Ladies and gentlemen, thank you for standing by and welcome to the SBA Second Quarter Results Call. At this time, all participants are in a listen only mode and later you will have an opportunity to ask questions. Instructions will be given at that time. As a reminder, this conference is being recorded. And I would now like to turn the conference over to our host, Mark DeRuffy, Vice President of Finance.
Please go ahead.
Thanks, Caroline. Good evening, everyone, and thank you for joining us for SBA's Q2 2021 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer and Brandon Cavanagh, our Chief Financial Officer. So the information we will discuss on this call is forward looking, including but not limited to, any guidance for 2021 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations.
Our statements are as of today, August 2nd, and we have no obligation to update any forward looking statements we may make. In addition, our comments will include non GAAP financial measures and other key operating metrics. Reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our with our Investor Relations website. And with that, I will now turn the call over to Brent.
Thanks, Mark. Good evening. SBA had a tremendous quarter with results for the Q2 ahead of our expectations in most key areas. Total GAAP site leasing revenues for the 2nd quarter were $524,100,000 and cash site Revenues were $514,600,000 Foreign exchange rates were ahead of our previously forecasted FX rate estimates for the quarter, contributing $3,100,000 of incremental site leasing revenue in the Q2. They were also a tailwind on comparisons to the Q2 of 20 20, positively impacting revenues by $3,500,000 on a year over year basis.
Same tower recurring cash leasing revenue growth for 2nd quarter, which is calculated on a constant currency basis, was 3.4% over the Q2 of 2020, including the impact of 2.5 percent of churn. On a gross basis, same tower growth was 5.9%. Domestic same tower recurring cash leasing revenue growth over the Q2 of last year was 5.5% on a gross basis and 3% on a net basis, including 2.5% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the Q2 was up significantly from the prior quarter and represented the highest quarterly level since 2014. Even with this high level of executions, our domestic new lease and new amendment application backlog finished the quarter at a multiyear high.
These backlogs support our expectations for continued strong domestic operational Leasing activity throughout the balance of this year. During the Q2, amendment activity represented 34% of our domestic bookings With 66% coming from new leases, the first time in many years that bookings from new leases outpaced that from amendments. The big four carriers of AT and T, T Mobile, Verizon and DISH represented 97% of total incremental domestic leasing revenue signed up during Internationally, on a constant currency basis, same tower cash leasing revenue growth was 5.3% net, including 2.2% of churn or 7.5% on a gross basis. International leasing activity increased modestly from the Q1. In Brazil, our largest international market, we had an improved quarter of leasing activity.
Gross same tower organic growth was 8.9% on a constant currency basis. During the Q2, 84.8% Consolidated cash site leasing revenue was denominated in U. S. Dollars. The majority of non U.
S. Dollar denominated revenue was from Brazil, with Brazil representing 11.5 percent of consolidated cash site leasing revenues during the quarter and 8.4% of Cash site leasing revenue excluding revenues from pass through expenses.
Tower cash flow for
the 2nd quarter was $421,200,000 Our tower cash flow margins continue to be very strong with a second quarter domestic tower cash flow margin of 84.7% and an international tower cash flow margin of 70.8% or 91% excluding the impact pass through reimbursable expenses. Adjusted EBITDA in the 2nd quarter was $400,200,000 The adjusted EBITDA margin was 70.7% in the quarter. Excluding the impact of revenues from pass expenses adjusted EBITDA margin was 75%. Approximately 98% of our total adjusted EBITDA Attributable to our tower leasing business in the Q2. During the Q2, our services business produced record results for the company with $51,400,000 in revenue and over $11,000,000 of segment operating profit.
The very high activity levels we Saw in the Q1 strengthened further in the Q2, resulting in a quarter end services backlog that was 30% above Q1 levels and was also the highest in our company's history. We expect to see continued high levels of services activity throughout the rest for the year and as a result have increased our full year outlook for site development revenue by $25,000,000 from last quarter and by $40,000,000 from our initial outlook. AFFO in the 2nd quarter was $293,500,000 AFFO per share was $2.64 an increase of 15.3% over the Q2 of 2020. During the Q2, we continued to expand our portfolio, acquiring 57 communication sites for total cash Consideration of $67,000,000 We also built 98 new sites in the quarter. Subsequent to quarter end, we have purchased or Agreed to purchase approximately 400 additional sites in our existing markets for an aggregate price of $95,000,000 and we anticipate closing on the majority of the sites under contract by the end of the year.
In addition, during the Q2, we announced that through a new joint venture We have entered into a contract with Airtel Tanzania, a subsidiary of Airtel Africa to purchase their 1400 towers in Tanzania. Under this agreement, Airtel will lease back space on each of the towers and will also A fixed minimum number of build to suit towers during the 1st 5 years following the closing of the acquisition. The total purchase price for the acquisition is expected to be approximately $175,000,000 and the acquisition is anticipated to close in stages starting in the 4th quarter. For our updated 2021 outlook, we have assumed that the acquisition closes at the end of the year, and thus we have included the entire Purchase price and our outlook for discretionary capital expenditures, but we have included no revenue or tower cash flow associated with these events. We expect the assets to produce approximately $18,000,000 of adjusted EBITDA during the 1st full year of operations under the joint venture.
SBA will be the majority partner of the joint venture, and we are partnering with Paradigm Infrastructure Limited, A U. K. Company founded by former senior executives of American Tower, which is focused on developing, owning and operating shared passive wireless infrastructure in selected growth markets. We believe the combined international tower industry operating experience of SBA and Paradigm will allow us to maximize the opportunity in this new rapidly growing market. In addition to new tower assets, We also continue to invest in the land under our sites.
During the quarter, we spent an aggregate of $11,800,000 to buy land and easements and to extend ground lease terms. At the end of the quarter, we owned or controlled for more than 20 years The land underneath approximately 71% of our towers and the average remaining life under our ground leases, including renewal options Under our control is approximately 37 years. In this afternoon's earnings press release, We included our updated outlook for full year 2021. Our updated expectations for Site leasing revenue, site development revenue, adjusted EBITDA, AFFO and AFFO per share. These increases are driven by outperformance across our Increased network investment activities by our customers, improved foreign exchange rates, reduced non discretionary cash capital expenditures, During the Q2, which were ahead of our expectations, we have not increased our 2021 outlook for incremental organic domestic leasing revenue.
New bookings typically begin to accrue revenue at the earlier of a date certain or commencement of construction. For outlook purposes, unless we have received notice of We only consider the date certain, which for the 2nd quarter booking outperformance generally ranges from late in the 4th quarter sometime in the first half of twenty twenty two. As we mentioned last quarter, we anticipate our reported gross Same tower revenue growth will begin to increase in the second half of the year and that we will exit 2021 at the highest rate of the year. As is always the case, our full year 2021 outlook does not assume any further acquisitions beyond those under contract today and the outlook also does not assume any share repurchases other than those completed as of today. However, when opportunities present, We are likely to invest in additional assets or share repurchases or both during the rest of the year.
Our outlook for net cash interest expense Does not contemplate any further financing activity in 2021. Finally, our outlook for AFFO per share is based on an assumed weighted average number of diluted common shares of 111,500,000, which assumption is influenced in part by estimated future share prices. With that, I will now turn things over to Mark, who will provide an update on our liquidity position and balance sheet.
Thanks, Brendan. We ended the quarter with 12,000,000,000 of total debt
and 11,700,000,000 of net debt.
Our net debt to Our net debt to annualized adjusted EBITDA leverage ratio was 7.3 times, a return to our target range of 7 to 7 point times faster than originally anticipated after the PG and E acquisition during the Q1. Our 2nd quarter net cash interest coverage ratio Adjusted EBITDA to net cash interest expense was 4.4x. On May 14, the company, through an existing trust, Issued 1,165,000,000 of Secured Tower Revenue Securities Series 21-1C, which has an anticipated repayment date of November 9, 2026 and a final maturity date of May 9, 2051. These securities have a fixed annual interest rate of 1.631 percent payable monthly. The net proceeds from this offering were used to repay the entire aggregate principal amount of the 20 seventeen-1C tower securities and for general corporate purposes.
Then on July 7, the company amended its existing revolving credit facility. Among other things, this amendment increased the total commitments under the facility from $1,250,000,000 to $1,500,000,000 In addition, extended the maturity date of the facility to July 7, 2026, lowered interest rate margins and commitment fees under the facility and incorporated sustainability like targets into the facility, allowing for Interest rate and commitment fee adjustments based on how we perform against those targets. We are pleased to be one of the first companies to include such Sustainability focused provisions in our credit facility. As of today, we have no amounts outstanding under our revolver and the weighted average interest rate of our outstanding debt is 2.9%, with a weighted average maturity of approximately 4.5 years. During the Q2, we did not purchase any share of our common stock.
As of today, we have $475,100,000 of Repurchase authorization remaining under our $1,000,000,000 stock repurchase price. The company shares outstanding at June 30, 2021 were $109,500,000 compared to $111,900,000 at June 30, 2020, a reduction of 2.1 percent. In addition, during the Q2, we declared and paid a cash dividend of 63,500,000 or $0.58 per share. And today, we announced that our Board of Directors declared a 3rd quarter dividend of $0.58 per share, which is payable on September 23, 2021 to shareholders of record as of the close of business on August 26, 2021. Today's dividend announcement represents a payout ratio of 22% of second quarter AFFO per share, which leaves us ample room for material future dividend growth.
And with that, I will now turn the call over to Jeff. Thanks, Mark,
and good evening, everyone. As you have heard, we had a very strong performance in the Q2, one of our best in quite some time. Domestically, our customers were extremely active. This quarter, we signed up more new leasing revenue than we have in any quarter in 7 years. We believe the 2nd quarter was the start of a multiyear increase in U.
S. Wireless carrier CapEx. Our backlogs of lease and amendment applications ended up near record highs at the end of the quarter, the high levels of bookings, which obviously bodes well for activity levels throughout the rest of the year and into next. Our customers are focused on building out their 5 gs networks with a particular focus on upgrading their macro networks. Leasing activity levels were driven by initial C band Initiatives, 2.5 gigahertz deployments, FirstNet amendments, general coverage expansion and the beginning of DISH's network build out.
These initiatives also drove our services volumes to record highs. Last quarter, I was pleased to discuss how our Q1 services results were the best In 7 years, but it didn't last long as we reported 18% more services revenue in the Q2 than we did in the Q1, producing over $51,000,000 of quarterly revenue, the highest in our company's history. We also finished the quarter with the highest services backlog in our history. These results allowed us to increase our full year services outlook by $25,000,000 As you could tell, our domestic customers are very busy right now and it sets us up for a very good 2021 2022. Internationally, the second quarter was also very solid for us with quarter over quarter sequential increases in new lease and amendment executions and increasing CPI based escalators in a number of our markets.
During the quarter, we signed up 45% of new international revenue through new leases and 55% through amendments to existing leases. Our increased leasing results We're driven by our 2 largest markets, Brazil and South Africa. These markets are still being affected at a greater level than here in the U. S. By the COVID-nineteen Pandemic.
Our local teams, though, continue to perform very well, and we believe we remain well positioned to benefit from increased Network investment from our carrier customers as conditions improve and new spectrum auctions take place over the next Similar options of 5 gs suitable spectrum are planned in the near term in a number of our markets, including Brazil. Even with this positive momentum, perhaps the most exciting international news from the quarter was regarding our pending acquisition from Air We have partnered with Paradigm Infrastructure for this opportunity. Paradigm was founded by and is run by Several former American Tower executives well known to us, including those that were responsible for their initial African expansion and operations. Paradigm will be both the financial investor and an operational partner in this venture. As a market, Tanzania provides many opportunities.
The country has a large growing population and has consistently produced good GDP growth, and the new President has indicated a greater commitment to policies that encourage foreign business investment. Despite Tanzania's growth, the mobile penetration rate is still only 41% today, creating significant opportunity for incremental wireless investment and expansion. The wireless market is predominantly made up of 3 major carriers who are Well balanced in terms of market share, Vodacom, Airtel and Axion, who recently bought KeyGo's operations in Each of these MNOs are focused on expanding their infrastructure in Tanzania. Airtel will be using a substantial amount of the proceeds From the sale of its sites to increase CapEx spending. Likewise, Axione is an African focused and experienced operator whose plans include a strong investment in the country to improve the existing TIGO network.
We are purchasing Airtel's approximately 1400 wireless towers, Which have a current tenancy ratio of just under 1.5 tenants per tower, including Airtel, and the majority of the existing revenues are denominated in U. Approximately 3 quarters of the sites are located on the power grid, and for those that are not required provision of energy, The costs will be passed through to the tenants. We believe there will be opportunities to not only organically grow our revenues on existing towers, but also to expand Our tower portfolio in Tanzania, including through a build to suit commitment from Airtel over the next 5 years, which was part of the transaction. The combination of our partnership with Paradigm, the attractive price paid for the assets and the growth characteristics of the Tanzanian market support our belief that this will be a value creating new market for SBA in the same way we have created material value in South Africa and Latin America on a country specific basis without any requirement for further regional or geographic expansion. We're very excited about this new SBA market.
In addition to our strong second quarter operating results, our balance sheet is in a very strong position. We ended the quarter at 7.3x net debt to annualized Adjusted EBITDA in the middle of our target range of 7 to 7.5 turns 1 quarter after absorbing the large 1st quarter PG and E transaction demonstrating the ability of our business to rapidly organically delever. During the quarter, we completed a new asset backed financing at the lowest fixed cost interest rate for any non equity linked security in our history. Shortly after quarter end, we increased the size of our revolving credit facility by $250,000,000 and extended the term. These activities continue to drive our liquidity position higher and our weighted average borrowing costs lower for the first time below 3 to 2.9%.
We have no debt maturities until 2023, and we continue to have access to low cost debt with additional opportunities to continue to Please continue to improve our overall cost of debt financing. Our liquidity position and balance sheet and our approach with regard to leverage have allowed us to drive incremental AFFO per share and incremental value for our shareholders. We feel really good about our capital structure. Things are going very well right now here at SBA. Our customers are busy, our financial position is strong, and our team members are the best in the industry.
We're excited about the opportunities that lay ahead. I want to thank our team members and our customers for their commitment and their contributions to our And we look forward to sharing our results with you as we move through the year. And with that, Carolyn, we are ready for questions.
Thank If you are using a speakerphone, please pick up the handset before pressing the numbers. Our first question comes from the line of Ric Prentiss from Raymond James. Your line is open. Please go ahead.
Thanks. Good afternoon, guys.
Hey.
Hey. Couple of questions. First, obviously, PG and E was a big transaction. We saw a story come out in the last few weeks that they plan to bury 10,000 miles of electric line. Is Is there going to be any changes in the sites you've got where they might be taking electric lines down, making it obviously easier to color on them?
And what kind of interest activity have you seen on those sites?
We've seen great activity. We're ahead of plan and There's a lot of demand in terms of application backlogs. In terms of that story, Rick, that Relates primarily to the lower wood poles, the ones that are closer to the end User as opposed to the high power transmission poles that are the ones that we really are part of our transaction. So we don't see a lot of issues related with that. But if in fact there are Polls or assets that were part of our transaction, there's a fairly elaborate, if anything, should Happened to those in terms of being no longer needed or used by PG and E.
There's a fairly Complex set of rules that deal with that. So something that we're covered all and feel very good about. But for the most part, it's It's going to be the shorter withholds that they're talking about.
Makes sense. Okay. Also the Tanzania joint venture, one of your peers recently doing a big private equity transaction in Europe I've started giving consolidated AFFO per share as well as attributable to common AFFO per share. Have you guys considered as now you get a little more joint ventures going that you might move to obviously EPS stories that are always take out minority interest, but any thought about moving towards a measure of more proportionate AFFO to common. Brandon?
Yeah. Rick, to this point, obviously, nothing's been Material enough to to do that. We do always back out. We've we've previously identified when we haven't It is something, obviously, the JV piece of the AFFO per share, but it's something we'll look at. If it becomes material, We'll highlight it for you guys.
We just haven't had any really to date.
Makes sense. Final one, obviously, we make that adjustment from AFFO to funds available for distribution. We've been watching, I think you guys call it amortization of capital contributions, which is still very low. I think it was $13,000,000 in the first half of this year, dollars 33,000,000 all of last year. 1 of your peers has almost 20 times that level of non cash Items that get put into AFFO, any thoughts of any changes coming from you that would take it up higher or Fairly low, because it's obviously one of the big non cash items that kind of is different between the tower companies.
Yes. I mean, I don't Thanks so, Rick. The thing that would drive it up is obviously more augmentation activity of the towers, which is certainly given the increased amount of activity in general that we're seeing, but the offset to that is that As we have longer, terms to our leases, particularly the Verizon, MLA, which we Talked about last quarter, and some of the new agreements that come with longer terms, that tends to stretch out the period over which you're amortizing and actually reduces the amount. Plus, it's just it's a factor of which towers are getting hit, whether work needs to be done at the site, how much it costs, who's being reimbursed, All those kind of things. So, I don't expect it to actually move up materially at any point in the next year or 2.
Yes. It's very different, Rick, when you're not doing small cell fiber work where it's more common that your customer contributes a Large amount of the initial CapEx upfront, then you amortize it into that amount. I mean, that's never really been A big issue in the macro tower side of the business other than just the regular augmentation stuff, which is We don't foresee any material changes in that.
Makes sense. Obviously, I always like going back to cash and the ability to pay dividends. So Appreciate that and you guys stay well.
Thanks. You too.
Our next question comes from the line of Simon Flannery Your line is open. Please go ahead.
Great. Thank you very much. I was wondering if you've had any more clarity from T Mobile about There are plans for the Sprint Towers. Do you think the churn is going to be consistent with the current contracts? Or do you think there's the potential to Keep some of those towers or have them pushed out.
And any updates on the OI restructuring and how we should think about the impact Maybe opening up the potential for more investment in Brazil once that goes through. Thanks. Yes.
In terms of The T Mobile Sprint question, Simon, T Mobile is very organized and very, I think ahead of what people thought in terms of their network planning. So there's a lot of crisp communications going back and forth. I don't know that it materially has changed our prior statements on what we expect in terms of decommissioning, and we don't have any additional news on the uptake of the potential Spread the sights. But I would just say that T Mobile is very prepared in their work in this area. And in terms of the OA, I believe the latest is that we're not Expecting anything until at least the Q4 of this year, maybe into next.
And our prior statements In terms of our exposures to both or to all 3 of Tim, Beboe and Claro, those have not changed.
Okay, great. And do you think there's an opportunity for you to do more on build to suit? I think you did about 100 In the quarter and then it sounds like it's part of the Tanzania story as well, but you haven't done a huge amount relative to what we've been hearing from some of your peers.
Yes. I think there's always an opportunity in the question as does it represent the terms and the financial returns that we're looking I think the universe of opportunities would allow us to do more.
Great. Thanks a lot.
Our next question comes from the line of Bill Cusick from JPMorgan. Your line is open. Please go ahead.
Hey, it's Phil Cusick. Start with the Paradigm deal. Was this the team you worked with from South Africa? Or is this a different team?
No. We didn't work with any The AMT guys in South Africa, Phil. This is Steve Marshall and Hal Hess and Steve Harris, Guys that I've known forever and work very closely with Steve Marshall at WIA. So That's really just for the industry. This all came together.
Okay. What's your potential capital commitment over time for this?
It's not much beyond the $175,000,000 I mean Brendan Yes.
That's the total purchase price, the $175,000,000 plus Few incremental costs, so that represents everything. So it wouldn't be materially more than that. I mean down the road we'll have to see You know how things Yes.
We've I mean, we've modeled in some upgrade CapEx and some refurbishment CapEx, but Yes, talking about material numbers there, Phil.
Okay. It just sounds like if you're going to do something like this in a whole bunch of new countries, it's I would think you'd have a So the number that you'd be willing to invest alongside them to make these more interesting over time?
Yes. The JV, Phil, is specific to Tanzania. There's no obligation to do anything alongside them going forward. So there's no commitment as far as that goes.
Okay. If we could find more Opportunities like Tanzania, though, we'd be
safe. Got it. Okay. Thanks, guys.
Our next question comes from the line of Michael Rollins from Citi. Your line is open. Please go ahead.
Thanks and good afternoon. With respect to the domestic leasing activity that you were highlighting just earlier in the call, how does this compare with the internal Expectations that you've had and what does this mean to levels of gross leasing growth that you can achieve in the domestic business over the next couple of years. And then just separately, I just wanted to follow-up on another thing that was said earlier. I was just curious if you could unpack why The mix of leasing activity had a greater amount of new sites versus amendments in the domestic business. Thanks.
Well, the last one is an easy one to answer, Mike, and it's DISH because DISH is coming Online
in the
form of entirely new leases and they're very busy. So that's the answer to that. In terms of The Q2, we achieved results that were ahead of our expectations. We did have some fairly Robust expectations, but even those were exceeded by the level of second quarter Activity. And in terms of the growth rate going forward, I don't want to get too specific other And to say it's going up.
In the past, I think and you can correct me If I don't have this right, were you talking, I think, high single digits of where you expected gross domestic growth to get over the next few years. I'm just curious if you could just revisit that perspective.
Yeah. Mike, from a growth standpoint, we certainly expect it to be mid to high single digits in the future given what's going on now. So, when you're talking about going out a lot of years, obviously, we're getting bigger and bigger, so you have to add that many more dollars to make that happen. But Given the activity levels today, I think as we get a year or so out, you'll start to see us return to levels that are similar to what we've reported in the past when we were busier.
Thanks. Our next question comes from the line of Nick Del Deo from MoffettNathanson. Please go ahead. Your line is open.
Hey, thanks for taking my questions. First, for the question that Mike just asked, It sounds like DISH was really an outsized contributor to leasing this quarter. Can you just if you back that out, can you talk about how activity from the big three carriers In particular has changed over recent quarters. Was it DISH in particular that really drove the outperformance on leasing versus your expectation? Or was that outperformance more broad based?
I would say that the ones that had kind of Step function changes in their levels of activity were DISH and Verizon. And the Verizon And store is very understandable. It's coming off the C band auctions. They're public statements and our MLI would say.
Okay. Okay. That's helpful.
And then one on Tanzania and the partnership with Paradigm. Do Do you have an option to eventually buy out their stake or vice versa? Or is there no mechanism in place to do that?
No. There is a mechanism that gives us the right to buy them out.
Can you talk about the time frame or any other parameters? Or is that proprietary?
It's not that proprietary. It's 5 years ish.
Okay. Okay.
Sure. Might be a reason why it gets accelerated a year or extended a year, but that's generally the time frame that we're looking at.
Okay. Okay, good to hear. Thanks, Jeff.
Our next question comes from the line of Brett Feldman from Goldman Sachs, your line is open. Please go ahead.
Yes. Thanks for taking the question. Following up a little bit on C band, now that you're starting to see What some of the carriers are doing with C band? How much visibility do you have into the extent to which that's mostly going to be a significant amendment project versus any visibility into a new site project because for all of the operators, that you already have as tenants who want C band, this would be a higher frequency than They've ever historically used on a macro site, so we would imply that they might need densification, but I don't know if you have that visibility at this point in time. And then just Fine up on the services backlog.
I'm just curious, is all of that services work being done on your towers? Meaning, is it
a fairly good leading indicator
of what your home leasing is? Or are you
The answer to your last question is yes, it is mostly all on our towers, Which is why we have the confidence we have. And in terms of your first question, Brett, there will be some leases in there. But for T Mobile, Verizon,
Our next question comes from the line of Walter Piecyk from Leitchell. Your line is open. Please go ahead.
Thanks. Jeff, I'll preface this question by noting that last quarter your average Price of your share repurchase is I think $2.58 and the stock is now $340 or 3.42. But in this quarter, you didn't buy anything. So I'm just kind of curious, is this I mean, I know this acquisition was, whatever, dollars 175,000,000 is kind In the ballpark of what you spent last quarter, is that the connection that we should draw? Or is it maybe where the stock price In terms of the activity this quarter?
No. We wanted to come down off the 7.6% and we came down quicker than we thought. And by the time we knew that, we were blacked out.
Got it. And then on the domestic ramp, when you look at your Guidance for new lease activity, it's obviously very high, so there's going to be a ramp. Can you give us a sense of Q3 versus Q4? I mean, obviously, we're going to have to see some type of jump Q3, but is the bigger jump really going to occur in Q4 in terms of the new lease activity?
Yes. You're talking about the same tower growth rate? Yes. Yes. We expect it to Step up sequentially each of the next two quarters, but certainly the 4th quarter would be a bigger step up is our expectation based on the timing When the stuff we're signing up
Orders and stuff came in. Yes, that makes sense. And then I mean, if T Mobile's Got to be a component of that. I mean, doesn't this kind of speak to the timing of how their integration is going, if it's still like a more of a Q4 event?
Yes, I mean they're busy. They're busy and
But they're not getting them
activated in Q3, right? It's still not happening until Q4 For them?
They're getting stuff activated in Q3 as well. So I mean, it's a mixed question, Well, but they're busy and activating stuff in both we expect in both quarters.
It's just interesting given that C band is right around the corner Verizon, they're still kind of back end loaded, but whatever. And then international, that's also a big number. So That's going to be a big ramp second half then for international as well, right, to hit that $13,000,000 target?
It will be a slight ramp. I don't know if I would call it a big ramp.
We could walk through those numbers.
It's slight relative to the overall company for sure, but Internet, for what your levels have been in the first half of the year, it seems like it's kind of big now?
Yes, it's increasing. I mean, certainly, The lease up has been a little bit better just recently, and we expect it to be better as we move through the year. I don't know that I would agree with your characterization, so we should We'll probably talk about that separately.
Sure. Okay. One last one then, sorry. But T Mobile's use of DISH's 600 Megahertz spectrum. Did that generate an amendment or a co location or anything?
It will when it happens.
Okay, great. Thank you.
Our next question comes from the line of Batya Levi from UBS. Please go ahead. Your line is open.
Great. Thank you. A couple of follow ups. First, can you provide some color on the pacing of Sprint churn for this year? I think it was close to $2,000,000 in the Q1.
How do we think about it for the rest of the year and maybe a color if that $13,000,000,000 still holds for next year? And another question on the services side. The margins are coming in a little bit lighter than historical levels. Is there any opportunity to improve The services margins and how do we think about the 2022 services revenues? Thank you.
Batya, on the Sprint churn piece, it's expected we had I think what we reported last time was about 1,700,000 or so in the Q1. We expect the full year to be somewhere between 8, maybe 8,000,000 to 9,000,000 or so for the year. The Q4 impact, and this is again on a full year, year over year basis, will be a little bit bigger because obviously there are some of those lease that are going away as we move through the year. In terms of next year, you know, right now, we still think the 30, maybe 30 to $35,000,000 or so is appropriate. I have to hedge a little bit only because, the timing of when we get notices, what they specifically decide to do It's a little bit of a fluid situation, but based on what we know today and lease expiration dates, we think that's a reasonable estimate.
Yes. In terms of the services margins, I mean, our services business is comprised of 2 distinct offerings. 1 is Site acquisition, zoning, kind of soft work and then the second is construction. Construction typically Produce is about half the margin of Citec and zoning. So the mix between Citec, zoning and construction That's what drives the margin.
And the margins have actually been, based on the type of work being provided, Historically strong compared to QR experience. In terms of next year, I mean, we'll give you Next year's guidance when we get there, but there's no reason why the services business, because it is primarily on our own towers, Should materially slow down. It's going to reflect leasing activity.
Got it. Okay. Thank you.
Our next question comes from the line of David Barden from Bank of America, your line is open. Please go ahead.
Hey, guys. Thanks so much. Just to follow-up on a couple of things. So I guess first, Jeff, I think last quarter, when we were talking about the services business, you said you didn't see any reason for there to be a material change 2Q, 1Q. Obviously, there was a change.
You kind of listed off A number of things that were contributing factors, but was it really like how quickly the C band The deployment came out of the gates or was it really how quickly T Mobile came out of
the gates or was it just everything just turned out
to be better than expected?
Really more of the latter. I mean, C band came out quicker. DISH came out quicker. T Mobile continues to be extremely strong.
And just with respect to the deployment, maybe you can comment on this, maybe you can't. But is it they've obviously Publicly announced what the plan is to build out the Vegas market. Is this kind of bump that you saw specifically related to that? Or is there something grandeur That's going on that maybe we haven't heard about yet.
Our work is pretty well spread out, David. I'm not sure exactly How they geographically define those comments you made, but we're seeing a fair spread in the geography.
Okay. Interesting. So just a couple of housekeeping ones. The Tanzania contract, Is that all denominated in shillings?
The purchase price? Are you asking about the purchase price or the leaseback?
The leasing the leasing contract?
It roughly, well, this includes the other third parties, so I don't know the exact Breakdown, but the total leasing revenue that's contracted is about 67% in US dollars, when you exclude The pass through stuff?
Yes. Most of the space gets rendered in U. S. Dollars. The energy pass through is all
Got it. Got it. Okay. And then
my last one, if I could. Sorry. The roughly $100,000,000 $95,000,000 That's not Tanzania that you guys invested. Where did you guys put that money this quarter?
I'm sorry, the what?
Sorry, the $95,000,000 to $100,000,000 that you guys that's not part of the Tanzania deal that got spent this quarter, where did that go?
The 95 discretionary CapEx?
Correct.
Yes. Yeah. Went into various acquisitions also, Some new builds we mentioned, we built about 100 sites during the quarter. So the total CapEx was up for a number of deals. The deals if you're asking where the deals are It was a mix.
There were mostly deals in the U. S. And that's going to work. Okay, good.
All right. Thank you, guys.
Thanks. Our next question comes from the line of Eric Luchow from Wells Fargo. Your line is open. Please go ahead.
Great. Thanks for taking the question. I was wondering on AT and T, you didn't mention them as one of the customers that had a step change function And activity. Have you seen any change from them since they announced the WarnerMedia spin off around C band urgency? And you mentioned FirstNet as well in your comments.
We had presumed that was starting to wind down, but maybe you could comment how much longer you expect first that amendment to persist?
Yes. AT and T is relatively steady, did not have the same change in velocity that some of the others that We mentioned did. And the FirstNet stuff, I think we are past well past the halfway point, but Not close to being finished.
Okay, fair enough. And just wondering too, is there any update or anything to point out on SBA Edge, The data center platform in terms of deal activity and any update on timing when that could potentially become a modestly more material part of the business?
I believe, and I just heard this today internally that we've now gotten our 3rd contract for a Through Mobile Edge Computing sites. So that would give us 2 data centers and 3 or 4 Mobile Edge facilities. So Moving forward, but quite a bit of ways away from reaching that materiality point you referred to. Okay. Thank you.
Our next question comes from the line of Colby Synesael from Cowen. Your line is open. Please go ahead.
Okay. Thank you. You mentioned the JV is $175,000,000 I was curious what's your ownership stake And why the JV, you obviously can't afford to do that straight up on your own. Is that meant to signal some type of shift And strategies are simply they're the ones that brought the deal to you and therefore, we're allowed to take a piece of it. And then secondly, the new AT and T DISH Partnership, I'm curious if you view that as incrementally negative or positive to your business and I guess just the broader tower industry?
Thank you.
Yes. The Paradigm folks were responsible for bringing the deal to us, Colby, and had a long relationship with Airtel in Tanzania, with their former employer. So that's why we're where we are. I don't think we're disclosing the exact Other than we are clearly the majority owner in all facets. In terms of the AT and T DISH deal, it doesn't really change DISH's requirements with the FCC, which is for their own fixed network.
Arguably, it Could impact their growth beyond that to just roam on AT and T's network. But we'll have to see. I mean, roping never is the first Economic choice. But I mean, it certainly hasn't in any way impacted DISH's Case out of the box here in 2021.
Can I
just do a quick follow-up? One of the parts of that Agreement is the ability for DISH to effectively give some of its spectrum to AT and T to deploy on its behalf to which then DISH can use. Do you know if that would meet the threshold that the FCC has in terms of their 70% coverage Requirement by 2023, I. E, they could effectively just go on AT and T towers using their spectrum and that would You meet the requirement wherever they
may choose to do that?
I don't know the answer to that.
Neither do I, but thank you.
Our next question comes from the line of Matt Mitnam from Deutsche Bank. Your line is open. Please go ahead.
Hey, guys. Thanks for taking the question. Just on capital allocation, now that you're back within your target leverage range, I'm wondering how you're thinking about that How you're sort of prioritizing
uses of excess cash post the dividend? And then
specifically on the M and A front as well, If you can talk about the latest you're seeing both in terms of valuations and number of opportunities, particularly internationally. Thanks.
Well, the number of opportunities internationally is high. Prices are high.
You need to be very selective.
I don't know that we will be able to do a bunch of things like we're doing in Tanzania. I hope
we can, but I don't
know that, that will be the case. In terms of capital allocation, generally, we continue to believe our shareholders are best suited by a lower dividend, Higher dividend growth strategy gives us the most flexibility, produces very good growth numbers. So that's what we will Continue to pursue there. And given our access to capital and interest rates, we will look to stay fully invested Within our target leverage range, whether that be portfolio growth or stock repurchases.
Got it. Thanks, Jeff.
Our next question comes from the line of Jeff Kvaal from Wolfe Research. Your line is open. Please go ahead.
Yes. Thank you for taking the question. I guess, first, Would you mind offering us an update on how close you are to bumping up against supply or labor challenges in this market?
So far so good. We really haven't seen any issues on the labor side. I mean the fact that we maintain a sizable in house crew Gives us some flexibility there. And in terms of the equipment side, we've not heard Any issues around our customers delivering the equipment to the sites for installation. Now we read about all the same Semiconductor issues that you read about.
So I guess that could change, but it has not manifested itself so far. Okay.
And then secondly, I think Brett asked earlier about potential for densification on the higher frequencies of C band. What are you hearing from your carrier partners about their propensity to add themselves? Or do you think that they will figure it out with Better antennas, etcetera, etcetera.
There'll be densification, but just like every generational Upgrade, you go first to your existing sites because that's the quickest and best bang for your buck. So this is happening exactly like it always does.
Okay. Thank you very much.
Our next question comes from the line of David Guarino from Green Street, your line is open. Please go ahead.
Thanks. Can you remind us of the company's views on expanding into new markets And if there's any off limits? And then assuming you are open to expanding the new markets, how do you determine whether or not to utilize the JV partner?
The last part of your question is based on what they would bring to the table and Mostly operational in context as opposed to capital, at least so far. And in terms of there are certainly ones that are off limits Either by choice or by legal necessity, places like Cuba and China, I mean, we're just not allowed to go there. And then there would be others where the analysis of the risks Outweigh the rewards. In a country where you have very little rule of law and you have The potential for nationalization of assets, those are not going to be markets where we're We are most excited about.
That makes sense. And then how do you handicap the risk in those markets? And I guess, particularly with the Tanzania acquisition, Is there a model you guys have internally that you use? Just would great to hear how you
think about that. We look
at all kinds of things. And when you get into markets In Africa, most of the work is not around the assets as much as it is around political, regulatory, tax, Government, and we spend a lot of time and taking a lot of resources before we make those decisions.
Okay. That's helpful. And then maybe one last quick one on the unoccupied towers, the 28,000 as part of the PG and E transaction. Is any activity from those sites showing up in your service revenue yet? Or is it still too early for that?
It wouldn't show up in our services revenue. The way that, that would and that would be leasing revenue, and I'm just not sure. I think I know we have some interest. Don't know if we've actually booked anything or not. Do you remember that?
I don't
believe so. Not yet.
Okay. Thanks. Appreciate
it.
And our last question comes from the line of Brandon Nispel from KeyBanc Capital Markets. Your line is open. Please go ahead.
Great. Thank you. And thanks for taking the questions. You mentioned backlogs a couple of times, Jeff. Can you quantify the year over year change in backlog of signed but not commenced new leases this quarter?
And then Just more broadly on build to suit, one of your peers has large scale build to suit program going on. Can you share with us how many towers you plan on building in Tanzania and maybe how you're thinking about build to suit more broadly over the next 2 to 3 years. Thanks.
Brandon, do we have the answer to the question?
I don't have the exact number For you, Brandon, it's materially higher. I can say generally, but we can actually look for something to maybe put a Percentage increase or something on that
for you after the call. Yes. And in terms of the new builds in Tanzania, we're committed to build Hundreds of towers over the next 5 years. The hope is we increase that. I would point to South Africa, which is now, I believe, over 1500 towers, most of which were built.
So there's a lot of opportunity there and we will continue to press it in those areas where we think it's going to provide great returns.
And remind us what you are generally looking for in terms of returns from like an NOI yield perspective on Bill, the suite sites. Thanks.
Well, we're looking for towers that ultimately, Either with the first, although that's more unlikely, but with the second, get to a 15% Cash on investment yield or higher.
Great. Thank you.
I want to thank everyone for tuning in today and stay tuned and we look forward to the next time we're together with 3rd quarter results. Thank you.
And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT and T Conferencing Services. You may now disconnect.