Ladies and gentlemen, thank you for standing by, and welcome to the SBA 2017 Third Quarter Results Conference Call. [Operator Instructions]. And as a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Finance, Mark DeRussy. Please go ahead, sir.

Good evening, and thank you for joining us for SBA's Third Quarter 2017 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 2017 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, October 30, and we have no obligation to update any forward-looking statement we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website. With that, I will turn the call over to Brendan to comment on our third quarter results.

Thanks, Mark. Good evening. The third quarter was another good one for SBA. We had steady operational performance on the leasing side of our business as well as a solid contribution from our services business. Total GAAP site leasing revenues for the third quarter were $408.5 million, and cash site leasing revenues were $404.2 million. Better-than-expected foreign exchange rate positively impacted leasing revenue by approximately $1.6 million relative to the company's prior expectations for the third quarter. Same-tower recurring cash leasing revenue growth for the third quarter, which is calculated on a constant currency basis was 4.8% over the third quarter of 2016. On a gross basis, same-tower growth was 7.4%. The net same-tower growth calculation was negatively impacted by approximately 2.6% of churn. Domestic same-tower recurring cash leasing revenue growth over the third quarter of last year was 6.9% on a gross basis and 3.9% on a net basis, including 3% of churn, over 70% of which was related to Metro/Leap and Clearwire terminations. Internationally, on a constant currency basis, gross same-tower cash leasing revenue growth was 10.6%, exclusive of 50 basis points of churn. Gross organic growth in Brazil was 11.5%. Domestic operational leasing activity, representing new revenue signed up during the quarter, was stable and in line with expectations. Newly signed up domestic leasing revenue came almost equally from new leases and amendments, and the big 4 carriers represented 92% of total incremental domestic leasing revenue added during the quarter. International leasing activity increased modestly from the second quarter, and we continue to see solid contributions from all of our markets. Brazil in particular had a very solid leasing quarter, giving us continued confidence in the long-term prospects for that market and the opportunity to see very positive returns on our investment there. During the third quarter,…

Thanks, Brendan. SBA ended the quarter with $8.9 billion of net debt, and our net debt to annualized adjusted EBITDA leverage ratio was 7.3x, within our targeted range of 7x to 7.5x. Our third quarter net cash interest coverage ratio of adjusted EBITDA and net cash interest expense was 3.8x. We ended the quarter with $430 million outstanding under our $1 billion revolver, but we have no balance outstanding as of today. On October 13, we issued $750 million of unsecured senior notes. These notes bear interest at a rate of 4% per annum, payable semiannually and mature on October 1, 2022. Net proceeds from these offering were used to repay $460 million outstanding under our revolving credit facility and for general corporate purposes. Pro forma for this transaction, the weighted average coupon of our outstanding debt was 3.6%, and our weighted average maturity was approximately 4.2 years. Year-to-date, as of today, as Brendan mentioned earlier, we have repurchased 4.6 million shares of common stock for $650 million at an average price per share of $140.47. We currently have $350 million of authorization remaining under our stock repurchase program. Current shares outstanding are 117.5 million, down from 124.1 million a year ago. We continue to be pleased with our capital structure, which we believe maximizes our ability to drive growth and AFFO per share. With that, I will now turn the call over to Jeff.

Thanks, Mark, and good evening, everyone. As you heard from Brendan earlier, we had another good quarter. We delivered solid financial results including industry-leading operating margins and strong year-over-year growth in AFFO per share. We also continued to grow our portfolio and made significant strides in shrinking our share count. Our positive results in the quarter, combined with the adjusted expectations for improved foreign exchange rates, have allowed us to again increase our full year 2017 guidance. In the U.S., operational customer activity was as expected with a solid mix of new leases and amendments. Growth drivers continue to include LTE capacity upgrades as well as AWS-3 overlays, 1,900, 700 and 600 megahertz deployments. While this year has been steady in the U.S., we believe operational leasing activity next year should be better. We've begun to see some initial applications from AT&T incorporating FirstNet needs, although nothing material yet. As of today, 25 states and 2 territories have opted into FirstNet, and many more are expected over the next couple of months. We are excited about the prospects for SBA associated with FirstNet and expect to see deployment starting some time in 2018. In addition to FirstNet, however, there are many other potential drivers for future growth over the next few years, including 2.5 gigahertz WCS and continued AWS-3, 600 megahertz, 700 megahertz deployment as well as the potential deployment of DISH's spectrum. And based on Sprint's public comments and the rumors that just kind of broke earlier today, Sprint appears to be on the verge of the first material investment in macro radios and antennas in years. As we've stated in the past, we think being a predominantly U.S. macro tower company will be a great position to be in for years to come. And while things are good…

[Operator Instructions]. And our first question comes from Simon Flannery from Morgan Stanley.

Jeff, you talked a little bit about FirstNet. Can you give us any more color about what that sort of looks like in terms of new colocation versus amendments? And it doesn't come bundled with WCS, so it might be a bigger amendment than normal. And then any updates on how carrier pricing is? They've clearly talked for a while about pushing back on 3% escalators. What's the latest from your perspective on that?

We have not seen any changes in our escalators, and you see kind of where we are in our supplemental filing. It's always a topic of discussion, Simon, but it's not one that -- we would much rather engage on other topics. And with inflation rising a little bit and interest rates rising a little bit, the kind of arguments on either side of that kind of ebb and flow. In terms of what FirstNet looks like, I think mostly for us it will be an amendment process. It still is yet to fully take shape. I do believe AT&T should be taken at their word when they say, "We are really trying to do this as best as we can in one truck roll," so they are continuing to kind of do a lot of work on their side. There is a lot of fieldwork being done in terms of auditing the assets, figuring out exactly what is there now and what kind of space is available and then them figuring out what exactly they want to do in that one truck roll. So I think 2018 is going to be an active year for the industry and certainly for SBA in that front. But I mean, given the fact that you're talking about 700 megahertz spectrum, which promulgates pretty well, I don't know, the exact number of cell sites for AT&T, but it's pretty big, I think you're going to see certainly for us mostly amendment business.

And now to the line of Jonathan Aiken from RBC Capital Markets.

So I guess, my questions are mainly international related. First of all, in your Brazil business, can you remind us of how much of your in-place contracts are -- have escalators that are based on CPI versus fixed. Given the decline in Brazilian CPI, it strikes me that you have kind of a nice tailwind into the business going forward. I just want to make sure I'm thinking about that correctly. And then I wondered if you could provide any sort of thoughts on the Argentina market.

Yes, Jon, on the first question, roughly half of our revenue, basically all of the Oi leases on the 3 portfolios that we bought from them, had a floor of 6.5% on the escalators.

On the Argentina market, we're very excited about that market because we think it's going to be a long, long development type of market. What I mean by that is at this point, because of the way the assets have been depreciated on the carriers books down there, most people don't think that there will be sales of assets down there, Jonathan. Now I could wake up tomorrow and there will be a headline and I could be wrong, but that has been the commentary. So really what you're going to see, I think, is a lot of greenfield building. And for a big established company like ours, I think that's really where we shine. We get into these markets, and we just set up our processes and procedures, and we have the resources and the staying power to get in there and continue to grow year after year after year. I mean, Brazil is a good example of that. I think this past quarter, we've built the most towers in Brazil that we've ever built on a quarterly basis, and I think we will be reporting similar results in Argentina for years to come.

And then turning to the U.S., just any different trends to think about in terms of the drivers of your services business?

I think they're to come. I mean, candidly, Q3 was pretty right down the middle of the fairway. There really wasn't any changes at all from where we ended Q2 and where we thought things would be and frankly where we see Q4 being. I think everything is building towards the FirstNet and the one truck roll and then the increased activity levels that Sprint has been talking about and the release of the macro work that hasn't really been there for the last several years. And all of that, we see it building, and we see a lot of things happening around that. But in terms of it actually starting to hit and certainly in terms of financial impact, it's not going to be until 2018. But it's all there, and it's all building.

And now to the line of Amir Rozwadowski from Barclays.

I was wondering if we could drill down a little in terms of your commentary on the demand environment. Clearly, it sounds like FirstNet is on the calm, and you're seeing some initial activity. Is there expectation for the improved demand environment obviously predicated on FirstNet? Or is it right to assume here that you're seeing improved activity across the board when it comes to the carriers? I know you'd mentioned maybe some relief at Sprint. Just want to make sure sort of what the visibility is there, Jeff.

Yes, I don't want to get too far ahead of ourselves into 2018. But I think the commentary right now, the only changes that I would really want to point out today, and we'll obviously point them out, others as they occur, would be the expectation around FirstNet and the expectation around change, a positive change in Sprint's behavior.

That's very helpful. And then was wondering, do you expect any sort of change in the U.S. competitive landscape? There's been some chatter about Lendlease getting involved in the market potentially with a partnership with SoftBank. There's been some fairly big numbers thrown about in terms of sites that could be available or anything along those lines. I would suspect that you guys have pretty good visibility if there were significant sites available in the marketplace, so would love any color that you're seeing there.

Yes, I'm pretty surprised with that chatter. That deal was a surprise to the rest of the folks in the tower industry. My understanding is those aren't towers. Those are single-user rooftop sites that I don't know if they're usable by non-Sprint users. So I always kind of look at that more as a financing transaction. I could be wrong, but I don't really see that as changing the competitive dynamic. I mean, it certainly adds capital to the competitive mix, but there's always been plenty of capital chasing this industry, Amir.

And now to the line of Ric Prentiss from Raymond James.

One U.S., one international. Jeff, thanks for the color on FirstNet. As we think about the timing, how should we think about them ramping FirstNet, your ability to have the visibility or feel comfortable in guidance? And is it something that requires an MLA? Or just trying to think of what the kind of benefit and how we should think of it ramping throughout '18. I know you're not giving guidance, but just philosophically how it would ramp.

Well, it doesn't require an MLA. If you have an MLA, you may book straight-line probably ahead of it, similar to what others did with MLAs in the past. Don't know if people should expect that or not from us. And then it's probably a lot like it always has been. I mean, depending on when you sign things up, the actual revenue accrual might lag 3 to 6 months or more. Amendments typically go faster than colos but there's always a lag period from the time you actually sign the amendment up to the time that the work gets done and the equipment gets put on the site. And I wouldn't expect that to be really any different than the typical business.

Right. And AT&T sounds like they're pretty anxious to get going, and tax reform might get it even more interested, it sounded like.

Yes, I mean, I do. Based on their commentary, I would agree with you. But I think they are going to wait until 2018 to really get going.

Oh, yes, no, they said January is where they'd kind of ramp-up. Okay, on the international side, Brendan, I think you mentioned that Brazil was about 13% of your cash site but 9% of your cash site ex passers. How should we think about this next wave of acquisitions? How big will Brazil come? Just trying to factor in our early thoughts on what these acquisitions might mean to the numbers.

Yes, I mean, the acquisitions are not all in Brazil but that component of it. You're talking about adding maybe a couple of percentage points. It will have the same structure as our existing operations down there, so the expenses, the ground rents specifically, will be passed through. So we're looking at our overall international mix, which today is 17-ish, 17% to 18%, probably goes up by 2%. So I would figure Brazil, excluding pass-throughs, is somewhere around 11-or-so percent post these deals.

Makes sense. We're getting a lot of questions about fiber to the tower internationally as well, and that's important for 4G. How do you guys look at fiber to the tower down there? Is that something you might get involved with?

We're looking at it and evaluating it just like we did here, Rick. And so far, we haven't concluded anything. And if we did, I mean, it wouldn't be material for a while, but we'll keep you posted.

And now to the line of Matthew Niknam from Deutsche Bank.

Just two on strategic and mainly capital allocation. First, can you give us an update on the latest you're seeing in terms of valuations and availability of sizable portfolios internationally? And I just mentioned it in the context of some of the announced transactions you expect to close, and I want to get a sense of if anything has changed either in terms of supply or just valuations. And then secondly, are there any other M&A sizable opportunities you're considering? Just wondering how to sort of think about buyback pacing relative to M&A on the forward.

Well, I don't think we're going to answer the second one for competitive reasons. But I'll tell you the first one. We've been working on these transactions for most of the year. And during this time, there were a couple, three transactions that went away from us that we were interested in. And there are probably a couple more that we are aware of. But I will tell you, Matt, that none of it is so great that you shouldn't think that there isn't room for both asset growth and stock repurchases. Obviously, the numbers allocated to each will vary, but I would expect that we do a little bit of both as we move forward. Maybe some quarters we don't do one, do more of the other, as we did this year, but I fully expect to do both moving forward.

And if I could just follow-up, the deals you mentioned that went away from you, was that more just relative valuation and you saw more opportunity in buying back your own stock? Or is there anything else that impacted those?

It's always valuation with us, always relative valuation.

And now to the line of Batya Levi from UBS.

Can you provide maybe some more color in terms of the tenancy in that portfolio? In terms of expected growth, will it be similar to growth you're seeing in the region, and impact on AFFO?

We missed the first part of your question. It didn't sound like you're on. I'm sorry. Can you repeat it?

Sure. The international portfolio, that you announced you're purchasing mainly in Brazil, can you provide more color in terms of tenancy, growth rates and accretion on AFFO?

We expect it to be accretive to AFFO per share growth. I believe the tenancy today is either 1.1 or 1.2 tenants per tower.

Yes, they're very immature sites.

Which is why we like it.

Right. They're very immature sites. We expect them to actually grow at a faster rate than our existing legacy business. So they should be growth additive or accretive, I guess, to our growth rates.

Okay. And then one follow-up on the leverage target. Would you consider to take it higher for the right acquisition, or if we get a pullback in the stock, if we get industry consolidation in the U.S., how do you think about that target?

We probably would be more likely to consider taking it higher for a good acquisition where we could see our way to clearly delever back within a year, less likely on the stock repurchases side of things.

And now to the line the Nick Del Deo from MoffettNathanson.

Over the summer, I've been hearing from a number of folks that the expectations of sellers in Latin America were you're generally kind of out of whack with what you're willing to pay. Given the towers you have under contract and your commentary around the pipelines, is it safe to say that there's been some favorable movement there? Or have you guys kind of moved up in terms of what you're willing to pay?

It's been a long year, Nick. We've been very patient and methodical in our approach, and we finally got where we needed to be.

Okay, good outcome. And I guess, more generally speaking, as you think of maybe a future leg of international expansion, you've been exclusive in the Western hemisphere today. I think in the past, you've suggested that you may eventually choose to move further afield. Can you talk about what sort of attributes you want to see to get you interested in markets outside of the Western hemisphere? And how do you think the size of the opportunity might line up versus what you have here?

I think we're going to be most interested in those markets that have higher growth rates where we can go in and add to what we have and have it be additive and supportive of a levered capital appreciation strategy.

And now to the line of David Barden from Bank of America.

I guess, a couple. Just maybe, Jeff, following up on the comments about the FirstNet being an amendment. I know that there was kind if a wait-and-see period to understand what the kind of physical parameters of the infrastructure would be, the panel antennas for the 700 megahertz, et cetera. I was wondering if you could kind of elaborate a little bit on kind of the magnitude of an amendment that this is going to turn out to be from a size and weight and wind shear perspective. And the second was just on 134 new towers, kind of where they got built and what the investment was? And then last, obviously, the jury is still out, of course. We've been whipsawed a little bit on some of those Sprint, T-Mobile mergers, but we kind of love to know your gut reaction, if you could kind of pick a direction where we to go, consolidate or don't consolidate the wireless market, which one is best for SBA?

I'm going to pun a little bit on the amendment pricing because it's going to depend a lot on is the particular tower going to include AWS-3 and WCS. I mean, in general, I do think obviously, we're going to see new radios. You got to have new radios for the FirstNet spectrum. And generally, I think you're going to see new antennas, so I think that's going to be, at worse, a good moderately sized amendment. And then it could go up from there. Brendan's looking for the answer to your second question. But on the Sprint, T-Mo, it's kind of six of one, half a dozen of the other, because the early, and obviously our stocks are all up today on the prospect of 4, staying 4. But I do think that there is -- it's not entirely that black-and-white. I do think a combination that actually is stronger with 3, where you have investment over time, where the combination of Sprint, T-Mobile, basically invest more than either of the 2 on a combined -- if you add the 2 investments up would have done before. And I actually believe that would happen at some point in the future if they get together. I think that's probably good. So I don't see this as binary as the market sees it.

And Dave, on the newbuild question. So of the 134, 119 of those were built internationally, only 15 were built in the U.S. And of the 119, a big chunk of those, 57 of those were in Brazil. And then it was spread throughout our other markets, but the biggest contributors were Costa Rica and Nicaragua.

And what's the total investment there, Brendan?

Dollar-wise?

Yes.

It's in the press release, isn't it?

Yes. I think in the press release, we do have it. I don't know off the top of my head, I apologize. But even that disclosure in the press release, in the press release, it says construction of new sites, the $16.8 million, that would be the cash flow that was spent during the quarter. So some of that would've been for sites that are in progress as well as the sites that got completed.

And now to the line of Walter Piecyk from BTIG.

A couple of follow-ups. When AT&T or whoever replaces an antenna, if they have multiple ports for different spectrum bands, is that what increases the price? Is it price on spectrum based on the number of ports in the antenna? Or does the price increase for them on the amendment basis depending on whether they actually hook up a radio into that port for that particular band?

We have the right, Walt, to charge anytime there's any change out of equipment, whether it's bigger, smaller, fatter, skinnier. We don't typically do that. What we typically do, and this is exactly what interestingly our customers say they want, we just happen to do it, is we typically only charge additional amounts when the change takes up additional load, such as when there's a heavier or a wider antenna. Now we have the right to charge at different times, we typically don't.

Got it. So if they put up an antenna that have extra ports for future spectrum usages, it will go up today, whatever the max is. And if they came back in and layered in additional radios for WCS, AWS-4 whatever it is, there's no incremental charge at that point from you guys?

Well, no. Anytime they're adding or changing, there's an opportunity for us under the structure of our agreements to charge something. Now whether we do or not, we look at every fact and circumstance of that particular site. So in your hypothetical, when you add or change -- any hypothetical, Walt, that you use where there's an add or a change of a radio or antenna, we could charge more, but we often don't.

Got you. And then on your spring commentary from earlier, just so I understand this correctly, are you saying that based on news reports you think they might be more active in macro next year? Or has there actually been some indication from the company that they're actually going to start spending again?

Based on their third quarter commentary and what we're seeing in the field and in our application pipeline.

That's great, awesome. And then just lastly then, can you give us a similar update on T-Mobile and Verizon? Verizon, I'm thinking more broadly for the year, but T-Mobile more recently. Has there been any kind of change in the activity from T-Mobile or Verizon? Is Verizon generally up or down this year versus last? And did some of the changes that they've had in there is CTO office changed the outlook that you have from them for 2018 or 2019?

Yes, I don't want to get that granular with either T-Mobile or Verizon. And the only reason I did with Sprint because it is such a change from their prior behavior where there hasn't really been anything over the last couple of years, but I would say that we see both Verizon and T-Mobile kind of being steady as she goes.

And now to the line of Brandon Nispel from KeyBanc Capital Markets.

I guess, would you guys consider roughly $25 million in new leasing activities a stable run rate? Or can you help us understand what could drop off in terms of new spectrum deployments from 2017 and obviously then you have 600, 2.5 and FirstNet coming on in 2018.

No, because you're trying to get to 2018 guidance, and I would prefer we not do that.

And now to the line of Robert Gutman from Guggenheim.

In the prepared remarks, you mentioned the WCS and AWS-3 spectrum, and I wasn't clear if you're implying that those are current drivers. Are you seeing activity from that already? And if you are, then how would that be impacted by throwing in FirstNet next year?

No, I was implying that that's still to come as mostly part of this one truck roll that it will be -- we still expect to see a lot of that rolled into the one truck roll from AT&T along with FirstNet.

And now to the line of Rosa Velásquez from State Street. Rosa Velásquez: I think my question is very specific to Brazil. So thank you for the update on Oi. I think you mentioned that it's undergoing this slow process of judicial reorganization. So I'm just wondering if in your scenarios, have you considered the possibility of a potential consolidation among the top players in the field? And if so, I just want to get a sense of what's the possibility of redundant network territories and then nonrenewal of leases to Oi? So that's my first question. Part of this is these recent acquisitions in Brazil, would that be part of a strategy to maybe offset this risk? And then my second question is related to an intercompany loan agreement with Brazilian entities. I'm not sure if this is still in place. But if so, what's the limit and then what's outstanding, if you're able to share that?

Okay. On your first question, we have thought about that, and there are two current rumored consolidation possibilities for Oi. One would be with TIM, and that's been long rumored, and that kind of comes and goes depending on the day of the week. For that to happen, there would need to be certain regulatory changes around the concession loss in Brazil or TIM, I don't think, would be interested. If that were to happen, and I've said this many times before, I actually don't think that 4 carriers going to 3 in Brazil would necessarily be a bad thing. I think you'd have stronger customers, and as we've said many times, the need in Brazil is huge. The only thing that's holding Brazil back is actually the strength and the cash flows of our customers because they need tremendous network investment. So the stronger they are, the more benefit, I think, we would see from that. So that's not necessarily bad. I don't know if it's going to happen or not. There would have to be particularly some regulatory changes for that to occur. And the other more recently rumored consolidation would be China Mobile coming in and looking to take over Oi, which, of course, would not be a consolidation event but you have an extremely well-capitalized new entrant into the Brazilian market, which would be good for us. Brendan, do you have the -- she's asking about the intercompany loan that changes based on the movements in the reais.

Yes. It was one of the acquisitions that we did in Brazil. We funded it through an intercompany loan from a U.S. subsidiary to our Brazilian entity. It's denominated in U.S. dollars. And so when there are changes in the FX rate each quarter, the value of that loan or the gain or loss that exists on that loan as a result of those FX changes flows through our P&L statement. So it does cause for some funny moves up and down in terms of our P&L, but really, it's money that we owe within the SBA umbrella to ourselves.

[Operator Instructions]. And now to the line of Phil Cusick from JPMorgan.

A couple of follow-ups. FirstNet, you've signed a few leases, it sounds like, though a small number. Do you think those are representative of what you'll see going forward? And how do they compare to the average amendment?

I did not say we signed any. I said we have...

Oh, you said you're seeing some early activity.

No, we have early application activity.

Oh, application activity, excuse me.

Application activity.

I'm sure I was not clear.

And then with the 1,200 new sites that you've contracted to buy, should we expect a level of slowdown in the buyback pace?

Well, maybe in Q4.

You should expect we continue to operate within our leverage target, and so that provides whatever it provides.

Okay. And then finally, there's been a lot going on in the African tower markets. How do you think about those markets? Have you looked at them? And if so, are they interesting, or if you sort of looked and passed a few times?

I think they could be interesting for the right price. I think the biggest issue there -- well, there are 2 big issues in Africa. One is the power issue, and I do believe that the companies there have spent the last several years doing a good job of getting on top of that issue. And then, of course, you have the currency issue. Those would be the two big concerns, both of which, I think, can be solved with the right financial transaction. Africa is the kind of market that, to the earlier question that I answered, would fit within our kind of growthy type of market, that would fit well, I think, into our levered capital appreciation strategy.

I would you imagine doing sort of a -- think of it sort of as a Canadian built-to-suit starting from scratch? Or would you need to do a pretty sizable transaction to really start that type of region?

Well, you'd always want to go in with some size and some scale if you can do it for the right financial terms. I mean, that's always the preferred approach. And that would have been the approach in Canada if it was available to us.

Thank you. We have no more questions in queue. Please continue.

I want to thank everyone for joining us, and we look forward to the next time we're together, which will be some time in February when we report our fourth quarter results and when we provide our initial 2018 outlook. Thank you.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive TeleConference service. You may now disconnect.