a rapid pace, we've seen elevated emphasis from select wireless carriers with respect to their edge compute strategies and the forging of partnerships with cloud and enterprise technology platforms to better prepare for the network demands of the future. We see all of this as incremental data points in support of our visions for forthcoming demand at the edge. In our view, much like the adoption of the shared power model, this digital ecosystem over time will be most efficiently provisioned through a distributed neutral host, multi-tenant, interconnected edge infrastructure model, reducing the capital intensity and total cost of ownership among MNOs, cloud, landline, and enterprise players, and critically facilitating a seamless universal customer experience for end users. Our tower portfolio, coupled with our U.S. data center business, represents a distributed portfolio of real estate with accessibility to robustly interconnected core networks and native access to cloud on-ramp. We believe the combination of these platforms will be critical as data processing extends from the core to the end. With that migration, more distributed and localized points of presence, along with transit costs and low latency considerations, will become essential over time. providing American Tower and CoreSight with the potential to win across multiple edge layers. To date, our team has identified over 1,000 sites within our existing U.S. tower portfolio that we see as shovel-ready candidates for mobile edge deployment based on location, parcel footprint, land control, and existing fiber and power access. Over the next several months, we plan to break ground on our first one-megawatt edge facility at an owned tower site. to build upon our understanding of market demand and customer requirements, design a blueprint that can be rolled out at scale as the edge ecosystem develops, and demonstrate the differentiated value proposition that America Tower and CoreSight can offer potential customers. As always, any future development will go through our disciplined approach to evaluating the market opportunity and economic returns of edge deployments at scale, as well as an evaluation of the best way to finance future deployments, which could potentially include strategic partnerships, financial sponsors, or both. In short, the strategic partnerships emerging between the MNOs and cloud service providers, the evolution of latency-driven edge leasing activity within our foresight portfolio, and our interactions with the architects of the low-latency networks of the future have only strengthened our conviction that the edge will represent a meaningful opportunity to drive incremental value to our assets over the long term. Although this architecture will take time to develop, American Tower is positioning itself as a critical future provider and partner for cloud M&O and enterprise customers as wireless and wireline network convergence accelerates over time. In the meantime, we'll seek opportunities to advance our learning, including through the development of an edge application incubator and our participation in various trials in edge industry forums. We are proactively taking the necessary steps understand emerging trends, network requirements, and customer needs, all aimed at strengthening our option to win at the edge over the long term. In closing, demand for wireless connectivity continues to grow across the globe, where despite the dynamic challenges we've all navigated over the past several years, the need for reliable wireless and broadband access has been elevated in importance as a means to advance global economies and the populations they serve. with carriers aggressively deploying their valuable spectrum assets, we will begin to realize the true capabilities of 5G. And with that, we expect to see new innovation that will change the way we live for the next decade and beyond. Our effort to build scale across our global footprint of macro tower assets for over the past two decades, combined with our continuous focus on platform expansion and innovation, has positioned American Tower to support our customers in meeting the continued acceleration in mobile data demand while leading the way in the development of new infrastructure models that will be essential in meeting the needs of applications of the future and drive incremental value on our assets over time. With that, let me turn the call over to Rod to go through our third quarter results and updated full year 2022. Rod?

Thanks, Tom. Good morning, and thank you to everyone for joining today's call. As you heard from Tom, We are very encouraged by the technological trends that we believe will drive continued secular growth in the industry and a long runway of growth for American Tower. Before I walk through the details of our Q3 results and revised outlook, I will first touch on several key trends and developments from the quarter, including the evident strength of leasing demand across our footprint and renewed collections volatility in India. First, we continue to see 4G and 5G investments driving strong demand across our footprint. which translated into solid gross leasing growth in the quarter. And we expect this trend to continue and further accelerate, particularly in the U.S. as we approach 2023. We complemented sequential growth in organic leasing with nearly 1,600 newly constructed sites internationally, earning, on average, low double-digit returns on day one, driven by those same trends. Additionally, demand for hybrid IT solutions optimally suited for our U.S. data center portfolio remains healthy, This resulted in another strong quarter of leasing results, fueled by digital platforms and the continuation of enterprises moving their IT infrastructure from on-premises to interconnection-rich co-location facilities with direct cloud access, such as Foresight. Next, we closed on Stonepeak's initial $2.5 billion investment in our U.S. data center business in August, which was upsized by another $570 million after quarter end, at the same valuation in terms. This further highlights the differentiated characteristics and value of the CoreSight portfolio, while establishing a partnership through which we will execute on our US data center strategy. Also, we signed a new comprehensive MLA with Verizon at the end of August, which is expected to allow Verizon to efficiently accelerate their 5G network deployment over a multi-year period. This agreement is yet another data point illustrating the fundamental long-term criticality of our portfolio as our customers seek to leverage our scale and capabilities to rapidly deploy nationwide 5G and further provides tangible evidence that our U.S. business should have a solid runway of growth over the next several years. Additionally, we executed a new multi-market MLA with Airtel Africa, our largest customer in the region. Under this new long-term agreement, we've secured attractive terms across our existing Nigeria, Kenya, Uganda, and Niger portfolio, along with a contractually committed, attractive built-to-suit pipeline to support Airtel Africa's 5G deployment, among other opportunities. Importantly, with Airtel Africa, we share a focus on advancing wireless connectivity in a sustainable manner, which is represented in this agreement through a commitment to deploy low-carbon sites and expand our digital communities program. Our agreements with both Verizon and Airtel Africa, two of our largest customers, is the latest demonstration of the value our global scale and operational capabilities as a company, both in markets and across borders, can unlock to provide mutually beneficial solutions for American Tower and our partners. With that, I'd like to take a moment to address some uncertainty related to collections arising out of our India operations and how this event has affected our results for Q3 and revised outlook for 2022. In Q3, collections from Vodafone IDEA or VIL fell short of our billings and the customer has also communicated an expectation for that trend to continue through the balance of this year. As a result, we found it prudent to take certain reserves associated with VIL in Q3 and against the anticipated Q4 billing shortfall in our revised guidance. Consequently, our full-year expectations now include approximately $95 million in additional revenue reserves, about half of which was booked in Q3. It also includes the removal of a $30 million bad debt reversal that was assumed in our prior guidance. Together, These result in a reduction in adjusted EBITDA and attributable AFFO of $125 million. At this time, our revised outlook for net income does not assume any additional impairment charges associated with the goodwill and intangibles that we currently have on the books associated with VIL, as the shortfall in cash flows is being viewed as temporary. It should also be noted that VIL did express a commitment to revert back to 100% payment at the start of 2023 and repay outstanding past due balances, which could potentially provide an opportunity to reverse certain reserves we've taken in the future. VIL has also laid out a set of strategic steps that we will closely monitor on its path to more stabilized and consistent payment, including the conversion of its AGR interest into equity held by the Indian government. Until then, we expect continued uncertainty in collections for VIL and have reflected those risks in our revised outlook. In the meantime, we are actively working with VIL on the path forward, which could potentially include converting a portion of its existing AR into optionally convertible notes, which we believe can better secure our receivables. We will incorporate new developments that unfold over the next several months into our guidance for 2023 on this February's call. With that, please turn to slide six, and I'll review our Q3 property revenue and organic tenant buildings growth. As you can see, our Q3 consolidated property revenue of $2.6 billion increased by over 10% and over 14% on an FX neutral basis as compared to the prior year period. Growth was primarily driven by solid organic leasing, execution on our international new build program, and contributions from our U.S. data center business. partially offset by headwinds of approximately 2% associated with revenue reserves taken in India during the quarter, as discussed, and another 2% from Sprint-related churn. Moving to the right side of the slide, you can see we achieved consolidated organic tenant billings growth of 2.6% for the quarter. In the U.S. and Canada, as expected, net organic growth was slightly positive at 0.3%, including a sequential step-up in gross organic new business $38 million, a meaningful acceleration from $31 million in Q2, in our highest quarter since Q1 of 2020. As we have indicated throughout the year, we expect this acceleration to continue into Q4, and even further in 2023, where a large portion of our growth will be contractually committed through our comprehensive MLAs. Escalators were 2.8%, which, consistent with last quarter, were impacted by certain timing mechanics within our MLAs. Though for the full year, we expect escalators to come in right around 3%, consistent with historical trends. This growth was offset by the impact of sprint churn, which continues to drive over 4% of negative headwinds year-over-year and will step down in Q4 as the largest tranche of contractual sprint churn will have lapped in our year-over-year growth metric. On the international side, Organic growth was 6.1%. Starting with Europe, we saw growth of 6%, which is now at a more normalized level with Celsius largely in the prior year base. In Africa, we generated organic tenant buildings growth of 6.8%, modestly higher than prior expectations due to some delays in anticipated churn, now pushed to later in the year. Growth also included another strong quarter of gross organic new business, standing at 7.5%. Putting Africa on track for its best organic new business year on record and continuing past quarter trends, we saw the strong organic leasing activity complemented with an active new build program, constructing just over 250 sites in the quarter. As we see 4G coverage and densification initiatives continue to drive strong top-line growth in returns on our capital deployments across the region. Moving to Latin America, organic growth was 8.2%. which includes approximately 9.7% from escalations. Growth through organic new business and escalations was partially offset by another quarter of elevated churn, primarily associated with certain decommissioning agreements, which we expect to further accelerate in Q4, as highlighted on previous earnings calls. In APAC, we saw organic growth of 1.9%, in line with our expectations, which comes alongside a continuation of solid new build activity with 1,200 sites constructed during the quarter. Turning to slide seven, our third quarter adjusted EBITDA grew nearly 6%, or over 8.5% on an FX neutral basis, to over $1.6 billion, with strong revenue growth and cost controls partially offset by the negative impacts of Vodafone Idea revenue reserves and Sprint-related churns. together representing approximately 6% headwinds to growth. Adjusted EBITDA margin was 61.5%, down 170 basis points year-over-year. Driven by the lower margin profile of newly acquired assets, the conversion impacts of Vodafone IDEA reserves and Sprint churn, along with higher pass-through revenue resulting from fuel costs. Moving to the right side of the slide, attributable AFFO an attributable AFFO per share decreased by approximately 3% and 5% respectively, with each including a 3% headwind associated with FX. Growth was meaningfully impacted by the Vodafone IDEA reserves and Sprint-related churn, combining for an over 8% offset to otherwise strong and resilient performance across our global operations. Let's now turn to our revised full-year outlook, where I'll start by reviewing a few of the key high-level drivers, First, performance remains solid across our portfolio as demand for wireless connectivity and the rollout of next-generation networks are fueling strong new business volumes across our region. Together with the straight-line benefits from our recently executed MLAs, along with pass-through increases primarily related to power and fuel, we're raising our property revenue and adjusted EBITDA guidance for the year. Second, we have revised our FXT assumptions using our standard methodology, which has resulted in outlook-to-outlook headwinds of $45 million, $22 million, and $13 million for property revenue, adjusted EBITDA, and consolidated AFFO, respectively. Finally, and as noted earlier, we have incorporated approximately $125 million in incremental reserves relative to our prior outlook associated with Vodafone IDEA. This includes $95 million in revenue reserves split between Q3 and Q4 and the removal of our previous assumption for incremental bad debt reversals of around $30 million. As I mentioned, Vodafone Idea has communicated its intention to resume full recurring payments in 2023. However, at this time, we believe these adjustments to be appropriate for the current year. With that, let's discuss the details of our revised full year expectations. As you can see on slide 8, we are raising our property revenue outlook by $70 million at the midpoint. This outperformance includes straight line upside of approximately $65 million, primarily associated with our recently executed Verizon and Airtel Africa MLAs, and $77 million in higher pass-through revenue driven by fuel costs. along with various non-recurring benefits, including accelerated decommissioning-related settlements in Latin America, which we now expect to total approximately $85 million for the full year. Our guidance raise was also supported by recurring revenue upside across several of our segments, helping to contribute to some modest revisions to our organic tender billings growth outlook, which I'll touch on shortly. This outperformance was partially offset by the $95 million in incremental revenue reserves related to Vodafone IDEA and $45 million in FX. Moving to slide 9, you will see our organic tenant buildings growth expectations. While we are reiterating our prior outlook on a consolidated basis and for the US and Canada as well as APAC segments, we are slightly revising our expectations for international, Europe, Latin America, and Africa. For international, we are raising our organic growth to approximately 6.5%, up from approximately 6% previously. In Europe, we have adjusted our organic growth expectations to greater than 8%, from approximately 9% in our prior outlook, where we expect new business commencements to shift further into 2023. In Latin America, we are increasing our organic growth expectations to greater than 7%, up modestly from approximately 7% in our prior guidance, reflecting a continuation of the CPI-linked escalation benefit in the region. In Africa, we are increasing our organic growth expectations to greater than 7%, up from approximately 6.5% in our prior guidance, reflecting the delays we're seeing in anticipated churn, as I mentioned earlier. As a reminder, in Latin America and Africa, consistent with prior assumptions, we anticipate consolidation-driven churn events to drive a sequential decline in growth as we exit the year, resulting in what we expect to be approximately 4% and 5.5% organic tenant billings growth in Q4, respectively, with some carryover impacts as we head into 2023. Lastly, in the U.S. and Canada, where we're reiterating our prior organic growth outlook, we expect to see Q4 organic tenant billings growth of around 4%. with further improvement in 2023, backstopped by the contractual visibility afforded through our comprehensive MLAs with the big three carriers plus DISH. Moving to slide 10, we are raising our adjusted EBITDA midpoint by $30 million as compared to our prior outlook, where we're seeing a high conversion of property revenue outperformance delivered through prudent cost controls and continued elevated services volumes providing meaningful upside as compared to our previous expectations. These benefits are partially offset by the $125 million associated with incremental reserves assumed for Vodafone IDEA, as previously discussed, along with $22 million in FX. Turning to slide 11, we are lowering our attributable AFFO guidance by $40 million, or nine cents on a per-share basis. This adjustment is attributable to the Vodafone IDEA reserves we have taken which is translating into approximately 27 cents per share of downside, offsetting what was otherwise very strong performance across our business, which represented approximately 20 cents per share outperformance on an FX neutral basis. Moving to slide 12, let's start by taking a look at our capital deployment expectations for the year, which are slightly updated compared to our prior outlook and continue to reflect our focus on driving sustained AFFO per share growth in shareholder returns. Within our capital deployment plan, we are reiterating our expectations to dedicate approximately $2.7 billion subject to board approval towards our 2022 dividends. With regard to CapEx, we are reducing our total midpoint by $45 million, with redevelopment decreasing by $35 million and startup decreasing by $10 million, the result of some timing adjustments and savings as compared to our prior plans. We continue to assume the construction of approximately 6,500 new sites globally and roughly $300 million towards our U.S. data center business, largely associated with development spend. As we've highlighted in the past, we continue to generate exceptional returns through our discretionary CapEx program, which remains largely financed through the redeployment of locally generated cash flows. We view our ability to allocate nearly $1.8 billion towards accretive, high-yield projects as a strategic benefit after years of building scale and credibility with our global customer base and a compelling way to further build scale and drive accretion for years to come. Finally, although we have not incorporated into our revised guide, I'd like to highlight that with the additional capacity we currently have as we outpace our delevering plan, We expect to opportunistically restart our share buyback program. Given recent market performance and the strong fundamentals we anticipate in our business over the long term, we see this as a great opportunity to further drive shareholder value, particularly against other forms of capital deployment in our current line of sight. Moving to the right side of the slide, I'd like to take a moment to review the progress we have made since the start of the year to shore up our balance sheet and liquidity positions. particularly in light of the market volatility and unprecedented rise in rates occurring over the past several months. As you recall, we closed the core site acquisition using our bank facilities and term loans, temporarily moving our leverage to 6.8 times and our floating rate exposure to 31% at the end of 2021. Since that time, and against the challenging backdrop, we have strategically termed out short-term borrowings through common equity, private capital, and senior unsecured note offerings, all at solid terms and pricing. Today, our leverage stands at 5.5 times ahead of plan, with floating rate exposure of around 20%, in line with our long-term target. Looking ahead, we continue to believe this profile is appropriate given the predictable and contractual nature of our cash flows, while providing us exposure to prepayable debt, which offers us financial flexibility as we execute on our delevering path. and access to the typical low-rate short-term curve. In addition, a meaningful portion of our floating rate debt is Euro-denominated, which provides us a natural hedge and diversified capital structure, while also offering prepayable debt at terms more competitive than those currently available in the U.S. Although we anticipate 2023, as it appears today, will present certain growth challenges stemming from the current rate environment, we feel comfortable with our proven approach to balance sheet management. This includes our ability to manage our upcoming 2023 maturities, where we expect our diversified sources of capital and solid liquidity position to provide near-term financing flexibility, allowing us to opportunistically access the markets against a healthy and constructive backdrop. In short, we believe our investment-grade balance sheet and the long-standing policies we've established position us well to navigate various economic cycles, including the challenges we're all facing today. And although we may see certain growth headwinds in the near term, we believe our investment-grade credit rating and continued access to diversified sources of capital, coupled with our focus on maintaining robust liquidity, will serve as a more meaningful competitive advantage over the next several years. Finally, On slide 13, and in summary, we had a strong Q3 across our global business with solid operating performance, accelerated leasing and resilient demand, even in the face of a challenging economic backdrop. During the quarter, the long-term critical nature of our portfolio of assets and positioning to drive sustained and compelling growth was further highlighted through key customer agreements with Verizon and Airtel Africa. and the closing and subsequent upsizing of our Stone Peak Partnership and our U.S. data center business. Although we will likely experience some growth pressure in the near term associated with the continued rise in interest rates, we see our investment-grade balance sheet, liquidity, and diversified sources of capital as a key competitive advantage as we execute on our growth strategy over the next decade and beyond. As we look ahead and over the long term, We are excited about the positioning of our global portfolio of communications assets as our customers augment and extend their networks to meet exploding data-driven demand and believe our global scale and proven capabilities have us positioned to drive incremental, sustainable growth and value creation for our shareholders for years to come. With that, I'll turn the call back over to the operator for Q&A.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the command of 1 then 0. Our first question comes from the line of Simon Flannery, Morgan Stanley. Please go ahead.

Thank you. Good morning. Tom, it was good to hear your discussion about the opportunities from 5G and particularly from capacity additions as well as the favorable comments around near-term and medium-term U.S. leasing trends. Can you square that with the CapEx trajectory at the likes of Verizon and T-Mobile, where they're expecting a significant step down? I know it's not a one-for-one relationship, but how do you expect this to evolve? Because I think there's a sense here that there will be some deceleration, as we've seen sort of in prior 4G cycles. So what's the What's the offset to those lower CapEx numbers?

You know, Simon, having seen the trends from the carriers for many, many years, I mean, there's always volatility in their overall spend. It will largely be a function of device penetration and application development that will require the further densification that we believe in the – you know, in their deployment as well. So it's not a kind of a one-for-one type of a, I think, a relationship with our overall growth. And also keep in mind that, you know, with our agreements that we have in place, you know, we have these broad comprehensive agreements with really locked in a lot of that revenue growth for us. And so, you know, 70 to 80% of our revenue growth, we have tremendous visibility into, as a result of those master lease agreements. I would expect the carriers, as I said, to be investing in their markets as that demand develops. I would expect, given the benefits of 5G, that each and every one of us are going to be using significantly more levels of spectrum, if you will, over time. As I said, it's not a one-for-one. Our MLAs do give us that kind of visibility. And over time, I would expect higher levels of CapEx being spent on 5G, just as we saw 4G versus 3G.

Great. Thanks a lot.

You bet.

Our next question comes from the line of David Varden, Bank of America. Please go ahead.

Hey, guys. Thanks so much for the question. Two, if I could. The first, Rod, just digging into the biggest moving part in the guidance, the Vodafone idea relationship, I guess two pieces to that. One is there's been a lot of press about, you know, them versus, say, Barty Indus and, you know, maybe trying to renegotiate tower rates to, quote, unquote, soften the impact on costs. And then could you kind of talk about what you're willing to give on that front? And then also you talked about converting your accounts receivable to notes. I mean, Historically, towers have never been impacted by bankruptcies. How is converting accounts receivable to notes a better option than just kind of continuing the way you are as a tower company with your counterparty there? And then I guess the last piece, maybe, Tom, on capital allocation, the conversation about buybacks I'm sure is welcome, but there's been a lot of conversation over the last two years about AMT's ambitions in Europe. and scaling there, and there's obviously some pretty big deals. And I think that obviously cost of capital is a huge issue, your equity, where it is, is an issue. Could you categorically rule in or rule out what your position on expanding in Europe is right now? Thanks.

Hey, David, good morning. Yeah, Rod, why don't you start and take the first couple, and then I'll take the third.

Yeah, that sounds good. Good morning, David. Thanks for the question. I hope you're doing well. So regarding India and Vodafone and kind of their current situation, their desire to renegotiate some MLAs, I don't want to get into too many of the terms and conditions. Certainly not want to talk about things that haven't happened yet in the future. But I can tell you they are in a predicament with their balance sheet, which everyone knows about. There's been a lot of press regarding that. So they're looking for a number of things from us in terms of supporting them. Discounts may be one of them. We'll certainly talk about that with them kind of over time. But I don't want to get into the details in terms of what we may or may not be willing to do. If we were to provide any kind of a discount, it would just run through our churn numbers and would be in our guidance. I don't expect any changes to our organics and billings guidance for this year, or renegotiation with VOTA. And if anything changes next year, we'll update you for next year. I guess shifting David to the note, we did convert 200 or we have the option to convert $200 million of our existing accounts receivable. This is not a new investment into voter. I want to make sure that that's clear. So it's existing accounts receivable that's on the balance sheet. We have signed an agreement where this $200 million could become a convertible note, but that is contingent on some conditions happening in India, both to the government converting their near-term interest into equity. I think everyone is aware of that kind of playing out. So that has to happen first. And if that does happen, then we could convert $200 million of our existing accounts receivable into a convertible note. The reason that's interesting to us, number one, is it helps shore up BOTA a little bit. It basically, you know, moves the accounts receivables and let's say an MLA default into more of a financial instrument, it helps them get some equity and maybe some additional debt on their books. So we want to support them and help them through this difficult time. So that certainly is one reason. The other thing, having this note, it does have predefined payment timeframe in it, which is a little bit more certain than what you might see in typical accounts receivable that's hanging on the balance. And then we also have the option of, at our option to convert it to equity, which is another way for us to liquidate that balance. So I think it increases our flexibility. It increases the probability in the near term to convert it to cash. And that's really the reason we're interested in doing it. And it helps voters. So all those things, we really looked at it. And it makes a lot of sense for us. And I think it makes sense in terms of our willingness to support them.

I guess, Dave, just regards to your last question on Europe and the opportunistic buyback program that Rod talked to. First of all, with regards to our Celsius asset base and integration, we're really very pleased with what we've experienced over the last year. I mean, you've seen the growth rates and the success that we've had there. and the relationship that we've actually built with Telefonica. So, you know, that's all gone incredibly well. You know, with regards to further scaling, we do have a sizable build-to-suit program that we are, you know, in the midst of, and we see even more build-to-suit opportunity coming forward, I think particularly in Germany. You know, with regards to further M&A, you know, we stepped away really just due to the sellers' expectations of value. There's just a significant delta between the bid and the ask at this time. Now, you know, over time that may change. There's just a lot of volatility economically, or, you know, obviously you well know around the world. And so there's just a significant amount of space between the bid and the ask. And so we've really stepped away from those. We're always asked to participate in them. And so you always see in the media that, you know, American Tower is doing this or that. But I know you well know that, you know, we're incredibly disciplined in terms of how we look at valuation. And given the terms and conditions of some of these transactions, as well as the expectations from a pricing perspective, we just don't see the value creation in those opportunities at this time. As I said, maybe that will change over time, I would hope, over the next, you know, 12, 18 months. You might see some change there. But right now, not. And so we're going to continue to, you know, knock the socks off the organic growth, you know, working with our customers in the region, drop in our built to suit program, which has been an incredibly terrific way for us to be able to grow inorganically within the business. As Rod said, it's some very attractive yields and really support our customers in the market and enjoy the growth that way.

Perfect. That's helpful, Collier. Thank you both, Tom and Rod. Thank you. Thanks, Dave. Thanks.

Our next question is from Greg Williams. Cohen, please go ahead.

Great. Thanks for taking my questions. I have two. One is how much of the raise in guidance for the 142 million in straight line was related to the Verizon MLA, if any? And the second one is just dovetailing off of the M&A discussions. What is your appetite for M&A that's not tower-related? And as you think about augmenting your data centers, you know, we've heard possible Asia data centers are of interest or even U.S. fiber. And I'm just curious of your thoughts. Thanks.

Hey, Rod, why don't you take the first one, then I'll take the second.

Yeah, thanks. Thanks, Greg, for the question. So the straight line increases that you see in our outlook here, we have an increase of straight line of about $65 million built into our property revenues. That's really split between the New Verizon deal as well as the deal over in Africa with Airtel Africa. I don't want to break down that in too much detail and give you the piece parts, but it's really those two deals that make up the front.

And, Greg, with regards to M&A on the data center side, as we've said all along, we are very focused on developing the U.S. market. I mean, CoreSight's got a terrific presence in the United States, and with our tower portfolio here in the United States, We want to be able to enjoy the benefits of the core site activity, as I highlighted and as Rod highlighted itself, but also really be able to bring together this overall notion that we have in terms of developing that edge capability that we'll be realizing out at the sites themselves, at our tower sites themselves. And so when you're seeing all this, again, noise about buying data centers and things outside of the United States, That's not where we're looking. That's not where our focus is. And if you take a look at the capital that's being spent on the business, because we do have a fair amount of development going on within CoreSight, within the data center activity, it's largely driven just from the cash flows that the business is generating. So the $200 million to $300 million that we're investing back into the data center business in terms of providing more capability going forward, not just in our OCX platform, but also in in space itself is just being driven by the $300-plus million of AFFO that the business is generating itself. So U.S. is our chessboard as we speak relative to our data center activity.

Great. It's helpful, Collin. Thank you both. Thanks, Craig.

The next question is from Batya Levi from UBS. Please go ahead.

Great. Thank you. Can you provide a little bit more color on the carrier activity that you're seeing in Europe? Given the macro backdrop, I think some carriers are pulling back on CapEx. How do you think this will drive the growth into next year? And another question on the FFO, I know we'll get full guidance next year, but a lot of moving parts going into 23 with U.S. accelerating, but higher interest costs and effects. Can you provide a general view on your expectations for EFIP into next year? Thank you.

Yeah, thanks, Bridie. I'll give you a quick update on Europe here. So we are seeing really strong growth in Europe, as you've heard us talk about consistently throughout the balance. And the activity is really split across the markets and across the carriers. So we're seeing good activity, you know, with all the carriers there. I don't want to talk specifically about carriers to carry, but I will just call out that we are seeing one-on-one begin to build a network there. We are beginning to see leasing activity. We certainly expect that to ramp up, you know, towards the later part of this year and be a much more meaningful contributor next year. The one thing we'll see, we are pulling back our guide a little bit in Europe. That really is just a delay in terms of timing on some certain leases that we have in our pipeline. We're seeing that kind of shift up a little bit into Q, later into Q4, and even some of the things later into Q4 shifting into next year. So that's really what you're seeing from that perspective. And remind me, the second part of your question was AFFO guidance.

Yeah, into 23. If you have a general guidance that you expect AFFO for sure to grow double digits, how should we think about 23?

Yeah, I think you should think about 23 as a challenging year for us. I think everyone knows that interest rates are rising rapidly here, probably more rapidly than most people expected as we head into the end of this year. That is a noticeable material headwind for us in the AFFO line heading into next year. So that will be a challenge. That certainly will take us off of our target AFFO growth. I don't want to get into too many specifics. But I think you guys have probably enough information to kind of work the numbers. And when you look at the, you know, the rate of increase on the interest line for us with the interest rates rising, you know, that'll be a challenge. When we get beyond – the other challenge for next year is the timing of the equity raise. We'll have the full new equity, 10 million shares, kind of running in the numbers next year. They're only in half of this year, so the confidence is – is a difficult comp from that perspective. I do think when you get out to 24 and beyond, we are seeing really good support for leasing revenue in the West, around the globe, particularly in the U.S. You've heard us say we're seeing acceleration of new business from co-location and amendment activity. That acceleration continues. We expect to end this year very strongly, coming in very close to that $150 million of co-location, new business, in the U.S., and we're seeing that accelerate into next year on a run rate basis, which is also underpinned by our long-term MLAs, so we have really high visibility into next year. So we expect to see a meaningful step up in U.S. co-location and amendment revenue into next year, and that puts us firmly on track for our long-term, particularly to the U.S. organic growth averaging 5%, you know, from 23 out to 27, and that includes some impacts from this return, which is about 100 basis points. So without that, you'd be at about 6%. We're firmly on track to that beginning next year and going forward because of that nice acceleration, that strong demand we're seeing in the U.S. Got it.

Thank you.

Thank you.

Next question is from Michael Rollis, Citi. Please go ahead.

Thanks, and good morning. Just curious, as you're looking out over the next 12 to 24 months, can you frame just some of the friction points around whether it's market consolidation that you're seeing or some of the structural issues for maybe things that customers are working through? And just have to think about the magnitude and timing of those headwinds, maybe relative to some of the other things that you've noted around the build-to-shoot opportunities and the organic improvement in demand. Thanks.

Michael, maybe I can start with that. Rod, I mean, that's kind of an open-ended question there you have when you start to think about what's going on around the world. I think the backdrop here is still the technology, right? The backdrop is still the demand for broadband wireless. We've seen it through several technology cycles, and that's really driving the ongoing capital that all of our customers are looking to commit over the next several years. And so that provides, I think, a real stable platform for growth. And as Rod kind of went through all the numbers, we're seeing that, right? And we're seeing 5G being deployed in more and more markets. We've seen the growth rates accelerate here in the United States. We expect that to continue into 2023. You've seen the strong growth coming from many of our other markets as well, particularly in Europe and Africa. Really a lot of significant activity going on in the market. You've also seen our customers aligning themselves more closely with us. you know, these longer-term strategic master lease agreements that we put in place, the one that we've talked about with Verizon, the other one that we've talked about with Airtel. I mean, these are long-term contracts with well-capitalized companies. There are, you know, still spots of churn that we have going on in the market. A lot of activity in Latin America with some consolidation, particularly in Brazil and Mexico that Rod kind of walked through and And so we'll see a heightened level of churn in Latin America over the next 12 to 18 months. We've seen some consolidation going on in Africa. But then again, we've been able to really largely work through all of that churn and still sizably increase the growth in each one of those markets. So I don't see any seismic shifts, if you will, over the next 12 to 18 months. Yeah, we are, you know, in a rising interest rate environment. We're in an inflationary time around the world. The good news is that we have long-term contracts in those very high inflationary markets. We've got, you know, escalators based on CPI and inflation in those areas. The other element, I think, within our business is we're well diversified. And so, you know, while we're, you know, perhaps, taking a market that might be growing slower in another market, you know, will be, you know, increasing the growth. And so it's offsetting some of the shortfall that you might see in other markets. I mean, we've talked about this in the past that, you know, our carriers invest kind of like a sine wave, right? I mean, it's heavy investment, and then it's less investment as they're tuning their network, and then it's higher investment. We continue to see that. We've seen that through you know, 1G, 2G, 3G, 4G, and we'll see that through 5G. Our customers aren't going to be building the networks before they see the demand. And so that's going to be a function of device penetration. It's going to be a sign of application development. I mean, I talked about the two phases. You well know this in terms of network deployment, first getting the coverage, and then we're going to see further densification and cell splitting, you know, as their customers are utilizing the networks. And with higher band spectrum, we're going to see an even increased level of densification just because of the propagation characteristics of the bands. So, you know, I do think that, you know, kind of a long, rambling answer for you perhaps, but, I mean, the core is the underlying technology and the desire for our customers and their countries themselves and their citizens to really be able to significantly increase their overall usage in wireless data. And so... As a result, that provides, you know, I think a real kind of protection for us, particularly when we're looking at these long-term agreements. Hey, Michael, this is Rod. Hopefully that answers your question.

Yeah, and Michael, I'll just add that in terms of the churn, the near term, one thing that you will see is our churn rates are actually coming down from Q3 to Q4. So, Globally, in our 2.6% Q3 organic tenant billings growth, it was about 5.5%, 5.4% that was cancellations or churn. That's going to step down to about 4% in Q4, which will end up driving our organic tenant billings growth for Q4 up from that mid-2s up to well over 4%, certainly, which is really good. And that, you know, 4.4 in Q4 is what helps us drive that 3% for the full year. And in the U.S., you're seeing that churn drop in the U.S. So the good news here is we're through the big bulk, the initial bulk of sprint churn. You're going to see organic tenant buildings growth for Q4 in the U.S. at around 4%, which will be getting us back to where, you know, where we really want to be longer term. And in the international markets, we do have some, as Tom was saying, some churn events, some elevated churn, those churn events will be temporary as certain countries go through a little consolidation. But you will see from Q3 to Q4, churn will step up by about 100 basis points, going from about a little under five to up into the fives churn in the international markets. And the only thing I'd call out specifically is in Latin America, you will see that's where a bulk of that temporary churn will begin to hit. So you will see a step up And our churn rates in Latin America are going from about 5% in Q3 up to a little over 8% in Q4. And that's all the normal churn that we've all talked about that you guys know is coming. Some of that will persist into next year as well, particularly in Latin America.

That's helpful color. Thank you. You bet. Thanks, Michael.

And our next question is from the line of Rick Prentiss, Raymond James. Please go ahead.

Nice morning, everybody.

Eric, good morning.

Hey, I want to follow up on a couple of questions. I'm following up on Simon's question about Caprax. If we think about the U.S., is part of the reason maybe you guys are so confident that U.S. leasing goes up in 4Q and then goes up and accelerates into 23 possibly to do with timing? Your Verizon MLA, your position of when you were getting contracts from DISH and that visibility that you talked about, Tom. I'm just trying to think, is some of this that it's very visible to you and it's really kind of more timing related?

Well, yeah, I mean, Rick, absolutely. And as I mentioned with Simon, you know, given kind of the MLA structure we have in place, it's kind of irrelevant in terms of that capital spend from our perspective, right? I mean, because we already have the kind of the rates and the pricing kind of locked in for a long-term period. Now, having said that, when I back up, I also believe that that capital is going to be spent over time. And that could be a timing issue as well. You know, it's all a function of customer demand and application development and device penetration. And so when you have those, you know, all locked in, you're going to see our customers physically spending on their networks because they have to. They're not going to want to see any decline in quality of service. And so they're going to want to meet this demand and stay ahead of the curve, as they traditionally have. But from an AMT perspective, you're exactly right. Timing is not that relevant to us just because of the construct of the agreements that we have in place.

Right. And you're not seeing any air pocket out there. That's been some of the concern in the marketplace because of high interest rates or because of inflation maybe turns into recession, at least on the U.S. side, with the carrier spending with you.

No, we haven't. We have not.

Okay, the last question for me is to follow up on some of David's questions. The stock buyback, what would trigger that? What else has to happen to trigger the stock buyback? That obviously will require some funding. That could affect back onto the interest rate side. And the second question with that is, was your $570 million upsizing from Stone Peak kind of expected in the guidance also?

Well, you know, I mean, from our standpoint – and then I'll let kind of Rod step in here – You know, we continue to look at the opportunities to de-lever as well as to look at supporting our equity. And given the movements, candidly, in the equity, I think that there's some opportunities there to be able to generate some value. And so it'll be a balance between the two. We talked about M&A, you know, and M&A kind of given the delta between the bid and the ask kind of around the world. I think that's less of a focus, candidly, at this point in time. And so we'll look at our NAV and we'll look at it versus our share price. And we'll, as we always have, look at the kind of the most attractive ways of being able to drive AFFO per share.

Yeah, and Rick, maybe I would add to that just from a leverage standpoint. We ended the quarter here at 5.5 times levered. You know, post the core site acquisition, we were as high as 6.8. So I'll just remind you and everyone else we have You know, we did start out higher than our target leverage range, which is three to five times. We worked through plans with the rating agencies to delever over time, maintaining our investment rate credit rating. That is critical to us. That's very important. We take leverage, you know, very seriously. That's why we've been able to delever as quickly as we have, going down from that 6.8 to 5.5. I'd also tell you that the 5.5 is, we're comfortably lower than the delevering plan that we've agreed with the rating agency. So that puts us in a pretty good position. The plans that we've agreed with the rating agencies did not contemplate or include the $570 million. So that's additional capacity that we have to either further delever well, well ahead of the delevering plan, or we can put it to use in a different way. So that's what we'll be looking at. When you think about the $570 million from Stone Peak. That is in our guidance in terms of the mechanics and the way it runs through our numbers, but it's important to point out that it is a benefit when it comes to our ability to delever. And then, of course, when we think about what we do with that capacity or any other capital capacity that we have available to us, we'll always put a share buyback up against our own internally generated net asset value of the company. And what we look at in terms of the share value, we're also balancing the analysis around the cost of of debt and how we drive better AFFO per share accretion, either paying down our revolving credit lines or buying back shares. So there's a lot of math, as you know, that goes into that. So we expect to be flexible and opportunistic as we evaluate what we do with our capital. And I do think that you could see us to both continue to deliver at a furious pace as well as buy back some shares when we think that's appropriate.

Makes sense. Thanks for that, Mr. Keller. Stay well, guys. Thanks, Rick.

And we have a question from the line of Matt Nickham, Deutsche Bank. Please go ahead.

Hey, guys. Thanks for squeezing me in here. Just one housekeeping and one broader question. On the housekeeping side, maybe just to go back to the Stone Peak 570 million raise, how does that impact the minority adjustments? I think it's been about 50 million typically, but it's been consolidated and proportionate AFFO. Just wondering how that may change in light of the incremental funding from Stone Peak. And then secondly, I think you've kind of answered this in terms of the U.S., but I'm wondering more broadly, as you think about tighter financial conditions, stronger U.S. dollar, weaker foreign currencies, is that weighing at all on any international customers or region's investment plans, just given some of the lower presumable purchasing power as they head into 2023? Thanks.

Rod, do you want to cover the MI question? And I can...

Yeah, so we took in another $570 million from Stone Peak as an additional investment into our core site business. So the original investment of $2.5 billion gave them basically a current ownership of about 22%, almost 23% of the business there. And then with their additional 570, that's going to pop up to about 28% to 29% ownership. And that is for the pieces of those investments that are actually equity from day one. You may recall from some of our disclosures, there are some pieces of the investments that are preferred, which will convert to equity. They're mandatory converts over a four-year period. So they will convert to equity. When that happens, then their ownership will jump up from the 28% to 29% up to about 36%. The way to think about the MI impacts here, when you get to Q4 at the run rate, you're going to see about $150 million of Q4 exit run rate for the European minority. And then you'll see about $60 million or so for the Stone Peak minority interest. That'll all run through kind of the minority interest section. On these preferred notes that we have with Stone Peak, you'll see another $45 million that'll be interest that'll run through the interest line. But you want to keep that in mind as well. So that puts us at a run rate of about a little over 200 million of MI as we exit Q4, 200, 210 million.

You know, and Matt, on the second question, you know, relative to the impact of what's going on around the world on our customers outside of the United States, you know, interestingly enough, we haven't seen anything of significance that would give me the sense that they're going to be slowing down on their build programs around the world. Now, You know, who knows what that might look like going into 23 and into 24. But, you know, they have the same level of energy that we've seen over the last 12 to 18 months. Now, we are also protected just because of the diversification of markets and diversification of customers. And so, you know, as a result of that, we are actually able to – to kind of avert a particular issue in one area or another. And also keep in mind, as I mentioned in my remarks, that our customers have spent almost $160 billion on Spectrum. And so they want to monetize that $160 billion and be able to get out into the market as fast as they possibly can. So we are seeing, as I said, the continued kind of robust deployment of capital in the markets. And we continue to support them. And we see also, again, a lot of built-to-suit activity in the market as well, which is also an indication of their willingness and ability to spend.

That's great. Thank you both. Thanks, Matt.

And our final question comes from the line of Phil Cusick, J.P. Morgan. Please go ahead.

Hi, this is Richard for Phil. Just wanted to follow up in Latin America, you're expecting a little bit higher churn. Will that impact any new activity or can you still see new activity growth continue through there despite the higher churn? And then also on the services side, it remains pretty solid. Are you seeing anything changing the trajectory of the services business or do you think it will continue to stay pretty steady?

Rod, why don't you take those two? Yeah, sure. Thanks, Tom. Richard, I think when you talk about Latin America, we are expecting higher levels of churn, but pretty consistent levels of kind of that gross new biz. And we're also complementing that with higher levels of escalator, which are driven by local CPI in the region. So, you know, those two things are pretty solid. We'll see where inflation goes and how the trajectory of our escalator changes. in that region may change over time. But there is, you know, solid kind of consistent new activity in Latin America, despite the fact that there is a little consolidation churn happening in some of the markets there. And then when it comes to services, we're having another great year in services. We're going to be up in the mid, you know, 200. We raised our guidance at the gross margin level by about $20 million. So we are, you know, going to be in that mid-200s. range for services revenue. That continues to come through at really nice margins in the mid-50s, 54%, 55% at the gross margin level. So our services business is performing exceptionally well and has proven to be very resilient. And that is because the U.S. carriers continue to be very active. I'm not going to guess in terms of where it's going to go in coming years, but to the extent that the activity levels stay high, we'll continue to see really solid you know, high services level. There's a chance that could pull back as the timing of activity, you know, from the carriers can ebb and flow from quarter to quarter. So we'll see what happens next. But we're going to be up in the mid 200s this year in services. All the carriers are active and we're maintaining really healthy margins in the mid 50s.

Great. Thank you.

Thanks, Richard.

And that concludes our questions.

Great. Thank you, everyone. If you have any questions, please feel free to reach out to the investor relations team. Have a great day.

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