SBA Communications Corp. Q1 2008 Earnings Call Transcript

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 |  About: SBA Communications Corporation (SBAC)
by: SA Transcripts

Operator

Ladies and gentlemen thank you for standing by. Welcome to the SBA First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to our first speaker Pam Kline, Vice President of Capital Markets. Please go ahead.

Pamela J. Kline - Vice President of Capital Markets

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

Before we get started, I need to get the standard SEC disclosure out. Some of the information we will discuss on this call is forward-looking, including, but not limited to any guidance for 2008 and beyond. These forward-looking statements may be affected by the risks and uncertainties in our business.

Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in last night's press release and our SEC filings, particularly those set forth in our Form 10-K for the fiscal year ended December 31, 2007, and our quarterly reports on Form 10-Q, which documents are publicly available. These factors and others have affected historical results, may affect future results, and may cause future results to differ materially from those expressed in any forward-looking statement we may make.

Our statements are as of today, May 1, 2008, 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. Tony, would you please get us started with comment on the first quarter results?

Anthony J. Macaione - Senior Vice President and Chief Financial Officer

Thanks, Pam and good morning everyone. As you saw from our press release last night, our first quarter financial results were excellent. And we were at the high end or above our guidance for site leasing revenues, tower cash flow, adjusted EBITDA, and equity free cash flow.

Total revenues were $109.9 million, up 14.7% over the year earlier period. Site leasing revenues for the first quarter were $89.4 million or a 16.8% increase over the first quarter of 2007. This leasing revenue growth was driven by both organic growth and acquisition. Site leasing segment operating profit was $67.3 million. Site leasing contributed 96.6% of our total segment operating profit for the first quarter.

Tower cash flow for the first quarter of 2008 was $67.7 million or a 21.4% increase over the year earlier period. Tower Cash Flow margin was 77.5%, up 230 basis points over the year earlier period and 100 basis points over the fourth quarter of 2007. Our services revenues were $20.5 million, compared to $19.3 million in the year earlier period, or a 6.4% increase. Services segment operating profit was $2.4 million in the both the first quarter of 2008 and in the first quarter of 2007. Services segment operating profit margins were 11.5% in the first quarter, compared to 12.5% in the year earlier period.

SG&A expenses for the first quarter were $10.5 million including non-cash compensation charges of 1.4 million and one-time net benefits of approximately $900,000 associated with a reduction of certain accruals that were originally recorded at estimated amounts. This compares to SG&A expense of $10.8 million in the year earlier period including non-cash compensation charges of $1.4 million. Other non-cash expenses in the first quarter included in other-than-temporary impairment charge of $2.5 million related to certain auction rate securities held at March 31, 2008.

As discussed in our previous earnings call, company still holds three auction rate securities with a par value of $29.8 million which had a fair value of $11.8 million at March 31, 2008. Net loss during the quarter was $14.6 million, compared to a net loss of $16.4 million in the year earlier period. Net loss per share for the first quarter was $0.13, compared to a net loss of $0.16 in the year earlier period. Excluding the $2.5 million non-cash impairment charge on the auction rate securities, our net loss per share would have been $0.11. Weighted average shares outstanding for the quarter were 108.5 million.

Adjusted EBITDA for the first quarter of 08, which excludes certain items such as described in last night's press release was $61.5 million in the first quarter, or a 25.4% increase over the year earlier period. Adjusted EBITDA margin was 56.9%, up from 52.5% in the year earlier period. Once again, equity free cash flow increased materially in the quarter, reflecting strong adjusted EBITDA growth. Equity free cash flow for the current period was $38.3 million, a 54.6% increase over the year earlier period. Equity free cash flow per share for the current period was $0.35 per share, or a 52.2% increase over the year earlier period.

In the first quarter, we acquired 88 towers, built 20 towers and ended the quarter with 6,325 towers owned and the rights to manage approximately 4,400 additional or potential communication sites.

Cash capital and expenditures in the first quarter were 58.7 million, of which we spent 1 million on maintenance tower CapEx, $1.1 million on augmentations and rebuilds and 200,000 on general corporate CapEx. We also spent $47.3 million of cash on acquisitions and earn-outs and $6.1 million on new tower builds and new build work-in-process.

With respect to the land underneath our by towers, we spent in total $4.4 million in cash to buy land and easement and to extend ground lease terms. And at this point, I'll turn things over to Pam to provide you with an update on our liquidity and balance sheet.

Pamela J. Kline - Vice President of Capital Markets

Thanks, Tony. SBA ended the first quarter with $1.555 billion of commercial mortgage-backed pass-through certificates outstanding, $350 million of 0.375% convertible senior notes, $40.0 million outstanding on our $335 million senior credit facility, $and 162.7 million of cash and short term restricted cash for a net debt of 1.8 billion.

We increased our senior credit facility to $335 million from $285 million during the quarter. We did not issue stock in the first quarter for acquisition and our share count at the end of the quarter was 108.5 million.

The company's net debt to annualized adjusted EBITDA leverage ratio was 7.3 times at March 31, 2008, down materially from the 8.0 leverage ratio at December 31, 2007. Our net secured debt to annualized adjusted EBITDA leverage ratio was 5.8 times.

Our auction rate securities are not included in our calculation of liquidity or net debt. As of quarter-end, all but $40 million of our debt was fixed rates with a weighted average cash coupon of 4.9% per year. Our first quarter cash interest coverage ratio of adjusted EBITDA to net cash interest was a very strong 2.8 times compared to 2.2 times in the year earlier period.

As of the date of our press release, we had total availability of $227 million under our credit facility, $20 million outstanding, remaining availability of $207 million; as we build and buy towers, additional availability is created under the credit facility.

Pro forma for the TowerCo and other transactions under signed purchase contracts, we estimate that the total availability under the facility will be approximately $310 million. We anticipate using a combination of cash on hand and draws from the credit facility to fund our closing obligations for such acquisitions. I will now turn it over to Kurt to discuss some of our operational results.

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Thanks, Pam and good morning. As you can see by the numbers, Q1 was a very good quarter for us, it continued to show the steady lease up and the resulting revenues from our desirable tower space, a consistent and predictable nature of our expenses, and the efficiency of our scale through the high yet steadily increasing gross margins.

Most of our major customers were busy leasing tower space from us in the quarter. We expect this level of activity to continue. So far this quarter, wireless carriers have continued to report excellent operational and financial results for both voice and especially data services, which we believe will continue to lead them down the path of continuing network development. Same tower revenue and tower cash flow growth was strong at 10% and 13% respectively on a cash basis, excluding approximately 130 basis points of Cingular/AT&T merger related de-commissioning.

In the first quarter, our churn rate was well below historical levels, representing only 0.2% of revenue on an annualized basis with the majority of this Cingular/AT&T churn now behind us. Rented space earned in our average cash basis rent across our 15,726 tenants, is now up to $1,828 per month. During the first quarter, 80% of our new revenues signed came from new tenant leases, with the other 20% coming from amendments to existing installations.

The new leases came from a mix of big 4 carriers and new and existing regional carriers, the mix of new lease activity has been widespread from geographic coverage expansion, to performance enhancing cells, technology overlays, into cover and building penetration, and capacity needs. Wireless backhaul is also gaining momentum and we are starting to see what we think is a broader, long term movement towards that medium from several of our major customers.

Backup tower continued to be an active area for our clients and the rental of additional ground space for their variety of solutions has been steady. Our new tower build team completed 20 towers during the quarter, putting them on track to have their best year since the restart of this program a couple of years ago. We are also very busy on the acquisitions side, which Jeff will discuss in more detail.

On the operational side of our tower portfolio, both OpEx and CapEx expenses continue to be low and reflect the high quality of our portfolio. The biggest highlight of our expense story continues to be the low rate of occurrence of a structural upgrade being required when we go to approve a new tenant lease application, upgrades to our towers are required in only about 1 out of 15 cases which we believe to be by far the lowest rate among the major tower owners in the industry. As a result, augmentation expenditures for the quarter averaged less than $750 per tower per year. Our maintenance capital expenditures for the quarter also averaged less than $700 per tower per year.

Lastly in the expense area, the percentage of our tower sites for which we owned or controlled for more than 50 years, the underlying land grew to 25% as of March 31st contributing to our strong margins and increased control of our assets. Our tower cash flow margins grew 230 basis points year-over-year to 77.5%. On the services side of our business, Q1 came in with revenues and gross margins as expected, revenue of $20.5 million was up 6% year-over-year and segment operating profit of $2.4 million was virtually flat year-over-year on total dollar basis.

We performed services work for a variety of carrier customers in the first quarter. We're anticipating that our work for one particular carrier which has been a primary services customer for the last several quarters will be less than the second quarter and thereafter for an unknown period of time. Our second quarter and full year services revenue guidance reflect this lower expectation, which is carrier specific. Those of our services personnel impacted by this carrier's level of activity are in the process of transitioning into other work.

On the bright side, there is plenty of network development services workout there from a wide variety of existing and potential SBA customers as evidenced by our high leasing backlogs. We're looking forward to another good year operationally. At this point, I'll turn things over to Jeff.

Jeffrey A. Stoops - President and Chief Executive Officer

Thanks, Kurt, and good morning everyone. We had very good quarter, which we believe sets us up for a very good year. We continue to benefit from an execute-well on our three part strategy to grow equity free cash flow per share, maximize organic growth, grow the portfolio materially through intelligent use of capital and appropriately leveraging the balance sheet. The strategy continues to work well for us as evidenced by our industry leading year-over-year growth in equity free cash flow per share of 52%.

We intend to stick with our strategy and believe that it will continue to produce material growth in equity free cash flow per share. As you heard from Kurt, most of our customers have been very active leasing space on our towers; our new tenant lease application backlog is at a recent high and is one of the drivers behind our increased full year outlook.

We do not need a new Sprint-Clearwire WiMAX network to achieve our 2008 outlook although obviously it would be welcome and could add to the results depending on the timing. We see no evidence that our customers are cutting back on network investment because of the general economy. Long-term, the prospects for continued strong growth of demand are very good. UMTS overlays will extend in 2009 and perhaps beyond. AWS new market launches will extend into 2009 and most 700 megahertz deployments will not start until 2009 at the earliest.

We do believe that Sprint and Clearwire separately or together will develop a WiMAX network. Based on the amount of money spent on the 700 megahertz option and the first quarter results of some of our customers, it appears that we have entered a new phase of wireless growth that of data services, data transmissions typically required greater network densities. We have been the beneficiary of that trend and expect to continue to be a beneficiary for years to come.

In summary, organic demand remains strong and we expect it to stay that way. We've taken that strong organic customer demand and have officially converted it into cash flow through our high quality assets and strong operational execution. Obviously 10% same tower revenue growth demonstrates the attractiveness of our towers to wireless providers, but it is also the low cost expense structure of our portfolio that Kurt highlighted that equally drives equity free cash flow. We focus particularly hard on asset selection and operational execution, and we believe our results prove out the success of our efforts.

We continue to benefit from the high quality of our towers and the fact that the substantial majority of our portfolio was built by our industry for our industry. Going forward, we believe there will be continued strong demand from our customers for our towers and that the quality of our assets and the strength of our execution will allow us to efficiently convert top line demand for SBA tower space into recurring cash flow.

We've had a great start to the year on the second part of our strategy, which is portfolio growth. We announced the TowerCo transaction where we have agreed to buy up to 444 towers, and through today, we have acquired or agreed to acquire an additional 263 towers from a variety of sellers.

Combined with the towers we expect to build, we expect to add over 700 towers to the portfolio this year which will be portfolio growth of 11.25%, well above the high end of the portfolio growth range we established at the beginning of the year. This is another reason why we have increased our full year outlook. We are thrilled with the TowerCo transaction and believe those assets to be one of the highest quality, highest growth portfolios of size available or likely to be available for the foreseeable future.

We expect to pay approximately 22 times run rate tower cash flow at closing for the towers not to exceed $450,000 per tower. While the multiple is on the high-end of what we typically pay, we believe it is more than justified by the quality cost-per-tower and expected growth of the assets. At closing, the portfolio will average less than 1.5 telephony tenants per tower, with an average capacity for four and average age of approximately three years and approximately $20,000 of run rate tower cash flow per tower.

The addition of one telephony tenant per tower over the next five years which we believe is a conservative projection and would only bring the assets up to our existing level of occupancy would more than double tower cash flow produce internal rates of return about 15% and would produce same tower revenue growth and same tower cash flow growth in excess of our portfolio as a whole.

We are very pleased with all the real estate and structural aspects of the towers and it is very clear that the portfolio was built and assembled by very experienced and knowledgeable team. Customer demand for the towers is strong; we expect the transaction to be accretive to equity free cash flow per share starting in the fourth quarter of 2008, and be much more accretive in 2009 and beyond. We have been working diligently on the transactions and are on track to close by May 30, 2008.

As to the other towers we have bought this year or have under contract to acquire, we are paying a wide range of multiples of run rate tower cash flow ranging from 9 times to 23 times, depending on the price and the growth prospects of the tower with an average of approximately 17 times and $500,000 per tower. Besides acquisitions, we continue to be and intend to stay active as possible building towers for our ownership and buying the land underneath our towers.

For the rest of the year, we will continue to look at additional acquisition opportunities, but given that we will exceed our portfolio growth goals by closing what we currently have under contract, we will have the luxury of being very selective. Given our current capitalization, we may have an appetite for up to an additional $100 million of cash acquisitions.

There are a number of additional opportunities we are pursuing, but none of those are signed or are in our outlook, and even if they were signed and closed this year, they may have little to no impact on 2008 financial results depending on the timing of closing. They would of course have full impact in 2009. The $100 million of additional potential investment is driven by where such amount of cash acquisitions would put us at year-end in terms of desired and projected leverage and liquidity. And it's a good segue to the third part of our strategy, appropriately leveraging the balance sheet.

We enjoyed a material drop in leverage in the first quarter seven-tenths of a turn due to strong current quarter organic growth and the impact of a full quarter of results from our fourth quarter 2007 strong lease-up and portfolio additions. At 7.3 times, net debt to adjusted EBITDA leverage, we are in the middle of our target range of six to eight times and at the lowest leverage levels since right before we purchased AAT two years ago.

The magnitude of the leverage reduction in the first quarter really demonstrates the operational ability of the business to handle leverage and reaffirms our comfort around target leverage. With adjusted EBITDA, the net interest coverage of 2.8 times and primarily fixed rate debt, we're very comfortable operationally with our debt service.

Looking forward, the TowerCo and other second quarter acquisitions will return leverage to approximately 8.0 times at the end of the second quarter and in the sevens on a pro forma basis as we will only have approximately one month of TowerCo in second quarter actual results. After that, given our strong leasing backlog and our positive views around future customer demand, we expect to resume reducing leverage rapidly.

If we spent the extra $100 million I have discussed earlier on as yet unannounced acquisitions in the second half of the year, our models indicate that we would end the year with fourth quarter annualized leverage in the low to mid seven times range depending on the timing of the closings with pro forma leverage even lower and with year-end liquidity including credit facility availability estimated to be between 150 million and $200 million. We believe that would be a very good position on which to end the year and move into 2009.

If we don't spend the extra $100 million, year-end leverage would be even lower and liquidity higher. Either way, we would have materially grown the portfolio and materially reduced leverage in the same year.

Given the speed at which the business organically de-levers, we are studying whether we should access additional debt capital in 2008 to maintain leverage at eight times. Operationally, the business can obviously handle the leverage. The debt markets, however, while recently improved, are still very challenging. Given all of our expected portfolio growth this year, we have the luxury of being able to be very selective around additional debt and as a result we are taking a wait-and-see approach to the debt markets.

We're going to continue to monitor conditions, maintain a state of readiness and stay flexible if a good opportunity comes our way. This is the key, a good opportunity, because we don't need to raise any additional capital to achieve our goals this year or grow the portfolio again next year.

In the last couple of years, we have been very successful with the rate and terms on which we have accessed debt capital. Any additional debt that we have added has been carefully evaluated on the basis of impact on equity free cash flow per share, covenants, and refinancing risk. We will perform the same analysis today with particular emphasis on the impact to our 2010 and 2011 refinancing obligations. We would only be interested in raising additional debt if it had a neutral to positive impact on the 2010 and 2011 refinancing.

In the currently challenging debt markets, we may or may not find an opportunity that satisfies our goals. If we do find such an opportunity, we may seize it, if we don't, we are perfectly content to finish the year with the capital structure we currently have as we will have exceeded our portfolio growth goals for 2008 and still be positioned for material portfolio growth and additional de-leveraging in 2009.

That's the update on our three part strategy, it's working very well, and equity free cash flow per share is growing materially. We had a great first quarter, one that was ahead of our expectations. We are in excellent financial shape and our customers are busy. We are extremely excited about our prospects for the future, and we are grateful to being in the business we are in, as we look at how some other businesses are faring in this economy.

I want to thank all of our customers and our employees for their role in our success; and for our shareholders we intend to channel our excitement into continued strong execution and growth in equity free cash flow per share and look forward to reporting future results. Linda, at this time we are ready for questions.

Question And Answer

Operator

Thank you [Operator Instructions]. Our first question will come from the line of Jonathan, pardon me, Jonathan Atkin from RBC Capital Markets. Please go ahead.

Jonathan Atkin - RBC Capital Markets

Yes, good morning. Couple of questions, in the earnings release it talked about the backlog of site leasing applications being at a multi year high and I wonder, either Jeff or Kurt, if you could comment at the speed at which you're converting applications to actual revenue, any differing trend there? And then just a couple of house keeping items, if you could repeat the run-rate tower cash flow per tower on the tower code assets as well as in the SBA portfolio the number of leases at quarter end and the average lease rates.

Jeffrey A. Stoops - President and Chief Executive Officer

The application conversions Jonathan is still pretty much the same, we haven't seen a speed up or slowdown there. I mean typically, from the time something hits, I mean we turn things around in 48 hours, but by the time that ultimately gets signed up by a carrier, you know, it may be a month or so depending on how quickly they want to move. Some want to move quicker than others, but in general, I think the averages are still the same. So I don't think there has really been any change there in terms of speed, but there has been an up-tick in volume. Kurt, you want to go back over the --

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Jonathan, 15,726 tenants at $1,828 per month. That's what you were looking for?

Jonathan Atkin - RBC Capital Markets

Yes.

Jeffrey A. Stoops - President and Chief Executive Officer

And the tower code TCF run rate at closing, Jonathan, is expected to be approximately 22 times at $20,000 of run rate tower cash flow.

Jonathan Atkin - RBC Capital Markets

Great. And then the... I think you talked about the CDMA... the steady level at one CDMA carrier affecting the services business and has leasing activities from that carrier slowed down as well?

Jeffrey A. Stoops - President and Chief Executive Officer

I don't think we said CDMA.

Jonathan Atkin - RBC Capital Markets

Oh I am sorry.

Jeffrey A. Stoops - President and Chief Executive Officer

But, yes, I think that of... when we talk about robust carrier activity, it's not generally uniform and that your question was headed in the right direction.

Jonathan Atkin - RBC Capital Markets

Okay. And then, any comments on any changes in the sales or operations organization. I think you're hiring a National Director of Sales. I am assuming that's in the services business, but if you could, kind of update us on that?

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Yes, we are just adding some depth there and trying to maintain our momentum in that business. It's obviously a very competitive business and one that you have to work on your sales and your backlog everyday and nothing more than that.

Jeffrey A. Stoops - President and Chief Executive Officer

Yes, it's a personnel issue and it's not a change in direction or outlook or view.

Jonathan Atkin - RBC Capital Markets

Okay. And then finally with regard to the 700 megahertz auction, is there any anticipation that you will be seeing lease applications from any regional build outs as a result of 700 megahertz?

Jeffrey A. Stoops - President and Chief Executive Officer

This year?

Jonathan Atkin - RBC Capital Markets

This year, yes?

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Potentially, it's a little early to say but potentially that could happen in some pockets, I think.

Jonathan Atkin - RBC Capital Markets

Great, thanks very much.

Operator

Our next question will come from the line of Clayton Moran from Stanford Group. Please proceed.

Clayton Moran - Stanford Group

Good morning. Two areas I want to ask about, first, on the guidance, can you just confirm that that includes pending acquisitions and that therefore the increase in EBITDA is due, about 6 million of it is due to the acquisitions? And then secondly, I think for Kurt, talked about maintenance CapEx down to about 700,000 per tower per year do you think that's a good run-rate, $700 I mean and then, can you talk about the tower portfolio in general that you currently have, the average age, the life of the tower that you expect, the tenants per tower and the total capacity per tower? Thanks.

Jeffrey A. Stoops - President and Chief Executive Officer

Yes the guidance, Clay, your right I don't know if it's 60% acquisitions, it might more be 50-50, but it is a mix of both organic growth and acquisitions.

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Maintenance CapEx, Clay, I don't foresee a major change in that line item. I mean it fluctuates every quarter up and down a little bit but there is nothing in there that we spend money on that I foresee dramatically changing on an ongoing basis.

Jeffrey A. Stoops - President and Chief Executive Officer

Yes, I think we've been running $700,000 to $800,000 on a run rate basis per year for a couple years now. In terms of the overall portfolio Clay, it's 2.5 tenants per tower, about 2.0 telephony tenants per tower, overall capacity continues to be between four and five telephony tenants per tower, so we estimate that we're about 40% utilized with 60% remaining capacity. Which ties in directly to some of these low numbers that Kurt mentioned, we just have a lot of capacity left that doesn't require any money to fill, and the average age of our towers is, and this will be a guess, I would guess probably 5, 5ish years on average.

Clayton Moran - Stanford Group

And do you, what do you expect life of a tower is at this point now that we're a little more mature in this business do you have any sense for how long the average will last?

Jeffrey A. Stoops - President and Chief Executive Officer

Well I think its 30 years plus.

Clayton Moran - Stanford Group

Okay, thanks.

Operator

Our next question will come from the line Jonathan Schildkraut from Jefferies. Please go ahead.

Jonathan Schildkraut - Jefferies & Company

All right, thank you for taking the questions. Just to follow-up on some of the earlier questions, in terms of the higher level of applications we had heard from one of you peers that Sprint had been doing a number of applications around its WiMax deployment, just kind of getting set for rolling that out, potentially either this year or next year, I was wondering if you had seen any activity along those lines? And then also if you could give us little bit more color, if you are seeing any activity from the wireless backhaul guys and how significant it is at this point, additionally what the rental rates on that type of deployment versus traditional telephony deployment might look like? Thanks.

Jeffrey A. Stoops - President and Chief Executive Officer

Yes, Jonathan as to your first question we would say some, but we don't really get into carrier specifics. On the second question we are definitely seeing an uptick in wireless backhaul from carriers that we had not historically seen a year or two ago. So that's up and the way that we are benefiting from that increased activity is to rent out additional tower space for microwave dishes and the rate on those leases varies depending on the size of the microwave dish, where they want to place it on the tower, what... where the tower is located. How much room is left, so it could vary from $150 a month to over $500 a month. But clearly an uptick in that type of business for us and one that we believe will continue to trend positively as carriers continue to search for data backhaul solutions.

Jonathan Schildkraut - Jefferies & Company

Great, in terms of the expected decrease in development revenues, it sounds like it would be a little bit more on the construction side, rather than consulting side, is that correct?

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Generally, I mean that's 80% of the business anyways and it's always the bigger driver of the numbers.

Jonathan Schildkraut - Jefferies & Company

Okay, thank you very much.

Operator

Our next question will come from the line of Jason Armstrong from Goldman Sachs. Please go ahead.

Jason Armstrong - Goldman Sachs

Thanks a lot, good morning. Couple of questions, first, we came into the year saying 08 was sort of a cash year, in terms of deals, and you've spent a lot of time obviously talking about capacity under the credit facility. I am just wondering, given the pace of deals, you are talking about 700 plus and odds are it moves higher than that, the improved equity currency you are working with, should we expect at least a partial equity component as we go into the back half of the year on some of these deals? And then second question, any comments around potential cost savings from the TowerCo acquisition? Thanks.

Jeffrey A. Stoops - President and Chief Executive Officer

I'll tackle the last one first, when we have guided with respect to TowerCo it's fully in anticipation of all the synergies that we will enjoy there. That is a transaction that's essentially an asset transaction in nature, where we will not be bringing over any overhead in connection with that transaction. We will probably need to add two maybe three people to the company out in the field and maybe one on the sales side, just as we grow our portfolio because we kind of view those functions as on a per person per number of towers function, but that would be it.

So very, very little, almost total drop down to the EBITDA line as a result of that transaction and we'll see on the equity side, we have it like where our stock price was early in the year and we did have the cash available to us. I don't know that people should count on that going forward. But again they shouldn't be surprised by it either and our guiding light there will be the same as it's always been, if this is a deal that should be done or in some cases if it's required to be done by the seller for tax reasons to be stock and it makes good sense for us from an equity free cash flow per share basis, we'll do it.

Jason Armstrong - Goldman Sachs

Great, thanks, Jeff.

Operator

Our next question will come from the line of Ric Prentiss from Raymond James. Please go ahead.

Unidentified Analyst

Hi, this is Charlie Matelo sitting in for Ric. On the M&A front, are seller expectations moderating, given that the capital market still remain challenging?

Jeffrey A. Stoops - President and Chief Executive Officer

Yes, a little bit... a little bit they are. I think some of the opportunities that are available at all are available because operators have decided that the capital isn't available for them to continue to grow their companies and execute their plans, so it has caused some folks to think about selling who might not have otherwise done that and I do think expectations are slowly starting to come down as people understand that it's a different credit market environment out there.

Unidentified Analyst

Okay. And other than the TowerCo portfolio which you gave us some pretty good detail on, in general like, how mature are the towers that you are looking at acquiring?

Jeffrey A. Stoops - President and Chief Executive Officer

Well they would be probably 1.5 to 1.6 maybe 1.7 tenants on average, a little bit more mature than the TowerCo assets. Hence the higher price per tower and the lower multiple but still well below our existing portfolio averages and of the same time type towers such as we believe that the growth on those towers in the future, will exceed portfolio growth as a whole.

Unidentified Analyst

Okay, that's helpful. That's it from me.

Operator

Thank you. Our next question will come from the line of Brett Feldman from Lehman Brothers. Please go ahead.

Brett Feldman - Lehman Brothers

Thanks for taking the question, actually it's a follow-up on the last one. The types of assets that you are looking at, can you sort of describe where they are in other words are you primarily looking at putting more towers in markets where you already have operations, are you trying to branch out into new areas, are you getting into areas that you never thought you might go to because you see demand? And then you talked about having confidence, that you will be able to lease these assets out, how do you get that confidence, is it simply based on the number of operators in the market or is there something more sophisticated that you do?

Jeffrey A. Stoops - President and Chief Executive Officer

Well, its 20 years of being in the network development business, that's first and foremost and a pretty good understanding of what is a good tower, and what carriers will look for and it's not really, Brett so much geographic focus as it is focusing on the assets themselves. I mean there are so many places in this country where a well located, well protected tower will do extremely well over time and those are the types of assets that we are looking for. We are looking for high growth assets that are in spots where carriers are going to need to be, but not necessarily have been there yet. And with the increased density that we've seen the trends over the last couple of years and particularly now with data, that strategy has really served us well.

Brett Feldman - Lehman Brothers

Do you see any strategic value in increasing the density of your towers in specific market because some of your larger peers are able to do like large volume deals, because they happened to have a lot of presence in the market, is that something you're doing, it's something you want to do and is that factored into your acquisition strategy?

Jeffrey A. Stoops - President and Chief Executive Officer

No, it's not something that we have pursued, with those large volume deals typically come other strengths attached and that's not... we have tended to price our assets and want to continue to price our assets on a tower-by-tower basis. So that's not really a strategy, perhaps that we persuade more neither I think we will be pursuing.

Brett Feldman - Lehman Brothers

Okay. Thanks for taking the question.

Jeffrey A. Stoops - President and Chief Executive Officer

Okay.

Operator

Our next question will come from the line of Gray Powell from Wachovia.

Please go ahead.

Gray Powell - Wachovia

Thanks, good morning everybody. Just had a few quick questions, the statistics you gave on the tower company acquisition were actually very helpful. Can you just talk about the tenant demand for those properties that you're seeing today, relative to what you are seeing under your core portfolio?

Jeffrey A. Stoops - President and Chief Executive Officer

Oh, it's about the same, it's strong.

Gray Powell - Wachovia

Okay. Because it does seem like a point to BBE lease operate I mean on a base of 1.5 tenants that implies that the revenue growth is significantly higher?

Jeffrey A. Stoops - President and Chief Executive Officer

We believe it will be.

Gray Powell - Wachovia

Okay. And then obviously there has been a lot of talk about the potential Sprint-Clear wire WiMax joint venture. If a deal were announced, just how quickly, do you think that you'd be able to get leases signed and start generating the incremental revenue on your towers?

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

I think very quickly, there has been a large amount of preparatory work that has been done by both of those customers in the last year to 18 months. So they theoretically have the ability to step right in and move fairly quickly.

Gray Powell - Wachovia

Okay, and then my last question, is that in the press release you stated that the backlog of tenant leases, is at a multi-year high. I thought that was particularly impressive just given that the Sprint has curtailed their spending so far in this year. So is there any one area in particular that you can point to that's offsetting that? Or is there any way that you can quantify the upside that you are seeing today?

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Everybody else is very busy. I mean it's really... I can't really signal on anyone particular contributor above the rest, but it's just a very good level of overall activity that we are seeing. Not only on the lease... when we talk about backlog, that's really just the new tenant leases. It's also on the amendment side with all the UMTS overlays still going on. So we really do feel good about the additional business prospects for the rest of the year.

Gray Powell - Wachovia

Okay, all right. Thank you very much.

Operator

Thank you. Our next question will come from the line of Simon Flannery from Morgan Stanley.

Simon Flannery - Morgan Stanley

Okay, thanks very much. Good morning. If I could come back to the wireless backhaul topic, is there anyway to help us sort of size the opportunity, what percentage of revenues today are from wireless backhaul? What sort of year-over-year growth rates are you seeing in revenues from wireless backhaul? Anything like that and then in terms of what's driving it, obviously the demand for data is driving it, but is it that the backhaul facilities the copper, the T1s whatever are either... there's not enough capacity going to the towers that people want to or just the pricing is so high that it's forcing people to look to alternative mechanisms? Thanks.

Kurt L. Bagwell - Senior Vice President and Chief Operating Officer

Simon, I can address the last piece of the question. It's really a combination of capacity and cost of that current and backhaul that's been offered, and the data services you are pushing, the bandwidth requirements to the extreme in a lot of cases and we are seeing carriers that need 10s of TI backhaul of the site. I mean, I think some of the minimum sites now with a lot of big core carriers have 4 to 6 T1s of backhaul to start with and it goes straight up from there usage.

And so a lot of the wireless backhaul we're seeing put in is by the carriers directly, we're still seeing a good bit of third party, wireless backhaul put in and a lot of it is from the carrier directly and they are reaching that cross over point where they can carry the traffic themselves, the cross over point between the CapEx and the OpEx. And once they put in a system themselves, they can scale that capacity very well, the systems that are offered today are very high capacity and scaleable and they are just reaching that cross over point.

Jeffrey A. Stoops - President and Chief Executive Officer

Yes, in terms of the magnetite of the current activity, I mean we don't have a exact numbers fully on that Simon, but just off top of my head given some of the new folks that have already appeared on that front in the last 12 months, I would say on trailing 12 months basis what we've seen... this most current 12 month is two or three times the level of microwave applications that we saw over the preceding 12 month period.

Simon Flannery - Morgan Stanley

That's very helpful. Thank you.

Operator

[Operator Instructions]. We now go to line of Brad Korch from Credit Suisse. Please go ahead.

Brad Korch - Credit Suisse

Hi, thanks for taking questions. Just one last follow-on on the site leasing backlog. With the higher than expected backlog have you seen any changes in pricing trends with respect new leases, are you able to raise prices at all? And then on the demand that you are seeing, is there any specific region or any specific type of market top 100 or not on top 100? Thank you.

Jeffrey A. Stoops - President and Chief Executive Officer

The demand is pretty well spread across the entire portfolio, it's definitely not concentrated. And in terms of pricing, we continue to see prices being very steady and on apples-to-apples, year-over-year basis we're probably seeing mid-single digit increases on new lease applications.

Brad Korch - Credit Suisse

Okay. Thank you very much.

Operator

There are no further questions at this time; I will turn it back to you.

Jeffrey A. Stoops - President and Chief Executive Officer

Great. We appreciate everyone dialing in today for our update, and we look forward to sharing our second quarter results with you. Thank you.

Operator

And ladies and gentlemen, this conference would be available after 12 PM Eastern Time until midnight on May 15, 2008. You may access the AT&T Executive Replay Service at any time by dialing 1-800-475-6701 and entering the access code 918953. Those numbers again are 1-800-475-6701, access code 918.

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