Welcome to Citi's 2024 Global TMT Conference. For those of you I haven't met yet, I'm Mike Rollins with Citi Research, and we're pleased to welcome American Tower's President and CEO, Steve Vondran. Steve, thank you so much for joining us today.
Thanks for the invite. It's good to see you.
Great to see you. This session is for Citi clients only, and disclosures are available at the back of the room, next to the AV desk. For everyone in the room, you can use the QR codes either up here on the screen, or there's also some posters or documents around the room that has these QR codes to participate in our upcoming live survey questions. Your participation and submissions are completely anonymous, and we'll hope that you participate with us today. So Steve, maybe just to get us started, if you could provide an update on American Tower's strategy to expand financial performance and improve the value for shareholders.
Sure. So been in the job about seven months now. So what I really bring to the table in terms of kind of the long tenure I've had with the company, oh, over 24 years, being part of the leadership team for the last five, is you'll see a degree of continuity with some of the things we've already been doing. So I'll reiterate kind of what our priorities are, kind of for the near to mid-term. And the first priority is maximizing organic growth. It's all about sales. And so we're looking across our portfolio, and the demand drivers that we're seeing in all of our markets, we're focused on organic growth, number one. And the second thing we're doing is we're coupling that with select investments in our internal CapEx program to develop new assets in different markets.
And that that CapEx program is a little bit more weighted toward developed markets today than it has been in the past, and we've talked about that on some of our earnings calls as we're prioritizing our investments there, just given some of the the headwinds that we've seen in our emerging markets as well. And so we see some robust demand drivers that that help us grow organically. We're seeing the inorganic opportunity to invest in our internal CapEx program. We're also focused on cost controls, and we've been able to bring down SG&A year over year. At the midpoint of our guidance, we're bringing down SG&A about $35 million this year, year over year.
Trying to make sure that we're expanding our margins wherever we can, making sure that organic growth drops to the bottom line at a very high percentage, and then also actually driving some savings as well. We're also focused on our balance sheet, making sure that we have a fortress balance sheet, and that means trying to get down below our to our target leverage of five point oh by the end of the year. We have taken a number of steps to do that, including reducing the CapEx in our internal program, and we did hold the dividend flat this year as another method of doing that. And, you know, we're happy to say that we're on track to do that. We did drop below five for a couple of quarters.
So there were some one-time items underpinning that, so you probably will see that pop up above five, and then depending on the timing of the India close and a couple of one-time things, twelve thirty-one could be, you know, just above or just below, but we're on track to get very close by the end of the year. That's been a priority for us as well. Then couple that with you know, making sure that we're implementing the best governance standards across the company. We are in the middle of some board refreshment that we've talked about a couple of times and just changed our committee chairs, added a new board member in Neville Ray, so we're excited about some of the changes there as well.
Predominantly, it's focusing on that organic growth, cost control, incremental investments where we can, working on the balance sheet, and then finally working on the organization.
Great. Well, it gives us a lot to dig into today. And as we're getting started, getting into each of these components, we'll throw up our first, survey question. So the first one we're gonna go with is... we're gonna ask our audience to participate. Remember, you can use the QR codes, and this is all anonymous. So do you expect domestic leasing activity to improve over the next 12-24 months? And we're excluding the impact from the Sprint merger, just to, you know, make it kind of, you know, simple to think about.
And we'll come back to this question in a moment, but the answers are: yes, with opportunities for annual organic domestic revenue growth to expand above 6%, yes, to sustain a 5%-6% range, and no, expect annual organic revenue growth to fall below 5%. And, by way of background, I think what the normalized number for this year is about 6-
Yes
for the guidance at the midpoint?
At the midpoint of the guidance, it's around that, yes.
Great. So we're gonna come back to this as we get the responses in, and just encourage everyone to participate. So, just one more question, sort of big picture. So, the management team's been talking about focusing more on developed markets, and that this has been not just a recent decision, but something that's been maybe more deliberate over a longer period of time. Can you talk about what's driving the interest to focus more on the developed markets and what that should mean for shareholders?
Sure. So I'll just give you a couple of data points in terms of how that investment thesis has played out over the past few years. We've invested about $25 billion over the last four years, and that's been in the U.S. and Europe. It's been the Telxius deal we did in Europe, the CoreSite acquisition in the U.S., plus InSite and a couple smaller acquisitions in the U.S. as well. And then we haven't done an emerging market M&A transaction during that kind of same timeframe. And at the same time, our internal CapEx investments in developing sites has gone down from, you know, roughly 70% of that in 2021 was in emerging markets, and that's down to roughly 40% this year. So when we talk about...
You know, directing our investment toward developed markets, this isn't a new thing. I think we're just probably being a little more explicit about what we've been doing and what we plan to do going forward. And what's underlying that is just making sure that we're creating the most long-term shareholder value. And so if you think about our international investment thesis when we first decided to expand outside the U.S., we had a couple components to that. The first component was that you could export our operating model and our operating capability across the globe, and you could get operational synergies because we consider ourselves to be a very good operator and able to tackle the types of operational challenges you see when you go globally.
And part of that component as well was that the demand drivers in those emerging markets would drive a lot of organic growth on the assets there because they're a little bit further behind on the technology curve, and so there's a lot of opportunity for sales in those markets. The second major part of the thesis was that, in doing so, we could elongate our growth curve and enhance our growth curve. And what I'm happy to say is the first two have held true, absolutely. We've gotten a lot of operational synergies. I will tell you, I believe that we're the best operator in every geography we're in, and that's because we're American Tower, and we know how to do this, and we've taken the know-how across the globe, and that gives us best-in-class margins.
We can even command a premium on pricing in some occasions. That's held true. The demand drivers have also held true. If you look at mobile data growth in the emerging markets, it's as high or higher than it is in the developed markets, and if you get to, you know, an economy like Africa: mobile banking, mobile healthcare, they're necessities for their way of life, so that demand is gonna continue in those markets. The second big component that's gonna elongate our growth curve has proven a little bit more challenging because the macroeconomic headwinds that you see in the global economy have affected those markets more than they have ours, and it's really the headwinds have come in two flavors. The first is carrier consolidation, and you know, we certainly saw that play out in India.
You know, we had some pretty dramatic consolidation there, and we've also had some FX headwinds as we've seen some currencies devalue. So as we've looked at the performance in those emerging markets, we've looked at that and said, "There are two things we need to do." The first is, we need to increase our hurdle rates because while we underwrote a degree of FX headwinds in there, you know, quite frankly, in the past couple of years, it's outpaced what we underwrote on that. And so we've raised the hurdle rates there, and we've also said that we want to decrease the overall company exposure to that type of risk. And so what we said on our last call is that pro forma for India, about 25% of our AFFO per share will come from emerging markets.
And as we have continued to direct more capital toward developed markets, as we continue to do that, you should see that come down over time, and we think that's appropriate to bring that number lower over time. So that's really what's driven a little bit of the change in investment philosophy. You know, number one, we can't source as many deals 'cause returns have to be higher, and number two, we do wanna decrease our investments relative to what we have in the past so that we have lower exposure to those economies, given some of the headwinds we've seen.
Very helpful. And, maybe we'll shift gears, talk about the domestic tower business and the leasing opportunity, obviously your biggest exposure in developed markets. Can you unpack the reasons that American Tower just seems to be seeing better leasing activity than your competitors? And I realize it's a hard question because there's a part of a comparison in there, but what are you seeing that is benefiting American Tower?
I can't talk about my competitors. I don't know what they're seeing. I'll tell you, I think I have the best assets and the best team in the industry, so I'd give me more business too. But I think if you look at what we're seeing in the environment here, it's very consistent with what the carriers are saying. You know, what we said in Q1 is that our application volumes in Q1 were up 70% sequentially over Q4. Now, that was a low base, but that's a pretty big ramp, and we had another sequential increase in Q2, and we're expecting to see similar levels of business in Q3 and Q4, and that allowed us to reaffirm our services guide.
Now, service is hard to predict, so I will tell you, it's there's variability in it, but that guide is based on the conversations we have with boots on the ground at the carriers and what they're gonna deploy. And if you look at what the carriers themselves are saying, you know, Verizon specifically said they're gonna take their mid-band 5G coverage up to about 70% by the end of the year. That implies, you know, a ramp-up in activity by them. Some of the other carriers have talked about other initiatives, such as, joining to one OEM. There's a level of activity employed with that as well. So we don't think that what we're seeing and saying is different from what we're hearing from our carrier customers.
And if you look at the kind of midpoint of CapEx guidance from the carriers, I think they're in the kind of $ 34 billion-$36 billion range, and that's right in line with what we thought the average CapEx would be during the 5G cycle, about $35 billion a year, and that's about $5 billion a year more than we saw in the 4G cycle. So what we're seeing on the ground and what we're talking about in our results, we think is very consistent with what the carriers are saying. We think that it's right in line with the guidance we gave at the beginning of the year in terms of our services, and it's also in line with what we thought was gonna happen in this cycle.
Let's see our survey results and see what our audience expects. So, 25% expand the annual organic domestic revenue growth rate to expand above 6%. 50% sustain 5%-6% range, and 25% of the audience expects the annual organic domestic revenue growth to fall below 5%. Now, based on the activity levels that you're seeing, how do you frame the future opportunities to grow organic leasing revenues?
That's a very clever way to try to get me to give 2025 guidance early. It's a little too early to give guidance for 2025, and what I would remind everyone is that activity and property leasing revenue is a little bit disconnected with American Tower because of our comprehensive agreements. And what we've been very public about is that we have two of the big three, plus Dish, at our comprehensive agreements. And what those agreements do is they smooth out some of the variabilities in terms of leasing that come with the activity levels in that. So you can't read much across from the activity levels to that component of it. We do have one carrier that's not in a comprehensive agreement today, and so there is some variability in terms of the timing in which we'll see the rent from them.
Yeah, we feel very comfortable that we'll get kind of the same amount over a period of time. It just may be a little bit choppier. You may have a little bit more variability quarter by quarter than you normally would. But what we're seeing, again, is very consistent with what we thought would happen in the 5G cycle. And when we put out our long-term guide, we had a certain level of activity we expected to see. Some of it was locked in, in the comprehensive agreement, some of it was not. We knew that that was gonna be there.
It anticipates the type of activities that our customers need to do to meet the growing mobile demand, and that's a combination of amendments to roll out 5G mid-band ubiquitously, and also to densify the networks to meet demand as uptake on the network requires it.
So for the customers that have these comprehensive deals, do you see times where they're gonna spend more with you than what they commit to? And what should we be watching to see if that could be a possibility for you in the future?
So every agreement's a little bit different. So some of them just cover amendments, some cover new amendments, and some level of incremental new sites. So they're all a little bit different. And the way to think about it is, if a carrier... we never just give an all you can eat, you can do everything you want on our network. So there's an anticipated activity level that comes with those agreements, and if the carrier goes beyond what we anticipated, then there could be some upside from that. In terms of what to watch, when we see those upsides, we'll tell you, so we'll be very transparent about that. But in terms of what's underwriting those existing guides, can I give you some of the components of that, so you can-
Yeah
... you can see the demand drivers. So when we put that guide out, we were looking at this 5G cycle, and, you know, we've got some really smart folks on my team who you know what frequencies are gonna be available during the relevant time frame, you know what equipment's gonna be available to be deployed. You know that mobile demand's gonna increase 20%-30% per year in the U.S. And so you can take that and then look back at 3G and 4G and figure out where that activity's gonna occur, and that's how we create our kind of demand model. And when we do that, we look over that multi-year period of time and say, "you know, on average, to meet the consumer demand, here's what they need to deploy," and that's how we constructed that.
What's not in there is a 5G killer app that makes demand spike up more than 20%-30%. We don't have, you know, independent fixed wireless network installations in there, and we're not seeing that today. The carriers are using existing network assets to do fixed wireless, but if that was a new use case, that could be incremental on that. We're not predicting a new carrier, so we're not predicting that the cable cos or a cloud provider or someone else comes in. So that's not there. And with Dish, we've underwritten only what's contractually committed in our comprehensive agreement. So if they got a new customer and wanted to expand their network beyond what we anticipated or needed to provide more bandwidth than we thought, that can be upsides as well.
And in terms of one of the recent trends that we've noticed is that churn's fallen to below 1% in the domestic segment if you take out that Sprint merger-related churn. What's happening to push churn to kind of below the longer term ranges that the company's previously indicated, and is this a sticky place that could also help that organic growth potential?
So if you look at our historical churn percentage, it's been kind of 1%-2%, and I think what we've been pretty public about is we expect that to trend to the lower end of that range, you know, as we get through some of the churn that we've had in the past and the Sprint churn. And I think one of the things driving that is, you don't have the regional carriers that have consolidated the way we did in the past. So you don't have a Cricket or a MetroPCS and those types of things. Now, some things that we're watching, you know, we have U.S. Cellular out there, and while our overall exposure to them is pretty modest, it's less than 1% of U.S. revenues, less than 0.5% of global.
Those agreements are set to renew over the next couple of years. Our average remaining term's about two years on those. So to the extent that that merger gets approved, and, depending on how they integrate the network, there could be some elevated churn from that. So that's one thing to watch. But overall, when you look at the rest of that ecosystem, there just aren't as many consolidations in the industry that are happening out there, and that's what was driving a lot of the years where you saw that churn ticking up closer to 2%.
I'm gonna introduce our next survey question, and so the next one here is. And this is, you know, some of the investor feedback that we've received has kind of raised this question, of, for our audience: Do you view American Tower as, I guess, the terminology that I've heard, from the buy side, is a bond proxy, with share performance primarily influenced by the level of Treasury rates in the market? So we're gonna go to our audience, see what they think. Steve, look forward to getting your view on this as well in a moment. But maybe just finishing up the domestic conversation, so what's the potential for American Tower to get this last carrier not on the comprehensive on a new one, whereby..., then you have even greater visibility across all of your customers.
Can you give us an update on your exposure to DISH?
So we're always talking to all of our customers, even way before something expires. The ink doesn't even dry on the contract before we start talking about new things with a customer. And we're very comfortable operating either in or outside of a comprehensive agreement. In fact, there have only been a couple of years in the last decade where we had all the carriers under a comprehensive agreement. And what happens when you're not in a comprehensive agreement is usually there's a mismatch between what we think they're gonna do and what they think they're gonna do. I think all things being equal, the operational efficiencies we both get out of it, the visibility that we get into revenue, they get into expense, you know, I think it's safe to say we all like those aspects of it.
So typically, you know, when we're not in a comprehensive agreement, it's just because we don't agree on what the future holds. And we're very confident. You know, I've got a really good team who's good at putting together that same type of forecast I talked about for the five-year guide. We do the same thing on an individual customer basis. And so, you know, we know what we think we're gonna do over a time period, and, you know, we don't sign these agreements to discount, to get into those agreements. We sign them for the operational efficiency, the customer friendliness of them, et cetera. And so we're perfectly happy to be patient and wait.
So in terms of the prospects of that, you know, you've seen us go into periods with a customer where we didn't have one, and those expectations aligned, and we got into one. You've seen that not happen sometimes, and I can't predict it, so we'll see how it plays out.
Let's go to our audience and see the results of our survey. So, 40% yes, they view AMT as a bond proxy, and 60% no. What's your view on how American Tower views its own company in terms of the influence of rates?
Well, if rates are the only factor, I'm working too hard. I'll say that. I think that there's a lot to be gained in terms of running the business really well. But you know, clearly, rates do have an impact on it. You know, I would mention, in case anyone missed this, we did get an upgrade in our debt ratings recently, so we're happy about that. And you know, we're a REIT, and REITs do have some correlation to the bond market, so I can understand why people think that way. But I will assure you, we work really hard to make sure that our performance commands a premium over what you're seeing in the bond market by making sure that we're...
Again, my team's tired of hearing me say this, you might get tired of it too: Maximizing organic growth and minimizing costs, and that's gonna be a focus as long as I'm in the chair.
And, you know, you mentioned the upgrade. So is there any evolution in your view. We'll kind of skip ahead on just the capital allocation side, since you mentioned it. Does that influence where you see target leverage for the company or how you would approach shareholder returns?
I think, I don't think that it changes anything in terms of our view of what our priorities are and how we're planning the business. It's certainly nice to get the recognition that the work that we've been putting into the business, in particular, focusing on quality of earnings. You've heard Rod talk about it, you've heard me mention it, and when we talk about decreasing our exposure to emerging markets, part of that is increasing the quality of earnings, and we do think that that justifies a better debt rating and, frankly, a higher multiple on the company as a whole.
So that, you know, we think that the upgrade that we got was a recognition that by divesting the market in India, by focusing on delevering, you know, by focusing our CapEx in developed markets, that improves the quality of earnings and makes us a more reliable partner and worthy of a premium. I would argue it's both on the debt and the equity side.
Right. And that actually just brings us to our last survey question. And we get this question from investors, so I thought it'd be helpful to ask our audience this question of: Should American Tower simplify its asset mix? And the choices we're offering are: No, the current asset mix should generate the best long-term value for shareholders. Yes, divest international assets and become a domestic-only tower and data center provider. Yes, become a domestic-only tower provider, divest all other assets. Or Yes, divest data center assets and just become a global tower operator. So we'll see what our audience thinks of this, but maybe we can just start talking about discussing some of these segments.
You know, what have you learned, maybe migrating over to data centers for a moment, of owning CoreSite, and how do you view this platform expanding over time?
Well, look, we're really excited about the performance of CoreSite. And again, I'll kind of remind everyone of the investment thesis there. So we believe that over time, there will be a convergence between wireless and wireline networks. And we didn't buy CoreSite to buy a data center company. We bought CoreSite for the interconnection ecosystem that they have there. Because as we start thinking about what that convergence looks like over time, it's critically important that if you do start putting compute toward the edge of the networks, it has to connect back to all the other users. And to do that, you have to land it in an interconnection ecosystem.
And if you're, you know, if you're just dropping a cabinet and running a fiber back to a data center, there's some value there, but the cross-connect environment is where the real value is created. And so what we saw the opportunity is that if we want to be a major player in the edge when it unfolds eventually, which it's not here today, but when it does, we need to control the interconnection ecosystem. That was the strategic thesis for why it made sense, but the business we bought was a fantastic business, and we knew that. So we didn't underwrite any of that edge revenue in the underwriting.
We looked at CoreSite and said, "We can create more value in the current asset operating it," and changing a little bit of the investment thesis they have in terms of providing a little bit more capital. We've also got the benefits of having a robust demand ecosystem there that's really more than what we thought when we originally bought it. I look at that acquisition. It's performing extraordinarily well. We've had the opportunity to increase prices, which has helped us actually underwrite higher yields than what they were writing previously. It's let us invest capital in the US in a way that's gonna create, you know, mid-teens yields, stabilized yields, once you kind of fully lease up the facility and get to a stabilization rate. We think it's a great use of capital.
So we're excited about the way the business is performing itself today, and we also still believe that this long-term thesis will play out. But in the meantime, we have a great asset that's growing really well.
It kind of brings us to another question that we've asking a lot of the companies here this week. How can the emergence of GenAI help revenue as well as cost for American Tower? And which is the greater opportunity between these two for value creation for American Tower?
Clearly, the revenue side, I think is gonna be the biggest opportunity, and I'll tackle it from both the data center perspective and also the tower perspective. It's creating opportunities today in the data center world, and that's coming in a couple of flavors. Now, we're not the right environment for large language models. You know, that's gonna be a hyperscale campus somewhere else. That's not our business. We're an interconnection hub. But the way we all interact with that large language model is through what they call the inferencing layer, and you need a distribution channel for that, and, of course, that's a perfect place for that. So we do see interest in that. We are writing some business for the inferencing layer.
We're being very selective on that because there's a lot of AI companies springing up, and we're not gonna take counterparty risk where we don't have to, so we're not doing that. But we are seeing demand there, and it's driving up prices in the ecosystem in the markets as well. But the other area of demand that we're seeing from generative AI is kind of tied to our bread-and-butter business, which is hybrid cloud deployments by enterprises. Because as enterprises wanna take advantage of these large language models, they don't wanna put their data out in a kind of a public environment. So they're creating their own large language models connected to a cloud on-ramp. And again, we're the perfect place to do that.
So we are seeing the enterprise customers that have been our bread and butter for a long time, expanding some of their installations to take advantage of AI as well. Now, I'll flip to the tower side. You're starting to hear talk about putting AI on the phones and using the networks for it. I think it's too early to tell exactly how that's gonna play out. The way, you know, at least the way I use my phone today, if I'm using ChatGPT, it's either text or, you know, a photo. You know, probably just playing around with the photo saying, you know, "Make me look like Governor Schwarzenegger," or something. But in the future, I think you'll see video applications that are being done mobile, and that's where the real demand is gonna come on the wireless network.
And just like when social media, when it was just, you know, text or a still photograph, it wasn't a. It was some uptake, but it wasn't a huge demand on the networks. But when you went to video, things like, you know, Facebook Live and TikTok, things like that, that's the hockey stick of demand that we've seen for a decade now. And when you look at AI, when you start seeing things like video applications, that's when you're gonna see a lot more demand on the wireless networks. There's some other stuff like facial recognition, you know, that requires, you know, low latency, you know, kind of high bandwidth streaming and things like that. Those types of applications as well are gonna put demand on the network.
So I think it's too early to tell exactly, you know, when that happens, but I think you'll clearly see the video applications coming out.
Can you give us an update on what's happening with India right now in terms of timing to potentially close the transaction, as well as, do you have a view now of where the monetization's ultimately gonna end up when you tally up all the parts to it?
Sure. So we received approval from the Competition Commission in India, and that was the regulatory hurdle that we needed to achieve to close it. So now it's just working through customary closing conditions. You know, like any deal, the lawyers have to spin through that. And so we're very confident in our ability to close it by the end of the year, as we've stated previously. And we probably won't get any more specific than that until it actually closes, and we'll give you guys a disclosure then when it happens, and also include some financials that give you a little bit more visibility, you know, and kind of some pro formas on that.
So in terms of the proceeds for it, I'll just kind of remind everyone that the total value that we expected to get was about $2.5 billion. That comes in a couple of flavors. There was an enterprise value of about $2.1 billion, then there was the optionally convertible debentures, OCD, that we had, which we have now converted and sold, and there were some receivables we're retaining the rights to, and then there's also a ticking fee in the agreement. At this point, we have exercised and sold the OCDs, and we've repatriated about $325 million of cash out of that. There's another $20 million-ish there that we should repatriate this quarter.
When you think about that, then the proceeds of closing should be another, you know, call it $2.1 billion to get us to the $2.5 billion.
Very helpful. And maybe taking a step back across the broader international arena, you know, FX has been something you've been dealing with since you broadened outside of the U.S. And I think in a recent discussion, you were describing how you're moving towards CPI escalators in a number of markets. Where are you on that front in terms of the international arena, trying to reduce the FX risk? And if you look back historically, is that a very effective way to manage that currency risk?
Sure. So we manage it a couple ways. So CPI-linked escalators have been something that we've done in every market except for India, and then in France. We have a fixed escalator in France. But even in our Telxius deal, it's a CPI-linked escalator, no ceilings, no floors. That's important for us in all those markets. But that's not the only way we manage it. We also have a large portion of our cost base is pass-through in those markets. So if you think about Africa, power is really the major cost piece, and we pass that through, and that's, you know, 75% of our cost base in Africa. In Latin America, land is our biggest cost base, and that's again, in the kind of seventy-ish range of expenses, we pass that through as well.
So you get a little bit of a natural hedge on that because you're passing through your cost base on it. We have also used some dollar pegging mechanisms, a market like Nigeria, where we have a component of the rent that's pegged to the dollar. So we have used a number of different mechanisms there. And in terms of kind of going forward, you know, we view CPI-linked escalators as table stakes in any emerging market or any international market, not just emerging markets, in terms of how we would look at that. We haven't historically used derivatives to hedge. You know, it's something we look at. We've talked about it. It's just complicated, and it doesn't always make sense to do that.
But, we've also used some local borrowing in a place like Europe, where we've borrowed. You know, we've got some borrowings in euros that helps hedge any currency risks there as well.
And just thinking about this international arena, maybe you could just take us around the world briefly and give us a fundamental update. So the regions and markets that are performing well, and you're seeing maybe accelerating trends and maybe those where things may not be where you want it for, you know, whatever reason you can share with us.
Sure, so I'll start in Europe. Europe's doing very well. We're seeing an uptick in new business there as well. If you look at kind of our guidance, we've been ramping that up a bit, and it's a combination of two things. One is that our customers continue to build, as we're seeing some amendment activity there, but it's also an increase in our operational capabilities in a place like Germany, where you know, quite frankly, it was pretty hard to deploy sites at first, and we've gotten better at that. We've parachuted our teams in across the globe, and it kind of fixed some of the challenges there, and we're also building more sites in Europe, so we're expecting to build about 500 this year. That's up from about 400 last year.
Europe's is performing very well. In Africa, on the demand side, we're seeing a lot of lease up. So from a sales perspective, it's very healthy. We're seeing a lot of activity by our customers there, a lot of new leases and a lot of amendments. You know, we did modify an agreement. You might have seen an announcement by MTN, where we had an agreement before that was gonna support about 2,500 sites. That's down to about 2,100 , but it's a higher percentage of those are gonna be co-locations now versus new sites. So that's very much in line with our goal of going a little bit capital light in those markets and focusing on the organic growth, so that's a good opportunity for us, but on the demand side, Africa is doing really well.
The challenge in Africa has really been FX and some of the devaluation in Nigeria and other markets there. That's been the challenge. Latin America, growth is a little bit more muted, and that's predominantly because of a couple factors. The first is they've been a little bit slower to roll out 5G. In Mexico, 5G spectrum has not gotten into the hands of the carriers as quickly as we'd like to have seen it. In Brazil, there's some 5G rollouts going on, but the major carriers in Brazil are busy integrating Oi. And, you know, the three main carriers there bought Oi's assets, and as they're integrating those assets, they're not as focused on building, 'cause they're still trying to optimize their network.
And then we are seeing churn in Latin America because of the Oi transaction as well, and that comes in a couple of flavors. Oi was both a wireline and a wireless company. On the wireless side, we're seeing some churn this year. We expect some additional churn that'll bleed over the next couple of years. On the wireline side, there's a judicial process similar to a bankruptcy, and we did see some churn this year, and we modified our agreement with them, and it expires in 2027. So when you look at Latin America, we're expecting our growth in Latin America to be pretty muted and being in the low single digits for the next several years because of that. Now, having said that, the dynamics in that market are still the same as they are anywhere else.
Mobile data usage is going up 20%-30% a year. The networks are getting strained. They need to invest in their networks. And so what we're expecting to see is when we get through this period of consolidation churn, that you'll have fewer carriers, but they're gonna be more financially stable. You have increasing demand by the consumer, so we think we're gonna see that return to a healthy level of growth once we get through that. But today it is more muted in Latin America, and then we already talked about the U.S. and how well things are going here.
Good. Are you ready to see the results to our survey?
Sure.
Okay. So, the question is: Should American Tower further simplify its asset mix? 14% no, the current asset mix should generate the best long-term value for shareholders. 57%, divest international and become a domestic-only tower and data center provider. 0% for yes, become a domestic-only tower provider and divest all other assets. 29%, divest data center assets and become a global tower provider. So a range of perspectives. You've been at the company a long time, a key part of the strategy, leading the company now. How do you look at the asset mix and what can create the most value for shareholders?
Look, I'll just reiterate what I said on our last earnings call. And that is that we are looking at our global portfolio where we sit today, and we're trying to figure out what creates the most long-term shareholder value with each segment of it. And so, as we look at those various segments, we're looking at the performance that we see today, the types of improvements we can make, things like margin expansion, cost control, things like that, what the alternatives would be. What I would tell everyone is that the board and our management team are always looking at all the alternatives, and those strategic options that are out there is something we talk about regularly. And so, the decisions that we make are geared toward that long-term shareholder value creation, and we'll continue to do that.
You know, as I look at the portfolio today, I think there's a lot of opportunity for us to continue to improve the things that aren't performing as well as we'd like to see, and then we can maximize the ones that are performing well as well. That's kinda what we're focused on today. We'll continue to evaluate the portfolio, and if we ever think it's gonna create more value to do something different, we will.
When you take your 2024 guidance at the midpoints, is there a way to unpack that to just... If you kind of look past the Sprint churn, look past some of the rates, you know, that you've had to absorb, and then the, you know, divestitures, the deleveraging, is there a way to unpack what that underlying AFFO per share growth is? And then the follow-up to that would be, does that- should that inform us of the type of growth American Tower can achieve in the future?
Yeah, we haven't been explicit about putting a number out on that, but we have what we have tried to do is, in our supplemental, provide enough information that you guys can put kind of your own, your own, calculations on that. So we think we've kind of given you the piece parts, but we haven't really put a number out there yet that gives you a specific number on that.
Do you still believe that international should grow faster on average than domestic?
So let me just run through the growth algorithm-
Yeah, please.
And then I'll answer as part of that. So if you think about our long-term growth algorithm, so what we believe is our developed markets should grow mid-single digits, so that's the U.S., Canada, and Europe. That, once we get through the carrier consolidation churn in the emerging markets that we're seeing today, they should grow a couple hundred basis points faster. So yeah, the answer is yes. Over time, they should grow faster. Today, given the carrier consolidation churn we're seeing, they may not grow faster, or at least not consistently, as we get through that churn. And then CoreSite, we expect to grow upper single or low double digits as well. And then you add into that the additional revenue we can generate from our CapEx program by investing in new assets, again, predominantly in developed markets.
You couple that with cost controls and an expanding gross margin, and we think that's a recipe to see, you know, mid to upper single-digit growth. You know, even absorbing some of the headwinds that you have to factor in, like refinancing costs, you know, there will be some headwinds there. In our supplemental, we've put our debt stack out. You can see the maturities and the rates and make your own decisions about what the refinancing costs would be. Lower, since we got an upgrade, but there'll still be some refinancing costs, and then make some FX assumptions on that as well.
And, you know, within that context, you know, talking about capital allocation earlier, as you look at getting to this debt leverage target of five times or below, is there a significant opportunity to ramp that development program as you look out over the next couple of years?
There is, and the way we'll look at it when we get to the 5.0, is that opens up the realm of possibilities on where that next dollar of capital goes. And the way we'll evaluate that is we'll look at share buybacks, incremental development CapEx in our current programs, M&A, further delevering, or raising the dividend. And the way we're gonna make that decision, it's gonna be a math-based approach, and we're gonna figure out what gives us the greatest long-term shareholder return based on all the variables that goes into that. And that's really how we think about capital allocation going forward, is that long-term. Look, I'm a big shareholder. I care what happens long term on that stock price, so that's how we're gonna make those decisions, is what creates the most value for all of you guys over time.
Steve, thank you so much.
Thanks.
Thanks.