SBA COMMUNICATIONS CORP — Call Transcript 2025

I'm Anna Goshko, and this is the Bank of America 2025 leveraged finance conference. I am the high-yield credit analyst covering technology and telecom. We're thrilled to have SBA Communications with us today, Marc Montagner, the company's Chief Financial Officer. Marc, thanks so much for joining us. Thanks for having me. Good. Okay, I think we'll kind of just dive right into questions, but we'll see how much ground we can cover, but make sure we leave some time at the end to make sure that we've had a comprehensive view on what's going on with SBA. I wanted to start with, site development has been really strong this year for you guys. What's been driving that activity? The service business is obviously a little bit cyclical, and we are indexed towards one carrier, and the carrier has a coverage requirement that they need to meet by the second quarter of 2026. They have been very active, basically rolling up sites. That is on the service side. On the lease-up, I think we have seen a pickup of activity. I think we did $9 million of lease-up in the first quarter, $8 million in the second quarter, $10 million in the third quarter. I think the trend is going in the right directions. I think you have seen a large wave of CapEx in 2022, 2023, where the wireless operator rolled out 5G. They received a 10x increase in capacity, and now they just need to expand the coverage, deploy more 5G to a bigger coverage area, fill up some capacity gap that they have. I think we're very pleased with the level of application that keeps rising. The momentum is there, and we feel good about 2026. Okay. I think on your recent call, you guys talked about kind of seeing a greater proliferation of 5G use cases. If you can expand on that. Also, as part of that, obviously fixed wireless access is FWA, a part of the carriers, is clearly something that's expanding and has a lot of momentum. From your vantage point, how burdensome is the FWA on the networks, and how big a driver is that for SBA in terms of your growth outlook? I mean, I wish I could answer the question. I think we are a real estate company, so it's a passive real estate business. We lease site on the towers and vertically and site at the base for the equipment, optic equipment, the generators, the solar panel, batteries, and so on. For us, on the network, a bet is a bet. We do not really know. We have no visibility into the packets going to the network. I think that's what the whole industry talks about, that fixed wireless access is chewing a lot of capacity. Fixed wireless access users are probably using 20-25 times more capacity than a handset user. The industry, the wireless industry is going to add over 10 million new fixed wireless access customers this year. Obviously, that is putting a huge burden on the network, which is good for us. Okay. Probably related to that topic, to FWA, but you've talked about a push by carriers into more rural markets. Could you just talk about how rural are these markets, and is your hunch that it's really the fixed wireless access that's a key driver there? To be honest, we've seen the carriers expanding the coverage. I don't know if it's fixed wireless access, it's for handsets, but I think SpaceX getting into the business, I think, is good for us. They spent $20 billion buying a spectrum from DISH. I think long-term is going to be good because if you really look at the next generation LEO that SpaceX or Starlink is going to roll out, it's going to be even lower, orbit less latency, more capacity, a smaller terminal. The new mini terminals are really small. Suddenly you spend, I don't know, $200 buying a terminal, you plug it in, and within 10 minutes you could watch Netflix or get on a Zoom call. That's obviously in a rural area, it could be a competitor to fixed wireless access. That's probably going to push the carriers to expand their rural area. I feel good about, I think, SpaceX getting into the business because it's going to be a new actor, and it's good for the industry overall, I believe. Okay. You preempted really my next question, which is just there's been a lot of talk about the direct-to-device or direct-to-cell actually being a substitute for terrestrial wireless. It's really early stage, but it sounds like you kind of see a positive outcome rather than a negative outcome. Yeah, I think it's positive. If you're a carrier, I mean, 20 years ago, 10 years ago, the industry was regrowing. Now everybody has a handset. In order to compete, you need to be different, have something that your competitor doesn't have. To the extent you could sell a device with coverage through your terrestrial network or the satellite, I think it's probably a differentiator. I think it's just going to be good for the industry, and it's going to push everybody trying to expand the range of what they could offer. If you look at SpaceX, I was starting, spent $20 billion buying Spectrum. I don't know what the plan is. They talk about building hybrid network. If I look at what XM Radio, the satellite radio company, has done, it's a satellite radio company, but they've built thousands of repeaters in urban areas to basically send the signal into houses, garages, under the tree, under the overpass. If you're starting, if you really want to have a direct-to-cell, direct-to-device connectivity in urban areas, you're going to have a tree, you're going to have a building masking the direct line to the satellite. I think having some sort of probably hybrid network with cell towers probably makes sense. I don't know what the plan is. I'm just reading what you're reading in the newspaper. I think overall, long-term, it can only be good for the tower industry. There's an interesting kind of comment on one of the recent calls you guys have had, which was talked about the wireless hybrid networks, that it really gives the wireless carriers more insights into where they actually should be placing macro cells. That's right. That's what we heard from one operator saying that suddenly we could see a lot of pings from satellite in a region where we have no coverage. It probably makes sense to build a tower right now because there's demand. Yeah, it's helping the other way. Okay, great. Okay, so another topic. SBA recently announced a new MLA or long-term agreement with Verizon. A lot of questions around it, I think, on your most recent call. Just to summarize, you also have an MLA with AT&T, right? That was signed in 2023. One, are these MLAs, how similar or how different are they? I know part of it is probably under nondisclosure, but if you could just talk about the structures. Really, what's the benefit of these agreements to SBA and what do you give up? Yeah. I think if you really look at the structure of the wireless industry today, you have three wireless operators, and top-line growth rate is a single digit. They need to build more capacity, expand the coverage. They're going to have to do 6G. Having a holistic MLA with a tower company like us makes sense because in exchange for volume commitment, they get basically better pricing, but also from our standpoint, you get a minimum growth rate going forward. They can control their cost. We could basically put a floor on the growth rate, and it's always upside for us in case they need more capacity. I think also allows them to roll capacity or coverage much faster in the next generation because you have a price list, you know how much it's going to cost you to get on a tower, you know what it costs for an amendment, you know what it costs you for a new lease. It basically makes life easier for all of us in terms of the relationship. It's more of a partnership than suddenly a vendor relationship where each time they come to a tower, you need to negotiate a new lease. It just makes life easier basically for all of us. Okay. Another just kind of last question on maybe the U.S. business before we switch to international. What is SBA's exposure to DISH? One of the things that's come up in one of our sessions earlier was DISH trying to kind of back out of tower leases, and there's been some lawsuits by some of your peers there. Where are you guys in terms of that exposure? For us, it's about $55 million a year, a very little lease-up in 2025. We assume zero for 2026. We have short-term contract with DISH, so it will be about $25 million of churn in 2027, $25 million of churn in 2028. The total exposure on the contract is $110 million. I think, and they're current on the lease right now. I think for us, it's a non-event, I think. Okay. They have been trying to get out of their leases, but I think that there is going to be lawsuits over that. Yeah, I can't comment on this, obviously, but I think our exposure is limited. I think we're okay on that front. Okay, great. Switching to international. You recently closed on the last part of the acquisition of the Millicom towers in five Central American countries. I think those are Guatemala, Honduras, Panama, El Salvador, and Nicaragua. Now you are the largest tower operator in Central America. That's right. Yeah. Why was this the right deal for you guys? And given your size now in Central America, what's the growth potential, either organically or inorganically? Yeah. I think those are we were already a tower operator in the region. We liked the region because it has been consolidated to two wireless operators, Millicom and Claro, which is basically the Carlos Slim company. The 5G is still at a very low rate of deployment. We negotiated with Millicom a 15-year lease in U.S. dollars with escalator and BTS commitment. We have locked in basically mid to high single-digit growth rate in a market where we operate already with the largest operator in the region. We pay 11 times EBITDA. I think it is a creative deal at a great valuation with a great partner, I think. We are doing very well so far in terms of integrating the assets. We are very pleased with this transaction. Okay. What about the potential for inorganic growth in that region? I think obviously. Or like in tangentially, or is there? Oh, you mean M&A? Yeah. We are not really looking to expand through M&A in emerging markets at this stage. I think we really like our position in Central America. We look at our business. It's about 80% domestic, 20% international, out of international, 15% is Brazil. Brazil, I think I'm very bullish Brazil for the long term. The country is a large exporter of mineral, agricultural product, and oil. It's always going to be a growth market. GDP per capita is very high for an emerging market. It's the largest economy in Latin America. We are going through basically a consolidation. Oi, the wireline operator, is going bankrupt, and the wireless operator is being parceled out to the other three wireless operators. We face churn in the last few years, and we're going to see more churn in 2025 and 2026. Long-term, 5G is less than 50% deployed. Brazil, I think, is going to be a growth market for us. It is just a question of going through the next couple of years. Long-term, we feel good about Brazil, but I do not see us doing more M&A in emerging markets at this stage. Okay. What about developed markets? It would be like Europe, for example, internationally. I think we like Europe. You could assume that whenever a portfolio of towers is being sold somewhere, we sign an LDA, we look at it. I think my personal issue with Europe right now is that most of the market have four carriers, and they're getting considered into three, the French market, the British market, probably the Italian market. With rent sharing, you're probably going to go from four wireless operators to two wireless operators. I think if you're a PE firm, private company, you could probably buy asset at a very attractive valuation with leverage. You probably get a really good return. It's very difficult for public company to buy into churn because then you report every quarter more churn. You dilute your top-line growth rate. I think we obviously look at Europe, but we haven't found the right opportunities. I think rather buy an asset like Millicom where you're locking a mid to high single-digit growth rate, 15-year contract in U.S. dollars that going into market where you know you're going to see churn. We learn that whenever an operator is being consolidated, like in Brazil or the U.S. with Sprint, you're looking at three to five years of churn. It takes time. It's good for the long term of the industry, but we're not going to step in front of a consolidating market. Got it. Okay. Kind of putting it all together. 2025 consolidated site leasing organic revenue growth guidance, I believe is about 2%. That still includes some outsized Sprint churn. With the Millicom towers now in the mix, the Sprint churn starting to abate, the new Verizon MLA, what's your target for organic revenue growth going forward? If you just look at the U.S. market, we always talk about the 3 + 3 - 1. 3% growth rate from Escalator, another 3% growth rate from lease up, and 1% churn from non-Sprint churn. You should probably think of a mid-single-digit growth rate in the U.S. Central America is probably mid to high single-digit. Brazil right now, I think we obviously have churn in 2025, 2026, but you pass the next two or three years, I think you are probably looking at a mid to high single-digit growth rate in Brazil as well. Okay, great. EBITDA margin. It is in the 68% area. No one's complaining. I think it is very enviable. You guys are just the tower industry now, and you guys are really efficient in terms of how you operate. Is there potential for further profitability enhancement? Yes, absolutely. I think, first of all, remember bad debt hit USD and ASL. That ticks with some bad debt due to some bankruptcies, both in the U.S. and outside of the U.S. That's going to get flushed out. Two, our service business is very strong, and the service business doesn't have a 70% EBITDA margin. It's more 15%-20% EBITDA margin. This has grown faster than anticipated. That's put a lot of pressure on the overall business. The Central American business has slightly lower margin right now, but with lease up, you have basically 100% or close to 100% flow through to the bottom line. I think that's going to drive EBITDA margin up again. I think there's an upside on the margin there as well. Okay. What about potential for more divestitures? You recently sold some Canadian towers. Yeah. We, Brendan, when you became the CEO, I became the CFO back in January of 2024. We announced a portfolio review, and it's ongoing basically. You look at every single market, and you realize in the market where you have scale, you have better EBITDA margins because you have a dialogue, a better dialogue with the operators. Obviously, you fix costs on the G&A side, gets cover better if you have a bigger footprint. We sold Argentina, we sold Colombia, we sold the Philippines, we sold Canada. We just had a few hundred towers. At this stage, I mean, if we still have a few markets where we have a minimum footprint, they're massively free cash flow positive. If we could monetize it for the right price, we may do it, but there's no action really. I think we like where we are right now with mostly Central America and Brazil as the bulk of our international footprint. Okay. Switching to cap structure. You recently changed your net leverage target. It was 7.0-7.5. It is now 6.0-7.0. Notably, you were already in that 6%-7% or 6-7 times range, I think since late 2022. By three years. Basically three years. Yeah. All you're really doing is lowering your target to where you've been, maintaining that leverage for the past three years. Further, you're saying that you are planning to transition to being an investment-grade issuer. I've got a couple of questions around that. A year ago when you were here, and I think when you kind of first started in the role, SBA was pretty clear that you didn't want to chase an investment-grade rating because you like the flexibility of not having to commit to investment-grade requirements, which is what the agencies always want. The rating agencies want to hear like, "We're committed to IG." You would like to have the flexibility on M&A and shareholder returns. You were happy with your cost of capital. You do have unsecured debt with 3% area coupons. Though admittedly, that was issued in a lower rate environment. It was 2021 when money was free. Overall, why the change from this idea that you wanted to maintain flexibility to basically now saying you want to become an investment-grade issuer? Yeah. I think investment-grade status came to us. We did not chase it. I think we have been operating below the seven turns for three years now. S&P changed the methodology that they use for tower company in the spring. They really look at the tower industry, basically three customers and the long-term contract. Those three customers are investment-grade, generate the bulk of your revenue. Basically, their guidance is that if you are below seven turns of leverage and if your mix of secure and unsecured debt is below the 50% ratio, you basically get an upgrade to investment-grade. The upgrade is at the corporate level to investment-grade. It is really, as we look at this, I think we have been operating below the seven turns for the past three years. In the current interest rates environment, I think we could raise investment-grade bond at 75 basis points better than non-investment-grade bond. We used to finance in the ABS market, but right now, an investment-grade bond would probably be cheaper than an ABS security. There is a cost advantage in going investment-grade. It does not really take away a lot of financial flexibility because we have been operating below the seven turns for the past three years. We did a $1 billion deal for Millicom that only increased leverage by 0.2 turns. We bought back as of earning in late October, $325 million of stock this year already. We have plenty of capacity for the dividend and keep increasing the dividend and buying back shares. I think we feel pretty good about the move to investment-grade. Okay. So you've got like $750 million of these 1.88%. So also like free money, securitized notes. I think the anticipated repayment date, which is January 2026, right? So the ABS market likes when you meet those anticipated repayment dates, even though it's not a hard maturity, right? Right. Are you going to refinance those as unsecured? Is that sort of part of the deal with S&P that you just kind of lower the amount of securitized? Yes. It is coming up early in January. At some point next year, I think we will do a large investment-grade debt deal in order to take our ratio of secured to unsecured to below 50%. We have a $2 billion revolver, and we are probably going to just tap the revolver sometime in January to refinance that ABS. At some point in 2026, do a large IG debt deal to take out basically the terminal and pay out the revolver. Okay. And then you recently got your first IG ratings across the board from Fitch. They were first-time issuer. And oftentimes, Fitch serves that role. Companies will go get the IG rating from Fitch. That kind of like starts the ball rolling. But Moody's is still, so they've got you mid to low double B, so Ba2 issuer, Ba3 unsecured. So what's going on with Moody's? Have you talked to them about this? Yeah, we talked to them. I think I can't comment on this, obviously, but I think they have their methodology. They have to stick to their methodology and maintain their, I think, the way they're looking at things. We have a dialogue with them. I don't know what's going to come out. I can't comment on this, but we have two investment-grade ratings, and that's enough to tap the investment-grade market at this stage. Okay. You did talk about you do not believe it is going to constrain your shareholder returns. Right now, the annualized dividend is about $475 million. How much are you budgeting for share buybacks? Let's just peel the onion, right? It's about $1.9 billion in the last two or three years, $1.9 billion of EBITDA. Last year was $375 million of cash interest expenses, $435 million this year. The dividend, $475 million, $35 million of cash interest expenses, $15 million of maintenance CapEx, $200 million of growth CapEx. You're left with about $700 million of extra cash every year that could be used for share buyback, paying down debt or M&A. In 2023, in a raising interest rate environment, we spent $600 million paying down debt, and we spent about $100 million in M&A. Last year, we spent $200 million on share buybacks, $300 million on M&A. This year, I mean, as of the earning days, we spent $325 million of share buyback. We like the valuation at this level. I think the goal, and we spend a lot of time with our board looking at capital allocation, what you do is that extra $700 million of cash that is being generated after dividend, after basically cash interest expense and CapEx. That is how you create value for the long term. If you find an attractive M&A opportunity, we are going to deploy capital. That was the Millicom deal. Currently, domestic M&A is extremely expensive because of the competition from the private equity firms and the scarcity of assets. We think our shares are attractive. Going forward, I think our payout ratio is about 35%. We are probably going to keep increasing the dividend at double-digit growth rate for the next few years. As long as our shares are trading at this level, I think buybacks are very attractive. Okay, great. Okay. With about two minutes left, I think let me just ask you to just say what you can about the outlook for 2026, what you're most excited about. Is there anything that we haven't touched on that you think you want to leave with the audience? Yeah. Outlook for 2026, we'll give guidance late February at the next earnings call. In terms of the business itself, this business has been around for 35 years. It's going to be around another 35 years. You look at some of the towers that were built in Connecticut, Long Island, Florida, California, the zoning laws are very strict. The carriers need more capacity, more coverage. It's a fantastic business. I would say after the Google search business, it's probably the best business around. Right now, the industry is probably facing three headwinds. One is a raising rate environment where you refinance, as you say, one coupon ABS deal. The one in January is another $1.25 billion ABS in November with one handle on it. You refinance that at the 5%. That creates headwind to FFO and FFO per share, but eventually, that's going to work itself out. Second one is the Sprint turn. You had consolidation in the U.S. from four to three, and that put pressure on the top line growth rate. The third one is really the CapEx wave, right? When you look back 30 years of wireless industry, CapEx as a percentage revenue goes between 25% and 15% of revenue. The cycle is always the same. The wireless operators buy spectrum. They deploy a new generation technology. They get a 10x increase in capacity. They cut CapEx. They fill it up. The cycle starts again. I think we are now probably CapEx as a percentage revenue this year is probably 14.5%. It's the lowest it has ever been for the big operators. 6G will come. The FCC is going to auction up a C-band in 2027. The wireless operators are going to have to roll out a new technology because the world is going wireless with fixed wireless access, with AI and TikTok and whatever. I think I feel good about the industry. Those three headwinds, the CapEx wave, the churn, interest rate environment, all of this is going to go away in the next two or three years. I feel very bullish about the tower industry for the long term. Okay, great. Great note to end on, Mark. Thank you so much for being.

Speaker 2: I'm Anna Goshko, and this is the Bank of America 2025 leveraged finance conference. I am the high-yield credit analyst covering technology and telecom. We're thrilled to have SBA Communications with us today, Marc Montagner, the company's Chief Financial Officer. Marc, thanks so much for joining us. I'm Anna Goshko, and this is the Bank of America 2025 leveraged finance conference. i'm anna goshko and this is the bank of america 2025 leveraged finance conference I am the high-yield credit analyst covering technology and telecom. i am the high-yield credit analyst covering technology and telecom We're thrilled to have SBA Communications with us today, Marc Montagner, the company's Chief Financial Officer. we're thrilled to have sba communications with us today marc montagner the company's chief financial officer Marc, thanks so much for joining us. marc thanks so much for joining us

Speaker 1: Thanks for having me. Thanks for having me. thanks for having me

Speaker 2: Good. Okay, I think we'll kind of just dive right into questions, but we'll see how much ground we can cover, but make sure we leave some time at the end to make sure that we've had a comprehensive view on what's going on with SBA. I wanted to start with, site development has been really strong this year for you guys. What's been driving that activity? Good. good Okay, I think we'll kind of just dive right into questions, but we'll see how much ground we can cover, but make sure we leave some time at the end to make sure that we've had a comprehensive view on what's going on with SBA. okay i think we'll kind of just dive right into questions but we'll see how much ground we can cover but make sure we leave some time at the end to make sure that we've had a comprehensive view on what's going on with sba I wanted to start with, site development has been really strong this year for you guys. i wanted to start with site development has been really strong this year for you guys What's been driving that activity? what's been driving that activity

Speaker 1: The service business is obviously a little bit cyclical, and we are indexed towards one carrier, and the carrier has a coverage requirement that they need to meet by the second quarter of 2026. They have been very active, basically rolling up sites. That is on the service side. On the lease-up, I think we have seen a pickup of activity. I think we did $9 million of lease-up in the first quarter, $8 million in the second quarter, $10 million in the third quarter. I think the trend is going in the right directions. I think you have seen a large wave of CapEx in 2022, 2023, where the wireless operator rolled out 5G. They received a 10x increase in capacity, and now they just need to expand the coverage, deploy more 5G to a bigger coverage area, fill up some capacity gap that they have. The service business is obviously a little bit cyclical, and we are indexed towards one carrier, and the carrier has a coverage requirement that they need to meet by the second quarter of 2026. the service business is obviously a little bit cyclical and we are indexed towards one carrier and the carrier has a coverage requirement that they need to meet by the second quarter of 2026 They have been very active, basically rolling up sites. they have been very active basically rolling up sites That is on the service side. that is on the service side On the lease-up, I think we have seen a pickup of activity. on the lease-up i think we have seen a pickup of activity I think we did $9 million of lease-up in the first quarter, $8 million in the second quarter, $10 million in the third quarter. i think we did $9 million of lease-up in the first quarter $8 million in the second quarter $10 million in the third quarter I think the trend is going in the right directions. i think the trend is going in the right directions I think you have seen a large wave of CapEx in 2022, 2023, where the wireless operator rolled out 5G. i think you have seen a large wave of capex in 2022 2023 where the wireless operator rolled out 5g They received a 10x increase in capacity, and now they just need to expand the coverage, deploy more 5G to a bigger coverage area, fill up some capacity gap that they have. they received a 10x increase in capacity and now they just need to expand the coverage deploy more 5g to a bigger coverage area fill up some capacity gap that they have I think we're very pleased with the level of application that keeps rising. The momentum is there, and we feel good about 2026. I think we're very pleased with the level of application that keeps rising. i think we're very pleased with the level of application that keeps rising The momentum is there, and we feel good about 2026. the momentum is there and we feel good about 2026

Speaker 2: Okay. I think on your recent call, you guys talked about kind of seeing a greater proliferation of 5G use cases. If you can expand on that. Also, as part of that, obviously fixed wireless access is FWA, a part of the carriers, is clearly something that's expanding and has a lot of momentum. From your vantage point, how burdensome is the FWA on the networks, and how big a driver is that for SBA in terms of your growth outlook? Okay. okay I think on your recent call, you guys talked about kind of seeing a greater proliferation of 5G use cases. i think on your recent call you guys talked about kind of seeing a greater proliferation of 5g use cases If you can expand on that. if you can expand on that Also, as part of that, obviously fixed wireless access is FWA, a part of the carriers, is clearly something that's expanding and has a lot of momentum. also as part of that obviously fixed wireless access is fwa a part of the carriers is clearly something that's expanding and has a lot of momentum From your vantage point, how burdensome is the FWA on the networks, and how big a driver is that for SBA in terms of your growth outlook? from your vantage point how burdensome is the fwa on the networks and how big a driver is that for sba in terms of your growth outlook

Speaker 1: I mean, I wish I could answer the question. I think we are a real estate company, so it's a passive real estate business. We lease site on the towers and vertically and site at the base for the equipment, optic equipment, the generators, the solar panel, batteries, and so on. For us, on the network, a bet is a bet. We do not really know. We have no visibility into the packets going to the network. I think that's what the whole industry talks about, that fixed wireless access is chewing a lot of capacity. Fixed wireless access users are probably using 20-25 times more capacity than a handset user. The industry, the wireless industry is going to add over 10 million new fixed wireless access customers this year. Obviously, that is putting a huge burden on the network, which is good for us. I mean, I wish I could answer the question. i mean i wish i could answer the question I think we are a real estate company, so it's a passive real estate business. i think we are a real estate company so it's a passive real estate business We lease site on the towers and vertically and site at the base for the equipment, optic equipment, the generators, the solar panel, batteries, and so on. we lease site on the towers and vertically and site at the base for the equipment optic equipment the generators the solar panel batteries and so on For us, on the network, a bet is a bet. for us on the network a bet is a bet We do not really know. we do not really know We have no visibility into the packets going to the network. we have no visibility into the packets going to the network I think that's what the whole industry talks about, that fixed wireless access is chewing a lot of capacity. i think that's what the whole industry talks about that fixed wireless access is chewing a lot of capacity Fixed wireless access users are probably using 20-25 times more capacity than a handset user. fixed wireless access users are probably using 20-25 times more capacity than a handset user The industry, the wireless industry is going to add over 10 million new fixed wireless access customers this year. the industry the wireless industry is going to add over 10 million new fixed wireless access customers this year Obviously, that is putting a huge burden on the network, which is good for us. obviously that is putting a huge burden on the network which is good for us

Speaker 2: Okay. Probably related to that topic, to FWA, but you've talked about a push by carriers into more rural markets. Could you just talk about how rural are these markets, and is your hunch that it's really the fixed wireless access that's a key driver there? Okay. okay Probably related to that topic, to FWA, but you've talked about a push by carriers into more rural markets. probably related to that topic to fwa but you've talked about a push by carriers into more rural markets Could you just talk about how rural are these markets, and is your hunch that it's really the fixed wireless access that's a key driver there? could you just talk about how rural are these markets and is your hunch that it's really the fixed wireless access that's a key driver there

Speaker 1: To be honest, we've seen the carriers expanding the coverage. I don't know if it's fixed wireless access, it's for handsets, but I think SpaceX getting into the business, I think, is good for us. They spent $20 billion buying a spectrum from DISH. I think long-term is going to be good because if you really look at the next generation LEO that SpaceX or Starlink is going to roll out, it's going to be even lower, orbit less latency, more capacity, a smaller terminal. The new mini terminals are really small. Suddenly you spend, I don't know, $200 buying a terminal, you plug it in, and within 10 minutes you could watch Netflix or get on a Zoom call. That's obviously in a rural area, it could be a competitor to fixed wireless access. That's probably going to push the carriers to expand their rural area. To be honest, we've seen the carriers expanding the coverage. to be honest we've seen the carriers expanding the coverage I don't know if it's fixed wireless access, it's for handsets, but I think SpaceX getting into the business, I think, is good for us. i don't know if it's fixed wireless access it's for handsets but i think spacex getting into the business i think is good for us They spent $20 billion buying a spectrum from DISH. they spent $20 billion buying a spectrum from dish I think long-term is going to be good because if you really look at the next generation LEO that SpaceX or Starlink is going to roll out, it's going to be even lower, orbit less latency, more capacity, a smaller terminal. i think long-term is going to be good because if you really look at the next generation leo that spacex or starlink is going to roll out it's going to be even lower orbit less latency more capacity a smaller terminal The new mini terminals are really small. the new mini terminals are really small Suddenly you spend, I don't know, $200 buying a terminal, you plug it in, and within 10 minutes you could watch Netflix or get on a Zoom call. suddenly you spend i don't know $200 buying a terminal you plug it in and within 10 minutes you could watch netflix or get on a zoom call That's obviously in a rural area, it could be a competitor to fixed wireless access. that's obviously in a rural area it could be a competitor to fixed wireless access That's probably going to push the carriers to expand their rural area. that's probably going to push the carriers to expand their rural area I feel good about, I think, SpaceX getting into the business because it's going to be a new actor, and it's good for the industry overall, I believe. I feel good about, I think, SpaceX getting into the business because it's going to be a new actor, and it's good for the industry overall, I believe. i feel good about i think spacex getting into the business because it's going to be a new actor and it's good for the industry overall i believe

Speaker 2: Okay. You preempted really my next question, which is just there's been a lot of talk about the direct-to-device or direct-to-cell actually being a substitute for terrestrial wireless. It's really early stage, but it sounds like you kind of see a positive outcome rather than a negative outcome. Okay. okay You preempted really my next question, which is just there's been a lot of talk about the direct-to-device or direct-to-cell actually being a substitute for terrestrial wireless. you preempted really my next question which is just there's been a lot of talk about the direct-to-device or direct-to-cell actually being a substitute for terrestrial wireless It's really early stage, but it sounds like you kind of see a positive outcome rather than a negative outcome. it's really early stage but it sounds like you kind of see a positive outcome rather than a negative outcome

Speaker 1: Yeah, I think it's positive. If you're a carrier, I mean, 20 years ago, 10 years ago, the industry was regrowing. Now everybody has a handset. In order to compete, you need to be different, have something that your competitor doesn't have. To the extent you could sell a device with coverage through your terrestrial network or the satellite, I think it's probably a differentiator. I think it's just going to be good for the industry, and it's going to push everybody trying to expand the range of what they could offer. If you look at SpaceX, I was starting, spent $20 billion buying Spectrum. I don't know what the plan is. They talk about building hybrid network. Yeah, I think it's positive. yeah i think it's positive If you're a carrier, I mean, 20 years ago, 10 years ago, the industry was regrowing. if you're a carrier i mean 20 years ago 10 years ago the industry was regrowing Now everybody has a handset. now everybody has a handset In order to compete, you need to be different, have something that your competitor doesn't have. in order to compete you need to be different have something that your competitor doesn't have To the extent you could sell a device with coverage through your terrestrial network or the satellite, I think it's probably a differentiator. to the extent you could sell a device with coverage through your terrestrial network or the satellite i think it's probably a differentiator I think it's just going to be good for the industry, and it's going to push everybody trying to expand the range of what they could offer. i think it's just going to be good for the industry and it's going to push everybody trying to expand the range of what they could offer If you look at SpaceX, I was starting, spent $20 billion buying Spectrum. if you look at spacex i was starting spent $20 billion buying spectrum I don't know what the plan is. i don't know what the plan is They talk about building hybrid network. they talk about building hybrid network If I look at what XM Radio, the satellite radio company, has done, it's a satellite radio company, but they've built thousands of repeaters in urban areas to basically send the signal into houses, garages, under the tree, under the overpass. If you're starting, if you really want to have a direct-to-cell, direct-to-device connectivity in urban areas, you're going to have a tree, you're going to have a building masking the direct line to the satellite. I think having some sort of probably hybrid network with cell towers probably makes sense. I don't know what the plan is. I'm just reading what you're reading in the newspaper. I think overall, long-term, it can only be good for the tower industry. If I look at what XM Radio, the satellite radio company, has done, it's a satellite radio company, but they've built thousands of repeaters in urban areas to basically send the signal into houses, garages, under the tree, under the overpass. if i look at what xm radio the satellite radio company has done it's a satellite radio company but they've built thousands of repeaters in urban areas to basically send the signal into houses garages under the tree under the overpass If you're starting, if you really want to have a direct-to-cell, direct-to-device connectivity in urban areas, you're going to have a tree, you're going to have a building masking the direct line to the satellite. if you're starting if you really want to have a direct-to-cell direct-to-device connectivity in urban areas you're going to have a tree you're going to have a building masking the direct line to the satellite I think having some sort of probably hybrid network with cell towers probably makes sense. i think having some sort of probably hybrid network with cell towers probably makes sense I don't know what the plan is. i don't know what the plan is I'm just reading what you're reading in the newspaper. i'm just reading what you're reading in the newspaper I think overall, long-term, it can only be good for the tower industry. i think overall long-term it can only be good for the tower industry

Speaker 2: There's an interesting kind of comment on one of the recent calls you guys have had, which was talked about the wireless hybrid networks, that it really gives the wireless carriers more insights into where they actually should be placing macro cells. There's an interesting kind of comment on one of the recent calls you guys have had, which was talked about the wireless hybrid networks, that it really gives the wireless carriers more insights into where they actually should be placing macro cells. there's an interesting kind of comment on one of the recent calls you guys have had which was talked about the wireless hybrid networks that it really gives the wireless carriers more insights into where they actually should be placing macro cells

Speaker 1: That's right. That's what we heard from one operator saying that suddenly we could see a lot of pings from satellite in a region where we have no coverage. It probably makes sense to build a tower right now because there's demand. Yeah, it's helping the other way. That's right. that's right that's That's what we heard from one operator saying that suddenly we could see a lot of pings from satellite in a region where we have no coverage. that's what we heard from one operator saying that suddenly we could see a lot of pings from satellite in a region where we have no coverage It probably makes sense to build a tower right now because there's demand. it probably makes sense to build a tower right now because there's demand Yeah, it's helping the other way. yeah it's helping the other way

Speaker 2: Okay, great. Okay, so another topic. SBA recently announced a new MLA or long-term agreement with Verizon. A lot of questions around it, I think, on your most recent call. Just to summarize, you also have an MLA with AT&T, right? That was signed in 2023. One, are these MLAs, how similar or how different are they? I know part of it is probably under nondisclosure, but if you could just talk about the structures. Really, what's the benefit of these agreements to SBA and what do you give up? Okay, great. okay great Okay, so another topic. okay so another topic SBA recently announced a new MLA or long-term agreement with Verizon. sba recently announced a new mla or long-term agreement with verizon A lot of questions around it, I think, on your most recent call. a lot of questions around it i think on your most recent call Just to summarize, you also have an MLA with AT&T, right? just to summarize you also have an mla with at&t right That was signed in 2023. that was signed in 2023 One, are these MLAs, how similar or how different are they? one are these mlas how similar or how different are they I know part of it is probably under nondisclosure, but if you could just talk about the structures. i know part of it is probably under nondisclosure but if you could just talk about the structures Really, what's the benefit of these agreements to SBA and what do you give up? really what's the benefit of these agreements to sba and what do you give up

Speaker 1: Yeah. I think if you really look at the structure of the wireless industry today, you have three wireless operators, and top-line growth rate is a single digit. They need to build more capacity, expand the coverage. They're going to have to do 6G. Having a holistic MLA with a tower company like us makes sense because in exchange for volume commitment, they get basically better pricing, but also from our standpoint, you get a minimum growth rate going forward. They can control their cost. We could basically put a floor on the growth rate, and it's always upside for us in case they need more capacity. Yeah. yeah I think if you really look at the structure of the wireless industry today, you have three wireless operators, and top-line growth rate is a single digit. i think if you really look at the structure of the wireless industry today you have three wireless operators and top-line growth rate is a single digit They need to build more capacity, expand the coverage. they need to build more capacity expand the coverage They're going to have to do 6G. they're going to have to do 6g Having a holistic MLA with a tower company like us makes sense because in exchange for volume commitment, they get basically better pricing, but also from our standpoint, you get a minimum growth rate going forward. having a holistic mla with a tower company like us makes sense because in exchange for volume commitment they get basically better pricing but also from our standpoint you get a minimum growth rate going forward They can control their cost. they can control their cost We could basically put a floor on the growth rate, and it's always upside for us in case they need more capacity. we could basically put a floor on the growth rate and it's always upside for us in case they need more capacity I think also allows them to roll capacity or coverage much faster in the next generation because you have a price list, you know how much it's going to cost you to get on a tower, you know what it costs for an amendment, you know what it costs you for a new lease. It basically makes life easier for all of us in terms of the relationship. It's more of a partnership than suddenly a vendor relationship where each time they come to a tower, you need to negotiate a new lease. It just makes life easier basically for all of us. I think also allows them to roll capacity or coverage much faster in the next generation because you have a price list, you know how much it's going to cost you to get on a tower, you know what it costs for an amendment, you know what it costs you for a new lease. i think also allows them to roll capacity or coverage much faster in the next generation because you have a price list you know how much it's going to cost you to get on a tower you know what it costs for an amendment you know what it costs you for a new lease It basically makes life easier for all of us in terms of the relationship. it basically makes life easier for all of us in terms of the relationship It's more of a partnership than suddenly a vendor relationship where each time they come to a tower, you need to negotiate a new lease. it's more of a partnership than suddenly a vendor relationship where each time they come to a tower you need to negotiate a new lease It just makes life easier basically for all of us. it just makes life easier basically for all of us

Speaker 2: Okay. Another just kind of last question on maybe the U.S. business before we switch to international. What is SBA's exposure to DISH? One of the things that's come up in one of our sessions earlier was DISH trying to kind of back out of tower leases, and there's been some lawsuits by some of your peers there. Where are you guys in terms of that exposure? Okay. okay Another just kind of last question on maybe the U.S. business before we switch to international. another just kind of last question on maybe the u.s business before we switch to international What is SBA's exposure to DISH? what is sba's exposure to dish One of the things that's come up in one of our sessions earlier was DISH trying to kind of back out of tower leases, and there's been some lawsuits by some of your peers there. one of the things that's come up in one of our sessions earlier was dish trying to kind of back out of tower leases and there's been some lawsuits by some of your peers there Where are you guys in terms of that exposure? where are you guys in terms of that exposure

Speaker 1: For us, it's about $55 million a year, a very little lease-up in 2025. We assume zero for 2026. We have short-term contract with DISH, so it will be about $25 million of churn in 2027, $25 million of churn in 2028. The total exposure on the contract is $110 million. I think, and they're current on the lease right now. I think for us, it's a non-event, I think. For us, it's about $55 million a year, a very little lease-up in 2025. for us it's about $55 million a year a very little lease-up in 2025 We assume zero for 2026. we assume zero for 2026 We have short-term contract with DISH, so it will be about $25 million of churn in 2027, $25 million of churn in 2028. we have short-term contract with dish so it will be about $25 million of churn in 2027 $25 million of churn in 2028 The total exposure on the contract is $110 million. the total exposure on the contract is $110 million I think, and they're current on the lease right now. i think and they're current on the lease right now I think for us, it's a non-event, I think. i think for us it's a non-event i think

Speaker 2: Okay. They have been trying to get out of their leases, but I think that there is going to be lawsuits over that. Okay. okay They have been trying to get out of their leases, but I think that there is going to be lawsuits over that. they have been trying to get out of their leases but i think that there is going to be lawsuits over that

Speaker 1: Yeah, I can't comment on this, obviously, but I think our exposure is limited. I think we're okay on that front. Yeah, I can't comment on this, obviously, but I think our exposure is limited. yeah i can't comment on this obviously but i think our exposure is limited I think we're okay on that front. i think we're okay on that front

Speaker 2: Okay, great. Switching to international. You recently closed on the last part of the acquisition of the Millicom towers in five Central American countries. I think those are Guatemala, Honduras, Panama, El Salvador, and Nicaragua. Now you are the largest tower operator in Central America. Okay, great. okay great Switching to international. switching to international You recently closed on the last part of the acquisition of the Millicom towers in five Central American countries. you recently closed on the last part of the acquisition of the millicom towers in five central american countries I think those are Guatemala, Honduras, Panama, El Salvador, and Nicaragua. i think those are guatemala honduras panama el salvador and nicaragua Now you are the largest tower operator in Central America. now you are the largest tower operator in central america

Speaker 1: That's right. That's right. that's right

Speaker 2: Yeah. Why was this the right deal for you guys? And given your size now in Central America, what's the growth potential, either organically or inorganically? Yeah. yeah Why was this the right deal for you guys? why was this the right deal for you guys And given your size now in Central America, what's the growth potential, either organically or inorganically? and given your size now in central america what's the growth potential either organically or inorganically

Speaker 1: Yeah. I think those are we were already a tower operator in the region. We liked the region because it has been consolidated to two wireless operators, Millicom and Claro, which is basically the Carlos Slim company. The 5G is still at a very low rate of deployment. We negotiated with Millicom a 15-year lease in U.S. dollars with escalator and BTS commitment. We have locked in basically mid to high single-digit growth rate in a market where we operate already with the largest operator in the region. We pay 11 times EBITDA. I think it is a creative deal at a great valuation with a great partner, I think. We are doing very well so far in terms of integrating the assets. We are very pleased with this transaction. Yeah. yeah I think those are we were already a tower operator in the region. i think those are we were already a tower operator in the region We liked the region because it has been consolidated to two wireless operators, Millicom and Claro, which is basically the Carlos Slim company. we liked the region because it has been consolidated to two wireless operators millicom and claro which is basically the carlos slim company The 5G is still at a very low rate of deployment. the 5g is still at a very low rate of deployment We negotiated with Millicom a 15-year lease in U.S. dollars with escalator and BTS commitment. we negotiated with millicom a 15-year lease in u.s dollars with escalator and bts commitment We have locked in basically mid to high single-digit growth rate in a market where we operate already with the largest operator in the region. we have locked in basically mid to high single-digit growth rate in a market where we operate already with the largest operator in the region We pay 11 times EBITDA. we pay 11 times ebitda I think it is a creative deal at a great valuation with a great partner, I think. i think it is a creative deal at a great valuation with a great partner i think We are doing very well so far in terms of integrating the assets. we are doing very well so far in terms of integrating the assets We are very pleased with this transaction. we are very pleased with this transaction

Speaker 2: Okay. What about the potential for inorganic growth in that region? Okay. okay What about the potential for inorganic growth in that region? what about the potential for inorganic growth in that region

Speaker 1: I think obviously. I think obviously. i think obviously

Speaker 2: Or like in tangentially, or is there? Or like in tangentially, or is there? or like in tangentially or is there

Speaker 1: Oh, you mean M&A? Oh, you mean M&A? oh you mean m&a

Speaker 2: Yeah. Yeah. yeah

Speaker 1: We are not really looking to expand through M&A in emerging markets at this stage. I think we really like our position in Central America. We look at our business. It's about 80% domestic, 20% international, out of international, 15% is Brazil. Brazil, I think I'm very bullish Brazil for the long term. The country is a large exporter of mineral, agricultural product, and oil. It's always going to be a growth market. GDP per capita is very high for an emerging market. It's the largest economy in Latin America. We are going through basically a consolidation. Oi, the wireline operator, is going bankrupt, and the wireless operator is being parceled out to the other three wireless operators. We face churn in the last few years, and we're going to see more churn in 2025 and 2026. Long-term, 5G is less than 50% deployed. We are not really looking to expand through M&A in emerging markets at this stage. we are not really looking to expand through m&a in emerging markets at this stage I think we really like our position in Central America. i think we really like our position in central america We look at our business. we look at our business It's about 80% domestic, 20% international, out of international, 15% is Brazil. it's about 80% domestic 20% international out of international 15% is brazil Brazil, I think I'm very bullish Brazil for the long term. brazil i think i'm very bullish brazil for the long term The country is a large exporter of mineral, agricultural product, and oil. the country is a large exporter of mineral agricultural product and oil It's always going to be a growth market. it's always going to be a growth market GDP per capita is very high for an emerging market. gdp per capita is very high for an emerging market It's the largest economy in Latin America. it's the largest economy in latin america We are going through basically a consolidation. we are going through basically a consolidation Oi, the wireline operator, is going bankrupt, and the wireless operator is being parceled out to the other three wireless operators. oi the wireline operator is going bankrupt and the wireless operator is being parceled out to the other three wireless operators We face churn in the last few years, and we're going to see more churn in 2025 and 2026. we face churn in the last few years and we're going to see more churn in 2025 and 2026 Long-term, 5G is less than 50% deployed. long-term 5g is less than 50% deployed Brazil, I think, is going to be a growth market for us. It is just a question of going through the next couple of years. Long-term, we feel good about Brazil, but I do not see us doing more M&A in emerging markets at this stage. Brazil, I think, is going to be a growth market for us. brazil i think is going to be a growth market for us It is just a question of going through the next couple of years. it is just a question of going through the next couple of years Long-term, we feel good about Brazil, but I do not see us doing more M&A in emerging markets at this stage. long-term we feel good about brazil but i do not see us doing more m&a in emerging markets at this stage

Speaker 2: Okay. What about developed markets? It would be like Europe, for example, internationally. Okay. okay What about developed markets? what about developed markets It would be like Europe, for example, internationally. it would be like europe for example internationally

Speaker 1: I think we like Europe. You could assume that whenever a portfolio of towers is being sold somewhere, we sign an LDA, we look at it. I think my personal issue with Europe right now is that most of the market have four carriers, and they're getting considered into three, the French market, the British market, probably the Italian market. With rent sharing, you're probably going to go from four wireless operators to two wireless operators. I think if you're a PE firm, private company, you could probably buy asset at a very attractive valuation with leverage. You probably get a really good return. It's very difficult for public company to buy into churn because then you report every quarter more churn. You dilute your top-line growth rate. I think we obviously look at Europe, but we haven't found the right opportunities. I think we like Europe. i think we like europe You could assume that whenever a portfolio of towers is being sold somewhere, we sign an LDA, we look at it. you could assume that whenever a portfolio of towers is being sold somewhere we sign an lda we look at it I think my personal issue with Europe right now is that most of the market have four carriers, and they're getting considered into three, the French market, the British market, probably the Italian market. i think my personal issue with europe right now is that most of the market have four carriers and they're getting considered into three the french market the british market probably the italian market With rent sharing, you're probably going to go from four wireless operators to two wireless operators. with rent sharing you're probably going to go from four wireless operators to two wireless operators I think if you're a PE firm, private company, you could probably buy asset at a very attractive valuation with leverage. i think if you're a pe firm private company you could probably buy asset at a very attractive valuation with leverage You probably get a really good return. you probably get a really good return It's very difficult for public company to buy into churn because then you report every quarter more churn. it's very difficult for public company to buy into churn because then you report every quarter more churn You dilute your top-line growth rate. you dilute your top-line growth rate I think we obviously look at Europe, but we haven't found the right opportunities. i think we obviously look at europe but we haven't found the right opportunities I think rather buy an asset like Millicom where you're locking a mid to high single-digit growth rate, 15-year contract in U.S. dollars that going into market where you know you're going to see churn. We learn that whenever an operator is being consolidated, like in Brazil or the U.S. with Sprint, you're looking at three to five years of churn. It takes time. It's good for the long term of the industry, but we're not going to step in front of a consolidating market. I think rather buy an asset like Millicom where you're locking a mid to high single-digit growth rate, 15-year contract in U.S. dollars that going into market where you know you're going to see churn. i think rather buy an asset like millicom where you're locking a mid to high single-digit growth rate 15-year contract in u.s dollars that going into market where you know you're going to see churn We learn that whenever an operator is being consolidated, like in Brazil or the U.S. with Sprint, you're looking at three to five years of churn. we learn that whenever an operator is being consolidated like in brazil or the u.s with sprint you're looking at three to five years of churn It takes time. it takes time It's good for the long term of the industry, but we're not going to step in front of a consolidating market. it's good for the long term of the industry but we're not going to step in front of a consolidating market

Speaker 2: Got it. Okay. Kind of putting it all together. 2025 consolidated site leasing organic revenue growth guidance, I believe is about 2%. That still includes some outsized Sprint churn. With the Millicom towers now in the mix, the Sprint churn starting to abate, the new Verizon MLA, what's your target for organic revenue growth going forward? Got it. got it Okay. okay Kind of putting it all together. 2025 consolidated site leasing organic revenue growth guidance, I believe is about 2%. kind of putting it all together 2025 consolidated site leasing organic revenue growth guidance i believe is about 2% That still includes some outsized Sprint churn. that still includes some outsized sprint churn With the Millicom towers now in the mix, the Sprint churn starting to abate, the new Verizon MLA, what's your target for organic revenue growth going forward? with the millicom towers now in the mix the sprint churn starting to abate the new verizon mla what's your target for organic revenue growth going forward

Speaker 1: If you just look at the U.S. market, we always talk about the 3 + 3 - 1. 3% growth rate from Escalator, another 3% growth rate from lease up, and 1% churn from non-Sprint churn. You should probably think of a mid-single-digit growth rate in the U.S. Central America is probably mid to high single-digit. Brazil right now, I think we obviously have churn in 2025, 2026, but you pass the next two or three years, I think you are probably looking at a mid to high single-digit growth rate in Brazil as well. If you just look at the U.S. market, we always talk about the 3 + 3 - 1. 3% growth rate from Escalator, another 3% growth rate from lease up, and 1% churn from non-Sprint churn. if you just look at the u.s market we always talk about the 3 + 3 - 1 3% growth rate from escalator another 3% growth rate from lease up and 1% churn from non-sprint churn You should probably think of a mid-single-digit growth rate in the U.S. you should probably think of a mid-single-digit growth rate in the u.s Central America is probably mid to high single-digit. central america is probably mid to high single-digit Brazil right now, I think we obviously have churn in 2025, 2026, but you pass the next two or three years, I think you are probably looking at a mid to high single-digit growth rate in Brazil as well. brazil right now i think we obviously have churn in 2025 2026 but you pass the next two or three years i think you are probably looking at a mid to high single-digit growth rate in brazil as well

Speaker 2: Okay, great. EBITDA margin. It is in the 68% area. No one's complaining. I think it is very enviable. You guys are just the tower industry now, and you guys are really efficient in terms of how you operate. Is there potential for further profitability enhancement? Okay, great. okay great EBITDA margin. ebitda margin It is in the 68% area. it is in the 68% area No one's complaining. no one's complaining I think it is very enviable. i think it is very enviable You guys are just the tower industry now, and you guys are really efficient in terms of how you operate. you guys are just the tower industry now and you guys are really efficient in terms of how you operate Is there potential for further profitability enhancement? is there potential for further profitability enhancement

Speaker 1: Yes, absolutely. I think, first of all, remember bad debt hit USD and ASL. That ticks with some bad debt due to some bankruptcies, both in the U.S. and outside of the U.S. That's going to get flushed out. Two, our service business is very strong, and the service business doesn't have a 70% EBITDA margin. It's more 15%-20% EBITDA margin. This has grown faster than anticipated. That's put a lot of pressure on the overall business. The Central American business has slightly lower margin right now, but with lease up, you have basically 100% or close to 100% flow through to the bottom line. I think that's going to drive EBITDA margin up again. I think there's an upside on the margin there as well. Yes, absolutely. yes absolutely I think, first of all, remember bad debt hit USD and ASL. i think first of all remember bad debt hit usd and asl That ticks with some bad debt due to some bankruptcies, both in the U.S. and outside of the U.S. that ticks with some bad debt due to some bankruptcies both in the u.s and outside of the u.s That's going to get flushed out. that's going to get flushed out Two, our service business is very strong, and the service business doesn't have a 70% EBITDA margin. two our service business is very strong and the service business doesn't have a 70% ebitda margin It's more 15%-20% EBITDA margin. it's more 15%-20% ebitda margin This has grown faster than anticipated. this has grown faster than anticipated That's put a lot of pressure on the overall business. that's put a lot of pressure on the overall business The Central American business has slightly lower margin right now, but with lease up, you have basically 100% or close to 100% flow through to the bottom line. the central american business has slightly lower margin right now but with lease up you have basically 100% or close to 100% flow through to the bottom line I think that's going to drive EBITDA margin up again. i think that's going to drive ebitda margin up again I think there's an upside on the margin there as well. i think there's an upside on the margin there as well

Speaker 2: Okay. What about potential for more divestitures? You recently sold some Canadian towers. Okay. okay What about potential for more divestitures? what about potential for more divestitures You recently sold some Canadian towers. you recently sold some canadian towers

Speaker 1: Yeah. We, Brendan, when you became the CEO, I became the CFO back in January of 2024. We announced a portfolio review, and it's ongoing basically. You look at every single market, and you realize in the market where you have scale, you have better EBITDA margins because you have a dialogue, a better dialogue with the operators. Obviously, you fix costs on the G&A side, gets cover better if you have a bigger footprint. We sold Argentina, we sold Colombia, we sold the Philippines, we sold Canada. We just had a few hundred towers. At this stage, I mean, if we still have a few markets where we have a minimum footprint, they're massively free cash flow positive. If we could monetize it for the right price, we may do it, but there's no action really. Yeah. yeah We, Brendan, when you became the CEO, I became the CFO back in January of 2024. we brendan when you became the ceo i became the cfo back in january of 2024 We announced a portfolio review, and it's ongoing basically. we announced a portfolio review and it's ongoing basically You look at every single market, and you realize in the market where you have scale, you have better EBITDA margins because you have a dialogue, a better dialogue with the operators. you look at every single market and you realize in the market where you have scale you have better ebitda margins because you have a dialogue a better dialogue with the operators Obviously, you fix costs on the G&A side, gets cover better if you have a bigger footprint. obviously you fix costs on the g&a side gets cover better if you have a bigger footprint We sold Argentina, we sold Colombia, we sold the Philippines, we sold Canada. we sold argentina we sold colombia we sold the philippines we sold canada We just had a few hundred towers. we just had a few hundred towers At this stage, I mean, if we still have a few markets where we have a minimum footprint, they're massively free cash flow positive. at this stage i mean if we still have a few markets where we have a minimum footprint they're massively free cash flow positive If we could monetize it for the right price, we may do it, but there's no action really. if we could monetize it for the right price we may do it but there's no action really I think we like where we are right now with mostly Central America and Brazil as the bulk of our international footprint. I think we like where we are right now with mostly Central America and Brazil as the bulk of our international footprint. i think we like where we are right now with mostly central america and brazil as the bulk of our international footprint

Speaker 2: Okay. Switching to cap structure. You recently changed your net leverage target. It was 7.0-7.5. It is now 6.0-7.0. Notably, you were already in that 6%-7% or 6-7 times range, I think since late 2022. Okay. okay Switching to cap structure. switching to cap structure You recently changed your net leverage target. you recently changed your net leverage target It was 7.0-7.5. it was 7.0-7.5 It is now 6.0-7.0. it is now 6.0-7.0 Notably, you were already in that 6%-7% or 6-7 times range, I think since late 2022. notably you were already in that 6%-7% or 6-7 times range i think since late 2022

Speaker 1: By three years. By three years. by three years

Speaker 2: Basically three years. Yeah. All you're really doing is lowering your target to where you've been, maintaining that leverage for the past three years. Further, you're saying that you are planning to transition to being an investment-grade issuer. I've got a couple of questions around that. A year ago when you were here, and I think when you kind of first started in the role, SBA was pretty clear that you didn't want to chase an investment-grade rating because you like the flexibility of not having to commit to investment-grade requirements, which is what the agencies always want. The rating agencies want to hear like, "We're committed to IG." You would like to have the flexibility on M&A and shareholder returns. You were happy with your cost of capital. You do have unsecured debt with 3% area coupons. Basically three years. basically three years Yeah. yeah All you're really doing is lowering your target to where you've been, maintaining that leverage for the past three years. all you're really doing is lowering your target to where you've been maintaining that leverage for the past three years Further, you're saying that you are planning to transition to being an investment-grade issuer. further you're saying that you are planning to transition to being an investment-grade issuer I've got a couple of questions around that. i've got a couple of questions around that A year ago when you were here, and I think when you kind of first started in the role, SBA was pretty clear that you didn't want to chase an investment-grade rating because you like the flexibility of not having to commit to investment-grade requirements, which is what the agencies always want. a year ago when you were here and i think when you kind of first started in the role sba was pretty clear that you didn't want to chase an investment-grade rating because you like the flexibility of not having to commit to investment-grade requirements which is what the agencies always want The rating agencies want to hear like, "We're committed to IG." You would like to have the flexibility on M&A and shareholder returns. the rating agencies want to hear like "we're committed to ig." you would like to have the flexibility on m&a and shareholder returns You were happy with your cost of capital. you were happy with your cost of capital You do have unsecured debt with 3% area coupons. you do have unsecured debt with 3% area coupons Though admittedly, that was issued in a lower rate environment. It was 2021 when money was free. Overall, why the change from this idea that you wanted to maintain flexibility to basically now saying you want to become an investment-grade issuer? Though admittedly, that was issued in a lower rate environment. though admittedly that was issued in a lower rate environment It was 2021 when money was free. it was 2021 when money was free Overall, why the change from this idea that you wanted to maintain flexibility to basically now saying you want to become an investment-grade issuer? overall why the change from this idea that you wanted to maintain flexibility to basically now saying you want to become an investment-grade issuer

Speaker 1: Yeah. I think investment-grade status came to us. We did not chase it. I think we have been operating below the seven turns for three years now. S&P changed the methodology that they use for tower company in the spring. They really look at the tower industry, basically three customers and the long-term contract. Those three customers are investment-grade, generate the bulk of your revenue. Basically, their guidance is that if you are below seven turns of leverage and if your mix of secure and unsecured debt is below the 50% ratio, you basically get an upgrade to investment-grade. The upgrade is at the corporate level to investment-grade. It is really, as we look at this, I think we have been operating below the seven turns for the past three years. Yeah. yeah I think investment-grade status came to us. i think investment-grade status came to us We did not chase it. we did not chase it I think we have been operating below the seven turns for three years now. i think we have been operating below the seven turns for three years now S&P changed the methodology that they use for tower company in the spring. s&p changed the methodology that they use for tower company in the spring They really look at the tower industry, basically three customers and the long-term contract. they really look at the tower industry basically three customers and the long-term contract Those three customers are investment-grade, generate the bulk of your revenue. those three customers are investment-grade generate the bulk of your revenue Basically, their guidance is that if you are below seven turns of leverage and if your mix of secure and unsecured debt is below the 50% ratio, you basically get an upgrade to investment-grade. basically their guidance is that if you are below seven turns of leverage and if your mix of secure and unsecured debt is below the 50% ratio you basically get an upgrade to investment-grade The upgrade is at the corporate level to investment-grade. the upgrade is at the corporate level to investment-grade It is really, as we look at this, I think we have been operating below the seven turns for the past three years. it is really as we look at this i think we have been operating below the seven turns for the past three years In the current interest rates environment, I think we could raise investment-grade bond at 75 basis points better than non-investment-grade bond. We used to finance in the ABS market, but right now, an investment-grade bond would probably be cheaper than an ABS security. There is a cost advantage in going investment-grade. It does not really take away a lot of financial flexibility because we have been operating below the seven turns for the past three years. We did a $1 billion deal for Millicom that only increased leverage by 0.2 turns. We bought back as of earning in late October, $325 million of stock this year already. We have plenty of capacity for the dividend and keep increasing the dividend and buying back shares. I think we feel pretty good about the move to investment-grade. In the current interest rates environment, I think we could raise investment-grade bond at 75 basis points better than non-investment-grade bond. in the current interest rates environment i think we could raise investment-grade bond at 75 basis points better than non-investment-grade bond We used to finance in the ABS market, but right now, an investment-grade bond would probably be cheaper than an ABS security. we used to finance in the abs market but right now an investment-grade bond would probably be cheaper than an abs security There is a cost advantage in going investment-grade. there is a cost advantage in going investment-grade It does not really take away a lot of financial flexibility because we have been operating below the seven turns for the past three years. it does not really take away a lot of financial flexibility because we have been operating below the seven turns for the past three years We did a $1 billion deal for Millicom that only increased leverage by 0.2 turns. we did a $1 billion deal for millicom that only increased leverage by 0.2 turns We bought back as of earning in late October, $325 million of stock this year already. we bought back as of earning in late october $325 million of stock this year already We have plenty of capacity for the dividend and keep increasing the dividend and buying back shares. we have plenty of capacity for the dividend and keep increasing the dividend and buying back shares I think we feel pretty good about the move to investment-grade. i think we feel pretty good about the move to investment-grade

Speaker 2: Okay. So you've got like $750 million of these 1.88%. So also like free money, securitized notes. I think the anticipated repayment date, which is January 2026, right? So the ABS market likes when you meet those anticipated repayment dates, even though it's not a hard maturity, right? Okay. okay So you've got like $750 million of these 1.88%. so you've got like $750 million of these 1.88% So also like free money, securitized notes. so also like free money securitized notes I think the anticipated repayment date, which is January 2026, right? i think the anticipated repayment date which is january 2026 right So the ABS market likes when you meet those anticipated repayment dates, even though it's not a hard maturity, right? so the abs market likes when you meet those anticipated repayment dates even though it's not a hard maturity right

Speaker 1: Right. Right. right

Speaker 2: Are you going to refinance those as unsecured? Is that sort of part of the deal with S&P that you just kind of lower the amount of securitized? Are you going to refinance those as unsecured? are you going to refinance those as unsecured Is that sort of part of the deal with S&P that you just kind of lower the amount of securitized? is that sort of part of the deal with s&p that you just kind of lower the amount of securitized

Speaker 1: Yes. It is coming up early in January. At some point next year, I think we will do a large investment-grade debt deal in order to take our ratio of secured to unsecured to below 50%. We have a $2 billion revolver, and we are probably going to just tap the revolver sometime in January to refinance that ABS. At some point in 2026, do a large IG debt deal to take out basically the terminal and pay out the revolver. Yes. yes It is coming up early in January. it is coming up early in january At some point next year, I think we will do a large investment-grade debt deal in order to take our ratio of secured to unsecured to below 50%. at some point next year i think we will do a large investment-grade debt deal in order to take our ratio of secured to unsecured to below 50% We have a $2 billion revolver, and we are probably going to just tap the revolver sometime in January to refinance that ABS. we have a $2 billion revolver and we are probably going to just tap the revolver sometime in january to refinance that abs At some point in 2026, do a large IG debt deal to take out basically the terminal and pay out the revolver. at some point in 2026 do a large ig debt deal to take out basically the terminal and pay out the revolver

Speaker 2: Okay. And then you recently got your first IG ratings across the board from Fitch. They were first-time issuer. And oftentimes, Fitch serves that role. Companies will go get the IG rating from Fitch. That kind of like starts the ball rolling. But Moody's is still, so they've got you mid to low double B, so Ba2 issuer, Ba3 unsecured. So what's going on with Moody's? Have you talked to them about this? Okay. okay And then you recently got your first IG ratings across the board from Fitch. and then you recently got your first ig ratings across the board from fitch They were first-time issuer. they were first-time issuer And oftentimes, Fitch serves that role. and oftentimes fitch serves that role Companies will go get the IG rating from Fitch. companies will go get the ig rating from fitch That kind of like starts the ball rolling. that kind of like starts the ball rolling But Moody's is still, so they've got you mid to low double B, so Ba2 issuer, Ba3 unsecured. but moody's is still so they've got you mid to low double b so ba2 issuer ba3 unsecured So what's going on with Moody's? so what's going on with moody's Have you talked to them about this? have you talked to them about this

Speaker 1: Yeah, we talked to them. I think I can't comment on this, obviously, but I think they have their methodology. They have to stick to their methodology and maintain their, I think, the way they're looking at things. We have a dialogue with them. I don't know what's going to come out. I can't comment on this, but we have two investment-grade ratings, and that's enough to tap the investment-grade market at this stage. Yeah, we talked to them. yeah we talked to them I think I can't comment on this, obviously, but I think they have their methodology. i think i can't comment on this obviously but i think they have their methodology They have to stick to their methodology and maintain their, I think, the way they're looking at things. they have to stick to their methodology and maintain their i think the way they're looking at things We have a dialogue with them. we have a dialogue with them I don't know what's going to come out. i don't know what's going to come out I can't comment on this, but we have two investment-grade ratings, and that's enough to tap the investment-grade market at this stage. i can't comment on this but we have two investment-grade ratings and that's enough to tap the investment-grade market at this stage

Speaker 2: Okay. You did talk about you do not believe it is going to constrain your shareholder returns. Right now, the annualized dividend is about $475 million. How much are you budgeting for share buybacks? Okay. okay You did talk about you do not believe it is going to constrain your shareholder returns. you did talk about you do not believe it is going to constrain your shareholder returns Right now, the annualized dividend is about $475 million. right now the annualized dividend is about $475 million How much are you budgeting for share buybacks? how much are you budgeting for share buybacks

Speaker 1: Let's just peel the onion, right? It's about $1.9 billion in the last two or three years, $1.9 billion of EBITDA. Last year was $375 million of cash interest expenses, $435 million this year. The dividend, $475 million, $35 million of cash interest expenses, $15 million of maintenance CapEx, $200 million of growth CapEx. You're left with about $700 million of extra cash every year that could be used for share buyback, paying down debt or M&A. In 2023, in a raising interest rate environment, we spent $600 million paying down debt, and we spent about $100 million in M&A. Last year, we spent $200 million on share buybacks, $300 million on M&A. This year, I mean, as of the earning days, we spent $325 million of share buyback. We like the valuation at this level. Let's just peel the onion, right? let's just peel the onion right It's about $1.9 billion in the last two or three years, $1.9 billion of EBITDA. it's about $1.9 billion in the last two or three years $1.9 billion of ebitda Last year was $375 million of cash interest expenses, $435 million this year. last year was $375 million of cash interest expenses $435 million this year The dividend, $475 million, $35 million of cash interest expenses, $15 million of maintenance CapEx, $200 million of growth CapEx. the dividend, $475 million $35 million of cash interest expenses $15 million of maintenance capex $200 million of growth capex You're left with about $700 million of extra cash every year that could be used for share buyback, paying down debt or M&A. you're left with about $700 million of extra cash every year that could be used for share buyback paying down debt or m&a In 2023, in a raising interest rate environment, we spent $600 million paying down debt, and we spent about $100 million in M&A. in 2023 in a raising interest rate environment we spent $600 million paying down debt and we spent about $100 million in m&a Last year, we spent $200 million on share buybacks, $300 million on M&A. last year we spent $200 million on share buybacks $300 million on m&a This year, I mean, as of the earning days, we spent $325 million of share buyback. this year i mean as of the earning days we spent $325 million of share buyback We like the valuation at this level. we like the valuation at this level I think the goal, and we spend a lot of time with our board looking at capital allocation, what you do is that extra $700 million of cash that is being generated after dividend, after basically cash interest expense and CapEx. That is how you create value for the long term. If you find an attractive M&A opportunity, we are going to deploy capital. That was the Millicom deal. Currently, domestic M&A is extremely expensive because of the competition from the private equity firms and the scarcity of assets. We think our shares are attractive. Going forward, I think our payout ratio is about 35%. We are probably going to keep increasing the dividend at double-digit growth rate for the next few years. As long as our shares are trading at this level, I think buybacks are very attractive. I think the goal, and we spend a lot of time with our board looking at capital allocation, what you do is that extra $700 million of cash that is being generated after dividend, after basically cash interest expense and CapEx. i think the goal and we spend a lot of time with our board looking at capital allocation what you do is that extra $700 million of cash that is being generated after dividend after basically cash interest expense and capex That is how you create value for the long term. that is how you create value for the long term If you find an attractive M&A opportunity, we are going to deploy capital. if you find an attractive m&a opportunity we are going to deploy capital That was the Millicom deal. that was the millicom deal Currently, domestic M&A is extremely expensive because of the competition from the private equity firms and the scarcity of assets. currently domestic m&a is extremely expensive because of the competition from the private equity firms and the scarcity of assets We think our shares are attractive. we think our shares are attractive Going forward, I think our payout ratio is about 35%. going forward i think our payout ratio is about 35% We are probably going to keep increasing the dividend at double-digit growth rate for the next few years. we are probably going to keep increasing the dividend at double-digit growth rate for the next few years As long as our shares are trading at this level, I think buybacks are very attractive. as long as our shares are trading at this level i think buybacks are very attractive

Speaker 2: Okay, great. Okay. With about two minutes left, I think let me just ask you to just say what you can about the outlook for 2026, what you're most excited about. Is there anything that we haven't touched on that you think you want to leave with the audience? Okay, great. okay great Okay. okay With about two minutes left, I think let me just ask you to just say what you can about the outlook for 2026, what you're most excited about. with about two minutes left i think let me just ask you to just say what you can about the outlook for 2026 what you're most excited about Is there anything that we haven't touched on that you think you want to leave with the audience? is there anything that we haven't touched on that you think you want to leave with the audience

Speaker 1: Yeah. Outlook for 2026, we'll give guidance late February at the next earnings call. In terms of the business itself, this business has been around for 35 years. It's going to be around another 35 years. You look at some of the towers that were built in Connecticut, Long Island, Florida, California, the zoning laws are very strict. The carriers need more capacity, more coverage. It's a fantastic business. I would say after the Google search business, it's probably the best business around. Right now, the industry is probably facing three headwinds. One is a raising rate environment where you refinance, as you say, one coupon ABS deal. The one in January is another $1.25 billion ABS in November with one handle on it. You refinance that at the 5%. Yeah. yeah Outlook for 2026, we'll give guidance late February at the next earnings call. outlook for 2026 we'll give guidance late february at the next earnings call In terms of the business itself, this business has been around for 35 years. in terms of the business itself this business has been around for 35 years It's going to be around another 35 years. it's going to be around another 35 years You look at some of the towers that were built in Connecticut, Long Island, Florida, California, the zoning laws are very strict. you look at some of the towers that were built in connecticut long island florida california the zoning laws are very strict The carriers need more capacity, more coverage. the carriers need more capacity more coverage It's a fantastic business. it's a fantastic business I would say after the Google search business, it's probably the best business around. i would say after the google search business it's probably the best business around Right now, the industry is probably facing three headwinds. right now the industry is probably facing three headwinds One is a raising rate environment where you refinance, as you say, one coupon ABS deal. one is a raising rate environment where you refinance as you say one coupon abs deal The one in January is another $1.25 billion ABS in November with one handle on it. the one in january is another $1.25 billion abs in november with one handle on it You refinance that at the 5%. you refinance that at the 5% That creates headwind to FFO and FFO per share, but eventually, that's going to work itself out. Second one is the Sprint turn. You had consolidation in the U.S. from four to three, and that put pressure on the top line growth rate. The third one is really the CapEx wave, right? When you look back 30 years of wireless industry, CapEx as a percentage revenue goes between 25% and 15% of revenue. The cycle is always the same. The wireless operators buy spectrum. They deploy a new generation technology. They get a 10x increase in capacity. They cut CapEx. They fill it up. The cycle starts again. I think we are now probably CapEx as a percentage revenue this year is probably 14.5%. It's the lowest it has ever been for the big operators. 6G will come. That creates headwind to FFO and FFO per share, but eventually, that's going to work itself out. that creates headwind to ffo and ffo per share but eventually that's going to work itself out Second one is the Sprint turn. second one is the sprint turn You had consolidation in the U.S. from four to three, and that put pressure on the top line growth rate. you had consolidation in the u.s from four to three and that put pressure on the top line growth rate The third one is really the CapEx wave, right? the third one is really the capex wave right When you look back 30 years of wireless industry, CapEx as a percentage revenue goes between 25% and 15% of revenue. when you look back 30 years of wireless industry capex as a percentage revenue goes between 25% and 15% of revenue The cycle is always the same. the cycle is always the same The wireless operators buy spectrum. the wireless operators buy spectrum They deploy a new generation technology. they deploy a new generation technology They get a 10x increase in capacity. they get a 10x increase in capacity They cut CapEx. they cut capex They fill it up. they fill it up The cycle starts again. the cycle starts again I think we are now probably CapEx as a percentage revenue this year is probably 14.5%. i think we are now probably capex as a percentage revenue this year is probably 14.5% It's the lowest it has ever been for the big operators. 6G will come. it's the lowest it has ever been for the big operators 6g will come The FCC is going to auction up a C-band in 2027. The wireless operators are going to have to roll out a new technology because the world is going wireless with fixed wireless access, with AI and TikTok and whatever. I think I feel good about the industry. Those three headwinds, the CapEx wave, the churn, interest rate environment, all of this is going to go away in the next two or three years. I feel very bullish about the tower industry for the long term. The FCC is going to auction up a C-band in 2027. the fcc is going to auction up a c-band in 2027 The wireless operators are going to have to roll out a new technology because the world is going wireless with fixed wireless access, with AI and TikTok and whatever. the wireless operators are going to have to roll out a new technology because the world is going wireless with fixed wireless access with ai and tiktok and whatever I think I feel good about the industry. i think i feel good about the industry Those three headwinds, the CapEx wave, the churn, interest rate environment, all of this is going to go away in the next two or three years. those three headwinds the capex wave the churn interest rate environment all of this is going to go away in the next two or three years I feel very bullish about the tower industry for the long term. i feel very bullish about the tower industry for the long term

Speaker 2: Okay, great. Great note to end on, Mark. Thank you so much for being. Okay, great. okay great Great note to end on, Mark. great note to end on mark Thank you so much for being. thank you so much for being