SBA Communications - Q2 2020
August 3, 2020
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by, and welcome to the SBA Q2 results. During today's conference call, phone lines are in a listen-only mode. We will have an opportunity for a Q&A session later on. If you require assistance during the call, you may press star, then zero. An operator will assist you offline. As a reminder, today's conference call will be recorded. At this time, I'd like to turn the conference over to our host, Mark DeRussy, the Vice President of Finance. Please go ahead.Thanks, Nick. Good evening, and thank you for joining us for SBA's Q2 2020 earnings conference call.
Here with me today are Jeff Stoops, our President and Chief Executive Officer, and Brendan Cavanagh, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including, but not limited to, any guidance for 2020 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, August 3, and we have no obligation to update any forward-looking statement, statement we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics.
The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our investor relations website. With that, I'll now turn the call over to Brendan.
Brendan T. Cavanagh (CFO)
Thanks, Mark. Good evening. SBA produced another solid performance during the Q2, notwithstanding continued hardship and uncertainty for many across all of our markets due to COVID-19. Total GAAP site leasing revenues for the Q2 were $482.4 million, and cash site leasing revenues were $482.1 million. Foreign exchange rates were a $1.3 million tailwind to revenues when compared with our internal estimates for the Q2. They were, however, a significant headwind on comparison to the Q2 of 2019, negatively impacting revenues by $21.4 million on a year-over-year basis.
Same tower recurring cash leasing revenue growth for the Q2, which is calculated on a constant currency basis, was 5% over the Q2 of 2019, including the impact of 1.9% of churn. On a gross basis, same tower growth was 6.9%. Domestic same-tower recurring cash leasing revenue growth over the Q2 of last year was 6.7% on a gross basis and 4.5% on a net basis, including 2.2% of churn, 0.5% of which was related to Metro, Leap, and Clearwire terminations. Domestic operational leasing activity, representing new revenue placed under contract during the Q2, was again slower than the year-ago period and remained similar to the Q1 and the Q4 of 2019.
The measured pace of new bookings in the quarter was primarily due to a slower restart than we anticipated by T-Mobile following the closing of their merger with Sprint, while our other domestic customers were steady. However, as we have begun the Q3, we have seen a meaningful increase in application activity from T-Mobile that we expect to drive increased domestic organic bookings in the second half of 2020 and into 2021. During the Q2, amendment activity was again a large majority of our domestic bookings, with newly signed-up domestic leasing revenue coming 69% from amendments and 31% from new leases. The big three carriers represented 70% of total incremental domestic leasing revenues signed up during the quarter. We again had a nice contribution to domestic leasing activity from some CAF II-funded rural broadband providers.
As I mentioned a moment ago, our domestic application backlog has started to grow nicely, which portends well for a steadily increasing pace of new bookings during the second half of the year. Internationally, on a constant currency basis, same-tower cash leasing revenue growth was 7.8%, including 0.5% of churn, or 8.3% on a gross basis. We continued to see leasing activity internationally, but it was a little slower overall than prior periods due to COVID-related spending reductions by customers in a number of our markets. This quarter, Brazil was again the largest contributor to international lease-up. Gross same-tower organic growth in Brazil was 10.4% on a constant currency basis. During the Q2, 86.1% of consolidated cash site leasing revenue was denominated in U.S. dollars.
The majority of non-US dollar-denominated revenue was from Brazil, with Brazil representing 10.9% of all cash site leasing revenues during the quarter and 8% of cash site leasing revenue, excluding revenues from pass-through expenses. Tower cash flow for the Q2 was $394.1 million. Our our industry-leading domestic tower cash flow margin was 84.3% in the quarter. International tower cash flow margin was 71.5%, also industry-leading, and was 91.1%, excluding the impact of pass-through reimbursable expenses. Adjusted EBITDA in the Q2 was $368.8 million. Our industry-leading adjusted EBITDA margin was 72.8% in the quarter, up 300 basis points from the prior year period, excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 77.1%.
Approximately 99% of our total Adjusted EBITDA was attributable to our tower leasing business in the Q2. Our Q2 Tower Cash Flow margin and Adjusted EBITDA margin were again both record highs for SBA. AFFO in the Q2 was $259.9 million. AFFO per share was $2.29, an increase of 9.6% over the Q2 of 2019, and a 14.8% increase on a constant currency basis. During the Q2, we continued to expand our portfolio, acquiring 16 communication sites for $13.4 million and building a total of 79 sites in the quarter.
Subsequent to quarter end, we have purchased 25 communication sites and one data center for an aggregate price of $61.6 million, and we have agreed to purchase 100 additional sites for an aggregate price of $42 million. We anticipate closing on the majority of these sites by the end of the year. The data center is located in Jacksonville, Florida, and will allow us to continue to expand our knowledge of the data center business, and will, we believe, be ultimately critical to maximizing our edge data center offerings as we continue to to develop our strategy and invest in the provision of edge data centers located at our existing communication sites. Jeff will discuss in further detail in a moment. We also continue to invest in the land under our sites, which provides both strategic and financial benefits.
During the quarter, we spent an aggregate of $12.9 million to buy land and easements and to extend ground lease terms. At the end of the quarter, we owned or controlled, for more than 20 years, the land underneath approximately 71% of our towers, and the average remaining life under our ground leases, including renewal options under our control, is approximately 35 years. In our earnings press release this afternoon, we included an update to our outlook for full year 2020, providing increases in all key metrics. Outperformance against our Q2 foreign currency exchange assumptions and slight improvements in forecasted FX rates for the balance of the year have partially contributed to our increased outlook.
Increases due to acquisitions and better than anticipated cash basis revenue collections, offset by modestly lower expected contributions from new leasing activity, represented the rest of the increase in our full year outlook. As mentioned earlier, we experienced a slower start to new revenue bookings this year than we had previously expected, which ultimately slightly delays by 90-120 days, the timing of new revenue growth from organic lease-up. However, given our increasing application backlog, our recent customer conversations, and the significant network deployment obligations of some of our customers, we expect this timing delay to be just that, a timing delay. We anticipate growth in domestic bookings in each of the next two quarters and into 2021. I will now turn things over to Mark, who will provide an update on our liquidity position and balance sheet.
Mark DeRussy (VP of Finance)
Thanks, Brendan. We ended the Q2 with $10.7 billion of total debt and $10.2 billion of net debt. Our net debt to annualized Adjusted EBITDA leverage ratio was 6.9 times, which is down 0.1 of a turn since last quarter. Our Q2 net cash interest coverage ratio of Adjusted EBITDA to net cash interest expense was 3.9x. On May 26th, we issued an additional $500 million of senior unsecured notes as an add-on to our $1 billion issuance completed in February of this year. These new notes were issued at 99.5% of par value, and similar to their original issue, they have a fixed interest rate coupon of 3.875% and a maturity date of February 14th, 2027.
The net proceeds of this issuance were used to repay the entire balance outstanding under our revolving credit facility and for general corporate purposes. As of today, we have no outstanding balance under our revolver. Subsequent to quarter end, on July fourteenth, through a trust, we issued $750 million of 1.884% senior secured tower revenue securities, which have an anticipated repayment date of January ninth, 2026, and $600 million of 2.328% secured tower revenue securities, which have an anticipated repayment date of January eleventh, 2028. The aggregate $1.35 billion of tower securities have a blended interest rate of 2.081% and a weighted average life through the anticipated repayment date of 6.4 years.
Net proceeds from this offering were used to repay the entire $1.2 billion aggregate principal amount of the 2015-1C and the 2016-1C tower securities, with the remaining net proceeds being used for general corporate purposes. The prorated-- I'm sorry, the pro forma weighted interest-- weighted average interest rate of our outstanding debt is 3.5%, and our weighted average maturity is approximately 4.5 years. During the Q2, we did not repurchase any shares of our common stock, and as of today, we have $424.3 million of repurchase authorization remaining under our $1 billion stock repurchase plan.
The company shares outstanding at June 30, 2020 are $111.9 million, compared to $113.1 million at June 30, 2019, a reduction of 1.1%. In addition, during the Q2, we declared and paid a cash dividend of $52 million, or $0.465 per share. Today, we announced that our board of directors declared an equivalent Q3 dividend of $0.465 per share, payable on September 22, 2020, to shareholders of record as of the close of business on August 25, 2020. With that, I'll now turn the call over to Jeff.
Jeff Stoops (CEO)
Thanks, Mark, and good evening, everyone. The Q2 was another solid one for SBA, both financially and operationally. We again produced leasing revenue, TCF, Adjusted EBITDA, and AFFO that were well ahead of our expectations. Our TCF and Adjusted EBITDA margins were once again a high bar as the highest in our company's history, and our AFFO per share grew 14.8% on a constant currency basis over the Q2 of last year. Our business remains healthy and strong. While we greatly appreciate our position in an essential mission-critical business, we recognize that many people are suffering from the continuing impacts of the global COVID-19 pandemic.
When we first reported our Q1 results three months ago, we did not expect so many of the markets in which we operate to still be deep in the fight against the virus at this time. While I am happy with our performance, our top priority continues to be the health and safety of our team members, customers, suppliers, and other members of the SBA family. At SBA, most of our offices have only been open to essential team members for the last four and a half months, and we've figured out how to adjust to being a largely remote workforce. We've had a relatively small percentage of our global team members test positive for the virus, and we're thankful that they're all doing okay.
I'm extremely proud of the dedication and level of performance by our team members during these very challenging times, serving our customers and our communities. We have learned how to operate safely in this environment, and we will continue to do so. In the U.S., the virus has had very little impact on our operational results.
Things continue to be good, but as you heard from Brendan earlier, the level of domestic operational activity or new bookings during the quarter was at a similar level to the Q1. This is definitely lower than we expected a few months ago, primarily due to a slower start than we had anticipated from T-Mobile after the closing of their merger with Sprint. We don't really see this as COVID-related, but T-Mobile choosing to initially focus on closing the Boost deal with Dish, integrating workforces and delivering on synergies. In typical T-Mobile fashion, they seem to have acted quickly, decisively, and thoughtfully, and now have the organization they want in place to turn full attention to their network development needs and obligations.
Although our timing was off by a quarter or so on when we initially thought we would see a material increase in domestic leasing activity, the anticipated increases in our application backlogs have now started providing us confidence in steadily increasing bookings during the second half of 2020. Increased bookings will, of course, drive increased organic revenue growth in the periods following these bookings. We are excited about our prospects because we believe that we have now just begun the necessary phase of increased capital investment in macro networks in order to offer true 5G service. T-Mobile has a lot to do to meet their required 5G coverage goals, including upgrading the majority of their sites with either 2.5 GHz or 600 MHz spectrum, and we expect to be a valued partner to them in meeting their build-out objectives.
In addition to T-Mobile, our other major domestic customers all have significant projects in process or ahead of them. AT&T recently launched true 5G service on low-band spectrum in a number of markets, and we expect both AT&T and Verizon and many others to be active in the current CBRS auction, and particularly AT&T and Verizon to be active in the C-band auction scheduled for later this year, which we believe will be a key component of future 5G networks and will require new equipment at many of their existing macro sites. In addition, our discussions with Dish have been very constructive, and we anticipate that they will be actively engaged in building out a nationwide 5G network over a multiyear period.
The fact patterns are setting up very well for a busy domestic leasing and services environment for the next several years. Internationally, we saw solid demand in most of our markets. However, we do believe there will be greater impact in our Latin American and South African markets than in the U.S. from the COVID-19 crisis. Some of our larger international customers have faced challenged economies and even government-required payment deferrals from their customers. As a result, some of our international customers have reduced anticipated capital expenditures and network expansion investment while they assess the length and severity of the pandemic in each of their markets. We view these current reductions as temporary.
Wireless is almost always the primary source of broadband services in these markets, and we believe that as economic conditions improve, wireless capital spending will increase considerably. In our largest international market, Brazil, we're watching closely the recent announcements from our wireless carrier customer, Oi, regarding their plans to divest of their mobile wireless assets.
A consortium of the other three largest carriers in the market have expressed interest and submitted the most recent bid on these assets, although much needs to occur before any transaction can be consummated. Oi Mobile represents 37.6% of our total Brazil cash leasing revenue and 3.0% of our total overall cash leasing revenue. Oi Mobile's largest portfolio-wide carrier overlap is with Telefonica in Brazil, with Oi's revenue on those overlap sites representing less than 1% of our total overall cash leasing revenue. Although any transaction would likely present much less overlap exposure, as the three acquiring carriers would be expected, for regulatory reasons, to split up Oi's assets based on each carrier's geographic area of greatest need. Our Oi Mobile leases also have an average remaining non-cancellable term of eight years.
We continue to believe our long-term prospects in Brazil will be bolstered by a shift from four major carriers to three stronger carriers competing on the basis of network quality. We expect the resolution of Oi's future will be a positive step toward an increased growth cycle in Brazil and improved wireless carrier health. We continue to favor investing in macro towers, including internationally, over other types of investments. Over the years, we feel we have proven very adept at managing the risk of international investments versus the benefits of faster growth, higher targeted returns, and more opportunities for investment. At the end of the Q2, we enjoyed industry-leading international tower cash flow margins, and our most mature international investments are generating attractive returns well above our cost of capital, with much growth still ahead.
We're very pleased. In addition to macro towers, we have continued to pursue other opportunities to create value around our sites, with a focus on leveraging those assets, strengthening core revenue streams, accessing large new customers, and investing in strategic technology. One of the areas of growth we are pursuing is SBA Edge, where we are focused on using our existing tower assets to offer highly distributed local sites for edge data centers, with the potential to provide low latency connectivity to wireless networks. We currently have over 8,000 pre-qualified tower sites in the U.S. as locations where we can situate an edge data center with access to secure space, power, and fiber.
These tower edge data centers will provide co-location options for customers' computing infrastructure, with connectivity to a larger metro data center for internet or private network connectivity. In order to support this business, we have deployed an edge data center at our tower site in Foxborough, Massachusetts, and we have also made investments in larger, more centralized data centers that we believe will act as edge hubs for intermediate aggregation points for compute and storage. Last year, we added a data center, our first, in West Chicago, and just recently, we acquired our second data center, called Jacksonville Network Access Point, or JaxNAP for short, located in
Jacksonville, Florida. JaxNAP is a 280,000 sq ft, 14-megawatt facility, providing regional co-location and interconnection services to a variety of customers, including subsea cable, telecommunications companies, and approximately 20 fiber providers, all accessing and sharing the property. JaxNAP will allow us to develop deeper data center capabilities and further enhance our tower edge data center value proposition through increased interconnection and operational knowledge.
We're excited about the potential of this value-added business line and are in discussions with a number of interested parties about the range of our expanding capabilities in this area. As we've said many times, however, for this new product offering to ever be material for SBA, a real 5G ecosystem needs to develop. Based on the increasing number of conversations we're having, we are optimistic that this will happen in the years to come. Moving now to our balance sheet. We were able to seize on favorable capital markets conditions over the last couple of months to reduce our weighted average cost of debt and extend our maturities. We currently have no debt maturities until 2022, and we have higher liquidity than at any time in our history, including our fully available, undrawn $1.25 billion revolver.
In July, we issued $1.35 billion of securities in the securitization market, including $750 million of 5.5-year paper at a fixed rate of 1.88%, the lowest fixed price debt in our history. Our June 30th leverage was 6.9x, a level I'm very comfortable with, and the strength of our balance sheet provides us with flexibility to continue to be opportunistic around investment opportunities and share repurchases, while still being able to comfortably support our dividend. We did not repurchase any shares of stock in the Q2 because we were targeting some of the volatility we took advantage of in the Q1. We didn't get it, but stock repurchases remain a critical part of our value creation strategy.
We announce today our dividend for the Q3 at a level 26% above our Q3 dividend of last year. Our dividend, however, remains at a relatively low percentage of AFFO, providing us the opportunity to continue investing in exclusive multi-tenant assets, producing returns well above our cost of capital. SBA's adept use of leverage throughout our history has truly differentiated us from our peers, to the clear benefit of you, our equity holders. It was another solid quarter in a very challenging time. I wanna, again, thank our team members and our customers for their contributions to our success. We expect to stay very busy serving our customers and our communities, and we look forward to a solid and even better second half of the year. And with that, Nick, we are ready for questions.
Operator (participant)
Thank you. If you'd like to ask a question today, you may press one, then zero on your telephone keypad. You should hear an indication that you've been placed in queue. We do suggest that if you're using a speakerphone, you pick up your handset before pressing the numbers. Again, going forward, you may press one-zero to queue up for a question. We do have several lines in queue. We'll go first to Ric Prentiss with Raymond James. Please go ahead.
Ric Prentiss (Managing Director)
Hi. Hey, guys.
Jeff Stoops (CEO)
Hey, Rick.
Ric Prentiss (Managing Director)
Glad to hear you and your employees and families are making it through these difficult times okay. A couple of questions. First, on the updated guidance, Brendan, I think you mentioned some of the increase was in the other category from the waterfall chart. Was that revenue collections, or what was that? I think in the U.S., $5 million of the guidance increase was quote, from other.
Brendan T. Cavanagh (CFO)
Yeah, Rick, that's a variety of miscellaneous things. It includes things like some higher cash basis holdover fees that we received, some a little bit higher on the structural augmentation amortization, and even some backfilling or out-of-period stuff. So a lot of that was outperformance in the Q2, and a little bit of that is expected outperformance for the balance of the year.
Ric Prentiss (Managing Director)
Hey, can you hear me okay?
Brendan T. Cavanagh (CFO)
Yeah. Now we can. Yeah.
Ric Prentiss (Managing Director)
Okay, sorry about that. Do you still expect to give guidance for 2021 on your Q4 call? I know some companies give it on Q3 call. I'm just wondering what your thought is on 2021.
Jeff Stoops (CEO)
We will continue the same schedule.
Ric Prentiss (Managing Director)
Okay. And when we think of the new T-Mobile, glad to hear activity is picking up. As we think about the potential for the Sprint decommissioning concept, do you have a preference as far as getting paid upfront, being paid over time, being paid on the current schedule? And how do you think T-Mobile thinks about what their preference would be on how to resolve the Sprint decommissioning into their integration?
Jeff Stoops (CEO)
You know, it's interesting. We've had, there are two schools of thought amongst our shareholders. There is the spread it out evenly approach, and there is the maximize the NPV approach or the maximize out the returns over time. I don't wanna get too far into, you know, how things will go. So it will be one or two or perhaps something of that in the middle. In terms of T-Mobile, I mean, they're smart guys. They're looking for, you know, the best results that will be a mix of financial certainty, you know, financial results, speed, and all the things that they need to do to really, you know, play for the big picture, which is the race to the ubiquitous 5G.
Ric Prentiss (Managing Director)
Okay. And on the Dish side, you mentioned you guys are having talks, obviously looking forward to them getting actively engaged. Any gating factors from your side as far as when to ramp up the efforts with Dish? Do they need the funding in place, or just as you think about Dish becoming a more meaningful 5G leaser, what are you looking for to occur?
Jeff Stoops (CEO)
You know, we are here and ready to go for Dish. We've worked with them for years now. They're a very good customer, and we're. When they say they're ready to go, we are ready to go for them.
Ric Prentiss (Managing Director)
Okay, very good. Well, again, I hope you guys stay well in these difficult times. Thanks.
Jeff Stoops (CEO)
Thanks, Rick.
Operator (participant)
Next, we have a question from Batya Levi with UBS. Your line is open.
Batya Levi (Managing Director, Communication, Media and Infrastructure Analyst)
Great. Thank you. A question on the international activity. You lowered the guidance a little bit, but you mentioned that as we exit the year, there is a slowdown in activity, especially in LatAm. Do you think the current slowdown will impact next year's growth? And just generally, how would you think about international growth next year? And just a follow-up on T-Mobile. How can we reconcile the slower start you saw at T-Mobile and commentary from them that they're accelerating the build-out of 2.5 on their towers? Do you think that's more of a function of maybe activity on rooftops or the replacing of existing 2.5 equipment? And when they're doing that, is there an upside for you? Thank you.
Jeff Stoops (CEO)
Well, I don't think that commentary is inconsistent at all with what we're seeing now in terms of increasing applications and backlogs. So I would say that that's consistent. In terms of international, I think given the types of populations that are being served in South America and South Africa, I think, Batya, you're gonna... It's going to be largely dependent on where the virus is and what stages of lockdown and economic activity you're going to see in those markets.
Batya Levi (Managing Director, Communication, Media and Infrastructure Analyst)
Okay, thank you.
Operator (participant)
Next, we have a question from Simon Flannery with Morgan Stanley. Please go ahead.
Simon Flannery (MD)
Great. Thank you very much. Good evening. You talked about some good activity from some of the CAF II builds. Maybe you could just talk a little bit about what opportunity you see from the RDOF process. Seems like there's plenty of people looking at fixed wireless solutions there. What do you see, as in, in that opportunity there? And then any color you could give us on with the T-Mobile applications, what, what sort of opportunities on, on amendments, putting 2.5 on T-Mo towers or putting the lower band spectrum on the Sprint towers? You know, have you got a sense of what sort of $ that's coming out at? Thanks.
Jeff Stoops (CEO)
Yeah, we do, but we're not gonna get into that specifically, Simon. That's, we don't do that.
Simon Flannery (MD)
Is it in line with your expectations?
Jeff Stoops (CEO)
Yes. I mean, what the, I mean, what people should take from our commentary is everything's pretty much exactly like we thought. It's just 90-120 days behind where we thought it would be. And then...
Simon Flannery (MD)
Right
Jeff Stoops (CEO)
... in terms of your first question was, yes, we do expect opportunities to come out of that. I mean, fixed wireless, you know, it's got, in certain areas, it's going to be better for macro sites than others. I mean, some of the applications, you know, are more existing poles and not necessarily towers as much as some of the CAF stuff was. But we do see opportunities there, and we think that there is going to be some added benefit from there. And all of these programs, which, you know, this unfortunate COVID-19 thing so much highlights the need for increased spending and broadband rural connectivity, you know, we will see some incremental benefits from that in the years to come.
Simon Flannery (MD)
Great. Thank you.
Operator (participant)
Next, we have a question from Michael Rollins with Citi. Your line is open.
Michael Rollins (Analyst)
Hi, good afternoon. I was wondering if we could focus a little bit on the edge projects that you were mentioning and the initiatives. A couple of questions there. First, if you could talk about the types of learnings that you're looking to extract from the data centers that you've acquired and how that's helping you frame the edge opportunity. Then the second thing is, with the trial that you have in Massachusetts, as well as some of the sites that you've been prepping for the opportunity, how are you thinking about what you can monetize the land for, the opportunity for, relative to what you get in terms of revenue per tower today? Thanks.
Jeff Stoops (CEO)
Well, that's the last question, Mike, is really the business model choice that needs to be made, which is one of, there's basically three options for us, which is to be just the basic landlord and rent out the pad and basically the improvements and the connections. Or the second one would be to take the middle ground and own the shell and the infrastructure, but let somebody else own the active electronics and operate them. And then the third is, you know, run the whole thing. And that's really what the data center ownership and operation is designed to allow us to, you know, when it really comes time to make that decision, to be in a position to do.
The other thing that we have learned is that for the folks who will be, and this we've learned since, you know, over the last year, and it was one of the impetuses behind this recent our second data center purchase, is that for all the folks who are going to be customers at the edge, at the cell site, they all need and will be coming from some other larger data center repository. So it's really quite interesting how the connectivity needs to work, where large storage goes to moderate size and then ultimately out to the edge, so the ultimate edge. So the data center connections to the ultimate edge are going to be very important, and that's part of, part of what we're working on here as well.
We want to make sure we understand and have that capability operationally down. You know, whether in 10 years we own these data centers more or less, I can't tell you, but we will, we will understand what the relationships are between the absolute edge, which is what, you know, ultimately will be our forte, and the data center aggregation points along the way that will be necessary to make it all work.
Operator (participant)
Our next question then, will come from Colby Synesael with Cowen, please go ahead.
Colby Synesael (Managing Director)
Great. Thank you. You know, looking at your investments, combination of M&A and buybacks, year to date, I guess relative to what you typically spend in a year, it seems like you're pretty far off the typical pace. I guess, how do you envision the back half of the year playing out? Do you see enough potential M&A to get you where you want to be? Would you anticipate, you know, stepping on the buybacks if that something presents itself, or are you comfortable letting the leverage continue to come down a bit? And then secondly, as it relates to Oi, maybe just international more broadly, just curious if you had to take any notable bad debt reserves in the quarter that may have impacted EBITDA.
And then secondly, I guess, as part of that, are you still getting payment from them right now? Thank you.
Jeff Stoops (CEO)
Brendan, I'm gonna let you handle the Oi stuff. But we would rather not let leverage continue to come down, especially given the cost at which we're accessing debt and the growth that we have. We'd rather be out investing in our new assets first and portfolio growth second. But we're not gonna, we're not gonna do stupid expenditures. I mean, that's always been the motto and the course of action here. So there's a lot of things out there that we continue to look at and will be looking at. Certainly enough to meet our minimum 5% portfolio growth. We certainly have the liquidity more than plenty there to accomplish that.
And it is our goal and belief that we will get there. But it's gotta be the right stuff.
Operator (participant)
Okay, and Colby-
Colby Synesael (Managing Director)
So you think that you would... I'm sorry, just to clarify, so you think you'll still hit the 5% minimum of portfolio growth, but beyond that, in terms of whether it's M&A or buybacks.
Jeff Stoops (CEO)
Yeah
Colby Synesael (Managing Director)
Or I guess, just letting the leverage come down, no-
Jeff Stoops (CEO)
We're gonna, work hard. We're gonna work hard to do that. That's certainly our, our first choice, but I don't have it, I don't have it in the bag today.
Colby Synesael (Managing Director)
Okay.
Brendan T. Cavanagh (CFO)
And, Colby, on your question with regard to Oi, first of all, in terms of bad debt reserves, we didn't book any material bad debt reserves in the Q2. And then, from a getting paid standpoint, they continue to pay us the full amounts that they owe us, so no issues there.
Colby Synesael (Managing Director)
Great. Thank you.
Operator (participant)
Next, we have a question from Nick Del Deo with MoffettNathanson. Please go ahead.
Nick Del Deo (Managing Director)
Hey, thanks for taking my questions. Your peers have spent a lot of time talking about returns by segment this quarter. And Jeff, you briefly alluded to international return in your prepared remarks, so I thought I'd ask you the same. You disclose an ROIC calculation in your supplemental package. What would the domestic versus international split look like? And maybe more importantly, you know, what do you think those numbers would look like when comparing assets that have comparable levels of maturity?
Brendan T. Cavanagh (CFO)
Hey, Nick, it's Brendan. So from a ROIC standpoint, we're not breaking out that information specifically, given the different maturity levels of those portfolios. But I can tell you some general directional information about it, which is, some of it may be obvious, which is that the domestic ROIC is obviously higher than the consolidated 10.2% number that we put out, while the international is lower. But some of our more mature international markets, like in Central America, have current ROICs that are in the high single digits, and in the case of certain countries like Panama, actually exceed the U.S. So the more mature markets that we've been in have performed very, very well. The less mature South American markets typically have ROICs that are in the mid-single digits.
We've had, obviously, some FX headwinds that have weighed on the Brazil numbers a little bit. But, you know, on a constant currency basis, that's up north of 9%. So, you know, we expect, as we kind of get into a little bit more normalized, time period in terms of currency, that that number will actually show very well. So it's all, it's all gone, pretty well in those, in our markets that we've been in for a while.
Nick Del Deo (Managing Director)
Okay, that's great. Now turning to Oi, I think you noted that you have an eight-year average contract term with them.
Brendan T. Cavanagh (CFO)
Yes.
Nick Del Deo (Managing Director)
If I'm not mistaken, that's a blend of some with, you know, very long terms and maybe some with more typical terms. Is that correct, that it's kind of a barbell distribution? And if so, can you describe kind of what each end looks like?
Brendan T. Cavanagh (CFO)
For Oi? Yeah.
Nick Del Deo (Managing Director)
Yes.
Brendan T. Cavanagh (CFO)
Yeah. So some of, almost all of the Oi leases are leases that we acquired through leaseback scenarios. They average, varying terms, but they're all, quite long. So when you look at Oi Mobile as a whole, the average, remaining term is a little over 8 years on those leases. And then we have some Oi, fixed wireline, leases as well, that are actually north of 25 years. So, between the two, it's an extensive amount of time left.
Nick Del Deo (Managing Director)
Okay, got it. Got it. And if I can just put one last quick one,
Jeff Stoops (CEO)
Yeah
Speaker 16
... Brendan.
Jeff Stoops (CEO)
Let me just, let me just be clear.
Nick Del Deo (Managing Director)
Sure.
Jeff Stoops (CEO)
That 8 years was the mobile.
Nick Del Deo (Managing Director)
Yeah, that was mobile.
Jeff Stoops (CEO)
We didn't even, I mean, we didn't even work into that calculation, the wireline.
Brendan T. Cavanagh (CFO)
Correct. That's right.
Nick Del Deo (Managing Director)
Okay, got it. Got it. That makes sense. And then lastly, you know, margins were very strong this quarter. You know, anything we should be aware of that's kind of one time or one-time issue in nature, like lower travel expenses or anything like that?
Brendan T. Cavanagh (CFO)
Yeah, I mean, we were slightly better. I mean, you're looking at $1 million or so in the quarter of probably reduced SG&A due to things like that, but it's not overly material.
Nick Del Deo (Managing Director)
Okay, perfect. Thank you, guys.
Brendan T. Cavanagh (CFO)
Yep.
Operator (participant)
Next, we have a question from Tim Long with Barclays. Your line is open.
Tim Long (Managing Director)
Thank you. Yeah, just a little bit of color. It sounds like there's been a, you know, fair amount of purchase activity in the quarter and subsequent to the quarter. Maybe just kind of a little color on where, you know, those tower assets were focused and what was compelling about the purchase. And then just to follow up, you haven't really mentioned indoor DAS, so just curious of any changes in direction or momentum there. Thank you.
Jeff Stoops (CEO)
Well, yeah, I mean, I'd like to say that was a lot, but it really wasn't. Most of that was in the U.S. You know, they were healthy multiples because they were very high quality assets. I mean, there still continues to be a strong bid, which goes back to the exchange I had with Colby about that's where we wanna be. But that's, you have to be very careful because prices continue to be challenging, and not every tower is created equal. I'm sorry, your second question, Tim?
Tim Long (Managing Director)
Just on indoor DAS.
Jeff Stoops (CEO)
Oh, indoor. Yeah, we continue to move along in that area and add, you know, a couple properties every quarter, which doesn't sound like a lot, but it's a steady growing business. And it's a, it's a much more difficult business in many respects because it is absolutely a, a custom, one asset at a time business. But we are very encouraged by what's going on in the CBRS auction. I think it topped $1 billion today, and that means there's, and there's, from what I understand, a wide interest, and I think that's going to be very good for, for that business.
Tim Long (Managing Director)
Okay, thank you.
Operator (participant)
Next, we have a question from David Barden with Bank of America. Please go ahead.
David Barden (Managing Director)
Hey, guys. Thanks for taking the questions. First, just maybe, Brendon, I think I heard you say it, there's a 2.2% domestic churn rate, 50 basis points of that was, you know, the Cricket Leap, Metro stuff. Could you kind of elaborate on what the other churn is being driven by? Is it government or municipalities or M&A? And kind of historically, it's been closer to 1%-1.5%. That's kind of the core churn rate, if you could kind of elaborate on where you see that going. And then the second piece is on Dish. Just as you kind of look out, it sounded optimistic on Dish. The last time, I think Q3 last year, we talked about Dish at some length.
It was a lot on the services side. Is that kind of how you see the relationship beginning, and then it kind of evolves into the macro side, maybe down the road? If you could some help, that would be helpful, too. Thanks.
Brendan T. Cavanagh (CFO)
Yeah. David, on the churn, just, just as a point of clarification, obviously, those percentages are same tower percentages, so they're representative of a trailing twelve-month period. I think you saw a little bit of a step up in that a couple of quarters ago, and it's really the same thing that's kind of in there that's affecting that. So we're slightly above our historical 1.5%, 1.7%, and it's due to a variety of miscellaneous things. It includes a number of smaller customers that are modifying or shutting down kind of older technologies. We have a number of sites that were never on air, so in some cases they're not being renewed.
Plus, there is actually still some legacy consolidation churn as well, related to old vestiges of old mergers, including Verizon and Alltel and AT&T and Centennial, and all kinds of things that you've probably long forgotten about. So it's a mishmash of different things.
Jeff Stoops (CEO)
Yeah, and on Dish, Dave, I mean, our comments haven't changed. Dish has publicly said that, you know, they're doing a lot of planning and prep work this year and very little, CapEx and spending, and we've said the same thing, and there's no Dish in our guidance. But we have great relationship. We talk to them all the time. We do a lot of planning, and, and we think we're gonna, over the years, be a, be a big help to them and, and a good partner to them. And it will start, you know, first with probably services on the, on the site acquisition, side of things, but we think it will certainly, morph to and, and turn into, leasing business.
David Barden (Managing Director)
Awesome. Thanks, guys.
Brendan T. Cavanagh (CFO)
Okay.
Operator (participant)
Next, we have a question from Jon Atkin with RBC. Your line is open.
Jon Atkin (Global Head - Communications Infrastructure Investment Research - Managing Director)
Thanks very much. So you mentioned a couple of questions back about the T-Mobile pace being 90-120 days slower than you expected. So I just wanted to maybe be clear. You were expecting Q2 activity that got pushed to 3Q, or you were expecting 3Q activity that doesn't see full run rate until 4Q?
Jeff Stoops (CEO)
I was expecting when the merger was completed, that they would hit the ground running in terms of applications and activity, and that and I was mistaken. What they chose to spend their time on was synergies and integration and getting the Dish deal done, and all things that, in hindsight, made tremendous sense for T-Mobile and had to be done. And that's basically what has happened.
Jon Atkin (Global Head - Communications Infrastructure Investment Research - Managing Director)
Great, that's helpful. And then, any kind of thoughts on the other two carriers out there in terms of just the, the cadence in getting stronger or weaker, the same, out of, AT&T and Verizon?
Jeff Stoops (CEO)
Really, business as usual, Jon.
Jon Atkin (Global Head - Communications Infrastructure Investment Research - Managing Director)
Then lastly, just a quick question. You both of your U.S.-listed peers have ATMs in place, and I'm wondering if that's something that you would consider, given some of the comments you've made about international and edge data centers and so forth.
Jeff Stoops (CEO)
Not something we've thought of, really. So we're looking for opportunities to buy our stock back.
Jon Atkin (Global Head - Communications Infrastructure Investment Research - Managing Director)
Very clear. Thank you very much.
Operator (participant)
We'll go now to the line of Walter Piecyk with LightShed. Please go ahead.
Walter Piecyk (Analyst)
Hey, Jeff. In terms of, like, companies hitting the ground running, there's definitely a narrative out there that the C-Band is also gonna trigger one company to have hit the ground running. When should you already be having conversations with carriers? I know C-Band is obviously not starting until December, but it's a couple months away. Are you already having discussions with operators that would give us some indication that people that expect to win at C-Band are gonna be hitting the ground running in 2021? Because that's certainly the narrative, and I'm just curious when we should expect those dialogues to occur between those carriers and yourself.
Jeff Stoops (CEO)
I would say, I would answer that question with one word, Walt, indirectly.
Walter Piecyk (Analyst)
Can you hear me now?
Jeff Stoops (CEO)
Yeah, I can now.
Walter Piecyk (Analyst)
Oh, I didn't get your answer. Indirectly, got you. Sorry. My second question was... I thought there was gonna be a lengthier answer. I didn't think indirectly was gonna be it, but I got you. Sorry. Brazil. Like, if you were gonna buy what you own in Brazil today, like, what do you think a reasonable multiple is for that business? I mean, I know, I know it's only, like, 15% of your EBITDA, but with everything that's going on in Brazil right now, currency, you know, what the president's doing there in terms of COVID and everything else, what do you think that a good comp is, or what you'd be willing to pay for an asset there?
Jeff Stoops (CEO)
Well, I'm not gonna answer that because it'll, you know, I don't know what it'll do to the, to the stock. I, I will answer the question the following: Brazil continues to be a country that has tremendous opportunity, and we are so far ahead of our operational plan there. There, this is all about FX in Brazil, and everything else is great. And if you look at where the, the things that you mentioned are and how they have, how they have affected, FX in Brazil, it's been, you know, a 1, 2, 3 punch between the president down there and the pandemic. And, you know, I, I guess what, what people have to, I guess, come to a referendum on is, is this the way it's always going to be in Brazil?
Is it always going to just depreciate at these kinds of levels? And if it does, then history will say that we made a mistake. It's that simple. I don't believe that. I don't believe that the economy, the people, the huge demand for wireless services, the fact that they have to do all the things that made us an investor down there in the first place, and I don't believe the currency is going to continue on a one-way trip to Palookaville. And that is how we think about Brazil.
Walter Piecyk (Analyst)
Got it. Thank you.
Operator (participant)
Next, we'll take a question from Brandon Nispel with KeyBanc. Your line is open.
Brandon Nispel (Analyst)
Great. Thank you for taking the questions. Jeff, one for you. You mentioned backlog a couple of times. Can you talk about the type of growth you're seeing through July and really where you expect to finish from a year-over-year standpoint later on this year, call it December? Then one for Brendan. In the guidance, change the guidance for new leasing domestically by $3 million, does that de-risk for the remainder of the year from any T-Mobile new bookings that you were expecting to get? And what does that imply in the guide since, you know, a year ago, T-Mobile was sort of slowing down, I would imagine you didn't have much T-Mobile in guidance in the first place. But what's in the guide for the year so for T-Mobile? Thanks.
Jeff Stoops (CEO)
Yeah, Brandon, it's not, it's not necessarily specific to T-Mobile. Obviously, most of our guidance is based on stuff that we've already signed up. So there's a portion of that that includes T-Mobile, although they've been slow, as we've talked about for the last, you know, few quarters. So its contribution to the incremental growth, organic growth, is limited. There is still some amount of T-Mobile contribution to our full year organic growth number that we are including in our guidance based on activity that's happening now, and we expect to happen through the balance of the year.
But given the delay, it's usually between signing and commencement of revenue, it's relatively small. So it's, I guess, if they did absolutely zero and they stopped today, then there would be conceivably some minor amount of risk. But given the pace at which they're operating, that's just not likely to be the case, so we feel good about our guidance. What was your first question, Brendan?
Brandon Nispel (Analyst)
Well, you mentioned bookings a couple of times, and, and specifically, I think you mentioned sort of picking up after the Q2 ended. So I was hoping you could give us an update on where you are from a year-over-year standpoint in bookings, or even backlog of unsigned lease applications from a year-over-year basis in July, and where you expect to be as you finish the year.
Jeff Stoops (CEO)
Well, we clearly expect to be higher at year-end than we are today. But remember, our growth rate is a trailing twelve-month metric. So, you know, it has weakened since Q3 of last year, so you need to, you need to expect to see that. But in terms of backlogs, we expect the end of Q3 to be better than end of Q2, and the end of Q4 to be better than the end of Q3.
Brandon Nispel (Analyst)
Would you expect year-over-year Q3 to be better than, last year?
Jeff Stoops (CEO)
Yeah. Yeah, actually.
Brandon Nispel (Analyst)
Okay.
Jeff Stoops (CEO)
Yeah.
Brandon Nispel (Analyst)
Great. Thank you.
Operator (participant)
Thanks. Next, we'll go to Spencer Kurn with New Street Research. Your line is open.
Spencer Kurn (Analyst)
Hey, thanks for taking the question. So just to follow up on Brendan's comment about the $3 million that you lowered that you took out of new leasing activity guidance. Could you help us understand the assumptions that underpinned that level of contribution from T-Mobile? Did that assume they sort of reached full run rate by the end of the year? Or do you think that, you know, what you had baked into guidance originally you expected to be a midway point to even higher growth in later quarters? And then as a follow-up, could you just help us understand the cadence of organic growth that you're expecting for the rest of the year?
Your guidance of 4.1% for the year implies a slowdown in the back half, and so, should we expect the low point to be in the Q4, or do you bottom sometime in the Q3 and start to come back up by Q4? Thank you.
Brendan T. Cavanagh (CFO)
Sure. So I'll answer the second one first. We expect actually, the Q3 and the Q4 will probably be very, very similar to each other, but they will be the low point, and obviously, they will be lower than we reported for the Q2, which is implied in the full year number. So you should assume somewhere, probably the gross number will be closer to 5.5 or high 5% range, in each of the next two quarters, domestically. And then on the T-Mobile piece, you know, the way that it was guided to previously assumed that they were active in the Q2 in signing up new leases and amendments.
Given that it's in the Q2, we expected, obviously, a number of those, particularly the amendments, to convert to revenue producers before the end of the year, which obviously would have contributed to that growth number. The fact that there's been some delay there pushes that activity towards the latter half of the year and significantly reduces the amount of the impact to this year's, you know, financial statement contributions, so-
Jeff Stoops (CEO)
Well, it's not significant. It's basically what happens when you take 90-120 days worth of activity and push it back. That's the impact on the fiscal year.
Brendan T. Cavanagh (CFO)
Yeah. I mean, that's basically what represents the reduction, the $3 million reduction that we've put in our numbers.
Jeff Stoops (CEO)
All it is, is pushed back, but it has a fiscal year impact.
Brandon Nispel (Analyst)
Got it, thanks. And just one more question. When you're seeing the 5G amendments today, are those coming in as a typical amendment rate that you've seen historically? Or, you know, is there some sort of a difference based on the type of equipment you're seeing going up for 5G?
Jeff Stoops (CEO)
Well, they're coming in as expected. And remember that we did have experience with this, for a while with Sprint.
Brandon Nispel (Analyst)
Great. Thank you.
Operator (participant)
Thank you, speakers. At this time, there are no further questions in the queue.
Jeff Stoops (CEO)
Great. Well, we appreciate everyone dialing in today. On behalf of all of us here, we wish everyone you know, stay safe, stay healthy, and look forward to our next call in three months. Goodbye.
Operator (participant)
Thank you. As stated earlier, today's conference call was recorded and will be available for replay beginning at 8PM. Eastern Time today and running through August 17. You may access the AT&T replay playback by dialing 866-207-1041, or international callers may use 402-970-0847. Either number will need the access code of 1062990. Those numbers again are 866-207-1041, with an access code of 1062990, or 402-970-0847, with the same access code of 1062990. Again, that does conclude our conference for today. We thank you for using AT&T Teleconference. You may now disconnect.