American Tower Corporation (AMT) Earnings Call Transcript & Summary

Okay. Well, good afternoon, everyone, and welcome to the Eighth Annual Moffett Nathenson Media & Communication Summit. I'm Nick Del Deo, and joining me is Igor Khislavsky, VP of Investor Relations at American Tower. Igor, thank you so much for joining us today.

Great. Thanks, Rick. Good to be with you.

Yes. Well, listen, let's dive right in. Let's start with the domestic side of the house. You're going to be facing some headwinds from Sprint related churn in the coming years, but you've been pretty transparent about what that impact will be. And so investors seem most interested in understanding the outlook for gross leasing. I think one of the more exciting aspects of the domestic lease and outlook is C band, which Verizon and AT&T, in particular, will be deploying over the coming years. You have an MLA with Verizon, and you've noted that it's rolling off at the end of the year. So presumably, they're either going to go a la carte, we're going to cut some sort of deal with them that explicitly incorporates C band in the way some of your peers have? No. In your view, does it matter which way it ultimately goes? Should investors really care?

Sure. Yes. It's a good question. I think from our perspective, historically, we've done both, where, in some cases, we've put together these more comprehensive MLA arrangements where those have worked really well, I think, for both us and the customer. It does speed cycle times. It makes deployments more efficient. It makes the overall process a little bit more streamlined. On the other side, we've also gone to have a drink with different tenants at different times with great success there, too. And so I think long story short, we're well equipped to do either. Relative to the financial impact, I think, the main difference between a comprehensive type deal and a more retail pay by the drink type of a cadence is really the limited volatility that you get through a comprehensive deal, right? You tend to smooth out growth rates quite a bit over a long period of time. You get excellent predictability relative to those growth rates. And I think you saw the sort of output of that through our ability to put out essentially a 7-year guide for U.S. organic growth a couple of quarters ago. And so I think in this particular case, we can be successful and we can serve the customer in a positive way in either scenario. And given that we have more than 2/3 of our growth trajectory for the next 7 years locked in already. To the extent that we did elect where we decided jointly with Verizon to simply go pay by the drink. I think we're more than able to deal with maybe a little bit of quarter-to-quarter volatility in activity levels, simply because so much of the rest of the growth path is locked in and smoothed out. And so at the end of the day, going back to your question, I don't know that it matters all that much. We'll defer to, obviously, Verizon's public statements regarding their intention to be aggressive on their C band deployments and on their deployments of 5G. And so I think in that regard, we're going to be well positioned either way with a pay by drink type of a scenario or with a revised or augmented comprehensive MLA.

Okay. That will make sense. You bought 11,500 towers from Verizon back in 2015. So those sites make up a good chunk of the Verizon sites you host on your portfolio today. As part of that deal, if I recall, Verizon got some meaningful capacity rights. I think it was 30,000 square inches of the windward surface area for tower. Recognizing that you probably can't get too into the weeds, are those capacity rights still out there and likely to influence the degree to what you can monetize Verizon C band deployments on those towers?

Yes. So there are still some rights that are in effect today on that particular portfolio. I don't want to get into the specific square footage or any of those provisions. But there are some things and some rights that they continue to have for a period of time at no incremental charge. And on that particular portfolio, I think the monetization opportunity around C band is probably further up. It is important though to keep in mind that a decent chunk, a significant chunk really, of our Verizon leases within the overall base sit outside of that portfolio of sites. And so to your point, I think, in the immediate term the larger monetization opportunity for us from a C band deployment perspective is going to be on site spend outside of that particular portfolio.

Okay. Okay. That's helpful. You also inked an MLA with AT&T that it was 1.5 years or 2 years ago. Can you share if C band was contemplated in that deal or if it's likely to influence the cadence at which AT&T C band activity gets recognized in the P&L, even it wasn't C band specifically?

Sure. That's a good question. We -- I believe we struck that deal in September or October of 2019, if I remember correctly, and I think without getting into the specific terms and whether or not C band was explicitly included, and given that it was signed 1.5 years ago, it's pretty reasonable to assume that there are going to be provisions within that deal. That incorporate some of the activity that would be expected to occur over the next couple of years. And so the way that we look at that on a broad basis is we have great visibility into the contractual growth rate that we expect to generate from that customer over an extended period of time. We've layered that into our longer-term guidance and so there's certainly the possibility for some upside depending on what the levels of activity are from that customer, whether or not there are additional network initiatives that they undertake over and above what was ultimately assumed as part of that contract. But I think in the near term, as a baseline set of assumptions, it probably makes sense to assume that most of the activity has been contemplated within the structure of that lease at a high level.

Okay. Okay. Fair enough. And to kind of round things out from a carrier specific perspective at least. Obviously, Verizon, AT&T took down the most C band, but T-Mobile bought some, too. Again, kind of same idea, is it reasonable to think that because the T-Mobile deal was signed. so recently, it probably contemplated C band. So there isn't -- that we shouldn't think about there being upside potential from that arrangement?

I think in a broad perspective that's probably fair. I think we are in a position where, again, the visibility of that growth path is really good. for an extended period of time. In that particular case, you're talking about a nearly 15 year lease. And so with that in mind, I think it's fair to say that the bulk of the potential upside contemplated or not contemplated, frankly, within that agreement, it's probably a little bit further out. Given it was just signed 8 months ago or so.

Okay. Okay. Makes sense. Now kind of more broadly, as it relates to C band, there's some conflicting opinion regarding the propagation attributes of the band. And how workable or unworkable it may be in some less densely populated areas, in particular. What have your engineering folks concluded regarding how pervasive C band is likely to be deployed over time?

Sure. Yes, it's a good question. It's something we've spent a fair amount of time on internally. And if you kind of look back to the commentary that we've had out there for quite some time, starting about, I guess, roughly 2 years ago, we laid out our thought that mid-band spectrum, in large part, would be deployed over macro towers. I think at the time, there was a fair amount of questioning as to whether or not that view was correct. Over the last couple of years, I think most folks have come around to holding that view. Today, I think our opinion, remains the same. We do think that a significant portion of mid-band spectrum deployments, including C band. will be on macro towers. Small cells will absolutely be involved. But the majority of the activity will be focused on macro. And so within that, there are going to be varying degrees depending on topography and population density and things like that. And so I think, certainly, you're more likely to see at a high level, C band being deployed in areas with fairly robust population densities. You're probably on balance, less likely to see as much of it, at least initially in some of the more rural areas of the country. I think eventually, you're likely to see it there, too. But similar to any network deployment that you've seen in the past, what tends to occur is networks will be deployed first in the more densely populated areas and then they'll spread out gradually over time. I think that's what you're going to see here. And so if you think about our own tower portfolio, we've got a good mix of highway corridor, suburban, some urban sites as well and then some more rural locations. And so I think the bell curve of network deployment associated with 5G. And specifically, this mid-band spectrum and C band is going to, in large part, follow the same general trajectory that you've seen in the past? But at the end of the day, do I think it's more likely that you'll see a more robust level of C band deployed in, call it, suburban areas versus extremely rural areas? Absolutely. From an economic perspective, it just makes more sense. But I do think that you're going to see C band distributed quite widely throughout the country. It will take time. There again, 4G took the better part of a decade to really be deployed. I think you're going to see the same thing here, where you have an initial coverage build-out for 5G, and then you're going to have a long period in our view, of densification and capacity infill. And so again, the overall trajectory, I think, at the end of the day is going to look fairly similar in many respects. To what you saw for 3G and 4G.

Okay. That makes sense. Yes, C band is kind of 1 leg of the domestic outlook for the coming years. Another exciting part is DISH. National greenfield network deployment is kind of the dream of all tower owners. No, you obviously can't talk about the exact terms of DISH MLA that you signed, It seems like the dollars that DISH is committed to are pretty significant. So I guess kind of at a high level, can you share any thoughts regarding whether there's likely to be upside to the MLA if DISH is successful in the marketplace? It ends up deploying a network with parallels and majors in terms of number of sites. Kind of -- or say it differently, how forward-looking was this deal and kind of contemplating that for them?

Yes. It's a great question. And I think we are excited about DISH. And what they're looking to do in the marketplace. I think with respect to the deal itself, the way that it's set up at a high level is they've committed contractually to a base level of activity over a number of years. And so the way that I would characterize that in the context of the outlook that we talked about back in Q4 is that if DISH does the minimum that they've contracted to do under this arrangement. That essentially will be in line with what we had assumed or DISH's contribution to our long-term outlook, right? And so net-net, you're going to be in the same general vicinity from the perspective of overall activity over a long-term period. I do think that the way that this deal is structured is that down the line there may be some opportunities for incremental upside over and above that. And to your question, that will largely depend on just how robust of a network ultimately gets built out. How many sites are there? Is it a 20,000 site network? Is it a 30,000 site network? Is it a 50,000 or 60,000 site network? How dense are we going to really see the DISH build out getting? And so what I would say is we're pleased with the baseline level of growth that's locked into the deal as it stands. And then what we've also tried to do is to enable us, particularly in the outer years, I would say, to potentially capture some incremental upside assuming that DISH is really successful, what they're trying to do. I think we can participate in that success, if you will, over and above the base level that's contracted.

Okay. Okay. That's good. Let's flip over to Telxius. That's going to -- when that deal closes, it's going to substantially increase your exposure to Europe? Yes. I think one of the more interesting aspects of that opportunity in Germany, at least is Drillisch. An MVNO that's looking for some assets in the ground. When I think about the German tower market, we have Vantage Towers, an affiliate of Vodafone just came public, they're looking to drive incremental lease in that market. DTS Towers that they're trying to commercialize and operate a way to drive incremental revenue. Can you talk a bit about why you feel the Telxius portfolio is well positioned to capitalize on that growth lever in the context of these other tower and looped up being assets available for third-party lease up?

Yes, absolutely. And so I think there are a couple of key points around the Telxius asset itself and why we're so excited about it internally. Number one is from a growth perspective on the organic tenant billings side, what we've laid out is basically the expectation that over the next 5 years, our newly expanded European business should generate organic tenant billings growth of at least 5% to 6%. That compares with the existing European business, the legacy ATC Europe business, generating roughly 3% organic tenant billings growth. The main difference between those 2 numbers is just churn. And so I think to get to where we expect to be relative to that 5% to 6% range, the real delta between those 2 ranges is just the fact that on the Telxius sites, we expect to have minimal churn. Whereas in the current ATC Europe sites, so you're having churn of 2.5% to 3%. And so take, let's say, 0.5% of churn on the Telxius sites compare that to 2.5% churn in the legacy business. And without anything really changing on the demand side of the equation in terms of new space on sites, you're already at that kind of 5%, 5.5% growth. And so to your question, I think when you start thinking then about Drillisch and the potential for them to be active in the marketplace, along with a general acceleration around 5G from the other carriers, we think that there certainly is some potential for there to be upside to the numbers that we've talked about. Particularly, if we're able to garner a significant share of Drillisch's upcoming activity. And so in terms of why the Telxius assets are -- should be well positioned for that, we obviously like the locations. It's a primarily urban oriented portfolio. That's going to be important in a market like Germany because so much of a population is urban. And if you think about the general architecting of a new 5G network. I think most folks are of the opinion that a lot of the initial build-out will be focused on urban areas, in many ways, similar to what you've even seen in the U.S., where the population is actually more suburban and urban. So having that much larger urban footprint grew the Telxius asset was really important for us. Our legacy German business, while it's performed well, is primarily rural and suburban. And so we didn't really have an urban focused presence in the market prior to signing this deal. So that, we think, will be very helpful. And we have been in Germany since 2012. And so we've had quite a bit of dialogue with Drillisch as well as the other carriers. And so I think, overall, we feel pretty good about the go-forward trajectory. But having said all that, I think we can get to the numbers that we've laid out from a growth perspective without a hugely material contribution from Drillisch. We obviously are going to be driving to get that contribution. But the model doesn't inherently rely on getting 100% share of the Drillisch activity to be successful. That can potentially be upside for us over time.

Okay. Okay. That's a terrific overview. Obviously, lease terms overseas tend to be different than what we have or accustomed to in the U.S. Large share of the Telxius sites are rooftops as opposed to ground-based towers. Talk a little bit about how these rooftop sites, as far as the Telxius deal, may be different from what we're used to and whether there are any contractual or other constraints, say the end limitations or whatnot on leasing those up the way that you would a ground-based tower?

Yes. It's a great question. I think, first of all, it's very important to distinguish rooftops in international markets from rooftops in the U.S. And so in the U.S., the typical rooftop arrangement for us is we simply manage a rooftop site. We don't have ownership rights. We're also not paying really any expenses on the rooftop. But essentially, we market the rooftop for the building owner, we collect a cut of the revenue, and that's pretty much it. In Europe as well as in most of our other international markets. the setup on rooftops is actually quite different and much more akin to your more typical sort of ground-based tower, right, where you're basically getting ownership economics on the asset. You're paying a rooftop lease to the landlord. And then you're marketing that site on your own behalf to try and drive co-location. And so to your point, I think you've seen a variety of different sets of lease terms on rooftops in different markets -- in different European markets that is. And so in some cases, those terms can be fairly restrictive. We've seen portfolios in the past that we've ultimately passed on that really limit your ability to monetize incremental co-location, whether it's from a revenue share perspective, where that revenue share percentage is very high or whether it's from a capacity perspective where from a structural basis, you just don't have room to add tenancy. And so before going through and signing up to do this deal, we did a fair amount of investigational work and due diligence relative to what these rooftops look like in this particular case? What the underlying lease terms were? What the capacity was? how much of the economics from a co-location perspective you would be giving up through revenue shares and anchor discounts and things like that? And so there are sites in this portfolio, where realistically, you're unlikely to get incremental co-location. That's the very small minority here. The other sites, in large part, have pretty favorable characteristics. And so there are some co-location discounts at times embedded in some of these leases. They are modest. There are some revenue shares also embedded where if you are adding an incremental tenant on a rooftop, you're going to have to give a small cut of that incremental revenue to the building owner. That's not all that dissimilar from some of the revenue share mechanisms that we have in place, even in the U.S. on ground-based towers. And so I would frame it like this. I think if you think about the typical U.S. site getting flow-through of organic revenue growth from top line to bottom line of 90 plus percent. In this case, the expectation is that it might not be 90%, but it's going to be something like 80%, 85%. And so there's a slight differential, which obviously has been contemplated within our deal model and enrolled through the return expectations, et cetera, et cetera. But by and large, the model is substantially similar. And that's not always the case. And so what we've always said, especially as it relates to Europe is, in our view, Europe really is a misnomer. Because every market in Europe is so different. Even in market, you have very different portfolios with very different lease terms. And in the past, that's been a big stumbling block for us that has prevented us from doing some M&A that we otherwise would have been very interested in. When we dug into the details of the various lease arrangements and the terms and conditions, we came out to the point where we just weren't willing to pay what the going rate was for some of these assets. In the case of Telxius, part of what made the asset so attractive for us is that the terms are much closer to what we're used to sort of everywhere else outside of the [indiscernible] . And so that was a critical component in our evaluation.

Okay. Okay. Yes. I mean, sort of highlight the idea that so much of the value of these assets is not the physical asset, but the way is leases are structured.

Absolutely.

At sort of a different angle. When we think about rooftops, I'll oftentimes get the question or a comment saying, what's to prevent a carrier from simply putting a site on the building next door? So how would you characterize the, call it, the moat or the exclusivity of rooftops relative to ground-based towers?

Yes. It's a good question. Not every rooftop is going to be equipped to host telecom equipment. And so in theory, you see a bunch of rooftops out there and the prevailing wisdom is, okay, well, yes, you can just throw an antenna anywhere you want. In practice, that's really not the case, right? Some landlords, frankly, don't want to deal with it at all. In other cases, there are structural limitations on certain rooftops where you simply can't house the equipment. And so is the moat the same as a typical ground-based tower in a highly desirable location? Maybe not, but I don't think it's all that far off, right. Because you -- and in addition to that, if you think about it from a carrier's perspective, similar to how a carrier is typically going to want to deal with a large-scaled provider on the tower side, they're probably going to want to deal with a large-scaled provider on the rooftop side as well. So that you're not doing bespoke lease terms on every rooftop and dealing with dozens and dozens of providers. You're going to want to do this in terms of a coherent network deployment, presumably with larger counterparties, where you can create some more strategic relationships, where the process is simpler and more scalable. And so that also plays into all of this. So at the end of the day, we would look at the rooftop, not only the rooftop economics, but also just the sort of mechanics of leasing rooftops in a similar vein to macro.

Okay. If I think about the American Tower playbook historically, it's oftentimes been to establish a presence in the market and then [indiscernible] over time, whether through M&A or organic activity. There are a lot of DTS sites that you've committed to as part of the Telxius deal. How are you thinking about the potential for follow-on M&A in those markets? Was that an important component of the thinking behind the deal?

I think in some respects, we would certainly like to do additional M&A on a selective basis in select European markets. What I would say is that there's no imperative for us to do that. There's nothing written into this deal that says you have to do additional M&A within 5 years, right? And if you sort of think about it from a scale perspective, in Germany, we now have the scale that we really wanted to have through this transaction or we will have it once the sites close. Same thing in Spain, right? You're going to start out with a scaled presence through this transaction. And so to the extent that there are opportunities on the inorganic side for us to get bigger at terms that make sense and with sites that are as high-quality or better than the Telxius sites, we're absolutely going to take a look at that. What we don't have to do though is to get bigger for the sake of getting bigger. And that's really never been our philosophy, no matter where you are. And so I think on the newbuild side, we're pretty excited about the newbuild possibilities in these markets. To your point, there's about 3,300 contracted new builds as part of the deal. I think 2,400 of those are in Germany and 900 of those are in Brazil. We think that there are more opportunities on the newbuild side beyond those that are explicitly contracted. And so we'll be looking to pursue that. Even in the absence of M&A, you're going to get bigger through that build program. And historically, new builds have been essentially the best use of our capital throughout the company. The initial yields have been attractive. We would expect the same thing here. And so I think what this does, and I know we'll get into the -- our CDPQ arrangement in a bit here as well. But in tandem with the CDPQ arrangement, what we've set ourselves up for is to have a platform through which we can really evaluate the potential for additional expansion throughout Europe. We're not though going to all of a sudden start rolling everything up, right? That's not what we're doing. And so we're going to be tactical. We're going to be opportunistic. We're going to pick our spots. And candidly, the same philosophy that has been in place over the last decade, during which we've really not done a whole heck of a lot in Europe outside of this Telxius transaction. That same philosophy in that same evaluation process from an M&A perspective is in place today. That hasn't changed. And so whether or not we end up with additional M&A, it's going to be solely dependent on the quality of the assets that are out there in combination with the prevailing price that they'll trade at. So again, very similar to what you've seen from us in the past.

Okay. And since you mentioned CDPQ, maybe we'll talk about that for a second. You sold a 30% stake in ATC Europe to them a week ago or lease announced a deal. Europe is the only market where you deliberately sold minority interest over time, first with PGGM and now with CDPQ. What did you see as the advantage of bringing in a partner in this case? I mean you're not wanting for capital.

Sure. Yes. No, it's a good question. We've had minority partners elsewhere. To your point, those partnerships have been under slightly different circumstances. We've had carrier partners in India. Historically, we've had carrier partners in Uganda and Ghana. This is obviously a minority stake sale to a financial entity, a well-respected one. CDPQ, obviously, large firm, very familiar with infrastructure assets, including telecom infrastructure specifically. From our perspective, they were very aligned with us philosophically, focused on long-term growth potential, focused on helping us scale this business over time. And so it was a great fit from that end. It also enabled us to obviously reduce the level of common equity issuance that we ended up doing. And further, we look at the CDPQ arrangement as not just a financing vehicle for Telxius. We look at it as more of a strategic platform that we can now utilize to evaluate M&A going forward and have CDPQ participate along with us potentially in future M&A. And so there, again, similar to Telxius deal, we wouldn't necessarily have to kick in all of the capital on our own. And so that obviously enhances your flexibility from a leverage management perspective, from an overall sort of an expansion perspective, I think it sets us up well. To your point, we're retaining operational control here. We're doing the day-to-day operations. CDPQ is obviously going to get some board seats on the ATC Europe board. But from a day-to-day operations perspective, they're entrusting us to continue to run the business as we run it. And so nothing really changes there. So at the end of the day, I think it's something that we believe can be quite mutually beneficial. They're looking for solid long-term returns as are we. We're looking to be able to take advantage of opportunities in the region going forward. And I think this structure will set us up well to be able to do that.

Okay. Okay. Well, since we're talking about Europe, yes, I thought it was interesting to see Cellnex enter into a sale-leaseback in Poland that involved active network components. I'm not quite sure how to wrap my head around, that sort of arrangement. But I'm sure it's something that the AMT team has contemplated. So would a deal like that, that included network infrastructure like antennas and radios, in addition to the traditional passive component, would that potentially be of interest you guys? Or is that kind of a bridge too far in terms of what you find the feeling?

Sure. It's a great question. I think to this point, by and large, we have really focused on being a passive infrastructure provider. There are exceptions, though. If you think about even our broadcast business in the U.S. In many cases, we physically own the master antennas on broadcast sites. And so that's obviously a very small part of our business and not the overall focus. But we have some experience with actually actively owning some of that equipment, similar for indoor DAS, right? We are actually owning a lot of the equipment for those systems. Having said all that, I think physically owning and running real network infrastructure across the country as, I think, is being done in Poland is not something that we've pursued in the past for a number of reasons, namely because in our view, that can get very, very complex very quickly. And to be candid, we haven't really felt the need to go down that path. And our preference overall continues to be to stick on both sides. Having said all that, at the right price, with the right set of terms and conditions, I think you can make a lot of different things work. And so I wouldn't totally rule it out forever. What I will tell you is that, as of now, we really have no aspirations to go down that path. We think there are going to be tremendous opportunities for us to expand our portfolio on the passive side, and that's where we're focused today. And I would expect that to continue going forward.

Okay. Let's talk about your long-term outlook and how edge computing might fit into that. In the guidance you laid out with your Q4 call, I think I think Tom and Rod noted that it doesn't really incorporate platform expansion initiatives like edge computing. So that could be potential upside to the numbers. And maybe just my interpretation, but it seems like on recent calls, the team has been -- they sounded more confident that there's something on the horizon that relates to edge computing than they used to be. So I guess kind of in broad strokes, how should I -- how should we be thinking about the potential upside in edge computing over time? And to what degree could it potentially move numbers if the stars were to align?

Sure. Yes, it's a good question. I think at a high level, there's not all that much of an assumption of contributions from platform expansion in our guidance. And I think that's accurate. There's a little bit sprinkled in, but really nothing substantive. And so as we said on our last earnings call, we do think that, eventually, the edge is going to be a multibillion-dollar TAM, right? And so that's significant. Now tower company is going to capture that entire TAM? Probably not, right? We do think that there will be a number of different permutations of the edge that will eventually be out there. There will be some on-prem facilities where enterprise will sort of partner with their own cloud provider in all likelihood and sort of do it that way. There's likely to be some intermediate edge facilities that may be located at places like carrier central offices. You've already started to see a little bit of that with a couple of the carriers. But we do think that for true low latency -- super low latency to be widespread and ubiquitous, you're going to have to have true edge compute facilities. And the true edge of the network is inherently at our tower sites and SBAs and Crown's and by the way, globally as well, right? We don't think this is going to be a strictly U.S. phenomenon. And so the challenge for us now is we have to come up with the appropriate strategy to be able to capitalize on this opportunity, which we do think is real and we do think it's coming. And so what does that entail? Well, first of all, I think the initial goal is to establish the view that much like neutral host infrastructure has been, by far, the most efficient way to deploy traditional wireless networks. Neutral host infrastructure is going to be the most efficient and cost-effective way to deploy the edge as well. Because in theory, each of the carriers can partner with their specific cloud partners, and each of them can do this in a silo. In our view, that's not the most efficient way to deploy this quickly and efficiently. And so we have to convince the market of it. In addition -- and we've sort of referenced this before as well, but I do think it's likely that you're going to see some partnerships as this opportunity develops. Some of those partnerships may be with the data center folks or other companies in the space. And so I think it's unlikely in the long term that we go it alone. We're great at what we do. We have really good real estate assets. We're probably less well positioned to have a huge sales force to sell-through the edge, right? We're probably less well positioned than some other players in terms of having a large engineering base to take care of the technical aspects of what this is likely to look. And so I think there are some very interesting potential JVs and partnerships that we can explore, and we're having those conversations already. We're excited about those conversations. And so we're doing a lot of work. We're doing a lot of relationship building. We have, I think, a half dozen trial sites out there already, where we continue to learn quite a bit about how this is all evolving. And my sense is, while the scaled opportunity here is still probably at least a couple of years away that over the next 12 to 24 months, you're going to learn a lot more about what this ultimately is going to look like. The challenge so far has been that the 5G ecosystem that you need to be developed around this type of solution hasn't been developed yet. Well, now you're seeing an acceleration of that 5G deployment, and so I think this is going to start moving along pretty quickly. And what we want to make sure we're in a position to do is that when this opportunity really gets going that we're positioned to act very quickly. We think we are. We obviously have substantial financial resources. We have a lot of existing relationships. And so certainly, more to come on this front. We've been somewhat hesitant to really get into the nitty-gritty details of unit economics, how many cabinets are going to be in each one of these facilities, what's the rent going to be, et cetera, et cetera, in large part because I think it's just a little bit too early to get into those types of details. But we do think this is a material opportunity. We do think it can represent some meaningful upside eventually. It's not going to be a 2022 or 2023 event. But once you get a little bit further on into our long-term guidance range, I think, there may be some meaningful upside here, and we just have to go out and secure that.

Okay. That's great. As I think about your targeted long-term AFFO growth goal, it seems like new builds are an important part of that. I think you're targeting something like 40,000 towers over the next 5 years, which is, I think, 2.5x what you've done over the last 5. So a material step up. Talk about that a bit. And should we think about the geographic mix in terms of where you're building these towers is similar to where you've been building them recently with a lot of them in India, maybe Africa thereafter? And maybe touch on -- because I've read about it recently, the Philippines. I think you have a deal there. So to what degree does that play into it?

Sure. Yes. So I think this year, at the midpoint of the guide, we're going to build 6,500 sites. And so if you kind of take that 6,500 and factor it into a 40,000 to 50,000 range that we've cited over the next 5 years, you're looking for a pretty meaningful step-up even beyond these levels. And the reason that we've kind of set that target out there is because we're seeing a lot of demand or incremental density. Most of this demand, as you sort of alluded to is coming in India, along with increasingly in Africa and in Latin America. Now we're going to tack on some pretty healthy build levels in Europe through the Telxius transaction. So that will help. But the underlying rationale here is that we continue to get very attractive initial yields on these builds. And so in India, you're getting yields on day 1 with 1 tenant of between 12% and 15% on new builds. In Africa, it's probably low teens. And in Latin America, it's probably 9% to 10%. Those are very attractive levels of return, right? Out of gate with 1 tenant which get better over time as you add additional tenants there. And so as long as that return profile remains consistent and as long as the underlying demand for sites remains consistent, I think we're going to deploy really as much as we can towards new builds because from a return perspective, it's probably the best use of capital that we have. And I think the fundamental driver of a lot of this is, in these markets, you are significantly behind where the U.S. is from a network density perspective. We've had some studies done, and we've used some third-party research in places like even Brazil and Mexico that suggests that, for a Mexican or Brazilian network in terms of 4G to be on par with where you're at in the U.S., you need roughly double the number of sites. So there's a lot to go, right? Are you ever going to get there? We'll see. We hope so. But even if you get partially part of the way there, that's going to require a significant number of incremental new builds. We're very well positioned to do those builds through our existing relationships with the carriers. In some cases, through contracted commitments with those carriers. And so that 40,000 to 50,000 site goal is not an absolute goal, right? We're going to obviously monitor market conditions. We're not going to go out and build 30,000 sites on spec if the demand isn't there, right? That's not what we're looking for. But based on what we see from a demand perspective for new sites in these regions, we're really encouraged. And I think from a rough geographic split, at least in the immediate term, I think, what you're seeing this year is probably fairly indicative of what you're likely to see. Good amount of sites in India, an increasing level of builds in Africa and a solid number in Latin America, with Europe starting to come in as well.

Okay. We'll probably have time for a couple more questions before our time is up. So I want to hit on Latin America. There's going to be a little bit of a shift to the tower landscape there once América Móvil kind of separates its towers outside of Mexico. I guess, do you have any initial thoughts regarding whether that separation is going to matter for your business or not? For example, their proximity to your sites or their propensity to at least to third parties or -- and the suitability for co-location, things like that?

Sure. Yes, it's a good question. We've seen this unfold in Mexico, where you've had tele sites in place for a number of years now. And so based on that experience, which I think is probably the most tangible thing that we can draw on, we wouldn't really expect the dynamics to change materially. So much of this business, as you well know, is location based. And so we have really good locations throughout all of these markets. I'm sure that AMX has great locations as well. But based on what we've seen in Mexico, to this point, demand for our sites has not suffered at all with tele sites in the mix. Whether that has to do with differences in the way the sites are marketed or the willingness of the other carriers in the marketplace to deal with an entity that is directly affiliated with a chief competitor, all of those things may come into play. But we've been quite successful in driving strong growth in Mexico. I would expect the same thing to be the case in these markets to the extent that AMX does spin out some of these sites.

Okay. Okay. That makes sense. Yes. I thought in the minute we have left, maybe we closed with kind of a touchy feeling, big picture question. Igor, I think you spend your -- almost your entire professional with American Towers. You've seen a lot. How are you feeling about the position of the business today? How would you describe the pulse of the organization and the opportunities that you see today versus years past?

Yes. It's a great question. I joined back in 2007. And so at the time, I think we had some sites in Brazil, some sites in Mexico, a lot of sites in the U.S. and maybe a couple of hundred in India and that was it. And so I've sort of seen the progression from a mostly U.S. business with a couple of international angles to a truly global player. And so I think, along with that, we've obviously seen tremendous growth, good margin accretion, significant growth in AFFO per share clearly. And today, I think the business, obviously, is, in many respects, a more mature business than it was back in '07. But at the same time, I think what's interesting is we're still positioned for a prolonged period of growth, right? Not only, by the way, in international markets, but even in the U.S., right? Just looking at the guidance that we laid out, you're going to have solid growth for the foreseeable future driven by 5G. To me, that bodes really well for our international business because a place like India or Brazil or Mexico is at least 5 to 10 years behind where the U.S. is. And so if the U.S. is going to grow at a really good clip for the next 7 years at least, I would think that, that means the international business has an even longer growth there. And so I think, overall, we're very well positioned. We're continuing to ride the secular growth trends in wireless We think that we have the right assets in the right places. And despite the business being a lot bigger than it was a decade ago or 15 years ago. We're still able, and we think we will be able to generate really solid growth over an extended period of time. And so as we all know, the only thing that's constant is change, right? And so the organization continues to evolve. I would say we're probably much more of a global organization today as opposed to an international organization, maybe even 5 or 10 years ago. But there's still work to do on that front. We can continue to drive efficiencies on the SG&A front, we can continue to drive value-added MLAs with our tenants. We can hopefully stack things like the edge on top of our base business to further enhance the value. And so I think, overall, we're very well positioned today at sort of the intersection of a lot of different things that are continuing to pave the way for growth. And so it will be interesting to see what we say at this conference 10 years from now on where we're at then. But I think the path forward is bright.

Well, that's a terrific note on which to close. Igor, again, thank you so much for taking the time to join us today, but that was a great discussion.

Great. Thanks, Nick. Appreciate it.

Thank you, Igor.