SBA Communications Corporation (SBAC) Q3 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen thank you for standing by and welcome to the SBA Third Quarter Results Conference. (Operator Instructions) As a reminder, today’s conference is being recorded. I would now like to turn the conference over to Mr. Mark DeRussy, Director of Finance. Please go ahead. Mark DeRussy Good morning and thank you for joining us today for SBA’s third quarter 2011 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer and Brendan Cavanagh, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking including but not limited to any guidance for 2011 and 2012 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, 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 statements we may make. Our statements are as of today November 1, 2011, and we have no obligation to update any forward-looking statements we may make. Our comments today 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 other information required by Regulation G has been posted on our website www.sbasite.com. With that, I will turn the call over to Brendan to comment on our third quarter results.

Thanks Mark Good morning. As you saw from our press release last night, our third quarter financial and operational results were very strong. We exceeded the midpoint of our guidance for site leasing revenues, tower cash flow, adjusted EBITDA and equity free cash flow. Total revenues were a $175.5 million, up 10.7% over the year earlier period. Site leasing revenues for the third quarter were a $154.5 million or a 13.9% increase over the third quarter of 2010. Our site leasing revenue growth was driven by both organic and portfolio growth. The vast majority of our site leasing revenue comes from the U.S. and its territories with approximately 3.7% of total leasing revenue coming from international operations. Site leasing segmenting operating profit was $120.6 million or an increase of 14.4% over the third quarter of 2010. Site leasing contributed 97.5% of our total segment operating profit. Tower cash flow for the third quarter of 2011 was a $121.6 million or a 14.2% increase over the year earlier period. Tower cash flow margin was 79.8% compared to 79.4% in the year earlier period. Operationally, we are experiencing strong leasing demand both domestically and internationally amendments which were predominantly from AT&T and Verizon continue to be numerous and contributed over one half of total incremental leasing revenue added in the quarter. Our leasing backlog right now remains solid and we expect that the fourth quarter will be another strong one in terms of customer activity. Our services revenues were $21 million compared to $23 million n the year earlier period. Services segment operating profit was $3.1 million in the third quarter compared to $2.7 million in the third quarter of 2010. Services segment operating profit margin was 14.8% compared to 11.7% in the year earlier period, a 310 basis point improvement as…

Thanks, Brandon. SBA ended the third quarter with $3.5 billion at total debt. We had cash and cash equivalents, short-term restricted cash and short-term investments totaling $209 million resulting in a net debt of $3.3 billion. Our net debt-to-annualized adjusted EBITDA leverage ratio was 7.3 times, the same approximate level it has been for the last eight quarters. Our net secured debt-to-annualized adjusted EBITDA leverage ratio was 3.4 times. Our third quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was a very strong 2.7 times. As of the end of the quarter, our debt had a weighted average annual cash coupon of 4.7% and a weighted average remaining maturity of 4.5 years. 86% of our total debt was fixed rate. We believe our balance sheet is in very good shape, as we have no material debt maturities prior to 2013 and we believe we have ample liquidity to meet our business plans and growth objectives. At the end of the quarter, our $500 million revolver was undrawn and fully available to us. This combined with our cash, cash equivalents, short-term investments and short-term restricted cash of $209 million, gave us total and immediately available liquidity of approximately $709 million. Including anticipated equity free cash flow over the next 12 months, we will have approximately $1 billion of liquidity. In the third quarter we repurchased approximately 2.2 million shares of our common stock for $75 million at an average price of $34.42. We currently have $150 million remaining under our existing $300 million authorization. Stock repurchases continue to be an important component within our overall capital allocation process to maximize shareholder value. We continue to view them as a tool we utilize opportunistically rather than systematically. As of September 30 2011, we had cumulatively repurchased 9.1 million as we began our open market purchase activities in late 2009 representing approximately 8% of our outstanding shares. I will now turn the call over to Jeff.

Thanks Mark and good morning everyone. As you have heard, we did have a great quarter exceeding our guidance midpoints across key financial metrics. Our organic leasing activity was strong and we expect this trend to continue through the remainder of 2011 and into 2012. We continue to see strong demand across our entire portfolio, particularly as carriers continue to enhance and upgrade their networks to next generation technology to keep up with the strong secular demand for high speed wireless data. We believe we are in the early stages of 4G deployments and expect to benefit from this technological upgrade for the next several years as carriers build out their initial coverage footprints to be followed by capacity spending as consumer adoption increases. In the third quarter we had our most active quarter with respect to executed lease amendments in the company’s history. AT&T and Verizon continue to be very busy and represented well over half of our new business in the quarter. Most of the domestic leasing activity in the last couple of years and we believe for the next couple of years has centered around customer overlays and upgrades to existing antenna sites as opposed to deployments of new antenna sites. SBA has been a great beneficiary of this trend due to our large embedded base of AT&T and Verizon tenancies and we expect our position will only be enhanced as Sprint begins a similar type of existing network upgrade with their Network Vision projects. Primarily as a result of anticipated continued strong demand from AT&T and Verizon a material new demand from Sprint, we are guiding to strong organic domestic leasing growth in 2012. Portfolio growth remains a primary focus for SBA. With respect to acquisitions and new tower builds, we continue to see a number…

(Operator instructions) Our first question will come from the line of Jonathan Atkin with RBC Capital Markets. Jonathan Atkin – RBC Capital Markets: Yes, good morning. On the Sprint MOA, I’m interested, does that contemplate just the CDMA and LTE related work or does it also include the impact of taking down iDEN equipment in the medium to longer term?

Hey, Jonathan it’s Brendan. It covers a few things. One of those things is the iDEN termination we’ve given Sprint certain negotiated termination rates associated with the iDEN decommissioning and it’s important I think to point out in our revenue guidance in calculation of the potential impact on straight line that we have assumed in our calculation sort of the worst case in terms of timing and amount associated with the iDEN terminations and just since we are on the subject a couple of the other things that are covered by the Sprint agreement are extensions the length of the minimum lease term associated with the existing lease agreements that obviously contributed to the straight line component of our guidance, as well as a minimum payment obligation that Sprint would have in connection with the Network Vision equipment adds or up replacements really where they will be paying us as they make those installations but even if they don’t there is a date certain by which they would ultimately have to pay either way. Those are the main components of the Sprint arrangement. Jonathan Atkin – RBC Capital Markets: And is the minimal obligation then straight lined or do you recognize that always as incurred?

No, it’s straight lined. Jonathan Atkin – RBC Capital Markets: Okay.

It would be adjusted though to the extent that they actually install on our sites earlier than that minimum obligation date there would be an impact where the cash revenue would start perhaps a little bit earlier then it’s assumed for purposes of the straight line calculation. Jonathan Atkin – RBC Capital Markets: Understand. And on 2012 the 400 tower builds what would be the approximate split between US and international?

It would be approximately 120 US and the rest international. Jonathan Atkin – RBC Capital Markets: And then can you remind us or tell us what the employee headcount is and then how might that change next year as you ramp international?

Think we have about 850 employees today and I – we might add 10 folks, but I don’t see us materially increasing headcount or SG&A above what is already excluded in our outlook Jonathan. Jonathan Atkin – RBC Capital Markets: And then finally, can you repeat the non-cash revenue the $30 million then how much of that is attributable to Sprint for 2012 and then what the non-cash contribution is for 2011, so we can think about margins?

Yeah it’s $20 million for ’012, it’s $20 million from Sprint, as well as $30 million roughly in total for ‘012 and in 2011, the total number implied in our full year ’11 guidance is around $11 million. That includes just for clarification about $3 million from Sprint in Q4. Jonathan Atkin – RBC Capital Markets: Okay. And then the revenue – you guys said 65% cash reimbursement for augmentation CapEx that flows through site leasing revenues I believe and over what period is that straight lined?

It spread out over the term of the lease agreement that is signed up in connection with. So, typically those leases are five years if it’s an amendment, it might be over a slightly lesser period of time.

The remaining current term. Jonathan Atkin – RBC Capital Markets: Right, understand. Thank you very much.

Thank you. We’ll go to the line of Ric Prentiss with Raymond James. Ric Prentiss – Raymond James: Thanks good morning guys.

Hey Ric. Ric Prentiss – Raymond James: Hey, couple questions for you if I could. Jeff you mentioned that the Sprint contribution was $4 million on a cash basis it would depend on the timing. Have you noticed the acceleration of Sprint applications to you as you negotiated and then signed the agreement?

Actually, that’s all just stated for us now, because all along our contemplated arrangement with Sprint would not only be the leasing side of the work, but also the services. So, until we kind of reach the overall agreement there wasn’t a lot, but now we expect things to open up there materially. And because of that reason there is really no incremental cash benefit assumed in our fourth quarter outlook from Sprint. It all starts in 2012. Ric Prentiss – Raymond James: Okay, that makes sense. And you mentioned no unusual churn expected or no material surprise of churn expected in 2012, what is your typical churn level these days on a percent of revenue?

About 1.5% and we’ve had two years now of a portion of that coming from Verizon, Altel. We actually are pretty confident we are well through the lion share of that. There will be some of that in ‘012 but that’s in our numbers. Ric Prentiss – Raymond James: And then on the international side, do any of your transactions down there anticipate pass-through?

Yes, they do. They do. And it’s not all and it’s kind of case-by-case, but there will be some pass-throughs of ground rents in some cases. Ric Prentiss – Raymond James: Okay and as American Tower today started reporting AFFO and FFO Crown on their call said they would look to consider reporting AFFO, have you guys given any thought of the industry coming together and creating an AFFO standard that everybody would report?

Well, that would certainly be the goal and I think we are going to study American’s definition which I think was first rolled out kind of now and like to see what Crown does and we’ll do the same thing. But I hope when I say the same thing it’s truly is the same thing. Ric Prentiss – Raymond James: And need to Always helps when people report the same kind of basis and nice to get all the straight line adjustments finally out there for everybody too. Great, thanks guys.

Thank you. We’ll go now to the line of Jonathan Schildkraut with Evercore. Jonathan Schildkraut – Evercore Partners: Good morning. Thank you for taking the questions. I’d like to actually go a little bit deeper on to the MOA with Sprint. Last year, you guys have kind of quantified your exposure to iDEN I think you had 8% to 9% about a year ago, maybe you can give us an update there. Also historically, you guys have stayed away from these MOA type agreements and maybe you can give us some color as to why this one was an important one or more advantageous one to go ahead pursue and then ultimately sign? And then finally, as we think about lease renewals in general, what we’ve heard from both Crown and American is that maybe over the last few years, lease renewals have been a little bit more aggressive, considering you haven’t entered into those MOAs, maybe you can give us some context for thinking about what your kind of lease renewal roll schedule looks like? Thanks.

Yeah, we continue to renew 00% or better of our leases as they come due. So we continue to, we really haven’t seen any change in that at all Jonathan. On the view about the comprehensive agreement we’ve said this now several times, that really the only reason that we have entered into this agreement is because it was the only way to kind of deal with so many different moving parts and in fact some of which were desperate concepts but all came together to be viewed as one kind of relationship with our customer. So it should not be viewed as signaling any change in our long-term view, but really the only practical way to deal with this many different issues with this one particular customer. And in terms of our remaining Nextel exposure, it drops every quarter. I think it’s 6 to 7-ish percent now and not all of that will be lost over time. Jonathan Schildkraut – Evercore Partners: Great. Thank you for taking the questions.

We’ll go now to the line of David Barden with Bank of America/Merrill Lynch . David Barden – Bank of America/Merrill Lynch: Hey guys thanks for taking the question. Sorry if you guys have touched on this a little bit, but just going back to the 704 towers that you guys have an agreement in principal, number one, those towers are in the next year’s guidance, understand but number two, could you kind of elaborate when the cash goes out the door, is it in the fourth quarter discretionary CapEx which will tie or is it in next year’s discretionary cash which is low as you explained? And then kind of where those towers are precisely again? Thanks.

Yeah, most of them, the substantial majority of the 704 are in Central America. The rest would be in the United States and the cash expenditure we’ve kind of spread between Q4 and Q1 of 2012. David Barden – Bank of America/Merrill Lynch: Q4 of ’11 and Q1 of ‘12.

Yes, yes. David Barden – Bank of America/Merrill Lynch: Gotcha. Sorry Jeff, but any more specific numbers on the cash out the door Q4 and Q1 and the number of towers in the US versus Latin America?

No I think, I think you can analyze the cash out the door pretty well by looking at our Q4 CapEx guidance. David Barden – Bank of America/Merrill Lynch: Okay, perfect and then just a second and apologize to broach the subject, but we are coming up potentially in a month Clearwire has an interest payment coming up and there has been a lot of debate in the industry about what the significance of that interest payment is and kind of what Clearwire has been working on as its potential options for dealing with that. Just as a representative tower company I know that there has been a very robust history between the tower companies and companies that have struggled in the wireless business, but are you making any particular preparations of doing anything special with respect to that company? Thanks.

The answer is no. We are not doing anything of particular other than monitoring the situation carefully and we know what are all the options are and you can rest assured we’ll be kind of reviewing what SBA’s response might be in light of all those options. But are we doing anything in particularly different? No. David Barden – Bank of America/Merrill Lynch: And could you remind us kind of the history of your experience with these sort of the situations in the past?

Yeah in every case where a company has chosen to reorganize through a chapter 11 process they have renewed senses without exception, every one of their leases with us, because that is the business they are reorganizing around. In those cases where the business was liquidated which goes back to the 2001 and 2002 period, Chapter 7 you would lose those leases. But in every case, where the business was reorganized around a debt restructure all the leases were renewed. David Barden – Bank of America/Merrill Lynch: Perfect, all right. Thanks, Jeff.

Our next question is from the line of Clay Moran with Benchmark Capital. Clay Moran – Benchmark Capital: Hey good morning. I wanted to get back to the 704 towers. Just wondering if this is multiple deals or was that one seller? And just wanted to make sure that when you say Central America it’s in your previously announced markets of Costa Rica and Panama. In addition, is it all cash deal? And then lastly, does this carry sizable cash payment meaning that you might slow down your near term stock repurchases?

It is all cash. It is multiple transactions. We will be entering Guatemala as a result of these transactions in addition to adding towers in the rest of our already existing markets of Panama, Costa Rica and El Salvador. And we’ll have to stay tuned on the stock repurchase side Clay as we’ve try to point out we have ample liquidity and if we decide to stay capitalized on a debt-to-EBITDA basis the way we have today, we have a lot of additional investment capabilities that could go towards stock repurchases or portfolio growth are in our likelihood both. Clay Moran – Benchmark Capital: Okay, thank you.

Thank you. Our next question comes from Jason Armstrong with Goldman Sachs. Jason Armstrong – Goldman Sachs: Hey thanks good morning. Maybe couple questions. First on to the margin trajectory in the 2012, Jeff I think you appropriately mentioned, when you peel out the $20 million on the non-cash revenue side, the implied margins are better than they otherwise would have been. But, then if you look at it and peel that out, it’s still sort of flat incremental margins in 2012. I’m just wondering when you would expect to see margin expansion on sort of an incremental basis and then secondly that the land deals that we’ve seen some of your peers doing this past quarter involved buying land to swap with others involve buying land under carrier towers with an eye towards maybe that forces the carrier to sell over time. Is that an opportunity that you think might be interesting as well? Thanks.

On the margins, Jason, it’s not just spread these you have to peel out the whole $30 million to appropriately calculate the margin and I would add two comments to your view we have a larger contribution expected in 2012 from services which is a lower margin business. And we also have a bunch of relatively new built type towers that we are adding to the portfolio. I’m not sure whether you are focused on the tower cash flow margin or the adjusted EBITDA margin. The adjusted EBITDA margin, I think somewhat grow and it’s our cash flow margin should grow some perhaps not as much as the adjusted EBITDA margin. On the land deals, we look at those things and I guess for a price we would find land under other folks’ tower attractive. We have simply just not made that decision to go that route when we would, because we would land under other folks’ towers we have to kind of view really along the same lines as additional portfolio growth or stock repurchases and we’ve simply seen in our particular case better opportunities with the latter. Jason Armstrong – Goldman Sachs: Okay, thanks Jeff.

Thank you. Next we go to the line of Simon Flannery with Morgan Stanley. Simon Flannery – Morgan Stanley: Thanks very much. Good morning. MetroPCS was just talking earlier this morning about moving to sell splitting to deal with the data demands from their customers and I think there has been a general expectation that the industry would start to move away from adding to existing sites and moving more into a cell splitting type model. I was wondering if you could comment on what you’ve been seeing in the last few months and what do you expecting as you move into 2012? Thanks.

Well, Metro is a little unique or at least different than, say AT&T or Verizon as they are moving forward. In AT&T and Verizon’s case, it is new spectrum is being deployed as on overlay. So it’s entirely amendment driven until they get this done. Metro is of course deploying LTE in the same spectrum. So it maximize that spectrum it works through cell split. So that’s all very logical, Simon and does it necessarily reflect industry-wide trends as much as I do believe it reflects Metro’s specific issues but having said all that, we have seen some business from metro and we expect to see some more in 2012. Simon Flannery – Morgan Stanley: And when do you think the big carriers will start to think about, they’ve talked about spectrum shortages out of couple of years and when do you think they’ve structured look to increase their cell cuts more dramatically?

Well, it’s happening a little bit now. But I think you have to – if history is a guide and I think it will be here. You will need to see them get through substantially all of their technology upgrades, so that they can accurately and correctly say that they are offering these services nation-wide and then you begin the cell-split. Simon Flannery – Morgan Stanley: Okay, thank you.

Our next question is from the line of Suhail Chandy with Wedbush Securities. Suhail Chandy – Wedbush Securities: Thank you for taking the question. Can I go back to the Sprint agreement? I realize you said that you kind of have the worst case assumptions, can you remind us how would this potentially change the timing of iDEN decommissioning? I think it was originally in, perhaps 2013 to 2017 come to the current assumptions assume maybe an earlier start to that?

No, that’s the time period in which we have assumed for purposes of calculating the straight line impact. Suhail Chandy – Wedbush Securities: Okay, great. Two large, big picture questions, do you think anecdotal evidence of private valuations of power companies versus public valuations have a slight disconnect. Do you expect that valuation disconnect to start contracting a bit sometime in 2012 and the second question on land parcels under your sites, have you done any kind of analysis on the ownership concentration of those ownership of the land parcels under your sites?

On the price disconnect, I do think the prices will begin to converge and I do expect to see that more in 2012. They haven’t done that quite as much in ‘011 which is one of the reasons why we’ve allocated more capital on a proportionate basis than historically to stock repurchases. And on the land, we have done an analysis, we have literally above a half a percent of land under our towers that is out in the hands of third parties to the best of our knowledge and that is amongst a bunch of desperate owners. So we feel like we are in excellent shape in that regard and as you can tell from our results, we keep working the land side of our business every quarter. Suhail Chandy – Wedbush Securities: Okay, great, thanks and congrats on the quarter.

Our next question is from James Ratcliffe with Barclays Capital. James Ratcliffe – Barclays Capital: Good morning. Thanks for taking the questions, two if I could. First of all, to what degree is any possible outcome of AT&T, T-Mobile incorporating in 2012 results either from accelerated activity in the event that the deal happens or divestitures et cetera and secondly if you look at the Clearwire base you have in the event of some sort of event where the – how would you consider the leases and the terms of those leases, versus your overall portfolio? Are they meaningfully different in terms of pricing or term or the like? Thanks.

On the latter first James, I don’t think they are any different, they are in the standard fiver year renewal option. So we are in the midst of all the rollovers there. So there would be a typical average remaining life and I would just want to remind folks that Clearwire has been a great customer. We wish them all the success and we are going to help them get there. But they are about 1% of our site leasing revenue. Your other question, I’m sorry? James Ratcliffe – Barclays Capital: AT&T and T-Mobile to what degree that is – or event in the 2012 guidance, one way or the other?

Yeah, we don’t have a specific divestiture model that has been run through there. We think by the time, the deal would be completed you would be the middle of the year and you’d have in fact very little if any impact on 2012 results we would think it wouldn’t have any real impact at all until 2013 even if then, depending on what task they choose to take. But so the bottom line answer to your question is we don’t expect much impact for our 2012 results. James Ratcliffe – Barclays Capital: Great. Thank you.

Our next question comes from the line of Colby Synesael with Cowen. Colby Synesael – Cowen: Great, I’ve got two questions. Just wanted to go back to the question that Schildkraut asked about lease renewals. I was wondering if you could give us a little bit more color are you expecting a larger percentage of your portfolio to renew leases in 2012 versus 2011. And then my other question just had to touch back on the AT&T and Verizon current LTE build outs. As we move into call it the second stage of their build out when they reached the majority of their POPs in 2012. Can you talk about how we shift in terms of activity and maybe fill in what the financial opportunity tied to that could be? Is it more, is it less, or is the same over the next few years like what we’ve seen in the last year? Thanks.

On the renewal we are not anticipating any material change in the level of the rate in 2012 versus ’11 versus ’10, versus ’09 for that matter. It’s always been around 99% renewal rates and we think as well that we were seeing. In terms of the AT&T Verizon activity, what happens historically is when a carrier moves through with a new technology upgrade they will launch that and roll that out a nation-wide basis and then depending on activity levels, they will cell-split and in-fill with new tenancies. The difference is, you’ll get similar revenue contributions of a third to a half of new tenancies as you amendments. So it’s a volume difference in terms of number of sites touched, but over time, it’s actually worked out that the contributions have been fairly steady during periods of both new technology rollout as well as in-fill and cell-splitting periods. Colby Synesael – Cowen: Great, thank you.

Next go to the line of Phil Cusick with JPMorgan. Phil Cusick – JPMorgan: Hey guys. Thanks. Just a quick clarification. The iDEN churn that will probably start ramping, I think in 2013, do you think that will be additive to the 1.5% that you talked about earlier? Or is that sort of replacing other things that have been turning for one time?

Yeah, it might be slightly additive, but it’ll also be replacing other things that have still not fully turned off like AT&T Cingular or Santanio Centennial, or the tail end of Altel, Verizon selling all kinds of – just as other things are rolling out. Phil Cusick – JPMorgan: And it’s got a steady number of churn towers over a five year period something like that?

It is a steady number that we’ve kind of worked around in terms of a negotiation with Sprint, but we are not going to get into the exact details of that. Phil Cusick – JPMorgan: Great. And then, you mentioned a few minutes ago but at a conference last month I think you talked about leverage or happy with where it is you could even take it up. What the conversation internally you and with the Board happening right now are on leverage? Are you fairly happy with where you are? And is there a conversation about taking it up?

We are happy with where it is and there really is not a conversation about taking it up, because we think where we are right now is the right place to be. Phil Cusick – JPMorgan: Good. Thanks, Jeff.

The next question is from Michael Rollins with Citi Investment. Michael Rollins – Citi Investment Research: Hi, thanks for taking my question. Good morning. Just on the organic growth, if you could break down, you may have done this earlier, but just a little bit more specificity if we look at 3Q site leasing revenue growth I think of your sites 39, if you could break it down from internal growth versus external growth and then just how to think about those components moving into 201? I think, last quarter you may have given an indication of internal or organic of around 9% and just looking for an update on that? Thank you.

Yeah, I think that’s still where we are Mike, 9%, of which 3% of the 9% comes from escalators or slightly above that then the rest would be from new incremental revenue added in the last couple quarters predominantly from amendments but also from some new tenancies. So everything above that you would I think correctly is as inorganic growth. Michael Rollins – Citi Investment Research: And that be same for the quarter as well?

Yes. And that would include new builds, new builds goes in the inorganic calculation and not the organic calculation. Michael Rollins – Citi Investment Research: And just one other question you think 3% from escalators is that a gross 3% and then we’ve got to minus some churn off of that if you can, I think you mentioned earlier that churn was about 1.5%, so how does that factor into the calculus?

Yeah, we have the escalators are between 3% and 3.5% on a gross basis that’s not net of churn. Churn is a separate item but it is netted into the 9% growth calculation.

Yes, so the incremental is what’s netted of the churn, not the escalator. Michael Rollins – Citi Investment Research: Great, thanks very much.

Next we’ll go to the line of Brett Feldman with Deutsche Bank.

Thanks and just two quick ones, just to clarify and I know we’ve kind of belabored this on the Nextel churn, but it sounds like there is no real point during the duration of the wind down or you hit a cliff or a wall or some jolt to the run rate into churn. Is that the appropriate way of thinking about it?

Yes.

Okay, good. And then just, to follow-up on Phil’s question about leverage. You do have a little over $1 billion of debt maturities in ’13 and ’14 and I was just interested in your thinking right now and you didn’t talked about how you have upwards or around a $1 billion of total liquidity to deploy. It seems like you are inclined to deploy it. What would change your mind? What would make you more cautious, more thoughtful about building cash? Are there triggers you look for and the credit markets or the economy, anything you can do to sort of help us think that would be great?

Well, first and foremost, we will be watching the 2013 May maturity date. That focal point is in part the reason for like answer to Phil that we are not really looking to take leverage up as we head into that refinancing obligation and we will watch what we spend and what our refinancing is going into that brand. But that obviously will be a primary determinant of exactly where leverage is as we head into 2012.

And do you have any changing thoughts on like the mix of secured and unsecured convertible securities and stuff like that?

We continue to I think have an business that’s ideally suited for secured financing. We are with a very steady business and therefore it is very suited to the covenants style lending that you see there and an exchange for that you get great rates and it’s on a relative basis great rates and so we like that, you should assume we will continue to do as much in that market as we can and that’s a combination of the securitization market and the traditional term loan A and term loan B market. And then over and above that, we’ll be looking at the various options for unsecured financing.

Great. Thanks for taking the questions.

Thank you speakers and at this time, there are no further questions in queue.

Great. So we will end the call now. I want to thank everybody for joining us and the next time we talk, it will actually be 2012 and we look forward to reporting our fourth quarter results. Thank you.

With that, ladies and gentlemen that does conclude our conference for the day. We thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.