SBA Communications - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 delivered solid execution: total revenues $693.7M, site leasing revenue $646.3M, diluted EPS $1.61, Adjusted EBITDA $489.3M, and AFFO/share $3.47, with margins of 70.6% (Adj. EBITDA) and 81.7% (Tower Cash Flow).
• Management highlighted rising US carrier activity, highest year-end backlogs in leasing and services, and a mix shift toward new colocations; results were “in line to slightly ahead of our estimates” despite worse FX.
• Balance sheet strengthened: net debt/annualized Adjusted EBITDA fell to an all-time low 6.1x; company refinanced $2.07B tower ABS at 4.778% blended and has an undrawn $2.0B revolver.
• 2025 outlook: site leasing revenue $2.53–$2.56B, Adjusted EBITDA $1.885–$1.905B, AFFO/share $12.40–$12.76; dividend increased to $1.11 (+~13%), implying ~35% of AFFO midpoint, and Millicom towers expected to close around Sep 1, 2025.

What Went Well and What Went Wrong

What Went Well

• US demand acceleration: “carrier activity levels in the US continued to grow,” with year-end backlogs at the highest of 2024, and services had its best quarter; 2025 is off to a strong start.
• Portfolio focus and scale: exited Philippines and agreed to exit Colombia; signed to acquire ~7,000 Central America sites from Millicom under long-term USD MLAs and a seven‑year build‑to‑suit exclusivity for up to 2,500 sites.
• Capital structure progress: net leverage at 6.1x (lowest in company history), $2.07B ABS refinanced below prior assumptions, revolver undrawn; dividend raised ~13% to $1.11/share.

What Went Wrong

• FX headwinds pressured reported growth; Q4 constant-currency growth outpaced reported across several metrics (e.g., Site Leasing revenue +4.6% cc vs +1.6% reported).
• International churn elevated due to consolidations (notably Oi in Brazil); management expects similar levels of international churn in 2025 before stabilization.
• Mixed margin dynamics: Adjusted EBITDA margin edged down YoY in Q4 (70.6% vs 71.6% prior year), while Tower Cash Flow margin improved (81.7% vs 81.0%).

Transcript

Operator (participant)

Welcome, and thank you for joining the SBA fourth quarter 2024 results. This call is being recorded. All participant audio lines are in listen-only mode until the Q&A session of the call. We'll give you instructions on how to enter the queue at that time. With that, I will now turn the call over to Mark DeRussy, Vice President of Finance. Please go ahead.

Mark DeRussy (VP of Finance)

Thank you. Good evening, and thank you for joining us for SBA's fourth quarter 2024 earnings conference call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer, and Marc Montagner, our Chief Financial Officer. Some of the information we will discuss in this call is forward-looking, including but not limited to any guidance for 2025 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, February 24th, and we have no obligation to update any forward-looking 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 on our supplemental financial data package, which is located on the landing page of our Investor Relations website.

As part of an ongoing effort to improve our earnings materials, we have made certain modifications to the supplemental financial data package and will be providing the materials in both PDF and Excel form. Note, the revised package does not exclude any previously provided financial or operating metrics. With that, I will now turn the call over to Brendan.

Brendan Cavanagh (President and CEO)

Thank you, Mark, and good afternoon. The fourth quarter was a solid finish to the year. Results for the quarter were in line to slightly ahead of our estimates, even with worse-than-assumed foreign exchange rates. Domestic new carrier activity, or bookings, continued to increase sequentially from the third quarter. The shift in the makeup of our new business also continued, with a higher percentage coming from new lease colocations versus amendments to existing leases. Our carrier customers continue to expand their 5G mid-band coverage, including adding capacity for fixed wireless access, as well as extend network coverage into areas of the country that have little to no cell coverage today. Even with increased bookings in the quarter, our leasing application backlogs grew throughout the quarter and finished at the highest level of the year, and our U.S.-based services business had its best quarter of the year as well.

The beginning of 2025 is also off to a strong start, suggesting another quarter-over-quarter increase in new leasing business to begin this year. Our 2025 services outlook contemplates a year-over-year increase in that business. Our U.S. customers are busy, and we expect to be a key partner to them this year in support of their network goals. Internationally, our fourth quarter results were in line with expectations as our customers continued to invest in their networks. In almost all of our international markets, the mobile network operators are well behind the U.S. in terms of 5G coverage. We anticipate continued network investment to close that gap and to broadly expand coverage to underserved areas. In many ways, wireless is an even more critical service in our international markets than in the U.S. International churn, unfortunately, continues to be elevated, largely due to customer consolidations.

We are working closely with our customers to help them achieve necessary network efficiencies. We believe the surviving customers will be stronger and better positioned for ongoing investments, and ultimately will support greater stabilization in our international cash flows. Overall, 2024 was a successful year. While our stock performance was hindered by the headwinds of the macro interest rate environment and a strong dollar, we had several accomplishments that set us up well for the future. Operationally, we expanded and strengthened our relationships with our largest customers. We grew our leasing and services backlogs, refreshed our mission, vision, and values, and streamlined a number of our operations and processes. With regard to capital allocation, we invested over $550 million in asset acquisitions, stock repurchases, and new tower builds, all while growing our dividend at an industry-leading 15%. We also improved our balance sheet and liquidity position.

In the beginning of the year, we refinanced our $2.3 billion term loan, pushing out the maturity to 2031, extended the maturity of our revolving credit facility, and increased it from $1.5 billion to $2 billion, and subsequently entered into a forward-starting interest rate hedge, reducing our future floating-rate interest exposure and locking in a much lower rate than can be achieved today. In addition, in October, we refinanced $2.1 billion of tower securities at rates well below where those same securities would price today. We ended the year at 6.1 times Net Debt to Adjusted EBITDA, the lowest level in our history.

In February of last year, I laid out my strategic priorities, focusing mostly on ways to enhance the portfolio with the goals to stabilize results, grow the core business, and improve the overall quality of our assets, be it through inorganic growth or new agreements with our customers. While we still have work to do, we made major strides toward these goals. As announced last quarter, we entered into an agreement to purchase approximately 7,000 towers from Novacom in Central America. This immediately accretive transaction positions SBA as the leading tower operator in the region, with over 10,500 pro forma sites. Beyond just the absolute size and scale, this deal aligns us with one of the leading MNOs in the market under long-term U.S. dollar-denominated lease agreements.

We also entered into a significant build-to-suit agreement with Novacom that we expect will drive growth and further improve our position in the region for years to come. In fact, our 2025 outlook incorporates a planned level of up to 800 new tower builds this year, the largest number for SBA in over 20 years, with the majority of those in Central America. Needless to say, we're excited about this transaction and its contributions to our future growth and stability. Alternatively, when we are in a subscale position and don't see a path to scale or other potential limitations on a market's future performance, we'll look to exit those markets. Like we did in Argentina back in the fourth quarter of 2023, we officially exited the Philippines in January, and today, we've also announced we are under agreement to sell our operations in Colombia.

The Colombia market represents less than 200 sites, and the impact to the financials is immaterial. It is not our desire to exit markets. In fact, it is much more our preference to find ways to scale, aligning with leading carriers and driving returns. We will continue to look for ways to do just that across our remaining markets. Each of the steps taken over the past year will help our teams be better focused and better positioned to maximize new business opportunities. Looking at 2025 and beyond, the key growth drivers remain intact. Mobile network consumption continues to grow, and limited new spectrum availability means more equipment at the cell site. Fixed wireless access, the incorporation of next-gen AI applications and handsets, regulatory build-out requirements, and remaining 5G coverage expansion are expected to contribute to ongoing network investments.

The strength of our balance sheet and the significant free cash flow that we generate every year will allow us to continue investing in high-quality new assets, as well as shareholder remuneration through industry-leading dividend growth and share repurchases. We are optimistic about our future opportunities. Before turning it over to Mark, I'd like to thank our team members. The company's ability to achieve our vision to be our customer's first-choice provider and the industry leader in quality infrastructure solutions is only possible because of the incredibly hardworking team members we have here at SBA. I'd also like to thank our customers for their trust in us, and we look forward to collaborating with them to achieve their network goals. With that, I'll now turn things over to Marc who will provide additional details.

Marc Montagner (CFO)

Thank you, Brendan. Fourth quarter domestic organic revenue growth over the fourth quarter of last year was 5.1% on a gross basis and 2.2% on a net basis, including 2.9% of churn. In the quarter, we added approximately $8.5 million in new leases and amendments billings. With respect to the 2.9% of churn, 1.6% was related to Sprint consolidation or approximately $7 million. Year-over-year, international organic recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis, was 1.7% net, including 6% of churn, or 7.7% on a gross basis. In Brazil, our largest international market, gross organic growth was 8.7% on a constant currency basis. Total international churn remained elevated in the fourth quarter due mostly to previously announced carrier consolidation. During the fourth quarter, consolidated cash site leasing revenue in Adjusted EBITDA denominated in U.S. dollars was 78% and 81%, respectively.

The majority of non-U.S. dollar denominated revenue was from Brazil, with Brazil representing 15.6% of consolidated cash site leasing revenues during the quarter. Today's earnings press release includes the initial 2025 outlook. Domestically, outlook reflects both the lower level of carrier bookings we experienced in 2024 and our expectation for increased activity throughout 2025, while guiding to a range of $35-$39 million for new leases and amendments. The outlook also assumed a range of $50-$52 million related to Sprint churn and $20-$22 million of regular churn. Our previously provided estimate of aggregate Sprint-related churn over the next several years remains largely unchanged, with an estimate of approximately $50 million in 2026 and approximately $20 million thereafter. For international segment, our outlook reflects steady network investment, guiding to a range of $16-$18 million for new leases and amendments.

The outlook also assumed a range of $27-$31 million related to churn. Churn continues to be elevated as we work through carrier consolidations, some carrier bankruptcies or restructurings, and wireless operators' network rationalizations. We are working with our current customers to minimize churns over the long term. Additionally, FX continues to be a headwind, and we're guiding to a negative $25 million year-over-year impact from FX on site leasing revenue. Turning to services, we're guiding to a range of $160-$180 million revenue, reflecting the increased carrier activity we are seeing at our tower sites today. We saw a meaningful increase in activity in the second half of 2024, and we expect to see similar levels throughout 2025.

Outlook assumed an anticipated closing date of September 1st for the previously announced Millicom transaction, contributing approximately $42 million to cash site leasing revenue and $29 million tower cash flow to our 2025 outlook. The ultimate closing date is dependent upon regulatory approval and other requirements and may differ from this date. Please also note that the outlook does not assume any further acquisition beyond those reached as of today or under contract and expected to close by year-end. We also do not assume any share repurchase in the outlook. However, it is possible when investing in additional assets or share repurchase or both during the year. I will now turn the call over to Mark, who will provide additional details.

Mark DeRussy (VP of Finance)

Thanks, Marc. As we previously announced on our third quarter call in October of last year, the company issued through an existing trust two tranches of tower revenue securities for a total of $2.07 billion, which included a tranche of $620 million issued at 4.654%, with an anticipated repayment date of October 2027 and a final maturity date of October 2054. We also issued a tranche of $1.45 billion issued at 4.831%, with an anticipated repayment date of October 2029 and a final maturity date of October 2054. Our next maturity is a $750 million ABS note due January 2026. Our current leverage is 6.1 times net debt to Adjusted EBITDA, and fourth quarter net cash interest coverage ratio of Adjusted EBITDA to net cash interest expense was very strong at 5.5 times.

Our weighted average maturity is approximately 3.4 years, with an average interest rate of 3.2% across our total outstanding debt. As of today, our $2 billion revolver remains fully underwritten. During the fourth quarter, we declared and paid a cash dividend of $105.4 million, or $0.98 per share. Today, we announced that our board of directors declared a first quarter dividend of $1.11 per share, payable on March 27, 2025, to shareholders of record as of the close of business on March 13, 2025. This dividend represents an increase of approximately 13% over the dividend paid in the fourth quarter of 2024, and approximately 35% of the midpoint of our four-year AFFO outlook. With that, operator, we are ready to turn the call over to questions.

Operator (participant)

Thank you very much, ladies and gentlemen. As we move on to Q&A, please dial #2 on your telephone keypad to be placed at the question queue. You'll hear a notification when it's your turn to ask your question. At that point, your line will be unmuted. Okay, and let's go ahead and go to our first caller, Batya Levi from UBS.

Batya Levi (Equity Research Analyst)

Great, thank you. Can you put a little bit more color on the increase in the backlog that you're seeing right now? Do you see that coming from increased applications from a specific tenant, or is it more broad across all your tenants? And maybe some color in terms of how should we think about the book-to-build cycle to be with colocation increasing? I know you just guided for 2025, but if we assume it's a back-and-loaded year, is it fair to assume you have good visibility for U.S. leasing to be up next year? Thank you.

Brendan Cavanagh (President and CEO)

Yeah, so the mix in terms of the backlog, I would say, is fairly broad. It's not exactly the same for each carrier. There are certain ones that are perhaps a little busier than others, but generally speaking, they're all up in terms of the applications that are coming in, and there are more, as we mentioned in our prepared comments. There definitely are more. There's more business coming from new leases relative to amendments to existing leases like we've seen in the past, and so that shift in the mix of the type of new bookings that we're seeing will drive the book-to-build cycle to be later, and therefore, we would expect to see growth quarter over quarter throughout this year in terms of the contributions domestically from new leases and amendments.

Yeah, I think that, generally speaking, would be favorable to next year, but it's certainly a little premature to be talking about what next year's number is going to look like. Let's see how this year plays out, but our expectation is we'll see growth move up as we move through the year.

Batya Levi (Equity Research Analyst)

Sounds good. Thank you.

Brendan Cavanagh (President and CEO)

Sure.

Operator (participant)

All right, moving on to our next caller, Jim Schneider, Goldman Sachs.

Jim Schneider (TMT Investor)

Good afternoon, and thanks for taking my question. With many of your carrier customers in the U.S. having sort of given a multi-year outlook for CapEx, which is sort of consistent with what we've seen over the past couple of years, how should we think about your ability to sort of grow domestic leasing in the out years relative to this year's guidance if those budgets remain where they are? And maybe what are some of the areas that would allow you to sort of outperform those overall CapEx growth envelopes, whether it's densification, fixed wireless, or otherwise?

Brendan Cavanagh (President and CEO)

Yeah, Jim, I mean, the carriers obviously have very large CapEx budgets, and so what would probably be relatively minor shifts in the mix or makeup of those CapEx budgets can have a more meaningful impact on us. And so I'm not too concerned about their overall CapEx budgets being relatively flat because what we're seeing on the ground is a lot more activity around their wireless networks and specifically the macro-based networks. So as I look out into the future, I can only see what's happening now and what they're telling us today, and that suggests a lot more activity.

I think, actually, the lack of incremental spectrum being added to the mix means that they have to make sure that what they have stretches farther, and I think that's actually going to turn out to be decent for us in terms of their planning in the next couple of years.

Jim Schneider (TMT Investor)

Thanks. And then, Brendan, just to follow up on that, I believe in your opening script, you mentioned that you saw demand specifically for fixed wireless capacity additions. Can we clarify whether that is fixed wireless capacity above and beyond or completely separate from conventional mobile capacity, or maybe any color on where that is happening would be helpful? Thank you.

Brendan Cavanagh (President and CEO)

Yeah, I mean, honestly, it's a little bit hard to distinguish from what we see going on to the sites in terms of basic 5G mobile capacity versus fixed wireless access. But what we're hearing is, in our conversations with the carriers on the ground, that that is a meaningful driver of the incremental investment in some of these locations. So what I'm giving you, I guess I would characterize as anecdotal, but we're definitely seeing the increased activity. And so we mentioned that because it is one of the drivers that we hear from our customers as to the increased investment that they're making, but I think it's probably an all-of-the-above type of thing ultimately.

Jim Schneider (TMT Investor)

Great, thank you.

Operator (participant)

All right, before we move on to our next caller, I just want to remind everyone that if you'd like to ask a question, please dial #2 on your telephone keypad to be placed in the queue. All right, let's move on to our next caller, Matt Niknam from Deutsche Bank.

Matthew Niknam (Managing Director and Senior Equity Research Analyst)

Hey, thanks so much for taking the question. Just two, if I could. First, on the leasing outlook for 2025, maybe, Brendan, if there's any commentary you can offer up in terms of what's baked in for customer-specific activity across the three nationals and DISH. And then just secondly, on the services outlook, so the guide is for $160-$180 million. It's a little bit shy of the annualized exit rate from Q4. If you just annualize the fourth quarter number, it implies closer to $190 million. And so I'm just wondering if there were any one-timers in the fourth quarter or if you're assuming any sort of moderation from any customers next year. Thanks.

Brendan Cavanagh (President and CEO)

Sure. Yeah, so on the second one first, there's no one-timers in the fourth quarter. I think what we're giving you is based on what we have in our backlog today and the conversations we're having with the carriers. The services guidance is a little bit harder to be completely precise on when you look out for the full year at this stage of the year because it's not a long-term contractual cycle the way it is in the leasing business. So as you get to the second half of the year, we tend to take perhaps a slight bit of conservatism in our approach to the back half of the year. So I don't think there's anything really that you should read into that, Matt, in terms of against the fourth quarter of last year.

On the leasing outlook, yeah, I mean, we prefer to stay away from too much detail on a customer-specific basis. As I mentioned in the answer to a previous question, we're seeing each of the big three carriers increase their activity levels, and so they're all contributing to that. We do have contributions from certain carriers that have regulatory obligations for coverage and downlink speeds that are driving a big percentage of the activity that we're seeing. So in one particular case, that's a main driver. But really, they're all busier. So I would say among the big three, that's the case. And as it relates to DISH, we're not seeing nearly as much as we have in the past, so that's a much lesser contribution.

Matthew Niknam (Managing Director and Senior Equity Research Analyst)

Thank you.

Brendan Cavanagh (President and CEO)

Sure.

Operator (participant)

Okay, moving on to Richard Choe, JP Morgan.

Richard Choe (Executive Director, Equity Research)

Hi. Hi, just wanted to follow up on the mix of business. I assume still kind of heavier amendment versus colo, but by the end of the year, do you see that being more even or actually even more colo?

Brendan Cavanagh (President and CEO)

Yeah, we're actually seeing in terms of dollars more, and this is the U.S. we're talking about specifically, but we're seeing greater contribution from colos today versus amendments. Historically, it's obviously been amendments predominantly, but that has happened in terms of that shift, at least on a dollar basis. The number of agreements because the amendments are lesser dollars tend to still favor the amendments.

Richard Choe (Executive Director, Equity Research)

Then you have Sprint churn this year and some next year. Is there any kind of positioning in terms of maybe wanting to get that all into this year at some point, or is it still just kind of waiting for it to roll off?

Brendan Cavanagh (President and CEO)

Yeah, Richard, I mean, at this stage, most of this year's Sprint-related is stuff that's frankly already happened or just about to happen in some cases. And this is the financial impact of it is what's in our numbers for this year. And when you look at next year, which is the last big year, most of the impact of that will be driven by leases that expire right towards the end of this year or the beginning of next year. And so there's really not that much time to try and pull something in. And in order to do that, you would expect, I think, that T-Mobile would expect some sort of balance in that, that there's something in that for them if they're going to pay it off early.

So the quick answer is I don't think that's likely to occur in terms of accelerating it, but at this stage, we're down to the final years of the material impact. So I think everybody knows what it is at this stage.

Richard Choe (Executive Director, Equity Research)

Great, thank you.

Brendan Cavanagh (President and CEO)

Sure.

Operator (participant)

Okay, moving on to Mike Rollins from Citigroup.

Mike Rollins (Managing Director)

Thanks, and good afternoon. Two questions. First one, if I could follow up on the last one. As the merger churn is picking up in the U.S., is there a corresponding increase in fees for carriers leaving the equipment behind? And is that something that could be a significant contributor, whether it's this year or over the next few years as you kind of wrap up some of this merger churn? And then secondly, just maybe taking a step back on capital allocation, if you can give us an update on what you're thinking about your target debt leverage and the priorities for capital. Thanks.

Brendan Cavanagh (President and CEO)

Sure. On the Sprint piece, there are fees associated with decommissionings or pay-and-walk type of fees, but actually, a lot of that stuff has been incurred because even though the churn is sort of spread out over this time period, in a number of cases, the installations have been decommissioned already. In fact, actually, if you look at the other bucket, if you look at our bridge of revenue and you look at the other bucket domestically, you'll see that it's actually down a bit. And that is one of the contributors is that we've had a decent amount of that kind of contributing to our numbers in the previous years, and so it's a little bit less now.

There's still going to be more of that because there certainly are sites where they're still continuing to decommission the equipment at those sites, and we typically do that work, but I don't expect it to be something that would be all that meaningful to the results that we report. And then on the target debt level going forward, you know what our historical target range has been, and we've been well below that target range for quite a while now. And I think at this stage, I don't see any reason that we will likely shift from the level that we're at, sort of between six and six and a half turns of net debt to EBITDA leverage. And I say that not because it's our desire to necessarily keep it at that level. It's really about the opportunities for the investment of capital.

And I think if we see meaningful investment opportunities of size and we needed to lever up a little bit to accomplish those investments, then we would be comfortable doing that. But as I sit here today and knowing that we can fully handle the Millicom deal that we're closing on later this year, I think it's a reasonable expectation that we'll probably be somewhere below six and a half times as we get to the end of the year. And that's what's implied in our current numbers that we've guided to.

Mike Rollins (Managing Director)

Thanks.

Brendan Cavanagh (President and CEO)

Sure.

Operator (participant)

All right, our next caller, Ric Prentiss from Raymond James.

Ric Prentiss (Managing Director)

Great. Thanks, everybody. How are you doing?

Brendan Cavanagh (President and CEO)

Hey, good, Ric. How are you?

Ric Prentiss (Managing Director)

Good, thanks. Hey, I want to follow up on Michael's question a little bit further. Where do you think leverage needs to be investment-grade? You guys don't have a lot of final purchase options. Could you be investment-grade kind of in the six, six and a half %, six, six and a half times range?

Brendan Cavanagh (President and CEO)

Yeah, well, based on where the agencies have indicated to us, and it's actually out there publicly as the breakpoints, I do believe that we could be investment-grade. Certainly, with at least one of the agencies, and I think with both at the level that we're at today, it's really more of a commitment as to our intention to stay there or to go lower. And we're frankly not yet ready to make that commitment. But at some point, that will be the natural course for things, and it'll happen. I just think it's a little premature to do that today. And frankly, I'm not sure that we get much benefit from doing it right now, particularly on a cost of debt basis. It would be very small to give up the flexibility that I think is more valuable right now.

Ric Prentiss (Managing Director)

Right. Of course, sometimes they let you flex up as long as you commit to bring it back down.

Brendan Cavanagh (President and CEO)

Sure.

Ric Prentiss (Managing Director)

The Millicom transaction, remind us how much turns of leverage that should be putting on as we look at closing the deal in September and what it means kind of leverage next year?

Brendan Cavanagh (President and CEO)

Yeah, I mean, by itself, it puts on about 0.2 turns of leverage, so very, very small. And obviously, depending on what we're doing in other places, that may or may not even show up as we get to the end of the year. So when you're producing $1.3 billion or $1.4 billion of AFFO, we can absorb actually a lot and not really move our leverage.

Ric Prentiss (Managing Director)

One more kind of strategic question and then one kind of out there question, but when you think about AI, you touched on it in your opening remarks, when and how will AI affect towers? We've seen it obviously affecting data centers, but will AI benefit towers, and how so and when?

Brendan Cavanagh (President and CEO)

If I could answer that as explicitly as I'd like to, that would be good. It's hard to say for sure, Rick. That is the honest answer. We do believe that there certainly will be a positive impact, as we mentioned in the prepared comments, as you see these generative AI functionality embedded into the handsets. And that's really because it's a driver of incremental usage and incremental network capacity that we expect will actually be taken up as a result of those solutions. So it's not that different from other things that have been introduced in the past that have driven greater use of the network. So that broadly is very good for us.

Obviously, there are AI benefits within our own business that we're introducing every day and continue to evaluate here to become more efficient, provide better information to our customers that we think could drive leasing, that kind of thing. But in terms of something more explicit than that, I think there could be, but I think it's a little too early to know for sure.

Ric Prentiss (Managing Director)

Makes sense. Appreciate it. Thanks, guys.

Brendan Cavanagh (President and CEO)

Yep. Sure.

Operator (participant)

All right, moving on to Simon Flannery from Morgan Stanley.

Simon Flannery (Managing Director)

Good evening.

Brendan Cavanagh (President and CEO)

Okay, Simon.

Simon Flannery (Managing Director)

To Millicom, you talked about a September 1 close. Can you just update us on where the deal timelines are? What's the sort of sensitivity? Is that going to be you have good line of sight to that? Could it be earlier? Could it be later? Might it be closing stages? And then, Mark, you talked about the Sprint churn. Could you just give us a little bit of update on the international churn '26 and beyond, what you're seeing remaining from Oi and some of the other consolidation? Thanks.

Mark DeRussy (VP of Finance)

Yeah, so on the Millicom closing date, we gave you what we consider our best guess at September 1st. There's a lot of different factors that are potentially going to contribute to the timing of that. It definitely could be a different time than that. I mean, honestly, it's our desire, and frankly, it's Millicom's desire to close earlier or at least close parts of it earlier. And if we can do that, we will do that because it's additive, and we both like to get going here. But there are certain regulatory hurdles that need to be cleared and other diligence items and certain other things that need to get addressed. So we pegged it at September 1st for purposes of issuing the outlook. And obviously, if it closes earlier or parts of it close earlier, we'll update our outlook as we move through the year if that happens.

I don't expect that it would close later. It's certainly possible, but I think that's unlikely. And then the international churn, there's a mix of things going on there. I mean, unfortunately, most of the churn that's in our outlook internationally is in Brazil. And I would say, unfortunately, it's a little bit higher than we probably would have thought before. It's largely built around the Oi consolidation, but it's not necessarily just the direct consolidation. It's also all the steps that the carriers are taking, going through that process, the surviving carriers are taking to rationalize their networks and deal with other focus areas. And so, as you would imagine, trying to be as efficient as they can.

And we're trying to help them through that in a way that is balanced for us too, but it is pulling forward, I would say, some churn that we probably thought would have been spread out over a little bit longer period of time. And then beyond that, it's a lot of different cats and dogs in different markets. The next biggest thing outside of Brazil, honestly, is a few million dollars of churn in Panama associated with the Claro Liberty consolidation. So we have those things that are still going on. But as I think that runs down, we'll see that improve. And actually, it'll be good for these markets as it will stabilize the markets.

Simon Flannery (Managing Director)

Great. Thank you.

Operator (participant)

Our next caller is Nick Del Deo from MoffettNathanson.

Nick Del Deo (Managing Director)

Hey, evening, guys. With respect to services, you've got one customer that's historically been much larger than the others. I guess, are you seeing any diversification of services work in 2025 versus 2024, or would you say it's broadly similar?

Brendan Cavanagh (President and CEO)

I would say we're seeing increases across the board, but that one big customer is increasing quite a bit as well. So I'm not sure that the mix is going to change all that much. We're still pretty heavily concentrated. And a lot of that just is based on agreements that exist with some of the other carriers, with turfing vendors and things like that. And we continue to work with them because I believe, in my opinion, that they would all agree that when we do the work for them, we do it as well as anybody in the industry. And so we're seeing more and more of a preference to use us, particularly on our own sites. There's a lot of advantages for the carriers. But it has to be profitable work for us too. And so that balance makes it a little bit more challenging.

But it is one of our internal goals, Nick, that you're touching on, to diversify our revenue base in that business because I think it's important to do, and I think it's something we can accomplish.

Nick Del Deo (Managing Director)

Okay. That's good to hear. Second, an unrelated topic, Brendan, you had mentioned a step up in the rate of new builds in 2025. Can you share anything about the kind of initial development yields that you're expecting with those builds? And should we think of the change in the cadence as basically being attributable to Millicom as opposed to other factors?

Brendan Cavanagh (President and CEO)

Yeah. I mean, the Millicom deal is definitely a big driver of that. It's by far the biggest driver of that. I mean, I mentioned in the script that we had approximately 800 new builds we expect to do this year. That's what's implied in our outlook and in the discretionary CapEx. Most of that, say, ballpark close to 500, it would be Central America as part of the Millicom deal. So that's definitely the biggest driver. But there are other markets as well. Tanzania is another market where we're building a lot of sites. So it's concentrated in certain markets. But the ones that we're doing are very good. We feel really good about the yields on those. Day one, they don't require a ton of lease-up, but I do think there's a lot of good opportunity for lease-up in a number of these situations.

So it's a positive contributor, and I think will help our return on invested capital that we report as we start to get into them and get them done.

Nick Del Deo (Managing Director)

Okay. Great. Thanks.

Brendan Cavanagh (President and CEO)

Sure.

Operator (participant)

Our next caller is David Barden from Bank of America.

David Barden (Managing Director)

Hey, guys. Thanks so much for taking the questions. So Brendan, Brendan Carr has been a vocal proponent of kind of changing the BEAD program to incorporate a little bit more flexible technological approaches to achieving some of these broadband goals. And Fixed Wireless Access has been one of them. This has been a question we've been dealing with on the other side of the equation, which is how does it affect the wireline providers? I'm interested to hear your perspective on to the extent that anyone has been phoning in asking SBA, "Could you help me figure out a way to address Fixed Wireless Access as a BEAD solution?" That'd be one question. And then the second question is another big question that's kind of arisen subsequent to DISH kind of refinancing itself and getting $5 billion in capital.

The question was, what were they going to do with that money? Were they going to use it to invest in handsets and marketing? Were they going to try to get to their build-out requirements? And obviously, that build-out requirement extension that they just got from the Rosenworcel FCC is under threat. And I'm interested to know if there's some change in the conversation around how DISH might factor into your thinking in tower demand for the next couple of years. Thank you.

Brendan Cavanagh (President and CEO)

Yeah. Okay. Well, there's a lot there, David. On the.

David Barden (Managing Director)

Sorry.

Brendan Cavanagh (President and CEO)

No, no, that's all right. On the BEAD program, I guess the short answer is no. We've not really heard much from folks who are looking to us to try and help them with Fixed Wireless Access as a BEAD solution per se. What we are, as I think, well, in my opinion, and I think others would agree with this, that it was obviously a very fiber-oriented program. And I think expanding it out to cover more than just fiber, to consider wireless as a solution is a good thing, and we would be very supportive of that. So I do think that it could be good if, in fact, it goes that direction. But it feels a little early on that. And it's pretty far down the road in terms of a lot of the money being out the door and what the plans are.

So, I'm not sure how much of an impact we'll see from that, but I have some little bit of a little glimmer of hope that it is a favorable contributor for us. And we certainly are supportive of that. On the DISH side, when I think about the impact to us over the coming years, I think I mentioned in response to an earlier question that we don't expect a whole lot of contribution this year. And that's really because we're just not seeing that much from them. They've been much quieter. I think that they have a lot to do. And when we have conversations with our network folks, it sounds like they have a lot of plans around that.

But I think the extra time that they received for these build-outs has given them the sense that they can take a little bit more time and focus on their financial house. If it's under threat and that change, I guess we'll see what that does if that, in fact, is the case. I'm not sure about that. But at this stage, it's pretty slow with them. So we'll see. And we're hopeful that it'll pick up. We have a very good relationship with them. We have a lot of existing embedded leases. And I think there's a lot that we can do together as soon as they kind of get clarity on their plans over the next couple of years.

David Barden (Managing Director)

All right. Thanks, Brendan.

Brendan Cavanagh (President and CEO)

Sure.

Operator (participant)

All right. Up next is Ari Klein from BMO Capital Markets.

Ari Klein (Director, Equity Research)

Thank you. And just going back to the international churn, curious to see the level you're expecting in 2025. Do you think that that's going to be the peak? And do we need to kind of move past the churn you're seeing to kind of see leasing start to accelerate in international markets, or could they kind of be separate from one another?

Brendan Cavanagh (President and CEO)

Yeah. I mean, unfortunately, Ari, I don't actually think that it's the peak. I don't think it's necessarily going to be higher, but I do think that next year is likely going to be at a similar level to this year in terms of international churn. But its impact in terms of organic growth overall, obviously, it weighs on it, but different markets have different dynamics right now going on. I mean, we've got a lot happening in Central America and in Africa, in Tanzania specifically. And I think we will see not only a lot of new build activity like we're working on, but we will actually see reasonably good lease-up in those markets. And in many cases, particularly in Central America, we're pretty much through the churn, the consolidation churn. A lot of it has happened at this point. And so we'll start to see that pull back.

It's really Brazil, which is, we're obviously heavily indexed to Brazil. So as Brazil goes, that kind of is a deciding factor for a lot of these things. And I think Brazil probably has another year beyond this year, at least, where things will be a little bit challenging on that front.

Ari Klein (Director, Equity Research)

Thanks. And then just maybe on share purchases, how should we think about that? Are those likely to be on hold until the Millicom deal is completed, or is it kind of independent of that in how you're thinking about it?

Brendan Cavanagh (President and CEO)

Yeah. I'd say it's somewhat independent of it. Obviously, we know that we have that commitment, that we have approximately $1 billion of capital that we are obligated to pay out. And as I mentioned earlier, the timing of that hopefully will be earlier than what we put forth. That's what we're shooting for if we can make it happen. And if it is earlier, that means we have to have that ready and available, which we do, but it does influence our thinking a little bit. However, having said that, we typically have run our share buyback program, and I expect it to be the same for the time being in a somewhat opportunistic manner.

If we don't see other things going on and we see an opportunity where we think there's a meaningful dislocation that happens that doesn't make any sense to us, we may react more quickly to that.

Ari Klein (Director, Equity Research)

Thank you.

Operator (participant)

All right. Moving on to Brendan Lynch from Barclays.

Brendan Lynch (CFA Director)

Great. Thanks for taking my question. Another follow-up on the government policy. Can you talk about the potential for more spectrum auctions over the next couple of years? And if you're having any conversations with customers on how that would inform their intentions and how you can support them?

Brendan Cavanagh (President and CEO)

Yeah. So obviously, that's one of the things that's being talked about by the new FCC that we are extremely favorable on and are very supportive of, as of course, are the wireless MNOs here in the U.S. And so I am hopeful that we will actually see an acceleration to improve the likelihood of having more spectrum auctioned off. But having said that, even if that is the case, with the current delay that's taken place and the time it will take to get to that, and then ultimately for it to be cleared and available for deployment, you're talking about a number of years off into the future. And so the conversations that we have with our customers are less about what they'll need to do with potential new spectrum years from now.

It's more about how do they optimize and maximize what they have today that they either still have to deploy or that they can maybe redesign a little bit in order to maximize what they're able to produce with the current holdings. So that's the more immediate thing, and that's the type of thing that we would discuss rather than around future auctions at this stage.

Brendan Lynch (CFA Director)

Sure. That makes sense. And another issue, you're selling the portfolio in Colombia. Should we expect you to exit additional markets throughout this year, or is that process pretty much complete at this point?

Brendan Cavanagh (President and CEO)

No. I mean, it's not our intention to necessarily exit additional markets. In fact, as I mentioned, I think in my comments, we'd much prefer to not do that and to find ways towards improved scale and better positioning with the leading carriers in those markets. So that's what we're focused on. But having said that, in some cases, like we did in Colombia and like we did in the Philippines, if we come to the conclusion that we don't see a reasonable, viable path to getting there anytime soon, then for purposes of being focused with our operations and where we are spending our time and energy, we would consider it. But it's not currently something that we have in the hopper.

Brendan Lynch (CFA Director)

Great. Thank you for the call.

Brendan Cavanagh (President and CEO)

Sure.

Operator (participant)

All right. That was our last caller in the queue. One final reminder for last questions. Dialing pound two. We'll place you in the question queue. All right. Looks like there are no further questions at this time. That concludes the SBA Fourth Quarter 2024 Results Conference. You may now disconnect.

This conference is now.