SBA Communications Corporation (SBAC) Q2 2008 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the SBA Second Quarter Results Conference Call. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for questions and instructions will be given at that time. [Operator Instructions]. And as a reminder, this conference is being recorded. I will now to turn the conference over to Pam Kline, Vice President, Capital Markets. Please go ahead.

Thank you for joining us this morning for SBA's second quarter 2008 earnings conference call. Here with me 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 this morning's press release and our SEC filings, particularly those set forth in our Form 10-K for the fiscal year ended December 31, 2007, 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, August 04, 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 the most directly comparable GAAP financial measures and other information required by Regulation G, have been posted on our website, www.sbasite.com.

Thanks Pam and good morning everyone. As you saw from our press release this morning, our second quarter financial results were excellent and we were near or above the high end of our guidance for site leasing revenues, tower cash flow, adjusted EBITDA and equity free cash flow. Total revenues were $112 million, up 11.6% over the year-earlier period. Site leasing revenues for the second quarter were $93.7 million or 17.8% increase over the second quarter 2007. This site leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment operating profit was $71.1 million. Site leasing contributed 98% of total segment operating profit in the second quarter. Tower cash flow for the second quarter 2008, was $71.8 million or 23.8% increase over the year-earlier period. Tower cash flow margin was 78.1%, up 310 basis points over the year-earlier period and 60 basis points over the first quarter of 2008. Our services revenue was $18.2 million compared to $20.7 million in the year-earlier period or a 12.2% decrease. Services segment operating profit was $1.4 million in the second quarter of 2008 and $2.7 million in the second quarter of 2007. Services segment operating profit margins were 7.9% in the second quarter, compared to 13% in year-earlier period. Kurt will discuss services in more details, shortly. Our SG&A expenses for the second quarter were $12.5 million, including non-cash compensation charges of $2.4 million. This compares to SG&A expense of $11.6 million in the year-earlier period including non-cash compensation charges of $2.1 million. Other non-cash expenses for the second quarter included an other-than-temporary impairment charge of $2.5 million related to certain auction rate securities held at June 30, 2008. As previously discussed, the company still holds three auction rate securities with a par value of $29.8 million which had a fair value of $9.3 million as of June 30, 2008. Net loss during the second quarter was $18.4 million, compared to a net loss of $15.1 million in the year-earlier period. Net loss per share for the second quarter was $0.17 compared to a net loss of $0.15 in the year-earlier period. Excluding the $2.5 million non-cash impairment charge in the auction rate securities, our net loss per share would have been $0.15. Weighted average shares outstanding for the quarter were $107.1 million. Adjusted EBITDA as we define it for the second quarter of 2008 was $63.5 million in the second quarter or 23.4% increase over the year-earlier period. Adjusted EBITDA margin was 57.7%, up 52.5% in the year-earlier period. Once again equity free cash flow increased materially in the quarter, reflecting a strong adjusted EBITDA growth. Equity free cash flow for the current period was $37.9 million or 30.7% increase over the year-earlier period. Equity free cash flow per share for the current period was $0.35 per share, a 25% increase over the year-earlier period. While we are pleased with the growth in equity free cash flow per share, it would have been even high on a pro forma basis if we were to get full effect during the quarter for the convertible note offering in the TowerCo acquisition. In the second quarter, we acquired 555 towers, built 18 towers and ended the quarter with 6,896 towers owned and the rights to manage approximately 4,400 additional or potential communication sites. Cash capital expenditures in the second quarter were $264.5 million, of which we spent $1.3 million on maintenance tower CapEx, $1.3 million on augmentations and rebuilds and $220,000 on general corporate CapEx. We also spent $250.6 million of cash on acquisitions and earn-outs and $5.6 million on new tower built and newbuild work-in-process. With respect to the land underneath our towers, we've spent an aggregate of $5.9 million in cash to buy land and easement and to extent ground lease terms. And at this point, I'll turn things over to Pam to provide an update on our liquidity position in our balance sheet.

Thanks Tony. SBA ended the second quarter with $1.555 billion of commercial mortgage-backed pass-through certificates outstanding, $315 million in 0.375% Convertible Senior Notes, $550 million of 1.875% Convertible Senior Note, significant outstanding on our $335 million borrowed [ph] under senior credit facility and $242.5 million of cash and short-term restricted cash, resulting in net debt of $2.2 billion. During the quarter, we issued $550 million of 1.875% Convertible Senior Notes during 2013. We used approximately $74.1 million of the proceeds for the note offering and we related warrant transactions to purchase convertible notes hedges, which when taken with the warrant transactions as a whole, effectively increased the conversion price of the note from $41.46 per share to $67.37 per share. Additionally, 120 million of the note proceeds were used to repurchase 3.47 million shares of our common stock at a price of $34.55. Our share count at the end of the quarter was 105.9 million. The company's net GAAP to annualized adjusted EBITDA leverage ratio was 8.7 times at June 30, 2008. Our net secured debt to annualized adjusted EBITDA leverage ratio was 5.2 times. Our auction rate securities are not included in our calculation of liquidity or net debt. As of quarter-end, all of our debt was fixed rate with a weighted average cash kept under 4.23% per year. Our second quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was very strong at 2.7 times. As of the day of our press release, we had zero outstanding in total availability of 278.9 million under our senior credit facility. As we build and buy towers, additional availability is created under this facility [ph], pro forma for the light tower and other transactions under signed purchase contracts, we estimate that the total availability under the facility will be the $435 million [ph]. We anticipate using a combination of cash on hand, draws from the credit facility and our stock to fund our closing obligations for all of our pending acquisitions. I will now turn it over to Kurt to discuss some of our operational results.

Thanks, Pam and good morning. As you can see by the numbers, Q2 was another good quarter for us. It continue to show the steady lease up and the resulting revenues from our desirable tower space, a consistent and predictable nature of our expenses, and the efficiency of our scale through the highest steadily-increasing tower cash flow and adjusted EBITDA and gross margins. In addition, most of our customers continue to report excellent operational and financial results for both voice and data services, which we expect will continue even down the path of continued network enhancement. On a per site basis, our growth tower leasing revenue signed in the quarter was ahead of our Q2, 2007 actual rate. And our net leasing revenue signed was equal to or better than any quarter in the past two years, including our big fourth quarter of 2007. It is also our best growth in net leasing revenue quarter on an absolute basis. For the quarter, year-over-year same tower cash leasing revenue and same tower cash flow growth, excluding a small amount of Cingular-AT&T merger related churn, was 11% and 14% respectively, once again the highest in our industry. While rates have stayed firm, our average cash spaces rents across our 16, 851 tenants, is up about 5% year-over-year to $1840 per month. During the second quarter, 81% of our new leasing revenues signed came from new tenant leases with the other 19% coming from amendments to existing installations. The new leases continue to come predominantly from three of the four big four carriers. We have also seen steady activity from new and existing regional carriers. The mix of new lease activities is widespread from geographic coverage expansion to performance-enhancing sales, technology overweight and they cover building penetration and capacity needs. Wireless backhaul has also gained momentum and we are starting to see what we think is a broader, long-term movement towards escalation from several of our major customers. We're also seeing renewed interest in this area from third-party providers. Our new tower build team completed another 18 towers during the quarter, putting them on track to have the best year since the restart of this program a couple of years ago. We also bought an additional 555 towers during the quarter, putting our total owned tower count to 6,896 at quarter's end. The TowerCo transaction closed on May 30 and the integration was smoothest ever for such large portfolio. Our operations and leasing teams have done a lot of advanced planning and picked up these assets and began running with them immediately after closing. For TowerCo, Light Tower and Optasite and our other 2008 additions, we expect to add fewer than ten additional personnel on the operations side which truly shows the efficiency of scale in the tower model. On the operational side of our tower portfolio, both OpEx and CapEx expenses continue to be relatively minimal and within our budget. Our tower augmentation CapEx was once again very well; we're spending right at $1 million on supporting revenue additions on high demand towers. Our gross expense in the period has been running at just about $1 million per quarter with an annualized rate of less than $1000 per tower per year. On a per tower basis, our expenses in these areas continue to be lowest in the industry by a pretty wide margin. Lastly in the expense area, the percentage of our towers for which we own or control for more than 50 years the underlying land was up to 25% as of June 30th, contributing to our strong margins and risk control. On the services side of our business, Q2 was a tighter quarter for us given the near stoppage of Osborne [ph] activity which was our largest services customer from the last couple of quarters. Revenue of $18.2 million was down 12% year-over-year, and down 11% compared to Q1. Unlike on the tower leasing side of our business where we provide service equally to all interested wireless carriers, the services business has always been more concentrated as to one or two customers in any given quarter. And in Q2, and possibly in Q3 that concentration and Sprints pullback has impacted and may continue to impact results. Our services teams are continuing the process of reloading their backlogs with a more diverse customer base, and we feel our future quarters would see an uptick from Q2's results. We believe we are well positioned for several new projects with new entrants building both, 3G and 4G networks as well as new projects from existing providers. We are very excited about our pending Optasite and Light Tower acquisitions. We are already well into our pre-closing integration activities, and we expect things will go very smoothly. In addition to the large number of existing high-quality towers, both transactions bring material newbuild pipelines in relationship they will produce new towers throughout in 2008 and more in 2009. Finally, we are particularly excited about entering the entering the outdoor DAS business through a Light Tower, where we will have the opportunity to confirm our belief about the attractive mix of the business, add some very talented employees, learn the business from a ground up and create new opportunities for attractive future capital investments. While we do not believe DAS will come close to towers in operational or financial importance to SBA, we do believe DAS will play an important niche role in future wireless appointment and we look forward to being a part of it. At this point, I'll turn things over to Jeff.

Thanks Kurt and good morning everyone. As I think you'll agree, we have been busy this summer at SBA. We have done a number of things, but not only we will generate material growth in 2008, but more importantly position us extremely well for additional growth in 2009, 2010 and beyond. Everything we have done and we will continue to do is focused on a single goal, maximizing growth and equity free cash flow per share while maintaining an appropriate balance sheet. If we are successful in doing that, we believe our shareholders will continue to be rewarded over both the short-term and long-term. We view the market and our share price as the ultimate judge of our success, and in that regard, we believe our strategy and execution have been proven to be very successful. Our share price has materially outperformed our peers and any relevant index over the last one, three and five-year periods. The factors behind that success remain important, relevant and in place today and we are very optimistic about our ability to produce continued success in the future. The foundation of our success is two-fold; first, the explosive growth in wireless and the needs of our wireless carrier customers to continue to invest in the expansion and improvement of their networks. Second; our ability to execute our business plan and capitalize on opportunities when presented. Both are very strong. As we have heard from Kurt and others before us, wireless continues to grow and in fact and has become the growth engine for the large multi-product telecom providers. 2G, 3G and soon 4G deployments are expected to drive strong continued demand for tower space. We just finished one of our strongest lease-up quarters and years and we did so without material contributions from several carriers, which carriers had been much busier in the past and we expect to be much busier in the future. Wireless data use is soaring. Data requires more network capacity and a higher level of complexity, both of which are increasingly addressed at the physical network level through additional equipment. We expect the deployment of the recently auctioned 700 megahertz spectrum will extend this cycle of new services which leads to consumer adoption and increasing usage and finally, required network improvement for years to come. We see strong continued leasing growth for assets in 2009, 2010 and beyond, which is why we are so excited to be growing our company with additional high-quality towers. On the execution side, we continue to perform very well. Our 11% same tower cash, lease and revenue growth and 14% same tower cash flow growth once again lead our industry and by a material amount. In addition to our organic growth, our portfolio growth is well ahead of plan and is expected to be over 25% this year alone. We expect to end the year with close to 8,000 towers. As a result growth in each of leasing revenue, tower cash flow and adjusted EBITDA are all very strong and led our industry this quarter by wide margin. Expenses remain well in check, as our tower, cash flow margin and adjusted EBITDA margins were our highest ever. Maintenance capital expenditures and augmentation expenses once again were the lowest in the industry, reflecting both our asset quality and the great work of our employees. Our employees continue to perform excellently and I thank them for their hard work. We are very happy with the acquisitions that we've closed or announced this year. We are acquiring quality assets at reasonable and accretive prices ahead of what we believe will be a strong customer demand in 2009 and beyond. We seized on these opportunities because we believe they will produce greater near term and long-term accretion to equity free cash flow per share than we would have achieved with stock repurchases and once acquired, we will speed de-leveraging because we've added additional growth assets to the company. With our successes this year, we had firmly established SBA as the pre-eminent acquirer in the tower industry. Two of the three large deals, we've announced this year were sole sourced to SBA by the sellers and their bankers on an exclusive basis and none of our peers nor anyone else had a chance to look at these opportunities. Why was that? Because in the seller community, SBA has a ten-year track record of straight dealing, confidentiality, efficient negotiation, documentation enclosing, problem solving, and most importantly getting deals closed on the terms on which they were agreed. No one comes close to the aggregate number of transactions we've closed to that time period. We are extremely deep and capable in the acquisition area and we have developed it to the point where we do believe it is a competitive advantage. We believe these strengths will continue to serve us well going forward and be even more important as we move into a world of acquisition opportunities that may lack for sizable transactions, but we think we will have an abundance of 10, 20, and 50 tower opportunities. These types of opportunities have historically been our bread and butter and we believe SBA is the most capable potential acquirer for these sized transactions. We intend to stay active pursuing those types of opportunities, notwithstanding the materially larger tower count by which we will end the year, we continue to believe that we can keep growing portfolio 5% to 10% per year for the foreseeable future and the four good opportunities in the U.S. would be there for SBA to do that. Now that I have told you how good we feel about our future acquisition prospects, I need to temper that a little bit at least temporarily. You should not expect us to announce any material, additional cash acquisitions prior to year end. We want to take the rest of the year a close to Optasite and Light Tower, integrate the assets into our company which we expect will go smoothly and take advantage of expected strong continued organic growth to reduce leverage as we move into 2009. We have plenty of liquidity. That is not the issue, in fact we believe we have no need to access the capital markets prior to 2010 and we still expect to have enough liquidity to grow the portfolio 5% to 10% per year through cash investments, if we so choose. The desire to reduce leverage is driven more by our watching the current conditions in the credit markets and wanting to best position SBA for smooth refinancings in 2010 and 2011. At the end of the third quarter, we expect leverage to be similar to leverage at the end of the second quarter, as we will be in the middle of closing the Optasite and Light Tower transactions. We expect to end 2008 reporting a low eight times total net debt-to-annualized adjusted EBITDA leverage ratio, which would be less on a pro forma basis, because we don't expect to close on Light Tower until the end of October. By the end of 2009, we expect to be at the low seven times-high six times range on a total basis and approximately two times lower on a secured basis, even after investing the cash necessary to achieve our goal of five 5% to 10% portfolio growth in 2009. Leverage would be even lower, if we choose to reduce our future cash investing which we could always do and would do depending on credit market conditions. We believe this path which includes both growth and de-leveraging will put us in excellent shape for our 2010 refinancing obligations. Based on where we expect leverage to be at that time if the markets were exactly the same as they are today, we believe we could refinance our 2010 obligations entirely in either the CMBS market or the bank market, or we may chose a combination of both. In closing, we cannot be more pleased at our position as we move into the second half of 2008. We will be adding to our company a material number of high growth towers and newbuild opportunities. We will enter the DAS business. Our customers are very busy with good prospects, which we anticipate will translate into an even higher level of activity in 2009. We will end the year with solid liquidity and a leverage position which we expect will create additional material value for our shareholders, as we de-lever fairly quickly from expected strong organic growth. We are very excited about our future and look forward to next time we can share our progress with you. Cathy, we can open up for questions. Question And Answer

Thank you. [Operator Instructions]. And we'll go first to Jonathan Atkin with RBC Capital Markets. Please go ahead.

Yes, good morning. I think Kurt mentioned in terms of the site leasing activity that three years, the national carriers were active; curious to get a view as to when that fourth carrier might start spending again? Anything we're seeing here on the site leasing side or in your services business that gives you any indication there. And then with respect to Outdoor DAS, can you talk about Light Tower in terms of their current scale. How many installations? How many customers? And how that business might get ramped over time? Thank you.

Jonathan this is Kurt, obviously the fourth or the big four, it's a little unclear still exactly when we'll start ranking backup, they are making a lot of moves obviously to get themselves in better positions and I don't want to get two customers specific here but we hope this, by the end of third quarter, fourth quarter they are back in the... a better here than they were now. But that's not a 100% clear to us this year. So I will leave that one at that. On the DAS systems, they have got five existing systems and one larger one it's in construction, right now. The systems average about three tenants per system now and some of other installations, multiple bands per tenant which would basically look like how much in other tenant. So they are definitely, they've done a very nice job of not just building several systems but building ones that are truly multiple tenant which is... what we really like about the Light Tower DAS business is, it's very similar to our tower model, they have been very selective.

And Jonathan, I would add that the financial attractiveness of the business is very good at this point. Kurt mentioned the three tenants per system, we are approaching this the way we approach the tower business, which is looking for multi-tenant opportunities. We think that's the right way we can gallop. The returns on invested capital over time have been really, really good for what Light Tower has done. The issue for us, which we will be kind of studying and then drawing some conclusions on over time, is actually how big we can take the success that they've had. Not quite sure yet, people should not expect that, we will be materially moving the needle through DAS in the short term and as we continue to evaluate opportunities, we will keep you posted.

In terms of how to ramp the business, if you were to do so organically will that require extra people or is your current site development organization able to handle Outdoor DAS, or do you think the acquisition is maybe to be more likely route for growth in that business?

Well, we certainly have the platform now to consider that moving forward and we will have to see how that goes. In terms of employees, we will be picking up five or six folks or right from the get go with Light Tower and there will be some additional, folks as we work... as we wrap up we'd want but it's not going to be a huge number of additional folks necessary for us to what we think martially to grow the business, but again materially from where it is, not material when you look at in the context of the overall SBA organization.

Great. Thank you very much.

Thank you we will go to Ric Prentis with Raymond James. Please go ahead. Ric Prentis - Raymond James & Associates, Inc.: Thanks. Good morning guys.

Hey Ric. Ric Prentis - Raymond James & Associates, Inc.: Couple of questions for you, first Jeff on the M&A front. Thanks for lot of heads up there about probably not a lot of big ones left out there, based on the current environment more 10, 20, 50s. You mentioned a couple of times don't expect any more cash deals and cash, how do you look at stock versus cash, when you are going through these transactions and also the ability to either acquire debt in the transaction or put it into existing capital structure?

Well, Optasite deal really brought along some very good attributes in terms of financing with us being able to assume the existing debt at a very favorable and below market rate and issue stock for most of the rest of our consideration. In effect, we did not use up any of our existing cash resources or will not use up any of our existing cash resources to do that deal. And it was still done so on a very accretive basis so, we like that one a lot. We've always used our stock to supplement our capital resources. We are very careful on how we use our stock and we pay particular attention to where the stock is trading at time, we would issue the relationship of accretion at that time to the assets that we are buying. But it's always been a tool for us to make sure we're fully capable of seizing the good opportunities that we see are out there and staying within our overall leverage and deleveraging targets as we move forward. So as we do bigger deals and did so this year, you see a fairly good size on a combined basis of stock in the aggregate consideration. As we move forward, we may or may not be doing that based on what the opportunity pull on and the size of them and where we see the various price relationships. But it's always something that we've used as a tool to make sure we don't miss out on any acquisition opportunities, while at the same time managing our leverage position. Ric Prentis - Raymond James & Associates, Inc.: Okay, next question, I think Tony mentioned 98% of the revenues for site leasing in the second quarter. A little concerned in the marketplace today, I think about the site development sources business. Can you talk a little bit about where you see that business going and what kind of percent of revenue and EBITDA should that business maybe represent and what's the benefits of keeping it versus selling?

Yes, I am not sure why people should be overly concerned. I think it was pretty clear for the last couple of quarters that Sprint was big services customer of us and I think everybody should know or as plenty out there know that Sprint was not that busy this quarter and may not be that busy in the third quarter. For us, it has always been a business that keeps us close to the customer, keeps us very current on what carriers are doing in terms of the equipment deployments and network expansion that translates into we think smarter leasing and asset acquisition decisions on the hard asset side of the business. But in... it was, so from a gross profit perspective, it was 2% this quarter. I think over the last year, it has been no higher than 5%, and I think now as you pro forma in Light Tower and Optasite and the other things that we are doing, even at its highest contribution from picking out any quarter in the last four, it probably would be 3% or 4% of gross profit. So it's not... it doesn't really impact EBITDA, certainly or equity free cash flow. We continue to see newbuild opportunities that come out of it. We continue to mostly see as I mentioned though the customer and challenges factor and in terms of going forward, as Kurt mentioned, we've got a couple of things, irons in the fire that we think will produce improved business as we move through the rest of the year, and we'll keep you abreast of that. And if we don't see that, then we will as we always have with this business, we will possibly be thinking about its future direction. Ric Prentis - Raymond James & Associates, Inc.: And then final question for you, because obviously it seems like the service business is that definitely the tail small to a 5% comp of the business. The DAS system, trying to hit that a little bit, looks like an attractive niche, probably doesn't get huge for you guys in the grand scheme given your entire model. If you think about the DAS systems and now you have been looking at with Light Tower, what kind of the ratio to how many nodes were in the DAS system versus an equivalent towers? There is something we should be looking at as we think of DAS, and also as you have been looking at DAS with the Light Tower guys, what kind of... is it a replacement per tower, or is there an augmentation or is it a alternative to tower? Just... how they kind of play into the tower leasing space?

Yes, it's... there are... the answer to your first question is very site-specific, and it ranges anywhere from three to six nodes to replace a macro sell site. So one macro is the equivalent of three to six DAS nodes based on all the work that we've done so far. We've got a lot of conversation with carriers. In every instance, they have indicated that they would prefer a macro site to a DAS system. DAS has found its niche in terms of places were towers can't get to and the best example is really an asset that we're we putting up at Light Tower which is their flagship DAS network, its WAN tuck-in system where a substantial portion of all the wireless on tuck-in is transported over that system. The WAN is not a place where we're going to get a lot of towers build, just can't happen. And that's similar to the other places where Light Tower has built these networks and that's kind of the model that we're going to pursue going forward, it's absolutely a adjunct and ancillary to towers, its is based on everything we've seen and expect, it's is not a replacement for towers. Ric Prentis - Raymond James & Associates, Inc.: Great. Thanks a lot. Good luck guys.

Thank you. Our next question is from Simon Flannery with Morgan Stanley. Go ahead please.

Okay. Thanks very much. You've made few interesting comments on Wireless backhaul, perhaps you could provide a little bit more detail around what you're seeing and how material that is and could be for you. And on the comments about leverage, can you talk about buyback from the context that you are fairly active this quarter, is that something where we might see some what less activity in the second half given the focus on de-leveraging? Thanks.

Kurt?

Simonour leverage... on backhaul; we are seeing the carriers start to deploy more and more their own microwave backhaul, mostly licensed spectrum that they can pick up through the government system on someone license but mostly license, and it's very high capacity. And yes, carrier historically had especially old cellphone companies they had a lot of wireless backhaul. They kind of moved away from the T1s over the years and so the pricing of T1s is getting more competitive. But now, it's really the data demands and just the capacity they needed certain sites, I mean a lot of carriers and their core say at suburban network, need 5,6,8,10,12 T1s just for themselves at single site. And the price points, there is a crossover point between the point at CapEx and paying for that recurring rate on T1. So, we are seeing a lot more carrier movement towards that. You have obviously seen Fibertower over the past several of years to point following third party wireless backhaul services, they continue and there is others in that space as well and they are entering that space. And if you look at some of the stats on what... how data is going to drive the backhaul demand, it's really eye opening. It's really saddening what has to happen at these sites, and so they don't...they are cogged up. And... so the materiality wise it's not huge yet. It's now going to be as biggest for kind of lease but we do think it's growing. And we hope to... I think it's really steady growth too in the last for a lot of years.

And some of these microwave additions that we're seeing are adding over $1000 per month to the existing tenant rent. So it actually in specific locations is pretty nice.

If you get the sense that the carriers are kind of having to scramble that the data growth is coming in faster, more volume or mix, expected with things like the iPhone, or laptop cards and they really happen to move faster, keep up with data demand?

Yes, we think that's right. We think... as we talk to our customers, wire...the future wireless backhaul solutions are right at the top, if not the top issue that they are all wrestling with. In terms of de-leveraging issue and the buybacks, I think it's important to know why we did the buyback this year and last, they were apart of convertible notes offering. We do buybacks when we do converts because we think it is the best way to maximize the execution of those transactions for the good of our shareholders. If you go back and kind of study RDLs and look at others the issuances in the convert market, RDLs quote price higher at closing of the announcement of those deals than they were at announcement, that's highly unusual, and that's because of the stock repurchase settlement that we put in there as we as the creativeness of the transactions. But understand that those really were tools to maximize the capital raising transactions. While we think buybacks are really good, we think the asset growth that we are doing is great and will produce better attrition over time than stock buybacks which again while good, we always can have those in our good future, we put forth the opportunity that we are seeing today on the asset side. So, I would not think folks should look for a lot of additional stock buybacks as we move to end the year.

Okay.Thanks a lot.

Thank you. And next we have Jason Armstrong with Goldman Sachs. Please go ahead.

Yes thanks. Good morning couple of questions. First, just on the guidance raise, you sort of hit the high end this quarter. You layered in two deals which sort of calculated a range what they might contribute on the back hand, where we sort of can't do about $11 million, yet you moved the high end of the year up $6 million in terms of site leasing revenues. So it just seems like there is a little bit of disconnect there, and that number could have gone up more. Can you provide a little more color there? And then on deals, you mentioned getting full sourced opportunities on pretty good size deals. Then you have got peers are out there saying that they just couldn't get there on the multiples anyways. And I am just wondering if you can sort of flush out those comments a little bit more. I know you have put a little bit of detail but looking for more granularity on why sort of towers perceived differently, your to access to capital or your ability to pay higher multiple are willing to go all sort of things?

Yes, on the guidance Jason, I think we always focus on the midpoint and as we move through the year we tend to bring the bottom up and sometimes bring the top down and you really shouldn't focus necessarily so much on the low or the high. But look at where we've moved the midpoints to kind of understand what we are thinking about where the future will take us. And on the comments, I am not sure what others were speaking to because they really didn't have a chance to evaluate or learn anything about the two deals that I was referring to, not only in terms of self sourcing. So I am not quite sure to which transactions their comments were directed. But our... the reason we end up getting transactions, look at transactions where no one else does is really the history that we have in this area and the relationships that we have with the primary bankers who do most of the work representing towers in this area, particularly the 50 to I'd say 400 or 500 tower transactions. There is a fraternity out there that we have been doing business for ten years. They've closed deals with everybody they know who does their deal smoothly; they know who they trust as working with buyers and yes, as a result through ten years of extremely hard work and really focusing on developing our skills in this area, we've reached a point where folks don't want to necessarily go through the high profile but auction process. They have a number in mind which if they can get to that number they are willing to forego whatever chances an auction might produce, a higher number for certainty and confidence in the counterparty. And that's we are able to provide people and this year was a great example of the success and the progress that we've made there.

Okay. That's helpful. Thanks Jeff.

Thank you. We now have a question from Greg Miller with Deutsche Bank. Go ahead please. Okay, we move then from queue. So we'll on to Clay Moran with the Stanford Group. Please go ahead.

Thank you. Couple of questions; Jeff, you mentioned it was the strongest lease-up quarter, in years. Yet it looks like you didn't raise the site leasing revenue guidance beyond the acquisitions. Can you explain why not? And then I have a couple of other ones.

Yes, I mean we by signing... when we talk about strongest lease up in years, remember we talked about leases signed. A lot of those leases don't begin hitting the financial statements till, in some cases two quarters up. So, what this really does is, we'll see some of this in Q4 but it really set us up for 2009.

Okay. And then, I think it was Kurt who mentioned that, only three of the four national carriers have really been active. Can you at all quantify the impact if the fourth carrier would have come back and be more to normalized level. What would that do to the lease up rate?

It has a very good impact. I mean we don't neither guess Clay or put a number on it but I mean if you got to look back over history and look at side counts and what everybody does, as they reported. It's pretty obvious to see we'd have impact on the industry.

Okay, fair enough and then can you also just give us the tenants per tower at quarter end? Thanks.

2.5.

Okay, thank you.

Thank you. We'll go to Brett Feldman with Lehman Brothers. Go ahead please.

Thanks for taking the question. Actually just a quick follow up that we had last one, did you disclose the total number of actual tenants you have?

Yes, Kurt.

It was 16,851.

Alright. And then I just want to go back over, you talked about the impact of the residual AT&T-Cingular churn. can you just clarify the 11% of the entire revenue growth and 14% same tower cash flow growth, did that include the negative impact of that churn or was that exclusive?

That was excluded.

So, what would have or what the impact?

Probably about a point or less.

Okay, and then this is my last question here. There was a sizeable transaction that you guys would not involve with. I'll certainly give you talk about the types of characteristics that you look for when you are looking to buy assets?

Well you shouldn't assume that because we didn't participate in that transaction, we didn't like it. We... as that transaction was put into the market, we were well along with our Light Tower and Optasite transactions and also that particular transaction big churn. However, the one you are referring to was all cash and would have put our leverage position above where we would have wanted to be. Brett, so for all those reasons, we took a path. But based on our understanding there is some well located immature assets involved there that we think Kurt and we'll do pretty well over time.

Okay, great. Well thank you for your color.

Thank you. Our next question is from Brad Korch with Credit Suisse. Please go ahead.

Hi good morning. I just have one last question, most have been taken. On your two acquisitions you did in the quarter, can you talk at all about the profile of towers, the average number of tenants and what number of tenants they can support and if you would need to upgrade those at all to lease up? Thank you.

Yes, those two deal for Light Tower and the Optasite deals have asset quality profiles very similar to SBA. You know, independents owned and operated tower companies, put their portfolios together through a combination of buying and building, built for capacity, bought for capacity. Light tower I believe was a 2.1 and Optasite 2.4. Although those numbers were in the press releases if I mistake those. And we think that they will perform similarly to our existing portfolio in terms of lease-up rate, low expense to maintain and low expense to augment.

Okay, thank you.

A little different than the TowerCo deal, where we bought it at a very immature stage of portfolio growth.

Thank you.

Thank you. [Operator Instructions]. We will go to Gray Powell from Wachovia. Go ahead please go ahead.

Great. Thanks for taking the questions. Just had a few quick ones; can you talk about the assumptions that drive the difference between a high end and low end of your guidance range for 2008 on site rent for revenue, because if I back out acquisition revenue, it looks like your implied Q4 estimates what appears to be very conservative.

Well model out really to the dollar, Gray and then we assign a high and a low to that, basically to make sure from the conservative perspective that we always hit our guidance. The main drivers of what will drive lease-up for the rest of the year is Q1-Q2, maybe what we are doing now. But if you leased, if you sign up leases really after pretty very much today you are not going to hit the 2008 financial statements. So we continue to model a conservative rate of lease-up which we beat in the second quarter and there is certainly a chance that we could beat it going forward. But in terms of the drivers, what purely has driven the guidance provisions this time is substantially the acquisitions, a little bit of our Q2 results. But if people are extrapolating or trying to... if you are extrapolating a conclusion that would be well projecting lease up to decline, that's absolutely wrong. We are not projecting that in the slightest.

Okay, thanks Kurt. That makes a lot of sense. And then, if I just look at your Q3 guidance, it appears that leasing demand remained solid. So I may... I don't' want to get too far into carrier specifics, but can you just talk about whether you are seeing a change in the split of demand that's being driven by new tenants versus amendments? And can you talk about there is any change in the mix that's driven by emerging carriers versus the traditional big four?

Well, it's pretty stable. And over the last year or two, I think at we've gone 20%, 19%, 20% on amendments up to 30%, and obviously a lot of we're seeing from AT&T and T-Mobiles on the amendment side, what we're seeing from most of the others, its more on the new lease side. We had a big new lease quarter in Q2 which is the reason why we're at the low end of the amendment side, although amendments were very still good. New leases were just very, very good. So, I think as you kind of project forward, you'll see a mix of new leases from... and amendments from T-Mobile and AT&T. Similar risk with Verizon although they tend to be more on the mix of new tenant leases, and obviously when we get to Clearwire and a reinvigoration of Sprint, Clearwire will be more on the lease, Sprint should be a mix of both and both and most of material I will leave, at this point it's all new leases.

Okay. And that just really brings into my last question. I know that the Clearwire-Sprint deal hasn't closed yet. Have you had much preliminary discussions with them? And then you kind of mentioned that how should we think about it next year? Is Clearwire going to be a simple augmentation in case if the Sprint is already on the tower? Or will they be treated as a brand new tenant paying the full rent?

Yes, it's unclear yet. I think from a legal separation, they will be written as new tenancies, depending on how much additional equipment they will be share will drive the rates and that's still being worked out at this point. But there is a lot of action going on now, a lot of activity, a lot of preliminary discussions. We think when the merger closes there is going to be a ton of business to be done but I don't know if any of that will show up in our 2008 financial results.

Okay. Thank you very much.

Thanks Gray.

Thank you. And next we have Jonathan Schildkraut with Jeffery. Please go ahead. Jonathan Schildkraut - Jeffries & Company, Inc.: Thanks for taking the questions. Most of them have been pretty well blanketed here. But I would like to see a few... if you can give us some commentary on international market, it seems like you're scaling up very well in the United States. All of your focus has been here as you start to approach more than 8000 towers. Would you just continue to focus on the United States or would you also look to the markets outside? Thanks.

No. We will ultimately look to markets outside the U.S., our corporate world, we believe the business model can be taken outside the U.S. Obviously, we'll be careful about where we go and what we do and look at risk adjusted returns and make sure that everything is consistent with maximizing equity free cash flow per share growth. But it is something that over time, you should assume that we will be evaluating. Jonathan Schildkraut - Jeffries & Company, Inc.: Great. One final question, in the footnotes around your guidance, you indicated that certain acquisition-related costs which are currently capitalizing a lot have to be expensed beginning in 2009. Obviously this is a big year for acquisitions, but order of magnitude how should we think about the EBITDA impacts for '09 based on this change of accounting?

Well, a lien item in our income statement will be labeled specifically as acquisition-related expenses and we will back that out of our definition of adjusted EBITDA that will be there for people to see. The order of magnitude for the first six months of the year was about $6 million. Jonathan Schildkraut - Jeffries & Company, Inc.: Thank you very much for taking my questions.

Thank you. And Mr. Stoops, I'll turn it back to you for closing remarks.

Great Cathy. Well thanks to everyone for tuning in and we've got a lot of closings and asset acquisitions between now and our next call, and we look forward to reporting our progress then. Thanks.

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