Crown Castle Inc. (CCI) Q4 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Crown Castle International Q4 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, January 26, 2012. I would now like to turn the conference over to Fiona McKone, Vice President of Finance. Please go ahead.

Thank you. Good morning, everyone, and thank you all for joining us as we review our fourth quarter and full year 2011 results. With me on the call this morning are Ben Moreland, Crown Castle's Chief Executive Officer; and Jay Brown, Crown Castle's Chief Financial Officer. To aid the discussion, we have posted supplemental materials in the Investors section of our website at crowncastle.com, which we will discuss throughout the call this morning. This conference call will contain forward-looking statements and information based on management's current expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurances that such expectations will prove to have been correct. Such forward-looking statements are subject to certain risks, uncertainties and assumptions. Information about the potential factors that could affect the company's financial results is available in the press release and in the Risk Factors section of the company's filings with the SEC. Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary significantly from those expected. Our statements are made as of today, January 26, 2012, and we assume no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. In addition, today's call includes discussions of certain non-GAAP financial measures, including adjusted EBITDA, recurring cash flow, recurring cash flow per share, funds from operations, funds from operations per share, adjusted funds from operations and adjusted funds from operations per share. Tables reconciling such non-GAAP financial measures are available under the Investors section of the company's website at crowncastle.com. With that, I'll turn the call over to Jay.

Thank you, Fiona, and good morning, everyone. We had a great 2011 and we are excited about the leasing activity we are seeing in our portfolio. Let me quickly summarize some of our accomplishments during the year, and then I'll take you through some greater detail. Throughout 2011, we consistently delivered results above our original expectation. And we ended 2011, delivering another very strong quarter of results. For the full year, as shown on Slide 3, we posted growth in site rental revenue of 9%, site rental gross margin of 11%, adjusted EBITDA of 12% and adjusted funds from operations per share of 17%, compared to 2010. These results were considerably above our expectations at the beginning of 2011. Further, our services business continues to outperform our expectations, delivering strong growth in 2011 as we continue to work very hard to meet customer deployment objectives and facilitate customers' installations on our sites. In addition to our strong organic leasing results, we announced several important acquisitions. In December 2011, we announced an agreement to acquire NextG Networks for $1 billion, which we expect to close in the second quarter of 2012. NextG is the leading provider of distributed antenna systems or DAS. This acquisition puts us in the leadership position in providing small-cell solutions to our customers in addition to our existing leadership position in U.S. towers. We believe that DAS will make a meaningful contribution to site rental revenue growth in the next several years as these and other small-cell solutions become an increasingly important part of the wireless infrastructure, complementing our existing macro towers. Then we'll talk more about why we are excited about this investment later in the call. Further, earlier this month, we announced the agreement to acquire 2,300 Ground Lease Related Assets from Wireless Capital Partners or WCP, an immediately accretive acquisition. We expect to close WCP in the first quarter of 2012. Relative to other potential investments, we believe that both of these acquisitions will be accretive to our long-term growth rate and enhancing the shareholder value. Further, we recently announced that we are seeking to refinance our credit facility with a new $3.1 billion credit facility. The proceeds of the new facility are expected to be used to finance the NextG and WCP acquisitions and to finance our existing -- refinance our existing credit facility. We expect to close the transaction later this month with approximately $1 billion of undrawn revolver availability after the aforementioned acquisitions and refinancing. I would also highlight as you saw from our press release yesterday, we began providing funds from operations or FFO and adjusted funds from operations or AFFO metrics, which I'll walk you through shortly. With that, let me turn to Slide 4 as I highlight some of the results for the fourth quarter. During the fourth quarter, we generated site rental revenue of $471 million, up 5% from the fourth quarter of 2010. Site rental gross margin, defined as site rental revenues less cost of operations was $351 million, up 8% from the fourth quarter of 2010. Adjusted EBITDA for the fourth quarter of 2011 was $335 million, up 8% from the fourth quarter of 2010. It is important to note that these growth rates were achieved almost entirely through organic growth on assets that we owned as of January 1, 2011 as revenue growth from acquisitions was negligible. AFFO, which I will describe in more detail later, was $193 million, up 15% from the fourth quarter of 2010 or $0.68 per share, up 17% from the fourth quarter of 2010, as shown on Slide 5. There were no significant non-recurring items in the fourth quarter of 2011. Turning to the balance sheet, we ended 2011 pro forma for the acquisitions on our new credit facility with total net debt to last quarter annualized adjusted EBITDA of approximately 6x and adjusted EBITDA to cash interest expense of approximately 3x. Pro forma, both our adjusted EBITDA leverage ratio and cash interest expense coverage ratio are comfortably within their respective debt covenants requirements. Moving on to investments and liquidity. We expect to close on our new credit facilities on January 31 with the blended coupon based on current LIBOR of approximately 3.7% on the $2.1 billion of funded term loan. In addition, we expect to have $1 billion of undrawn revolver capacity. This gives us tremendous flexibility for investing activities that we expect will enhance long-term AFFO per share which we expect -- which we believe is the best long-term measure of shareholder value creation. During the fourth quarter, we invested $104 million as illustrated on Slide 6, including $83 million on capital expenditures. These capital expenditures included $33 million on our land purchase program. In total, during 2011, we extended over 1,200 land leases and purchased land beneath more than 600 of our towers. As of today, we own or control for more than 20 years, the land beneath towers representing approximately 76% of our gross margin, up from 70% a year ago. In fact, today, 38% of our site rental gross margin is generated from towers on land that we own, up from 34% a year ago. Further, the average term remaining on our ground leases is approximately 32 years. Having completed over 11,000 land transactions, we believe this activity has resulted in the most secure land position in the industry based on land ownership and final ground lease expiration. We continue to believe this is an important endeavor that provides a long-term benefit as it protects our margins and controls our largest operating expense. Further, our recent acquisition of the ground leases from WCP, which are predominantly under our customers' towers, allows us to apply the expertise we have gained as the industry leader in land lease extension and purchase. Of the remaining capital expenditures, we spend $9 million on sustaining capital expenditures and $41 million on revenue-generating capital expenditures, the latter consisting of $28 million on existing sites and $13 million on the construction of new sites. During the fourth quarter, the acquisitions I previously discussed replaced our share purchase activity. For the full year 2011, we purchased 7.7 million common shares and potential shares, spending $318 million. Since 2003, we have spent $2.7 billion to purchase approximately 100 million of our common shares and potential shares at an average price of $26.85 per share. Also in January, we announced the conversion of the remaining $305 million of our 6.25% convertible preferred stock, which will result in the issuance of 8.3 million common shares and eliminate an annual dividend of approximately $19 million. For the full year 2011, as illustrated on Slide 7 and 8 of the presentation, site rental revenues were approximately $1.9 billion, up 9% from the full year 2010. Approximately 5% of the growth was attributable to the additional tenant equipment added to our sites, reflecting the strong leasing activity we enjoyed in 2011. And approximately 4% of the growth came from the existing base of business that was in place at the beginning of 2011 through contracted escalators and renewal of tenant leases net of any churn. Site rental gross margin grew 11% from the full year 2010 to $1.4 billion. Adjusted EBITDA for the full year 2011 was $1.3 billion, up 12% from the full year 2010 and AFFO per share increased 17% from the full year 2010 to $2.58 for the full year 2011. I would note that due to our rigorous control on cost in 2011, approximately 90% of the growth in site rental revenue found its way to site rental gross margin and adjusted EBITDA. Turning to Slide 9, while we are only a month into 2012, we are seeing encouraging signs of the continued growth fueled largely by AT&T and Verizon overlaying 4G networks and Sprint actively deploying their Network Vision program. In our full year 2012 outlook, we have not included the expected impact from our acquisitions of WCP and NextG or our $3.1 billion credit facility. We would expect to include the impact of these in our quarterly earnings announcement following each respective closing. We expect site rental revenue growth in 2012 of approximately $90 million, wholly comprised of new leasing activity in the form of amendments to existing installations and brand-new installations on our site. This is in line with the growth in organic leasing we have enjoyed since approximately 2007. We expect the vast majority of this revenue in 2012 to come from Verizon, AT&T and Sprint. As shown in our outlook on Slide 10, we expect AFFO growth of approximately 11% in 2012. We would expect to augment this growth through opportunistic investment of cash flow and activities such as share purchases, tower acquisitions, new site construction and land purchases. Even with our recent acquisition announcements, we expect to have significant cash to invest in activities that we believe will maximize long-term AFFO per share growth. During 2012, we expect to generate approximately $810 million of AFFO and invest approximately $325 million on capital expenditures related to purchases of land beneath our towers, the addition of tenants to our towers and the construction of new sites, including distributed antenna systems. In addition, if we were to leverage at 5x, our expected growth in adjusted EBITDA, we would have an additional approximately $400 million to invest. In total, this is approximately $1.2 billion of investment capacity for 2012. Ignoring our borrowing capacity, the portion of our AFFO after expected capital expenditures represents a little over $100 million per quarter of cash flow that we could invest in activities related to our core business, including purchases of our shares and acquisition. Consistent with our past practice, we are focused on investing our cash in activities we believe will maximize that measure long-term AFFO per share. I believe that this level of capital investment can add between 4% and 6% to our organic AFFO per share growth rate annually. Before I turn the call over to Ben, I would like to walk you through our new financial metrics as outlined on Slide 11. As you've seen from our press release, we began providing FFO and AFFO metrics this quarter with the aim to provide additional transparency and a comparable metric to others in the tower industry and a broader REIT universe. We continue to expect that we will convert to a REIT no later than the exhaustion of our net operating losses, which we currently expect to consume by approximately 2016. During the second half of 2011, we began some of the preliminary work that will be necessary to make the conversion of this tax efficient capital structure in the future. While we've not made a decision to convert to a REIT, we do believe it is a likely outcome given the current tax efficiency of the structure. As such, we decided to provide the same AFFO metrics used by our peer, American Tower. For the first time in the history of the tower industry, there will be a metric that is calculated the same across multiple tower companies. I am hopeful that this definition of AFFO will become the metric that investors will use when evaluating companies in the tower industry. I believe the metric is indicative of the dividend capacity of our industry and applaud American Tower for leading the way in defining the metric last quarter. As many of you know, FFO and AFFO are widely used in the REIT industry. Long term, we believe it will be important for REIT and other investors to be able to evaluate Crown Castle on this basis. And by initiating the use of these metrics now, we will hopefully demonstrate the long-term stability and growth of our business through good and bad economic periods. Similar to our past practice of discussing recurring cash flow or RCF on a per-share basis, we will focus the majority of our value creation discussion on AFFO per share. Certainly, we will be making our capital allocation decisions based on our goal of maximizing long-term AFFO per share. To aid the transition to this metric, we have provided the FFO and AFFO metrics for the full years from 2007 through 2011 with quarterly details for 2010 and 2011 in the supplement we posted along with our earnings release yesterday. I would also note that cumulatively, our new AFFO metrics would have yielded essentially the same results as our historical RCF metric since 2007. As noted, the cumulative difference between AFFO and RCF from 2010 through 2012 is only $14 million, less than 0.5% of the $3.7 billion of recurring cash flow over these periods. Our AFFO metric will provide more specificity with regards to straight-line revenue, straight-line expense and non-cash interest expense. The impact of these 3 items largely offset one another over the last 5 years. As adopted, our AFFO metric adjusts for the impact of straight-line revenues and expenses. As I've mentioned in the past, we've been able to recognize site rental revenues in advance of the cash received from our customers due to the extension of contracts with our customers. In fact, our revenue growth from 2009 through 2011 benefited by approximately 150 to 200 basis points per year from lease renewals. We have been very successful and we're working with our customers to extend the terms of our contracts. Over the past 3 years, we've been able to renew and extend approximately 45% of our customer contracts with initial terms of up to 15 years with multiple renewal periods at the option of the tenant. Due to these long-term customer contracts with fixed escalations, we've been recognizing site rental revenues in advance of the contracted cash payments from our customers in accordance with Generally Accepted Accounting Principles. Also, we have been recognizing higher site rental expense than actual cash rental payment as a result of renewing our ground leases with fixed escalation for long periods of time. As shown on Slide 12, we have graphed all of our existing leases, both our revenue tenant leases and our expense ground leases for years 2012 through 2020, showing the expected reported amount and the respective cash receipts and payments. As shown, we expect that at the beginning, that in the beginning into -- in about 2015, our cash receipts from tenant leases will exceed the amount of reported site rental revenue. For purposes of generating the graphs, we have assumed that all leases are renewed at term end dates. As illustrated in the graphs and based on the aforementioned assumptions, we expect that our cash receipts from our existing tenant licenses will grow at approximately 3.6% per annum for years 2012 to 2020. We have made no assumptions in the graphs with regards to additional tenant leases, tenant amendments or land purchases. We hope that you will find our additional disclosure in the adoption of an industry -- of industry standard metrics helpful in your analysis. To aid in the transition to AFFO and FFO from our current metric RCF, we will continue to provide the RCF metric through the end of 2012. In summary, we had a terrific 2011, with a number of significant accomplishments, and I'm very excited about 2012 as we continue to execute around our core business, integrate NextG and continue to allocate capital to enhance long-term AFFO per share. And with that, I'm happy to turn the call over to Ben.

Thanks Jay, and thanks to everyone for joining us on the call this morning. We've got a lot to cover and as you can imagine, there's been a lot going on at Crown Castle. I want to take a couple of minutes to reflect on the tremendous year we had on a number of fronts. As Jay just mentioned, we had an excellent fourth quarter and finished the year very strong, growing site rental revenue, adjusted EBITDA and AFFO by 9%, 12%, and 17%, respectively. In addition to a strong year of site leasing, our U.S. Services business performed exceptionally well. This success results from a diligent effort to capture more of the revenue opportunities associated with assisting our customers in locating or upgrading installations on our sites. This increase in services activity is attributable to the confidence our customers have in Crown Castle through our disciplined and routine execution as regularly expressed in our customer surveys that consistently rank us as delivering the highest customer satisfaction in the industry. As I look out to 2012 and beyond, I'm as excited about the prospects for our business as in any time in my memory. Wireless data demands on these networks continue unabated. We have each of Verizon, AT&T and Sprint actively upgrading their networks, which is driving significant revenue growth on our sites. Further, we see renewed activity from T-Mobile as they react to remaining independent and seek to improve coverage, capacity and the economics of their network. Beyond the immediate demand we see, we believe longer term, we will benefit from new partnerships and applications yet to be identified that bring additional spectrum to the market with the need for our sites. It is the realization that we can extend our shared infrastructure model to assist customers in meeting these challenges that has led us to our decision to take a market-leading role in the DAS or small-cell site architecture business through our announced acquisition of NextG Networks. I'm excited to spend a few minutes with you this morning sharing my enthusiasm with you about walking through our thought process and why we believe this investment uniquely positions Crown Castle for the future and why we believe this transaction will be accretive to our growth rates and shareholder value. As mentioned by AT&T on their call this morning, as demand for data services accelerates, network architecture is expanding. And increasingly, we believe DAS will be an important complement to traditional tower installations. The acquisition of NextG furthers our capabilities in DAS, enabling us to provide more shared wireless infrastructure for customers beyond those areas served by traditional towers, thereby augmenting our service offering in this growing market. NextG is the leading provider of DAS with over 7,000 nodes on the air and a further 1,500 nodes under construction. Consistent with our focus on the top 100 BTAs in the U.S., over 90% of NextG's nodes are in urban and suburban locations with 80% in the top 10 U.S. metropolitan areas including New York, Los Angeles, Chicago, Dallas-Fort Worth. The NextG assets are expected to provide significant growth as they currently average only 1.25 tenants per network. Following the contemplated acquisition, we expect to be the largest independent operator of DAS systems in the U.S. with approximately 10,000 nodes, including 26 venues in over 20 university campuses in operation or under construction. Based on existing and contracted networks under construction, we expect the acquisition of NextG to have approximately $50 million of annualized run rate site rental gross margin when complete. At closing, we expect NextG to have approximately $17 million of annualized run rate G&A costs. The G&A costs are largely associated with developing and building new sites and leasing the existing networks. We consider these development costs to be an investment in building new systems currently under construction, and do not expect material benefit from synergies until 2013. I expect that as we work through the integration of NextG, we will achieve cost synergies, no doubt, but we will go slow at achieving these synergies as we want to ensure that we don't stifle the growth opportunity that we believe we can achieve in the DAS market. This acquisition is about scale, capability and growth and I don't want to spoil that opportunity with shortsighted cost synergies. In fact, I believe that this acquisition has the potential to deliver adjusted EBITDA of 5x to 6x its current level in 5 years, based on the commitment we believe wireless carriers are making to utilizing small-cell site solutions. Similar to the towers we acquired from the carriers a decade or so ago, these are largely single tenant assets that have tremendous lease-up potential. In fact, we've enjoyed much faster lease-up on our existing DAS portfolio compared to the tower lease-up rate, where it took a decade or so to reach an average tenancy of 3 carriers per tower. Our existing DAS networks are tracking to reach this level of tenancy much faster than what we saw on our traditional tower business and we have high expectations NextG systems will perform similarly well. There are many parallels and similarities between DAS and our existing tower business and there are a few differences. Let me take you through a few of the key questions that we had to answer before we were willing to make a $1 billion investment in DAS. First, is DAS a necessary component of the wireless infrastructure solution? Second, does DAS have similar barriers to entry that our towers enjoy? And third, is DAS similar enough to our existing infrastructure business to leverage our expertise and relationships? The resounding answer to all 3 of these questions is a yes, and let me walk you through some of our conclusions. We have included some slides to help facilitate this discussion. As most of you are aware, towers currently serve as the primary infrastructure solution for wireless communications. As the usage of wireless devices increase, there's an increasing need for small-cell architecture to help improve coverage, but more importantly, to help increase capacity in areas that can't be served by towers. Industry estimates suggest there could be as many as 6 to 10 small cells deployed for each macro cell tower site over the long term as carriers add capacity to meet consumer demand. We are still in the early stages of this infrastructure, similar to where we were with towers a decade ago. In fact, the opportunity we see feels a lot like the early tower days of the late '90s. Since 2003, we have gradually gained expertise in this area starting internally with a small-cell site -- a small DAS deployment team in specialized areas with minimal investment. As these early systems gained traction and carrier buy-in, we made a $115 million investment in DAS by acquiring NewPath networks in September of 2010. Since then, we've enjoyed significant growth in DAS from this relatively small acquisition. As a result, we began to look for ways to leverage on a larger scale what we learned from our NewPath acquisition and our carrier relationships and so we pursued NextG with the aim to become the largest operator of DAS networks in the U.S. and secure locations that would be nearly impossible to replicate. Like the early days of the tower industry, we believe the best assets are likely to be the first ones constructed in the most densely populated areas of the U.S. As illustrated in Slide 13, DAS networks are in many ways, similar to a tower simply laid on its side. Simply put, DAS is a network of antennas connected by fiber to a communications hub designed to facilitate wireless communication services for multiple operators. We rent space on our individual DAS antenna locations or nodes via long-term contracts. These contracts are generally at least 10 years in term with renewal options and annual escalation features. Similar to our towers, DAS can accommodate multiple customers for antennas and other equipment necessary for the transmission of signals for wireless communication devices. Typically a DAS network will consist of nodes or antennas mounted on utility poles, streetlamps or traffic signals connected by fiber to a base station radio in a remote location. The fiber routes are typically a combination of aerial cables strung pole to pole along a street or a cable buried in a conduit. On Slides 14 through 17, there are pictures of some completed DAS solutions. It may be helpful to talk about DAS in the context of towers. In our traditional tower business, we are responsible for building and maintaining the steel tower structure and renting ground space from the tower -- and renting -- and renting the ground on which the tower is located. In DAS, we are responsible for building and owning underground or aerial fiber for multiple tenants, utilizing the public right-of-way and locating antennas on streetlamps, traffic light or utility poles. The fiber component of a DAS installation is akin to the galvanized steel in a traditional tower. That is what we own and lease to customers in its most simple form. As in the traditional tower business, the wireless carrier is typically responsible for operating their base station equipment. Economically, a good rule of thumb is to think of a tower as roughly equivalent to 3 DAS nodes. So our portfolio pro forma of 10,000 DAS nodes including those under construction, relates to approximately 3,000 towers. To help frame it for you, you can think of the cost of a node as 1/3 the cost of a typical tower and the rent we receive as 1/3 of the rent we would receive for a typical tower installation. As in towers, the incremental margins on adding additional tenants are very high as the cost associated with adding tenants are negligible or subsidized by the additional tenant. A DAS can typically accommodate up to 5 tenants. The landlord is usually the municipality or a local utility company. The recurring rent associated with DAS can vary widely depending on the location, cost and complexity of the system. But typically, the rent is approximately 1/3 of a typical tower lease. Importantly, as in the tower model, this is a shared infrastructure model and is a cost effective solution for wireless carriers when compared to the cost of owning the assets themselves and our return expectations are achieved through co-location. Examples of DAS we have installed include sports venues, such as stadiums and arenas where thousands of people are trying to utilize their smartphones to surf the Internet. Similarly, university students are typically early adopters of new communications technologies and mobile phones are no exception. Following the acquisition of NextG, we will have over 20 universities to offer wireless carriers access via a shared DAS network and these networks deliver excellent indoor and outdoor campus coverage in lecture halls, dormitories and sports venues. Further, in communities, particularly suburban and urban areas where there isn't space for towers or where zoning restrictions or space limit the construction of towers, we have developed DAS solutions by attaching small antennas and small equipment cabinets on existing utility poles or light poles. After combining with NextG, systems -- the NextG systems with our own, we will have DAS deployed in marquee locations such as the University of Notre Dame, Stanford University, Hilton Head Island, Colonial Williamsburg, Amway Center, high-end suburban locations such as Scottsdale, Arizona, dense urban environments like Manhattan and San Francisco and some of the most recognizable theme parks in the world. In short, I am thrilled about the portfolio of DAS networks we are acquiring and the talented people we expect will be joining Crown Castle. They will play an important role as we continue to grow and expand our small-cell site capability to deal with network capacity needs of the future. So to wrap up and go to questions, we are very pleased with our fourth quarter and full year 2011 results and believe they demonstrate the quality of our assets combined with our ability to execute for our customers. We remain disciplined and focused on maximizing long-term AFFO per share through growing our core business and making opportunistic investments and we have significant capacity to continue to do this in 2012. And finally, I'm excited we have positioned the company to be the clear leader in shared wireless infrastructure in the U.S. with unique capabilities to meet the current and future needs of our customers. With that, operator, I'll be pleased to turn the call over for questions.

[Operator Instructions] Our first question comes from the line of Simon Flannery with Morgan Stanley.

First, on the AFFO, again, thanks for that detail. We've seen a strong performance out of American Tower. Obviously, there's incremental investor demand I guess, not just from REIT investors, but other income investors. How are you thinking about waiting for all the NOLs to expire. I know you addressed that a little bit earlier versus maybe getting ready to move a little bit quicker if things change over time? And paying a dividend as a C Corp. And then if you could comment on any potential interest in T-Mobile towers as well, that would be great.

Sure. Simon, I'll take the first couple of those and let Ben take the last one on T-Mobile. With regards to where we are as I mentioned in my comments, we expect to exhaust the net operating losses in about 2015, 2016 and would expect that no later than that date, we would convert to a REIT. Obviously, given the tax efficiency of the current structure as a REIT, we would benefit from not having to pay any taxes and would expect to take advantage of that at least in our current planning before we would become a taxpayer at the corporate level. With regards to doing that early, I think that's an evaluation we will continue to make on an ongoing basis and look at what we think the value of converting early is. As I mentioned, we've begun to do some of the preliminary work that would be necessary for us to do that and depending on kind of our forward view, we may choose to accelerate ahead of a 2015 or 2016 date or we may ultimately decide to stay as we're organized as a C Corp. With regards to paying a dividend before converting to a REIT, as we've talked about in the past, look, I think this is an opportunity for us to think about as we have historically, the allocation of capital. And to date, we spent about $2.7 billion returning cash to shareholders in the form of share purchases. And as we currently think about allocation of capital, that's our preference. However, we'll continue to entertain the opportunity of potentially translating that, transferring that return of cash to shareholders in the form of share purchases and may ultimately decide to do it in the form of a dividend. But I think therein lies a significant amount of flexibility. So as we think about flexibility and allocation of capital, the flexibility of being able to choose at this point whether to pay a dividend or not and having the NOL covered, we think is a valuable asset in addition, as I talked about in my comments, having a significant amount of availability under a revolver, either pursue share purchases or acquisition. I think we've got a tremendous amount of flexibility and we'll continue to evaluate that as we go.

Just to punctuate one thing, I think, we think the outside, when we used the NOLs, probably 4 years and we think that's the most efficient structure, as Jay mentioned, but we've got a lot of flexibility and we don't want to give that up casually. So we're going to think very we carefully about how we do that. Simon, you asked about the T-Mobile towers. I think we've all been reading the same press reports and I understand that potentially, there's a consideration of them coming back on the market. You would expect us to be interested in taking a look at the asset. We certainly expect to do that, but I will tell you, we will be very disciplined about how we think about the value of the asset. We've got a lot on our plate. We are extremely excited as I mentioned in my remarks, about the growth prospects we have in front of us as a company, really positioned for the future and so we'll certainly take a look at any tower asset out there including this one, but I would expect us to be pretty disciplined in our review.

And our next question comes from the line of David Barden with Bank of America.

Just 2 things, if I could. First, just with respect to kind of where the leverage is now, Jay, on the business, I think if this has been a year or a year and a half ago, you'd probably continue to talk about de-leveraging being a priority. If you could kind of revisit kind of where you stand in that context now. And then maybe, Ben, AT&T, we just ended the call where they talked about now that the T-Mobile deal's off the table, they're going to restart a cell-splitting exercise and a DAS initiative that they intend to fund into 2012. I was wondering, based on your agreement with AT&T, how do -- under what circumstances can you monetize those kinds of new spending from AT&T and have you already been approached by them?

Sure, Dave, on the first question around leverage. We've talked about our target as being 4x to 6x and the great benefit we have in this business is that it de-leverages very quickly given the organic growth in the assets. And given our view of the acceleration of growth relative to traditional towers that we expect around NextG, that's going to be increasing the speed at which we would expect a normal course of the balance sheet to de-lever. So I think we'll continue to operate in the target. I think that this transaction that we just did illustrates the value of the flexibility that we created by running a little bit lower leverage and operating at the midpoint of our target range. So we're approximately going towards the end of 2011, we had approximately 5 turns of leverage and we spent a lot of time talking about our target leverage of potentially being willing to go up to 6x for the right asset. And as we looked at these 2 assets that became available in the back half of 2011, we were able to invest $1.5 billion in assets we think are growth enhancing, strategic and very important to the next generation of wireless. We were able to do that without issuing a single share of stock. And so we look at the value of the flexibility and would say about these acquisitions this is exactly why we were operating the balance sheet that we were. I would further say this is why I am excited about having $1 billion revolver because I think the revolver, which we expect to have a 5-year term, obviously I'll expect a balance sheet and would expect the normal course of the balance sheet will de-lever some over time, not through the pay down of debt but through a growth in EBITDA as we move back towards target, the middle part of the target of the range, we'll have a revolver there that's available for us to again, take advantage and be strategic when the right asset or opportunity is available to us. So I think as I mentioned, we'd expect that if we borrowed the growth in EBITDA at about 5x, there's $400 million of capacity during the year and investing the cash flows, another $800 million, so in a normal course, that's $1.2 billion to invest, but certainly wouldn't want to eliminate the possibility that we operate at the high end of that range for the right asset or the right opportunity.

Dave, let me take your question around cell splitting and AT&T's comments on their call this morning around creating more capacity within their network. Cell splitting, as you know, is just that. It's utilizing a new site and reducing the size of the cell that a prior site was covering. And so certainly, with the top 72% of our towers in the top 100 markets and significantly more than any of our peers, cell splitting and capacity challenges occur where population density is the greatest. And so we certainly expect to be working actively with our customer AT&T on accommodating their needs to split cells and we expect to have significant numbers of sites, in fact, many of them already, that would accommodate that type of activity around cell splitting. And so we would expect to see some activity going forward in that regard. Obviously, it's just January so it's a little bit early to put that into any kind of guidance or outlook, but you can bet we'll be very actively in those conversations and that fits right into the other conversation we were just having around about DAS systems and I believe that they actually mentioned DAS as a technology and architecture they're pursuing. We already do business with AT&T at the DAS level and would expect that again, as I mentioned in my remarks, DAS will play an increasingly meaningful role in helping AT&T and all the carriers meet the capacity challenges in these dense urban environments or other places where a macro tower site won't provide the capacity that's required. And just let me expand on that just a moment. Because having been in this DAS business now for about 7 years, there was a time when it was very challenging to profile the leasing opportunity for a DAS system because a lot of these areas had what we would all term as sort of minimal or substandard coverage, voice coverage, from a traditional tower site. Well obviously, that standard, maybe 5 or 6 years ago, of what you potentially needed to hold a voice call, is just wholly inadequate today as we are all burdening these networks with broadband Internet expectations. And that is really why now you've seen this small-cell site architecture really come into the forefront and be a technology that is widely accepted and adopted. And it's really demand based. It's the fact that the capacity challenges and the demand on the networks have really come to this architecture and made it now a very attractive solution. Whereas before, 5 or 7 years ago, we didn't have these capacity challenges typically on a network and so notwithstanding the technology that was there as an opportunity, the lease-up opportunity was more elongated or difficult to underwrite. So anyway, happy to answer that and appreciated obviously, AT&T's comments this morning on the capacity needs.

And our next question comes from the line of Jason Armstrong with Goldman Sachs.

Maybe first question just going back to -- the potential portfolios that might be out there, whether it's T-Mo or some of the private equity portfolios that may come up for grabs. The balance sheet, where it is now, understanding you've got revolver and the ability to lever incremental growth in EBITDA. It does seem like one of these deals potentially might require you to introduce equity and issue shares. I'm just wondering how you think through that. Is that something you're willing to do at this point? And then second question, we had talked on the third quarter call as it related to the 2012 outlook about Alltel and risk that they were going to de-commission, or Verizon was going to de-commission a substantial number of cell sites and I'm just wondering as we start to get into 2012, how that's tracking relative to the plan you laid out?

Sure, Jason, I'll take the first one. I'll just say we'll be very disciplined. We're pretty proud of our shares. You've seen what we've done to take out 1/3 of the company over the last several years and we don't issue shares casually and so we'll be very disciplined in our review of any transaction that would require us to issue shares.

On your second question, Jason, around churn. As I noted last quarter, we expect the churn in 2012 if you counted number of tenants, to be up about 10% over 2011. That increase was attributable as we mentioned, largely to Alltel. It's almost -- it's 70% loaded in the front half of 2012 and 30% in the back half of the year and the split in that first half is almost even. So higher churn in the first 2 quarters of this year and then in the back half, we're currently expecting significantly less churn and as we sit here today, we think it's on track for what we talked about last quarter.

And our next question comes from the line of Rick Prentiss with Raymond James. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: Thank you very much for transparency, AFFO, calculated the same way as American Tower. What a concept, to have one number exactly the same way so we all can do evaluation works, so thank you very much for that. Second, just to dig into some of the details on NextG, Ben, I think in your comments, you mentioned that the $50 million annual run rate on the gross margin side, the press release talked about $40 million and then another $10 million under construction. When does that $10 million come in?

Yes, the vast majority of that will be over the first 12 months of ownership. In fact, potentially all of it in the first 12 months of ownership and that number obviously doesn't account for any additional business or leasing that you might expect. So that's just purely contracted. So we're having to swag the number a little bit here, but that's about as close as we can peg it. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: Okay. And then you mentioned the $17 million G&A, no material synergies until 2013. And then you mentioned that the adjusted or the EBITDA impact could be 5x to 6x the current level in 5 years, was that referring to like the $40 million that you have currently less the $17 million? Just trying to gauge what you're trying to signal to us there.

Everybody's got to have a goal and we've got some pretty tall goals around here for this asset and so, if you come off the $33 million sort of run rate to start with, if you will, in terms of contracted less the full boat of G&A, could we see a business that's 5 to 6x bigger than that in 5 years? That's our expectation and certainly, our aspirational goal. And I will further say that I've not ever seen an opportunity in this industry where an asset that is in our case, 5% of the enterprise value of the company, could potentially, if you reverse engineer what I just said about growth, could potentially be well outside its size relative to contribution to growth. Many multiples of its relative size in terms of contribution to growth. And so we -- it's again -- it's incredibly analogous. The more time we spend on this, the more similar it feels and the economics, the more similar they feel to the original tower portfolios we acquired in 1999 where obviously, the carrier built sites in the major cities, have proven up over the last 12 years to be the most valuable and where revenue on those sites for example, just as we're revisiting history here, have more than tripled over the last 10 to 12 years. So again, we have high expectations and that's what that came from. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: Right. And also in the original press release when you talked about the acquisition, you mentioned that you thought it would be neutral to AFFO per share initially, then obviously become quite accretive. In the press release, you also mentioned I think, $60 million in incremental interest expense from the new facility. Just trying to gauge what are you thinking as far as NextG itself as far as AFFO per share in 2012?

Yes. I think it will be -- Rick, I think it will be about a push, still. The numbers have been mentioned in the first 12 months of about $33 million of adjusted EBITDA and that's about what the interest costs will be on that component. The whole number that we gave you there includes the impact of refinancing the existing credit facilities, the money that we're raising for WCP and a little extra funds that we'll have left over. So I think we're trying to help you with a couple of different numbers including where interest expense will be for the full year '12 if we're right about guessing on closing dates for the various acquisitions and closing dates on the debt. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: So that $60 million included the assumption from Wireless Capital Partners?

That's right, and maybe just to be -- put a finer point on it, we're still saying we think it's a push in the first 12 months for NextG relative to the cost of the money. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: That helps a lot. And then another, just a logical question, when you mentioned Wireless Capital Partners, you said that the cash before interest expense would be the $42 million. Where's that going to get put? Is that going into revenue? Is that going into cost reductions? How should we think about where that will come through the financial statements? .

Well, ultimately it will fall down to AFFO. And where it exactly falls above adjusted EBITDA, I think we're still working through exactly what that will look like and as I think after close, we'll take you through it. Richard H. Prentiss - Raymond James & Associates, Inc., Research Division: Okay, and then final question, T-Mobile, you mentioned you're starting to see some activity there. I assume that guidance for 2012 did not assume -- kind of caught a lot of people off guard, them throwing in the towel that quickly, any kind of renewed activity from T-Mobile?

We did not include that. A vast majority of the activity we have on our outlook is from AT&T, Verizon and Sprint. We would've had some in there for T-Mobile.

And our next question comes from the line of Kevin Smithen with Macquarie Capital.

I think you mentioned in the past that you have over $300 million in annual ground lease expense. You already own considerably more land than your competitors. I wonder how do you view ground lease or other land purchase opportunities versus buying tower or additional DAS assets. And will the pace of land acquisitions increase over the next year given attractive credit markets?

Sure, Kevin, I'll take that. You are right, we do have approximately $300 million a year of ground lease expense and I would divide that into basically 2 categories. One of the activities, which we've obviously spent enormous amount of time on in the 11,000 transactions that I've talked about thus far in securing the portfolio. In 2007, we were less than 20% owned in terms of sites and a much lower percentage of gross margin that was on site that we had greater than 30 years. So we both have focused virtually all of our activity on ground leases that have less than 20 years remaining on them. And that activity would have in it a component of a mark-to-market rate on those ground leases, whether we were purchasing them or extending the ground lease. And the purchases have largely offset any rental increase that we've seen from the ground leases as we've renewed them. I think the majority of that or a lot of that is through the system now and so most of the activity from this point forward and as we think about the future, the majority of the activity that we'll be doing will be purely a financial test around do we want the liability off balance sheet in the form of a ground lease because we're able to finance it at a lower cost with the landlord or do we prefer it on the balance sheet because we're able to achieve a lower cost of capital using our balance sheet to acquire the property? And I think more and more, as we go forward, we'll be thinking about our land purchases in that context and utilizing the lowest cost of capital to acquire them because we'll have already secured the land leases for such a long period of time. In terms of pace, I think you can expect for the next 4 to 5 years, we're probably going to continue at the pace that we're on. It has great operational benefits beyond the financial benefits to have long-term leases and improve the lease structure and own land. And so it's worth facilitating customers getting on sites and customers are making decisions about where to allocate their capital to make the quickest improvement in their network. We know that land ownership and long-term leases help that and so, I think there are some operational benefit to it. I think we'd probably stay on this pace for the next 4 to 5 years and then after that, it probably comes down and we're just purely making a financial decision.

Your next question comes from the line of James Ratcliffe with Barclays Capital.

Just 2 if I could. First of all, did I understand you to say that the WCP acquisition would be accretive to the growth rate or accretive to growth? And in general, can you talk about the relative appeal of land assets under other tower company towers versus under carrier towers? And just secondly, again, philosophically, wondering if you could comment on the sort of debate between what are more appealing acquisition candidate assets, towers that were originally built for carrier use or those who were purpose-built for Co-lo?

On the first one, James, we believe it will be both accretive to ultimately AFFO per share which is how we evaluate everything. I think over time, you will also find that it will be accretive to our growth rate as we go through the process of applying the expertise that we have, that we complied to our own portfolio around extensions and purchasing the land. On a relative appeal standpoint, you've got to look at the underlying assets and the underlying towers and what the tenancy of those towers are and I would say, in terms of looking at that, that's one of the considerations that we make as we think about owning land of any third party towers is, who are the tenants installed on that tower's -- on the tower, as well as the location of the asset. It's not too dissimilar from the analysis that we've done under tower portfolios for a long period of time.

I would just add on the other activity around purchasing land under other people's towers. Obviously, we've done that now, in the WCP transaction as it will close. We've also seen public announcements where the Unison, the 2 large portfolios that were acquired over time by Unison have now traded to other tower companies. We are certainly comfortable owning land under other people's towers. We're sort of in the landlord business. That's what we do for a living and there's not much difference between whether you own the steel on the tower. Obviously, there's a revenue opportunity as we've certainly described our core business in terms of growth but at the right price, it's a financial transaction and to ultimately own and underwrite the value of that site through ownership of the ground and we certainly would expect to do that over time. Obviously, this one transaction puts us in that business. Others have made that decision already as I mentioned and we would expect to continue that as one of the many opportunities we have to allocate capital, but it will be purely on a discretionary, sort of pure financial decision to see what's the highest and best use of that capital. And I guess, James, your third question was on purpose-built towers?

Yes.

Would we prefer to own towers built by the carriers originally. And I think, James, this comes down to as we've seen over time, what ultimately determines the value of tower assets is the location and the need. And so, whether a carrier originally built it or it's built by a company whose out building spec towers, ultimately the value of those towers is determined by the location and the need. We've done incredibly well with towers that were originally built by Bell Atlantic Mobile and BellSouth and other carriers. We've also done very well with towers that we built a long time ago. So I think I wouldn't necessary draw a distinction in terms of preferring one over another. It just comes down to evaluating price, the location and then what we believe the demand would be. And as Ben mentioned earlier, at that point, once you've evaluated those things, and we're pretty disciplined on the price because we know we have an alternative, we can buy the towers that we already own in the form of share purchases or pursue a third-party tower opportunity.

And our next question comes from the line of Jonathan Atkin with RBC Capital Markets.

I'm interested in just the -- you commented on the 4 national carriers. Any commentary on other carriers such as Clearwire in terms of the pace of leasing or I guess in Clearwire's case, amendments. And then with respect to the NextG growth targets over the next many years, was that an organic growth through just lease-up or was that through assets expansion?

On the first question, Jon, our outlook for 2012 does not include hardly any benefits from folks like Clearwire or others that may have spectrum but not -- have not been deploying. And so as we get into calendar year 2012, we'll just have to see how some of those other carriers come. As I mentioned, virtually all of the growth that we've put in the outlook comes from Verizon, AT&T and Sprint.

We're certainly encouraged by what we see with Clearwire and as they do their 4G LTE overlay and then also prospectively go back and do some infill in markets, we have expectations hopefully that we'll see some activity from them later in the year. And then Jon, on NextG in terms of growth in the aspirational targets I threw out, obviously, that's a sort of a business case. So that assumes co-location on existing networks as well as growth with building additional networks that we would capture in the marketplace. So then there's a capital component that we're not going to get into on this call, it's too early to do that, but suffice it to say that the capital deployed in this business, not unlike the early days of the towers business, if you get it right and we think we will, based on our current experience already is that these come at very high returns far in excess of any kind of hurdle rates that you want to impose on it. And so hence, the reason we did the transaction. We think it's accretive to not only growth but accretive to value.

And as you make further investments in that business segment, is that going to be weighted more towards indoor or outdoor?

I think you'll see us do both. The indoor is very attractive but each individual one is pretty small. So you've got to do a lot of them obviously, to make a meaningful difference and we are doing a lot of them, and we'll continue to. I mean, virtually every sports arena or public venue and ultimately, class A office buildings, we think are ultimately going to have a shared wireless infrastructure component to them and we got a long way to go in America at getting that done. And there's room from other players beyond ourselves, obviously. And so as that market continues to develop, we will continue have a very active indoor presence but we will also pursue outdoor of zip codes as we call them, neighborhoods and urban centers and things that we've described. I think it's really a -- it's both. You'll have outdoor and indoor, both attempting to meet the same capacity challenge that's uniform out there.

And then finally, internationally, if you could maybe give us an update on next generation broadband in Australia and how you feel about entering new international markets that some of your peers have been doing?

Yes, we are really pleased with Australia. It's too early to really see it much in the financial results but there's a lot going on right now down there. Not only the national broadband network that is sponsored by the government in terms of bringing broadband, fiber and wireless connectivity to essentially 100% of the population. So there's going to be leasing and build opportunities for us there. But there's also, for the very same reasons we see it here, renewed commitment on the part of the carriers to add capacity and improve networks in Australia. And I was just down there a couple of months ago and we have very high expectations. I won't put out a similar aspirational goal there that's in terms of guidance or anything but you should expect considerable more growth over the next 3 years than you've seen in the last 3 years in Australia and potentially, some investment opportunities down there as well. And it wouldn't surprise me at all to see us launch a DAS business in Australia. I think that's something that's going to make a lot of sense to us down the road. We will continue to evaluate other international markets. We've looked at a couple things and some friends in Western Europe recently. Don't really like what we see there in terms of the industry dynamics so much. We continue to believe the U.S. and the Australian market, which is almost identical to the U.S. in terms of market character, is the fastest-growing, most profitable market for the carriers and where the consumer demand for data demand, data is driving the capacity needs that's driving frankly, these businesses, our business in the U.S. And so, we think at the price that we see in the market today, this is the most attractive investment for us but others can have different views. We're going to continue to work on what we've got on our plate, and we're pretty excited about it.

And our next question comes from the line of Clay Moran with Benchmark Company.

A couple of questions. One thing I didn't follow was how the land purchase enhances the AFFO growth rate. So if you could, Jay, maybe explain that again. And then over on NextG, could you just tell us what the current customer mix is? Maybe break it down by the national versus other and then what the 2011 revenue growth rate was.

Sure, Clay, on your first question. As we have experienced in our own portfolio, as ground leases approach their term end date and you go to renegotiate those leases, you pay whatever is market as you enter into a new lease on the property. And so we evaluated the leases and our view is that there is an increase coming in the rental rates that are going to be paid underneath those ground leases. Thus, an increase in the growth rate.

On NextG, Clay, I'm not going get into specifically breaking out each individual revenue component of NextG. The early days of some of the networks were built in urban centers for some of the later rollouts, Metro PCS, Leap Wireless. The company today, NextG, does business with all of the major carriers in a significant way and we would expect that to grow materially over time with the lease-up opportunities that are resident for each of AT&T, Verizon and Sprint as well as new build opportunities for all of the major carriers including T-Mobile. So I think you'll see us a significant mix change. Today, it is not the majority of the revenue, it's not to the big 4, but over time, I think you'll see it change and probably flip such that the majority of the revenue going forward in my 5-year aspirational goal, I think it will look a lot more like the traditional tower portfolio that we have as the capacity needs are most acute in these large 4 carriers.

And our next question comes from the line of Jonathan Schildkraut with Evercore Partners.

Just 2 questions. First on the DAS business, driving a little deeper here. I just want to understand maybe some of the non-cash elements relative to the traditional towers business. Also, I was under the impression that carriers contribute to the CapEx of the DAS system build-outs and wondering if that's accurate in terms of NextG's business. Separately, on the recent refresh on your credit facility, I was wondering if there were any net debt to leverage tests. I had read somewhere there was a 6x net debt to leverage test that dropped down to 5.5x in 2014. I didn't know if that was preliminary or just incorrect?

Jonathan, I think on your first question, just to be really clear, we threw around a couple of numbers to span what's going into the NextG numbers. As we talk about what we think site rental gross margin of $50 million and then obviously, the G&A, that's all cash received. And so, the timing on that, I don't if there's anything more to say about that, but it would continue in perpetuity. In terms of how the carriers pay for this and how we structure these, as Ben mentioned, similar to the tower portfolio, when a tenant comes to the site, oftentimes, they do make a contribution to the CapEx or subsidize the cost of expanding the network to hold them and over time, as this plays out and gets larger scale, we'll see how that goes. That's probably the 2, I will say there around pricing. Each system is different, but it's generally pretty similar to what you've seen historically in the tower business. I think specifically on the terms of the credit facility, we'll wait until that closes before I go into great detail about that. But it doesn't have an impact on changing our targeted leverage level of 4x to 6x as I talked about before and we would not expect to do anything that would limit our flexibility to be anything other than what we've had over the last 5 to 7 years as we structure the capital structure.

And our next question comes from the line of Batya Levi with UBS.

I just had a follow-up question on your outlook. I believe when you first provided 2012, you suggested that the activity you are seeing from Sprint at that time was included in the outlook and I think in 4Q, Sprint increased some activity and it's ongoing now. So is there a scenario where you could increase the outlook based on just coming from Sprint or is all of the MLA already accounted for? Also just one question on the straight-line impact that you guided for first Q. I think that goes up or is it a trend of deceleration? What will be a driver of that?

Yes, on the first question if Sprint were to go out and lease more sites or do greater amounts of activity then we could see potentially, a change. One thing I would point out is that we saw the actual pickup in Sprint activity dating all the way back to the second quarter of 2011. So I think we saw it earlier than others did and the comments that are making -- that have been made more publicly recently are really commensurate with what -- a level of activity that we've seen 4, 6-plus months from Sprint. And so I don't -- as we've looked at our outlook and reaffirmed it for 2012, I don't think we've seen any of that. But to the extent that they were to change their plans or processes or deploy more sites, then we could potentially see the benefit of that in our outlook. When you're looking at the differences between the contribution of cash receipts and reported revenues, there's going to be some movement quarter to quarter just as leases renew a normal course. There's not anything significant that's happening in the first quarter relative to the past quarters. I think broadly, as you look at our revenue growth, our outlook for 2012, it's got revenue growth of approximately $85 million on a reported basis. And on a cash basis, that's going to be about $111 million. So growth on a cash basis is about 7%, roughly, but I think the ins and outs quarter-to-quarter, they're going to move just a little bit, but I think I'd step back and look at it over the course of the year and tell you I think that the amount of contributions from non-cash revenues is actually going to decline year-over-year to the tune of about $25 million as we near that crossover point in 2015, as I talked about in my comments.

And our next question comes from the line of Brett Feldman with Deutsche Bank.

Just one more question here around the DAS business. You talked about the work you've done with your land leases in order to secure long-term ownership or control under towers. You can't really own whatever would be considered land's rights of way in the DAS business, so what type of statistics can you provide with regards to what NextG has in terms of long-term access or exclusivities around the rights of way?

Brett, that's a great question. And it's one of the differences and I think, a favorable difference actually, DAS versus the tower work that we've done on the ground. To operate a DAS network in most jurisdictions, you're organized and have competitive local exchange carrier status, which gives you rights, certain contractual rights to access public rights of way and utility poles and easements. And so there's a established practice for what the pole attachment payments, or think of it as ground rent, are in those in markets and it's got to be consistently applied among really all users. For example, a cable company in a market. And so, it's a very sort of well trodden legal standard there of what gives us the access to those sites over a long period of time at very predictable expenses or payments. And so I don't think you have a circumstance here in the DAS business where you can be potentially, have the economics eroded over time because of what's happening on the ground, which obviously is a concern in the tower business and why we've spent the last 5 years working on the ground portfolio as we have. I really don't think you have that here. And in fact, a much more orderly and disciplined process of accessing the public right of way as a competitive local exchange carrier and we think that's pretty well established and a benefit of the business.

Are these agreements or these access to right of way, are they indefinite? Because a land lease, it might be 50 years, but still there's a termination on it?

No, these are definitely long term.

Maybe, operator, we've gone past the hour, but maybe we'll take two more questions and then end.

Our final question comes from the line of Tim Horan with Oppenheimer. Timothy K. Horan - Oppenheimer & Co. Inc., Research Division: I have 2 basic questions. Your margins were up a lot the last couple of years, but just looking at the FFO versus AMT, you're still a bit below those guys. Do you think there's much room for expansion over the longer term here and kind of what drives that. And then secondly, just listened to AT&T's conference call and their issues with spectrum and trying to move the networks over. Maybe at a high-level, what percentage of T and Verizon, what percentage of the spectrum do they own? Do you actually think they'd build out at this point? And they did mention shutting down a 3G network to free up capacity, spectrum capacity, how do you think that would play out and affect you?

On your first question around margin, we would expect those to continue to go up in the absence of acquisition activity. As we've seen over time, we're able to increase the margins that the gross -- site rental gross margin line just considering the growth in revenue against growth in expenses. Those have been rising at about 150 to 200 basis points per annum. As we go down to the AFFO level, we certainly don't expect that we'll lose any of that with regards to G&A or other expenses. And so I would expect you will continue to see those margins expand considerably over time. The one exception to that is obviously, if we buy an asset that has lower margins than the existing base, it will dilute some of that growth. But NextG being a good example of that, that would be "dilutive" short-term to the margins. But over time, we think it's actually margin and growth enhancing. So I think it will come down to the mix, and what do we -- how do we allocate capital, and what percentage of that ultimately gets allocated towards assets. But in a normal course, if you just think about organic leasing, I would expect those margins to continue to expand enough to enjoy the high incremental margins we've seen over the last several years.

With spectrum, I think the best way to handle your spectrum question is we're not in the habit of really commenting on specifically spectrum as it relates to individual customers. But I think broadly, as you think about our business, it's important to remember that there are spectrum challenges and constraints really in all of the carriers, whether it's a capital constraint on build-out or utilization constraint. And so it's -- they are constantly looking for a cost effective way to utilize the spectrum or reuse the spectrum through cell splitting to get more value out of that spectrum asset. And so I think you're going to continue to see more and more reuse of spectrum as we all continue to put more demands on the network and you'll probably see some -- obviously, the DAS component of that become meaningful overtime and other offloading strategies like Wi-Fi even in stationary locations. So I would not get into individually on, with respect to each customer's situation, but obviously, the capacity challenges that we're all placing on these networks is making it a significant burden on the carriers today. I think we've got time for one more, and I'll say up front I appreciate everybody hanging with us on the call for 1 hour and 20 minutes this morning.

Thank you. And our final question comes from the line of Michael Rollins with Citi Investment Research.

Just 2 real quick. So first, as we're thinking about internal growth for the company. It looks like 2011, I think you talked a little bit about the reasons why before, is a better year -- sorry, 2012 would be a better year than 2011? And how would you rate when you look at the numbers, what's going to come from upgrades versus actually new tower co-locations? Upgrades meaning amendments. And just a follow-up question on the AFFO definition and again, thanks for all that detail. Why wouldn't you subtract out preferred dividends just from the calculations, since that's a cost of financing that's used in your company more like debt than an equity dividend?

Sure, Mike. On your first question, we do expect slightly better internal growth certainly on a cash basis in 2012. And I think most of that is related to the timing of the Sprint Network Vision. We've got about 6 months of that during 2011 and our outlook implies that we're going to have a full 12 months of that activity in 2012. So I think Sprint would be the main change if you're comparing those 2 years. And with regards to amendment activity versus new lease activity, if you're calculating it on a revenue basis, amendments continue to make up in the neighborhood of 70% of the total activity on a dollar basis. Obviously, if it was account basis, it would be greater than that, but on a dollar basis it's making up about 70% of the growth there. On your second question around preferred dividends, I guess I would say it's a bit of a moot point at this point because we've just converted our 6.25% preferred. So that's now gone. But honestly, the spirit of what we were doing was to simply take exactly what American Tower was doing and report our company on the exact same basis for comparability purposes. I think in the future, if we were to ever to do a security and had a similar cash dividend, then we could look at should the industry adjust the metric? And I'd be open to doing that, but the logic simply was, it was going away anyway and so I thought from a comparability standpoint, the best thing to do was just literally do exactly what our other peer was doing. And hopefully, that becomes the industry metric.

Mike, just to come back to your first question, just to add my 2 cents. I think it's January, still. So it's very early for us to be looking out for the year and see. But I think you can see beginnings of evidence that you could have more cell splitting in 2012 than you had in 2011. I don't know that that makes a material difference in our performance in any given year. Obviously, an activity, as you well know that starts in a year and carries forward, at best, you're only going to get a half year convention in that in your financial results. And so, we'll have to see, but ending run rate is always very important. And so we're very pleased with what we see for 2012. I want to thank everybody for bearing with us on this long-winded call today. We just felt like spending $1.5 billion since we last spoke to you deserved a little more explanation than 60 minutes would contain. So I appreciate you bearing with us. We're very excited for how we've positioned the company going forward. We've got a lot of work to do, and we look forward to speaking with you on the next call. Thanks again.

Ladies and gentlemen, this concludes the Crown Castle International Q4 Earnings Conference Call. Thank you for your participation. If you would like to listen to a replay of today's conference, please dial 1(800) 406-7325 or (303) 590-3030, and enter the access code of 4501567. Thank you, and you may now disconnect.