American Tower Corporation (REIT) (AMT)

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American Tower Corporation (AMT)

Deutsche Bank's DbAccess 21st Annual Media and Telecom Conference

March 04, 2013 9:30 am ET

Executives

Thomas A. Bartlett - Chief Financial Officer, Executive Vice President and Treasurer

Analysts

Brett Feldman - Deutsche Bank AG, Research Division

Presentation

Brett Feldman - Deutsche Bank AG, Research Division

All right. If everybody will just take their seat, we're going to start this in just a couple of seconds. Great. Well, thanks for joining us here. I'm glad you guys can make it. We still have some seats in the back. We have for our first session this morning, Tom Bartlett, the Chief Financial Officer of American Tower. Tom, welcome back to the conference. Glad you guys are here.

Hey, thanks, Brett.

Brett Feldman - Deutsche Bank AG, Research Division

Glad you guys could be here.

Thomas A. Bartlett

Yes, it's great to be here, but it's cold.

Brett Feldman - Deutsche Bank AG, Research Division

It is cold for Florida. This is going to be the same Q&A format that we'll be using all day. I'll ask most the questions up front, and I'll definitely give you guys a chance to raise your hand and ask some questions as well. You may have noticed, I'm working off of our conference guide. If you did not pick one up, my questions are in here. You can use them for yourself, so you can get them after the fact outside the door.

Question-and-Answer Session

Brett Feldman - Deutsche Bank AG, Research Division

Tom, I thought I'd just start off with something that came on the tape just a few minutes ago. You guys are launching a debt refinancing. Can you give us a little background on that?

Thomas A. Bartlett

Yes. Sure, Brett. I'm mean, there's not a lot I can say about it, but we're relatively opportunistic in the marketplace. And what we're looking to do is refinance our CMBS portfolio that we put in place in 2007. So the rate environment looked attractive, and we're in the market. And I'm told that we have a couple of days in terms of how these transactions typically go. But hopefully, it'll be a positive event. Our -- as you may or may not know, our existing CMBS has an average coupon or yield, if you will, about 5.5 -- in the mid-5s, and we'll be looking again for duration on this particular transaction between 5s and 10s, but hopefully we'll be achieving some attractive results in the market. The market seems to be ready.

Brett Feldman - Deutsche Bank AG, Research Division

Great. And it's $1.8 billion, I believe that's roughly...

Thomas A. Bartlett

That's right. That's right. It's $1.8 billion that we're in the market. And again, it's to refinance the existing portfolio that's outstanding.

Brett Feldman - Deutsche Bank AG, Research Division

And those are callable in July so there might a little bit of an early call here on some of these if this works out?

Thomas A. Bartlett

Yes. That's right. That's right. There's a May call associated with them. But given the rate environment, we thought that, that was a good trade.

Brett Feldman - Deutsche Bank AG, Research Division

Okay. And then just the last point on this. The CMBS, for those of you who remember a couple of years ago, we started seeing what were effectively mortgage-backed security or something similar to that in the tower space. They're actually 30-year notes, but they have, I guess 5-year anticipated repayments, where you really would make the payment within 5 years. You said you're looking maybe to get 5 to 10 years on what you're in the market right now. Would you still like the structure, where it's a 5 to 10-year anticipated repayment but with the option to extend up to 30 years? Or do you think you're just looking for straight maturities at this point in time?

Thomas A. Bartlett

Well, a little bit of both. I mean, we're looking at the straight maturities, but they do have the kind of the same notion that -- on the existing securities. And as you recall, we have about 5,000 towers that we put into this portfolio about -- in 2007. And given kind of the cash flow stream that's associated now with that portfolio and the growth that we've had over the last 5 years, it's a very attractive asset. And so as a result, we think we'll be quite successful in the market.

Brett Feldman - Deutsche Bank AG, Research Division

So we'll keep an eye on that. But hopefully, there might be an opportunity to get some interest savings that are not contemplated in the guidance. That would be the upside here?

Thomas A. Bartlett

That's right. That's right. As we talked about last week on our call, the benefit from the interest rate savings as a result of this type of a transaction weren't contemplated in our guidance.

Brett Feldman - Deutsche Bank AG, Research Division

Great. So let's turn our attention back to business operations, and I thought that maybe we could just start off with a quick recap of what you're seeing domestically, and then we could talk a bit internationally. Just high level, you just came out of the quarter. What are the principal things that are driving your U.S. business right now?

Thomas A. Bartlett

I mean, right now as we continued from 2012, which was probably our highest year and I think the fourth quarter was actually our highest quarter in terms of new business activity, we're seeing a continued theme in the U.S. The AT&T and Verizon are leading the charge, if you will. Roughly 80% of our business in the United States right now is from amendment activity or the wireless carriers coming back and adding infrastructure to our existing sites, their existing sites. And we've seen the momentum continue into the first quarter, and we would expect the United States -- in the United States to have another similar level of performance as we had in 2012. So we're seeing activity from the Big 4, if you will: AT&T, Verizon and T-Mobile and Sprint. And they're very, very active. I think Sprint's probably at a -- has got all of the cylinders firing in terms of their deployment. T-Mobile is as well. And AT&T continues to be very, very aggressive in terms of their program. Well, I also see a higher backlog of build-to-suit activity than I have seen in the last several years in the United States. We built 2 -- 250 sites in 2012. I would expect to see that go up in 2013, particularly given the amount of search rings that I see in our U.S. tower group. So we had -- or same tower organic growth in 2012 in the kind of the mid-7s range. And we expect to see that in 2013. A nice thing is that you have escalators that help promote that, so you have 3.5% of revenue that's being generated from that. And I think right now, we're in that cycle of amendment activity. And I would expect to see that same level of activity while we've given 2013 guidance. I mean, we think that we're in the early innings of the buildout of 4G or LTE. And given the spectrum that AT&T and Verizon are deploying that over, they don't need to go on all of their sites, out of the gate, to get that nationwide coverage. But as you would see the pickup in device penetration in the United States, you will continue to see they're continually amending their existing sites with us and with others. And then when, in fact, they've hit the level of infrastructure that each one of those sites can stand, they'll have to start to split cells. And we saw the same level of activity with 3G. 3G took a decade to deploy, and we would expect that LTE will be the kind of the technology of this decade.

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