Batya Levi

Batya Levi with UBS inquired about the impact of the new Verizon Master Lease Agreement (MLA) on SBA's new leasing revenue for the upcoming year, specifically asking if it includes amendments and colocation components and how it would capture incremental revenue from Verizon's acquisition of adjacent spectrum. Additionally, Levi asked for an update on DISH Network's payment status and if they are seeking to exit their contract earlier than renewal dates, referencing a peer's disclosure. She also followed up on whether the Verizon deal structure is linear or similar to the AT&T agreement.

Answer

Brendan Cavanagh, President and CEO of SBA, stated that the Verizon agreement is expected to contribute to long-term growth, building on a strong partnership. He confirmed it includes both colocation and amendment components, with a minimum commitment for colocations over the next 10 years, ensuring a certain amount of growth. Verizon gains access to sites with cost certainty and operational efficiency. Regarding DISH, Cavanagh confirmed they are current on rents and SBA expects them to honor their agreements, though correspondence between the companies is ongoing. He clarified that the Verizon deal structure is much more linear, unlike the AT&T agreement.

Batya Levi of UBS Group AG questioned if the slight slowdown in domestic activity in Q2 was significant and asked if the strong bookings growth was accelerating and becoming more broad-based among carriers.

Answer

President and CEO Brendan Cavanagh clarified that the Q2 slowdown was merely a rounding difference and not indicative of any trend. He confirmed that activity pacing increased in the quarter and was slightly ahead of the prior strong quarter, which should drive higher recognized revenue in the second half of the year and into 2026.

Batya Levi questioned the drivers behind the stronger-than-expected network services business, the slight uptick in non-Sprint domestic churn, and SBA's strategic approach to potential M&A opportunities for tower portfolios in Canada.

Answer

President and CEO Brendan Cavanagh attributed the services growth to a major customer accelerating its network investments. He explained the churn uptick was a matter of timing and within the full-year outlook. Regarding Canada, he stated SBA thoroughly evaluates all M&A opportunities and would pursue a deal if the value and price point are sensible, acknowledging that acquiring carrier portfolios would create a market leader.

Batya Levi inquired about the drivers behind the increased leasing application backlog, asking if it was broad-based or from a specific tenant, and what the shift towards colocations implies for the book-to-bill cycle and 2026 leasing visibility.

Answer

President and CEO Brendan Cavanagh explained that the increase in the leasing backlog is broad-based across carriers, not driven by a single tenant. He noted a significant shift in new business towards new lease colocations over amendments, which extends the book-to-bill cycle. This trend is expected to drive quarter-over-quarter domestic leasing growth throughout 2025, creating a favorable setup for 2026, though it is premature to provide a specific outlook.

Batya Levi asked about the mix of domestic carrier activity between co-locations and amendments, the potential leasing outlook for 2025, and financial details of the Millicom acquisition, including AFFO accretion and lease-up opportunities.

Answer

President and CEO Brendan Cavanagh confirmed an increase in domestic carrier activity with a shift towards new co-locations, which benefits long-term growth but has a slightly longer revenue commencement timeline. He stated it was premature to provide a 2025 leasing outlook or specific AFFO accretion for the Millicom deal, but confirmed it will be accretive and noted the sites have a low 1.2x tenancy ratio, indicating significant lease-up potential.

Batya Levi from UBS Group asked for more details on the strategic review process leading to the acquisition, the deal's implied valuation, the network's fiber-to-the-home mix, any breakup fees, and whether 2025 CapEx plans would proceed as planned.

Answer

CEO Teresa Elder stated that a special committee of independent directors conducted a thorough and diligent process before unanimously recommending the offer, with full details to be disclosed in the upcoming proxy filing. She confirmed that the current year's CapEx plan remains unchanged and noted that while all 91,100 greenfield passings are fiber-to-the-home, a total network percentage was not provided.

Batya Levi inquired about underlying broadband trends for Q4, excluding storm and ACP impacts, the competitive environment from converged bundles, and the CapEx outlook, including the pace of new builds for the remainder of the year and into the next.

Answer

CEO Teresa Elder stated that the ACP subscriber roll-off is complete, while hurricane impacts are estimated at a 6,000-7,000 subscriber loss in Q4. She highlighted positive trends in the legacy business due to speed upgrades and simplified pricing, and strong penetration growth in expansion markets. CFO John Rego added that Q4 Greenfield CapEx will be an additional $10 million, bringing the 2024 total to around $70 million, and suggested the 2024 expansion spending pace is a good proxy for the next couple of years, but declined to provide a specific Q4 home build forecast.

Batya Levi asked for an update on the ~$200 million in incremental costs for 2025, whether they would extend into 2026, and for more detail on the drivers and structure of the new PCF (Public Cloud Fabric) sales.

Answer

President & CEO Kate Johnson stated the new $500M in PCF deals are mostly lower-risk 'over pull' work for data centers and hyperscalers. EVP & CFO Chris Stansbury identified ~$200M in second-half EBITDA headwinds from disconnects, cloud migration, and PCF OpEx, which is why the company is guiding to the high end of the range despite strong H1 performance.

Batya Levi from UBS asked for clarification on the difference between 'cloud economics' and traditional telco models, including potential margin differences. She also questioned if these strategies could apply to the mass market segment and inquired about incremental fiber build costs amid the strategic review.

Answer

President and CEO Kate Johnson explained that 'cloud economics' breaks the linear revenue-to-cost link by enabling multiple digital services on a single 'fabric port,' thus increasing revenue at a lower marginal cost. She noted it was too early to quantify the margin impact. EVP and CFO Chris Stansbury added that more details would be shared at a September Investor Day and confirmed that new fiber builds are progressing with economics similar to the first round.

Batya Levi asked for clarification on the network utilization chart, questioning the drivers behind the enterprise segment's utilization assumptions through 2028. She also inquired about the cadence of incremental costs and whether free cash flow guidance assumes new deferred revenue.

Answer

CEO Kathleen Johnson explained the chart reflects total fiber miles, and the significant hyperscaler utilization comes from leasing previously empty conduit, which expands overall capacity without taking from enterprise. CFO Christopher Stansbury added that no new PCF deals are assumed in guidance. He detailed that a $200M EBITDA headwind relates to PCF team ramp-up, a CapEx-to-OpEx shift to cloud, and TDM disconnects, while a separate $300M in special items are one-time transformation costs.

Batya Levi of UBS asked about the customer mix of the incremental PCF sales, questioning if they were primarily big tech or included enterprise demand. She also sought to confirm if the new sales were on existing routes and what the prepaid revenue mix would be.

Answer

President and CEO Kate Johnson stated the customer mix includes both repeat and new business, predominantly from companies building AI models like the major cloud and social platforms. EVP and CFO Chris Stansbury added that the total $8.5 billion in secured deals share a similar structure, including the ratio of CapEx to sales and upfront versus recurring revenue. He noted that future deals on new routes will have different economics.

Batya Levi of UBS Group inquired about the current wireless competitive environment, including recent price increases and the outlook for the back-to-school season. She also asked about changes in subscriber loading trends as the company laps the impact of lower immigration.

Answer

President & CEO Tony Staffieri noted that the wireless market net add growth has slowed to around 2.5% but the company is performing well on subscriber share. He explained that recent pricing changes aim to simplify the value proposition and reduce promotional activity, supported by features like satellite service. Staffieri also highlighted that improved churn has been a significant factor in net additions.

Batya Levi inquired about Rogers' confidence in its annual outlook given the macroeconomic environment and potential tariffs, and also asked about trends in the Cable segment, including revenue performance and monetization opportunities from the Xfinity platform.

Answer

President and CEO Anthony Staffieri stated the annual outlook already accounts for the economic slowdown and expects growth. He attributed the Q1 Cable revenue dip to the timing of price adjustments and video/satellite losses, but anticipates that growth from Internet and Xfinity products will lead to a breakeven or growth scenario in the latter half of the year. CFO Glenn Brandt added that he expects Cable revenue to return to zero or positive growth in the coming quarters.

Batya Levi inquired about the wireless competitive environment after the holiday season, the potential for continued churn improvement, and the key drivers for 2025 CapEx, including whether DOCSIS 4.0 spending would peak.

Answer

President and CEO Tony Staffieri described the post-holiday market as returning to normal seasonality with fewer promotions and stated that churn improvements, driven by better customer service, are expected to continue. On CapEx, he noted the focus remains on network reliability and mid-split upgrades. CFO Glenn Brandt added that while the DOCSIS 4.0 rollout is a multi-year project, the spending will be most prominent in 2025.

Batya Levi asked for details on the $7 billion structured equity financing, including potential share issuance and operational impacts, and inquired about the wireless competitive environment and the sustainability of stable ARPU into the holiday season.

Answer

Chief Financial Officer Glenn Brandt clarified the financing is a minority equity sale in a subsidiary holding wireless backhaul infrastructure, not a sale-and-leaseback, and involves no RCI share dilution. President and CEO Tony Staffieri addressed the competitive outlook, highlighting a disciplined promotional strategy, a focus on the premium Rogers 5G brand, and the successful use of the Chatr brand for new-to-Canada customers, which he expects to continue into Q4.

Batya Levi from UBS asked about Crown Castle's exposure to UScellular (USM) and the potential financial impact from T-Mobile's plans to acquire more of USM's towers.

Answer

Interim President and CEO Daniel Schlanger stated that Crown Castle has minimal exposure to UScellular as a tenant on its towers. He clarified that the amount is negligible and would not have a material impact on the company's overall financial results.

Batya Levi asked for color on how SG&A is allocated between segments, whether the AFFO growth range could be updated with cost savings, and if the regulatory approval for the asset sale will be a single, holistic process.

Answer

Interim CEO Daniel Schlanger explained that SG&A is allocated based on accounting rules, with directly related costs going to discontinued operations, but acknowledged the remaining shared costs are not representative of the final tower-only structure. He stated that guidance ranges could be updated later in the year as performance becomes clearer. He clarified the sale will close as one transaction, but regulatory reviews are for each buyer's specific asset purchase, not a single holistic review of both.

Batya Levi asked for confirmation of no tax consequences from the sale, quantification of one-time costs in the AFFO bridge, and an explanation for the wide AFFO growth range.

Answer

CFO Dan Schlanger confirmed no significant tax consequences are expected. He noted that $40 million in 2024 advisory costs will not recur. He explained the wide AFFO range on the provided bridge is intentional to provide a directional sense of the post-transaction profile without giving a specific 2026 forecast, and declined to break down the components further.

Batya Levi asked about the geographic concentration of the small cell cancellations, the potential for stranded fiber assets, the outlook for tower churn excluding known impacts, and the current competitive environment.

Answer

CFO Dan Schlanger stated the cancellations were not concentrated in one region and did not leave significant stranded fiber assets. He maintained the long-term tower churn outlook of 1-2%, expecting to be at the low end of that range. CEO Steven Moskowitz added that Crown Castle's urban and suburban asset locations create a strong competitive moat against churn.

Batya Levi inquired about the leasing activity cadence in Latin America, asking if the recent lower churn was a matter of timing and seeking clarity on the outlook for escalators in the region.

Answer

CEO Steven Vondran noted pockets of increased activity in markets like Brazil but confirmed that multi-year churn headwinds, particularly from Oi, will keep organic tenant billings growth in the low single digits for the next three years. He stated that the churn profile is consistent with expectations and that the 2025 escalator for the region is anticipated to be around 5%, subject to CPI.

Batya Levi from UBS requested details on the 5G upgrade progress for carriers outside of comprehensive agreements, the expected cadence of new leasing activity throughout 2025, and the company's stance on share buybacks now that leverage is within its target range.

Answer

CEO Steven Vondran provided carrier upgrade tiers without naming them (one over 80%, one at 65%, one under 50%) and noted that the 2025 growth cadence will be impacted by Sprint churn in the first three quarters. CFO Rod Smith elaborated that with leverage set to fall below 5.0x, the company has full financial flexibility. While open to share buybacks, capital allocation decisions will weigh interest rates, macro uncertainty, and attractive organic growth opportunities against M&A and buybacks to maximize long-term shareholder value.

Batya Levi inquired about any changes in the colocation versus amendment mix in the U.S., whether DISH network expansion is included in current holistic agreements, and the reason for a year-over-year decline in domestic gross margins.

Answer

Steven Vondran, President and CEO, noted that while the current business mix is consistent, there is growing interest in new colocations, which are expected to increase during the network densification phase and would be incremental to some MLAs. Rod Smith, EVP, CFO and Treasurer, attributed the reported gross margin decline primarily to a non-cash straight-line revenue impact, clarifying that cash margins actually increased year-over-year.

Batya Levi sought clarification on whether the subscription growth guidance includes new deals and the Tempo acquisition, asked if the current margin is a good run-rate for the year given FX, and questioned how the new Spotify publishing deal compares to previous CRB rates.

Answer

CEO Robert Kyncl declined to compare the Spotify deal to CRB rates but expressed satisfaction with the outcome. CFO Bryan Castellani clarified that the Tempo acquisition primarily impacts Music Publishing, not the subscription streaming guidance. He also reiterated that while cost savings initiatives are on track, foreign exchange remains the key variable preventing the company from reaffirming its full-year margin target.

Batya Levi of UBS Group AG followed up on the multiyear growth outlook, asking specifically about the expected cadence for fiscal 2025, including whether growth would be slower in the first half, and about the linearity of the artist release schedule.

Answer

CFO Bryan Castellani indicated that fiscal 2025 subscription growth should be comparable to 2024, though some moderation is expected while lapping recent price increases. CEO Robert Kyncl added that the release pipeline is strong with projects from major artists like Coldplay, Rose, and Linkin Park. He noted that while release timing can shift between quarters, his focus is on maintaining a high volume in the pipeline to ensure consistent output.

Batya Levi asked what caused the deviation from the original high single-digit subscription growth outlook and questioned if the release slate was lighter than initially anticipated.

Answer

CEO Robert Kyncl explained the results were due to a combination of four factors: a tough year-over-year comparison, ad market pressure, a lighter release schedule, and weakness in China. He noted that release schedules can fluctuate for creative reasons. CFO Bryan Castellani added that the prior-year quarter's growth was a high 13.5%, making the comparison difficult.

Batya Levi of UBS asked for more color on the competitive dynamics mentioned in the prepared remarks, specifically which competitor actions contributed to Spotify's Q4 outperformance.

Answer

CEO Daniel Ek explained that while Spotify operates in a highly competitive market, the specific instance referenced was a net positive where a regional competitor 'fell away.' He emphasized that this is part of the normal market dynamics and the company's primary focus remains on building the best product to drive engagement and lifetime value.

Batya Levi inquired about the drivers behind the strong broadband additions, the outlook for the second half considering the ACP impact and seasonality, and the reasons for the deceleration in ARPU growth.

Answer

CFO Scott Beasley noted that while the Affordable Connectivity Program (ACP) wind-down will be a headwind in Q3 and Q4, he expects Q3 net adds to be up significantly year-over-year due to strong sales momentum and seasonality. Regarding ARPU, he explained that Q3 would be sequentially flat due to ACP transition plans before picking back up in Q4 to meet the 3-4% annual target. CEO Nick Jeffery added that long-term ARPU growth is supported by core pricing, speed upgrades, and value-added services.