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American Tower Corporation (NYSE:AMT)

Q4 FY07 Earnings Call

February 25, 2008, 8:30 AM EST

Executives

Michael Powell - VP, IR

Brad Singer - CFO and Treasurer

James Taiclet - CEO

Analysts

Ric Prentiss - Raymond James

Michael Rollins - Smith Barney Citigroup

Jonathan Atkin - RBC Capital Markets

David Janazzo - Merrill Lynch

Brett Feldman - Lehman Brothers

David Barden - Banc of America Securities

Richard Choe - Bear Stearns

Jonathan Chaplin - JPMorgan

Shaun Parvez - Cowen & Company

Operator

Good morning, my name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the American Tower Company Fourth Quarter 2007 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions].

I will now turn the call over to Mr. Michael Powell, Vice President of Investor Relations. Please go ahead, sir.

Michael Powell - Vice President, Investor Relations

Thanks, Dennis. Good morning and thank you for joining the American Tower's Conference Call regarding our preliminary fourth quarter and full year 2007 financial information. We will begin with comments from Brad Singer our Chief Financial Officer. We will then turn things over to James Taiclet, our Chairman and Chief Executive Officer. After these comments, we will of course open the call... open for your questions.

However, before I turn the call over to Brad, I would like to remind you that the call will contain forward-looking statements. These statements involve a number of risks and uncertainties. And examples of these statements include statements regarding our full year 2008 outlook. The evaluation of our potential tax related adjustments to our financial statement, the timing of our filing Form 10-K for the year ended December 31st 2007, and any another statements or matters that are not historical facts.

You should be aware that certain factors may affect us in the future, and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's press release, and those set forth in our Form 10-Q for the quarter ended September 30th, 2007, and any of our other filings with the SEC.

We urge you to consider these factors, and remind you that we undertake no obligation to update the information contained in this call to reflect subsequently occurring events or circumstances.

And now I would like to turn things over to Brad.

Brad Singer - Chief Financial Officer and Treasurer

Thanks Michael. Before we get started on our results, I would like to highlight that we are reporting only throughout this financial information for the fourth quarter and full year ended December 31, 2007. In today's press release, we announced that the company is in the process of valuing the impact of certain non-cash tax related items and its financial statements, including the potential adjustments to its deferred tax assets and liability.

The significant portion of the evaluation was undertaken primarily as a result of the settlement of the Verestar bankruptcy proceedings and related litigation, which was approved by the Bankruptcy Court in the fourth quarter. As a result, we are unable at this time to provide complete financial results for the quarter and full year ended in December 31st 2007, and currently all financial information present on this call remains subject to the completion of our analysis and the completion of year end audit. However, we believe that the financial information released today would not be affected by the potential non-cash tax related adjustments. And the adjustments will not have an impact on our historical revenues adjusted EBITDA, cash flows from operations for pretax income from continuing operations.

The company intends to report its complete financial results and filed Form 10-K for the year ended December 31st 2007 as soon as practical. While we anticipate that we will be able to file the Form 10-K within the 15-day period permitted, due to the complexity of the analysis and depending on the final outcome of our valuation, we may need up to four weeks to prepare and file the Form 10-K.

American Tower successfully completed the year, delivering strong operating performance while continuing to invest in its ongoing operations. We ended 2007 with record levels of revenue, gross margin, and free cash flow, and then a strong financial position. For 2007, our top line revenue growth gross margin and free cash flow met or exceeded our expectations marking the sixth consecutive year that American Towers met or exceeded tower revenue, gross margin, or operating profits outlook that was provided beginning of the year.

Our fourth quarter total revenues increased 12% to more than $378 million, an 11% for the full year compared to 2006. Our performance was driven primarily by organic revenue growth and our rental management division, which increased 12% to over $370 million for the fourth quarter. Our tower gross margins increased 14% to $284 million for the quarter. In the fourth quarter, we achieved our largest quarterly commenced new business in our history, which was 125 million of annualized revenue, which excludes any escalates. Please note that our fourth quarter revenues included approximately $3.5 million of positive non-recurring items that were not included in our previously spoke outlook, related to non-cash straight-line revenue adjustment and a cash settlement from one of our customers.

Our expenses included 1.5 million of non-recurring negative items resulting in an unforecasted positive contribution to gross margin of $2 million. For the full year 2007, our results are approximately 23 million and 24 million above of our initial 2007 tower revenue and gross margin midpoint outlook provided to investors in late 2006.

Our total selling, general and administrative expense was 46 million including 11 million of non-cash stock based compensation expense. Our SG&A expense also includes approximately $3.2 million of cost associated with historic stock option review and related matters, which includes 1.5 million of net expense related to the anticipated settlement of the class action lawsuit. Excluding stock-based compensation expense, our fourth quarter tower and growth service margin plus SG&A increased 16%, a return $53 million. For the full year 2007, our tower and service gross margin plus SG&A grew 13% to $980 million. Our operating income for the quarter increased 38% to $101 million in the prior year.

In the fourth quarter, our capital expenditures totaled 47.4 million. During the quarter, we successfully completed the construction of 66 towers and 2 in-building installations with momentum through a solid pipeline of domestic and international new build... new tower build going into 2008. The average unleveraged day 1 return on new towers and in-building project was approximately 15% with strong prospects for additional tenants like further increase our future returns on invested capital. In addition to our construction activities, we acquired 181 towers during the quarter for approximately $23 million.

For the year, we built 152 towers and completed the installation of 17 in-building sites, which was below our original expectations. In combination with the 293 towers we acquired during the year, we added a total 462 towers in in-building units to our portfolio during 2007, which produced initial returns of approximately 13%. We also increased our land purchase activity acquiring $13 million of land in the fourth quarter and over $44 million for the year.

With our strong revenue growth and disciplined capital spending and cost control, we produced approximately $540 million of free cash flow for 2007. We define free cash flow at cash provided by operations with all capital expenditures. Please note that the free cash flow calculation include $111 million of discretionary capital spending on construction of new towers and in-building site land purchases and capitals to redevelop existing site for additional tenant demand.

We are refining our 2008 outlook. We continue to anticipate levels of commenced new business to be higher than 2007 level. We are raising our initial 2008 revenue guidance by approximately $12.5 million as a midpoint of our outlook. We expect incremental tower revenues to increase by approximately $120 million to $140 million offset by an approximate $25 million decrease in the non-cash straight-line revenue. As we discussed in our last earnings call, the decrease in straight-line revenue is a normalized decline that would have occurred in 2006 and 2007 without the multiple ten year extensions, which were signed with our national carriers. And that we previously disclosed relating to increased straight-line revenue in 2006, and slightly increased straight-line revenue year-over-year in 2007.

On a cash basis, we anticipate tower revenues decreasing approximately 8% to 10% and 6.5% to 8% on a GAAP basis inclusive of straight-line effect. We anticipate converting approximately 80% to 90% of incremental tower revenues to gross margin.

In addition to typical inflationary levels of increase in SG&A, we expect an increase of $4 million related to our international expansion effort. Based on strong levels of customer demand, we anticipate 2008 tower and service gross margin less SG&A excluding non-cash comp to increase $95 million to $120 million for 2007 excluding the reduction in straight-line revenue of approximately $25 million and $14 million in cost incurred related to historic option review in 2007.

We have increased our capital spending expectations for 2008. As a result of several initiatives focused on our tower construction pipeline, we now anticipate that we will build between 300 to 400 new towers in 2008. In addition, we expect to increase our land acquisition activities and our targeting investing 40 months to 60 months. We also anticipate our redevelopment efforts will be greater primarily driven by our activity in our international markets. As a result, we increased our outlook for total capital spending to between $185 million and $215 million. If we are successful in executing our built plan land repurchase initiatives, our capital spending may increase beyond the current outlook.

Our financial position remains solid due to strength of our operations and fundamentals of wireless industry. During the fourth quarter, we repurchased approximately 8.9 million of our shares return to our stock option repurchase program were approximately $385 million, with an additional 4.3 million shares or $165 million subsequently end of 2007. As a result, we have repurchased over the past year and half a total of 2.2 billion representing over 57 million shares.

We will update investors on future repurchase plans when we complete the review of the non-cash tax related item and file the appropriate document with the SEC. We remain committed to return in capital to our shareholders. We do not have a productive investment opportunity in our core tower business. With spring training beginning last week, we look forward to 2008 as the rest stocks [ph] begin to work hard on defending the relative style, and we continue to produce industry living results.

I will now turn things over to Chairman and CEO of American Tower, Jim Taiclet.

James Taiclet - Chief Executive Officer

Thanks Brad. In light of the excellent operational results that Brad just reviewed, I would like to first highlight to our investors on the call and express my deep appreciation to our managers and employees in both the U.S. and our international market. These are the talented and energetic people, who make the sales calls, plan the towers, press release [ph] documents, make the ledger entries and do the many, many other critical tasks that enable our company to deliver this kind of performance.

Our company, our whole organization is poised for a strong year of growth in 2008. As reflected in our updated guidance, we anticipate 2008 will be one of our strongest years of commenced new business. Importantly, we believe this growth will also have the most adverse and evenly proportionately spread of sources that we have experienced in the company's history.

In the U.S., we expect meaningful contributions from all four national carrier legacy networks. So, Leap Wireless and MetroPCS as they rollout for Auction 66 spectrum and from a portion of the initial plan WiMAX deployments by Clearwire and Sprint. Moreover, we anticipate an active year in both Mexico and Brazil from a number of carriers, including Claro, Vivo, and Oi, all of which have secured additional licensees in Brazil.

In sum, we feel good about that scale and scope of our new business in 2008. There are also a number of trends evidenced in wireless that we believe will support strong demand for tower space well into the future. These trends re-enforce two continuing things: the ever growing importance from mobility and telecommunication and the industry's drive for a greater bandwidth and speed.

As to the growing role of mobility, there is nothing happened [ph]. In 2007, wireless minutes were well in excess of wired minutes and the trend lines continued to diverge. The country's two largest telecommunications companies, AT&T and Verizon have publicly stated their dedication to wireless services and have recently taken some notable steps.

These include AT&T's successful launch of the Apple iPhone and its purchase of 700 megahertz spectrum in advance of the current option and Verizon's announcement of LTE as its directional technology choice of the future. And even wireless penetration and usage rates continue to grow, it is evidenced that it's critical that wireless carriers of all types to protect and grow their revenue base.

Consequently, carriers continue to invest in marketing, handsets and network quality to keep their existing customers and are striving to keep churn to a minimum. Another example of these types of innovation is the premium and limited usage plans recently unveiled by three U.S. national carriers. Ongoing network investment will be required after these types of plans with competitive signal quality and coverage.

So, while mobility is becoming more and more important, a second theme is the advancement of all the elements necessary to take us from the 2.5G to a 3G to a 4G world in U.S. telecommunications. Just as it took a wide range of industry players to bring the wired Internet from dial-up speed to today's multi-megabit speed, it will take a broad array of technology, hardware, and software companies to develop wide spread mobile data services in the three plus megabit per second range.

Major investments in technology hardware and software are all necessary to advance wireless fees and bandwidth for today's wired high speed Internet offerings that are available through cable modems and DSL. We are now seeing the leading players in the technology hardware and software industries making major commitments to investing in wireless products and services.

To mention just a few common examples, on the technology front is Intel with its WiMAX challenge to the 4G aspirations of Qualcomm and the GSM consortium. With respect to handset hardware, Apple's entry with the iPhone is a landmark event that could encourage additional consumer product leaders to focus on wireless devices.

Regarding software, Google's recent activism in the wired [ph] space should facilitate bringing not only its own resources to the industry, but that of independent application writers as well. And while technology hardware and software are all essential to advancing towards 4G, the capacity and motivation of the wireless carriers to invest in their networks to deliver their requisite speed and bandwidth are crucial.

Carrier economics will drive these investments. And as voice service matures, wireless carriers are likely to increasingly look towards high speed data services for future revenue growth. Verizon and AT&T both appear to be committed to an LTE upgrade path over the next few years and Sprint and Clearwire are already doing trials and deploying higher speed WiMAX markets.

Prices for 700 megahertz of spectrum in the current SEC auctions are exceeding expectations, indicating that this spectrum is a valuable enabler for a widely offered high speed next-generation servers. For tower companies, the deployment of 4G networks would lengthen and strengthen the demand for tower space. Both 3G and 4G networks drive augmentations of existing cell sites and they drive new cell sites required to the more dense networks that will ultimately be necessary to deliver these types of services.

And so the most important strategic and investment question for American Tower is, will the wireless industry move toward deploying high speed services for broad consumption in the U.S. over the next five years to eight years. We believe the answer is yes. We see the major pieces coming together; carrier financial strength and business motivation, sufficient spectrum availability, enabling technologies from inside and outside the current OEMs, consumer friendly handsets and bandwidth-hungry software applications such as music and social networking.

Consequently, our company strategy remains steady. Seek to add quality assets to our portfolio both in the U.S., which will remain the strong center of gravity of our company and in select international markets. Continue to improve the operational performance of our assets by maximizing revenue growth and maintaining disciplined cost and CapEx control.

And finally maintain financial flexibility with reasonable leverage and a diversity of financial instruments and centers. Our strategy we believe enables our company to prosper in a range of economic and capital market scenarios. We are confident that our business will perform well in 2008 underpinning our increased guidance for the year. And we also expect that our strong balance sheet will provide the access to capital to invest in our business; and once our full financial statements are completed, we address our historical practice are returning excess capital to shareholders.

Thanks everyone for joining us in the call today. And at this time, Brad and I would be happy to take your questions.

Question And Answer

Operator

[Operator Instructions]. Your first question will come from the line of Ric Prentiss with Raymond James.

Ric Prentiss - Raymond James

Yes, good morning guys.

James Taiclet - Chief Executive Officer

Hi Ric.

Ric Prentiss - Raymond James

Hi. Couple of questions for you; probably start with couple for Brad on the guidance. Can you kind of update as far as what gave you the comfort to take the guidance up? Was it the leasing activity that you talked about to increase strong step in fourth quarter? Was it the 180 towers that you guys have bought since the end of the quarter? And also on that $95 million to $120 million number you threw out there, was that on cash EBITDA as far as year-over-year growth? I was trying to compare that with the last guidance you gave for 08 was.

Brad Singer - Chief Financial Officer and Treasurer

Sure. Let me take them in order. We gave the comments to increase the revenue midpoint was a combination of both them. It was primarily due to new business. We had an exceptionally strong fourth quarter; the best in our history in terms of what was signed. It's based on the pipeline of what we have signed and our running. And then the acquisition was also a portion, not quite as much as the new business. But that's... but it did contribute to it. And so to all those things that growth plays into taking the numbers up, but we feel that based on where we are today, those numbers are very justifiable and gives an appropriate outlook. As expected, it's not adjusted EBITDA. It is gross margin less SG&A and adding that non-cash comp, which you could be construed as a proxy for growth for adjusted EBITDA, but not by mix. It's... what we had last time was really... what we... to make it cash based is we only did a... we took it as a GAAP number sort to speak by factoring in the $25!  million decrease. Here we took everything down to a cash level and that's the numbers I got it.

Ric Prentiss - Raymond James

So the... so that $95 million to $120 million excludes the $25 million non-cash or... yes non-cash great line item?

Brad Singer - Chief Financial Officer and Treasurer

And adds back and also deducts the $14 million stock option review cost was apples-to-apples, and we have none in 2008. We should add them... we should take it out of our gross margin less SG&A added that non-cash tax number.

Ric Prentiss - Raymond James

Okay. Another question for you, with the review of the tax assets and liabilities, any expected change to your net operating losses or can you just kind of update us as far as how large is your NOLs right now, and when do you think that will carry you through as far as not being a significant cash tax fare?

Brad Singer - Chief Financial Officer and Treasurer

Sure, this is not a tax issue sort to speak as it impacts our tax NOLs. This is a GAAP issue in terms of how they are accounted for. So I just want to differentiate that the actual NOL itself that we would be utilizing our tax returns. And we don't anticipate a change in as the work stands today. And so what you are really doing is that how is it accounted?

Ric Prentiss - Raymond James

And your NOL should carry it through... how much...

Brad Singer - Chief Financial Officer and Treasurer

Well, wehave about 1.7 billion of NOLs, and that should carry us through this decade and maybe a year or two beyond.

Ric Prentiss - Raymond James

And then final question for you is, I think, Jim, in your comments you mentioned update to the stock buyback would be after the year-end audit. How is that... why the delay in kind updating their thoughts on the buyback programs?

James Taiclet - Chief Executive Officer

Ric, we'd rather just give the financial statements out, so we can implement a 10B-5 program. To do it, we offset direct, we offset way would not enable you to do a 10B-5 plus you just want to have good statements out there that the goal were down in net income, but while we make an announcements on equity.

Ric Prentiss - Raymond James

Okay, so really is more the kind of program that you guys have used as far as doing the program in the past?

James Taiclet - Chief Executive Officer

That's correct. Because what happened is our natural blackout periods, Ric, begin prior to when you end the quarter.

Ric Prentiss - Raymond James

Great.

James Taiclet - Chief Executive Officer

So we are going to March 31st, and then we have a natural blackout. We need to sign those programs up and put them in place to be able to be active...

Ric Prentiss - Raymond James

Right.

James Taiclet - Chief Executive Officer

...prior to the blackout.

Ric Prentiss - Raymond James

Makes sense. Great, thanks guys.

Operator

Your next question will come from the line of Michael Rollins with Citi Investment Research.

Michael Rollins - Smith Barney Citigroup

Hi, good morning.

Unidentified Company Representative

Good morning.

Michael Rollins - Smith Barney Citigroup

Just a couple of questions, I guess first if there is an update in terms of specifically what's going on in the ground in India and Latin America in terms of the relative investments you are making there versus the U.S. And the second part of the question would be, if you look at the acquisition opportunities because of our balance sheet and the market environment were in and also giving your outlook for how you feel the future is going to play out in terms of cycle location demand. Is this the time to really accelerate the M&A activity whether it's building out more of a portfolio in Latin America, U.S., or again you talked about India in the past? Thanks.

James Taiclet - Chief Executive Officer

Yes. Hi Mike, it's Jim. First of all, you've already heard Brad talk about raising our expectation of tower builds, right? So, the most sort of controllable activity in our most mature markets U.S., Mexico, and Brazil, we are already moving ahead with higher build plan. So that's the first point. Second point, I just want to start by reiterating that we expect the U.S. tower domestic operation to remain the center of gravity for the company for the foreseeable future; and as you know, it's 87% of our revenue base today. But the compliment to further diversify that existing revenue base, we are evaluating a range of investment opportunities on a number of dimensions you guys have heard us talk about before country as of used asset quality, gross prospects. And you can be assured that the historical discipline that we've applied when looking at investments in the past, we are also applying them today as we actively evaluate international markets.

And so, we all have announceable transaction today, Mike, but that's... the consistent theme of how we are approaching that. Where are the opportunities? I think you named two of them top on our list, and all if you start with Latin America, again we have existing operations. We have customers that are common in those two countries in Mexico and Brazil and additional countries. So, we've got a very strong focus on adding potential countries in Latin America and expanding in market as we have already talked about. India, we've got a team on the ground. They are assessing the opportunities today. You haven't seen us act in some of the auction situations. That's been purposeful on our part. We've been able to see them and decided not to participate. So just what we ask is, give us some time. We will either make a revenue generating investment in the near to mid future or will decelerate some of our SG&A investment looking at these things. So we are on anything today Mike, but ! again that's the consistent way we are looking at it and everything is on the risk adjustment return as you know.

Michael Rollins - Smith Barney Citigroup

And just as a follow-up, can you give us a little more description as to where the 180 towers were that you acquired, was that U.S., was that Latin America?

James Taiclet - Chief Executive Officer

Those were primarily Latin America and kind of consistent with how our dollars were spent this year, which was 30% of our acquisitions for U.S. base, 70%... in dollar terms, 70% were international. The returns that we averaged were roughly between 13.5% and 14% initial returns on leverage on that money.

Michael Rollins - Smith Barney Citigroup

Thank you very much.

Brad Singer - Chief Financial Officer and Treasurer

Sure, Mike.

Operator

Your next question will come from the line of Jonathan Atkin with RBC Capital Market.

Jonathan Atkin - RBC Capital Markets

Yes. I had a question about tower cash flow margin sequentially. I think the trend might have been down a bit from 3Q to 4Q; wondering what drove that. And then with respect to just activity on the ground in Mexico and Brazil, can you comment on the activity of the kind of the legacy carriers, and then you mentioned new license build-outs. Can you give us just a little bit more operational color for each country?

Brad Singer - Chief Financial Officer and Treasurer

Sure John; it's Brad. I will start and then I will turn over the Latin America question for Jim. The reason for the sequential decline was if you remember last quarter we had one-time items that were fairly substantial. So we had a $4 million one time gain in revenue and we had a $2.5 million one-time benefit in expense. So those didn't exist this quarter and that... it's a fairly significant one-time that causes margins to go up when you reduce expenses and you increase revenue. In the fourth quarter, we also had... just an operationally when you strip out the one time item, it's usually a pretty... it was a heavy quarter for R&M, as we do certain year-end projects that are finally done. And then we also had a little bit of uptick in non-cash revenue... I mean ground lease expense related to some of the buyouts that we have been doing or extending of leases, because we do extend a lot of our lease... if they have 20 years to go, we extend that sometimes another 20 years. A! nd so you have to then increase your straight-line over that period of time. Those were the major drivers in terms of the sequential gross margin.

James Taiclet - Chief Executive Officer

Yes Jonathan, it's Jim. When it comes to Mexico and Brazil, we are going to see a lot of activity from our existing carriers, especially Iusacell combined now with Unifone in Mexico, also sort of run rate level of business from Telcel and Telefónica and Nextel International too. And then there is a few new WiMAX and fixed wireless players in Mexico price modest, but beneficial, nonetheless MVS, Axtel, and Telemex, the wired phone companies actually getting into some fixed wireless projects as well.

In Brazil, Claro and Vivo, which are América Móvil and Telefónica affiliates respectively, both acquired additional spectrum that gives them nationwide coverage, so that will be doing some build-up there. Oi acquired a new license in Sao Paulo state. And also there is a new carrier called Unicel that's sort of gearing up to do a rollout in Sao Paulo also. So those are the sources of much of the new business that's coming here in the Mexico and Brazil.

Jonathan Atkin - RBC Capital Markets

And then the 70% of new tower builds that are international, what's been the rough mix respectively as well as maybe for 07 between Mexico and Brazil of that 70% in other words?

Brad Singer - Chief Financial Officer and Treasurer

That was acquisition, what we... that 70%, not new builds.

Jonathan Atkin - RBC Capital Markets

Okay.

Brad Singer - Chief Financial Officer and Treasurer

But coincidently, it's about one-third U.S. and rest international, that's not far off. That's what we anticipate in 2008.

Jonathan Atkin - RBC Capital Markets

And of the international, is it split-evenly between Mexico and Brazil or is it weighted more toward one country?

Brad Singer - Chief Financial Officer and Treasurer

Brazil is higher this year than last year.

Jonathan Atkin - RBC Capital Markets

Okay. And then finally, you talked about the lease extensions and then combined with ground lease repurchases, is there anyway to kind of give us some flavor for during the preceding fourth quarters what portion of ground leases have either been extended or purchased?

Brad Singer - Chief Financial Officer and Treasurer

We will have that in our investor presentation, so that's I think the best place to cover with respect to this year. [ph]

Jonathan Atkin - RBC Capital Markets

Great, thank you.

Brad Singer - Chief Financial Officer and Treasurer

But our whole goal is really to extend out anything we have... though even though it's a small subset of our ground leases, anything the next 10 years should be dealt with by the end of this year and we've made substantial progress, and then year 11 through 15 were off the constantly held up.

Jonathan Atkin - RBC Capital Markets

Thank you.

Operator

Your next question will come from the line of David Janazzo with Merrill Lynch.

David Janazzo - Merrill Lynch

Good morning. In the release, you mentioned looking at a range of economic and capital market scenarios. Obviously, you are going to need get the financials out, but with your strategy of the prudent financial leverage in the diversifying of the capital structure. Can you discuss that some of those scenarios that you are seeing particularly capital markets and how that's going to weigh on your considerations?

Brad Singer - Chief Financial Officer and Treasurer

Sure, let's... we finance ourselves in three primary markets, which is the securitization market, the bank market and that's relationship bank, not the Term B more broad investor market. And then the typical corporate debt markets, which are bond. The securitization market is very challenging, very volatile with very few new issues and spreads that are... we have gapped out dramatically well beyond any historic level it's been seen. That market may take time to ultimately settle out and may never settle back to where it was, since that was really... were the securitization market was at historically tight level. So that put us towards the bank market and the bond market. Both are open to us, I think the key is to be selective especially in the bond market, because that is... there is opportunities we can use our credit... our good credit ratings to issue, but you just don't want to do it in a period, which my have a lot of volatility. So you just wait your time and move for! ward. The bank market we have very good relation with our bank that some market that is again open. There is a finite amount of capital in the bank market. I don't think our current facility is asset as that finite amount of capital, but again you can go up, but you can only go up so much. And that's how I'd like to portray.

David Janazzo - Merrill Lynch

Thank You.

Unidentified Company Representative

Hold the line David, I think we have got access to the capital markets in 2008 due to things that we like to do.

David Janazzo - Merrill Lynch

Okay, thanks.

Operator

Your next question will come from the line of Brett Feldman with Lehman Brothers.

Brett Feldman - Lehman Brothers

Thanks. This is a quick follow-up to the last question. Can you just remind us where your availability under the revolver is right now?

Brad Singer - Chief Financial Officer and Treasurer

Sure, I think as of year-end, we had $875 million or $825 million outstanding. There was a $1.25 billion revolver. So you've got a little over $425 million in their low left section, because it's a few lines of credit accounting into and so that's where we ended the year.

Brett Feldman - Lehman Brothers

That's $825 million is available right now?

Brad Singer - Chief Financial Officer and Treasurer

No, that is drawn.

Brett Feldman - Lehman Brothers

That's drawn?

Brad Singer - Chief Financial Officer and Treasurer

$2.5 billion facility.

Brett Feldman - Lehman Brothers

Okay. And then just one last point of clarification; I think you mentioned in your guidance that you are assuming about $9 million of expenses in your SG&A for international business development. I don't think you... have you previously disclosed with, I am just wondering if that changed with the update to your guidance?

Brad Singer - Chief Financial Officer and Treasurer

It should not have, maybe $1 million. It wasn't... I think it's below $1 million that changed from our November budget.

Brett Feldman - Lehman Brothers

Okay, and then...

James Taiclet - Chief Executive Officer

And Brett, in the past, we didn't break it out. It was $5ish millions, I think it's in a number was in 2007 going to 09, and we just want to give you the visibility to that.

Brett Feldman - Lehman Brothers

Okay. And then one last question; you said the buyback that you currently have is substantially complete. Are you actually going to complete that even if you haven't completed your tax review or is that actually going to hold?

Brad Singer - Chief Financial Officer and Treasurer

Well, we've completed 2.2 billion as of 2.25 billion. And what's our typical practice, we don't discuss timing of our share repurchases, because we do under 10B-5. So, we don't really bear form that practice, because a lot of our plans are usually under automatic execution.

Brett Feldman - Lehman Brothers

Okay. Thank you.

Operator

Your next question will come from the line of David Barden with Banc of America.

David Barden - Banc of America Securities

Hi guys, thanks for taking my question. Maybe just two real quick ones; Brad, just in terms of the expectation for the four weeks for the 10-K, obviously we've made estimates before about giving restatements done and the time it takes. And so I was just wondering just if you could kind of give us some comfort level on your estimate for that four weeks will be appreciated and...

Brad Singer - Chief Financial Officer and Treasurer

That's a quick question?

David Barden - Banc of America Securities

That's a quick one.

Unidentified Company Representative

In terms of the timetable, where we expect the final statements; unlike the reason the last time that got delayed or last time, we made estimates was during the stock options review. That was a different type of issue, different type of review. This is a isolated issue we've done a ton of work over the last few weeks to get our hands around it and nearing completion of that. And then it's working to evaluating the materiality of it and what you do you'll be on the shorter end of that timetable if you don't think it's material. And if you do think it's material, you'll be more towards the longer end, but hopefully even inside of that. So I think because of that, it gives us a decent amount of confidence that estimate was created with our orders and we are reviewing where we are in this process. And so I think we feel that's a pretty good number. If nothing is certain in life, but we do feel pretty strong, pretty good that that timetable is a previous timetable.

David Barden - Banc of America Securities

Okay, good, thanks. And, just a second question; again, this is more on this related theme of the credit market et cetera. So, I am just looking back from three months ago to today. The capital budget is way up; obviously you've shared some good reasons why you want to spend that money. But it is a very kind of sharp increase just over a handful of month. Obviously you guys continue to remain at the very low end of the leverage range borrowing costs are way up. We are kind of expecting a buyback announcement, but obviously that's going to be comment a few weeks presumably. But I guess as I sit here, I just wonder if given the overall more conservative nature of American Tower when it comes to the balance sheet, is it prudent to kind of just think about you guys maybe pulling in your horns a little bit from the standpoint of leverage and getting too aggressive on stock buybacks in the current climate or am I reading too much into kind of the recipe of things that we are seei! ng come together this quarter?

Brad Singer - Chief Financial Officer and Treasurer

I think you are reading too much into with my initial statement. If you look at our money that we put to work on the yearly rate guidance, we are rating the number of new build rough to by a little bit more land. Our returns, acquisitions and new builds were about the same is 13% on leverage. That's day 1, they do grow and you have more tenants, pretty good numbers. Our credit costs were higher than they were three months or six months ago; they are not that much higher. Our bonds trade above of par; that's the 7% bond. So by implicit of a Friday, it was below 7% range. Our bank when you swap out debt, the bank is LIBOR you get 3% LIBOR and it's plus 75 basis points under 4% money. If we were up to rate new facilities would cost more, but not dramatically more, because LIBOR has come down. So all these things we have to take into account. The securitization market is what is as I noted not accommodating right now and may not be for credit for a long period of time. But we d! on't see our capital constraint from that. You just have to be profitable about when you enter the market, and that's the key. So, if we have good returns and putting money into these productive assets that makes lot of sense. Our shares, it's clearly better to buy more at lower prices than at higher prices. So our shares have come down more than our burrowing costs have gone up, so again the pretty good recipe for putting money to work. And that's, that's how I portray this.

David Barden - Banc of America Securities

And are you at all incrementally more gun shy about moving the leverage backup into the middle of the range to take advantage of the fact that the stock is down harder?

Brad Singer - Chief Financial Officer and Treasurer

I think it's a relative discussion of share price. We... where we have moved over the last three quarters, is up towards kind of the 4.5ish range on a LTM basis. Even if we held it there, because we generate close 600 million of cash flow even after all these products we highlighted, you still have, if we were to see what our EBITDA growth again if it grows 100... gross margins plus SG&A adding back non-cash, you get another 500 million or 600 million of... so even to hold it steady, you have to build into it. So, even moving up or down, you have a lot of capacity.

David Barden - Banc of America Securities

Great.

James Taiclet - Chief Executive Officer

David, my initial comments include the point that we feel very confident about the strategy we have had and taking it forward. So there is nothing again in the economy or the financial market that are taking us off of the strategy that we have been talking about with you guys for the last couple of years.

David Barden - Banc of America Securities

Great, good to hear. Thanks guys.

James Taiclet - Chief Executive Officer

Yes.

Operator

Your next question will come from the line Richard Choe with Bear Stearns.

Richard Choe - Bear Stearns

Hi, I just wanted to get a little color on your WiMAX comments for guidance. Is this given what the current players are building or planning to build? Is it the contract side, I guess you have seen the pipeline and how could that change if there is a dramatic change in build from Sprint and Clearwire?

James Taiclet - Chief Executive Officer

Hey Richard, it's really two parts. I think you may have both on your questions, which is if the contracts we have signed, which are money good and then it's what our anticipated based on talking to our customers that that their planning to spend and really market based specifically identified working with us. So, could those change? They could. Are they material to our guidance? Not particularly. And so that's how I portray that in terms of the impact with the WiMAX. As they come fruition, the markets that they have discussed with us where they do.

Richard Choe - Bear Stearns

Great, thank you.

Operator

Your next question will come from the line of John Marcedy [ph] with Morgan Stanley.

Unidentified Analyst

Hi, thank you very much. Wondering if you could talk a little about the M&A environment in the U.S. I know that you acquired a lot of towers in 4Q outside, but wondering if maybe there are some sizeable opportunities still left in the States or if it's now pretty much down to mom and pop. And then just following on the one of the previous questions; you talked a little bit about the cost of borrowing coming down faster or not rising as fast. Wondering if that's still the same for M&A, are you seeing the cost of M&A now down more than the cost of borrowing have increased. Thank you.

James Taiclet - Chief Executive Officer

John, it's Jim Taiclet. The major sources remaining of towers in U.S., you have talked about the past the T-Mobile, AT&T public tower companies. There is no public indication that any of those are available or on the market at this point in time. That takes you down to really, if you want to follow the mom and pop multiple 100 tower type businesses down to the 10s and 20s. They are almost always push for sale, but we've seeing prices diminish dramatically over the last couple of quarters, not necessarily. So again we are being prudent; we look at the opportunities, we apply our risk adjusted return based on the quality of the assets, and we move or we don't move. Again you didn't hear us talk about major numbers of acquisitions in the U.S. in the fourth quarter. So, that's probably an indicator for you.

Brad Singer - Chief Financial Officer and Treasurer

I would also... the only thing I would add is on the... the small private companies side, what you do, what we have seen is several deals pulled, because they could not get the value they were asking, which is I think comes as the markets starts getting a little bit softer in the private market side. It's something you'll always see; that's like the precursor to it.

Unidentified Analyst

Thank you.

Operator

Your next question will come from the line of Jonathan Chaplin with JPMorgan.

Jonathan Chaplin - JPMorgan

Thanks. Just a follow-up on an earlier question; if Clearwire were to accelerate their build back the initial $30 million POPS [ph] a day, they had targeted from the $6 million that they are targeting now. I am wondering what that would mean for your guidance if it would even be material. I am assuming the discussions you are having with them at moment are only on the $6 million that they are now targeting for this year. And I am also wondering if you have a preliminary estimate of what the unlimited plans could do to... to demand over time. Thank you.

James Taiclet - Chief Executive Officer

Sure Jonathan, it's Jim. If Clearwire were to reinvigorate its build plan, the lead time of doing that, getting people deployed into the market, doing side acquisitions in conjunction with it, et cetera, would lead you to sort of back into the year, lease signings and maybe some commencements. So, it wouldn't move us past the top end of our guidance even though they reengage in a $30 million POP build-out. It will be helpful, we love to see it. Second question the unlimited plans from some of the major carriers that have been rolled-out. They're at the high end, which is a good thing meaning if you are going to charge people 99 bucks a month, you are going for the quality, subscriber, they are going to expect quality networks service and again it should support their CapEx budgets to deliver that service over the next few years. It will be a dramatic spike, doubtful, but will it again lengthen and strengthen, will these major carriers are going to invest in their networks t! o compete with each other? Yes.

Jonathan Chaplin - JPMorgan

Great thank you.

Operator

Your next question will come from the line of Shaun Parvez with Cowen & Company.

Shaun Parvez - Cowen & Company

Hi guys; two quick questions. Can you comment on 08 free cash flow guidance? I know you didn't update that and since you had updated revenue and gross margins, I am wondering why they don't seem to flow through to free cash flow.

Brad Singer - Chief Financial Officer and Treasurer

The reason for that is when we do free cash flow, we usually incorporate our estimated interest expense related to any share repurchases. So we have all the elements if you want to assume from our last outlook the interest expense, prior to any announcements if we do announce a share... another share repurchase, then you can have all the build environment. And you can just move up the cash from operations based on the increase in our guidance and decrease it by the CapEx that we put in. Did that help?

Shaun Parvez - Cowen & Company

Yes, yes, that is helpful. And one other question I have is given your accelerating rate of ground lease acquisitions, can you tell us what percent are your towers are now on land that you own, and where that number might be in a year or two?

Brad Singer - Chief Financial Officer and Treasurer

Sure, that percent is right around 16% or 17%, and that's all domestic. So it's higher on that if you put that percentage over the domestic portfolio, because we don't buy the land in Mexico and Brazil currently. As that... as land costs are pass through to our customers. So the numbers drop that percentage is probably a little bit understate relative and if you see our peers, because their... they don't have 13% of our portfolio international. And that's how I portrait, was there a second part to that question?

Shaun Parvez - Cowen & Company

No, no... yes. And where you might see that number in a year or two?

Brad Singer - Chief Financial Officer and Treasurer

Again it's the very range of what a cost of per piece of land really varies and what we are paying ground rent. So if we can assume, let's say you pay 100,000 bucks aside, that's going to move somewhere between 400 and 600 sites into the portfolio and on top of what we have. And we have roughly a little bit over... on the 23,000 bucks.

Shaun Parvez - Cowen & Company

Got you, got you. Great, thank you very much.

James Taiclet - Chief Executive Officer

And at this time, I think we are going to end the call.

Operator

Okay. Thank you very much, sir. Ladies and gentlemen, this does concludes the American Tower Company fourth quarter 2007 earnings conference call. You may now....

Brad Singer - Chief Financial Officer and Treasurer

Thanks a lot everyone. We really appreciate everyone's time.

James Taiclet - Chief Executive Officer

Yes, have a great week everybody.

Operator

Thank you all. You may now disconnect.

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Source: American Tower Corp. Q4 2007 Earnings Call Transcript
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