American Tower Corp at Bank of America Media, Communications and Entertainment Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Barden - Bank of America Securities - Analyst : So maybe to kick it off, to talk about something that's not fiber to the home for the first time today. Just as the new CEO, you've been here for about -- in the seat for about six months, you've been around American Tower for the longest time. But at your new perch, could you tell us a little bit about what you see inside the organization that you want to amplify, things that you want to steer away from, just the new CEO playbook?

Question: David Barden - Bank of America Securities - Analyst : It's that headcount or process? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 1:40PM, AMT.N - American Tower Corp at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - Bank of America Securities - Analyst : Yeah, Neville was a good choice. So I mean, for the longest time, American Tower was the standard bearer for the emerging market tower business model. And it was born out of the success that you guys had in Mexico and Brazil, and then you looked at India and then took it to Africa. And the premise, as I understood it, was that emerging markets were basically on a direct line to following the US model eventually of just blanketing the market with mobile. And I think that the -- and now the pivot, you were the head of the US, now you're the head of the whole company, and you're steering away from emerging markets. What -- I mean we can pinpoint one thing probably in each market that's been problematic but is the thesis that underpinned REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 1:40PM, AMT.N - American Tower Corp at Bank of America Media, Communications and Entertainment Conference the whole idea of emerging markets being attractive for tower is no longer true or is it just taking wildly longer to play out than hoped or what is really going on?

Question: David Barden - Bank of America Securities - Analyst : So when you say developed markets, obviously, we're talking about the US, I understand, but Europe has been your go to. One of your peers was here yesterday, I asked about the appetite to invest in developed markets. And they were very cautious that the European model isn't as developed as you might think, that consolidation is an issue still, that the profitability and the regulatory environment is such that it's tougher for the European carriers to make and invest money in their networks. So what makes you comfortable that Europe is such a better opportunity than South Africas and the Mexicos of the world?

Question: David Barden - Bank of America Securities - Analyst : I mean you've -- is that balance sheet contingent because I think you guys have been floated as a potential buyer for a number of assets over the last couple of years. And you've said, "No, no, no, like we're focused on deleveraging, like don't even think about us being part of that." Is now we're starting to modify that language a little?

Question: David Barden - Bank of America Securities - Analyst : So I think that, that probably goes without saying for everybody at the right price. You guys -- I mean, given that you're close enough maybe to your leverage target a few months away getting there, showing the rating agencies that when you go up in leverage like you did with CoreSite, you have the capacity to bring it back down again. So once you've hit that, I'm sure you're going to get permission from the rating agencies to lever up a few if you choose.

Question: David Barden - Bank of America Securities - Analyst : I've not seen anything.

Question: David Barden - Bank of America Securities - Analyst : Congratulations. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 1:40PM, AMT.N - American Tower Corp at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - Bank of America Securities - Analyst : I want to get to that balance sheet stuff in a second. But just you have the highest multiple of the towers. We're going to talk a little bit about why that is in a second too. So your peers have made the argument and I've heard this argument from a lot of people that private tower valuations are just beyond where the public valuations are. There's just -- the bid-ask spread is just far too wide. And then maybe that's informed by investments and valuations that linger from an earlier time in lower interest rates. But do you feel like it's possible that there are inorganic transactions that are within reach that your valuation, your balance sheet, the pliability of the sellers is -- there's a way to bridge that gap?

Question: David Barden - Bank of America Securities - Analyst : Well, I think people maybe don't understand like so a higher -- a more fuller tower, the [ Mona Lisa ], as Jim Taiclet used to say, is worth a lower multiple --

Question: David Barden - Bank of America Securities - Analyst : Because it won't grow as fast. And the opposite is true for, say, captive tower portfolios inside one carrier, where there's 1.1 tenancy, 1.2 tenancy, you pay a much bigger multiple for that?

Question: David Barden - Bank of America Securities - Analyst : So let's come back to the domestic tower business, the majority of the company. So there's been three challenges that, as an industry the towers have been grappling with. One is the material slowdown in carrier activity levels. The other is the lingering effects of Sprint churn. And the last of the big three is the higher for longer impact on rate refinancing and other things. So you guys have kind of, I think, shown that you're best-in-class on those three things. And starting with the carrier activity levels, you've had the best same-store sales organic growth rate among the peers. And it seems to be related to your MLAs. Did you anticipate what was happening, and it was all skill or was it a little luck, too?

Question: David Barden - Bank of America Securities - Analyst : So you are also the only tower company really that from the beginning of the year through now, which is almost the end of the year, has been saying that you saw activity levels improving and you saw green shoots. And I think that we've had other tower companies, I remember, I think, Vertical Bridge said something to the effect that only American Tower is seeing this. Why is only American Tower seeing this?

Question: David Barden - Bank of America Securities - Analyst : How's Q3 going?

Question: David Barden - Bank of America Securities - Analyst : Flattish from Q2.

Question: David Barden - Bank of America Securities - Analyst : I think I asked that question on the call, so --

Question: David Barden - Bank of America Securities - Analyst : Okay. So we actually had Marc Montagner, the CFO of SBA, come in and say that he expected that the way that 2025 would shape up would be quarterly steady improvement as densification and that sort of thing occurred. And the belief that, that would happen, it was a function of a combination of the activity conversations that they were having coupled with some of the MLAs that they have. Do you see the year the progression of that unfolding?

Question: David Barden - Bank of America Securities - Analyst : So I guess two questions is whether they step up demand or not, does it really matter from American Tower because of the MLAs, you already know what you're going to earn. I mean --

Question: David Barden - Bank of America Securities - Analyst : Right. So that's AT&T who came off the holistic at the beginning of the --

Question: David Barden - Bank of America Securities - Analyst : I think you did, just now. And so the -- but one of the theories was that the reason why you were seeing services revenue activity that other people weren't was because you're getting an outsized share of the AT&T Open RAN initiative that they announced at the beginning of the year. Is that true?

Question: David Barden - Bank of America Securities - Analyst : You were just saying a third player -- there's a third player out there that --

Question: David Barden - Bank of America Securities - Analyst : So the second big challenge for the industry has been Sprint churn. And can you tell us about how Sprint churn has and will affect American Tower?

Question: David Barden - Bank of America Securities - Analyst : And again, how was it that you decided to -- what made you chew through that faster than everyone else was able to chew through it?

Question: David Barden - Bank of America Securities - Analyst : And then the third piece is the balance sheet interest rate exposure. So there's guys who have like very attractive hedges, but those things are going to get refinanced at much more expensive rates. There's guys that have bigger towers coming up sooner. It feels like Rod did a pretty good job of stacking the maturity towers through time. But you did have a lot of variable rate debt that you had to chew through. So give us a snapshot of where we are and now philosophically as we look at a falling rate environment, assuming that's where we are, what happens next.

Question: David Barden - Bank of America Securities - Analyst : Is there an appetite to float the floating rate exposure back up again, if rates are moving down? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 1:40PM, AMT.N - American Tower Corp at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - Bank of America Securities - Analyst : I think SBA just was saying yesterday that they just did an A rated ABS deal like 4.5%, but they think like 10-year paper on a standard basis will be closer to maybe a 5% rate. What do you think American Tower could do on a 10-year piece of paper when we're modeling a refi for your own debt stack?

Question: David Barden - Bank of America Securities - Analyst : Totally understood. So another piece of the domestic pie is CoreSite data center business. I guess a couple of questions on that. So it's obviously been doing really, really well. And -- but it's not really in the AI space really. Is it?

Question: David Barden - Bank of America Securities - Analyst : So I was skeptical of this. Maybe I'm still a little skeptical when American Tower bought CoreSite, not that I didn't think that the data center business was a good one, but I think Tom bent himself into a pretzel trying to explain how towers and data centers fit together, and that was going to really be a good idea. And where we landed on that was this idea that because you had all the big players who would be creating the applications of the future that you would have an inside track on learning where the edge would want to live. And if the edge happened to live maybe where the towers were, there would be a new opportunity for you, and you would be the first one to spot it. And what was interesting to me was Sampath, the CEO of Verizon Consumer, yesterday said that he was optimistic that AI is creating the platform from which a lot of applications will be born, and many of those will need an edge compute component. Do you have -- putting those two things together, have you, at this stage, any new learnings about where the edge might live and what the opportunity might be for American Tower there?

Question: David Barden - Bank of America Securities - Analyst : So where the towers meet the data centers, and I've taken some tours. One of the things if we're going to have edge compute or essentially data centers at the tower, we might need more land, we might need more power backup systems, that all requires investment. Those sorts of things probably happen relatively slowly. Are you prepared to make that bet in terms of trying to negotiate expanded footprints at your towers and bearing diesel, getting permits to do that in your backyard?

Question: David Barden - Bank of America Securities - Analyst : For the other 39,000.

Question: David Barden - Bank of America Securities - Analyst : Interesting. So then again, so wrapping it up, we get to our target 5 times leverage round numbers at the end of the year, it's interesting, a lot of companies getting to their leverage targets at the end of 2024 after different acquisitions, spectrum and data center companies or whatever. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 1:40PM, AMT.N - American Tower Corp at Bank of America Media, Communications and Entertainment Conference Verizon, obviously, this morning, has decided to choose to use its leverage to buy a new company. It sounds like you're open to that, but if we cardinal rank at this stage, acquisitions, data center investments, edge experiments, domestic -- or sorry, developed market acquisitions, dividend payments, stock repurchase, in order, which ones are we going to do?

Question: David Barden - Bank of America Securities - Analyst : Spoken like a true CEO. Steve, thank you so much for coming. Appreciate it.