SBA Communications Corporation (SBAC) Earnings Call Transcript & Summary

Right. Good afternoon, everyone. I'm Nick Del Deo with MoffettNathanson. And I'm thrilled to be joined by Brendan Cavanagh, the long-time CFO of SBA Communications. Brendan, thank you for joining us.

Great. Thanks, Nick. It's great to be able to join you, even if it's only virtually.

Great. Well, thanks again, Brendan. Listen, the topic du jour is obviously COVID. It hasn't had a real noticeable impact on the operations of -- or for the outlook of your core business. And the industry, in general, seems pretty sanguine about its ability to navigate through the crisis. People seem kind of split over what it might mean in some emerging or, call it, middle-income countries, like Brazil, in particular, where you have a pretty sizable business. What sort of things have you done to prepare for the possibility of a more meaningful deterioration in conditions in some of these markets? And how do you think the business will hold up if things start to worsen noticeably?

Yes. Well, first of all, as a tower company who's operating wireless sites, we were able to work with a lot of the local tower company associations and the regulators in many of these markets to be classified as an essential business. So in some markets, tower companies were specifically listed in the regs and in others, it's just by virtue of being associated with the carriers businesses. So this has allowed us to handle most critical functions and be able to support our customers even in ways we don't typically do. The service our customers are providing has certainly proven to be critical during this time. And it's our understanding that data usage in our international markets is up for many of them by 20% or 40%. And thus far, the networks seem to have performed very well, but many of the sites are definitely at capacity and backhaul is stressed. So while we need to be mindful of the economic condition of our customers and that there could be some shift in their new site expansion expenditures, at least temporarily, we think that the underlying reliance of the populations on high capacity, high-performing wireless networks will ultimately be very good for our business. If conditions continue to deteriorate materially, there might be some temporary impacts on new tower builds or incremental leasing growth. But the critical nature of our business should allow it to hold up very well during this time. And I think we're extremely well positioned when things start to turn around.

Okay. And I forgot to mention to any listeners on the call, there should be a chat box when you logged in. So if you have a question, you can feel free to type that in, and we can try to work some in later. So Brendan, are there any operational impediments that are more pronounced than any emerging markets in which you operate like getting access to rooftops or collecting payments or getting employees set up to work remotely, things like that, that we should be cognizant of?

Yes. I mean from a remote working standpoint, we really haven't missed a beat. Within a week's time, we were able to transition our entire workforce across all 14 of our countries. Many of them were working, obviously, from an office previously, we were able to transition them all to a telecommuting setup. And we really didn't have any noticeable disruption. So that piece of it's not really been an issue. There definitely have been some issues operationally, but in the grand scheme of things, they've really not been that material. Access to some rooftop locations has been tricky if the -- the associations have limited having outside contractors on their properties. In some cases, we've got municipal registries and permit offices that have been closed. But most of these issues have been -- well, I think, are short term in nature, and we've been able to manage through them. And I guess in some of the emerging markets, there are some challenges for our customers. Some of the local regulatory authorities have put demands on our customers to continue service even if they're not paid by their customers. So as a result, we do have some that have asked at times for payment relief for a temporary period of time. And in some cases, we've been able to provide that accommodation in order to help kind of contribute really to markets where our people live and work. But most of that has been very immaterial, and I don't expect it to be material or long term, really for us.

Okay. So it sounds encouraging. In a more general sense, I'm sure you guys do a lot of work regarding linkages between GDP growth and the financial health of your customers, by extension, their ability to lease up on your towers. It's kind of a vague and maybe an impossible question to answer. So what sort of thresholds do you think macroeconomic weakness -- what sort of threshold do you think macroeconomic weakness really starts to impact the ability of your customers to lease both here and abroad? How much worse would it have to get before it actually makes a difference?

Yes. That's a bit challenging to answer because you're really talking about a service that's probably one of the last things that the average consumer cuts out. And ultimately, quality of the carriers' networks is even more important to people if some of these social distancing dynamics continue to persist, plus the number of our customers, particularly here in the U.S., have specific coverage commitments they've made under risk of financial penalty that will require them, I think, to continue to invest in our networks. So we're not completely immune, but because of all that stuff, I don't think we're likely to see material impact. I guess if it was really long term, if anything, it may just modify the curve of spending, but certainly would not expect it to impact the cumulative pie of spending, if you will.

Okay. On the flip side, sometimes, crisis like this can create opportunities for well-positioned players. Have you seen any indications that the current crisis might shake loose any attractive assets, whether towers or land parcels or even human capital, I suppose? Or is it just too early to tell?

Yes. I think it is a little too early to tell. I do think there is that possibility, particularly on the land side. It's definitely something we'll continue to monitor closely. And as we always do, we'll look to invest if we see good opportunities, but it's probably a little premature to tell just yet.

Okay. It would obviously be deal dependent. But if opportunities arose, what's the magnitude in dollars do you feel like you could quickly put to work without having to issue equity if need to -- or if need be? How high could you flex your leverage?

Well, I guess if we just stayed within our historical target leverage range, which has been 7 to 7.5 turns, with the cash flow we produced and the growth in our EBITDA, we could spend $1.5 billion to $2 billion over the course of the year, including our dividend payments. But now if we're looking more specifically, which I think you're getting at, at a large kind of immediate transaction, which we saw as value additive for our shareholders, something where we felt like we could be opportunistic about it, we would definitely be comfortable temporarily flexing leverage up probably to around 8x in order to get it done. But that would only be based on our view that we could quickly delever back to our target range. So it's not our intention to issue equity. But for the right transaction, I guess, we would consider it, but it would have to be, obviously, fairly sizable.

Okay. Okay. Makes sense. Let's turn away from the crisis, and maybe to some other themes in the space and that apply to us, to SBA. One of those themes is 5G and how that might influence growth. Do you see 5G as an upgrade cycle that will really accelerate growth in the way 4G did? Or are the attributes of 5G such that it's more likely to help sustain growth over a longer period of time?

Yes. I don't expect 5G to be the same kind of accelerant that 4G was mostly because of the concentrated timing we saw around 4G spending because it was so concentrated in a couple of year period and required significant equipment additions across virtually every site. The jump in our organic leasing during that period was quite pronounced. But having said that, we do expect the deployment of massive MIMO antennas and the rollout of 5G, in general, to drive accelerated growth for really, not just for us, but for the whole industry and to have that last for an extended period of time. So I think basically, the answer is that it will be higher than it is -- leasing will be higher than it is right now, but not as high as during the heyday of the LTE rollout, but likely lasting longer than the LTE rollout.

You mentioned massive MIMO antennas, which is -- I had sort of a debate with the clients about this. On the one hand, clearly, they're heavier, they consume more space on the tower or more of the tower's capacity, you can charge for it and so on. Some folks will argue that to the extent people put up MIMO antennas, that means they need to perform less work in other regards, say, less new cell sites, less densification. So the net impact is kind of muted by that. It was almost a self-stabilizing -- it kind of self stabilizes. Is that something that you -- that you think could happen and mute the impact of those sorts of investments? Or do you think it's kind of more of a one-way benefit to SBA?

Yes. No, I think it's primarily a one-way benefit. Certainly, MIMO antennas and the ones that we've seen, which frankly has been limited thus far, typically encase the radios in them. So there's some of that, but I still expect it to ultimately be incremental for us, but we'll have to watch it as it continues to grow.

Okay. To what degree have the carriers been prepositioning equipment that's usable for 5G? And to the extent that they have, is it fair to say it's generally in radios rather than antennas?

Yes. I mean there hasn't been a ton of prepositioning. In the cases of Sprint and T-Mobile, where we saw the most instances of kind of true 5G being deployed, mostly via 2.5 spectrum in the case of Sprint, they have used the massive MIMO antennas. As I just mentioned, those antennas typically have the radios embedded. With the lower-band deployments, though, it's typically kind of more of a panel swap and a separate radio. So it really depends on which spectrum band they're using for 5G as it can go both ways in terms of being more radio- or antenna-centric. But I think the bottom line for us is that there hasn't been that much done at the macro sites as of yet. So we feel good about the runway, I think, whatever prepositioning that's been done has been limited.

Okay. Okay. Good. When we look back at 4G rollouts, I think at the time, carriers were of the view that it would drive smartphone adoption that they can monetize and that kind of help support their business case and willingness to invest. The idea that we've got $30 per smartphone. That's a lot of money for us. That's a good investment to be able to drive that. A concern that we've heard around 5G is that there's no obvious corollary there and that the lack of a clear monetization opportunity today might kind of slow the pace of investment beyond, call it, a coverage layer or a marketing layer for some carriers. Do you share that concern at all? And what are the 5G applications that you guys view as most promising?

Yes. I mean I think it's a fair question. And then ultimately, it's incumbent upon our customers to develop kind of those clear monetization opportunities for 5G. However, I don't really share that concern because 5G is coming from at least one of our customers. So as a result, I think it's coming from all of them. It will require, obviously, significant spectrum deployment that will support growth, I think, for many years for us. So I just don't have that concern. I mean when you talk about use cases, I don't think I have any great insight that you don't. Obviously, use cases can include things like augmented and virtual reality, particularly, I think, around gaming, actually could be very positive. Obviously, there's interconnected cars, there's high-quality mobile video streaming and lots of other things. But I think really, it's too early to be sure about what those specific uses are. Frankly, Nick, as a CFO, I'm not really the best person to probably say which applications will be most impactful. But I do think that it's going to be something that, as I said, there will be at least -- as long as there's at least one of our customers making a serious push towards that, I think, they all basically are forced into that.

So basically, T-Mo drags and kicking and screaming if they don't want to?

I think to some degree, that's the case. Yes. And I think it would get there eventually. It's really a question of timing. How quickly does it happen? And I think the pressure that's on T-Mobile, in particular, will help push it along maybe a little faster than it otherwise might have happened.

Okay. On the topic of T-Mobile, that deal with Sprint is obviously changing the landscape of wireless in the U.S. They're probably going to try to strike MLAs with their infrastructure providers like you, just given the sheer amount of work they need to do and the number of sites involved and the complexity. You obviously can't say what a deal might look like or what you're talking about. But can you share some of the principles you will uphold when negotiating a complicated deal like this one?

Yes. I mean I think it's actually quite straightforward from our perspective. I mean I think the bottom line is we'll expect to be fairly paid for the usage of capacity at our tower sites. And if there's a volume commitment that allows for better pricing, we would be open to that. But otherwise, we're really just going to be here working to support T-Mobile however we can. I don't think there's any magic to it beyond what I just said. So we'll see how those conversations go.

When you say volume commitment in exchange for better pricing, you mean just a commitment on the part of T-Mobile to do more sites with you than maybe you think they otherwise would have and that you got a discount for that?

Yes. I mean it would be -- that's exactly what it means, how we determine what they would do or wouldn't do. I mean there is some value to the certainty within a particular time frame of a certain amount of work. But a lot of it does come back to what would it be without the agreement. So that's been the case in the past. But we've done MLAs with T-Mobile before. We actually have one that's in place right now that we're operating under. So I think we have a course of doing business that will work well when discussing this potential opportunity with them.

You mentioned some of the MLAs you've signed in the past. When you assess the performance of those MLAs, do you feel like you broke even on them relative to what you otherwise have been paid? Or do you get the sense that you came out ahead or there was some slippage?

I think the MLAs we've signed in the past have -- well, let me put it this way. The MLAs that we have signed in the past have always contained some sort of specific equipment rights. So I'm confident that they've always been fair really for both parties. And basically, as I said in response to your earlier question and what we talked about a second ago on the volume commitments, we've been willing to give them better pricing for volume commitments at certain times in our past. So I think our customers have received some benefits by doing these deals, assuming that their volumes would have been the same in either circumstance. And it's hard to know that for sure, always. But I think that's an opportunity that's available for them. But ultimately, any master deal we do with these guys will contain aspects that I think will be beneficial, frankly, to both parties. So the key is some specificity about what their rights are in the site.

Okay. And obviously, DISH is kind of a party to that transaction. They're poised to undertake a lot of work to build a network in the coming years. And so long as they can find the money to do so. On your earnings call, Jeff seem pretty confident that DISH is for real. You've had a relationship with them for some time. If for some reason, DISH is unable to execute on the commitments that it's made and it fails to build a network or fails to gain market traction, to what degree would that shift your view of the long-term outlook for the U.S. market?

Yes. We just simply don't expect that to be the case because what we're seeing from DISH today is very supportive of them investing materially in their network build-out. But even, I guess, in any case, they own a lot of valuable spectrum. And it will ultimately be deployed one way or another. So I think inevitably, it's beneficial for us, kind of regardless of which way it goes, although as I said, we do think they're for real. As you mentioned, Jeff mentioned that on our earnings call, and that's not just a hope. That's based on our actual interactions and experience with them to date.

It is fair to say that having DISH deploy that spectrum would be more remunerative to you than having an existing carrier do it. Is that fair?

Yes, I think so. I think somebody doing it brand-new as they're expected to do, where it's a brand-new facilities-based network that's built out kind of from the ground up would almost definitely have to be better than it just being added on to an existing nationwide carrier. But maybe -- I expect it to be them, so to kind of speculate on who else it would be or how else it would work, it's kind of hard to do that right now because it was certainly hypothetical.

Yes, yes. It's more of a downside risk analysis. DISH, by virtue of starting from -- starting today versus having a long history, they've talked about using a lot of new technologies and approaches to lower their CapEx and OpEx relative to the incumbents. From your perspective, I mean aside from deploying the gear to support a single technology rather than multiple technologies, maybe using a little less ground space, I suppose, it's not really relevant for your business. Is it?

I think many of the things that they're referring to in that regard would not be relevant to us. But because they are starting with a clean slate, they may have some opportunities. To the extent they're able to reduce their footprint at the tower site, they may have the chance for some savings. I think they're doing what they should be at this point, but I'm not really concerned about not seeing a sizable contribution from them due to this, if that's what you're asking about because ultimately, they need to be able to provide that high capacity, high-quality 5G service in order to be competitive. And there are just certain minimum things that, that will require.

Yes. So I mean the point is, I guess, your towers offer unique -- regardless of technology, they need to put antennas up on a tower...

That's exactly right. And it's -- we think about just the core of what the tower business is, I mean it's a -- as you all know, as people have been around it for a long time. It's ultimately a real estate business and the location of that real estate is important and the exclusivity of that real estate is important. And that same dynamic doesn't change for DISH different than anybody else. They do have some flexibility, obviously, because they can start with their design from nothing as opposed to overlaying something that exists. But generally speaking, the quality and the exclusivity of the locations is still going to be what matters most at the end.

Okay. And maybe shifting gears a bit. It remains a very small part of your business, but you've been working to grow the portfolio of buildings, for which you have rights to put up indoor systems. Coronavirus could hit the target customers, the owners of office building, shopping centers, other venues, pretty hard potentially for a long time, depending on how things shake out. If we end up living in a world where landlords have less to spend on this sort of project, are there things you can do to help make it more feasible for them while still maintaining your economics?

Yes. I mean in each case, it's really -- just as we just kind of talked about, it's really location-specific. Depending on the location, the landlord may not need to spend anything on providing wireless coverage because the carriers want to be there enough that they'll pay for it. And in other cases, it's dependent on the landlord. So for us, each project kind of stands on its own. But generally, we aren't laying out capital without the contract and the financial arrangements already in place. So from an investment standpoint, it's really not a big risk. But if the new world is kind of, as you just presented it, the negative would certainly be a reduction in the number of these opportunities. More than it would be a risk, I think, to our investment, it'd just be how much could we do.

Yes. Yes. Just to size it, roughly how big is your -- in building revenue business -- revenue stream today?

I mean it's very immaterial, Nick, at this point. On a percentage basis, it's obviously bigger than it was a couple of years ago when it was almost nonexistent, but on an absolute dollar basis, it's still just not that big.

Okay. One of the more interesting topics that people are focused on today, there's new ways of monetizing tower infrastructure. Like edge deployment is an idea that's captured investors' attention, little data centers at the base of cell towers or other aggregation points smaller than a typical interconnect-oriented data center. You're doing a lot of research and experimentation on this front. I know you bought a data center in suburbs of Chicago. I know you have a trial with Packet in at least one site. From a customer perspective, at least the way I look at it, the engineering can make a lot of sense, but the economic case is still unclear. So kind of given the work you've undertaken, how appealing might the economics of mobile edge be to potential customers? And how do they compare to other edge solutions?

I think it can be attractive to customers as long as the service pricing is comparable to other mass options that they might have available in data centers. There's varying degrees. I think we've talked about this in the past, that we could participate in this in a number of different ways. But we're likely to be best suited to offer kind of a straightforward colocation model, where we lease edge compute sites that are at or near the tower, and we offer kind of powered, cooled, managed rack space. So we've been experimenting on operationalizing the tower data center model, which can be deployed economically and remotely monitored so that, that market pricing that I talked about can be achieved. And we ultimately want to offer the customers options at our sites, which are comparable to the market when they're out there shopping for data center colocation space. So ultimately, I think our value proposition is providing colocation space in areas where existing data centers just aren't available. We believe that the value of our mobile edge data center locations would increase, and therefore, the economics would increase if and when the carriers are able to provide cross-connections to the mobile infrastructure in order to enable that kind of ultra-low latency connectivity to the wireless subscribers. So that's really going to be the big issue. The deciding factor will be how important is it to have the cross-connection and to be at the actual edge of the network. And if it is important, then we're extremely well positioned because we are definitively at the edge of the network.

Based on what you've learned so far, what are the sort of applications or customers that you think would find that appealing?

Yes. I mean I think it's still really too early to say for sure. I mean we certainly had discussions and are working with a number of potential customers. Some of these are things like enterprises that just want to be more local or have more diverse colocation space to put their servers in. We talked to CDNs who are wanting to increase their locations in more cities and geographies in order to improve their service. You've got cloud companies wanting more local hosting locations in order to serve enterprises, factories, IoT workloads, et cetera. And you even have carriers, in some cases, that are looking for options to host their virtualized network servers or possibly as new fiber aggregation points as they're looking to modernize their networks. So there's a lot of possibilities out there. But where we are today, it feels a little early, a little premature to be able to say for sure what's going to be the biggest driver as we go on. So it's early stages for this business, which I think we've been saying for a little while, but it's still certainly early stages.

Yes. Yes, it will take time to just sort out. American Towers made the argument that, by virtue of its global reach, it's better positioned to partner with global players in the edge ecosystem, like big cloud service providers than both of the more, call it, regional presence. Do you think there's any merit to the argument that global reach matters for these sorts of initiatives? Or do you think it really is kind of a location business, just like towers, just like real estate?

Yes, I think we believe the location by location will still be what's most important. And the big cloud service providers and other global players, for that matter, they usually see the edge as opportunities to provide services to their customers that are delivered with better experiences, meaning kind of deliver without lower latency. And so we think that when these edge options exist, then these companies will look to innovate on offerings that in today's architecture aren't possible yet. So these offerings that they're -- that we think will come will likely be very low latency, as I said, or hyper local kind of services and applications. And so if that is the case, they will have to look for the best location that fits their use cases and also for standardization of those locations. I think that's what we can provide, SBA can provide and, frankly, other companies that have numerous edge hosting locations. The fact that we have so many different possibilities is what we think is most important. I don't know, with regard to the global aspect of it, there's -- I guess what I'd say is that not all is equal in global markets today with regard to connectivity. The U.S. has higher average end user bandwidth compared with a number of other areas. And so what works here in the U.S. might not be the same in other markets, which, again, I think, suggests it will likely be a location-specific model with differences depending on the country or the region.

Okay. That makes sense. You mentioned before, DISH is promoting the idea of network virtualization. I assume some other carriers will explore it, too. Are there -- is there a role for you to play in a world with virtualized networks like leasing out computer resources to carriers, things like that? Or has that not struck you as -- at least any work you've done, not struck you as an appealing niche?

Yes. I mean I guess it's certainly possible. Our approach today, though, has been to focus on the tower edge colocation opportunities and then trying to identify partners for other parts of the stack, like what you're referring to. So for instance, I think you mentioned our Foxborough site. Packet is a company who has these bare metal offerings that provide shared computing resources. We've been working with them at the Foxborough site for over a year now. So I expect we'll keep looking for folks to partner with in this regard, and that's most likely the way that we would we would approach it.

Okay. You're not interested in the fiber business here in the U.S. I think based on some comments you've made in the past, it sounds like you might be more open to it overseas under the right conditions. Can you talk about anything you've done to experiment on this front? And would it mostly be for backhaul that would fit that fiber criteria?

Yes. I mean we've been looking at all communication infrastructure opportunities and trying to assess how they look as a growth opportunity. But much like everything else we focus on, we would ideally want to invest in opportunities that have some exclusivity or protection in the investment. So with regard to fiber, this could include fiber backhaul from towers in our international markets and possibly some other specific situations. We've evaluated a number of opportunities. But to this point, we really haven't found anything that fits our model at a price point that we would consider attractive. So I guess the way I'd leave it is that we'll keep looking for now. And maybe there'll be something, but then again, maybe there won't. So it's really more about that exclusivity of the investment.

Okay. Okay. What else, RAN sharing. RAN sharing is something that hasn't cropped up in the U.S., but it has happened in a few other markets like Brazil, if I'm not mistaken. If we see carriers face increasing financial stress, it might push them in that direction. Can you talk a bit about how you're dealing with RAN sharing, both from the perspective of protecting your economics while still being constructed with carriers that want to go that route, not alienating them?

Yes. I mean most of our agreements specifically prohibit RAN sharing. We do have some agreements internationally that specifically kind of detail out the required incremental rent obligations if it were to be allowed. As I said, most of them specifically prohibited. So it's usually a mix of those 2. I think as long as we protect ourselves contractually, we don't see it as a large risk. There are some companies that have not protected themselves from this, and I think that's going to be a real difference maker. But that's really the key for us. And I think we've been pretty good about ensuring that it's well covered in all of our agreements.

Okay. Telefonica is one of your primary customers overseas. They have plans to divest their Latin American assets, say, Brazil. Does this introduce any risk or opportunities for SBA? Or is it largely irrelevant from your perspective?

It really depends on what's happening to their assets in each market. More specifically, who are they selling to? So in Guatemala and El Salvador, they sold out to Claro, who already had a presence in the market. So they created some risk due to overlapping networks in those cases. But in the case of Panama and Nicaragua, they sold the Millicom, who was new to the market. So in that case, it may present some opportunities for us. And it looks like in Costa Rica, their sale to Millicom is in jeopardy. So we'll just have to wait and see what happens there. But like most places, I think at the end of it, when you strip all that away, the same subscriber base has to be covered and the spectrum has to be deployed. So I don't really expect it to be particularly material, but each market, depending on who it is it ends up with it, that will be the biggest driving factor as to whether it has any real impact or not.

Okay. Now last year, you expanded into South Africa as your first acquisition outside of the Americas. I think you've noted that you're examining a few other markets. And so in the coming years, you might see a broader footprint for SBA. I mean you obviously won't name them for obvious reasons, but what are the attributes that you look for when you're assessing a new market and considering entering?

Sure. Yes. I mean I think we've talked about some of these things in the past, and I don't -- they're probably not a surprise. We look for markets that have multiple wireless carriers and hopefully have a relatively balanced market share among them. We look for markets that appear to have significant wireless network investment ahead of them as a good indicator of potential growth. We clearly look for good land use laws and just in general, a good rule of law and enforceability of contracts. That's important to us. And then ideally, we look for countries that are as politically stable as possible. That's not as easy to find these days as you would like to hope it would be. But those are the kind of the main things that we target. And then obviously, the opportunity itself and the economics around that particular opportunity play a big role in that as well.

Is it fair to say that you target an emerging market, where there's a greater -- I guess, a greater complexity in the business model, where you can bring your management prowess to bear rather than it being like a spread- versus debt-type market?

Yes. I mean I guess that, that is possible, but it really depends on what those challenges are that, that market presents. I mean if it's something where we being professional tower operators can bring something to bear that we think will drive incremental value, which we generally would be able to do, I think, in most cases, then yes, that's a good opportunity set. However, if the complexity is driven out of something else that is more nuanced and is specific to that location, that's something we'd have to step back and make sure we were comfortable with it because, frankly, if it's new to us, then we're not bringing a particular expertise in that case. So we've been in a number of emerging markets, particularly in the Western Hemisphere. It's been a little bit easier for us because we have -- the language barrier has been easier to manage through, being based in South Florida. It's same time zones, easier access. And so -- and we've been in neighboring countries typically as we've expanded. So I don't know if it's just emerging market specific as much as it is the particulars around that individual market.

Okay. You just alluded to the fact that you've kind of run part of your business for Latin America out of Boca. If I'm not mistaken, I think you've leveraged existing back-office systems. There's a lot of Spanish- and Portuguese-speaking talent in South Florida that you can hire. If you're talking about an operation in a more far-flung country like South Africa or some other market you might enter that's not in the Western Hemisphere, would you get the same sort of expense leverage out of it?

Yes. I mean it depends on the specific country, certainly. We definitely believed a centralized back office for things like accounting and contract management is the best way to go. It allows us to have consistency across all of our markets and to learn, frankly, from past mistakes in order to apply kind of those best practices wherever we go. But the material time zone differences may make that more challenging, depending on where it is that we go. But I do think the more we can do effectively through a centralized model, the more efficiencies we'll be able to gain, we have been able to, and we will be able to gain in the future.

Okay. Now you guys run a pretty lean operation. But for a firm your size, there are always opportunities to take out additional costs. Are there things you're exploring to further reduce your cost structure, whether from a property cost or SG&A perspective? And how meaningful might they be? Or do you think you're sort of at, call it, an efficient frontier from a cost perspective?

Well, I do think we're pretty efficient. I do think we're pretty lean. We have the lowest SG&A as a percentage of revenue of all the major tower companies. So I think that's good, even when we're a smaller company in a number of cases. However, we're certainly always looking for ways to improve our efficiency through automation of processes and kind of what we talked about really was sharing resources across markets. I think that will help us from an overhead perspective. From a property cost perspective, when you have tower cash flow margins over 80%, it's certainly hard to find material places for improvement. But we continue to do things like purchase of land under our tower sites. We challenge property tax assessments. We use improved technologies for maintenance operations, such as workforce management tools and drones. All of these things I think have allowed us to continue increasing these margins every year, and that will always be a focus of ours. And I think when you look at the relative shift in new revenues, even when we're buying stuff, versus the shift in our cost of revenue, you'll see those things diverging that they're not increasing at the same pace. And so I think a lot of our initiatives have been helpful in that regard.

You mentioned land ownership. Where do you think your land ownership will ultimately shake out in terms of where either the sellers aren't willing to sell or parcels that can't be split up or the pricing, the bid-ask is just too wide? I'd say then, what do you think your ultimate land ownership might end up being?

It's hard putting an exact number on that and what you call land ownership, obviously, there's some nuance to the wording. There's a number of places where we do long-term prepaid easements and what we effectively consider land buyouts without actually necessarily taking ownership of the land. I think we'll be able to continue to push that higher. I think in the U.S., it's getting harder and harder to do that because we've been fishing from the same pond for quite a while. And so we're really talking to the same people over and over again at this point. If you don't add material numbers of new assets, you end up just, as I said, talking to the same people over and over again. So it's going to be harder for us to continue to materially move it here. But internationally, we've added a lot more sites. We haven't had the same length of time where we've been attacking it. So I think there's going to be a lot of opportunity there. I'm hesitant to put a number on it as a target. But I think we can get internationally to probably a higher percentage than we've been able to get to in the U.S. because a lot of times, it's a greater economic opportunity for the landowner, from their point of view.

In a number of your overseas markets, the cost of land is passed through to the carriers, right? Does it make sense to own land in those sorts of circumstances?

Yes. We only -- in the cases where we have that situation, a big part of our practice is to structure it so that we're still able to pass the cost through to the carrier because we don't actually eliminate the lease, maybe another entity is involved in it. There are ways to deal with it. So that we're -- if we're laying out the capital, we're still getting the benefit of it. And actually, in some cases though, we've been able to work things out even with the carriers, where they'll partner with us, and they'll help us by supporting it with the landowners in a number of cases. They were originally a party to the lease with the landowner because we bought the tower from them. So we'll give them a little share of the savings, and we all win if we can strike a deal at a certain price point. So we're certainly not buying it out and not receiving any benefit for us.

Okay. Okay. That makes sense. From a capital structure perspective, you've historically structured the debt portion of your capital structure using a greater share of secured debt, maybe a somewhat shorter average maturity profile than your peers. Do borrowing environments like what we see today make you think about shifting that a bit and maybe locking in low borrowing costs for a longer period of time? Or are you happy with the current setup?

Yes. I mean I think as we see opportunities to lock in long-term financing at low cost, we'll certainly take advantage of that. Historically, though, as long as -- at least this is what we've seen. As long as you maintain strong liquidity and you stay ahead of the individual maturities, adding an extra couple of years to your average maturity date is only modestly beneficial because ultimately you're beholden to the market at the time you need to refinance. So that timing -- for instance, in 5 years, the market could be very good to refinance, and it could be worse in 7 years, just as easily as it could be the other way around. So you just don't know what that's going to be. So we've tended to go a little bit shorter primarily in the securitization market because our analysis has shown that the cost savings have more than outweighed any perceived market risk. It may not always play out that way, but it certainly has for the last 2 decades. So I think we feel pretty good about that approach.

Okay. You've also been hesitant to issue local currency debt, like in Brazil. I think you've always commented that the apples-to-apples borrowing costs are meaningfully higher than in the U.S. I guess is that range you're thinking today that if you want to invest in a market that you really can't hedge at local debt, you just have to size it accordingly and absorb the FX risk?

Well, we would actually really like to issue local currency debt in markets that have FX risk. Unfortunately, in Brazil, as you noted, the costs have been quite high. That's not only from an interest rate standpoint, it's also in terms of the amount of leverage we can obtain against the EBITDA that we produce down there. It's been materially lower than what we could obtain against that same EBITDA here. So by doing that, we would be giving up total absolute dollars if we borrowed it there. Of course, having said all that, given the huge negative move in FX rates recently, maybe those costs weren't quite as high as I thought they were. But I'll just say it's something we're continually evaluating, and if we can find a way to do it, it is the best way to create a natural hedge. So we would like to do it if we can find a way to make it work economically.

Okay. Okay. You buy back more stock than any of your peers, it's obviously been a terrific investment over time. But the math behind buying your shares at $300 today is different than $100 a few years back. But what's the process you use to try to estimate the intrinsic value of your stock? And do you still see an ample cushion there for value creation via share repurchases?

Yes. I mean the stock is more expensive than it used to be, which ultimately, I think, is a good thing. But we think that there is still opportunity to create value through opportunistic share repurchases. So we, of course, have our own internal models around the potential long-term growth of the business, which we're obviously bullish on. And then a triangulation of that with our expected cost of financing, which has only decreased recently, and our views on alternative investment opportunities help us set a view on intrinsic value because our stock has some volatility in it. And that volatility is generally caused by things outside of the core business. It's allowed us the opportunity to be able to take advantage of that volatility and routinely buy the stock back at accretive prices. So I think there will continue to be opportunities to do that. And I don't see us changing kind of our approach on that. Wherever we see a trade-off or reasons that don't make any sense to us, we'll look to be buyers in those cases.

As you look across the landscape today, how do you view the relative appeal of repurchases versus acquisitions versus organic investments or the dividend? How do those shake out?

Well, it is -- our key job is definitely to allocate capital in the most efficient manner that we can in order to generate the maximum long-term returns. So sometimes, new assets are the more attractive option and sometimes share buybacks are. I think we'll continue to see a mix of opportunistic investments in both. As for some of the other things, the dividend is locked in now. It will grow materially for years to come. And certainly, anything that drives organic growth will also be a priority for us. So I think it's really going to continue to be a mix of all these things. We prefer, if all things were equal from a return standpoint and an opportunity set standpoint, to invest in assets and to grow our portfolio base and grow our EBITDA base. But when that's not the case, I think share buybacks have been a very good backup to that. So it will be a mix of all those things, Nick.

How would you describe the level of competition for tower assets today versus, call it, 5 or 10 years ago?

Competition for tower assets today is as high probably as it's ever been. And I don't know if it's necessarily higher than it was 5 years ago because it's been intense for some time now, but it's definitely higher than it was 10 years ago. And so makes it necessary for us to be really disciplined and sometimes a little creative to have some success there, but highly competitive.

Okay. Has the impact of any one particular group of investors has been more pronounced? Or it's just kind of the general -- yes.

I don't think so. We've seen a little bit of a shift to where some of these infrastructure funds and folks have come in. It's been probably more internationally, maybe a little bit here domestically as well. And perhaps that's shifted things, particularly if you're looking at markets like in Europe, places where they were borrowing at 0% and their view on what they needed for returns was certainly a lot different than ours just makes it much harder to be competitive in places like that. But I think it's been highly competitive for some time across a lot of different potential buyers.

Okay. If I think -- we're almost out of time, so I'll ask kind of one more substantive one. If there's a single, very long-term question or concern I have about the tower leasing model is that -- is mathematically, there's only some finite period of time where the industry can go substantially faster than its customer base. And that has implications for the appropriate terminal multiples within the business. And there's obviously plenty of headroom today because of relatively small share of the cost structure. Do you see this becoming an issue at any point? Or is that so far down the road that you and I won't be involved anymore?

Well, first of all, you're a much younger guy than I am, Nick. So I don't know if I can necessarily speak for whether you'll be involved or not anymore. But I believe that we do have a long runway of growth ahead of us. And I don't expect that really to be an issue anytime in the near future. I ultimately leave it up to you guys to figure out what the terminal multiples should be. Our focus is more on kind of the fallow spectrum, I think, is what it comes back to. It still needs to be deployed, and that's an indicator, probably the best indicator of the significant growth opportunities that are still to come for the tower industry. So I don't really see it as any kind of a near-term concern.

Okay. I guess just to close out the discussion, any thoughts or insights you want to leave listeners with?

Not really. I think we've covered a lot here today. I guess I'd just finish with the basic core attributes of the tower business: continued steady growth, even in times of macro market dislocation like we're seeing; high operating margins and leveragability; generation of significant cash flow to be returned to shareholders through dividends, share buybacks and portfolio investment. That's what we offer. We feel truly blessed, particularly in this time period, to be in the business that we're in. And we hope, as a result, we're able to provide kind of a place of calm and stability for our employees and for our shareholders. So I guess I'd just leave it at that. I appreciate you having me here today, Nick.

Yes, this is a super, super informed discussion, Brendan, and I really appreciate you taking the time.

Yes. No problem. Hopefully, we can do it in person next year.

All right. We'll shoot for that. All right. Thanks again, Brendan, talk to you soon.

Sure. No problem. Thank you. Bye.