SBA Communications Corporation (SBAC) Earnings Call Transcript & Summary

Thrilled to be joined by Brendan Cavanagh, the CFO of SBA Communications. Brendan, you've been at our conference a bunch of times over the years, and I really appreciate you doing this again for us.

Yes. Absolutely. Nick. It's nice to be with you. Thanks.

Okay. Well, listen, I just kind of jump into the U.S. business to start. Obviously, a lot of optimism in general about leasing accelerating as a result of 5G deployments and the spectrum that the carriers are bringing to work. We're seeing that in your results. We're seeing that in your peers' results. You've also suggested 2023 is looking like it's going to shape up to be a pretty good year. So I guess to start, maybe can you just expand a bit on your enthusiasm for the domestic leasing backdrop and without giving guidance, kind of how you think about it developing over the longer term?

Yes, sure. No. Domestic leasing activity definitely remains healthy in terms of dollars signed up, the levels of that versus what we saw, perhaps back to the 4G upgrade cycle. Each of the major customers are busy. Each have a significant amount of spectrum to deploy. I think that's one of the key indicators of new leasing opportunities for us. So when we look at the backlog levels that we have, we're pretty excited about it. We see a lot of new lease and amendment executions that are still going to happen, I think, for the balance of this year. Really just based on what our customers have to still achieve, we would expect that to continue to be solid pretty much into 2023 and perhaps beyond.

Okay. Okay. Great. In the near term, AT&T has talked about pushing its 5G deployments bit harder in the back half of this year. I think as equipment for the 3.45 gigahertz spectrum becomes more available. Is that kind of what you're seeing from them?

Yes. I mean I don't want to be too customer-specific on current deployment activities. However, in general, we've certainly seen recent increases in leasing activity with AT&T. And if just consistent with their public commentary, we would expect to see them accelerate the leasing activity as we move through the year. I think I've been pretty clear about wanting to efficiently deploy both C-band and the 3.45 spectrum in one truck roll. And to this point, their behavior has been consistent with those statements. So I would expect that to accelerate as we move into the second half of the year.

Okay. Great. Great. As I think about the spectrum that the carriers are focused on deploying today, whether it's the 2.5 gigahertz at Sprint or the C-band at AT&T and Verizon, 3.45 at Verizon, it's a bit higher frequency than the low course bands of years past, so there are different propagation attributes. I guess, are you seeing a fairly consistent level of activity across, call it, more of your urban and dense suburban sites where the propagation might be more suitable versus maybe your less populated suburban or ex-suburban sites? Or has it been pretty consistent across your portfolio?

Yes. I mean, the carrier rollouts almost always start with a focus on the more populated areas and then they kind of expand out from there. However, at this time, I'd say that we're seeing fairly consistent demand across our portfolio. Concentrations come in certain geographic markets at certain times, but they don't appear to necessarily be focused on urban versus rural sites. And also, I think maybe it's just take this moment to clarify that sometimes calling sites rural is a little bit of a misnomer because they may have -- they may be necessary for other purposes such as important highway corridors that kind of thing. So sometimes we get hung up on the BTAs. But even within those rural BTAs, there's actually concentrated either population areas or, like I said, highway corridors that kind of thing. So at this point, I haven't seen it really -- it's been fairly evenly spread, I guess.

Okay. Okay. That's good. And then when you -- based on what you've observed to date and your conversations with the carriers, are there reasons to think that the current deployment wave, which is mostly about amending existing sites, is likely to be followed by a period of infill where they deploy new sites? Or is it too soon to kind of point a tangible evidence of that one way or another?

Excluding DISH, we are seeing and expect that most of the domestic leasing activity will come in the form of amendments. However, based on backlogs and conversations with our customers, we're seeing increases in the number of new lease applications, and we expect we'll see more new leases with our existing customers over the next couple of years than we've seen probably in the last few years. So I think we'll continue to see the amendment activity, but it will be alongside those new leases, given the breadth of what has to be accomplished.

Okay. Okay. That makes sense. And I guess on the flip side, the big 3 carriers have generally talked about 5G CapEx peaking, if not now, relatively soon and then trending down to more typical levels in the coming years. I think most people would interpret that as meaning that leasing activity might tail off a bit after that point in time. I think on your last earnings call, Jeff kind of acknowledged those comments but felt that it wasn't necessarily an appropriate conclusion to draw. So I was just wondering if you could expand on that idea a bit. Obviously, CapEx and leasing aren't perfectly correlated, but they tend to move together. So what gives you confidence in the more extended, call it, leasing duration and what the carriers may have suggested from a CapEx perspective?

Yes. I think the comments that we made were really just a view based on the significant amount of spectrum that needs to be deployed and therefore, the corresponding significant amount of work that needs to be done to truly roll out the spectrum and deploy 5G on a nationwide basis. As you kind of noted, the carrier CapEx and tower leasing aren't necessarily correlated because, to some degree, purchases of equipment by our customers will predate the actual deployment, which will more closely align with leasing. But based on what we see, we feel good about the amount of work that still needs to be done at the macro sites and the opportunity that, that will present to us for a while.

Okay. Well, I want to spend some time digging into DISH because obviously, they're going to be a primary driver of growth in the coming years. It's been a real source of excitement for the industry. By all accounts, the company has been very active from a -- on the leasing front and have made pretty significant commitments to both you and your peers. Now you've indicated that your DISH deal has a pricing framework with certain minimum commitments which is kind of in contrast to what I think like Crown Castle sign, which seems to be more of like a flat rate deal irrespective of the number of sites that DISH actually deploys. So I guess what ultimately prompted you to maybe tilt more in the direction of a traditional PxQ type model as opposed to something more novel like what Crown Castle or others may have done?

Yes. I mean it's hard for me to speak to the structure of the deals that DISH has with the other companies. But in our case, it's really just a function of a large-scale brand new build-out where DISH would need a lot of our sites but would also have some choices in certain locations. We had to consider that, right? So what we agreed to, I think, is a fairly standard structure in a sense that we provided DISH with standard pricing expectations in exchange for minimum volume commitments. But the standard pricing is still done on an equipment specific basis, and it can fluctuate as a result based on whatever DISH requires at a given site. I think that just is a better -- in our history, that's been the better way to go. And I think it's worked for both parties, generally speaking, because they're getting -- they're paying for what they're getting.

Okay. Okay. Now obviously, you can't get too specific, but how should we think about the minimums that the agreement entails? I guess, kind of big picture, are they consistent with, call it, the number of sites needed to support a pretty substantial network build or kind of some other level. I mean again, maybe a hard question to answer, but some way to frame what those minimums will entail.

Yes. I guess I'd say that they're consistent with our proportionate share of DISH's stated network needs in terms of the site count at least. But having said that, I will tell you that DISH has been ahead of the pace we anticipated when we signed new agreements. And as I said a second ago, I think the deals turned out very positive for both parties as a result.

Okay. Now I think one of the more interesting things that DISH has done in preparation for its build, it's signed that long-term wholesale agreement with AT&T, which I believe lasts for about 10 years. I mean on the one hand, that might be fewer sites that DISH has to build itself. So you might say that that's less leasing activity for the tower industry. But on the flip side, maybe it lessens the hurdle for success or enables them to invest more in the markets where they do want to build. So I just kind of -- what are your thoughts internally on that agreement and what it means for DISH's prospects and their ability to work with you going forward?

Yes. I think it's positive in the sense that it allows DISH the opportunity to meet their broader coverage objectives more quickly, which, in turn, allows them to establish their business faster on a wider scale. It's obviously not easy to build a brand-new nationwide wireless network from scratch. So I think their ability to have earlier success through this sort of arrangement like they have with AT&T should help kind of facilitate continued network investment on consistent pace for us. And then longer term, I think the preferred economics of having and controlling their own network installations should continue to be a good source of continued growth opportunities for us. So overall, I'd say net positive.

Okay. I think if we look at DISH's stock price or maybe some investment commentary on the name, it seems like a lot of folks have become a bit more pessimistic about DISH's prospects for success. I won't ask you to comment on your view of whether they'll be successful or not. It seems like you're pretty optimistic about leasing activity at least. But I guess I do want to get a bit of a handle on what a downside scenario might look like for SBA if DISH doesn't perform consistent with broader expectations? Say, for example, that they end up perhaps treading water in the marketplace akin to like what Sprint did in the past. What would that sort of outcome mean for SBA?

Yes, this is hard, Nick, because I'm not sure it's totally appropriate for me to engage in sort of the speculative kind of discussion. I think for now, DISH is actively and professionally moving toward a nationwide network buildout. And we're -- at SBA, we're pleased to be a part of that to provide our assets to be a good supporter of those efforts. I think bottom line as long as there's a network to operate, our infrastructure is going to be a significant component of that. And as a result, would continue to generate a steady revenue stream. So that's I guess the way I'd frame the downside which is it will be needed in some form or fashion.

Okay. So maybe to state it differently, DISH's spectrum in some shape or in the form over time will be deployed to serve nation's wireless needs. And irrespective of how that's done, you'll be paid for it.

I think that's probably right. I mean bottom line is it's a valuable spectrum that we expect will be deployed and utilized, we think, by DISH, but by somebody.

Okay. Okay. Great. Let's talk about the cable industry a bit. Obviously, cable entered the wireless market a few years ago by virtue of their MVNO arrangement with Verizon. They've been picking up quite a pretty decent market share in a pretty short period of time. I think as of the end of the quarter, Comcast and Charter had about 8 million subs between the 2 of them. Both those companies have talked about potentially offloading some traffic to own facilities, whether it's macro sites that they put up in high-traffic areas or strand-mounted small cells on their existing coax plant. So I wanted to get a sense of how you think about what cable offloading traffic would mean for SBA? Is that a net positive, net negative, kind of net neutral when you think about the different ways they could go about that?

Yes. I think anything that expands wireless services on independent networks would be a net positive for us. The real limiting factor in this case is the lack of spectrum. While CBRS certainly provides a limited solution, I think the benefit through traditional macro sites is limited as well. Just like the CBRS solution is probably limited. So if that's where it lands and stays, it's not likely to be material unless there's a change in the cable company spectrum holdings, I think.

Okay, okay. Do you have an internal view on sort of how functional strand-mounted small cells have been for others who have deployed them? Or is that not something you've looked at all that closely?

Yes, not that closely because it really has an effect. Obviously, it's not something that we're directly offering. We haven't seen it to be something that's competitive in any way to what we're doing. So we haven't spent a ton of time on that.

Okay. Okay. Well, I guess if we step back and kind of think about the big picture environment, it seems like regardless of which carriers do the work or how exactly it transpires, deploying 5G is going to be a very long process, with the pace potentially influenced by factors like the development of use cases or what have you. So I guess, in this sense, does this effectively put a floor under what your leasing activity might be over an extended period of time? Or is that an inappropriate takeaway when we consider the length of time that it's going to take to deploy 5G in an appropriate way.

Yes. I think -- well, as I said before, we think the 5G needs are such that we have a runway for continued growth for a number of years. So I think that by itself does effectively put a floor on leasing activity for a period of time. However, I couldn't say that the floor is higher than where it currently stands, given that we've seen elevated leasing activity levels for the last 3 or 4 quarters. So there may -- there still may be some ebbs and flows from quarter to quarter, but I think we would expect to be at a higher level on average over the next few years than we were at in 2020 and early 2021, at least.

Okay. So at least for the next few years looking good; beyond that, probably a good setup, but too soon to be specific about it.

Yes, I think that's right. I mean it's always -- again, the basis for my answers in terms of trying to frame that out is really to just look at what the carriers have to do and what they've stated they need to do. And typically, these things take maybe a little bit longer than sometimes what they say they're going to do it. So really, that's the basis. But you start getting more than 2, 3 years out, it's much harder to say with any certainty what's going to be happening at that time.

Okay. Okay. When I think about the performance of your services unit, I think that tends to be sort of a forward -- a leading indicator of performance for leasing, albeit a loose one. You've been putting up record numbers in your services unit. If we see that services revenue kind of move up some more or conversely, if we see it tick down, what's the lag between that services revenue and what we'd expect in the P&L from a leasing perspective.

Yes. Yes. I mean our services business has been performing very well over the last year, record levels, as you noted. However, I don't think it's always a leading indicator of leasing activity. A portion of our services business, when you think about the 2 major components, the portion is focused on site acquisition, consulting services. And that business can be a leading indicator because the end result of that work is often new leasing activity. But the other portion of the services business is focused on construction work which sometimes comes contemporaneously with the new -- with leasing revenue commencements because it's usually tied to when a customer is installing their equipment. So usually, that is more in line there. And if you think about our services business in recent times, we've seen a shift in it to more construction and less consulting, which obviously makes sense, I think, given the amount of new agreements that we've signed up over the last few quarters. So as a result, I think we'll begin to see increases in our leasing revenue contributions that are already frankly contemplated in our guidance that we've given publicly. So I don't know that I would necessarily always go to it being a leading indicator. One other side factor maybe to note is that the mix of customer concentration for our business is not necessarily the same as our tower business. So to the extent there is a correlation, it's sometimes only specific to certain customers, meaning we may have busy leasing activity with a given carrier, but they don't choose to use us for the associated services work. So you can't necessarily draw any conclusions when you're just looking at high-level results.

Okay. Okay. So that's a good point. So just to make up an example, if DISH were to give you a lot of site ac work that could certainly be tied to leasing, but it wouldn't tell you anything about what AT&T, Verizon or T-Mobile were doing.

Yes, I think that's right. And in our case specifically, we've done very limited almost, no services work for AT&T as an example. We've done a lot for T-Mobile. We've done a pretty good amount for DISH. We're doing more for Verizon. But AT&T is you have -- if you take one of your largest customers, and you basically don't have any of the services work because of the way that they've given out work and structure that type of -- that part of their business, they're still leasing customer of ours. And if they were particularly active on the leasing front, you wouldn't see it in services and vice versa, you wouldn't know, based on the services by itself.

Okay. And obviously, from a margin perspective, the services unit carries lower margins than the leasing business. But if I'm not mistaken, recently, the mix shift towards like site ac or other services has helped the margin profile for that unit relative to the past. Are there any reasons to think that margins for that business could stay somewhat higher than historical levels on a mix-adjusted basis? Or is it appropriate to think that they could kind of trend back to more typical levels over time?

Yes. I mean I think it's -- they've been high because of the demand really, what's been going on of the customers and how much they need. So I think to the extent that you continue to see this elevated activity, which we do expect to see for the next few site there's a great opportunity for us to keep the margins up because it's not just about the demand in general, but the fact that it allows us to be maybe more selective in the work that we do, where we don't have to take lower margin stuff during time, maybe when things are slower, where you can't be selective. So between that and just -- the fact that the other thing that's happening is you're seeing carriers maybe see value in using us to do the work on our sites when they're installing at our sites, there's an efficiency that's gained there. And I think they're willing to pay a little bit more because it's actually worth it to them. The return is better. It doesn't take as long to get it deployed. There's not as many question marks about the sites, there's steps that can be avoided because we own the towers. So between those 2 factors, the efficiency that they gain and the competitive nature that allows us to be a little bit more choosy, I think we'll be able to keep those margins up for some period of time. But of course, if -- it goes with everything else, if there's a shift in the demand in the market, and that may be several years from now, I assume it would change a little bit with that as well.

Okay. Okay. That makes sense. Yes, let's turn to inflation, another popular topic as of late, really popular for discussion purposes. It's not popular now, it's affecting people. I think people -- I think investors have generally started to realize that your business is probably more protected from inflation then a first look might suggest in that your fixed escalators match up -- on the top line kind of match up with fixed escalators for your ground rent. So there's not a real mismatch there. I guess my question is more around what happens longer term and if we do see a structural shift in the inflation level in the U.S. I've always kind of been of the view that if that were to transpire, at least for new business, the tower companies would probably be in a position to negotiate different terms for that new business and perhaps offset some of the pain from inflation. I'm wondering if you would agree with that assessment. And if so, for how long would inflation have to remain elevated or at what sort of level before that was something you would consider?

Yes. I think if we're truly entering a time period with structurally higher inflation, we would have some ability to modify pricing for new leases and amendments, although our escalators in the U.S. are generally fixed. But as you noted, we do have master agreements with some of our existing customers that have equipment specific pricing terms that we could not adjust for the term -- at least for the term of the agreement. The existing agreements generally have 2 to 4 years left, I would say. So I think it's an option that's available to us within a certain time window, but it's less available under those agreements that we have in place right now for the next couple of years. But just generally speaking, given our escalators have typically exceeded inflation for the last 2 decades, and our largest direct cost is capped with the fixed escalators as well, like you mentioned, I think a higher period of inflation will not have a material impact on us.

Okay. Okay. That makes sense. Let's turn to overseas business. There's obviously a lot going on there. Some of your first overseas investments were in Central America, which I think were -- looking back, terrific investments to make, but you've been having some churn there more recently, which is weighed on results. For how long do you expect that to be an issue? And if we look out kind of past the churn you're forecasting, would you expect the change in the market structure to result in a healthier leasing environment so the growth can kind of pick up versus historical levels prospectively? Or do we expect a more typical level of growth after churn, so that there wouldn't be sort of a silver lining to it.

Yes. Well, first of all, we're -- we will likely have some elevated churn in Central America for the next couple of site although at this moment, I think 2022 will be our highest year given some of the specific challenges with Digicel in Panama and the consolidation of Claro and Telefonica in Guatemala in particular. I do think that as there is some rationalization among our carrier customers in the region, there is an opportunity for a healthier market that will be kind of a steady performer over the long term. I think it's important for what it's worth to point out that we have done extremely well in Central America over our first 10-plus years there. We've had results and returns that were -- have been well ahead of our initial expectations. And we've had a few bumps recently with some of these macro events, but the overall investment when you look at it in totality has worked out very well. I guess what I'm really saying is that sometimes it's tough to be a public company that has to report quarter-to-quarter when we're really, in our case, in a very long-term business. So sometimes that one period doesn't tell the whole story. But when you look at the whole investment, it's actually worked out quite well.

Right. Fair enough. I won't take that to mean that you're going to go private anytime soon that I know?

No, that's not what I mean. There are based on, Nick, what I think of it is.

All right. Let's turn to Brazil, which is your largest overseas market. Your biggest customer there, Oi was recently acquired by the other 3 carriers in that market and is being split up. I think Oi is about 1/4 of your international revenue, so about $125 million a year. You've initially dimensioned your churn expectation from that acquisition. It's been in the $20 million to $30 million range in total. So I guess just to start, could you describe a bit how you're estimating that number? Is that kind of the same tower overlap framework, same towers plus adjacent sites that you might -- you think might be at risk for some other framework?

Yes. It's based on our own internal site-by-site analysis, which to of what you're asking doesn't only include overlapping sites, but it also includes our view around nearby installations that the surviving carrier has. So I think it's not that different than what we've tried to do with Sprint here in the U.S. or other analysis that we've looked at, but we try to take in the whole picture. It's never quite perfect given that we're making some assumptions about what the carriers specific plans are, but I think the range is appropriate.

Okay. But importantly, it's a more expansive number than just same tower overlap.

Yes, yes, for sure. I mean there's -- obviously, if you have a nearby tower that say, Tim is on, they're going to figure out how to consolidate in one way or another.

Okay. If you look back to other deals where you've performed this sort of analysis, it's probably too early to do a postmortem on Sprint/T-Mobile. But if you look at, let's say, Metro PCS or Leap or Clearwire or others from the past, how well have your forecast lined up with what actually churned off at the end of the day?

They've been pretty decent. I think every case is a little bit different. I mean if you took like a Leap, for instance, the intention there wasn't really to combine 2 networks. It was essentially to eliminate one altogether. So in a way, that was probably easier to predict because pretty much all of those agreements were going to go away. It's just a matter of how quickly they could do it. In other cases, obviously, Sprint being the biggest one, really there's a lot more that goes into combining 2 large existing networks. So I -- we've done pretty well over time. I'd say we're off, it's usually a little bit more around timing than it is around what ultimately plays out over an extended period of time.

Okay. Okay. And from a timing perspective, how are you thinking about that $20 million, $30 million. When does that start to hit the P&L? Do you have a sense for when the peak year is going to be yet? Or is it too soon to say how that's going to play out?

Well, we are anticipating it internally to happen over the next over the next 3 to 4 years with possibly next year. But it's interesting that would actually probably require the incumbent carriers to potentially decommission some of their own legacy equipment, given that the oil leases typically have much longer remaining terms. So without yet knowing how each of the remaining carriers are going to approach that rationalization, it's hard for me to say for sure what the time frame is. But given what I just said, I think there's a chance that it could take much longer than the estimate that I just gave you because of contractual limitations, if nothing else.

Okay. Okay. And what's your degree of optimism that some of this churn is going to be offset by higher leasing activity due to the rationalized market or investors wanting to -- or the carriers wanted to capitalize on their larger networks now. But Brazil has always been a market that's -- that people have commented with a number of sites per capita or the investment levels are too low. So how are you thinking about that as a potential offset to churn?

Yes. I mean we're fairly optimistic that we'll ultimately be in a net positive position as a result of this merger. I think the strength and balance of the 3 remaining carriers will result in a better environment for network-based competition. And as a result, therefore, for investment by those carriers. So especially when I combine that with the recent spectrum that was auctioned off in Brazil, I think we'll have a pretty robust leasing trajectory for a number of years. Obviously, you have the bump of the churn. But I do think that the broader setup going forward is much stronger and much healthier. Any time to compete on network. That's really what you want. And I think there's been less of that in recent years because of -- in part because of Oi. So I think separating that out will actually help facilitate that perhaps.

Okay. Okay, good. I want to talk a bit about the Philippines next, which it's a market you recently entered. It looks like it could be pretty interesting. It's got a big young population. There's been a lot of regulatory reform to encourage tower construction, the carriers seem to be embracing the third-party model. You've got a new entrant in the market. My associate, Michael spotted an article or a press release from an agency of the Philippine government suggesting that you might be building something like 1,500 towers over the next 5 years. Is that an accurate assessment of what your initial plans are in that market?

I think we would certainly consider that 1,500 over 5 years as a success if we're able to achieve that. And I do think that's possible. It's probably more than I would commit to at this point, given that we've really just begun in the market. But we're off to a good start, and I think we'll have a pretty good year this year in terms of adding new sites. We've got a number of -- a lot of sites in process and underway. So we'll see, but there's definitely a lot of opportunity.

Okay. So maybe we think of that as more of an aspiration and we see how it progresses over the coming years.

Yes. Yes. I mean I think shorter term, we probably will be high 100s or something for this year. And then hopefully, we'll be able to take that higher as we move into the future years.

Okay. How would you characterize the development yields that you're getting on your bills in that market?

Well, newbuilds in general, when they're done correctly and selectively in almost any market produce higher yields than acquired sites once you're able to add that second customer. And that's really what it comes down to. So when I look at these sites in the Philippines and what we've modeled out, the yield on a 2-tenant newbuild in this market will probably be in the mid- to high teens.

Okay. Okay. What about -- what can you share regarding other key lease attributes in this market? is the escalator fixed or CPI-based average lease term, treatment of amendments, things like that.

Yes. I mean the agreements are pretty consistent with what we're signing elsewhere internationally. So you've got standard length terms typically 10 years is typically the initial term. CPI escalators, limited equipment rights. So not that dissimilar than what we're seeing in a lot of our other markets.

Okay. So the kind of the classic SBA framework for these. There are a couple of big deals recently in the Philippines where 2 of your competitors engaged in some sizable sale leasebacks. I'm sure you took a little hard look at those and obviously ultimately passed on them. But I guess maybe expand a bit on how you thought about the puts and takes of kind of developing this market organically over a number of years versus gaining greater scale right off the bat with the sale leaseback?

Yes. I mean, we definitely look at all of these opportunities, especially in any market that we have a presence in. And while there can be advantages to scaling quickly through an acquisition, we're ultimately, I think, a very financially focused company. And our primary focus is on returns of any incremental investment. So when you look at the carrier sale leaseback deal, it was announced, in that particular case, it included both terms and a price point that we did not find attractive. And we had already begun establishing our new build operations in the market before the acquisition opportunity even came up. So I think we're comfortable continuing down our original path, which I think will again, provide a better return on investment, which is our primary focus. So of course, in the future, we could purchase towers from private tower owners should those opportunities become available. But if we don't see those opportunities. So I feel pretty good about what we'll be able to do to the new build process.

Okay. Makes sense. Another new market for you is Tanzania. I think you closed on that deal in January, if I'm not mistaken. Obviously, it's early days, but any kind of early -- initial learnings or things that are interesting that you might want to call out.

Yes. I mean it's probably very early to have too much to share at this point. But things are going well so far. We've been building our team in the market. We're rapidly getting up to speed on the operations. We've been developing customer relationships with each of the carriers. All of that has been very positive. And we've also made very positive inroads in our relationships with the government and regulators. So all that's been good. There have been no negative surprises to date. But it's -- again, it's early, but so far, feeling pretty good about it.

Okay. That's good to hear. One of your peers, American Tower, has made the decision to really ramp up its pace of construction activities in some of its overseas markets pretty meaningfully versus what it's done in the past kind of setting the Philippines aside because that's a larger newbuild type market for you, how should we think of your pace of newbuilds in the coming years versus what you've done historically?

Throughout our history, consistent with what I just said, a well done newbuild has been probably our best returning investments. So we would certainly like to do more of that. I think we will do more than we've done in the last couple of site and there's certainly some opportunities for that in some of our markets. But the key remains making sure that it is, in fact, well done, that it's not just incremental tower count. Sometimes it's easy to just build towers to get to numbers, and we try to stay away from that and make sure that what we're building is actually going to meet the returns that we expect because not every tower is the same. Location, the incremental customer opportunity and certainly a cost to build are all important factors in the decisions we're making. But I do think there's opportunities to do a little bit more. And hopefully, we'll be able to do that.

Okay. Have you had any trouble with respect to materials steel, concrete or skilled labor to put these towers up? Or has that not been an issue for you?

Well, knock on wood, we have some here to-date that's not been a material issue for us. I'd say maybe in our international markets, in particular, we're watching the cost of materials little closely to make sure that the returns that I was talking about on these incremental builds are still where they need to be. But as of yet, it's not been an issue.

Okay. If I think about development yields in the U.S. over time, they've also been compressed as people figured out towers are a good business. So you're seeing more people willing to build towers and the carriers have taken advantage of that. It seems like overseas development yields have remained pretty steady over time in most markets. Do you think it's reasonable to think that yields will remain steady and not compressed like we've seen in the U.S.? Or are there reasons to think that there might be pressure in future years?

Yes. We've seen, I would say, the yields on the initial tenant maybe have compressed modestly because of the competitive nature of people trying to get these opportunities thrown in their direction. But the 2 carrier new builds still produce the yields that are in the same range they've been in historically. So again, that's why it's critical to build the right sites. You got to get the ones that are going to get that second tenant. And I don't we'll see where it goes. It's not that easy. It's one thing to go and buy towers. It's not that's easy necessarily, but you're buying an existing operation to get sites actually permitted and the materials sourced and built properly and all that. It requires some real effort and know-how. And so I think maybe because of that, the competition is a little bit less for that than it's been through the acquisitions and maybe that's why you haven't seen quite the compression of the yields in that area.

Okay. Okay. Now let's turn to the mobile edge, which has been another kind of hot topic as of late. You bought a couple of data centers here in the U.S. You recently bought one in Brazil. I think mostly to learn about how it could tie into your tower business. I guess it seems like your tone regarding the prospects for Edge seems to have got a bit more positive in the recent past. I guess, is that fair? And what prompted that change?

I don't think we've intentionally changed our tone. We've always looked at the potential that Edge actually develops at the tower site is an opportunity that, frankly, we can't afford to miss given our positioning with our existing tower portfolio. So as a result, we've made some modest investments into existing data centers and some tower at edge data centers as well so that we can work through what it takes to operate a data center. However, the jury, in my view, is still very much out on whether Edge compute ultimately reaches the tower site on any scale. The importance, I think I've said to you before, maybe even last year, and it's still the same story because it doesn't change that much, but the importance of interconnect to the wireless network will likely be a determinative factor in that and whether it has to get to the tower site and it's just not there yet. But if it doesn't ever get there -- if it does get there, obviously, that's why we're doing what we're doing. And if it doesn't get there, I think our current investments are both modest and they're performing well on their own, and they could be exited if that was our desire. So but perhaps the more important thing is if it does get there, right, that we'll be better positioned to take advantage of that opportunity, which I think could be meaningful if in fact, it becomes a reality.

Any key learnings from owning and operating those data centers aside from the simple experience of how to run a data center that are worth sharing.

Really, I mean we're getting a better direct understanding of the operational requirements at a data center, things like how to service your customers, what they consider as important as well as deal with the basic operational things like power, cooling, security issues, among other things. So I'd say it's mostly around those areas. And to some degree, you have to be in the space to be able to assess what the future potential of the space is. It's very hard to do when you're totally outside of it. So this gives us kind of a more of a toe in the water, I guess, and we're starting to gain some valuable inputs as a result.

Okay. I thought the acquisition in Brazil was pretty interesting in that if mobile edge is years away from being material or materializing in the U.S., it's probably even further out in Brazil. So I guess how far ahead are you thinking with respect to the Brazilian market? Is it fair to say that it would develop well after the U.S.? Or do you think it would happen more in tandem if it does happen?

Interestingly enough, we've actually had some of our tower customers in Brazil indicating interest in exploring the tower-based edge data centers as well as distributed cloud deployments for sure. So adding this data center in Brazil and frankly, the team that comes with it, it provides us not only the direct industry knowledge, but also, as I was kind of alluding to operational credibility, I think, that would help us kind of facilitate those conversations with those customers. So it just positions us better to discuss whether there really are these opportunities that we could take advantage of, given our fairly large presence there in terms of the tower portfolio.

Okay. And sticking with, I guess, Brazil a bit on the FX front or at least for overseas markets, you've historically said that it's been more appealing to kind of finance for overseas businesses in dollars and kind of ride the FX movements given a lack of borrowing capacity in overseas markets at appealing rates. I guess I assume that remains the case today because you haven't changed anything. But has there been any indication or movements in the markets that would suggest that you might be able to do more overseas borrowing in the future than you have to date?

Yes not really. I mean it's something that we're kind of always monitoring and many -- first of all, many of the markets that we operate in don't really have a capital market structure that's well suited to our borrowing needs. But in the case of markets like Brazil, we've definitely spent a lot of time on it. And at the end of the day, the cost of financing just hasn't aligned very well with our financial analysis in comparison to what's available to us in the U.S. Certainly, as you kind of indicated, it would academically certainly be better for us to finance in the local market and the local currency, specifically in order to create that natural FX hedge but the all-in cost, the leverage capacity that's available, certain other structural issues in these markets have made it unappealing to date. So we'll keep our eyes on that. It's something I've been wanting to do for a lot of site but just can't ever see it clear to making sense to this point.

Okay. Okay. And I guess, turning back to your services business. If I'm not mistaken, that's purely a U.S. operation. As you -- are there opportunities to engage in service activities overseas? Or the reasons why that's not feasible?

Well, we were originally founded as a services company before we transition to tower ownership. So it's kind of a fundamental part of our DNA. And I think our management experience in the 30-plus year history that we have in the business has allowed us, I think, to become, frankly, the best telecom services company in the country. but it's not a recurring revenue model, so the volumes can obviously fluctuate over time during those carrier up and down cycles. And here in the U.S. as a result of our experience, we figured out how to efficiently kind of manage our cost structure so we can manage through those various periods. So I think if we were to try to take this international in some ways, I look at that is really like establishing a brand-new business in markets where some of the options that are available to us here may not be available there. So we'll I wouldn't foreclose it completely. Down the road, we may see a market opportunity where we think it would be additive to have a services offering, but we haven't really seen that yet, and I think it's frankly unlikely.

Okay. Let's talk about fixed wireless in the U.S. for a moment. Obviously, Verizon and T-Mobile, in particular, have -- they've been pushing fixed wireless offerings. Given the usage characteristics, you might think that, that could be good for towers to the extent that it drives greater capacity needs on the networks. But at the same time, they talk about how it's kind of working within their existing capacity thresholds or using capacity at different times of day. So I'm wondering about how you think about fixed wireless at SBA internally and whether you think that's likely to drive any meaningful incremental demand.

Yes. I mean I think any general move toward more wireless solutions is probably positive. And obviously, we're making our sites available as potential solutions for any of these initiatives. However, the nature of what's being done makes it likely that it's only a minor contributor for us. So today, we aren't spending a ton of time on it.

Okay. Okay. I guess it was about a year or so ago that you entered in to deal with PG&E to pick up the tower sites on their transmission structures. And I think at the time, a lot of folks expected there to be kind of a flood of other utility deals or other kind of creative types of infrastructure as a new pathway to M&A for the tower operators. But it hasn't really materialized. I guess, why haven't we seen more deals like that? Is it just because PG&E was a really unique circumstance or some other reason?

Yes. I mean that was really kind of a special deal. The locations of the assets and the regulatory setup allowed for it to be a good wireless infrastructure solution. A lot of the other utilities and other nontraditional types of infrastructure don't necessarily have those characteristics. So if we can find others that do, we will certainly take a serious look at them, but I think the options are actually somewhat limited.

Okay. We have just about a minute left. I've got to throw in one more kind of CFO-oriented question before we wrap up. Obviously, interest rates are up, that will -- your average maturity is reasonably far out. But over time, if rates stay higher, that's going to pressure your AFFO a little bit. I'm curious about how you think of it from a target leverage perspective. How high would rates have to go? And over what sort of time frame would they have to remain there before you start to think about your current leverage ratio or your target leverage ratio being inappropriate for the environment.

A lot of it comes down to the core of our business. Because of the stability and the continual growth that's in the underlying EBITDA, we're comfortable we can continue to support leverage in the current range. Our current target range is 7 to 7.5 turns of net debt to last quarter's EBITDA. And we can, I think, continue to do that even as rates rise. In the past, we've made some comments, I think, about adjusting it if the 10-year treasury were to hit 5%. But really, I think the real key is whether the investment opportunities for new assets see price adjustments that are commensurate with the increasing cost of debt. And if they do, then we remain comfortable with our current leverage target because we're able to adjust and invest that capital still at an appropriate return. But if we don't see the appropriate price adjustment for new assets, then we would likely begin to delever organically, which we're able to do fairly quickly. And in fact, I think that would give us -- if that's the way that it played out, it would give us capacity that we could always lever up again quickly if we saw worthwhile opportunities. So some of it is really a function more -- more than it is of the general cost of debt, it's the relationship of that cost of debt to the cost of the investments that we're making. And if they move in tandem, the leverage is supportable given the steadiness of the underlying EBITDA. And if they don't, then that's when we, I think, would be more focused on delevering.

Okay. Important qualification. Well, listen, I think we're out of time. I thought this was a terrific discussion. Again, thanks so much for carving out the time to speak with us. And I think I'll see you next week in Denver.

Look forward to it. Thank you, Nick. I appreciate it.

Okay. All right.