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Executives

Mark DeRussy - Director of Finance

Brendan T. Cavanagh - Chief Financial Officer and Senior Vice President

Jeffrey A. Stoops - Chief Executive Officer, President and Director

Analysts

David W. Barden - BofA Merrill Lynch, Research Division

Amir Rozwadowski - Barclays Capital, Research Division

Michael Rollins - Citigroup Inc, Research Division

Colby Synesael - Cowen and Company, LLC, Research Division

Brett Feldman - Deutsche Bank AG, Research Division

Benjamin R. Lowe - Stifel, Nicolaus & Co., Inc., Research Division

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

Simon Flannery - Morgan Stanley, Research Division

Spencer Kurn - New Street Research LLP

Michael G. Bowen - Pacific Crest Securities, Inc., Research Division

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

SBA Communications (SBAC) Q3 2013 Earnings Call November 5, 2013 10:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SBA Third Quarter Results Conference. [Operator Instructions] As a reminder, this conference is being recorded. And I would now like to turn the conference over to your host, Mr. Mark DeRussy, Director of Finance. Please go ahead.

Mark DeRussy

Good morning, and thank you for joining us for SBA's third quarter 2013 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer; and Brendan Cavanagh, our Chief Financial Officer.

Some of the information we'll discuss in this call is forward-looking, including but not limited to any guidance for 2013, 2014 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, which documents are publicly available. These factors and others that affected historical results may affect future results, and may cause future results to differ materially from those expressed at any forward-looking statement we may make. Our statements are as of today, November 5, 2013, 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.

With that, I will turn it over to Brendan to comment on our third quarter results.

Brendan T. Cavanagh

Thank you, Mark. Good morning. As you saw from our press release last night, we had another great quarter on all fronts. We exceeded the high end of our guidance for leasing revenue, tower cash flow, adjusted EBITDA and AFFO. Total revenues were $332.1 million, up 39.2% over the year-earlier period. Site leasing revenues for the third quarter were $287.5 million or a 37.7% increase over the third quarter of 2012. Approximately $3 million of site leasing revenue in the quarter was non-recurring and was comprised of fees for temporary equipment placement. Our leasing revenue growth was driven by organic growth and portfolio growth, including the impact of the TowerCo acquisition, which closed during the fourth quarter of 2012, and our initial Brazil acquisition, which closed at the end of 2012. iDEN-related churn had a negative impact of $1.5 million. The vast majority of our site leasing revenue continues to come from the U.S. and its territories with approximately 7% of total leasing revenue in the quarter coming from international operations. The impact of changes in Canadian and Brazilian exchange rates during the quarter versus our guidance was de minimis. Site leasing segment operating profit was $219.5 million or an increase of 35.3% over the third quarter of 2012. Notwithstanding a record services quarter, site leasing still contributed substantially all, or 96%, of our total segment operating profit. Tower cash flow for the third quarter of 2013 was $211.7 million or a 35.8% increase over the year-earlier period. Tower cash flow margin was 78.2% compared to 79.3% in the year-earlier period. Sequentially, and adjusted for non-recurring revenue, tower cash flow margin increased 30 basis points from the second quarter of 2013. We continue to experience strong leasing demand, both domestically and internationally. Amendment activity continues to be strong. And new lease activity continues to trend higher. New collocation leases contributed just over 1/2 of our new leasing revenue added this quarter for the whole company, and just under 50% domestically. This is up from about 30% in the second quarter. The big 4 U.S. carriers contributed approximately 80% of our consolidated incremental leasing activity in the quarter. We have a solid leasing backlog and expect a strong finish in 2013 and a strong start to 2014. Our services revenues were $44.6 million compared to $29.8 million in the year-earlier period, reflecting generally higher activity levels and work mandated to us by our Sprint Network Vision contract and T-Mobile 4G agreement.

Services segment operating profit was a record $9.4 million in the third quarter compared to $4.7 million in the third quarter of 2012. Services segment operating profit margin was 21% compared to 15.8% in the year-earlier period. SG&A expenses for the third quarter were $21.8 million, including noncash compensation charges of $4.1 million. SG&A expenses were $17.6 million in the year-earlier period, including noncash compensation charges of $3.6 million. Our overhead efficiency continues to improve as we grow. As a percentage of revenue, SG&A expenses were 6.6%, a decline of 80 basis points compared to the third quarter of 2012. Adjusted EBITDA was $203.7 million or a 39% increase over the year-earlier period. Adjusted EBITDA margin was 64.6% in the third quarter of 2013 compared to 64.7% in the year-earlier period. Strong organic margin expansion from our leasing segment was slightly offset by the inclusion of the less mature TowerCo and Brazil towers, and an increase in our lower margin services revenue. Adjusted for non-recurring revenue, adjusted EBITDA margin did increase 30 basis points sequentially from the second quarter of 2013. Approximately 96% of our total adjusted EBITDA is attributable to our tower leasing business. AFFO increased 44.2% to $134.3 million compared to $93.1 million in the third quarter of 2012. AFFO per share increased 36.8% to $1.04 compared to $0.76 in the third quarter of 2012. Net income to SBA Communications Corporation during the third quarter was $21.5 million compared to a net loss of $52.4 million in the year-earlier period. Net income for the quarter was positively impacted by a $6.9 million gain on the mark-to-market of the company's currency hedge entered into in connection with the previously announced Oi acquisition, and a gain of approximately $27.3 million on the sale of a bankruptcy claim against Lehman Brothers related to a hedge terminated in 2008. Net income per share for the third quarter was $0.17 compared to a net loss of $0.44 per share in the year-earlier period. Quarter-end shares outstanding were 128.1 million.

In the third quarter, we acquired 279 tower sites and the rights to 4 additional communication sites for $91.1 million in cash. SBA also built 73 towers during the third quarter. We ended the quarter with 17,889 owned towers. 14,915 of these towers are in the U.S. and its territories and 2,974 are in international markets. Total cash capital expenditures for the third quarter of 2013 were $124.8 million, consisting of $4.7 million of nondiscretionary cash capital expenditures such as tower maintenance and general corporate CapEx and $120.1 million of discretionary cash capital expenditures. Discretionary cash CapEx for the third quarter includes $91.1 million incurred in connection with tower acquisitions, excluding working capital adjustments and paid earn-outs. Discretionary cash CapEx also included $14.3 million in new tower construction, including construction in progress, $1.2 million related to the purchase of new offices and $13 million for gross augmentations and tower upgrades. Of the $13 million augmentation figure, approximately $10.9 million or 84% were simultaneously reimbursed by our customers resulting in net augmentation cash expenditures to us of $2.1 million.

With respect to the land underneath our towers, we spent an aggregate of $13.5 million to buy land and easements and to extend ground lease terms. Our investments in land are both strategically beneficial and almost always immediately accretive. At the end of the quarter, we owned or controlled for more than 20 years, the land underneath approximately 71% of all of our towers and 73% of our domestic towers. At the end of the quarter, the average remaining life under our ground leases, including renewal options under our control, is approximately 30 years.

At this point, I will turn things over to Mark, who will provide an update on our liquidity position and balance sheet.

Mark DeRussy

Thanks, Brendan. SBA ended the third quarter with $5.7 billion of total debt. We had cash, cash equivalents, short-term restricted cash and short-term investments of $243.3 million. Our net debt to annualized adjusted EBITDA leverage ratio was 6.7x. Our third quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 3.2x. During and subsequent to the third quarter, we paid $74.3 million in cash and issued approximately 393,000 shares of common stock to settle the warrants associated with our 1 7/8% convertible notes. We have no further obligation with regard to these notes and the related warrants. As of the end of the third quarter, the weighted average coupon of our outstanding debt is 4.3%. And our weighted average maturity is 5 years. We currently have no outstanding balance under our revolver. And the full $770 million in commitments is available to us. We did not repurchase any shares of our common stock during the quarter, and currently have $150 million remaining under our existing $300 million authorization. I will now turn the call over to Jeff.

Jeffrey A. Stoops

Thanks, Mark, and good morning, everyone. As you have heard, we did have a great quarter, exceeding the high end of our guidance across almost all key financial metrics. Once again, we led our industry in many important growth metrics. Our organic leasing activity has been particularly strong this year and the primary reason for our outperformance. We are experiencing strong demand across our entire portfolio, both domestic and international. We are seeing the benefits from that demand in both our leasing and services segments. We expect to benefit from these elevated levels of activity for the next several years as carriers build out their initial coverage footprints for 4G to be followed by capacity spending as consumer adoption increases. Commentary from our customers has been very clear that network speed and quality is now and will remain a primary focus. The path to better network speed and quality is more infrastructure. And we are seeing the results in our executed new leasing business and backlogs. We are seeing increasing amounts of cell splitting in the U.S. And our new tenant backlog is at an all-time high. Having said that, we have just experienced another wave of amendment applications, which has pushed our amendment backlog to a 2013 high. Internationally, we are seeing strong growth in new cell sites with a lot of basic 3G coverage builds still ongoing in our markets. We look forward to the buildout of 4G in many of our international markets in the future. As a result of anticipated continued strong demand from our U.S. and international customers, we're guiding to strong organic leasing growth again in 2014.

In the third quarter, we had a very busy quarter with respect to new leasing business. And we signed up the highest number of new tenant leases in years. In addition to an increased of volume of new leases, our customers are requesting larger equipment loads, which have a favorable impact on rate. AT&T and Verizon continue to be very busy and represented well over 1/2 of our new business in the quarter. Both customers were active with new leases and amendments. We saw another material contribution from Sprint due to its Network Vision project. And T-Mobile remains active on its 4G upgrade. We have not yet seen any 2.5G business from Sprint, although we expect to see material activity in 2014.

Our services segment produced another record level of activity for us in the third quarter, once again with the primary contributors being the Sprint Network Vision and T-Mobile 4G projects. We expect continued strong services segment contribution for the remainder of 2013 and through 2014, although we expect that our 2014 outlook reflects our work on the Sprint Network Vision project tapering off as the work we were contracted to perform nears completion. We expect Sprint to stay very busy with leasing activity.

We continue to see strong activity in our international markets. Leasing activity is mostly new leases, but there is a growing amount of amendment activity. We had a busy quarter-end in Brazil. We closed on the acquisition of an independent tower company with a quality employee force and a sizable new build backlog. The transaction closed at the end of September. The integration is going well. And we now have about 30 experienced employees in Brazil ready to close and integrate our pending 2,113-tower Oi acquisition. We will continue to expand our Brazilian workforce as we grow, but with much of our back-office functions located in the U.S. We expect our Brazilian overhead to grow in the future at a fraction of the rate of growth we expect in Brazilian revenue. With our leverage currently below our target range of 7.0x to 7.5x net debt to annualized adjusted EBITDA, and at the low end of the target range pro forma for the Oi transaction, we are seeking additional portfolio growth. We will look both domestically and internationally and believe that we will continue to find attractive opportunities that will meet our investment requirements. We are reaffirming our goal of 5% to 10% portfolio growth in 2014, while maintaining our target leverage levels. Our initial 2014 guidance reflects a lower percentage of portfolio growth, reflecting only those acquisitions we have under contract today. And if we are successful in consummating some additional acquisitions, I would expect our initial 2014 outlook to increase.

Our access to capital and balance sheet are both in great shape. Our undrawn $770 million revolver and anticipated AFFO generation are more than sufficient to fund pending investment activity. If we pursue additional investments, as is our goal, those would likely be funded with additional debt financing, which is currently readily available to us at attractive rates. With respect to our expected obligations related to our 4% convertible notes due October 2014, our outlook contemplates a $1.4 billion debt refinancing to fully cash settle the convert obligations, and to call the remaining $244 million of our 8.25% senior notes. We anticipate seeking such refinancing in the secured and securitized markets and have assumed a 4% refinancing rate in our 2014 outlook.

As our initial 2014 guidance indicates, we expect the current strength in our business to continue into 2014. A primary driver of the substantial growth we expect to set forth in our initial 2014 outlook is strong same tower cash revenue growth similar to 2013, which we expect to finish the year in the 9% to 10% range before iDEN terminations. We see a tremendous amount of amendment activity again in 2014 at an increased number of new leases. We have included no material contribution in 2014 from any customer that was not reasonably active in 2013. So that would exclude DISH and Public Safety. We are anticipating in our services outlook some Sprint 2.5G activity, although not in our leasing outlook. Please keep in mind that our 2014 outlook reflects site leasing revenue on a GAAP basis, while our tower cash flow, adjusted EBITDA and AFFO outlooks are all on a cash basis. Total noncash leasing revenue in 2014 is estimated to be approximately $43 million compared to $66 million in 2013, a $23 million difference. As is our custom, our outlook includes only those towers we own, intend to build or have under agreement to acquire as of today. And we do not guide to any stock repurchases. As a result, we are today, including in our initial 2014 guidance a level of discretionary capital investment well below 2013 levels and well below our guided AFFO. As I mentioned earlier, it will be our goal to invest additional material amounts of capital in portfolio growth or perhaps stock repurchases or both. Assuming the one refinancing contemplated in our outlook ahead of the maturity of our 2014 convertible notes, we will have significant liquidity that could be deployed for additional asset growth and/or stock repurchases. Based on our estimated 2014 year-end run rate adjusted EBITDA, we could invest approximately an additional $800 million into portfolio growth and still maintain our target net debt to annualized adjusted EBITDA leverage levels.

In the aggregate, we believe our initial 2014 outlook is strong with potential opportunities for improvement throughout the year. Our focus next year is straightforward: execute well against the favorable macro environment, add quality growth assets and continue to take advantage of what is expected to be a favorable financing market. We expect to once again, produce material growth across a number of key metrics, including growth in AFFO per share.

Before we open it up for questions, I want to recognize the contributions of our employees and customers to our success. Our employees work really hard to achieve the goals of our customers. Our employees do a great job. Our customers recognize that. And as a result, we are a preferred provider for our customers' network needs. Our customers are and we think will remain, extremely busy improving and expanding their wireless networks. We look forward to continued success as we finish this year and move into 2014.

Rochelle, at this time, we're ready for questions.

Question-and-Answer Session

Operator

[Operator Instructions] First question comes from the line of David Barden of Bank of America Merrill Lynch.

David W. Barden - BofA Merrill Lynch, Research Division

I had 2 questions, if I could, Jeff or for Brendan. First is on portfolio growth and the goals that you have for 5% to 10%. Obviously we've been watching the valuations in the sector for these types of large deals at least creep up, we saw 21x for the GTP business, we saw 22x for the AT&T tower business in terms of EBITDA multiples on run rate performance. And I was wondering if you kind of look at that as an obstacle to growing your business at an accretive rate. On the other hand, do you see that as an opportunity to comp yourself to those types of deals? And then the second question I had was just quick on some of the comments you made, Jeff, around Sprint. It just was a little fuzzy to me. It sounds like you're expecting there to be a tapering off of the Network Vision spending from Sprint in the 2014 guidance. You also expect there to be new spending on the 2.5-gig rollout, but you haven't included that in your forward-looking guidance. If you could just fill that one up for me, it'll be great.

Jeffrey A. Stoops

Yes. Let me take the last one first, Dave. Our Sprint Network Vision activity was the result of the kind of master negotiation that we did with Sprint a couple of years ago. And it involved on all of our towers taking out CDMA equipment, adding in a whole new array of CDA -- CDMA equipment. So a lot of work. What the 2.5G work will -- it will be less than that on a per job basis because what we expect will happen will be Sprint will add to its existing mounting heights several antennas, which will still be still a nice job for us, but it won't have the same magnitude that the CDMA kind of rip-and-reinstall project had. And the reason we haven't included any leasing in our -- from 2.5G in our 2014 outlook is until Sprint actually decides what they're going to do, there will be some cases where we get additional leasing revenue, where they no longer have any additional capacity under the agreement we signed. But where they do have some capacity and they can fit that in, we may not see any additional leasing revenue on that particular site. So we're going to wait until we get a little bit clearer picture of the leasing activity before we roll it into guidance. Does that make sense?

David W. Barden - BofA Merrill Lynch, Research Division

Yes, that's clear.

Jeffrey A. Stoops

Okay, good. On the pricing, first, I would certainly agree with your comment that the prices that have been paid recently certainly underscore the value that we're creating here at SBA. And it just makes our underwriting and our working to find these opportunities that much more stringent. There are still plenty of opportunities out there in both the U.S. and the international markets where we're very confident that we can pursue, hit our goals and still return double-digit IRRs in the U.S. and growing 300 to 500 basis points from there in the international markets. We have to work a little bit harder, but there's plenty of opportunities out there for us to accomplish those goals.

Operator

And the next question comes from the line of Amir Rozwadowski of Barclays.

Amir Rozwadowski - Barclays Capital, Research Division

You folks have mentioned that looking at sort of 2014, you're going to be opportunistic around some potential opportunities for adding additional towers. Clearly, we've seen some of the larger deals take place recently in the domestic market. I was wondering if you could give us a little bit more color in terms of what types of opportunities you're seeing in the international arena in terms of bolstering your tower portfolio?

Jeffrey A. Stoops

Well, we think there will be more larger transactions available in the international markets where you will continue to see some carrier divestitures that, again, for the right opportunities and with the right returns, we would be interested in. We are continuing to focus our primary efforts in the Western Hemisphere, in the Americas. But having said that, Amir, if you look at what we have under contract today, and you back out 2,113 Oi towers, the rest of our backlog is all in the United States. So there remains a lot of 5, 10, 20, 50-tower opportunities, which of course has always been our bread and butter and an area that we remain very active in and expect to continue to do so.

Amir Rozwadowski - Barclays Capital, Research Division

And then I guess, building upon the prior question, are a lot more tower opportunities perhaps, even smaller ones coming to market given some of the valuations we've seen from a deal perspective, i.e. our folks now intrigued about perhaps, unloading their tower opportunities given where valuations are in the marketplace. And do you see a disparity between international sort of valuation of some of these assets versus the domestic valuations?

Jeffrey A. Stoops

Well, in general, you are -- we are able to find lower pricing on a multiple to tower cash flow in the international markets. I don't know that any one is rushing to sell today, notwithstanding some of the valuations that have been posted because while you may have that as one motivation, I think a lot of people share our views, our positive views about the future and the ability to put additional tenants and revenues on their towers. So I think it's a balance.

Amir Rozwadowski - Barclays Capital, Research Division

And then if I may, one last question. We have gone, I believe, from you folks and some other folks in the industry that there still seems to be some challenges when it comes to capacity, be it hiring enough folks to do some of the installs that we've seen taking place, given the amount of activity taking place in the domestic market. I was wondering if you could give us sort of an update there? Are you seeing a little bit easing capacity in terms of getting enough tower climbers and so forth in order to meet the demand that you're seeing in the marketplace?

Jeffrey A. Stoops

It's still tight. And we expect that, that will cause some of the work that our customers would've liked to have gotten done in 2014 to spill into -- or 2013 to spill into 2014. Even though we've had a record year and expect to finish with a record year in services, we could've actually done better if we had more people. I don't know how much more, but it would've been more. So you do still have some of that dynamic in the marketplace.

Operator

And next question from the line of Michael Rollins of Citi Investment Research.

Michael Rollins - Citigroup Inc, Research Division

From a high level, one of the questions that comes up a lot is what's the best way for a tower portfolio to grow in terms of mix. Is it urban, suburban exposure versus rural? Is it the exposure to certain tenants? Is it the number of tenants per tower? Jeff, what are you seeing today as the characteristics that you think put a tower portfolio in the best position to grow? Or is there just an element of luck in this where you got those locations in that 1 year that your customers want, you end up doing better. If you can help us think about where you are on that today in terms of this philosophy for the portfolio?

Jeffrey A. Stoops

Well, you have to have good locations, Mike, whether it's urban, suburban or rural. So you might call that luck. We hope that -- experience and skill that have led us to those good sites. I think our portfolio is perhaps less urban than some others. And we have consciously -- I mean that decision and that focus goes all the way back to mid-90s when we first got into this business with the belief that the big 4 U.S. customers would deploy and provide services on a nationwide basis. And that has proven true. And that has really been, I think, a big source of our success. I mean, in terms of tenant mixes, while there's a lot of other contributors out there, smaller Internet providers, you have a fair amount of government providers in both the U.S. and the international markets. We make decisions based off where we think the primary wireless service providers in those markets will be. So in the U.S., it's the big 4. In Brazil, it's the big 4. In Costa Rica, it's the big 3. And that's how we -- that is the basis upon which we want to build a portfolio.

Operator

And next question from the line of Colby Synesael of Cowen.

Colby Synesael - Cowen and Company, LLC, Research Division

Great. Two questions, if I may. There's recent comments from Verizon and Sprint that they are pretty content with their current tower portfolio in terms of the amount of towers that they have. And obviously, there's still a lot of talk from the tower operators about cell-splitting and the growth that you expect from that. I was wondering if you could kind of just tie to those 2 together and explain how we could still see significant cell splitting based on the comments from Verizon and Sprint recently. And then the second question just has to do with additional churn beyond iDEN. I was just wondering, do you think it's too early to start being -- thinking about potential for 2G churn as we move into 2014 and 2015? And is there a way to kind of look at what perhaps happened in the industry in the past to kind of get a sense of when that might start to be a more meaningful impact?

Jeffrey A. Stoops

Yes. I'm not exactly sure of the Verizon comments. I know that they've made comments about not selling their towers. I don't know that they've -- I have not heard that they said that they're content with their number of cell sites.

Colby Synesael - Cowen and Company, LLC, Research Division

Yes, at a recent sell side event, they indicated that the 42,000 or 44,000 towers, I can't remember the number, that they're pretty content maintaining that number for the next few years.

Jeffrey A. Stoops

Well, all I can tell you is what we're experiencing, which is very good demand for new cell sites from particularly the big -- from AT&T and Verizon in the U.S. and we think in the future also, T-Mobile and Sprint. And it really gets back to the fundamentals of the business, which is that with limited spectrum and the increasing needs and demands of consumers and the desires to put forth more services and faster speeds, there's really no other way other than through additional infrastructure. And that kind of basic connection has held true ever since we've been in the business. And I'm sorry, your second question?

Brendan T. Cavanagh

2G churn. 2G churn.

Jeffrey A. Stoops

What has happened historically is as customers have migrated and basically reduced or, in fact, turned off technologies, they keep that equipment space and use it for other equipment. So we don't really anticipate that as companies move through 2G. What they'll do is they'll redeploy equipment in those spaces that will be 4G or 4G-advanced focused.

Brendan T. Cavanagh

And maybe I can make one comment on that just to clarify how our agreements are structured. As the carriers have migrated to the 3G and 4G technologies, they've amended existing contracts that we had that were originally in place for their 2G installation. And they don't have the ability to simply pull out their 2G equipment and reduce their rent based on the way our contracts are structured. So we have one agreement that covers their entire rights. And it's not set up with piecemeal pricing.

Jeffrey A. Stoops

Yes. And I would just close by saying that the increased loads, Colby, that we're seeing on these new leases would indicate that, that is not really going to be a concern.

Operator

Next question from the line of Brett Feldman of Deutsche Bank.

Brett Feldman - Deutsche Bank AG, Research Division

I'm going to ask for a little more clarity around the Sprint stuff as well, and just to make sure we're being clear here. It does sound like from Sprint, that they have this 55,000 cell site portfolio, which seems to be comprised of 38,000 sites that represent the core of Network Vision and to call it 17,000 that they essentially acquired from Clearwire. And it also seems that most, if not all, of those sites are likely going to see a tri-band installation over the next 2 years. So when you are previously discussing your Sprint agreement, and you gave some clarity around the extent to which it will or not see increased leasing on the additional loading. Was that just for the 38,000 sites? I'm just wondering how the Clearwire sites factor into the agreement you have with Sprint and the opportunity to gain amendment revenues as they put tri-band gear on those towers?

Jeffrey A. Stoops

Yes, it applies to all of it, Brett, and let me be real clear. Every touch of our towers that Sprint will do, whether M&A-ed or from a traditional Sprint site or a Clearwire site, we will have the opportunity to do the services work for that 2.5G installation. So that's every single one.

Benjamin R. Lowe - Stifel, Nicolaus & Co., Inc., Research Division

And what about amendment revenues? Because it sounds like the original Sprint...

Jeffrey A. Stoops

Well, let me get to that. Let me get to that. So the amendment revenue will be dictated by whether Sprint has any remaining capacity under the deal that we cut 2 years ago, the master deal that dealt with all kinds of things, including the iDEN terminations. So to the extent they have additional space that they can fit their 2.5G antennas in there, we will get the services work, but we won't get the leasing work. Now on the legacy Clearwire sites, that should result in some additional leasing revenue for us in almost every case. But we don't want to roll that in until we actually see it.

Brett Feldman - Deutsche Bank AG, Research Division

That's fine. I just want to understand the difference between Clearwire and Sprint. And just one last question. You issued some shares this quarter to satisfy the warrants. You still have some authorization under the buyback. Are you thinking about maybe taking those shares back out of the market?

Jeffrey A. Stoops

Well, we're going to see how we do in portfolio growth. We're very committed in light of the environment in our organic growth and the debt markets to maintain target leverage at 7 to 7.5 turns. We'd like to fill that up through portfolio growth, but to the extent we conclude that we can't find the right opportunities there. We would certainly expect to turn our attention back to stock repurchases.

Operator

And next question from the line of Jonathan Schildkraut of Evercore.

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

A few, if I may. First, you guys were kind enough to break out what the iDEN churn was in the quarter. And I was just wondering how the pacing of iDEN churn so far has matched up to your original forecast. And I know that for both this year and next year, you've sort of taken the most conservative approach in terms of order of magnitude and timing of iDEN churn. Secondly, it appears just based on commentary from a new cell site perspective that SBAC may be a little bit later in terms of the conversion to new cell sites from amendments. And historically, we've thought about SBAC as sort of receiving some of the benefits of network upgrades a little bit later. I just wanted to get your perspective on whether this also implies that maybe the high growth portion of your curve will extend a little bit further than some of your peers. And then finally, Jeff, you broke out some of the cash numbers, noncash numbers rather, around leasing. And it looks like, on a cash basis, you're expecting leasing to grow at about 12% site leasing next year. And your initial guide for AFFO growth is maybe 13%, 14%. And I was just wondering how we might think about the conversion of site leasing growth into AFFO growth?

Jeffrey A. Stoops

Brendan, do you want to do the iDEN question?

Brendan T. Cavanagh

Yes, sure. Jonathan, with regard to what has happened for this year, we went into the year with an expectation of about $6 million of negative impact to our revenue numbers from iDEN churn. That was a worst-case scenario. It's going to end up approximately $4.5 million for the year based on the actual notifications we got. And that's simply because Sprint did not terminate the highest dollar leases first, although they did maximize their rights in terms of number of leases. For next year, the impact, as we mentioned, is $17.2 million on the full-year '14 guidance. And that's, again, assuming the worst case in terms of the timing and number of leases and dollar amounts or rent rates of those leases. If it turns out to be closer to the average, it would be approximately $1 million or so less than that $17 million.

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

On the timing issue, Jonathan, we feel very good about continued years of activity. If you look at where our portfolio is today, we're probably, with the big 4, just over 50% amended for 4G and with the recent flurry of activity we had just in the last month or so on amendment backlog, that really gives us the expectation that, that number's going to continue to move substantially higher over the years. So the positioning that we have and the behavior and the rollout characteristics of our customers certainly gives us good confidence that we still have a fair amount of runway left for the full initial 4G amendment cycle. And then of course, you have capacity after that. And then finally, on the AFFO, I think the leasing revenue, remember when you do that, you have to take into account the iDEN terminations and all that to get a true growth rate perspective. And I think you will see that drop down almost entirely to the AFFO line. But what is also impacting the AFFO line next year is our contemplated $1.4 billion refinancing. And there's going to be some additional interest that goes along with that.

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

That makes a lot of sense. I know that everybody's MLAs with Sprint differ. I'm just wondering if there were any sort of penalty clauses with your MLA with Sprint if they don't proceed according to the initial plan?

Jeffrey A. Stoops

Well, there are requirements on both sides that would have some consequences if they're not met. I don't know that -- there is a -- I don't know if you're asking about a drop-dead date? There is that situation where whether they install their Network Vision upgrade or not, by a certain date, they are required to start paying the rental increase. I'm not sure if that's what you're referring to, Jonathan.

Operator

And next question from the line of Simon Flannery of Morgan Stanley.

Simon Flannery - Morgan Stanley, Research Division

I think you referenced TowerCo earlier in the comments. I wonder if you could just review some of the recent acquisitions and how they're trending versus your expectations. And then we did see Crown elect early REIT conversion. Have you had any more thoughts about maybe following them?

Jeffrey A. Stoops

Yes. We are very, very happy with our Mobilitie and TowerCo acquisitions, Simon, particularly in light of some of the more recent transactions that really demonstrate the value in our sector. So we think we created tremendous value there. And they both happen to be trending ahead of plan and I'm most thankful to say, and you might recall that our theory behind those transactions was, that they were underrepresented with AT&T and Verizon, and would be strong candidates for cell-splitting and capacity infill. And those towers are on a kind of a per tower basis, leading our pack in that regard. So we're extremely pleased with the way all that was going. On the REIT front, I think there are a number of good reasons to convert to a REIT. And at some point in time, we will clearly -- we will definitely be a REIT. That is our intention. I personally think that to maximize our life as a REIT, we need to be paying a healthy dividend. And while we're currently compounding our AFFO per share the way that we are, we think it makes more sense to reinvest the proceeds. And we think that currently is the better way to create shareholder value. So while I think we'll get there eventually, I'm not sure that, that REIT election or announcement similar to what our peer did is imminent from us.

Operator

And the next question is from the line of Jonathan Chaplin of New Street Research.

Spencer Kurn - New Street Research LLP

This is Spencer Kurn in for Jonathan. I think we just talked about cash and leasing revenue growth looking in the 16% range for '14. Can you just clarify what your expectations are for organic growth?

Jeffrey A. Stoops

Well, we think it's going to be similar to the 9% to 10% before iDEN terminations that we're experiencing or expect to experience here in 2013.

Spencer Kurn - New Street Research LLP

Got it. And just to touch on the Sprint topic a little bit more. You've forecasted iDEN churn and no 2.5 deployments. Can you touch on what you're expecting for the rest of Sprint portfolio in terms of growth? Are you -- have you forecast any incremental site builds for their core sites?

Jeffrey A. Stoops

Very little. We do have some Sprint growth in our numbers which emanates from the deal that we cut 2 years ago, where they're still deploying Network Vision equipment, and we get certain benefits and revenue recognition from that. And as Brendan mentioned earlier, I believe by the end of '14, we will start to accrue all the benefits from that transaction. So yes, we do have some of that in our guidance. But what I think is more interesting is we have seen a number of instances where Sprint has deployed new cell sites and also deployed equipment outside their allotted bucket in their agreements. And that has resulted in additional revenue opportunities for us. And we think that, that will continue into 2014.

Spencer Kurn - New Street Research LLP

Got it. And I think that going for the first half of this year, we were talking about organic growth in sort of the 8.5% range. And now it seems like you're talking about organic growth in the 9% to 10% range. What's been the major driver of that? Has it been this equipment deployment that's outside of the scope of the original MLAs? Or has it been something else?

Jeffrey A. Stoops

No, I think it's a wide range of things. The customers are just very busy. And they -- I believe they'll continue to stay busy. A lot of the commentary from our customers this quarter was around investment in the network and the desire and the need to continue to invest in the network. And it's really from a whole variety of things that has call us this performance on the organic side. I wouldn't single out any one thing.

Operator

And the next question is from the line of Michael Bowen of Pacific Crest.

Michael G. Bowen - Pacific Crest Securities, Inc., Research Division

First question I have is on the iDEN negative impact of $17.2 million. Jeff or Brendan, how should we think about that in the first quarter of '14? Is that going to be a step function up? Because I think you said this quarter was $1.5 million? Or is it going to be more of a gradual increase to get to that $17.2 million? And then second question, Sprint also made some commentary outside of their 2.5-gig coverage. They said they're going to move to 250 million of POP coverage for LTE, even excluding the 2.5. So is that included in your '14 guidance?

Jeffrey A. Stoops

Michael, on the Sprint question, it is essentially a step function. And basically, what it amounts to is the highest potential loss in Q1, which would be a little over $2 million in the first quarter of quarterly revenue. And then you would have that loss, obviously, for the entire year. So that component of it would be $8 million of the $17 million. And then the next quarter, you'd have a loss and so on. And so the $17 million is basically the accumulation of the total revenue to be recognized -- or to not be recognized, I should say, during 2014 associated with losing those leases.

Brendan T. Cavanagh

And on the specific inclusion of additional Sprint POP coverage, Michael, no, we -- that really didn't go into our 2014 outlook.

Operator

[Operator Instructions] You have a question from the line of Ric Prentiss of Raymond James.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

A couple of questions for you guys. First, Jeff, you mentioned that the Sprint Spark or the 2.5 gigahertz, you'd put it in when there was better clarity, given Sprint just announced it last week, but wants to have 100 million POPs covered by the end of '14, is this something you think we see within 3 months, 6 months as far as you getting clarity? I'm just trying to gauge how soon they've got to kind of get to you guys?

Brendan T. Cavanagh

Yes. I think, Ric, given the timing of when we would talk about fourth quarter because it's a little bit later than the typically 1 to 3 quarter calls. We probably should have some more color next time we talk.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

That makes sense. We've also been picking up a lot of buzz in the industry, including a related company to Sprint about third-party gear again back to the old kind of LightSquared concept. It seems to be picking up a lot of buzz again that when we asked the Sprint-related company, they said that's one of the prime reasons they had done Vision was to be prepared for a third-party hosting. Can you update us a little bit about what that means for you guys, what if Sprint were to host third parties, what if they were to put some frequencies that they don't own into their equipment, how does that kind of play out?

Brendan T. Cavanagh

Well, we did go down that track pretty far with LightSquared. So we had previously negotiated an arrangement where Sprint would have had that right and we would have gotten additional revenue for that. And it was equipment-specific. We had a detailed spec that we negotiated from. So the basic concept and theory is in place. And we're -- I think we'd be open and ready if that opportunity comes again, that it would clearly result in additional revenue to us because -- on the basis that Sprint would not own that spectrum.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Great, makes sense. And then on your backlog, I think I heard you say that there's about 200 or so towers in the first quarter of '14, M&A backlog, and those were U.S. Can you talk a little bit about what you're buying there? It looked a little expensive on a price per tower basis maybe.

Jeffrey A. Stoops

Yes. These are some real quality towers that average probably 2.5 tenants or more a tower. So these are a little more on the pricier side because their cash flows are much greater.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Makes sense, makes sense. And then on the organic growth that you've been talking to, is there a differentiation between the U.S. cash organic growth rate and the international organic growth rate?

Jeffrey A. Stoops

It's a little bit less, less than 100 basis points off of our range in the U.S. and probably 200, 300 maybe 400 basis points more internationally. The 9% to 10% was a blend.

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Right. So the U.S. would be more like 8% to 9% or 9-ish in the international or be above that?

Jeffrey A. Stoops

Yes.

Operator

And there are no further questions in queue. Back to you, gentlemen.

Mark DeRussy

Great. Thanks, Rochelle, and thank you all for joining us today with our third quarter results. And we look forward to our year-end call in February. Thank you.

Operator

Okay. Thank you. And that concludes 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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