Ladies and gentlemen, thank you for standing by. Welcome to the American Tower, CELSIUS Towers Acquisition Conference Call. As a reminder, today's conference is being recorded. Following the prepared remarks, we will open the call for questions. I would now like to turn the conference over to your host, Igor Kudlisky, Vice President of Investor Relations.
Please go ahead, sir.
Good morning, and thank you for joining American Tower's conference call regarding the Telsius Tower transaction we announced earlier today. We've posted a presentation regarding the transaction, which we will refer to throughout our prepared remarks in the Investor Presentation section of our website, www.americantower.com. This morning, I'm joined by Tom Bartlett, our President and CEO and Rod Smith, our Executive Vice President, CFO and Treasurer. Before I turn the call over to Rod to walk through the key financial points around the deal, I'd like to remind you that this call will contain forward looking statements that involve a number of risks and uncertainties. Examples of these statements include those regarding the And our revenue, gross margin, adjusted EBITDA and consolidated AFFO estimates and our expectations regarding future growth, Industry trends, our net leverage range and any other statements regarding matters that are not historical fact.
You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward looking statements. Such factors include the risk factors set forth in this morning's press release, Those set forth in our Form 10 ks for the year ended December 31, 2019, as updated in our Form 10 Q for the 3 months ended March 31, 2020, and in other filings we make with the SEC. We urge you to consider these factors and I remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. And with that, I'll turn the call over to Ron.
Good morning and thank you for joining us on the call. As you saw in our press release, we have signed a definitive agreement to acquire A portfolio of communication sites from Telefonica, sites that are located within select markets across Europe and Latin America. I will start by highlighting the key financial elements of the transaction. Next, Tom will discuss its strategic significance, including the expansion And before we conclude the call, we will open the lines for your questions. As summarized on Slide 3 of our presentation, we expect to acquire approximately 31,000 existing sites, which consists of roughly 12,500 sites in Germany, 11,300 sites in Spain and another 7,100 1300 build to suits, which are expected to be completed over the next 5 years, primarily in Germany and also in Brazil.
Including the growth capital we plan to deploy for these new builds, we expect to dedicate nearly $10,000,000,000 towards this deal. The existing sites have an average of 1.3 tenants per tower with Telefonica serving as the anchor tenant and the portfolio has substantial Remaining capacity for incremental tenancies. In its 1st full year in our portfolio, pro form a For the impacts of the committed new builds I just mentioned, the TELSIUS sites are expected to generate a total of approximately 7 $5,000,000 in property revenue, approximately $410,000,000 in gross margin and approximately $390,000,000 in adjusted EBITDA. Therefore, the implied all in adjusted EBITDA multiple is under 26 times, which We believe is attractive given the high quality nature of the assets, the benefits of our enhanced relationship with Telefonica And of course, the portfolio's very strong growth prospects. Importantly, this multiple is calculated under US GAAP Accounting.
If we were to look at this from a European IFRS perspective, that multiple would be significantly lower given the treatment of ground leases Our projection that on a consolidated basis, the assets will generate an organic tenant billings growth CAGR of around 6% through 2025. And turning to the funding side of the equation, we expect to finance this transaction in a manner consistent with maintaining our investment Great credit ratings, which remains a key priority for us. Given the strength of our balance sheet and the current conditions of the debt capital markets, we anticipate Having access to the required capital at very attractive rates. In addition and similarly to the way we financed our 20 15 tower transaction with Verizon, we expect to temporarily bring our net leverage above our stated 3 to 5 times target With a path towards returning to that range over time. We also expect it to be an equity funding component to this transaction, Again, similar at a high level to what we did back in 2015.
As always, we will be targeting an optimal financing path that And subject to government and regulatory approvals, we expect to close on these assets across multiple tranches in 2021, likely beginning in the Q2. And lastly, I will note that we have a fully committed bridge loan in place to support the closing process. In conclusion, we believe that this transaction highlights our patient, disciplined and highly successful approach to strategic capital allocation. This is an economically attractive transaction for us, but just as importantly, it is transformational for our European business, Delivering significant scale in Germany and Spain, where we expect to drive some of the highest organic tenant billings growth rates available in Europe. It also adds to our existing footprint in Latin America and significantly enhances our relationship with Telefonica, a key customer and important strategic partner.
As always, we look forward to providing you with more updates as we begin closing and integrating these sites into our global portfolio and capitalizing on their significant long And with that, let me now turn the call over to Tom.
Hey, thanks, Rod. Thank you everyone for joining us today. We are very excited to announce our acquisition of the TELSIUS assets and I'm pleased to share with you some of the key points around the my comments, we'll go ahead and open the line for any of your questions. Since entering Europe through our acquisition of around We're very familiar with the various European markets and as a result have spent a significant amount of time identifying the most attractive markets, Counterparties and Assets. With that said, until now, we've not found a scaled portfolio with the characteristics that we are looking for at a price point that we felt enabled us to achieve our required returns.
This has been due to a variety of factors, including valuation hurdles, Regulatory considerations, asset quality concerns and organic growth challenges among others. We believe that the TELSIUS assets though on the other hand are an excellent fit for American Tower. Underpinning the strategic rationale for this transaction are 4 core concepts, which we've highlighted on Slide 4 of our slide deck. First is our strong belief that the markets where the TELSIUS assets are located are highly attractive In Europe specifically, we view Germany and Spain, which comprise the vast majority of the TELSIUS asset base as 2 of the premier From a variety of perspectives and now coupled with our French presence, they will collectively provide us with an excellent market position to grow. 2nd, we believe that the size and scale of this portfolio will enable us to more effectively compete with other large tower companies in the region.
While positioning American Tower is a clear leader in the European Communications Infrastructure market. 3rd, the TELSIUS assets are high quality, well located and are supported by long term beneficial relationship with Telefonica through this transaction and expect this to be a clear win for both parties. And finally, we believe that this asset base is a strong long term organic growth profile, both in Europe and Latin America, with future leasing activity expected to primarily be driven by high quality Tier 1 mobile network operators. Turning to Slide 5, I'd like to dig a bit deeper into the strategic elements of this transaction. First, to the obvious scale benefits.
This transaction will be transformational for us in Europe, catapulting us into a position as one of the Top 2 independent tower companies on the continent and a leader in Germany and Spain. And while we've had success with a smaller European presence Over the last 8 years or so, we clearly understand the benefits of scale in the tower business and are confident that a more comprehensive portfolio Focused on what we believe to be the 2 of the most attractive markets in the region will pay significant dividends over time. In Latin America, we're adding about 7,000 existing sites to this deal across 4 of our markets. We view this as an excellent to further strengthen and expand our existing business. Along with those scale benefits comes the ability to develop increasingly Strategic deeper partnerships with key multinational tenants.
For example, as the anchor tenant on all of the sites we're acquiring, Telefonica is committed to a long term non cancelable term of around 7 years on average. In addition, We now expect to have more meaningful opportunities to drive lease up with the other Tier 1 MNOs, particularly in Europe, where we will have a greatly expanded asset base. And finally, as 5 gs deployments accelerate across these markets, we expect That our material or larger presence will position us well to enhance our platform expansion initiatives, particularly in the context transaction to augment our go forward organic growth trajectory. In Europe, where organic growth has been relatively modest for us in the past, We anticipate that these assets will generate average organic tenant billings growth at least in the mid single digit range over the 5 years, representing a significant acceleration. And this is due to a combination of increased 5 gs spending, continued carrier investments in 4 gs and to modest churn expectations.
Meanwhile, we expect the Latin American sites we are acquiring to also generate solid organic tenant billings growth rates Over the long term, as 4 gs deployments accelerate throughout the region. The final key strategic element I want to highlight We've always sought to strike an appropriate balance between the higher growth potential of emerging markets and the attractive stability and consistency of more mature regions. And this deal fits squarely within that objective. I also want to specifically point out that we believe that this transaction will further expand our access to the European Capital Markets, which we expect will continue to be extremely attractive from both a rate and a continuity perspective. In closing, I want to reiterate our excitement around The TELSIUS sites are well built, well located assets with an attractive long term growth And a strong committed partner as an anchor tenant.
We have solid experienced management teams in place eager to start integrating these assets into both our existing European and Latin American operations, supporting Telefonica and marketing them to new potential tenants. We look forward to moving forward with the closing process and leveraging this portfolio to continue to drive compelling sustainable growth and returns for our stockholders for years to come. With that operator, please open the line for questions.
Thank
And one moment please for your first question. Your first question comes from the line of Brett Feldman. Please go ahead.
Yes. Congrats on the deal and thanks for taking the question. In terms of the multi year outlook That you provided in the presentation and you just walked through. Can you give us a little insight into the visibility that's behind it? I'm interested in how much of that is Maybe based on an existing funnel, whether it's from Telefonica or maybe other carriers, how much of it is just your read of the market?
And then to what extent do you think that moving the portfolio into your independent ownership is going to accelerate the ability to lease up the towers to other carriers beyond Telefonica. Thank you.
Yes, sure, Brett. Thanks for the question. A lot of the growth It's based upon kind of current run rates, a visibility into the funnel, as well as working closely with Telefonica themselves, I mean, we expect minimal churn, obviously, they're committed builds. And what we're seeing in, Particularly in Germany and Spain, it's a very similar kind of 5 gs build. They have new spectrum, interestingly enough, they have A mid band spectrum that we're looking at even in the United States, there is there are MVNOs who have Put themselves and have spectrum themselves and are actually looking to build.
And so we are looking at this and from as I said, really based upon kind of the current run rates, what we expect and what we've been working on with Telefonica themselves. And so a good visibility in terms of the growth rate. And we expected candidly, even our own markets with 5 gs being deployed, particularly in Germany, An uptick clearly in the core organic growth in that market over the next several years as well. And your second question, Brett?
It's just, obviously, Telefonica makes up the vast majority of the revenue in the existing assets. So it seems under leased to non Telefonica tenants. Do you think moving this into your independent ownership is going to maybe open up the leasing opportunity that might not have been there before when it was a captive portfolio?
Yes, that's what we've experienced in every other market that we're in. We approach the business differently. It is our only business. And as a result, we think that there is Significant opportunity for us to be able to take advantage of this portfolio now in a neutral host type of environment. So clearly that's what we expect.
And as I said, we've You bet.
Your next question comes from the line of Simon Flannery. Please go ahead.
Great. Good morning and thanks very much for doing the call. I think I wonder if you could just talk a little bit more about the master lease agreement. I think you said it was 7 years. Any color on escalators reserve space?
And perhaps you could just clarify on the BTS, what exactly is the inclusion on EBITDA to get to that 390,000,000 Before and after the BTS. Thank you.
Yes, sure, sure. I mean, the escalators are like many of our other national markets are CPI based. So there is no surprise there. No reserve space or any of those types of things, Simon. I mean, it's a Traditional colo amendment type of their market.
And as a matter of fact, given the densification in the market, we expect, probably a higher weighting towards new colocations, Particularly given the fact that we're going to be marketing these sites that haven't really been marketed to any third parties before. So We would expect more co locations.
And they physically can handle 3 or 4 tenants?
Yes, they can. One of the issues that I've always had, we've talked about in the past, is that in certain markets, in certain areas, The height of the sites themselves, and these are all 30, 35 meter sites. And so can significantly handle more tenancy. There will be some startup CapEx, as we always have some startup CapEx in just about every deal that we've ever done before. But it's really minimal Going forward, so we wouldn't expect that.
And as a matter of fact, even in Germany, given that the population is largely There's a significant rooftop presence that comes along with this transaction. And candidly, that's one thing that we've struggled with a bit With our existing portfolio, we haven't been able to get that rooftop presence. So if you look at Vodafone or even DT, They have a significant rooftop presence and which is really an important in terms of being able to service that population. And so by putting our hands on this particular Portfolio, we work our way right into having that significant rooftop presence, which is critical for us.
Right. And on the BTS?
And your other question was?
Just how much what's the BTS contribution to that $390,000,000 of pro form a EBITDA?
Yes, it's about $35,000,000 of EBITDA.
Yes, great. Thanks a lot.
You bet.
Your next question comes from the line of Nick Del Deo. Please go ahead.
Hey, good morning. Thanks for taking the questions. First, regarding The 6 year, 5 year organic growth forecast, how much of that do you think comes from Telefonica versus other carriers? And do you see that 6% come in relatively evenly over the 5 years or is it, say, back end loaded?
It's actually pretty evenly spread Candidly, I think in terms of how we're looking at that right now, I think a lot of that growth is going to be coming from Going there, I think it's going to make our portfolio being opened up very attractive in both markets. We had Leading really leading position in Spain with Telefonica as the anchor as you would expect. We're the only independent tower company in Germany. So we think as a result of having that neutral host market position in those markets that we'll see some Really sizable growth coming from other the other carriers themselves.
Okay. How does
higher candidly, and one of the issues that we've had in the past have been kind of twofold. Where is really the growth going to be coming from, First of all. And then secondly, what is the capital that's going to be required to enable those sites structurally to be able to handle those And those are the two elements that have impacted our valuations, which made us unsuccessful Annaly, in terms of looking at transactions. And so the growth that we're seeing right now is Interestingly enough, the markets look very much like the U. S.
Markets in terms of numbers of wireless carriers, as well In terms of even tower codes themselves. And so we're looking at the growth really coming from the continued 4 gs build, 5 gs. They're really at their infancy in 5 gs. I mean, Telefonica, I believe, is looking to get to kind of half of the markets In Germany, for example, by the end of the year, they've rolled out 5 gs sets really at the back half of last year. And so we're looking at the growth really to come from the same kinds of elements as we're seeing really in the United States themselves.
And so as a result, we're seeing And so as a result, we're seeing real growth coming from the markets. And we're Very excited about what we're seeing going forward. And so and by the way, we saw that even with our existing business coming out of kind of as we've talked about coming out of Looking at some of the spend that the carriers were making into their 5 gs networks, I clearly think that the European players are really wanting to regain that 5 gs presence and that technology position that they had many years ago. And so we're excited about what we're seeing going forward relative to new growth.
Okay. That's great. And one last thing. I'm sorry, go ahead.
Sorry, Nick. This is Rod Smith. So just one quick additional So we are very excited about the additional real growth, but also as Tom mentioned earlier, we do expect a lower level of churn And then we see in some of the other portfolios that we reviewed in Europe and a lot of that, of course, is contractual with Telefonica as an anchor And so there's good visibility in the churn picture here, which certainly is helpful for us in terms of growth rates.
Okay. That's great to hear. And one quick Just to confirm, you're buying these assets outright, not through your JV?
That's right. We're buying the assets outright. And relative to our capital structure going forward and things like that, we'll provide more color in terms of how that will materialize.
Okay, great. Thank you so much.
Your next question comes from the line of Colby Synesael. Please go ahead.
Great. Maybe just a follow-up on that. You do have the JV with PGGM. Just curious why they're not being included or maybe based on what you They might be, it just hasn't been disclosed yet. And I guess as it relates to the balance sheet, this deal is going to be done over tranches.
Are you intending Do the full equity raise, the full debt raise all at once or is that going
to be spread out over the course of
the year? And then Just my second question has to do with just the balance between U. S. And international. The company in the past has talked about trying to maintain some, I think, percentage coming from the U.
S. Has your views on that changed and based on just the sheer size of this deal, is it more likely that some of the future transactions
Let me try to take those and Rod can fill in some of the gaps. We anticipate some of our TCGM participation going forward, and we'll disclose more of that going forward. But they're very excited about the transaction as well. And they've been a great partner. And so we look forward to having them participate in this in whatever way that they feel that they Relative to the capital raise, I mean, I'll leave that to Rod to answer, but we'll take a look at, again, being opportunistic in the market And whether we're looking at kind of once in the market or twice in the market, I think Rod will be working that through with his team.
He's done this very well in the past. We've raised similar levels of capital. So we'll take advantage and working with our advisors Figure out the right timing to be in the markets themselves to be able to finance it. As you all know, we've got a bridge In place to be able to support the transaction out of the gate. And relative to going forward, Colby, the way we've always approached our capital allocation is really looking at where we can create The most net present value.
We've been fortunate in terms of having a nice balance between emerging markets where we're able to get some outsized growth versus our more developed markets where it's more predictable, solid growth. And this deal, I think, as I mentioned in my remarks, It fits really well within that structure. It provides perhaps more predictable kind of growth rate, more growth rates Consistent with what we've seen kind of in the United States, predictable growth rates, I view Germany as just being real Crown jewel candidly in the marketplace, particularly given our presence in that market. And they're taking that leadership position in the region From a 5 gs perspective, as well as in Spain, having Telefonica as the anchor there, and that being their home market. So they obviously have the market share in that particular country.
We just look at those two opportunities, those two markets as being really a terrific With our other presence that we had in Europe. And so we'll take a look at all transactions going forward. As I said, where we can create the most NPV and the most value and we'll look at those in the typical way that we always have And determine whether we want to move forward with them or not.
Yes. And Colby, maybe I'll add a little bit on the financing Just as a reminder, we do have a fully committed bridge to help with the closing process if needed. But certainly, our intention is To finance this deal consistent with our investment grade credit ratings. And then if you think back to 2015 when we did the GTP Verizon acquisition, The combination of those two transactions was similar to this transaction. So in terms of our leverage, stated leverage range of 3 to 5 times.
We do anticipate going above that in a similar way that we did back in 2015. And then we would delever back to our stated range within a probably within a couple of years or so, in that kind of a Strategy and that would be entirely consistent with maintaining our investment grade capital. And then the additional capital, we'll be looking at all different sources of capital. Certainly, with our strong balance sheet, the quality of these assets and the quality of our company, we have a lot of different options. We think the debt capital markets will be very constructive for us.
You know the interest rates have been very low recently. You've seen us in the market, both in the USD market and in the euro Mark, so we'll certainly be looking at all of those sources as well. And as I said in my prepared remarks and as Tom said, there will be Some portion of this purchase price that will be funded with equity and our view will always be to try to minimize the dilution and maximize
Have you given any color in terms of The magnitude of accretion to AFFO?
We have not. In my prepared remarks, we do View this transaction as being accretive right out of the gate, and that it will be increasingly accretive as we lease it
up and develop the portfolio.
Okay. Thank you.
Sure. Your next question comes from the line of Ric Prentiss. Please go ahead.
Good morning, guys. Hope you continue to be well in these difficult times.
Thanks, Rick.
Yes. Hey, Obviously, a lot of
the focus here is on growth. I want to continue that kind of price to growth questioning. First, On the growth side, Rod, you've mentioned a couple of times churn hopefully is lower. I think your European portfolio has been seeing a churn kind of in the 2, 3, kind of mid-two range. What are you thinking magnitude wise?
Is this being churn on this portfolio drops
I'm sorry, Tom. Yes. So in terms of churn for Europe specifically, we would expect that this portfolio, the nature of the contract And the heavy weighting to Telefonica, we expect churn to be well below 1%, so well below kind of our average in Europe that we've been seeing.
Okay. And then when you think about the 6% organic filling gross and that obviously benefits from churn being lower, How does that 6% compare do you think to the markets we'll see in Germany and Spain predominantly? Are you guys expecting to get Bob, market share growth then with this portfolio?
Yes, I would expect so Rick. Again, Just kind of given the neutral host component of this and the kind of the marketing and sales capabilities that we have, we think we'll be able to expand The existing relationships that we already have with them, and keep in mind, it's a very low existing tenancy that's coming on with this portfolio. So we would expect ourselves to be able to kind of give an outsized share of the market over the next several years.
And Rick, the other thing I would point to is just the concentration of assets, particularly in Germany that comes with this deal. Those assets will be centered around the densely populated areas and they could be really attractive assets As that market transitions into 5 gs and continues to deepen their 4 gs coverage, so that certainly adds to the quality of this portfolio, particularly in Germany.
Okay.
And Rick, I guess, on the 1 last, there is a new 5 gs entrant In Germany as well as an MVNO who now has some spectrum that's actually looking to build. And so we would hope that we would be able to support them in a significant way as they build out their network.
Makes sense. Yes, and I assume you're also talking On the C band auctions they had there a while back and that new entrant definitely bought a big chunk.
Right.
Okay. And on the price side,
I'm glad you brought up the land, U. S. GAAP versus international GAAP. Is the $390,000,000 that you said would be adjusted EBITDA, is that the U. S.
GAAP number or is there a different way we should think about you're going to be reporting the European assets?
Yes. No, our numbers are U. S. GAAP, Rick.
Okay. And then, can you remind us in the 2015 timeframe when you did the Verizon deal on GTP, was it about 27,000,000 shares that you raised back then to keep the balance sheet balanced and Point of that maybe as an example, is that the right number to look back in our historical model and think that was what was done back in 2015?
I wouldn't look at that number specifically as being a number that we'd be looking at for this transaction. I wouldn't want to go make that stretch, Rick, but I think the point was made that when we were when we did that particular transaction, we looked at a number of different elements of Equity Capital that to use to be able to finance that deal. And I think that's the same comment here is that we'll look at all different forms of Capital of consideration that we'll use for this particular transaction, public equity being one of them.
And converts also possible?
Very possible.
Okay. And final one for me, I guess, is on the ability to add Capacity, I think to Simon's question, you said the height for the tower portion of this is kind of 30, 35 meters, so about 100 foot tall towers. You mentioned startup capital. Can you give us a thought about how much startup capital it would be? And is there going to be a component of augmentation capital that's needed as well?
I mean, I believe the start up capital helped me to go right. I think it was in kind of the $20,000,000 to $30,000,000 range. So Not significant, candidly, from that perspective, on a per year basis for a few years. And I think the augmentation, As it's typical with adding anything on a side by side basis, we'll take a look at what that particular augmentation CapEx. That's obviously all built
And I
guess the other
piece, Rick Yes. The other piece I just wanted to also mention, because you talked about land. Another way that this Transaction is being underwritten. Is there a significant amount of pass through? And so, when we're talking about Kind of the pro form a $800,000,000 of revenue, there's probably a couple of $100,000,000 of pass through on land and some power, in the German and Spanish market as well.
So when you start to take a look at then the $390,000,000 $40,000,000 of EBITDA, you're looking at some very attractive margins That TELSIUS is actually built up in the region that we're going to be able to take advantage of.
Great. Thanks again, guys.
You bet. Thanks, Rick.
Your next question comes from the line of Spencer Kern. Please go ahead.
Hey guys, thanks for taking the question and congrats on the deal.
Thanks, Bascome.
So Typically, a lot of European tower companies look to cost synergies as a way to drive EBITDA growth. And you've typically been skeptical of those. I'm just curious, are you expecting to drive any cost synergies with this deal?
Yes, Betsy, it's Tom. I mean, as I mentioned, you just cut some of the margin performance that comes along that the The teams at TELSIUS have been able to manage. This is really an organic growth driven business. I mean, that's where I think a lot of the growth is coming from. There aren't a lot Synergies built into the model candidly.
They have overall, I believe, a couple of 100 people that will be coming over for Coming over to our business, particularly in Germany And we're in France, but this obviously transaction is not there. But in Germany, we don't have a significant amount of synergy opportunities there. I do think that there are going to be opportunities for us to be able to bring to the markets based upon things that we have best This is what we're doing in the rest of our portfolio. So perhaps in the areas of how we think about power and how we think about co location And those types of things, I think we'll be able to bring to bear to the business, which I think will be beneficial. But relative to the business itself, the growth is really largely revenue driven, new amendment and colo driven.
Yes. I mean, Spencer, I would just add that the largest number of employees that Telefonica has is actually in the Spanish market, which will be a new market for us. So we need those employees Certainly, so there's a nice situation there for us. And then in Germany, they have about 40 Employees there, we have an existing business. We plan to just merge those 2 in together.
And as Tom said, there aren't a lot of synergies built into the models. Anything that was synergistic Would be additive to the model, but also not necessarily a priority for us. This portfolio and this transaction really is about driving growth.
Got it. That's really helpful. And then, just a follow-up on another question from earlier. You're now at 20% of your international business being in Europe. Over time, is that sort of the right place to be or is there a number that we should think about for Europe contributing to your international portfolio over time.
Yes. No, I don't think I don't have a number in my head in The right percentages, again, we're looking at these particular opportunities and looking at where we can create the most value. We like the balance of having the emerging market presence built on top of the foundational more mature markets. It's been a good mix for us in the past. And so I would expect that clearly that kind of a mix going forward.
But in terms of Particular regions, particular markets, we don't have any preconceived notion of what that should look like or what those percentages should be.
Awesome. Thank you.
Your next question comes from the line of Batya Levi. Please go ahead.
Great. Thank you. Just a couple of follow ups. On the churn side, is there any identified churn that we should think about in Latin America maybe tying in what Telefonica's shutdown in Mexico could look like or anything Fonica's shutdown in Mexico could look like or anything in Brazil. And just to make sure, is this an out Right, purchase or do the assets still sit on Telefonica's balance sheet and you have the option to buy them What, maybe 30 plus years?
No, this is not Batya, this is an outright purchase. We're acquiring CELSIUS as an entity. And keep in mind, as I mentioned, and I think Rod also mentioned, we have long term contracts in place Now with Telefonica in each of these markets and so churn is minimal throughout the entire portfolio.
Okay. Thank you.
You bet.
Your next question comes from the line of Matt Niknam. Please go ahead.
Hey, guys. Happy belated New Year. Congrats on the deal. Two questions from me. First, It might make sense to ask this on your earnings call, but I'm going to ask it anyways.
Would the deal would this deal and the Incyte transaction impact at all How are you thinking about AFFO per share growth targets for the business over the long term on a multi year timeframe? And then secondly, more of a housekeeping item, How should we think about the timing of the different tranches of this deal closing? If you can give us any sort of cadence or color in terms of how to think about that over 2021? Thanks.
Matt, on the AFFO per share, I think It does contribute to our aspirational goal of double digit AFFO per share growth. And so it will play into that Clearly, and I think it given the growth that we expect from the business and the position that we have in each of the markets, I think it will be a nice To our overall aspirational goal. And throughout the second question on the tranches, We would expect them to be the multiple tranches throughout the year. I think as Rod mentioned, we would hope To be able to start to close on some of these transactions even in the Q2. But as you well know, going through The regulatory process, it's really somewhat difficult to predict.
We don't expect to have any issues, given the presence particularly that we have Currently in Europe, and so we would anticipate it starting in Q2 and going from there.
Got it. And Tom, maybe just a follow-up. Is there any expectation in terms of when you expect us to have this ultimately wrapped up? Is that sort of a wait and see right now?
We are hopeful that 2021, we'll be able to have all of the tranches completed.
Perfect. Thank you. You bet.
Your next question comes from the line of Brandon Nispel. Please go ahead.
Hey, thanks for taking the question. I was hoping you could update us on just American Tower's legacy average tenants per tower in both Germany, Spain and then Brazil. And then really is there a difference in tenancy of these assets on a market by market basis relative to the 1.3? Then I guess, just as a second question, I'm sort of confused, why is 6% the right organic growth number When I think historically it's 2% to 3% in Europe, is it really just scale? Is it there a difference in quality of assets?
Just trying to understand organic growth A little bit better. Sure.
I think our legacy and Rod will be here, but I think our legacy tenancy is in that 1.5 Tenants per site.
And I
think going forward, as we've kind of mentioned a couple of times, Where they are on the kind of the 5 gs build cycle, where they are in clear and still 4 gs, but really Starting out on the 5 gs cycle, we have significant rooftop presence that we think is going to be critical for our growth In Germany, where we haven't had that before, we are seeing minimal churn as we've talked about. And the sites themselves fit really well, particularly within Germany in terms of the good locations. I mean, they really fill out the Telefonica portfolio that we acquired so many years ago. And that we acquired so many years ago. And as you would expect in Spain, have Significant presence in that market geographically.
And so This is what we've experienced in the past. We have significant presence in the more urban markets As a result of the acquisitions of these portfolios, so as I said, in a combination of all of those and by the way, as I mentioned, We see potentially new MD and O is actually coming into the market looking to build out their networks themselves. And So we think we have good visibility into looking at the growth rates and hopefully we'll be able to even exceed them. But Right now, we're kind of looking in that kind of that 6% range as a guide for the next several years.
Hey, Brandon, can you just follow-up on this?
Go ahead.
No, sorry, Brandon. Sorry, just a quick addition here. In terms of the 1.3 that we say this new portfolio Averages in terms of tenancy, that breaks down in Latin America, it's just above 1.3 and therefore in Germany and Spain, it's just below 1.3. And just below 1.3 in Germany and Spain is for each individual market. Just to give you a little bit of context on how that fits into the 1.5 Legacy.
Got it. And if I could just follow-up, you mentioned rooftops a couple of times. How many rooftop sites are included in this? And then what are your ownership rights of rooftops in Germany and Spain?
I mean, the rooftop presence in Germany, I think, is roughly 70%, 80% of the sites are actually rooftops. And relative to the ownership rights and things, I don't know Rod, do you have any color on that?
Yes. So in Germany, there's about 10,000 Rooftops out of roughly the 12,500 total sites in Spain. We've got about 5,000 rooftops out of the 11,300 Total sites and in terms of the rooftop rights, we do expect to be able to put additional co locations on those assets. Many of the sites are contractually allowed where we can do that. And then also with the relationship we have in the marketplace, we think we can And those rights on certain sites as well.
But yes, certainly those rooftop assets are good quality rooftop assets that will function a lot like towers in terms of the way the leasing works.
Thank you for taking the questions.
Your next question comes from the line of Michael Rollins. Please go ahead.
Thanks and good morning. First, I was curious if I didn't hear earlier if you mentioned the cost Of the build to suit, if you could share that? And then secondly, what impact might network sharing between the customers Have on
the outlook for leasing over time?
Yes. On the build to suit element, Michael, it's around $500,000,000 that we would Expect to incur for the, actually 3,300 sites, 2,400 of them are in Germany and 900 of them Are going to be down in, largely down in Brazil. And on The network sharing question itself on the RAN sharing. In Germany, the overall impact of active RAN sharing is not It's expected to be materially at all, which contributes to the very attractive nature of the market. There are regulatory issues that actually Prevent a lot of the network sharing to begin with.
There are some limited sharing initiatives targeted, some gray spots, if you will, in some rural areas and along some traffic routes that are in discussion, but we don't believe that they'll be material in our organic growth trajectory. In Spain, Vodafone and Orange actually have a network share in place covering many of the existing technologies and settlements, But there are less than 175,000 people. So all of these factors that we've had, we've been through these, We understand them well. We've evaluated them and included them in our evaluation of the TELSIUS assets themselves and do play a role in our that organic growth will be lower in Spain actually than in Germany. So we've taken all of that into account, We believe, and as I said, the German situation is much different than the situation in Spain.
And does the rooftops change the operating leverage of the business?
I mean, from what perspective?
Incremental margins, so as you lease up revenue, do the incremental margins differ from the gross margins, if you take out the Pass throughs?
It's very similar actually, Michael. I wouldn't expect significant differences. There are some pass through elements that are different On the rooftops, but relative to overall margin performance, very similar.
And Michael, in Europe, Both Germany and Spain, we expect margins in the 75% range excluding the pass throughs, just to give you that perspective. And In Latin America, the average is even higher, up closer to 80% to mid-80s. Thanks very much.
You bet.
And that does conclude the Q and A session. I'd now like to turn the call back to Mr. Kislawski.
Thanks, Greg, and thank you everybody for joining
us. Have a great rest of your day.
Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT and T teleconference. You may now disconnect.