SBA Communications Corporation Q4 2008 Earnings Call Transcript

Feb.27.09 | About: SBA Communications (SBAC)

SBA Communications Corporation (NASDAQ:SBAC)

Q4 2008 Earnings Call

February 27, 2009 10:00 am ET

Executives

Pam Kline – Vice-President-Capital Markets

Brendan T. Cavanagh – Senior Vice President & Chief Financial Officer

Kurt L. Bagwell – Senior Vice President & Chief Operating Officer

Jeffrey A. Stoops – President & Chief Executive Officer

Analysts

Jonathan Atkin – RBC Capital Markets

Richard Prentis – Raymond James

Simon Flannery – Morgan Stanley

Jonathan Schildkraut – Jefferies & Company

Gray Powell – Wachovia Capital Markets

Manish Jain – JPMorgan

Operator

Ladies and gentlemen, thank you for standing by and welcome to the SBA fourth quarter results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session, with instructions being given at that time. (Operator Instructions). And as a reminder today's conference is being recorded. I would now like to turn the conference over to our host, Vice President of Capital Markets, Pam Kline. Please go ahead.

Pam Kline

Thank you for joining us this morning for SBA's fourth quarter 2008 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer; Kurt Bagwell, our Chief Operating Officer, and Brendan Cavanagh, our Chief Financial Officer.

Before we get started, I need to get the standard SEC disclosure out. Some of the information we will discuss on this call is forward-looking including but not limited to any guidance for 2009 and beyond. These forward-looking statements may be affected by the risks and uncertainties in our business. Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in last night's press release and our SEC filings. Particularly those set forth in our Form 10-K for the fiscal year ended December 31, 2007, and our quarterly reports on 10-Q which documents are publicly available.

These factors and others have affected historical results, may affect future results and may cause future results to differ materially from those expressed in any forward-looking statement we may make. Our statements are as of today, February 27, 2009, and we have no obligation to update any forward-looking statement we may make. Our comments will include non-GAAP financial measures as defined in Regulation G. The reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and the other information required by Regulation G has been posted on our website, www.sbasite.com.

Brendan would you comment on the fourth quarter results please.

Brendan T. Cavanagh

Yeah, thanks Pam. Good morning. As you saw from our press release last night, our fourth quarter financial results were excellent and we exceeded the mid-point or were above the high-end of our guidance for site leasing revenues, site development revenue, tower cash flow, adjusted EBITDA and equity free cash flow.

Total revenues were $134.4 million up 23.4% over the year earlier period. Site leasing revenues for the fourth quarter were a $111.9 million or 32.1% increase over the fourth quarter of 2007. This leasing revenue growth was driven by both organic growth and acquisitions. Site leasing segment-operating profit was $85.1 million. Site leasing contributed 96.9% of our total segment operating process in the fourth quarter.

Tower cash flow for the fourth quarter of 2008 was $85.9 million or 35.9% increase over the year earlier period. Tower cash flow margin was 78.2%, up 170 basis points over the year earlier period. Our services revenues were $22.5 million, compared to $24.2 million in the year earlier period or 6.9% decrease. Services segment operating profit was $2.8 million in the fourth quarter of 2008 compared to $3 million in the fourth quarter of 2007. Services segment operating profit margins were 12.2% in the fourth quarter of 2008, compared to 12.5% in the year earlier period. Kurt, will discuss services in more detail shortly.

SG&A expenses for the fourth quarter were $13.3 million including non-cash compensation charges of $1.5 million and a one-time pension settlement expense of $600,000 related to the termination of the AAT pension plan. This compares to SG&A expense of a $11.9 million in the year earlier period. Including non-cash compensation charges of $1.4 million. Other expenses for the fourth quarter included in other than temporary impairment charge of $7.8 million related to certain auction rate securities, we held at December 31, 2008. Those securities have now been written down to less than $1 million.

Net income during the fourth quarter was $2.7 million, compared to a net loss of $28.9 million in the year earlier period. Net income for the fourth quarter of 2008 includes a $32 million gain on the early extinguishment of our debt, net of the right off of deferred financing fees. Net income per share for the fourth quarter was $0.02, compared to a net loss per share of $0.27 in the year earlier period. Weighted average shares outstanding for the quarter were a $116.5 million.

Adjusted EBITDA was $77.3 million in the fourth quarter of 2008 or 37.8% increase over the year earlier period. Adjusted EBITDA margin was 58.4% up from 52.5% in the year earlier period. Once again equity free cash flow increased materially in the quarter reflecting strong adjusted EBITDA growth. Equity free cash flow for the fourth quarter of 2008 was $47 million, a 41.5% increase over the year earlier period. Equity free cash flow per share for the fourth quarter of 2008 was $0.40 or a 29% increase over the year earlier period.

In the fourth quarter, we acquired 350 towers and 5 distributed antenna systems or DAS networks. We also built 25 towers and completed construction on one additional DAS network and ended the quarter with 7,854 towers owned and the rights to manage approximately 4,200 additional communication sites. Total cash capital expenditures for the fourth quarter of 2008 were $251.5 million consisting of $1.6 million of non-discretionary cash capital expenditures, such as tower maintenance and general corporate CapEx and $249.9 million of discretionary cash capital expenditures.

Discretionary cash CapEx includes $242.1 million incurred in connection with acquisitions and earn outs. $6 million in new tower construction and $1.8 million for augmentations in tower upgrades. With respect to the land underneath our towers, we spent an aggregate of $7.9 million to buy land and easements and to extend ground lease terms. As of year-end we own or control for more than 50 years the land underneath 26% of our towers. At this point I'll turn things over to Pam, who will provide an update on our liquidity position and balance sheet.

Pam Kline

Thanks Brendan. SBA ended the fourth quarter with $1.49 billion of commercial mortgage-backed pass-through certificates outstanding, $138.1 million of the 0.375% convertible senior notes, $550 million of 1.875% convertible senior notes, $230.6 million outstanding on our $285 million senior credit facility, a $149 million principle balance outstanding on our Optasite credit facility, and a $117.6 million of cash, short-term investments, and short-term restricted cash resulting in net debt of $2.4 billion.

During the fourth quarter of 2008 we repurchased and privately negotiated open market transactions. $211.9 million of our 0.375% convertible note and $65.5 million of our CMBS notes for a $147.8 million in cash and $3.4 million shares of our Class A common stock. During the quarter, we issued 300,000 shares in connection with acquisitions and our share count at the year-end was a $117.5 million. The company's net debt to annualized adjusted EBITDA leverage ratio was 7.9 times at December 31, 2008. Our net secured debt to annualized adjusted EBITDA leverage ratio was 5.7 times. Our auction rate securities are not included in our calculation of liquidity or net debt. As of quarter end 85% of our debt was fixed rate and the weighted average cash coupon on all of our debt was 4.3% per year.

Our fourth quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was very strong 2.7 times. Subsequent to December 31, 2008 we have repurchased an additional $34 million of our 0.375% convertible senior notes and $7.6 million of our CMBS notes for $25.3 million in cash and approximately 600,000 shares of our common stock. As of today, we have a $104.2 million of our 0.375% convertible senior notes outstanding and $1.48 billion of CMBS notes outstanding. I will now turn it over to Kurt to discuss some of our operational results.

Kurt L. Bagwell

Thanks Pam and good morning. We are pleased to have finished 2008 with such a strong fourth quarter. We said on our last call that Q4 should be similar to Q3, which was a very good quarter, but Q4 turned out to be even more robust than originally anticipated. As Brendan outlined, we preformed well in all aspects of our business as our customers remain busy. We enjoyed our highest ever organically sub-quarter in terms of dollars added with high volume contributions from both new tenant leases and amendments to existing leases.

We bought and built a lot of high quality towers, we had a good service this quarter and we completed a new boss scenario DAS network on time and on budget. Specifically, for our fourth quarter results our gross tower leasing revenues signed in the quarter was very good on both the gross and a per tower basis. Activity was highest from T-Mobile and AT&T as they expand into new locations and also continued with their 3G UMTS overlays.

Other leasing activity was diversified amongst Verizon, Metro, Leap and other regional carriers along with activity from other private and governmental entities deploying specialty systems. We are also seeing the early stages of other deployments from recent spectrum winners as well as beginning some of the clear wire ramp up. 79% of our new revenues signed came from new tenant leases about 21% came from amendments to existing leases, which as we've said before we feel is a very healthy mix.

For the quarter, year-over-year same tower cash revenue growth and same tower cash flow growth was 10% and 13% respectively. Rental rates of state farm and our average cash basis rents across all of our 19,344 tenants at quarter-end increased to $1,886 per month. We bought 350 towers in the quarter including the culmination of our light tower deal on October 20. We've built another 25 towers during the quarter and finished the year having built a total of 85 approximately 40% more than each of the previous two years.

We have a strong backlog of good new built prospects and we are confident that we will build at least as many towers in 2009 as we did in 2008. Our structural augmentation CapEx remains very well on a per tower basis and our teams are very focused right now on refining our operating expenses after a big year of asset growth. We feel very confident in our ability to increase our tower casual margins through optimization of utilities, repairs, and maintenance costs on a tower-by-tower basis, while continuing to provide the highest quality leasing service in the industry.

The services side of our business had their best quarter of year in Q4 achieving substantially higher revenues and profits than in any of the three previous quarters. The driving factors in the much improved services quarter were our success in diversifying our backlog after Sprint's pullback in early 2008, and the traditional year-end push by several carriers to hit their target. We expect a steadier 2009 in this line of business, although it does remain very competitive. Overall, we feel very good about meeting our goals for 2009. The forecast for total carrier deployments are flat to up from 2008. We finished 2008 with a big quarter, which will help define 2009 and a continued evolution in total growth of wireless, especially wireless data gives us confidence that the tower business is a great segment of the wireless industry to be in right now and for the future. With that I will now turn it over to Jeff.

Jeffrey A. Stoops

Thanks, Kurt and good morning everyone. As you have heard and can see in our numbers the fourth quarter was another strong quarter for us. I am going to spend the first part of my comments on our operational performance. Operationally, we had a great year and we believe our future continues to look very bright. I will finish with some comments on the credit markets on our refinancing plans.

Operationally, our backlog remains solid, our first quarter lease-up is on plan and all of the other data points we see indicate that leasing demand will stay strong through 2009 and beyond. The macro environment for wireless remains very favorable. Our wireless customers have reported their fourth quarter results and they were generally very strong. Wireless minutes of use are up, wireless data uses up even more and carriers are seeing improved economics from data use. Wireless minutes of use are displacing wireline minutes.

Even though times are tough, wireless results in the current economy certainly argue that wireless has become a staple; and no longer a discretionary or luxury item. Because of the favorable demand drivers, our customers continue to make significant additional investment in their networks. We believe our customers have just begun to enjoy the growth that will be come from mobile wireless data services. The amount of investment dollars flowing into the development of content and applications for mobile data services already large growing fast then expected to drive material additional demand by consumers for 3G and 4G services.

The two positive developments in the 4G area have occurred since our last call. Clearwire has begun to build-out its networks and Verizon has announced an accelerated build-out schedule for LTE with activity commenting as early this year. New market entrants such as Leap, Metro, Cox and a few smaller players have announced plans for significant network investment over the next couple of years. We believe the new federal stimulus legislation will also provide us with some additional opportunities for growth that we might not otherwise have had.

All of this adds up to a very favorable demand environment for SBA for the foreseeable future notwithstanding what we know will be tough economic times in general. We continue to believe that lease-up on a revenue added per tower basis will be as good or better in 2009 as it was in 2008. Operationally, we continue to execute very well. Our team put up great results last year, we grew our portfolio 26% without increasing year-over-year leverage.

All the acquisitions we did last year are fully integrated and performing well. We have entered the DAS business and already have some growth to show for it. We led the industry by a wide margin in leasing growth, adjusted EBITDA growth, equity free cash growth, and equity free cash per share growth. We materially expanded our tower cash flow and adjusted EBITDA margins and our SG&A as a percentage of revenue continue to decline. With this type of operational performance in our business model we are very well positioned to weather a rough economy and still produce materially increasing cash flows in 2009 and beyond.

As you could see from our 2009 outlook, we are projecting materially higher and for us record amounts of equity free cash flow next year. We will see a full year of results from the towers we acquired in 2008 and we expect organic leasing growth to once again be strong. The amount of CapEx we spend on augmentations and maintenance is a fraction of what our peer spent on per tower basis. With reduced plans for discretionary cash capital spending and materially higher adjusted EBITDA, we expect to reduce leverage materially by the end of 2009. Our outlook implies we will end 2009 with net debt to quarterly annualized adjusted EBITDA in the mid-6 times range. That puts us in excellent shape for our 2010 and 2011 refinancing obligations.

Operationally, we ended the year strong and as a substantial company capable of and well positioned for additional growth. I expect this to continue to excel operationally. Now let's talk about what has been happening in the credit markets. The fourth quarter of last year was the time, when the perception by many was that no credit was ever going to be available again. For a company like SBA that uses leverage to enhance shareholder returns it was a difficult environment. Our great operational performance was not enough to offset concerns over whether or not we could refinance at all level let alone what price.

As a result, our stock price suffered and changes were necessary to maximize shareholder value. We understood the need to change our priories and we did so quickly and clearly. In the fourth quarter, our priority was shifted to reducing leverage and refinancing risk rather than portfolio growth. While I am not happy about what happened to our stock price in the fourth quarter I am very proud of the speed and decisiveness with which we address the rapidly changing credit market situation. We immediately slowed our discretionary cash spending on assets, which you can see in our fourth quarter results as well as in our 2009 outlook. We will remain in the mode of materially reduced discretionary cash spending, pending refinancing some of our debt.

In the fourth quarter, we seized on the opportunity to repurchase our debt at significant discounts and get ahead of our refinancing obligations. Since we never doubted the certainty of our future cash flows, we had the confidence to jump into the market and repurchase some of our debt at what we think were very favorable prices. Since October, we have retired $319 million of our 2010 convertible notes in our 2005 and 2006 CMBS debt in the aggregate for a $173 million in cash and 4 million shares of our stock. That equates to 17% of the original principle amounts of that debt, a net debt reduction of a $145 million at annual cash interest savings of $5.6 million, that's real value for our shareholders.

We intend to continue to repurchase our 2010, 2011 maturities where we can do so at discounts, which we think are appropriate. In my opinion, the variability in our stock price continues to be all about the credit markets and our future cost of debt. Since December the high-yield in some other debt markets have improved some financings are getting done and we have seen our stock price recover somewhat. Many companies are dealing with both the credit crunch and with operational performance issues brought on by the tough economy. For SBA thankfully it's not about operations, our future operational prospects remain bright. For us, it's about credit and I believe shareholder appreciation for the foreseeable future will be dictated primarily by our success with refinancing and capital structure.

Knowing that our top priority is to refinance our debt comfortably ahead of our maturity dates on the best terms possible and I am very confident about our prospects. On our last call, we discussed plans around refinancing. We provided detail plans then, which remain the same and we can review with any of you if you would like off-line. We have lot of flexibility given the fact that we have separated our assets for financing proposes into several different structures, which can be financed together or separately. We have multiple paths we can take to comfortably refinance our 2010 and 2011 maturities. We will be opportunistic as we have always been in the capital markets. Since the beginning of this year, we have been inundated with financing proposals to access multiple credit markets.

We are ready to take advantage of the right opportunity, but we also want to continue to be thoughtful and patient. In just the last two months rents have tighten considerably and we would pay materially less to finance today then would have been the case in early January. While I don't want to get too far ahead of myself I do believe in today's market that we could refinance an all in fixed rates below 10% and that we will successfully refinance our CMBS ahead of the anticipated repayment dates and avoid any cash trap or step-up in interest rate. The market is becoming more differentiating and is disproportionally rewarding those companies that can provide predictable results and a certain future. SBA is one of those companies and we believe our current and future performance will continue to positively differentiate us with financing sources.

Having said all of that however we do not intend to wait too long and it is our goal to get a material financing or financings done in 2009. That results have not only removed any lingering concerns about refinancing costs, but just as importantly would provide us with additional growth capital. We are committed to resume material portfolio growth at the appropriate time given our historical success and our operational optimism for future. We see and we believe we will continue to see a number of opportunities for investment that we believe will produce excellent returns for our shareholders even if our future debt costs are up a little bit. We are very good at acquiring and integrating towers into our portfolio. Our towers have performed very well and we have produced material shareholder value with our growth activities. We believe we will do the same in the future.

We expect our operational performance to remain sharp and we are confident we can resume material portfolio growth on short notice if presented with the right opportunities. We are very excited about our future. As always I want to close by thanking our employees and customers. We accomplished a lot in 2008 and we expect to do the same in 2009. We have a great business that performs well in both good economies and bad and we look forward to reporting future results.

Cary at this time we will open it up for questions.

Question-and-Answer Session

Operator

All right. Thank you. (Operator Instructions). And our first question comes from Jonathan Atkin of RBC Capital Markets. Please go ahead.

Jonathan Atkin – RBC Capital Markets

Yes. I am interested in investments this year with respect to may be tuck-in acquisitions I assume that's not a priority for you relative to other years, but also the DAS activity that you referenced in the fourth quarter, organic growth versus perhaps buying other systems, what are your thoughts around that?

Jeffrey A. Stoops

Until we accomplish some refinancing Jonathan we are going to be very tight on discretionary cash spending as we have outlined in our outlook. We would focus primarily on organic new tower builds, and new DAS networks, and at this point, we really have not guided to any cash acquisitions of either towers or new DAS networks, but we are still interested within the outlook we've given for the reduced cash expenditures of growing both through new builds and new DAS networks, and we think we will be able to do that to some degree.

Jonathan Atkin – RBC Capital Markets

And in each case with the organic growth are you pretty much looking for two tenants from the get-go or one tenant committed with very clear visibility towards the second tenant, what’s you're discipline on that?

Jeffrey A. Stoops

The latter. It's been our experience that to, we get much better results and much better use of our capital if we can get out there with one solid tenant and a clear path to see the second, and we have been very pleased with how that's played out overtime and that’s what we would continue to do.

Jonathan Atkin – RBC Capital Markets

And then on the M&A front perhaps involving smaller companies, are you seeing or expecting that there might be private-to-private transactions or perhaps transactions involving carrier build towers?

Jeffrey A. Stoops

Well, we are even though we are not in a cash market today, we are looking at everything and watching and there has been a few things that have occurred, there is not been much I mean we really haven’t missed out certainly on anything material and don’t think we will, but I do think there will be a steady stream of opportunities in that area and that’s one of the reasons why we want to move forward and refinance the company on the right terms and get us back to really the growth path that we have been on over the years. And I think we will, I don’t know if it will be early in '09 or late or when exactly, but there are opportunities out there and I think they are going to be good ones, I think that we are starting to see some seller price expectations come down in light of the market and we are pretty confident that there is going to be opportunities out there that will produce very, very good shareholder returns for us over time.

Jonathan Atkin – RBC Capital Markets

And then with respect to ground purchases or ground lease extensions, are seller price expectations coming in a bit or….

Jeffrey A. Stoops

They are. We've actually ratcheted down what we are prepared to pay, and we are in the process of sorting that out with sellers, some are saying, no thanks that's not what you were prepared to offer me last year and we’re saying fine that's all we are going to offer you this year and we are doing okay there. It's a process of adjusting seller expectations but it is happening.

Jonathan Atkin – RBC Capital Markets

Great. Thank you very much.

Operator

Thank you. And our next question comes from Rick Prentis of Raymond James. Please go ahead.

Richard Prentis – Raymond James

Thanks. Good mornings guys.

Jeffrey A. Stoops

Hi, Rick.

Richard Prentis – Raymond James

Hey. Jeff I want to follow-up a little bit on the capital markets items that you and Pam were talking about. As you look at your ability to buy some of your existing debt in the marketplace out there, talk to us a little bit about what you are seeing as January came into February as far as what they are trading as far as any discounts versus par, how the flow of sellers approaching you versus you finding them has kind of played out?

Jeffrey A. Stoops

It's actually over the last couple of months it’s been fascinating because in the kind of the peak of the October, November pressure on the hedge funds, particularly the convertible arbitrage hedge funds, that's when we're getting calls, daily and multiple calls daily from those holders looking to sell their coverts back to us. That has ebbed a little bit, that pressure seems to be off those particular investors, maybe the selling is all done or they don't have anything left to sell, I am not quite sure which. But as the debt markets reopened Rick there was a kind of a steady improvement in price which means the best discounts, we captured we're in the probably November timeframe maybe early December and since then the discounts have been shrinking a little bit as the credit markets have improved and people are biding up in general debt instruments. I think we'll still capture discounts to par I'm not holding out hope that we will capture the same discounts that we got in November.

Richard Prentis – Raymond James

Probably actually it's a good indicator that the rates you might be able to get in taking out new debt should be coming down as well then?

Jeffrey A. Stoops

Well it is, I mean we've got our best deals on the converts when our stock was at $9 a share. I'm not really looking forward to that. So, that's absolutely right. I mean it's, what we took advantage of was the silver lining, but it was really a silver lining in a very cloudy environment and I'm just as happy to have all of our debt prices recover, because it's exactly as you say it means that capital will be flowing and available to us at better prices.

Richard Prentis – Raymond James

As you look at your options you mentioned multiple financing proposals all kind of different type of structures. Can you let us know just kind of what some of those different varied structures have been, how senior or junior on the balance sheet might they be and I guess another question associated that was how much cash do you want to keep on your balance sheet?

Jeffrey A. Stoops

The structures are literally all over the board. They could be at the holdco level. They could be at an interim level between the companies that own the towers and our holding company or they could be at the asset ownership level. So, we have at least three different types of levels that which we can offer that and we have a variety of markets. We haven't been in the high yield market in a couple of years, but we are watching things there, obviously we have been in the convert market. There is some possibility although, I wouldn't run out and get too excited about this just yet, there maybe additional securitized debt available at least at the AAA level maybe down to the AA levels. So, we are watching everything and anything and looking to make the best decisions for us over the long term, I mean the one thing I’d tell you, we are pretty careful about and why we haven’t rushed in so far although we could have, whatever we do we are going to be looking for an instrument of at least five years or longer, maybe much longer and we are going to be living with that for a while. So, we want to make sure we do the right thing.

Richard Prentis – Raymond James

And as far as cash on the balance sheet what do you thing the right kind of run the business levels are?

Jeffrey A. Stoops

Well to run the business without any material additional cash expenditures beyond your equity free cash flow, 50 million. I mean if you go back over time, the cash needs in the business other than for discretionary spending are really low, I’m sure we could do it with less than 50, but I don’t think we would.

Richard Prentis – Raymond James

Great. Okay. Thanks guys.

Operator

Thank you. And our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.

Simon Flannery – Morgan Stanley

Thank you very much. Good morning. I wanted to followup on a couple of things you said on the call. I think you said that your CapEx on augmentation and maintenance was lower than your peers. I just wanted to understand a little bit more about what's driving that and how are you able to get better advantage and then you talked about the new build activity. If we could get some more color on that is that people building out new footprint, the Cox’s of the world, or is that a consequence of 3G that you are requiring more density in sell sides for existing carriers perhaps a little more color around what the kind of things driving the new build that would be great? Thanks.

Brendan T. Cavanagh

Yeah. I will take the first and then I will let Kurt take the second Simon. The difference between our portfolio and how it translates into much lower augmentation and maintenance CapEx all stems from the fact that our towers were either build by us or build by others like us and a very small percentage of our towers were originally built by carriers for their own network needs. And there is just a lot of differences that go with that distinction including, original structural capacities the age of the towers, we just have the newer more robust physical plant that allows us to take on a lot of additional tenant growth with very little additional capital required, and it all stems from who originated the assets, and how they were originated and for what original purpose. Kurt?

Kurt L. Bagwell

Simon. On the new builds, its most of our anchor tenants are from the big four, we do some with the other regional carriers and some with the new carriers as well, but it's not really skewed towards the newer carriers, and it's, if we do them for the new carriers its not in a situation where the tower next door is full because it obviously doesn’t lead us to a tower with future growth prospects. So, we only we have been very selective with these and they are only in locations, we see that a path of two, three, four tenants over a couple of year time period. Some of the deals are structured as a build-to-suit deal or it’s a more official deal with the carrier and some are what we call strategic sites where we may have location in several tenants are interested initially, and the sites are a mix of I would say suburban and highway, in the small town sites, it’s a little bit of everything that we have got going on. But its been nice, we spent about five years rebuilding this program, and we have got the backlog up to a good point, we have been able to be selective, and we are hitting some good volumes now, but its all good quality sites that are leasing up well. So, we are pretty happy with it.

Simon Flannery – Morgan Stanley

And is lot of this driven by the need to really get a better 3G signal into some of those places?

Jeffrey A. Stoops

Yeah. That's some of it and some of it is just signal growth out on the edges of their network, or filling in holes in the middle, it’s a little bit of everything, but its definitely not just 3G.

Simon Flannery – Morgan Stanley

Great. Thank you.

Operator

Thank you. And our next question comes from Mike McCormack of JPMorgan. Please go ahead. Is your phone on mute? Well, we'll move along to the line of Jonathan Schildkraut of Jefferies. Please go ahead.

Jonathan Schildkraut – Jefferies & Company

Great. Thank you for taking the questions. Just two here, in terms of the large acquisitions that you did at the end of last year, could you remind us if there were any kind of cash earn out provisions that we should be looking at. And secondly, if I have it correctly I think there was a bit over a $100 million left in a facility that you guys could use for acquisitions and I just wanted to get that right number as well as get a sense as to when that facility closes? Thank you.

Jeffrey A. Stoops

Yeah. No earn outs on our three big deals. And on the facility, Jonathan, we actually had a $100 million left, but when Lehman went bankrupt we lost $50 million of that so we have about $50-$55 million left on that facility, which we could use for acquisitions I mean we are not that's not really in our plan even though we have the liquidity because it would be counter to our current goal of reducing leverage heading into refinancing, but that facility matures in November of 2010.

Jonathan Schildkraut – Jefferies & Company

Great. Now, I understand and you have laid out fairly clearly what your priorities are in terms of cash flows, but just trying to give a sense as to what the dry powder is if the overall environment improves and some of your priorities change? Thank you again.

Operator

All right. Thank you. (Operator Instructions). And our next question comes from Gray Powell from Wachovia. Please go ahead.

Gray Powell – Wachovia Capital Markets

Good morning. Thanks for taking the question. Just had a few quick ones here. Just in terms of the demand, do you think that demand in 2009 is more back-end loaded or spread out evenly throughout the year, and do you expect growth to be driven more by augmentations or new tenants?

Jeffrey A. Stoops

Kurt?

Kurt L. Bagwell

Gray, I think what you've heard from the other guys is similar to what we are seeing probably a 40, 60 years nothing too severe on the back-end loading. So, that's pretty consistent. I don’t expect our augmentation mix to change a whole lot. We've been running, I think as high as 70:30 and as slowest 80:20. I would expect it to probably balance somewhere between there all the year. The augmentations are nice, but we love new leases too. So, I don’t really see a huge mix change there.

Jeffrey A. Stoops

A lot of the devils in the details with that question Gray and the Clearwire is that a new lease, or is that an amendment to an existing Sprint lease. I mean there will be some of both Verizon, LTE, if they begin to do business this year is that a brand new tenancy because it probably will be a brand new lease and not folded into an existing lease. I mean we haven’t yet kind of fully baked the answers to all those, because we haven’t seen exactly the facts that we will be addressing. But the answers to some of those questions will shape the numbers as we go forward. I’m not sure it matters a whole lot because it's all good revenue, but it will make a difference.

Gray Powell – Wachovia Capital Markets

Okay. That makes sense. Then just how should we think about the lease rates on the towers that you acquired in 2008 versus SBAC's core portfolio, are you seeing any difference in demand there in 2009?

Jeffrey A. Stoops

No, it seems to be our demand is fairly even across the portfolio.

Gray Powell – Wachovia Capital Markets

Okay, great. And then just last question, this one I have to admit this one might be tough to answer, but you've mentioned that if you were to refinance today, you could get rates below 10%, if you were to refinance debt in current conditions, but leverage were closer to say 6.5 or 6 times net debt-to-EBITDA, can you ballpark what the rate would be, or at least kind of quantify what the benefit of delevering by another turn, turn and half would be?

Jeffrey A. Stoops

Well I don't want to answer that question because the answer will be lower, if you go back to an earlier question as to what point you structure your debt add in our overall corporate structure, if we issue additional secure debt that will be cheaper than what we could issue say in unsecured high yield deal at the holding company level. So, and that's why we're taking our time to work through this because there will be real interest rate differences depending on where we structure that facility, and it's possible even in today's market that a secured deal could come below 8%.

Gray Powell – Wachovia Capital Markets

Okay fair enough. That's good to know. Thank you very much.

Operator

Thank you. And our next question goes to Rick Prentiss of Raymond James. Please go ahead.

Richard Prentiss – Raymond James

Hey guys I think everybody is tired after yesterday, but I had a few followups. Jeff, you mentioned Clearwire, previous calls you had thought Clearwire might be I think about $1.5 million worth of revenue to you guys this year, now if they are funded and you're still thinking 1.5 could it be a little bit bigger just kind of what are you thinking on Clearwire?

Jeffrey A. Stoops

It's probably the same.

Richard Prentiss – Raymond James

Okay. And then with your services businesses going pretty well, do you have any insight into LTE as far as what's going to be involved with an LTE build out, we keep getting mixed signals on exactly how much equipment and what size of the equipment might come in, any insight on LTE what it might mean?

Kurt L. Bagwell

Rick this is Kurt. Nothing definitive just yet, but I mean I don't see this being incredibly different than UMTS overlay. I means it's a technology, it’s a different frequency, and you hear reports of bigger antennas, which with the frequency should generally be true. I think they will obviously try to take as much advantage of their existing leases as they can, but those are limited depending on what how much they lease for in the past, and they are trying to do a lot of different things out there with 800 megahertz, 1900, now 700 in 3G and 4G technology. So, I don’t foresee it really being a whole lot different, and we will try to work with them where we can, and in some cases are going to need to acquire some more space. So, I think it is substantially different then, when Sprint and Verizon went to Rev A, EV-DO in Rev A that was more unseen for us, but this a new technology.

Jeffrey A. Stoops

And it's clearly going to require new equipment, but I mean the bottom line answer here Rick is it's still not to the stage yet where we've actually gotten the specific specs for us to react to.

Richard Prentiss – Raymond James

And then trials will take a while and before I guess real revenue effect as far as scale is probably really '010 or '11 probably?

Jeffrey A. Stoops

Yes.

Richard Prentiss – Raymond James

Okay. And then the final question, kind of lost in the American Towers called the other day they talked about generators. Spending some CapEx on generators, update us on a little bit on what you are seeing as far as demand for generators, kind of that commitment to keeping cell sites on air and also microwave back haul, are you starting to see some of that accelerate on your sites?

Jeffrey A. Stoops

Yeah. I mean we see all those things and they have all been sources of incremental positive revenue for us, we had a couple of years back we trialed our own program of kind of going out and buying generators and holding them out to the carriers, and that didn't work that well. Probably because we did it in Ohio maybe it wasn’t that smart, but even if you do it in the costal areas. Really it's hard to get an existing carrier to kind of buy into that if they're not of their own initiatives. So, what we've done is we just hold ourselves open to facilitate they are putting generators on the property and in some cases we have multiple generators that are paid for and incremental lease revenue added for the additional footprint in various sites. So, we have generally tried to stay away from getting into equipment provisioning where there could be obsolescence. And we're happy with the way it's going for us maybe we're getting a lot of added generator revenue, but we're not actually buying and maintaining the generators and holding it out there for people to tie into. There have been some recent changes in the whole backup power situation I don't think carriers are under the same regulatory pressure they were I think those regulations got struck down, but carriers are still interested in the topic they don't want the adverse publicity of downtime in the event of storms and things like that. So, I think we'll continue to see incremental revenue from that source for years to come. And we're starting to see incrementally more on a year-over-year basis revenue from wireless back haul, but it's still tiny in comparison to just adding basic antennas for carriers looking for better capacity.

Richard Prentiss – Raymond James

Great. Thanks guys.

Operator

(Operator Instructions). And we go to the line of Mike McCormack of JPMorgan. Please go ahead.

Manish Jain – JPMorgan

Yeah. Hi, this is Manish Jain for Mike McCormack. How are you guys doing?

Jeffrey A. Stoops

Good Manish. How are you?

Manish Jain – JPMorgan

Doing well. Just a couple of quick questions. One, you mentioned the 79 of leasing activities, 79% is from new leases and 21% from amendments, just wondering how are you expecting that ratio to play out throughout the year. And then regarding the broadband stimulus plan, just wondering if you guys think given the geographic positioning of your towers, you may have some advantage over your other tower peers in that respect?

Kurt L. Bagwell

Manish this is Kurt. On the leases versus amendments again we expect that's spread to say fairly similar probably between 20% and 30% from amendments, which is fine I don't expect it really to go lower because there is a lot of augmentation activity out there, but we are also seeing a lot of new leases come in. So, I think the 20% to 30% range is kind of consistent again. On the potential stimulus spending out there, there have been specific references to tower companies being eligible for some of the money. The money will be coming through the Department of Agriculture RES funding, which has been an existing program for years and it will get some increased funding. And they have a good set of processes in place to receive that and then some of it will be coming through NTIA, which those processes are yet to be defined. We've had thoughts of, if we have some access to some low priced money, we've already reached out and started to chat with some of the carriers if they could also access some of that for their equipment, what it makes sense in some of these outer areas, it doesn't model out to build sites, which we may not otherwise build, that's a possibility. Obviously, with our existing portfolio, I don’t think it really, I guess it could help if the carriers can get some of that funding for their equipment purchases, we may see some incremental lease-up in those areas.

Jeffrey A. Stoops

Yeah I’d we look at it as a incremental positive Manish, but it hasn’t caused us to rethink our outlook or materially change our views about the future.

Manish Jain – JPMorgan

Great. Thank you.

Operator

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

Jeffrey A. Stoops

Well we appreciate everybody joining us today as we kind of wrap up our 2008 results and we look forward to our first 2009 report, which I guess will be sometime in early May. Thanks.

Operator

Thank you. Ladies and gentlemen this conference will be available for replay after 12:30 PM Eastern Time today through midnight March 13, 2009. You may access the AT&T replay system at any time by dialing 1-800-475-6701 and entering the access code 983821. International participants may dial 320-365-3844. Again those numbers are 1-800-475-6701 and 320-365-3844, access code 983821. And that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference service. You may now disconnect.

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