Ladies and gentlemen, thank you for standing by. Welcome to the American Tower's Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to our host, Leah Stearns, Senior Vice President, Treasurer and Investor Relations. Please go ahead.

Thank you. Good morning and thank you to everyone on the call for joining us this morning to discuss our second quarter earnings. Our agenda for this morning's call will be as follows: First, I will provide some brief highlights from our financial results. Next, Tom Bartlett, our Executive Vice President and CFO will provide a more detailed review of our financial and operational performance for the second quarter 2016, as well as our full-year outlook for the full-year 2016. And finally, Jim Taiclet, our Chairman, President and CEO will provide a brief update on our international business and strategy. After these comments, we will open up the call for your question. Before I begin, I would like to remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include those regarding our expectations for future growth including our 2016 outlook, foreign currency exchange rates and future operating performance, technology and industry trends and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's press release, those set forth in our Form 10-K for the year-ended December 31, 2015 and in other filings we make with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. In addition to this morning's press release, we have posted a presentation, which we will reference throughout our prepared remarks, under the Investor Relations tab on our website. I'd like to note that…

Hey, thanks, Leah, and good morning, everyone. As you can see from the results we released this morning, we had another quarter of strong organic tenant billings growth and good margin performance across our global asset base. We also declared a common stock dividend of $0.53 a share, which was up over 20% from the prior-year period. And given the close of our Viom transaction in late April, our teams in India are now working hard to seamlessly integrate the more than 42,000 towers we added to our portfolio with that acquisition. If you please turn to slide six, let's take a look at our quarterly results. You can see that we generated strong performance with total reported property revenue growth of about 24%. This included total tenant billings growth of over 23%, of which about 8% was organic, driven by consistent demand levels throughout our global footprint. Our total property revenue growth this quarter included a negative 60-basis point impact from a $7 million revenue reserve related to the receivables associated with a tenant in Brazil which were outstanding at the time of their judicial reorganization filing. Based on our prior experiences with carrier bankruptcy and reorganization proceedings, we expect to pursue the full amount owed to us. Additionally, I would note that this tenant has resumed payments to us for amounts owed subsequent to their judicial reorganization filing date. Our U.S. property segment generated total reported revenue growth of about 3%, including a negative 1.4% impact from straight-line revenue recognition. We did not book any decommissioning revenue this quarter as compared to about $8 million recorded in Q2 of last year and $31 million or so booked in Q1. This negatively impacted our U.S. property revenue growth, by an additional 1.1%. U.S. organic tenant billings growth for the…

Thanks, Tom, and good morning to everyone on the call. Today, similar to prior second quarter earnings calls, my comments will focus on American Tower's international operations. As you just heard, our Asia, EMEA, and Latin America segments all generated another strong quarter of operating results in Q2, once again serving as a turbocharger for our market-leading domestic business. Beginning with American Tower's first international investment in Mexico in 1999, we've methodically expanded our geographic scope and scale based on the set of fundamental tenants. First, we recognized that the power of the Tower business model that has first been developed in the United States should equally apply in additional countries that presented the right operating conditions. It is our experience that due to a number of common factors the fundamental drivers of Tower demand are consistent across our selected geographies. First, consumers everywhere have a huge appetite for mobile technology and service and moreover the underlying physics of radio wave propagation, useable spectrum bands, and the 2G, 3G and 4G technology standards all apply globally, plus the network equipment OEMs, the handset manufacturers such as Apple and the chipset developers like QUALCOMM sell their products all over the world. Second, we understood from our U.S. experience that by buying towers from mobile operators, we could transform single-use non-performing cost center assets into high-performing multi-use commercial real estate. Consequently, sale-leaseback transactions for these assets provided an additional source of capital to mobile operators so they could more rapidly deploy their active networks and grow their core business. Again, since these common sense economics apply across multiple countries, we've been able to pursue the same strategy successfully to-date in Latin America, Africa, Germany and India. And third we recognize that we can dramatically increase our growth opportunities while at the same…

[Operator instructions] And first from the line of Amir Rozwadowski, your line is open, please go ahead.

Thank you very much and good morning, folks. I was wondering if we could dig a bit deeper into U.S. properties a bit here. As you mentioned, Tom, your guidance factors in what I believe you characterize is anticipated acceleration of new business. While I realize giving carrier specific detail isn't where you may want to go, perhaps you can give us color on what initiatives you're seeing and how you think the trajectory of the business should pan out over the next 12 months. And then, I guess, within that, during the quarter I feel like there has been a lot of questions or conversations about how to think about future escalator rates in the U.S. with perhaps some of the carriers expressing some consternation about how the compounding growth outlook of that cost structure would be for them. Maybe you can provide us with some insight on what you're hearing from your conversations with carriers and whether you believe there is either a risk or perhaps a middle ground going forward. Thanks a lot.

Amir, this is Jim. Why don't I take the second part of your question and Tom can go to the more quantitative side after that. As you know, and as you've said, we do not comment on specific customer negotiations, discussions, or their plans. But what we can do is provide you facts for the big four U.S. national carriers in aggregate, and these are average remaining term and domestic churn, excluding our non-national customers. Now we can sort of see the trend of the business as far as duration and fall off. So for 2016, our expected remaining term for the four nationals is 6.6 years and the churn is only approximately 0.2%. So we feel very confident about the stability of our U.S. domestic sort of big four asset base or revenue base right now. And the other piece of that is the escalator, which across the U.S. on average is still above 3%. So I'll turn it over to Tom.

Yeah, and Amir, I think, kind of coupling what Jim had just said, if you take a look at what our pipelines support, we've talked about this momentum kicking into the second half and we also, as a result, see that about 47% of our total organic business generated in the first half with 53% in the second half. So I think that that also kind of reflects my remarks and Jim's remarks that we continually see this growing pipeline of co-location amendments. In the United States, I think you're well aware that over the last three quarters, it's been a large piece of amendment activity, continually to filling in and meeting that capacity, and so as we've always talked about we see this amendment in co-lo activity in the form of sine waves and so we fully believe that all of the carriers are generating their own sine wave in terms of new business, grooming, co-los amendments. And I think as I mentioned we see a more momentum coming even to the second half of the year, which we think will position us well then for going into 2017.

Thank you very much for the additional color.

Sure.

And our next question is from Batya Levi. Please go ahead.

Great, thanks. Question on Brazil. Can you remind us what your outlook for growth in Brazil is for this year? There've been dramatic changes in carriers' CapEx guidance that were laid out in the most recent earnings. Can you talk a little bit about if you're seeing any slowdown in the level of carrier activity and how should we think about growth in that region? Thank you.

Yeah, sure, overall for the region I think I mentioned in my remarks I'm going to say it's in that kind of that 12% kind of range. In that particular market, it's been pretty steady. But it's really interesting with all of the issues that they have in the marketplace, we've seen quite steady performance this year. It's down from where it was last year clearly, and in addition, as I mentioned, we took that additional reserve this particular quarter just from a total revenue perspective. But the level of activity in the market has actually been quite steady and we expect to see that same level of activity for the balance of the year.

Okay. Thank you.

And the next question from David Barden, please go ahead.

Hey guys, thanks for taking the questions. Two if I could, just maybe this is for you, Jim, or Tom. Just following up on the earlier question, the T-Mobile and AT&T I think have pretty explicitly gone out there and tried to solicit alternatives for microcell sites that have been compounding for maybe 10 years or even 20 years, and there is conceivably a window for economic substitution for new tower builds. Could you talk about what you see is the vulnerability of AT&T's domestic portfolio in terms of long-term leases that have compounded with terms of leases that are expiring with alternative sightings that might nearby? It doesn't seem like it could be very big but I'm wondering if you see it at all as a potential vulnerability at this stage. And then second in India, obviously Bharti Infratel has been talking about the potential for resetting lease - pricing lower at the end of the term of some of their main shareholder leases. Obviously, with Viom you're going to have a larger overlap with them. I was wondering if you could talk about kind of the outlook for market lease pricing in India going forward. Thanks.

Sure, David. It's Jim. What I would say about potential substitution anywhere for towers is that - just to remind you, you've all heard this the functional inputs of the franchise value of the tower. And so, first of all, any change of equipment from one tower to another one, assuming you could even build it nearby is fairly costly for any operator. So that's something they would have to put into their equation. Also, the longer the site has been up, the more equipment tends to be on it, et cetera, and the more embedded it is in the network. So there are some network difficulties and economic cost to doing a switch. But as you know the other part of the franchise value is that most municipalities try to manage the number of structures in their jurisdiction, and would take that into account. And then thirdly, we continually try to reach mutually beneficial arrangements with our customers that can ameliorate the impact of specific high price sites as far as the contracts. So we'll continue to help them as we can in that way as well. So I do think that having some metrics for you to track over the years will be a useful way to keep track of all of this, and that's why I wanted to put out to you what our average remaining term is for the big four in aggregate and also what the churn rate for the non-national sort of assets of the big four, excluding the non-national, the assets of the big four are. And as I just said it's 0.2%. And so, again so far with the industry conditions we expect to continue it's very, very low as far as actual churn off, but we'll keep providing you those metrics as we go forward in time.

Great.

Secondly, on the Indian market, it's a critical difference to be a truly independent provider of siting in any country versus a captive provider of siting. In other words, you're a subsidiary or an affiliate of the mobile operator itself. Those contracts I don't want to speak to, but I can speak to our contracts with all mobile operators in India as being market based and therefore arm's length and certain provisions that may apply to captive contracts may or may not apply to ours. I guess I would set the foundation there, because again we don't talk about specific contracts or discussions or negotiations in any of our markets. So that's - I think a fundamental way to look at it is how do independents deal with mobile operators and how do captives deal with mobile operators and again you can track our metrics over time in that regard.

Thanks, Tim.

Next question from the line of Jonathan Schildkraut, please go ahead.

Great, thanks for taking the question. I just was hoping that maybe you could provide a little color, Tom, and sort of understanding the change in the organic growth metrics that you delivered and help sort of bridge the gap. I know when I look back at the first quarter numbers, the total organic growth was 7.9%. This quarter it's 7% and I know that those may actually be very close to the same numbers, just based on differences in calculations and so if you could give us a little bit of a look under the hood it might be helpful. Thanks.

Yeah, I mean the definitions are, Jon, in the release and in the back of the slides that we have here. But I mean the fundamental difference in the organic, we're really trying to - as we talked about last quarter, we're really trying to give a true run rate, a recurring run rate of build revenue. And so the tenant billings if you will, is that recurring revenue that is constantly being invoiced to customers. Outside of that which then gets you to the reported are things like pass-through and straight-line and all of those other elements, which had a lot of volatility from quarter-to-quarter. And then on an organic basis, what we're really trying to do is again give you that recurring revenue that we have from co-los amendments plus escalators, less churn to give you a true view in terms of what additional activity is happening on all of the sites that we have. So if you take a look at, for example, the U.S. in this particular quarter, if you exclude again the decommissioning revenue, which again was kind of that - again that volatile, you're right, for the U.S. it's in the mid-5%s. Right at about that 5.5% and versus the organic number that we talked about now under the tenant billings methodology of 5.6%. So it's very, very similar in terms of what the rates were that we talked about last quarter and that we would see in Q2. Similarly for international, if you looked at the core organic growth we're talking about 13.7% on the tenant billings organic basis which is the number we just referred to. On the international side, again if you backed out the impact of OI we would be right at 13.5%. So again, what we're trying to do is we're trying to just reflect what that real run rate recurring billings stream would be. So very, very similar, just a couple of nuances in terms of the differences between the organic core growth and the tenant billings. The real difference is being that decommissioning revenue in the U.S. which would be the kind of the major element to reconcile it to, and the reserve that we took on the OI or on the Brazilian business in Brazil.

Okay, thanks, Tom.

Yes.

Next question is from the line of Simon Flannery. Please go ahead.

Great, thank you very much. Tom, you talked about the capital allocation portion a couple of times. I remember when you became a REIT, you set a fairly low payout reflecting in part the NOLs. Can you just update us on the NOL status, the AFFO payout, and how should we think about dividend growth at some point the 20% number is going to come down to more match your overall growth, so what should we be thinking about there? And then there has been a lot of comments over the last little while about various outdoor small cell strategies and municipal pushback and so forth. Just wanted to get your perspective on that market at this point. Thanks.

Sure. Simon, I'll take the first part and Jim take the second part. On the dividends, you're absolutely accurate. We started out being a REIT, we had a sizeable amount of NOLs at that time and we've utilized those largely over the last, three, four years, and so we have $50 million of NOLs or so. And as a result, our payout has been down in the 30%, 35% range, which is where it exists today. We fully expect that as a result of no longer having those NOLs and having assets that are further being depreciated, that over the next couple of years, we would start to see payouts in the 45% to 50% range of AFFOs. So there is no doubt that we're going to be paying a larger piece of that AFFO and then clearly as a result of not having those NOLs available.

So does that allow you to keep the 20% for a couple of more years?

Well, again, it's all subject to board approval. Really looking at - we'll take a year at a time, but we would expect that the - I would expect with that growth rate we'd be able to continue for the next - yes, couple of years.

Great, thank you.

And, Simon, it's Jim. Regarding our small cell strategy overall, we've chosen to focus on indoor data systems and ultimately indoor small cell systems as where we think the best returns have and can be attained. We're also actively exploring innovative ways to achieve tower-like returns on other what we call macro supplement types of assets, and that could be outdoor small cells and other technologies that can better serve the high density venues. I think the classic tower, the macro tower is going to serve its purpose for the foreseeable future, because we are really in the business of in the macro tower world is providing mobile service in suburban largely and corridor - transportation corridor and rural environments. And where a lot of the small cell demand is coming, as you hear from the carriers and others, is in the really high density locations, such as urban centers where towers don't have a role - much of a role to play anyhow. So this would be a complementary business for us if we could figure out how to scale it, but importantly, how to scale it with tower-like returns. And that's what we're really aggressively exploring today, although I have to admit we haven't solved the problem quite yet. And I think already you're seeing that part of the issue with urban small cell deployments is the municipalities, again, have a big role in what gets built on their jurisdiction and how it gets built and if it's shared or single use. And so there are some municipal delays on some of the projects going on by all of the industry today and we want to continue to work out all those issues as time goes on and figure out if we can get tower-like returns from these kinds of projects. So it's going to be a long cycle approach, 5G, even a standard won't be set till probably 2019, 2020 and then that will start being deployed in some of these dense venues. In the meantime, 4G is the go-to technology for at least the next four or five years, and then another five years to ten years beyond it as you migrate to 5G. So I know we have some time to figure this out, but it is a knotty problem and we hope we can figure out a way to get tower-like returns on a complementary asset someday.

Next from the line of Ric Prentiss. Please go ahead.

Thanks. Good morning, guys.

Hey, Ric.

Hey. First, appreciate you guys providing AFFO, both on a consolidated and a proportionate basis for the quarter. [indiscernible] several earnings already this morning. Did you provide that AFFO proportionate or to common shareholders for guidance?

Yeah. I mean, Ric, what we're guiding to is that consolidated AFFO, that's always been - our guidance has been based on. I mean, as you well know, over the next several years we have the opportunity to be able to secure more ownership of that Viom asset. And we fully expect that the incremental dollars associated with obtaining that and the cost thereof will be offset by incremental synergies as we're able to secure and merge more of our businesses together in that business and so that's why I continue to look at the consolidated AFFO, because I think that's the better benchmark for us going forward. And so that's what 2016, based upon what the numbers that I just talked about a few minutes ago, that's what our outlook is based on.

Okay. In the quarter was there about a $0.05 difference between consolidated and proportionate?

Yes, that's right.

And is that something we should assume could be extrapolated out over the year, that same kind of level?

Yeah, it's fair.

Okay. Second question is, getting into the weeds a little bit here. There was a fairly noticeable change in your straight-line adjustment for 2016 guidance from the previous guidance to now. I think now you're looking for maybe $124 million of straight-line adjustment versus what was more like $109 million-$110 million previously. What happened there? Is it new contracts or what would cause it to swing that much on an annual guidance.

There're two things really. One is the addition of Viom, in terms of fine-tuning that outlook and understanding again the specific terms underneath those specific leases in terms of what would be straight-lineable or not. So that's the most significant difference between the two. And then ongoing, Ric, there are certain elements that in contracts that when you actually - when the site comes up for renewal it automatically extends for a longer period of time and so that also becomes straight-lineable. But the most significant piece was the Viom transaction.

Great. So it's not really any new MLAs or anything like that in the U.S.?

That's right.

Okay. Thanks, guys.

Sure.

And the next question is from the line of Tim Horan. Please go ahead.

Thanks. Jim, could you give us a little more color on India, kind of what's going on from a technology perspective, buying perspective and pricing. It sounds like your pricing is kind of well below the captive kind of tower companies. Any color there would be great.

Sure, Tim. First of all, I'll speak to technology and volume and pricing last. But the technology deployment in India is [indiscernible]. We've got a new entrant just on the cusp of launching national 4G network, which is going to in some ways leapfrog what's available today and also motivating the other market leaders to invest in 4G as well. So we see as Tom said sort of an upcycle in technology investment in India at a scale that may have never been done before given the population in that country. Now that will be over a few years, which has positioned us I think really well with the Viom acquisition as we kind of tuck it in now to ride that wave of technology investment, and there is some great companies involved here. These are significant multinationals like Vodafone as well as Bharti Airtel, as I mentioned Reliance Industries, there is also Reliance Telecom. There is going to be some real competition from really moving quickly through 3G into 4G sort of technology territory. And as we all know, densification and siting equipment needs go up as you go into that higher technology stack. So we're very optimistic about the technology kind of road map for the country. As far as volume, what was interesting about the Viom merger with ATC India was that our major customers happen to be the partners at Indus. So again Airtel, Vodafone, Idea are very large customers of ATC, proportionally not so much actually of Viom where, of course, Tata was the core customer there. So you've got very complementary opportunity when we put these two assets together to drive volume in both directions, which I think is really going to be great for leasing for our market again over the next number of years it'll play out. And then finally pricing, I think it's a miscasting that our pricing is lower than the cap. With our pricing we tend to drive as high as we can without being tethered to the parent and that's been a - I think a fairly successful endeavor. But we do have to stay in the context of the overall market and certainly don't overprice. But I would say that we're probably on the upper-end of pricing, given our independence and the quality of our assets, and finally our ability to do construction jobs quickly and in difficult places.

I know, historically, in India as you've added more cell sites prices have come down. Do you think overall prices can be stable or growing or shrinking? Just some color on that.

Well, we've talked already probably enough about pricing. Those are individual negotiations ultimately with carriers, but there is going to be more equipment on towers. There is going to be more of them and the outsourced model, I think, with our Viom acquisition. And actually the increasing independence of the captives over some period of time as they go public or float more shares and get more mature will probably be ultimately constructive to that.

Thank you.

And the next question from the line of Spencer Kurn, please go ahead.

Hey. Thanks for taking the question. You've had your perch in Europe for quite a while and we've been seeing tower M&A activity increasing. It doesn't seem like you've been very involved. I would love to understand why you haven't been very active and if there are any specific reasons why European tower assets haven't been appealing to you. Thanks.

Sure, it's Jim. We've been extremely active in business development in Europe for probably 10 years. What hasn't occurred is the asset trading price meeting our investment criteria. It happened once in Germany where we do have a really great base with the KPN assets, now part of Telefónica. So we think we're firmly positioned with a great beachhead in the continent and continually strive to work negotiations so that we can get our investment criteria met and invest more in the region. And so far that combination just we have not been able to secure. And that mainly has to do with asset pricing and the characteristics of the market and the returns you will get. So we are poised to, just like with small cells, aggressively pursue assets that meet our investment criteria. If we can locate or determine those, we will act quickly and decisively. When we don't, we will avoid investing in what we would consider at the time to be lower return opportunities, frankly.

Great, thank you.

And now to the line of Michael Rollins, please go ahead.

Hi. Thanks for taking the question. I was wondering if you could talk a little about as you look at the industry and see more small cell activity, whether it's your in-building DAS or outside small cells new DAS, there seems to be a more upfront revenue component, which then converts into deferred revenues, some call it prepaid rent. And so how do you look at this category in terms of the impact to revenue, how it affects cash flow, and how you would think about the valuation of assets and a return on your assets between the cash versus some of the non-cash contributions to the income statement? Thanks.

On a pure ROI basis, Michael, in terms of just the economics of whether a project makes sense or not, capital coming in from a customer is clearly going to have an impact in terms of what that ROI is ultimately going to be. Right? I mean, that's just a discounted cash flow. From a P&L perspective, I think you can see from the release and from - of our supplemental that you can - you recognize just how that revenue is being recognized and it's being recognized over the balance of the lease. And you can see that even on a quarter-over-quarter basis, I think the number is around $20 million, it was almost identical to what it was the same quarter of last year. So that number continues to be fairly consistent on an annual basis. There is not a lot of volatility, not a lot of growth, not a lot of decline in it as we continue to invest in those types of systems where we're actually getting capital contributions. So I look at it from two perspectives. One is just from the ROI whether the transaction makes sense, it just goes into the math to determine whether a particular project meets our internal thresholds to be able to move forward with it, and then the recognition of that particular revenue is done over the remaining balance of their lease term.

Thanks.

Operator, any more calls?

There are no further questions at this time.

Great. Well, thank you, everyone, for joining us today. We're here to help. If you have any further questions you can reach out to myself or the Investor Relations team. And with that, operator, you can close the call.

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