All right. Good morning, everyone. Thanks for joining us. I'm Eric Luebchow, Senior Analyst at Wells Fargo, covering telecommunications and communications infrastructure. Very pleased today to be joined by Doug Chambers, previously the interim CEO, transitioning into a senior advisor role and handing the reins over to Anthony Carlson. Thank you, Doug, for being here today.
Yeah. Great to be here. Thanks, Eric.
Doug, obviously, maybe we could just kinda talk about an overview of Array today. It's been a busy year. You recently closed on the wireless operations sale to T-Mobile, a portion of your spectrum assets. Maybe you could just give us a rundown of what's left in your portfolios in terms of the tower business, and any other kinda non-core assets you expect to monetize.
Sure. Happy to. We have three pillars of value at Array. One is our tower business. We own 4,400 towers. We have a tenancy rate of 1.02 after the T-Mobile MLA went into effect. That is a very robust, high-growth business for us. We have spectrum that we have retained from our wireless business. From US Cellular, we have now signed agreements to sell 70% of our spectrum on a megahertz pops basis. 30% we still retain. Almost all of that is our C-band spectrum, which we can talk about in a moment. The third pillar is our non-controlling investment interest. We own approximately 10 different investments. There are about four investments that comprise 80% of the income and distributions that we get. Those produce in the neighborhood of $150 million of cash distributions per year. Again, three, you know, really strong stores of value within our company.
That's great. And you obviously have some pending spectrum transactions closing. Maybe you could just talk through the timing of those and then kinda what return of capital to shareholders may look like when you close on those deals, and what your pro forma capital structure will look like, under the new Array umbrella.
Sure. The two large deals we have pending are we agreed to sell a billion of spectrum to AT&T. That is 3.45 GHz and 700 MHz . That transaction we expected to close in the fourth quarter of this year prior to the government shutdown. It still may close in the fourth quarter, may drift into 2026, you know, given the government is catching up from the shutdown. That is one large sale. We expect that to be about a $10—we expect the Array board to declare about a $10 dividend per share when that transaction closes. The second one, we agreed to sell spectrum to Verizon, 850 MHz cellular spectrum. That is also a billion-dollar sale of that spectrum. That cannot close until the spectrum lease we have with T-Mobile expires, which we expect that to end in the third quarter of 2026.
We expect that Verizon sale, spectrum sale, to close in the third quarter of 2026. That, you know, after taxes, we expect about an $8.50 dividend per share to be declared by the Array board. As we just announced on our third quarter earnings release, we agreed with T-Mobile to sell $178 million of additional spectrum. $86 million of that is exercise of T-Mobile's put or, I'm sorry, their call option on the 600 MHz spectrum. T-Mobile also bought, yeah, they also bought 700 MHz A block for $85 million. There's a small amount of AWS3 they also bought. In total, it's $178 million. We expect that to close in 2026 as well.
Okay. That's a good, great overview. Now you're really transitioning into more of a pure-play tower operator. You, like you talked about, you have just over 4,000 sites. Maybe you could talk about kinda the components of growth longer term. You obviously have fixed escalators. You have, I believe, MLAs with all the major carriers. With a tenancy ratio of around 1, 1.0, you obviously have a lot of upside from colos. Maybe we could kinda talk about how you see this business growing over a slightly longer time horizon, understanding there will be, you know, a little bit of volatility from the T-Mobile MLA c oming in over the next couple of years.
Yeah. We're very bullish on our growth prospects. Our towers, by, you know, virtue of the fact that we were born out of US Cellular, we skew rural and suburban with respect to our towers. When you look at the, you know, the last portion of the 5G builds from the carriers, they play really well to our portfolio. That's one of the reasons, and I talked about this in our third quarter call, that our applications for new colocations are up 125% year over year, year to date, 9/30/2025. I'm excluding T-Mobile from that number entirely because obviously they skew it with the new MLA. We're seeing very robust activity in 2025 that obviously will really be a tailwind for 2026-2027 revenue. By the way, amendments are up substantially year over year for that same time period as well.
We have talked about the fact that our towers, a third of our towers do not have a competing tower within a two-mile radius. That and, you know, again, our skewing of rural really helps as you think about rural edge outs for, you know, for coverage and capacity as carriers complete their 5G build. Really excited about that. You know, 80% of our towers are over 150 feet tall. We obviously have a lot of capacity in our towers, so we have really high-quality infrastructure to sell. We have talked about on numerous occasions that we brought our sales and leasing operations in-house at the beginning of 2025. That has been a really, you know, a catalyst for us with respect to sales.
When I talk about that pickup in sales we experienced in 2025, it's not only the location of our towers and carrier activity, but also having that sales team in-house with direct relationships with our carrier partners. We're also focused on verticals, non-carriers, and that's really been a, you know, tremendous improvement for our operation.
Yep. Great to hear. And maybe you could talk about the, the T-Mobile relationship. You'll have, as you've talked about, somewhere between 800-1,800 tenantless or naked towers, once the transition's complete by the beginning of 2028. Any kinda indications yet from talking to T-Mobile, you know, about where you may skew in terms of how many towers you'll have with no tenants? And, and based on what you know today, do you think it makes more sense to try to obviously lease those up, get tenants on the sites, decommission them, and take costs out? Or what other, kind of scenarios are you looking at, to handle those towers?
Yeah. T-Mobile was required, and when the MLA commenced on August 1st, to submit an initial list of committed towers, which they did. That gave us a view as to where they were going. They also have the right to change those sites for up to 30 months. Now, based on the pace this is moving with T-Mobile, we think it's gonna be well less than 30 months that they have their integration completed, and we have a clear line of sight to which towers are naked towers. We'll keep you apprised in coming quarters as to how, you know, how naked towers are looking. Certainly, we find that range a little bit, so we're getting closer. We're starting to get a clearer picture of where that is.
With respect to our strategy on the naked towers, I mean, one is we wanna obviously lease them up aggressively. We're working hard at that. We're also going, and this is really kicking off in the fourth quarter, to our ground lessors and explaining we have a different set of economics now. I mean, we're no longer a wireless carrier. In order for us to rationalize many of these sites that are naked, we need some relief on the rent. We're gonna be seeking, you know, rent relief on a lot of our naked towers. We also have a very sophisticated model built on our expected prospects of future leasability of the towers based on where competitor towers are, crowdsource carrier traffic, where we think they're going next. That's gonna inform our decision-making.
We will take all that information and, on a tower-by-tower basis, assess what to do. Either we will hold the tower for future optionality, maybe we will sell it. In some cases, we will have to decommission towers, you know, to get that OpEx off our books.
Okay. No, that's great. I'm sure we'll hear more about that over the next couple of years. If you look at your tower portfolio today, you talked about how there's still a lot of amendments happening on your sites. I mean, do you have a sense for, like, how many have been upgraded with, you know, 5G spectrum radios? I know each of the big three carriers is at a slightly different pace in terms of upgrades, but do you kinda have a sense of where that is?
Yeah. Eric, not, not precisely, but, again, based on the activity we're seeing and the location of our towers, you know, if you wanna take the carrier average and say they're, you know, 75% of, you know, through the 5G upgrades, we think our towers are a bit behind that.
Yeah.
We have some more catch-up to do. That is back to my previous comments about we feel really good about as carriers are, you know, sort of in the later innings of their 5G buildouts, that our towers are very well-positioned to take advantage of that. We think we are a little bit behind, you know, the overall curve given, you know, the large metros and so forth are generally further along.
On a lot of the new colo demand that you talked about, I mean, maybe you could talk about whether some of it's just pent-up demand from your sites that you've unlocked. Do you have any sense that fixed wireless, which we're hearing a lot about, is starting to drive some densification demand in some of your markets? Any sense for what's driving the uptick in colo demand that you talked about where you're up, you know, over 100% year to date?
We think it's additional 5G buildouts and some degree of densification as well as rural edge outs on coverage. That is primarily what we're seeing. We do not believe that carriers are doing a lot of builds as it relates to building capacity for fixed wireless. A lot of that is our heritage of being a carrier. We know the economics. The economics do not make sense to build capacity for fixed wireless. That is not to say nobody is doing it, but we just do not believe that carriers are doing that in any significant way, nor do we think that is sustainable. You know, maybe that changes over time as carriers do, you know, even increase bundling of fixed wireless with the mobile product and/or, you know, maybe there are other reasons to drive fixed wireless subs.
Just generally, the economics of building capacity for fixed wireless, you know, really don't make sense to us. We don't think that is a significant driver of our growth.
Yep. Fair enough. Fair enough. You did mention on your call, and I realize you might be somewhat limited in what you can say about it, but, you know, you're having discussions with, you know, EchoStar or, or Dish on the leases on their sites and maybe, you know, any sense for how that situation may ultimately get involved? I know one of your competitors obviously has a pending lawsuit against them, and maybe you're slightly limited in how you think that gets resolved. Any, any thoughts there?
Our goal, and we were very transparent about this in our public filings and in our comments in the third quarter, we received the same letter that all the tower companies did from Dish and them indicating the FCC forcing the seller licenses, and therefore, they're excused from their obligations under our MLA. We disagree with that. We sent Dish a response letter indicating that we disagree with that and that we intend to enforce our MLA. That is sort of where it is, Eric. We intend to enforce the MLA. We have a strong agreement. Dish's assertions in their letter do not have merit. You know, we intend to, you know, collect on the obligations that are in that MLA, which are fairly significant.
Yep. Fair enough. Fair enough. And, you know, recently, satellite has come up a lot. SpaceX has made some waves in acquiring spectrum from EchoStar. So maybe you could just give us your high-level view on how satellites complement your tower footprint, or is there a chance they could be a competitive threat for very rural sites that potentially are in, you know, much less population-dense areas?
Yeah. I think complement's the key word. We don't look at it as a significant competitive threat. Our towers are rural, but they're not remote. I mean, we built our towers as a wireless carrier for a reason. There was enough traffic to justify building a tower there. Given the capacity constraints of satellite, only 3% of satellites are covering the U.S. landmass at any one time. They just don't have the capacity capability to deliver what our terrestrial sites deliver. We don't look at them as a significant competitive threat where we have towers. As it relates to the remote areas that are beyond where we have towers, satellite has a big role to play and provide service in those areas.
Yeah, again, complementary, but not something that we consider a significant competitive threat just based on, you know, the technology and physics related to capacity.
We've heard some speculation from investors that maybe it could actually be an opportunity for the tower companies if SpaceX ever wanted to deploy a terrestrial network, especially in metro areas where satellite doesn't really penetrate buildings very well, you know, whether through a partnership with one of the other carriers where they could share at least spectrum. Do you think maybe it could be more opportunity than threat, or is it just too early to say?
Yeah. I hope you're right, Eric. And from my perspective, it's too early to say. I don't know specifically what SpaceX is going to do. Certainly if they, you know, if they start any activity where there's a demand for tower locations, we, we'd be happy to be part of that and would eagerly pursue that. I, it's just too early for us to speculate. I just don't have a good line of sight as to where they're going.
I'll let you know when I hear from Elon.
Yeah. Please, please do.
Okay.
Please do. Yeah.
Maybe we can go to your spectrum assets next. As you mentioned, primarily what you have left to sell is in C-band. I think the buildout obligations for those start in 2029. There is some in 2031. Maybe you could just talk about your timing on monetizing the remaining spectrum assets. There has obviously been some supply that has come to the market from EchoStar. There is another auction of upper C-band that is planned in 2027, assuming it goes off on time. How does, you know, future spectrum supply kind of influence the timing of when you may look to monetize those?
Right. There's a lot going on on the spectrum supply side, obviously. You know, our point of view is that, you know, the injection of supply all else being equal is probably not a good thing for selling spectrum, but there's a lot more to it than that. One is that, you know, mobile data traffic continues to increase at 30% per year. So there's a need for the spectrum coming to auction, EchoStar spectrum and our spectrum. We believe there's a demand for all of that. With respect to the FCC auction coming up of up to 180 megahertz, while that's mid-band spectrum like our C-band, our spectrum's more attractive in the lower end of the mid-band. Also, our spectrum's contiguous to that spectrum.
That may be appealing to a carrier that's, you know, in the auction for the FCC spectrum. You know, it gets complex. You know, again, our spectrum is unencumbered. It's available now. You know, we think it has, based on the fact that spectrum still is a finite resource and there is significant continued growth in mobile data traffic, that it has value. We're willing to be patient to realize that value. As you indicated, Eric, we can go all the way to the second build deadline in 2031. We'd have to start building in 2029 to meet that, but that still gives us a lot of time. All that said, we, you know, like to sell it as soon as we're able, but it has to be at the right price where we realize full value.
Yep. Yep. That's totally understood. How should we think about cost optimization longer term? I think you've talked about targeted EBITDA margins of 45%-50% within the tower business. I know there's going to be some noise in those numbers from the interim sites with T-Mobile, some of the wind-down costs from the wireless sale. Maybe you could just kinda give us a broad overview of your pathway to get there between, you know, ground lease optimization, SG&A or overhead reductions, anything else that you're looking to do to right-size the cost base.
Yeah. The two you mentioned are the most critical. First of all, I mean, revenue growth is critical, right?
Yeah.
Continuing to focus on colo growth, that, that's gonna be a big driver of margin. On the cost side, as we talked about in SG&A, our SG&A costs now are really high. They're high because we're working on winding down the wireless operation. That has a lot of costs that are associated with that. We also have an infrastructure that is, you know, built to support a $4 billion wireless organization, I think IT platform support and so forth. That has to be, you know, sort of, rationalized, which we'll do over time and bring SG&A. We talked about the fact that SG&A, because of the wind-down costs, is going to remain elevated through the first half of 2026 and then start to come down, rather substantially in the second part of 2026. SG&A is a really key area to address.
The other thing is we have spectrum management costs. When you hold spectrum, you know, we have certain compliance costs and, you know, we have certain colocations that we have to lease to maintain that spectrum. Once we sell the spectrum, those costs go away. That's gonna be helpful. The other one you mentioned, Eric, on the cost operation side, ground leases, it, it's back to what I was talking about with the naked towers. I mean, we have to, you know, work with our ground lessors to rationalize rents. You know, for certain towers where rents are unacceptably high, you know, we're gonna have to think about, you know, decommissioning or other measures to get that expense off our books.
Yep. Understood. I think once you get through this transition, you've talked about maintaining around a three-times leverage profile, right? You'll generate substantial free cash flow, as well. What could we think about in terms of what you'll do with the excess free cash to stay at three-times leverage between share buybacks, dividends, ground lease purchases, M&A? Probably not as likely, but, you know, anything that you're looking at.
Yeah. Right now, it's our expectation that the excess cash will be returned to our shareholders in the form of dividends. I talked about the special dividends.
Yep.
As it relates to the spectrum. Once we're through, and by the way, any excess cash that the business accumulates, you know, prior to those dividends can be subsumed in those, you know, spectrum sale dividends. We expect, you know, late 2026, early 2027, once we're through the spectrum sales, for the Array board to institute a regular recurring dividend. That, that's the mechanism that we anticipate, to return capital to shareholders.
Yep. Fair enough. As we think about the wireless JVs as well, I think you've talked about that being $150 million-$160 million a year of cash. We've seen some precedent in Verizon buying back ownership stakes from players years ago, like Consolidated Communications. I mean, anything unique about the process regarding the partnerships that's different from other potential non-core asset sales like spectrum or your wireless operations business?
There are a few things that are different. One is there's only one bidder for these partnership interests, whereas, you know, spectrum, we obviously have, sort of a market process that we can go through. That makes it a challenge. In addition, you know, as we talked about historically, we have very low tax basis in these investments. When we think about the return on any sale and the after-tax return we get, relative to what we would get in perpetuity from the distributions, you know, we need a relatively higher price for it to make sense for us. We look at these investments as financial investments. We do not have strategic reasons or liquidity reasons why we need to monetize the investments. We are happy to hold the investments indefinitely. We have held them a long time already.
If there is, you know, an offer that makes sense based on, you know, how we view distributions for a long period of time and our tax, you know, gain that we'll realize upon a sale, you know, we'd entertain that. We're not interested in selling the investments for, you know, something that doesn't make financial sense when we look at their long-term return, return profile.
Yep. As you look out longer term, I know because of your somewhat unique structure, I don't think you'd qualify for REIT status. Longer term, if you do monetize the JV partnerships, you monetize the spectrum, would a conversion to a REIT make sense eventually, just based on everything you've walked through? You've obviously given us some disclosures that are more REIT-like recently, which we appreciate. Any encumbrance to getting there?
There are certainly encumbrances. You mentioned them, Eric. Our current asset and income profile prevents us from electing REIT status immediately. It's something we're gonna look closely at. We've already looked closely at it. We're gonna keep looking closely at it. As we sell our spectrum, there are some options that you can avail yourselves of with the equity method investments as it relates to REIT qualification. We're gonna keep looking at different options. There are various trade-offs. There certainly is a strong financial incentive from a tax perspective to gain REIT status. It's something we're gonna keep looking at and assessing options for how we can get there and whether the trade-offs make sense.
Yeah. Just wondering too on the leverage front. Obviously, a lot of the larger public tower REITs are levered at five to six times with investment-grade balance sheets. Do you think with that, that you potentially could increase the leverage threshold longer term, as the company gets bigger?
That could happen. I mean, our current position is we wanna stay in the three-times range as we navigate through the spectrum sales, you know, really for the foreseeable future and to maintain flexibility, you know, to the extent there's opportunities that come up over time that would compel us to increase that leverage ratio. It's something we would look at. We're not committed to doing that, but we like being in a position of three times where, you know, if we wanted to do something where we want to lever up more, we have that optionality. And so we feel good about, you know, in our first year or two or more of running this business, that's the right place to be.
Yep. And in terms of M&A, it seems like private tower multiples are still very elevated, you know, 30 times, in some cases higher. I'm sure you look at smaller portfolios that are around your footprint. Is there any interest at all in growing inorganically through M&A?
In the first year or two, no substantial interest in doing that. We have so much in front of us operationally to get right and to stay focused on that, that is our focus. We'll look at onesie, twosies and we continue to do that. Our focus is operations. You mentioned it, Eric. There's not really deals to be had out there with larger tower portfolios. You're generally gonna pay full price for those. Again, given priorities, we are totally focused on operations given the opportunity we have, making sure the T-Mobile MLA integration goes well, continuing to drive colocation growth. I talked about the ground rent optimization with our naked towers, and then the spectrum monetization.
We wanna stay focused on those fundamentals in the next year or two.
I know with some of the private tower operators, there are a handful that do a lot of BTS or build-to-suits. You know, is that something that's potentially interesting to you, or do you think it's really more focused on the colocation opportunity, getting your tenants per tower, moving that higher?
Yeah. More the latter.
Yeah.
It's back to, you know, we have so much capacity in our towers, really focusing on the towers we do have, leasing those up. That's where we're gonna be focusing. You know, again, the build-to-suit model, never say never. Maybe, you know, we'll eventually do that. No, no plans right now. You know, the returns are a bit challenging in that space, as you know, at least right now. Something that, you know, over time we may look at, but not in near-term focus given, again, our opportunities that are in front of us.
Yep. Fair enough. Obviously, there's been a very big private market premium on tower assets for a really long time where the publics have traded at a lower multiple. You know, it's been something we've always kind of wondered if that would ever narrow, and it really hasn't. Does that influence at all at a high level the longer-term path for Array? Do we stay a public company where we're smaller than the other public REITs? Do we look at, you know, a take-private scenario? There's just a lot of capital out there today that is willing to look at communications infrastructure assets like towers and data centers. Does that influence the thinking of management and the board at all?
Array is, again, we have a tremendous opportunity to build value in this business, based on all the things that I've talked about. Array is committed to being in the tower business for the long term. One thing that is much different about the tower business than the wireless business that we just exited is we have sufficient scale to compete. One of the things that was challenging us at US Cellular and ultimately one of the key drivers for the divestiture was that we didn't have sufficient scale to be competitive. That's not the case at Array. When you look at our ability to work directly with the largest carriers, the fact that the economics are mostly local, you know, ground leases, you know, maintenance, that type of thing, property taxes, they're not these scalable types of expenses.
We have sufficient scale, you know, to be competitive, be successful, and earn a great return on this business. We feel really good about where we're at in operating this business for the long term.
As you look at some of your larger peers, a lot of them have margins that are 70% or higher. Do you think the biggest factor for getting margins even higher than the 45%-50% you laid out is just simply leasing out the towers, right? If you get to two tenants per tower over time, obviously that's gonna drive a lot of incremental margin, given the high flow-through margins that you have in the business. That, you know, as this business matures, it'll probably just become even more profitable.
Yeah. An emphatic yes to that. I mean, we, this business at a fundamental level is very simple. Revenue per tower is the single biggest driver of margin. We're well behind the big three tower companies in revenue per tower and tenancy rate. Again, we're 1.02. You know, they're up in the mid-twos. We're at that level, of course, because we're an artifact of a wireless company.
Yep.
Right? We didn't build this company to be a tower company, but we're a tower company now. That is where the single biggest driver of margin improvement is going to come from, increasing our revenue per tower and effectively our tenancy rate. Yeah, again, we're highly focused on that.
The MLAs you have with the big three, are they more comprehensive in nature where they have set use fees that are pretty locked in, or do you kind of generate new revenue more on an à la carte basis based on activity levels on your sites? We get that question a lot related to some of your larger peers like American Tower.
We have a mixture of both. With all our carriers, we have some sites that are bucket pricing, other sites that are, you know, pay-for, you know, sort of.
Paid by the drain.
Square inch. Yeah. Exactly. We do have a mixture, as it relates to our MLAs in place, as far as how amendments are priced.
Great. No, I appreciate it, Doug. Thank you. Doug will, you know, be transitioning, you know, the reins to Anthony. Any kind of final comments on the transition of leadership at Array before we let you go?
Yeah. I would just say it's going really, really well. I mean, Anthony's been in our business for six years. He's been a really strong leader. He's an outstanding strategic thinker. He's gonna do great things with this Array business. You know, Anthony and I are spending a lot of time together in a two-month period. He has a great leadership team underneath him. I have no concerns about the transition. It's gonna go very well.
Great. Thank you, Doug. And thank you, everyone, for joining us today.
Okay. Thanks, sir.
Yeah. Thank you.
Okay. All right. Great.