American Tower Corporation (AMT) Earnings Call Transcript & Summary

[Audio Gap] services and infrastructure categories for Citi research. I'd like to welcome back American Tower's Chairman, President and CEO, Jim Taiclet. Jim is going to provide some opening comments, and then we're going to get into a fireside discussion. Jim, I'll turn it over to you.

Mike, thanks. Happy New Year, everybody. Good morning. Before we get into your questions, I do want to quickly touch on a few of American Tower's key near-term and long-term priorities. And they're centered on what we call Stand and Deliver 10-year strategic plan that I introduced in 2018. So we're year 2 into it now. There's 4 components to the Stand and Deliver strategy that we put together. And the first one is to step up and lead wireless connectivity around the globe. And what we mean by that is we've got ourselves in a position where we feel we're the global leader in wireless infrastructure, and that puts us in a spot where we can help advance wireless connectivity and the adoption of communication technology in the U.S. and around the world. And as the U.S. private sector -- Co-Chair of the U.S.-India CEO Forum was Secretary Ross from the government, this is one example where we're working at a higher level with government, multilateral institutions and foreign countries to really drive that agenda. Another example of what we're trying to do in the leadership space is we're on the World Economic Forum Digital Communication Board of Governors. That puts us with our customers, with senior government officials and key NGO leaders, a venue for ATC to advocate for commercially shared infrastructure, again, in the U.S. and around the world. And on the other side, we're on the Executive Board in NAREIT so that gives us a platform to advocate both in U.S. government circles for shared wireless infrastructure and how to really play out the 5G infrastructure strategy from a government perspective in a way that's going to be most constructive. And it also helps us elevate the importance of connectivity for the future of commercial buildings across all the sectors that the REIT space encompasses. The second part of our Stand and Deliver strategy is to innovate for a mobile future. We introduced the innovation program a couple of years ago at ATC. And we set an aspirational goal when we did this in 2017 for $1.7 billion revenue line or contribution by innovative programs, projects, new customers that we didn't have in 2017 by 2027. That was -- that's about 25% of our revenues back in 2017. It's something that we're going to strive for by primarily though making our existing towers and other assets more valuable and attractive to our current and potentially future customers. So we're out doing a number of programs and projects with existing and new counterparties to try to drive that 10-year agenda of innovation. Some of the ones you may have heard about is we're exploring edge data solutions, including with some of the big cloud providers and also the REIT side of the data center industry, which we don't necessarily want to try to replicate but rather how do we figure out how to plug in and partner with those 2 counterparties to figure out what we can do together for our new and existing customers down the road. We've got, in fact, some of them in this town over at Miracle Mile, you'll see indoor networks that are much higher capacity speed and capability that we're introducing with current and new technology and current and new spectrum, including CBRS. That's another way that we're innovating in the space to make our existing assets more valuable. And then thirdly, just again one of many examples of our innovation programs in the energy space. So we're collaborating with energy industry leaders and institutions like MIT and Princeton University's Engineering School to identify reliable alternatives and optimal setups for alternatives to diesel fuel generators in many of our sites. And that also leads me to the third component of Stand and Deliver because the energy program is going to help drive efficiency not only to American Tower but throughout our industry. So our third pillar, if you will, of our Stand and Deliver strategy is to drive efficiency in our company and throughout the industry. What we're going to do internally is continue to do what we've always done, is we're going to try to drive organic growth on existing assets we have to the maximum extent we can through operational execution and also going to try to drive operating expenses down on a continuing basis through the same kind of teams that are driving the growth. And SG&A and other spending is always a target at our company, frankly. Our goals on the efficiency space are 2: to increase operating margins continuously and ROIC at American Tower over time through operational excellence in all those spaces. We're going to continue to target 90% conversion or 90%-plus conversion of our organic revenue growth into operating profit across the entire business. And again, we're also helping our whole industry to become more sustainable and energy efficient. And that helps our customers actually save money because when we burn diesel fuel and a generator on their behalf, we pass through the billing to them. That's a big cost in some markets for them in India, Nigeria, et cetera. So we're actually trying to help the industry more efficient -- be more efficient. And for example, in our African markets, last year, we added battery installations to 2,800 sites and solar assist panels to another 600 sites to make those sites less reliant on diesel fuel, bring the run rate of the generators down and the hours down, which then reduces our whole industry's impact on the environment. The fourth pillar of Stand and Deliver is to grow our assets and capabilities to meet our customers' needs. We've been doing that for a long time. We've acquired a lot of assets and built a lot of assets over the last 20 years. Recently though, we've just added 5,700 sites to our portfolio in Africa as a result of the Eaton Towers transaction, which we just completed. And we've also finished up recently a transaction in Chile, Peru, that bolsters our really strong presence already in Latin America with a key customer there. We also ramped up our build program over the last few years. And this year, we're going to build, I think, more towers than we've ever built, and next year's plan looks like it's going to even exceed that. So we think we're well positioned to keep adding scale. We've got 180,000 sites on 5 continents around the world. And we think we can continue to add to that while meeting our investment criteria. So in closing, we think these 4 pieces of Stand and Deliver are going to take us forward in the next 10 years and give us the kind of results, hopefully, that you've all been enjoying as shareholders for the last 10. And with that, Mike, we'd really be happy to take your questions and go from there. Thanks.

Yes. Thank you for reviewing what you talked about here a couple of years ago with the Stand and Deliver program, and there's a lot to unpack and get into in each of those points.

Right.

Maybe just the first question is when you think about the expansion of your assets over time, how are you looking at the value of the domestic portfolio and what you've been able to achieve over a long number of years versus allocating capital to international or to other areas, be it fiber or in that small cells or now data centers and maybe just holistically how you approach this allocation of capital?

So Mike, the U.S. macro towers that ATC owns and operates are still and will be the cornerstone of our business. It's about half the revenue base, and it's 2/3 of the cash flow of the company, roughly. That is the engine that drives everything at ATC. Now what we've tried to do over the years is diversify really around that core engine, if you will, and diversify both geographically and now in adjacencies to those sites and make those sites more valuable and more attractive to customers and thereby, with the diversification, reducing the risk of volatility in our cash flow growth. We're trying to get the steadiest, longest, highest-reaching vector, if you will, of cash flow growth over a 20- or 30-year period. And so what we want to do is build that cash flow curve but also prevent any downward discontinuities from really causing us a disruptive negative event, right? So that's really all we're trying to do. And the basis of all of that is the U.S. macro assets that we have. So when -- our first stage of our strategy the last 10 years was let's take this really great business model. It's the best business model I've ever seen in my, I guess, limited business career, but it's pretty fantastic because you can get those 90% conversions from revenue to EBITDA. There's really no other business I've seen that can do that. So we tried to replicate that basic business model in all the markets that we felt qualified for us to be present in. And we feel like we're in most of those now. And usually, you'll find us to be #1 or #2 in every country, including the United States, in the macro tower business. So over the next 10 years, we're going to keep doing that. We're going to keep driving the efficiency and the M&A program on macro towers. But we're also going to try to get in those 2 extra dimensions, which is lead others toward the value of commercial macro tower asset sharing for both governments, NGOs, populations and the environment. And that will help frame, we hope, the policy atmosphere that we work in to be more favorable to what we do. On the other hand, the new piece of innovation says, well, how can we use these macro towers to get revenues that we don't really enjoy today but get them in the future? And those are going to come from either adjacent assets that bulk up the towers' value or attractiveness or they're going to come from new customers that we just don't have today. And so when you go to, say, an innovation program, and these innovation programs now because we have the global platform, are -- we're much more interesting, I think, than any other tower company in the world to other global companies. Most wireless businesses, even if they're multinational, they're still national. They have individual licenses from governments in specific countries and they operate around those. Vodafone and Telefónica and others have sort of done what we've done. They've replicated that national business in a number of places and clustered it together in a corporation, but they're still national businesses. If we get some of the customers in the cloud space, data centers; aerospace if drone control really takes off; automated vehicles, which would be the automotive business, it's a global -- these are global businesses that are going to need assets for 5G future in multiple countries. And so we think we're more attractive because of that. But everything we do then goes back to the existing asset base that we have. We would like to be able to have drone control systems hosted on our towers. That's really the goal of that phase of our innovation program. So again, the U.S. core tower asset is what -- is the heart and soul of our company. It's -- everything else emanates, if you will, from that or to the benefit or risk management of that asset.

Great. I -- pull up the first live survey, if we could, please. So one of the questions that we get from the buy side is what's the most appealing mix for a firm in the communications infrastructure category. Is it, one, domestic tower assets; two, global tower assets; three, what now has become domestic infrastructure, towers, fiber, small cells, data centers? Or is it global infrastructure? So you take that model and you just expand it to the globe. So we'll go to the -- to our audience here and see what -- how they vote. [Voting]

And by the way, Jim, you are welcome to vote if you would like.

I'll just comment. It will be interesting to see what people think.

Yes. So 27% domestic towers, 11% global tower assets, 19% domestic infrastructure, 43% global infrastructure.

And I would place us literally in category 4 but with an asterisk. And that is it depends on the national characteristics of each market that you're talking about. So in the U.S., for example, we do not participate in fiber optic cable business. But we do in Argentina and Mexico and Brazil and a few other places because of a very simple reason, the industry structures in each of those countries is different and the demographics in each of those countries is different. I'll just give you 2 really quick data points on that. On the demographic side, 85% of the people in the United States live in places less than 5,000 people per square mile. That's not -- that's a non-dense living environment. In Argentina, 85% of people live in places above 5,000 people per square mile. It's the actual mirror image of what the U.S. looks like from a demographic density perspective. So therefore, small cells are going to be way more important in Argentina and way more effective as a carrier's option for deployment someday for 4G and 5G than they will in the United States. The United States because of its low population density and its suburban environment where most people live, is a macro tower atmosphere. That's the ecosystem that has to be built. But in places with really high densities like Mexico City or Buenos Aires or Delhi potentially, there's going to be some small cell needs. Now there'll be small cell needs in the United States too, but there's an existing -- this is the other side of the coin, there's an existing fiber optic cable industry which is well funded, highly competitive and already in process and in play and available to anybody in the United States that needs a fiber connection. You can pretty much get it off the commercial market. But in places I've just mentioned, Delhi, Buenos Aires, Mexico City, that industry doesn't exist at the scale it does in the United States. We, first of all, want to get fiber connected to our towers because if you don't have a fiber connection, you really don't have a true 4G tower. That's why we're in the fiber business in some of these other countries because there's not an existing infrastructure to do it where our customers can just go to the market and buy it like they can here. So we have decided to get to the last quarter mile or half mile, we'll do the fiber under the ring, it's in the metro area that somebody else already put in, and we'll make that connection. We'll put that CapEx to the ground and we'll charge our customer for it. So that's the nuance -- the level of nuance that you need is national and maybe even market-by-market inside of countries to figure out what assets should be on the list of #4. That's the asterisk. And that's where we have a globally deployed team that can figure out what that right mix is country by country.

Yes. As you started to prosecute this strategy and you've had these bundled sales, we'll call it, have you learned anything about that process, revenue share relationship that would say maybe the economics aren't as good in the U.S. or some of our other markets where there's fiber availability and stuff, but maybe we need to take another look because of this instructive relationship that you're seeing in some of these other countries.

Yes. The only reason people come to us in any market for fiber optic cable is because we're offering it since no one else will do it, and therefore, we will get our ROI. In the United States, that's a good example of the opposite situation where the returns in the fiber optic cable business in the United States are not as good as tower returns, to my understanding because there's plenty of supply, there are short-term contracts, there's not a lot of franchise to the cable runs, the fiber optic cable runs. In other words, if it's going down the west side of Sixth Avenue, someone else could run one down the east side of Sixth Avenue tomorrow and now you've got competition. So -- and there's a lot of CapEx that goes into it on a recurring basis afterwards. So the characteristics, the business model, if you will, of U.S. fiber is different, and we find it less attractive than the tower model in the U.S. So we do towers and we don't do fiber. In places that I've talked about outside the U.S., those business model characteristics of fiber can differ, and therefore, we can get our return, and therefore, we will do it and offer it to customers. So customers aren't asking for us to do all these things across the board everywhere. They want to go to a supply base and buy what they need. I mean airlines and -- which I used to work with in my past life, and mobile operators are similar. They're providing a service to consumers and building a supply chain to deliver that service. Some of them self-perform and some -- in areas and some others don't. In our space on towers, they've outsourced in the U.S. by sale leasebacks the macro tower supply chain piece. But if you look at the fiber optic cable piece, 2 of our big customers in the U.S. do it themselves, 2 don't. So you have to really get in market by market, make a -- create an understanding of the business model that's specific to that and then decide where to make the investments, Mike. We're not getting pulled from our customers to do it. We're deciding what -- in working with them, actually, what do you need? Can you get it off your existing supply chain? If you can't, here's my ROI, and I'll do it for you. And if you're willing to pay that, I'll do it.

So before we get into some of the operations, just keeping on this high-level strategic layer, edge compute, data centers, you bought a small data center. You also talked about in your comments about partnering and plugging into the data center community. Can you unpack what you're seeing in terms of the interest in edge compute to leverage your assets and just maybe unpack a little bit more of what the best way to proceed into this opportunity is?

Right. So 5 to 10 years from now, Mike, we believe there's going to be a capillary system of processing and storage outside of big data centers. It will be fairly pervasive. Now a capillary system, if you look at biology, you would take the heart. The heart is a big data center. And how many veins and arteries do you need? How far do they need to go out? And how dense do they need to be at the endpoints? And we're just getting started on building that new system, if you will, that new circulatory system for data. In a 5G world and really an IoT-based world that's coming, there's going to need to be capillarization of storage and processing for latency, for cost reduction, for being able to cache things closer to customers so they have a better experience and things like that. That's all going to happen. What we're doing in our innovation program is we're making small investments to set up prototype platforms to figure this out with other counterparties because we don't think we can figure it out for ourselves. We've hired some ingenious and very experienced people to help us inside of our company, but we have to work with the cloud providers and the data center companies and our existing customers to figure out kind of who's on first and how long is this going to take to play out and what is the capillary system going to evolve to and how is that going to space itself out over time. Now there's going to be investment required to do this. And again, who's writing checks to who? Who's putting capital on the ground? We have the starting point at the end of the capillary system of the 40,000 U.S. towers, almost 140,000 international towers. We've got places to put storage and processing equipment that has just what the macro tower and the cell site has. It has electricity, it has security because it's usually a fenced compound, and it also has a fiber optic cable backhaul to the web. So we have 180,000 places for edge compute, but we don't know what that capillary system is going to look like, so we are working with companies that are going to bring to -- that are going to bring that together now so that we can get, as Gretzky said, to where the puck is going before anybody else, not where the puck is today, where is it going. And that's the whole drive behind our innovation program, our prototyping, our investment in Colo Atl, which is about a $75 million investment that meets our ROI goals, by the way, just like towers do. And why we've bought that was because it's across the street from a big digital realty data center in Atlanta that we can then make that connection back to a meet-me room or an exchange office, which is what Colo Atl is, and then see where the capillaries go and how fast they go out and what do you use them for. And so we're partnering with some pretty interesting companies, pretty well-known companies to work off of this and some of our other prototype platforms. That's really why we're doing those things.

So is this something where we shouldn't expect some announcements maybe in the next few months but it's like a year or 2? Or is this something that could be more proximate in terms of getting more announcements and details of these efforts?

These are all long cycle programs, and so what I'm spending a fair amount of time on now is not that -- we have a team with my oversight that's driving the next 5 years of revenue and EBITDA and cash flow. And I'm looking at 5 to 10 years from now, how can we really bolster that. And it's going to -- before you see meaningful revenue from edge compute, I would expect it to be for our company, which is a $7.5 billion revenue line, it's going to take a few years to get there. But if we don't start now, we won't be able to be in a position to capture more than our fair share of that. And that's why we're devoting time and energy to it now.

So you mentioned the 5- to 10-year focus. So if we stick with that frame for a moment, how should investors think about the 5- to 10-year just base case opportunity to grow domestic tower revenue? When you cut through all the noise and you just look at the cycle, what does that look like for American Tower?

So we go back to physics and engineering fundamentals, and for better or worse, about half of our executive team are lapsed degreed engineers. And we start with the most simple metric, what is the monthly aggregate data use in each country market? We'll just take the U.S. as an example. What's the growth rate of that on an annual basis? It's about -- I think your numbers say the same thing, at 30% to 35% CAGR of data flow going through the mobile network. And what we then do is say, "Okay, what is the growth rate that we can expect based on what our customers have to do to handle that growth?" I mean there's almost no business anywhere that has 30% to 35% demand growth every year for, literally, decades now. But our customer base has that challenge. And what their response to that challenge has to be is, to retain their own margins, they have to reduce the cost per gigabit as fast as the gigabits are growing every month. And so therefore, we're trying to work with them on an efficiency basis to do that. And that's partly why the tower industry exists in the first place is because when the industry was going -- our customers were going from 2G to 3G, well, did they all need to own their very own tower and pay all those costs and carry that asset? Or could they monetize it and reinvest it in the network because we were all starting to use iPhones and things like that eventually and driving network demand up. And they decided to do that. So what our role is, and that's why we say efficiency for the industry, is how do we help our customers keep cost per gigabit down as gigabits are growing. And the ways for them to do that, they can either buy spectrum, which is in itself expensive, by the way, so it's not the cheapest solution, they can deploy more equipment or they can have a faster and better algorithm to get more bits on a hertz of spectrum that gets transmitted over their network. Those are the only 3 -- this is an engineering problem, so those are the only 3 things you can do. And so how do each of those things affect the tower industry? Well, when they buy more spectrum, they tend to match the panel antenna size to the optimal frequency range that they've just bought. And that tends to be amendments for our industry, for our companies that are in the infrastructure side. And that's growth for us. The second way they can do it is they can say, "Well, let's add another cell site somewhere else and have a better signal." Well, that's a colocation lease for us and our peer group, so that's a good thing. And then when they introduce a new G, which is off 2G, 3G, 4G or 5G is a more efficient way to put hertz spectrum to use in a way, you put more bits on each hertz of spectrum. So when they do that, they end up marketing it, driving demand and introducing new things into their network that now the network has to carry. So when 4G got introduced, if you remember, this is 7 or 8 years now, before 4G, you didn't really have great mapping software. You didn't really have Uber. You didn't really have ordering Amazon on the train and having it delivered when you got home because it took a 4G network to carry all that load. And that 4G network had to have a gigabit -- cost per gigabit lower than the 3G network had. And so all these things come together and drive tower growth, frankly. So we think that the tower growth will be very steady because the 30% to 35% data growth seems to be just natural and inherent in this industry. There are only 3 ways to address it. All of them, we think, are beneficial at some level for the tower industry. And we also gauge it by what's the CapEx spend of the carriers doing this because they've got to put their equipment they buy some place and we have all the places. So when you take -- you get -- it's kind of a rule, 30-30 rule. If there's 30% growth or more in wireless data, the U.S. carrier spend about $30 billion a year, and then that drives the kind of growth you've seen from us and our peer group. Now recently, that growth has been in the 6% to 7% range, and the only caveat to the future is as the base gets bigger, the absolute value of revenue growth for us will be -- all will be not the same but on a bigger base. So it's about -- it could be up to a 50 bps drag year-over-year because the base got bigger and you still got the same absolute value because this is all physics, right, of new load being put on your towers that you are charging for and we are -- the 3 of us are charging for in our industry. You're going to see nice growth for a very long time and it should be in the mid- to high mid-range of organic growth.

So if we think about -- we always like to check in with the audience, see what growth might be for the coming year for the tower group, so we won't say for AMT specifically. So if we go to the next live survey question, please. What will domestic organic growth be in the U.S. for the category for towers in 2020: 3% or less, over 3% to 5%, over 5% to 7%, over 7% to 9% and then over 9%? [Voting]

And our survey shows 3% at 3% or less; 38% at over 3% to 5%; 43% at over 5% to 7%; 14%, over 7% to 9%; and 3%, over 9%. Now for American Tower, the last 2 years have been interesting because, if I recall correctly, 2018 was a back-end loaded year for growth. 2019, per the initial guidance you established, and then as you updated it, it seemed to be about a front-end loaded year.

Right.

So how do you think about growth for the category and for AMT going into next year, especially in light of, I think what you were asked about in the past, the uncertainty around T-Mobile and Sprint in the direction of that transaction?

So let's start at the back and go towards the front. That transaction over the 5- to 10-year time frame that we planned for to us is neutral to positive. Neutral because no matter what happens with that particular transaction, there is going to be, on one hand, the demand growth continuing. So the 340 million people in the United States, 95% of them have cell phones, 80% or 90% of those are 4G going to 5G, and there's going to be data demand growth, we think, of 30% to 35% for the -- all through that time frame. So the demand is going to be there. And then it's a matter of industry structure and gains there as well as there are 3 or 4 carriers and does that matter on the tower industry's growth rate. And that issue, if you've had a question in your mind about it, it's been resolved by the government. And the government says, no, there will be 4 carriers, it just may be a different 4. And so we think that, again, it can be neutral to positive if that deal goes through. If it doesn't go through, it's also neutral. Our base case is there's 4 carriers that are reasonably sized and that's the customer environment we have today. So we think that we're still going to have the growth rates I just described over a long period of time. Now year-to-year and quarter-to-quarter, they fluctuate because, as you said, front-end loaded, back-end loaded. Carrier X is busy this quarter but carrier Y is not, but then next quarter, they're both busy. These rollouts, as you and I have talked about for years, they happen in kind of like a sine wave fashion by each carrier in each country. And what we've tried to do is stack up the sine waves so that it looks really smooth to everybody because it is. Because if you introduce enough differentiation and diversity into a set of fluctuating curves and stack those curves on top of each other, they will end up appearing and being a smoother curve on the top. And that's our whole international strategy, and our innovation strategy is based on that math. So we think it's going to hold up just fine over a long period of time, Mike, deal or no deal, so to speak, but -- because of the fundamentals. But quarter-to-quarter and even year-to-year, you could go plus or minus that CAGR 100 to 200 bps based on what's going on in the industry.

Moving over to India. What's -- what can you share with us in terms of what the carriers are going through with the government asked to pay the tax and the penalties and what that means for your business over there?

So let's again go to the long term and then back to the current day. Long term in India, there's 1.3 billion people. They don't have a wired communication system, cable, fiber, copper telephone, they don't have it. The entire Internet and communication system in India for 1.3 billion people runs off of mobile. The mobile industry is going to survive over the -- country, it's essential to the development and health of the country that, that happened. The people in India who have 4G phones because of what I just described, use more data than Americans who have 4G phones. The economics need to be reconciled and that's in the process of happening in that market. We're now in an industry structure there -- it was a little abrupt getting there, but an industry structure where there's going to be 4 mobile operators just like the U.S., and there's going to be 3 -- 2 to 3 at the end of the day, depending on what you call a tower company, okay, a lot like the U.S. So the industry structure is birthed now. It was a little bit busy and frantic a little recently, but it's been birthed. That industry structure and the kinds of companies that are behind it on the customer side and the government support, ultimately, is going to make this a good market for us. Now let's come back to current day, there's been this industry consolidation over about an 18-month period. Usually, it takes 5, 6 years to do these things. It took about 1.5 years. That was disruptive. And on the heels of that being resolved, there was a Supreme Court ruling that past due taxes were indeed owed by our customer base. The customer base then has a deadline to pay those taxes and they're going to have to find the money to do that. I don't believe it's going to denigrate the mobile industry in India because it's essential to the country. But in the short term, just like we talked about a minute ago, the sine curves are going to be different. And 1 or 2 of the carriers are probably not going to spend much in the next few months or even quarters until this is sorted out or they raise the money and pay their tax bill, whatever it may be. But in the long term, it will play out fine. We tend not to be -- we are well aware of all -- I mean, weekly, if you trust me, weekly calls with India to know what's going on. But we're still confident in the fundamentals that this industry and that country, our customer base will get through this.

Let's go to the next live survey questions. We're just thinking about the future for American Tower. You talked about trying to get that smooth long-term growth. So what is the risk to future consensus AFFO per share growth for American Tower: one, not concerned; two, customer consolidation or rationalization; three, low or no inflation; four, currency; five, slower domestic organic growth; and six, slower international organic growth? And it kind of put the India situation, as it has been for the last couple of years, in bucket #2, the rationalization or consolidation. [Voting]

And the survey says: 17%, not concerned; 20%, customer consolidation, rationalization; 9%, low or no inflation; 3%, currency; 40%, slower domestic organic growth; and 11%, slower international organic growth. As you look at the domestic situation here, just in thinking it through, you just announced this past year signing a deal with AT&T. How much of the growth is dependent on inflation in the U.S.? And as you enter into negotiations with different carriers at different times, how contentious is that escalation discussion?

Over decades, the escalator has been an issue of discussion in contract negotiations. It always has. It's one of the puzzle pieces. We actually are willing to change the escalator or something else goes to compensate for that. At the end of the day, you've seen most of these contracts come out with a fixed escalator in the United States, right around 3%. It's a couple of the tower deals but that we didn't do necessarily had different ones. But this is sort of the consensus and survives in large part. So inflation doesn't really affect U.S. growth rates specifically. I would answer that question from American Tower's management perspective as all of the above, which wasn't a choice. We know there's risk in ours and any other business to sustainable kind of reliable growth, and therefore, we take every one of those extremely seriously, and we have a risk mitigation plan against every one. But underneath it all, as a basis, we have tremendous scale and we have the diversity that we've been talking about this morning already. Those 2 characteristics of the company allow us to absorb a lot of individual risks and even adverse conditions that then get remedied, but in one moment in time, they do not damage the company. So we are addressing all the risks that you saw listed on that foundation of scale and diversity, and we proactively plan ahead so that any one of them doesn't become material eventually. And the deal you referenced was a couple of years in the making to hopefully do just that, which is to mitigate the risk of any particular domestic customer having some kind of either financial event, merger, technology change or whatever that would really damage our domestic growth rate. So the highest priority on a risk management basis in the company is to work with each of our now 4 and in the future, 4 domestic customers to try to lengthen and stabilize the growth rate from a downward risk direction.

Do we have a question from the audience? Over here, please?

Over the holidays, it emerged that Apple is working on a satellite direct beaming type of technology. I know we've seen the starts and stops in this regard, and I think Amazon's working on something too, but can you just speak to the disintermediation risk that could be associated with something like that?

Yes. So if we go back to the physics again, and this direct satellite device networks have been tried before. None of them have succeeded based on ultimately the physics of doing this at scale, right? Our view is that there's sort of a bell curve of environments and macro towers sit in the middle of the bell curve, meaning when you've got a mobile architecture that you're trying to deploy for most people in most places, the macro tower is the optimal technical solution for that. Now as you go out the bell curve, it's either very high-density places like the -- a casino 2 in the morning after a prizefight. You're going to need something else. You need small cells in that building to handle that load. But for most of the United States for most of the time, it's going to be macro sites. The other side of the bell curve is you're in the middle of the Mojave Desert and there's hardly any people there. And there's no freeway there but you're driving to go on a camping vacation in the middle of nowhere. That's where the satellites actually are effective because there's not that much utilization, there aren't that many people and there's not that much data traffic. So as long as you're in the -- not within 3 standard deviations of what generally is the norm, satellites don't work on an economic basis. Technically, they don't work either once you get inside of probably 2 standard deviations from the normal load. And a small cells also, once you get within 1 or 2 standard deviations, economically and even technically, they don't work. So satellites specifically and Apple particularly, I think they're obliged to look at based on whatever their own business plans and strategies are. Can satellites help me get connectivity to any of the people that I'm looking to touch or to have my devices connect to? And in every occasion, the answer has been it's this far edge of the 2 to 3 standard deviations out and low density, low data rate environments. So cruise ships are served by satellites. Airplanes that go over water are served by satellites definitely, but those that go over land are generally served by towers, believe it or not. So that -- we are well aware of Apple's initiatives and really just a nascent initiative. I think they hired a dozen engineers. Maybe they have 24 now. They're looking at this. They should. Other companies are looking at it, and they should. Google is probably turning off a couple of other things that they've tried to look at to scale these things for, again, hundreds of millions of people using 10 gigabits a month at a certain latency requirement, which is the speed of the signal getting back and forth -- that's the condition for satellites, by the way -- and a gigabits per second or megabits per second load that you're trying to put, satellites don't really work. And economically, I'm not sure they'll ever work outside of those edge cases.

In our last 30 seconds, 5G, are you seeing anything notable from millimeter wave spectrum deployments for macro towers right now? Or do you think the industry just needs to see more mobile and mid-band spectrum to catalyze those new deployments?

To quickly answer your question, there's not a lot of 5G activity from millimeter wave on macro towers because the architecture doesn't make that much sense. There will be a huge need, we think, for mid-band spectrum on towers in the United States to economically deploy 5G. Remember, the Gs enable faster throughput, but the reason anyone invest in them as a mobile operator is it reduced their cost per gig delivery of a gigabit. And so every decision on 5G is going to be driven by economics. Technically, this can be done, but there are also technical limitations. And just one of them, really quick, is that the lower band spectrum you have, the less benefit that consumer is going to see from 4G to 5G. So if you really want to do augmented reality games that don't make you dizzy, you're probably going to have to be in a pretty high-frequency, high-density environment. But if you want to have a more reliable drone control system, you can probably do that with 5G on a macro site environment. So it's going to take many years to roll out. The economics are going to drive the deployment. And we think in the U.S. because of the fundamentals that we talked about earlier, much or most of that deployment is going to have to be on macro sites with mid-band spectrum.

Jim, thank you very much. Thanks.

You're welcome.