SBA Communications Corporation (SBAC) Q4 2007 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen, and thank you for standing-by. Welcome to the SBA Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later we would conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference to our host and Vice President of Capital Markets, Ms. Pam Kline. Please go ahead.

Thank you for joining us this morning for SBA's fourth quarter 2007 earnings conference call. Here with me to today are Jeff Stoops, our President and Chief Executive Officer; Kurt Bagwell, our Chief Operating Officer; and Tony Macaione, our Chief Financial Officer. Before we get started, I need to get the standard SEC disclosure out. Some of the information we will discuss on this call is forward-looking, including, but not limited to any guidance for 2008 and beyond. These forward-looking statements may be affected by the risks and uncertainties in our business. Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in last night's press release and our SEC filings, particularly those set forth in our Form 10-K for the fiscal year ended December 31, 2006, and our quarterly reports on Form 10-Q, which documents are publicly available. These factors and others have affected historical results, may affect future results, and may cause future results to differ materially from those expressed in any forward-looking statement we may make. Our statements are as of today, February 22, 2008, and we have no obligation to update any forward-looking statement we may make. Our comments will include non-GAAP financial measures as defined in Regulation G. The reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and the other information required by Regulation G, is included in our earnings press release, which has been posted on our website, www.sbasite.com. Tony, would you comment on our fourth quarter results, please?

Thanks Pam and good morning everyone. As you saw from our press release last night, our fourth quarter financial results were excellent. We move at the end or above our guidance to leasing revenues, tower cash flow and adjusted EBITDA, and exceeded the mid point of our guidance on equity free cash flow. Total revenues were $108.9 million, up 12.6% over the year earlier period. Site leasing revenues for the fourth quarter were $84.7 million, or 13.8% increase over the fourth quarter of 2006. This leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $62.9 million. Site leasing contributed 95.4% of our total segment operating profit in the fourth quarter. Total cash flow for the fourth quarter 2007 was $63.2 million or a 17.3% increase over the year earlier period. Total cash flow margin was 76.5%, up 170 basis points over the year earlier period. Our services revenue were $24.2 million compared to $22.3 million in the year earlier period. Services revenues were up 9% sequentially from the third quarter of 2007. Our services segment operating profit was $3 million compared to $2.6 million in the year earlier period. Services segment operating profit margins were 12.5% in the fourth quarter, up from 11.8% in the year earlier period. SG&A expenses for the fourth quarter were $11.9 million including non-cash compensation charges of $1.4 million. This compares to SG&A expense of $10.8 million in the year earlier period including non-cash compensation charges of $1.2 million and one-time AAT integration cost of 500,000. Fourth quarter SG&A expenses were negatively impacted by several one time items aggregating approximately 500,000. We expect quarterly cash SG&A expenses to be approximately $10 million for 2008. Other non-cash expenses in the fourth quarter included in other than temporary impairment charge of $15.6 million related to certain auction rate security investments we held at December 31st, 2007. As of December 31st, 2007, the company's short-term investments consisted of nine auction rate securities that had a par value of $70.7 million. Auctions associated with these investments have failed as a result of the lack of demand in the marketplace. The company had not been able to liquidate these securities at par as of December 31, 2007. As a result of the company's assessment of the number of factors including market conditions and the credit quality of serving these securities, the estimated fair vale of some of these investments no longer approximates their par value. Subsequent to December 31st, we sold at par value six of these auction rate securities, which totaled $40.9 million of the company's total par value of $70.7 million. Based on the subsequent sale, these six securities are carried at par value at December 31, 2007. The company still holds three auction rate securities with a par value of $29.8 million and a fair value as of December 31, 2007 of $14.2 million. And we continue to receive interest on these securities monthly. The three remaining auction rate securities are not backed by any CDOs or subprime related assets. They are issued and insured by monoline bond insurers. Given the current state of the credit market and the lack of demand in the marketplace or auction rate securities, we have discontinued purchasing these instruments and have restricted our cash investments to only those that are highly liquid and short-term in nature and a highly rated. Net loss during the fourth quarter was $28.9 million compared to a net loss of $24.3 million in the year earlier period. Net loss per share for the fourth quarter was $0.27 compared to net loss of $0.23 in the year earlier period. Excluding the $15.6 million non-cash impairment charge on the auction rate securities, our net loss per share would have been $0.13. Our weighted average shares outstanding for the quarter were 106 million. Adjusted EBITDA for the fourth quarter 2007, which excludes certain items such as non-cash leasing revenue and ground lease expense, non-cash compensation and a non-cash charge on our short-term investments was $56.1 million in the fourth quarter or an 18% increase over the year earlier period. Our adjusted eb1 margin was 52.5%, up from 50.4% margin in the year earlier period. Once again, equity free cash flow increased materially in the quarter, reflecting strong adjusted EBITDA growth. Equity free cash flow for the current period was $33.2 million, a 60% increase over the year earlier period. Equity free cash flow per share for the current period was $0.31 per share or 55% increase over the year earlier period. In the fourth quarter, we acquired 175 towers, built 20 towers and ended the year with 6,220 towers owned and the rights to manage approximately 4,500 additional or potential communication sites. Cash capital expenditures in the fourth quarter was $59.4 million, of which we spent $1.2 million on maintenance power CapEx, $1.9 million on augmentations and new builds and 500,000 on general corporate CapEx. We also spent $45.1 million of cash on acquisitions and earn-outs and $4.2 million on new tower builds and new build work-in-process. With respect to the land underneath our towers, we... in total, we spent $12 million in cash to buy land and easements and to extend ground lease terms. Our ground lease purchase program is going very well and we finished the year significantly ahead of plan, and spent a total of $34.1 million on this program in 2007. At this point, I will turn things over to Pam, who will provide you with an update on our liquidity position in capital structure.

Thanks, Tony. SBA ended the fourth quarter with $1.555 billion of commercial mortgage-backed pass-through certificates outstanding, $350 million of 0.375% convertible senior notes, $107.9 million of cash and restricted cash, and net debt of $1.8 billion. We issued 2.9 million shares of our stock in the third quarter, 2.6 million of which were for acquisitions; and our current share count at year end was 108.4 million. We did not repurchase any shares of our common stock in the fourth quarter and our Board authorization to do so expired December 31, 2007. The company's net debt to annualized adjusted EBITDA leverage ratio was 8.0 times at December 31, 2007. Our short-term invests of $55.1 million related to auction rate securities are not included in our calculation of liquidity or net debt, nor are the $40.9 million of cash proceeds we received post-year end, when we sold six of the auction rate securities, which on a pro forma basis would have reduced our leverage ratio below eight times. As of year end all of our debt was fixed rate with a weighted average cash keep on at 4.9%. Our fourth quarter cash interest coverage ratio adjusted EBITDA for net cash interest was a very strong 2.7 times compared to 2.0 times in the year earlier period. In January 2008, we obtained a $285 million senior secured revolving credit facility. This facility has a three year life and allows for borrowings to be used to build or buy towers or for ground lease buyouts. The amounts borrowed under this facility will accrue interest at LIBOR plus a margin, which ranges from 150 basis points to 300 basis points or at a Base Rate plus a margin that ranges from 50 basis points to 200 basis points. The spread to be paid on top of either the LIBOR or the Base Rate will be determined based on certain leverage level calculated at the borrower level. As of today approximately, $183 million is available under the facility of which $20 million has been drawn and is outstanding at a rate of LIBOR plus 150 basis points. On a pro forma basis, when you combine the $40.9 million of proceeds from the sale of the auction rate securities with cash and restricted cash at year-end, and the amount currently available under the current credit facility liquidity at December 31st, 2007 would have been approximately $312 million, which we believe puts us in a very strong position. Kurt, would you give us an update on operations?

Thanks Pam, and good morning. As you've heard through the tally of the numbers, the fourth quarter was solid for us at SBA. Our customers very busy with a variety of network build out, growth and enhancement activities and we feel we captured at least our fair share due to the excellent quality of our towers, their locations, and the hard work and diligence of our employee base. More specifically, our incremental tower leasing revenue signed in the quarter was similar to our very successful third quarter in terms of new leases and amendments. This was also our best net lease of course since the AAT acquisition would post AT&T, Cingular churn dropping back to normalized levels. During this time, rent of state farm and our average cash basis rents across all 15,429 leases in our portfolio is up 5% year-over-year to $1,807 per month. During the quarter, 72% of our leasing activity came from new leases while 28% came from amendments to existing installations. With strong activity on the amendment side is from technology overlays, backup tower, wireless backhaul, and other capacity and performance enhancing modifications on the tower and on the ground. We are currently at 2.5 tenants per tower, and this number has been relatively steady as we have continued to build and buy lower maturity towers with high available capacity and excellent growth characteristics. As it is typical at any time during the year and with fourth quarter being no exception, certain carriers are more active than others, but the combined activity level is continued to stay high. Our leasing backhaul is strong as we work through the first quarter of 2008, and we expect the year to get busier as it moves along, and overall to rival or be bigger than 2007. Our new tower build team completed 20 towers during the quarter; their strongest efforts since we restarted the program a couple of years ago and putting that to 61 completed for the year. New tower builds remains very competitive, but we have stayed disciplined with our side-by-side selection, modeling and approval process and our production has been steadily growing. We intend to increase annual new build production over the next several years. We also bought 175 towers during the quarter, which puts us at 612 towers acquired for the 2007 calendar year. The combined growth from these two initiatives put our year-end tower count at 6,220, an increase of 12% over the year ago period. We intend to continue this in 2008 with targeted portfolio growth of 5 to 10% from acquisitions and new builds. On the operational side of our tower portfolio, we continue to take advantage of our large scale. We have been able to successfully operate under a structure, where our expense ratios of personal, ground leases, repairs maintenance, and other cost drivers continues to improve. The percentage of our towers, which we own, are controlled more than 50 years; the underlying land grew to 23.3% as of December 31, contributing to our strong margin growth. We are confident in our ability to maintain a simple low cost structure that is steady and predictable. We expect tower cash flow and adjusted EBITDA margins to continue to grow. Lastly on the services side of our business, we finished off the year in good fashion with highest revenue and profit quarter of 2007. Revenue of $24 million was up 8%; and segment operating profit of $3 million was up 15% over the year earlier period. This capped off a typical seasonal year for services, where each quarter grew busier sequentially than we expect a similar pattern in 2008 for this segment of our business. At this point, I will turn the call over to Jeff.

Thanks Kurt and good morning everyone. We had a very good fourth quarter, and we are very pleased with the year as a whole. The year 2007 marked the fourth consecutive year of strong organic growth, portfolio growth and balance sheet improvement for SBA. The year played out as we predicted it would with strong carrier activity in the aggregate although not necessarily uniform among the various carriers. We saw more activity in the second half of the year than the first half, which bodes well for our 2008 financial results. We ended the year slightly ahead of expectations on organic leas up, ahead on services gross profit, well ahead on acquisitions and well ahead on ground lease purchases. These results drove our final adjusted EBITDA for the year to the highest in company history. I want to thank our customers and our employees for another very successful year. We think 2008 will also be a good year and similar to 2007 and that we expect to see a strong carrier activity in the aggregate providing us with solid lease up and solid services results. We expect to continue to add quality tower assets and purchase additional lands under our towers. We are progressing well on the acquisition front and feel very good about hitting our 5 to 10% portfolio growth goals. Our acquisition successes and out strong operational lease up in the fourth quarter gives us a good start in 2008; and as a result, we have increased our full year guidance for 2008. At this time, we are projecting another year of material growth in all key metrics, particularly growth in equity free cash flow per share, where we have established ourselves as the clear industry leader. There are a number of factors that we believe will drive continued strong organic growth. Data services from our customers continued to grow, driving carrier revenues and thus requiring additional network investment. There remains a large amount of AWS spectrum to be built including by a number of new market entrants. AT&T and T-Mobile are expected to be busy all year with UMTS upgrades. We expect material network activity out of Sprint although in what form we are quite not sure. Verizon is expected to stay steady. Additionally, Clearwire could turn out to be a positive factor for us later in the year if they resume network development at their early 2007 pace. We just saw this week the introduction of a number of all-you-can-eat voice plans that should require additional network capacity. And then there is the 700 megahertz spectrum option, the benefits from which will even begin to be recognized by the tower industry until 2009. All in all, we believe 2008 will be another good year for carrier activity our organic leasing growth at our services business. We are extremely well positioned to increase our tower portfolio materially again this year primarily for two reasons. First, our new credit facility gives us plenty of attractively priced capital. Second, we see many additional opportunities out there as we believe the current capital markets conditions are causing some, who have been sitting on the fence to decide to sell since our view on future carrier activity and operational growth of these assets remains very positive and we have the capital. We are eager to continue our investments in tower acquisitions when our internal rate of return requirements are met. We continue to see a number of quality high growth tower assets for sale at reasonable accretive prices that meet or exceed our return requirements. Accounting acquisitions transactions currently under contract, we are already over 35% of the way to the high end of our goal of 10% portfolio growth. Under current market prices and conditions, our models tell us that the best use of our discretionary capital is to continue to buy growth assets for cash to maximize future growth and equity free cash flow per share. We believe that this use of capital will produce superior growth and equity free cash flow compared to stock repurchases or acquisitions for stock although both of those uses would also produce good growth in equity free cash flow per share. We will continue to carefully monitor the market to make sure these priorities remain appropriate; and if our conclusions change, we have the ability to change our discretionary spending virtually immediately. We are excited about the future. We have successfully positioned SBA as a fast growth company with high quality assets in a very favorable wireless market. Our customers are very busy and expected to stay busy. We are executing well on our three part strategy of organic growth, portfolio growth, and capital structure management. We are achieving our goal of material growth and equity free cash flow per share. And as you can see from our increased 2008 outlook, we expect 2008 to be another good year for SBA. Tremetria, at this time, I think we are ready for questions. Question And Answer

[Operator Instructions]. We will take our first question from the line of Gray Powell with Wachovia. Please go ahead.

Hi guys, good morning.

Good morning.

Hey, just had a couple of quick questions. Has anything changed in your outlook for carrier activity overall, or was it mainly the upside in acquisition this quarter then to the upside in your 2008 guidance?

The increase in the guidance Gray is as a result of the operation lease up in the fourth quarter, which doesn't begin to hit the financials till the first or second quarter of 08. Now it's ahead of our expectations, and it was also ahead of the... also because of the acquisitions and where we are on that front. We are still at this point projecting lease operates at the same rate that we enjoyed overall in 2007.

Great. And can you just talk about the characteristic of some of the acquisitions you are making just in terms of like the tenants per tower and the cash flow margin?

Yes, we are still pursuing a wide variety of different types of assets, focusing primarily on the projected returns. But the towers, Gray, range from 2.5 to 3 tenant towers that we are buying for 13 times to one tenant towers that look just like new builds that we are buying over... for over 20 times that where price ranges that go from 3,000 a tower to up to $750,000 or more. So it's very much across the board. But I will give you our full year 2007 kind of averages. We bought towers throughout the entire year at a tower cash flow multiple run rate of 17 times, which we would think is about 15 times forward and at a price per tower of $538,000.

Okay. Well, great. Thank you very much.

Our next question is from the line of Brett Feldman with Lehman Brothers. Please go ahead.

Yes, thanks for taking the question. Just real quick and I apologize that you gave these data points; what's the total number of actual tenants you have in your tallies [ph] right now?

2.5.

That's the average. You know what the total is?

Yes, total tenant count?

Yes.

15,429.

Thanks. And then also in terms of same tower revenue growth in tower capital growth, you have those stats what they were in the fourth quarter?

Yes, if you take out the Cingular merger churn, revenue was 10% and tower cash flow was 13%.

Great, and then you mentioned the mix between new leases and augmentations, and it looks like it's getting closer to 70-30, I think historically been more 80-20. Are you seeing more... do you think that mix is going to be more representative of what's going to happen in 2008 especially when you consider all the business you are getting augmentation related work like the UMTS overlays, maybe some WiMAX stuff? And if that is the case, are you finding that the augmentations are maybe more revenue intensive than they have historically been?

We definitely see more augmentations in volume, Brett. Because we think AT&T and T-Mobile in particular will be very busy all year with UMTS overlays. Now we also think we will see a lot of brand new tendencies from a number of players not the least of which will be Metro and Leap, who are only generally new kind of the course in there markets. So whether it changes... whether one of those offsets the other probably don't have a good guess for that right now. But we do expect good augmentation and amendment activity for at least the next several years. And the amount of dollars that we get, it varies; I mean it ranges from the low of 3 to 400 to add a couple of lines over a thousand depending on what's being done out of sight. I am not sure I can generalize for you there.

Okay. And then one last question on different subject; I think you said that your ability to repurchase shares actually expired at the end of the year, and while it's clear that your primary interest is on acquisition as opposed to buybacks, why not just have another authorization any how? I know you can't use the revolver, but you can still use your cash flow from operations if you thought it's very opportunistic.

Yes, we could and it's just the board authorization that we can go to our Board and get at any time if we have good reason and your point is well taken.

Okay. Thank you for taking the questions.

Our next question is from the line of Clay Moran with Stanford Group. Please go ahead.

Good morning. Two questions on the increase in the EBITDA guidance; can you just confirm that about half of that would be from organic sources and half from acquisitions. And then you talked about the credit markets and your... how you're viewing tower acquisitions, and that could change depending on what happens with the credits markets going forward. But can you just give a little more color sort of on how you are looking at it based on what you know today? Do you see this as a real opportunity to scoop up some assets possibly at cheaper prices or are you already a little bit more cautious than you were a year ago? Thanks.

Yes, I think it is... your first question, Clay, it is roughly 50-50, maybe 40-60 one way or the other of which I am not sure, but that's close. On the acquisitions, we are... we have... the way we've handled the change in credit markets, yes, we do believe that others will no be as well positioned as we will to access capital and take advantage of the traditionally mom and pop market at least the folks who have traditionally competed against us there. And the way we've kind of worked pricing as we have ticked up our rate of return requirements. And there is a... there are two schools of thoughts as to whether you wait for lower prices or whether you tick up your return requirements and as long as the deals continue to meet those, you move forward, because you really don't know what the future would bring and you are buying stuff that is at or about of where you wanted to be from a return requirement. And we are currently in that ladder camp right now. So we have to cup our return requirements a little bit, which is caused us to probably get better deals than, and we would probably see that as higher growth potentially even though the tower cash flow multiples may be similar to what we pay the year ago, but our projected returns are higher. So that's how we are moving forward and trying to work our way through the current environment.

Our next question is from the line of Rick Prentiss with Raymond James. Please go ahead. Richard Prentiss - Raymond James & Associates, Inc.: Thanks, good morning guys.

Hey Rick. Richard Prentiss - Raymond James & Associates, Inc.: Hey, couple of quick questions for you; one I think for Tony. Did I hear you right on the one timers that actually was a negative $0.5 million impact on EBITDA in the fourth quarter, and is there any one timers forecast for the first quarter; first question?

Yes, Rick, this is Tony. There was a $0.5 million in the aggregate and there was a no one individual that I would consider that materials. There were several items that net-net was a negative 500,000. And no, there were not any one timers that were projecting for the first quarter guidance. Richard Prentiss - Raymond James & Associates, Inc.: Okay, and then on the short-term investment item, given that you guys have fell to [ph] six at the end of the year, but kept three. Should we assume that since these things are still bearing interest, you will not look at to sell these at a loss even though you took the fair market right on it, you would get out of it, but only as they get closer to parse that kind of a thought process?

That's the current thought process, and we will... one of things that we did and we have taken these things down from $120 million at the end of Q3 to now $29 million, so we have kind of boxed this in. So we are not happy with the $29 million that we still are holding. But it's small enough number now, where we don't have any need to sell at a loss, so we will see what the market does. Richard Prentiss - Raymond James & Associates, Inc.: Exactly, okay. And then Jeff, as you think about leverage, you guys are eight times excluding that short-term stuff. Now that you have gotten some of that cash back little bit less than eight times. Where do you look at as far as kind of your target leverage range and your thoughts on where it might go?

I think we are comfortable at these levels given what we are doing with our capital. I mean a year ago, Rick, I might have been ready to debut a nine times target leverage level, but in light of the credit market conditions, we are comfortable and going to stick with our six to eight and still comfortable at around the high end of that at eight times. Richard Prentiss - Raymond James & Associates, Inc.: Fair, and then there is a lot of buzz, a week or two or three weeks ago about industry consolidation. How do you think about industry consolidation within the tower space? When does it make sense, does it make sense, is scale important? How do you guys think about the potential for a larger industry consolidation within the tower group?

Well, it's certainly possible. Obviously, there will be a lot of SG&A synergies that could come of out of it. I guess the way we think about it is we feel like we are producing superior returns on our independent path through our ability to materially grow equity free cash flow per share at the highest rate in the industry. And would our views change on that? Maybe other things change, but it continues to be and it always has been really a pure financial decision. How you're going to make the most money for your shareholders? Because unlike in other industries, there is really is no strategic reason why consolidation should occur in our industry. Richard Prentiss - Raymond James & Associates, Inc.: Right.

It's all financial. Richard Prentiss - Raymond James & Associates, Inc.: Right. And then the final question; we heard that whacky Wall Street Journal gas bladder story earlier this week. An idea we have seen flow before or too, but I guess it's an opportune time to touch on less field technologies. Do you guys see anything out there may recur being given for this one as far as smart antennas or DAS [ph] systems or anything else out there that might be a little bit more real than somebody pumping a bunch of hydrogen in a balloon?

Rick, we look at that all the time and we keep up with that pretty well. There is really nothing that I see out there that's looming. That DAS stuff, I would tell you is very real, and it's... we view it as some of complementary though, because it's still typically filling up for you can't get the tower zone. There are things like that. So it's... I think that's the most real technology, but again I view it more as complementary than competitive. And the other stuff is I mean the gas balloon thing is not a worry at all. There is really no... I don't think any capacity in that or anything other than a minor real story. The carriers continue working with the OEM every day to come up with ways to squeak a little more capacity out of the existing bandwidth and product... physical product, but they have been doing that for years. And that's good for them. I mean we need them to stay healthy financially too. So it's a balancing act, but there is really nothing out there that we feel as looming. Richard Prentiss - Raymond James & Associates, Inc.: And the DAS system would typically be rolled out in a place, where there is no towers any way, I would think.

Yes, I mean it's really a filling strategy in a lot of cases. Richard Prentiss - Raymond James & Associates, Inc.: For the very, very tough to zone areas?

Yes, or an urban are. Richard Prentiss - Raymond James & Associates, Inc.: Okay, right. Hey, good luck guys.

Thanks.

Our next question is from the line of Richard Choe with Bears Stearns. Please go ahead. Richard Choe - Bear, Stearns & Co.: Hi, to follow-up on the... some of acquisitions questions. Can you give us a sense on over the past few deals what has changed and what the specific characteristics of the towers were like. If we see this one deal 750 per tower and then a cash deal 440 per tower and this other deal at around 550, 540. Can you give us a little more color on... in terms of cash and equity, the credit markets and equity markets? What kind of drove the different pricing in these field?

Well, the different pricing was all a function of the maturity of the tower. The current tenants per tower on the tower and where we thought growth would go on that tower over a forward five year period, which we then used to project out what our return requirements are. And if they are met, we move forward and if they are not, we don't. So that's why you get the wide variation in price per tower. It's a function of tenants per tower. So on the... for the full year numbers, I think the average was around 1.5, 1.6 tenants per tower on this stuff that was brought at higher prices, it would have been higher tenancy per tower. The mix on the cash and the stock was... in the fourth quarter, we had a larger transaction. That was driven by the seller, who wanted tax for exchange treatment, so that accounted for most of the stock that we issued. But we also from time-to-time issue stock in acquisitions to balance out our leverage to extend our capital. We went to all cash in 08 as we did not like the price of our stock and with the... now the credit facility in place, we have all the cash we need to continue to go that route as we move forward. But we will keep monitoring things and have the opportunity to use the mix, where we think it's in our best interest to do so. And best interest is all about maximizing growth in equity free cash flow per share. Richard Choe - Bear, Stearns & Co.: Great, thank you.

[Operator Instructions]. We will take the next question from Jonathan Atkin with RBC Capital Markets. Please go ahead.

Yes, good morning. I am curious within CapEx; how much specifically you spent on tower augmentation in the quarter. And then I apologize if these were addressed earlier. But what kind of multiples are you seeing on ground lease purchases? And then with the respect to your 08 guidance, what sorts of 4G or WiMAX related expectations are kind of built in?

John, this is Kurt. On the tower augmentations, we spent about 1.9 in the quarter gross on that. That was a little higher than typical, but not much. And a lot of that we get back from the carriers and in capital contributions.

Approximately what portion of the time do you have to think about augmenting the tower when you receive the lease application?

Well, I will tell you, it's not very often. I approve those myself, anything that's substantial. And I mean it's probably one out of 15 or 20, and some of them are small, some of them are little bigger. But it's not a real up from occurrence.

Right.

Ground lease purchases are averaging around 12 times current year's rent, and really there is no WiMAX in the 08 numbers per se, Jonathan. I mean what we did... we really don't do quite as granularly as you might think. We really take a view of the overall lease up numbers from the year that we are in and kind of decide amongst the group and using all the data that we have, is it going to be higher, lower or the same. And there really was obviously no WiMAX in 07. So you could say there is none in... oh, well, that's not true. There was some Clearwire in 07. But whatever they contributed towards our 07 results that would be... all that would be in 08.

Great, thank you very much.

Our next question is from the line of Jason Armstrong with Goldman Sachs. Please go ahead.

Thanks, good morning. Just a couple of follow-up questions. First on the auction rate securities; you said obviously sold six at par and you've got a big credit associated with the other three. Can you talk us through I mean to the best of your knowledge, is there any sort of material underlying quality differential between the six that you sold and three that remain? And then second question raising guidance, Jeff, I think you indicated sort of 50-50 split between organic versus acquisitions. On the organic side, is this something you saw exiting 4Q that was relatively broad based across the carriers or there maybe one or two specific customers sort of driving the entry? Thanks.

Yes, I will start with the ladder, first. I mean it was really all about the leases and the amendments we signed up in Q4. They were just above of where we thought. So, because those don't head the financial until 08, it was really what's already been done that allowed us to increase a portion of the outlook with the other being acquisitions. And there... it's pretty broad. I mean there is our top four customers in no particular order were AT&T, Metro, T-Mobile, Verizon, both new leases and amendments. So, it's coming from a variety of different spots. I mean there wasn't much Sprint in Q4 as I think everybody knows. And we will see where that heads as we go forward. And clearly there were differences in the auction rate securities on what we are able to sell for par and what we've held on the books and mark down. I mean that's the best basis of the differentiation is an analysis of the underlying securities.

Right, okay. Thank you.

[Operator Instructions]. And with that being said, I will turn it back to the conference room for closing announcement.

Great, thank you. And thanks everyone for joining us today. We look forward to reporting our first quarter results. Thanks.

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