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American Tower Corp  (NYSE:AMT)
Q3 2018 Earnings Conference Call
Oct. 30, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower Third Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the conference over to our host, Senior Director of Investor Relations, Mr. Igor Khislavsky. Please go ahead.

Igor Khislavsky -- Senior Director, Investor Relations

Good morning, and thank you for joining American Tower's third quarter 2018 earnings conference all. We've posted a presentation, which we will refer to throughout our prepared remarks under the Investor Relations tab of our website www.americantower.com. Our agenda for this morning's call will be as follows. First, I'll provide a few highlights from our financial results. Next, Jim Taiclet, our Chairman, President and CEO, will provide some brief commentary, focusing on key technology trends in the US. And finally, Tom Bartlett, our Executive Vice President and CFO, will provide a more detailed review of our third quarter results and updated full year outlook. After these comments, we'll open up the call for your questions.

Before I begin, I'll remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding future growth, including our 2018 outlook, capital allocation and future operating performance, the pacing and magnitude of Indian Carrier Consolidation and its impacts on American Tower, assumptions around our pending and recently closed acquisitions and other transactions and any other statements regarding matters that are not historical facts. 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 earnings press release, those set forth in our Form 10-K for the year ended December 31, 2017, as updated in our Form 10-Q for the quarter ended June 30, 2018 and in the other filings we make with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances.

Now, please turn to slide four of our presentation, which highlights our financial results for the third quarter of 2018. During the quarter, our property revenue grew 5.8% to $1.75 billion. Our adjusted EBITDA grew 5.3% to nearly $1.1 billion. Our consolidated adjusted funds from operations grew about 10% to $821 million and consolidated AFFO per share increased by nearly 7% to $1.85. Finally, net income attributable to American Tower Corporation common stockholders increased by about 23% to $367 million or $0.83 per diluted common share.

And with that, I'll turn the call over to Jim.

James Taiclet -- Chairman, President and Chief Executive Officer

Thanks, Igor, and good morning to everyone on the call. The highlight of our third quarter was our US property segment Organic Tenant Billings growth of 7.4%, leading us to raise our 2018 expectations for that metric to about 7% for the full year. Unlimited data plans and increasing mobile video consumption continue to drive additional spectrum deployments and equipment installations by our domestic tenants to support 4G network technology and that's leading to those elevated growth rates. Moreover, our major US customers are beginning to embark on tangible plans for 5G technology, which provides a relevant backdrop to our usual third quarter topic of technology development.

But before getting into the details of those trends, I'd like to spend a few minutes on our comprehensive agreement with Tata, which I'm pleased to disclose in this morning's press release. We've been working amicably with the Tata Group for nearly a year to reach an agreement that satisfies three main objectives for us, while also respecting our partner's goals of an orderly exit from both the mobile business and from our tower joint venture. Those three objectives for ATC, which we believe we've attained through this agreement were to first preserve our ability to achieve American Tower's long-term return on investment targets in India by securing economic value for Tata Teleservices leases to be terminated, while at the same time, retaining a portion of the run rate through new leases with other Tata Group businesses. Second, to better position ATC India for growth in the post consolidation phase of the Indian mobile market in the 2020 timeframe and beyond. And thirdly, to set the timeline to evolve the joint venture through the replacement of Tata as a partner with either increased ATC ownership, an additional partner or some combination. Tom will provide additional details of the agreement during his remarks, so now let's jump into our regularly scheduled technology discussion.

My remarks will focused today on technology trends in the US, which remains our largest market, generating the bulk of our company's cash flows. We also expect that over time, these trends will follow across our international markets. As I noted earlier, the overwhelming driver of tower demand today is 4G technology and we believe that will remain the case well into the 2020s. However, as momentum for 5G builds, a number of trends in network deployments are expected to increasingly contribute to our demand profile as well.

The first of those is the anticipated deployment of new spectrum assets as carriers continue to enhance the capacity and speeds of their networks. Already, 600 megahertz equipment for 5G applications is being deployed on our sites and several carriers have been vocal about millimeter wave base roll-outs as well. But in my view, one of the most compelling aspects of evolving 5G expectations is the role of mid-band spectrum, including 2.5 gigahertz, CBRS spectrum in the 3.5 gigahertz band and C band spectrum assets in the 3.7 gigahertz to 4.2 gigahertz range. All these bands have the potential to significantly enhance network performance over time, and importantly, are well-suited to macro tower-oriented deployments. 2.5-gigahertz, for example, a spectrum that several carriers have identified as being vital for their 5G network plans.

There is substantial channel bandwidth with favorable MIMO capacity and peak speed characteristics. In addition, the 2.5 gigahertz band is able to propagate across considerably longer distances than millimeter wave spectrum. And as a result, 2.5 gigahertz is an intriguing hybrid between low and high band spectrum for 5G. Importantly, outside of dense urban areas, we continue to believe macro towers are the ideal signal transmission points for 2.5 gigahertz spectrum. We've already started to receive applications for the very early stages of deployments of this spectrum, utilizing massive MIMO antennas on our tower sites and we would expect the activity around 2.5 gigahertz deployments to increase over time.

CBRS spectrum is another interesting opportunity, it is a priority element of our innovation program. This year's spectrum in the 3.5 gigahertz band can potentially help significantly expand the US indoor opportunity for American Tower beyond the 15 -- or 100 or so venues in the US that we today believe are suitable for traditional indoor DAS systems. Being able to dynamically share this spectrum can help drive down costs and we are working on new and innovative architectures that may make it feasible to bring connectivity using CBRS spectrum to Class A office buildings, condominium complexes and other indoor environments, where DAS has historically been cost prohibitive. Combining shared CBRS spectrum with reduced cost installation architecture can enable private LTE systems enhance Wi-Fi installations in addition to traditional indoor cellular coverage, thereby enhancing the economics of installing the system for both the building owner and our customers.

We're also increasingly convinced that spectrum in the C band range of 3.7 gigahertz to 4.2 gigahertz will be a significant driver of macro site demand in the mid to long-term time horizon. This band similar to 2.5 gigahertz has crossover benefits that combines potentially several hundred megahertz of bandwidth and sufficient propagation distances to be utilized in suburban settings, which are predominantly served by towers.

In addition to helping ushering the deployment of new spectrum, we anticipate that 5G is likely to open up a host of new business and consumer services, including a tremendous expansion in IoT functionality. Consequently, another primary focus area of our innovation program continues to be to foster relationships with companies in a variety of industries that may end up being new tenants, while at the same time, exploring complementary technical solutions and network architectures to augment our existing core macro business.

One example of our efforts with respect to emerging applications is our ongoing evaluation of edge compute solutions at our tower sites. Our sites can act as a convergence point for the wireless access network, cloud services, the Internet of Things and enterprise networks. We are currently engaged in discussions with players in numerous industries that may ultimately be edge compute tenants and expect to further explore the potential long-term opportunity going forward.

While evaluating prototyping and partnering around future 5G growth opportunities represents a focus area of our innovation program, we have additional initiatives that seek to leverage currently available technology as well. One prime example of this is ATSC 3.0 broadcast technology, which we've been working on in Dallas with several partners. This new broadcast standard is designed to enable significant expansion and broadcast content to mobile devices, while opening up the ability to add value for broadcasters through geographically targeted ads. As the largest independent owner of broadcast towers in the US, we're extremely well positioned, should this new standard and product take hold.

So to summarize, we are experiencing strong organic growth in the US driven by 4G technology, which we expect to continue for many years to come, but we're also increasingly convinced that emerging 5G technology will further extend American Tower's growth trajectory many years into the future, not only in the US, but also in international markets. We see meaningful potential to utilize our tower sites for mid-band spectrum that's not even in use for available today. We also believe there is additional opportunity for indoor small cell systems based on CBRS spectrum. And importantly, our experience proves that macro tower and indoor systems provide high colocation and return on investment performance and 5G should thereby provide additional runway for both those asset classes.

And we are also applying our innovation approach to outdoor small cell architectures in an effort to bring installation and operational cost down to develop avenues to hopefully achieve tower like returns on those installations though at a much earlier stage in solving that equation. The bottom-line is that we see real, but long-term opportunity in macro, indoor and possibly outdoor small cells and we'll use our innovation program to pursue those aggressively and in a disciplined manner that we've always followed.

Now, I'll turn it over to Tom for more detail on the quarter and our full year expectations.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

Hey. Thanks, Jim. Good morning, everyone. As Igor highlighted earlier, we had another quarter of strong growth across our key metrics. Organic Tenant Billings growth in the US was over 7% for the second consecutive quarter. Simultaneously, we grew our common stock dividend by 20% and repurchased more than 600,000 shares. We also settled with TV Azteca with respect to the unpaid interest issue we disclosed last quarter, which resulted in the receipt of nearly $60 million in late September and favorable use right terms. Subsequent to the quarter end, we further diversified our geographic footprint with our expansion into Kenya. And just a few days ago, we were able to reach a settlement agreement with Tata in India, as Jim mentioned, that we believe helps clear the path for us to capitalize on the acceleration in 4G deployments that we expect in this market.

With that, let's dive into the details around our third quarter performance and updated outlook for the year. If you please turn to slide six, during the third quarter, consolidated Organic Tenant Billings growth was over 5% or nearly 8% on a normalized basis, primarily attributable to a record contribution of new business generated from the colocations and amendments across our global asset base, resulting from the strong pace of run rate additions over the course of the last 12 months. Our US business reported property segment revenue growth for the quarter of about 6%, including a negative impact of nearly 3% associated with $21 million decline in non-cash straight line revenue recognition versus the prior year.

US Organic Tenant Billings growth was 7.4%, including volume growth from colocations and amendments of nearly 6%. This new business recognized in the quarter was up nearly 30% versus Q3 of 2017 and up over 7% sequentially. Pricing escalators contributed just over 3% and were partially offset by churn of about 1.5%. Signed new business in the quarter, which was up by around 60% versus Q3 of '17, was again heavily weighted toward lease amendments as carriers continue to add incremental equipment into their networks. Given the multi-year nature of carrier spending initiatives in the market, we expect to sustain solid levels of organic growth in the US going forward.

Our International business reported property revenue growth was also about 6% in the quarter. International Organic Tenant Billings growth was about 2% or around 8%, excluding the impact of the Indian Carrier Consolidation-Driven Churn, which represented over 70% of the total international churn. Colocations and amendments drove nearly 6% of International Organic Tenant Billings growth, escalators contributed another 4.3% and other run rate items added about 60 bps. This was partially offset by cancellations of about 8.5%, again primarily concentrated in India.

Key international markets across LatAm and EMEA continue to show positive trends, with Brazil, Mexico and South Africa, all generating Organic Tenant Billings growth between 11% and 12% this quarter. And in India, although, Carrier Consolidation has resulted in elevated levels of churn, gross new business volumes came in slightly higher than our prior expectations. Overall, organic commenced new business across our international markets was up about 15% sequentially in the quarter. And finally, the day-one revenue associated with the sites we've added over the course of the last year contributed another 4.4% to our global Tenant Billings growth. This was largely driven by acquisitions and to a smaller degree revenue from newly constructed sites, including nearly 700 towers built this quarter. Our new build programs, primarily in our international markets, continue to generate solid returns with average day-one US dollar NOI yields of over 9% in Q3.

Turning to slide seven, we also generated solid adjusted EBITDA and consolidated AFFO growth in the quarter, supported by strong top-line growth, diligent management of operating expenses, interest costs, net of interest income and maintenance CapEx. Our adjusted EBITDA grew by over 5% with our adjusted EBITDA margin coming in at over 61%. And after stripping out the negative impact of non-cash straight line recognition and the impact of the Indian Carrier Consolidation-Driven Churn, our adjusted EBITDA would have grown over 10%. Finally, SG&A as a percentage of revenue was about 7.6%, roughly flat on a sequential basis.

Consolidated AFFO and AFFO attributable to common stockholders grew nearly 10% and 11% respectively in the quarter. On a per share basis, consolidated AFFO grew about 7%, while AFFO attributable to common stockholders grew about 8%. Finally, on a normalized basis, consolidated AFFO per share grew nearly 10% and these growth rates reflect our high quality global portfolio, significant diversification, focus on operational efficiency and strong investment grade balance sheet. In line with our previous expectations, the growth rates this quarter incorporated sequential increases in maintenance CapEx and cash taxes. We expect both of these items to tick up again in Q4.

Turning to slide eight, as Jim briefly touched on earlier, we have reached a settlement agreement with Tata with respect to their contractual obligations on certain of our towers in India. For the agreement, we will receive a one-time cash payment of approximately $320 million in the fourth quarter. In exchange, approximately 80% of Tata's Tenant Billing run rate on our sites representing roughly a $120 million in annualized billings will churn-off effective November 1st of this year. The remaining $30 million or so in annual run rate will continue under various new leases, including leases assumed by other Tata related entities.

We are consequently updating our view on Carrier Consolidation-Driven Churn in India to incorporate this incremental $120 million or so in annualized churn from Tata. We now expect a total of between $270 million and $320 million in Carrier Consolidation Churn with approximately a $140 million occurring in 2018 and between a $130 million and a $180 million expected in 2019. Besides from the incremental Tata churn, these new charge -- ranges reflect assumptions probably consistent with our prior expectations. With the signing of this agreement, we believe that the major anticipated churn events associated with carrier consolidation in India have now been substantially cared for within our numbers. We expect to have between $550 million and $600 million or so of ongoing annualized tenant run rate revenue in Asia, post the Tata churn and expect to increase this base over time as incumbent carriers eventually make investments to expand and improve their 4G networks.

Our portfolio of more than 76,000 sites, combined with strong relationships with the major remaining carriers, should position us well to play an important role in the transformation of India from 2G to 4G over the next decade. Over 90% of our leases will in fact be with remaining large incumbent wireless carriers. We expect it to eventually result in more normalized rates of organic growth, moving to the high single to low double-digit range during the 2020 to 2021 timeframe. Finally, I'd also note that even in 2018, despite the volatility, our gross organic growth in India is expected to be about 9%.

Moving to slide nine, before I dive into our updated '18 outlook, I'd like to quickly summarize a few key considerations driving our optimism on the long-term growth potential in India. India is the world's largest free market democracy and also one of the biggest wireless markets with well over a 1 billion mobile subscribers today and over a 1.5 billion expected by 2022. To put that into context, 1.5 billion subscribers would represent nearly 4 times the subscriber base of the US. With minimal fixed line penetration, wireless connections are absolutely critical for consumers and businesses and wireless broadband access has been clearly recognized by the government as a fundamental driver of economic growth and transformation. The path toward increased broadband access in India is represented by the deployment of 4G, which in most parts of the country is still in its nascent stage. In fact, despite 4G investments made thus far, over 50% of connections are still 2G based. This, however, is changing rapidly, helped in part by the ongoing carrier consolidation process that we've referenced for some time now. Once this consolidation wraps up, we expect the three remaining large wireless operators, plus BSNL, to eventually ramp CapEx spending for 4G, as the wireless competitive environment trends toward normalization. Importantly, because 4G brings exponentially more data traffic, it requires significantly more network density. As a result, third party forecasts indicate that India will need nearly twice as many cell site leases to enable ubiquitous 4G connectivity. With more than 76,000 communication sites in the market today, we believe we're well positioned to capture a significant portion of this incremental demand, enabling us to achieve our targeted returns over time.

Moving to slide 10, let's now take a look at our updated expectations for the full year 2018 revenue. At the midpoint of our revised outlook, we expect annual reported property revenue growth of about 10%. This includes a negative impact of over 2% from lower non-cash straight line revenue and a negative 2.5% associated with foreign exchange translation effects. We expect consolidated Tenant Billings to increase between 8% and 9%, including Organic Tenant Billings growth of around 5% and a 3% to 4% contribution from new assets. This new asset contribution includes around $13 million from the combination of our new sites in Kenya and a portfolio of urban fiber assets in Brazil that we expect to close on November 1st. This is also being supported by especially strong trends throughout our US and Latin American segments, where we are raising our expectations for Organic Tenant Billings growth. Additionally, we are maintaining our expectations for Organic Tenant Billings in EMEA, while slightly reducing our expectations for Asia as a result of the incremental Tata churn I just discussed.

In the US, we now expect Organic Tenant Billings growth of over 7%, supported by record levels of new business run rate additions. Further, we expect that Organic Tenant Billings growth in the fourth quarter will be at least as high as the 7.4% rate we achieved in the second and third quarters of this year. Meanwhile, in Latin America, we expect to generate Organic Tenant Billings growth of over 11%, also as a result of higher than anticipated levels of new business. In Asia, while we expect slightly higher levels of gross new business, our churn expectations are being raised to incorporate the impact of our settlement with Tata. As a result, we project an Organic Tenant Billings decline of around 13% versus the decline of 11% we included in our prior guidance. And on a gross basis, as I mentioned earlier, we now expect organic growth of around 9%, up versus our prior outlook, which anticipated growth of just over 8%. Finally in EMEA, we are maintaining our organic growth expectations of between 6% and 7%, as performance in the business continues to be consistent with our previous projections.

In total, we are raising our property revenue outlook by $325 million as compared to our prior outlook. About $300 million of this is accounted for by the net impacts of our Tata agreement. The remainder is driven by approximately $55 million in higher revenue expectations across the business, including the new assets I referenced earlier and US outperformance, including around $9 million in incremental straight line revenue. This is being partially offset by roughly $30 million in unfavorable FX impacts. As a result of our revised expectations for India Carrier Consolidation-Driven Churn, we now expect the consolidated churn rate of approximately 4.1% for the year. Churn across the remainder of the business is expected to remain between 1% and 2%, in line with historical ranges.

Moving on to slide 11, we now project our adjusted EBITDA to grow by over 12% for the year, up $315 million from our previous outlook, reflecting a $300 million net benefit for the Tata agreement. The increase also reflects about a $7 million contribution from our newly added portfolios and about $11 million in net straight line impacts in the US. Overall, of more than $30 million FX-neutral increase in our EBITDA expectations, about $13 million is in the US with the remainder spread across our international markets. This is being partially offset by approximately $12 million in unfavorable currency fluctuations as compared to our prior expectations as well as just under $7 million in other non-run rate items.

We are also raising our consolidated AFFO expectations by $255 million to just under $3.5 billion, reflecting a year-over-year growth rate of over 20%. On a per share basis, we now expect consolidated AFFO of $7.88. These increases are being driven primarily by about $250 million or $0.56 per share in net impacts from the Tata agreement. In addition, we expect over $18 million or roughly $0.04 per share in incremental consolidated AFFO, resulting primarily from higher anticipated cash EBITDA and lower net cash interest expense. This is expected to be partially offset by about $13 million incremental FX headwinds.

Turning to slide 12, we remain committed to our proven investment evaluation methodology, which has enabled us to generate consistent cash flow growth and returns over the long term. Over the last two decades, we worked judiciously to cultivate a high quality portfolio of global assets with attractive cash flow growth. In fact, since 2007, we've grown our US segment free cash flow at an average annual rate of about 12% and our International segment free cash flow by an average of about 25%. This is attributable to the operational excellence of our teams in the highly structured map-based process we utilize to assess new investments, which includes careful consideration of ongoing capital needs, the sustainability of future growth and a host of other factors.

As you can see in the slide, not only have we've been able to generate tremendous long-term growth in free cash flow, but also we've been able to do it while keeping capital intensity, which reflects the non-discretionary capital needs of the business extremely low. In fact, as we've scaled our operations, capital intensity on a global basis has decreased by nearly a-third. This in turn further enhances the recurring free cash flow stream of the business, which increases our ability to invest in future growth and innovation, while simultaneously returning cash to our stockholders.

Since 2007, we've expanded our portfolio by an average of about 20% annually, while simultaneously repurchasing nearly $5 billion in stock, distributing over $5 billion through our dividend program, maintaining our investment grade rating and diversifying our sources of capital. We remain committed to that investment grade rating, are comfortable with our long-term target leverage range of 3 to 5 times and expect to continue to evaluate opportunities to further strengthen and diversify our balance sheet as we seek to build on our past performance. We believe that continued discipline within our investment evaluation process combined with our balance sheet strength positions us well to deliver attractive total returns to stockholders for many years to come.

And as you can see on slide 13, our expansion strategy has also resulted in sustained growth in consolidated AFFO per share and an expansion of our return on invested capital over time. These are the financial metrics that comprise our leadership team's long-term performance objectives and drive compensation. Since 2007, we've grown our consolidated AFFO per share at over 16% on average each year. We've also simultaneously expanded our ROIC by nearly 2%, despite growing our asset base over 7-fold during the period. We expect that the strong organic growth generated by the scaled asset base in combination with our strong balance sheet will continue to enable us to make compelling investments in assets, while minimizing any potential dilution for our shareholders.

Looking at slide 14 and in summary, we had another strong quarter's global results in Q3, including US Organic Tenant Billings growth of over 7% and Organic Tenant Billings growth in Latin America of over 11%, enabling us to raise our expectations for full year organic growth in both regions. Our continued focus on cost controls throughout the business has enabled us to also increase expectations for adjusted EBITDA and consolidated AFFO from our legacy operations. Additionally, we reached an agreement with Tata, which resolved the last major known near-term churn item for us in India and clears the path toward achieving more normalized levels of growth in the market in 2020 and 2021 timeframe.

We continue to be excited about the long-term potential of our global business. We've worked carefully to select assets with attractive free cash flow characteristics and low capital intensity, while continuing to focus on operational efficiency. As a result, we are well positioned to deliver attractive total shareholder returns over the long run as we seek to capitalize on the rapidly evolving wireless communications landscape across our global footprint.

And with that, I'll turn the call over to the operator, so we can take some Q&A. Operator?

Questions and Answers:

Operator

Thank you. (Operator Instruction) Our first question comes from the line of Amir Rozwadowski. Please go ahead.

Amir Rozwadowski -- Barclays -- Analyst

Thank you very much and good morning folk and thank you for taking the questions. Wanted to ask, two if I may. First on US site rental growth, while clearly at healthy levels and recognizing that you took up your Organic Tenant Billings outlook for the year, it seem to be largely flat on a sequential basis. Is this the current run rate we should expect going forward or are there factors that could edge it up higher? For example, Jim, I believe you alluded to the fact that you're just starting to see massive MIMO deployment on 2.5 gigahertz, so any color there would be most appreciated. And then I've got a follow-up after.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

Hey, Amir, it's Tom. It was up a bit Q3 to Q2, although relatively flat sequentially. It was up a couple in colocation amendments, escalations were up a little bit. But I think if you actually kind of look forward to the balance of the year, we actually are finishing I think on a very strong note. We've continued to kind of set record levels, as we said in Q2, Q3. The commenced new business in the year is up probably 50% from where it was year -- where it was last year. When we start to get into 2019, we will introduce guidance at that time period. And we do that largely due to the fact that the carriers themselves will then have been public in terms of what their overall capital plans will be, so we'll be able to give you a much better sense of where it will be. But I have to say that this year has been terrific year for the US, if you've seen, I think there have been leading industry growth rates and the team continues to knock it out of the park. So we're really encouraged by the growth that we've seen. We think they are long-term trends. But in terms of coming out with the -- actually the rates in 2019, we will do that in the February timeframe.

James Taiclet -- Chairman, President and Chief Executive Officer

Yeah. And just to add to that, Amir, we look at a few gauges, as we've talked about in the past when we think about forward opportunities and I would just remind everybody on the call of those that gauge to look at, one is aggregate mobile usage in the US, it's still growing 30% to 40% a year from what we can surmise based on the data. If that continues, we should have strong growth going forward in the next few years. Also, the second gauge we often look at is aggregate US industry CapEx for mobile. Again, if it's in the $30 billion range, it supports the kind of growth we've been experiencing. And then lastly, the spectrum availability, when spectrum becomes more available and you can look at the SEC schedules and other inputs for that, we tend to have strong growth. So if you look at those three gauges over the next couple, three years, you can get a sense of how our trajectory should look.

Amir Rozwadowski -- Barclays -- Analyst

Thanks very much. That's very helpful. And then my second question. Jim, I believe you mentioned the potential opportunity to bring tower like returns to outdoor small cells. What needs to be done in terms of getting the business there? Is this a matter of acquisitions that you guys are thinking about, diversifying your asset base to areas such as fiber or how should we think about the necessary steps to be able to peak your interest in potentially moving to that business model?

James Taiclet -- Chairman, President and Chief Executive Officer

Yeah. I think the key to this is attaining scaled franchise real estate rights in municipalities because everything else is a production input. Fiber is a production input, we can get off the US existing fiber market. You can -- in especially urban areas, you can get multiple bidders on fiber runs. So we're going to go to supply chain. But the most important thing for us is getting franchise rights at scale, large scale in municipalities and we've got a few small examples of that and prototypes and trials that we have done. We're starting another one in Southern California. We're going to see if these things will actually attain those franchise real estate rates and then we can use those key positions to monetize them going forward with multiple carriers. So for us, what we're really interested in is really an outcome in sort of 5G small cells, if we can help encourage it, open source infrastructure meaning third parties like us create the infrastructure for multi-use and it can be our existing customers and/or new customers. And secondly, that that infrastructure is resilient meaning if there are changes in administration or municipal concerns that the regulatory realm -- relationships that that infrastructure is survivable and it will continue to create great returns for the provider. So if we can get the regulatory regime to go toward an open source resilient model, we can achieve scaled franchise rights, that really is the key to getting the outdoor business up to tower like returns for us. What we've done outside the US though, where we don't have sufficient fiber capacity -- existing fiber industry like in Mexico, South Africa and Brazil now is that -- and Argentina as well, we decided, in those cases, we can get a tower like return on the fiber to the tower itself and then tag small cells on to it over time. So depending on the market, Amir, there's a different solution set. But in the US, which is, of course, the biggest and most focused market for us, it's really getting franchise real estate rights.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

And just to underscore that, Amir, I mean, if you look at the opportunity we have in Mexico, that came along with 50,000 small towers, if you will, in the key markets like Mexico City, Guadalajara, Monterrey and Buenos Aires, so that ties to that exclusive real estate model that Jim's referring to.

Operator

And we'll be moving on to the next question. We do limit you to one question. We'll be going to Colby Synesael. Please go ahead.

Colby Synesael -- Cowen & Company -- Analyst

Great. I just wanted to go to India. So, was the negotiation with Tata, when you look at what you guys did the $325 million and then also restructuring the JV, the Viom portion, was that all one negotiation or were those two discrete events? And the reason I ask is that the $325 million seems a little light relative to what we are anticipating, all things considered, and I'm just trying to take in -- trying to see if I should be thinking about how you structured the JV and ultimately what you're paying for that as part of that overall process. And then just one quick housekeeping on that. Can you remind us -- is it correct that you owned 65% of the JV, Tata owned 26% and IDFC owned 9%? And if that's correct, I would have thought the new blend would get you to 87% pro forma ownership. And I think in the press release, you guys mentioned 79%. So I'm just trying to understand what I'm missing there. Thank you.

James Taiclet -- Chairman, President and Chief Executive Officer

Colby, it's Jim Taiclet. Let me first say, I'm extremely pleased with this agreement. This is an equitable MLA settlement and it is integrated with the future transition of ownership in the joint venture, all that had to be negotiated simultaneously because it does -- each piece affects the other. And what's important about this is, I firmly believe that this MLA settlement is going to enable us to meet our investment criteria for our India business, I think one of the best position to actually evaluate that and we pushed on it for a year to make sure we got the numbers we needed to make our investment return pull, so that's the first piece.

The second piece of this is by -- in an integrated fashion solving for the MLA, if you will, and solving for the future ownership, it allows us to stabilize the business, fully integrate all of our assets, including Idea and Vodafone that we've recently acquired, achieve cost synergies and in doing all of that, really prepare this operation for the growth phase in the post consolidation market, which as Tom suggested, we think will happen over the next couple of years.

The third benefit of this is it opens up the opportunity now that we have certainty of the future ownership position of Tata Group to establish the optimal ownership and capital structure for our all India business going forward as we integrate the whole thing. So there are tangible and intangible benefits here that we are more than convinced have made this agreement really positive for us. As far as the ownership piece, currently, I think we're at 63% at ATC, that's going to go to 79% in the first foot of this Tata share and then we'll decide where we go from that. Today, they're at 13%. By the way, McCoy is at 8% and IDFC is I think 1% or 2%. So there will be a long-term ownership structure that we will determine over the next year or two to take this business into the future here.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

And Colby, I would just say, just to kind of underscore a couple of things that Jim said. I'm not exactly sure what numbers you might be referring to or what the timing is. We've got the benefit of the cash flow coming in from this business all year, where some had expected it to be kind of effective back in the beginning of the year and we do have the going forward MLA with the leases on the 30,000, so -- the $30 million of revenue. So there are a couple of other pieces in there that they may alter some of that math that you may actually have. And just to also come back to Jim's point, we have 26%, the 70% odd also includes the 2% coming from IDFC. So it's half of the Tata put -- plus the IDFC piece. That's what gets the math, again. McCoy, I think as Jim mentioned has about 8%. So we'll continue to evaluate also the possibility of continue looking it -- bringing in our other global investors into the business as Jim mentioned as we've done in other geographies. It's worked really well for us in other geographies, but we'll see if it makes sense here.

Operator

Our next question comes from the line of Amy Yong. Please go ahead.

Amy Yong -- Macquarie -- Analyst

Thanks. Tom, I guess there's a lot of concern from investors around interest rates rising. At 4.6 leverage, can you help us think about some of the puts and takes? You have obviously some cash coming in, but you also have a pretty big commitment in 1Q with India. Can you help us just think through what you're thinking -- how you're prioritizing cash and maybe if we should expect that the buyback will continue to stall, given the commitment in India? Thank you.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

Yeah. No, sure, Amy. As you can see in some of the slides, over the last decade, we are committed to the allocation strategy that we've had. Its first to our dividend, which is growing pretty steadily at over 20%. Then to our CapEx program, where I've said just 2% of the revenues is non-discretionary with the balance driving incremental value, either new builds. This quarter, we had 700 new builds, redevelopment or land acquisitions and M&A or share buyback wherever we can create more value. And all this is a function of our staying within our leverage targets, being committed to that investment grade rating in that 3 to 5 times level.

So if you step back and you take a look at 2018, we'll generate just about $3.5 billion of AFFO, that 1.3%, 1.4%, so as we targeted to our dividend, $800 million on our CapEx and $1.6 billion or so roughly to M&A and the incremental $500 million or so of EBITDA has given us that added flexibility regards our leverage ratios and allowed us to buy back shares, which is about $250 million or so year-to-date. So we think that allocation approach gives us a lot of flexibility. It's very balanced and I think our record of growth to both AFFO share and ROIC is really reflective of it. And so as we kind of finish out the year, which we think we're doing very strongly, start out the beginning of the year. I think we have a lot of opportunities to keep all of those four ladders, if you will, to -- with regards to our capital -- with regards to our allocation program in place. We would expect to continue to drive incremental EBITDA. We are continually working on driving operating expense savings within the business.

James Taiclet -- Chairman, President and Chief Executive Officer

Yeah. And I would say, Tom to reaffirm your earlier point, we've done regression analysis on all of our capital allocation decisions over the last 10 or 15 years. And the first and highest and best returns have come from growth CapEx, building new towers, buying back lands, et cetera. The second most valuable to the investor has been our M&A program. And when we have excess cash, we just return it to you by repurchasing shares and once we've paid our dividends. So the batting order that we've been outlining here, again that Tom just went through, we've done the regression analysis that says that is the right order for us based on our decision criteria and our operational execution and so we'll be making those decisions in a consistent way with the cash we have available.

Operator

Next question comes from the line of Ric Prentiss. Please go ahead.

Ric Prentiss -- Raymond James -- Analyst

Yes. Good morning, guys.

James Taiclet -- Chairman, President and Chief Executive Officer

Hey, Ric.

Ric Prentiss -- Raymond James -- Analyst

Hey. First, congrats to Boston, obviously, a strong year for you guys.

James Taiclet -- Chairman, President and Chief Executive Officer

Well, it's about time somebody said that.

Ric Prentiss -- Raymond James -- Analyst

Just surprised Jim didn't hit it, but yeah, very strong (inaudible) obviously.

James Taiclet -- Chairman, President and Chief Executive Officer

We would have by the end of Q&A, if you hadn't stepped up, Ric. So thanks.

Ric Prentiss -- Raymond James -- Analyst

But I want to follow Colby and go to India, I guess. Want to understand, how many years were remaining on that $120 million worth of revenue that is going to now show up in churn, $20 million this year and a $100 million next year?

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

Yeah. Four to six. I mean, it was -- it fell off a bit in the fourth year going into the six, so average of about five.

Ric Prentiss -- Raymond James -- Analyst

Yeah. Okay. And then when we think about the flow-through of that $120 million, how should we think of that flowing through from property revenues to EBITDA and AFFO? $20 million is already reflected into your guidance, but how should we think about that incremental $100 million and what that means flowing through to EBITDA and AFFO?

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

I mean, it will be -- it's chart, it's coming out of the run rate, right. So I think you think about it most of -- all of it coming out of revenue and virtually coming out of EBITDA. Now, keep in mind that as a result of those 28,000 leases or -- probably 24,000, 25,000 coming off, the business itself will have the opportunity to take some incremental cost out of their operation as well. So to the extent that there were some of those sites on and it being the only site on a particular tower, we'll look at that particular tower and the opportunity for that going forward and we could take some land costs out of the business. So there will be a number of costs, I think that will be able to come out of the business as well, Ric. But relative to that Tenant Billings, think of that coming out of the churn rate, so think about it coming out of property revenue and EBITDA as well.

Operator

Our next question is from the line of Jonathan Atkin. Please go ahead.

Jonathan Atkin -- RBC Capital Markets -- Analyst

Yeah. So wondered, if you could hit a little bit on the -- some of the growth drivers that you're currently seeing in Nigeria and in Mexico, Telesites in Mexico reported a little bit of lumpiness, I'm just kind of curious what you're seeing in that business? And then just one more on India. Just in terms of longer-term tower industry structure, any sort of updated thoughts, given what's going on among two of your larger peers in that market and how that might affect kind of the commercial model for Indian telcos over the medium to longer-term? Thanks.

James Taiclet -- Chairman, President and Chief Executive Officer

Yeah. Jonathan, maybe I'll take the first one and Tom you can grab the second question. But in Mexico, for example, we have a really significant MLA with one of our customers and that can have some uneven billing over the course of the year based on the MLA timing, but it's a significant revenue and growth driver for us and it's multi-year. The second element Mexico for us is the Altan build out. We have a significant portion of that build out. You might recall that Telesites is an affiliate of Telmex and Telcel and I think Altan as result of that kind of looks to ATC first whenever they can and we've got some really good growth, not only currently, but in the future, we expect from all tenants -- from our existing legacy customers too. So that's kind of the layout in Mexico for us.

Nigeria is a little bit slow right now based -- versus prior years, but this is typical when networks are built out as more of a sine-wave as we've talked about. There'll be a couple of strong years and a couple of grooming years and that's kind of what's happening in Nigeria right now, and we expect that given the demand of -- again, if you go back to the same kinds of things, what's the mobile usage in the country, are they moving from 3G to 4G in emerging markets and then what's the aggregate CapEx and what's some of the big customers there, Airtel and MTN there to stay, we're pretty convinced that this will be a good business long-term and that cycle will turn up.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

Then on the tower, Jonathan, I mean, really kind of three pieces. The -- there are companies like GTL, Tower Vision, Ascend, smaller players in the market. It's hard to say what might happen with them at the end of the day, we probably expect them to exit or merge somehow either into the independent tower cos with really kind of the India's merged, which has probably a 150,000, 160,000 sites and us that have up to kind of 80,000. So that's on the independent side. And then you still have a couple of the captives with BSNL and RTL. So I think as we've seen in the United States, we've seen the -- coming down to kind of four broad wireless carriers and ultimately we see the consolidation on the tower co itself. So it's following the same trends as we have seen in the US, which we've talked about in the past and my sense is there'll be some further consolidation on the tower side, particularly with some of the smaller players.

Operator

And we will open the line of Matthew Niknam. Please go ahead.

Matthew Niknam -- Deutsche Bank -- Analyst

Hey guys, thanks for taking the question. I know it's a little bit early, but as we think about 2019, you've got the midpoint of guidance this year for consolidated AFFO at about 7.88. I know that's boosted by the Tata settlement, but how should investors think about next year's AFFO per share considering that $100 million churn headwind, which seems to be pure margin -- maybe put another way, is there an offsetting impact that's material enough to offset that from a increased stake and lowered minority interest that you would take out? Thanks.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

No, sure, Matt. That's very well one piece of it, the incremental capital that may come from third parties to help offset some of that, but I think it just comes back to the strength of the business itself. I mean, there are -- roughly $0.56 is identified coming from the Tata settlement and so we took up the guidance in our underlying business. But I think if you take a look at over last 10 years, our goal is to continue to drive double-digit growth within the business. We'll talk obviously more specifically and federally relative to what makes up that overall growth rates, but those are -- that's what really drives human eye within the business and the leadership team that you have here. I think that there are a lot of very positive things within the business, particularly even in the second half of the year with the strength of just the organic growth that we see in the business. So we feel really good about the end of the year, how we're finishing and what we would expect for 2019 and think we have a lot of ways, if you will, to be able to mitigate some of the exposures that we've seen or the volatility that we've seen in India. But I think longer-term, when we start to think about India, I also just want people to think, this represents about 5% of our enterprise value. Okay. And so we take a look at that from a kind of a risk reward, we're really excited about the position that we have in India. And while we may not see the net growth in '19, we would expect to be back to that high single-digit kind of organic growth rates, double-digit growth rates in 2020 and 2021. So we have a lot of levers we think within the business. We are a very diversified business and so we think that there are a lot of really good things in the business to help offset some of that volatility that we might see in '19.

James Taiclet -- Chairman, President and Chief Executive Officer

Yeah. And as Tom said that we'll do our formal guidance in February, that's when we have enough of our application flow that we understand all the US and many of the international carriers are going to say what their CapEx will be for 2019 and we'll have better feedback from our field as to what their customers are saying locally. But in the mean time, you can just take that reminder of $0.56 a share for the full year 2018 devoted to Tata and the AFFO. If you wanted to back that out, start with the remainder number and then look at these gauges in the context that I've been talking about, what are your CapEx expectations for the industry, what do you think the aggregate growth of data is going to be next year and some of those other inputs that you can get and build your model from that, I think we've given you all the pieces to go ahead and get started.

Matthew Niknam -- Deutsche Bank -- Analyst

Thank you.

Operator

We'll open the line of Simon Flannery. Please go ahead.

Simon Flannery -- Morgan Stanley -- Analyst

Thank you very much. Good morning. Tom, coming back to your comments on capital allocation, you did the Kenya deal, you've been finalizing fiber in Brazil, but we haven't seen any major transactions for a little while. Can you just talk about the broader M&A market? There's a lot of portfolios in Europe that have come up, that might come up. How are you just thinking about opportunities in Europe or elsewhere and the overall environment? Thanks.

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

Yeah. No, sure, Simon. I mean, we think about it exactly as we've always thought about it. I mean, we're involved, as you would expect, as kind of a small community in all of these opportunities and we continue to come back to just kind of the underlying way we value these businesses in terms of looking at the long-term growth, in terms of looking at all the capital requirements of the business and most of those opportunities just kind of fall by the wayside because they don't meet our return thresholds, if you will. And there are some sizable transactions out there, there are -- have been many in Europe as you know. And where -- we have our Germany and our France operation is there is really kind of a beachfront force to give us an opportunity to look even further about the particular asset bases that are in the market. And never say never, but we just haven't seen the growth on -- opportunity there at the right kinds of return thresholds for a lot of those portfolios that are available for sale. And so there are a lot of smaller opportunities that we'll look at. You've seen the kind of the ones we've done in Latin America, the kind of the fill-ins that we've done in there and looking at the opportunity we just did in Brazil and following on what we've done in Mexico. We've done some small things in Africa, we just did enter Kenya. So we'll continue to look at those kind of opportunities and many of them provide opportunities for build-to-suits. So they get us into the market, we can operate Kenya out of Joburg, which is really good from a value creation perspective. And we'll continue to evaluate other portfolios there. If they meet the thresholds, we'll look at that as an opportunity to expand. Africa happens to be one of those regions, where we would like to get deeper into the market. It's -- we're -- we've had great experience there, we have a great management team in the market, we have solid relationships with our customers. So that is an area where we would like to get deeper, but just haven't found an opportunity to do so at this point.

Simon Flannery -- Morgan Stanley -- Analyst

Great, thank you.

Operator

And we have time for one more question, we'll open the line of Phil Cusick. Please go ahead.

Phil Cusick -- J.P. Morgan -- Analyst

Hey, guys, thanks. To start, can you talk about Mexico, AT&T has been very public that they plan to ramp spending down. Do you expect growth to slow with that or you think you can continue despite --

James Taiclet -- Chairman, President and Chief Executive Officer

There's numerous moving pieces in Mexico, Phil. We don't speak to our customers' plans, we allow them to do that and -- but we -- what we can tell you is in a range of plus or minus a few hundred basis points that sine-wave of spending is going to, we think, continue in Mexico over the next few years. They're basically transitioning from a 3G to a 4G network for 120 million people or so. Altan will continue to be a big part of that. We'll see what Telefonica decides to do in AMX, but everyone's going to 4G. That's going to be the competitive requirement in Mexico to have a mobile business. And we're going to be providing bulk of the infrastructure for that as really the only truly independent tower company down there.

Phil Cusick -- J.P. Morgan -- Analyst

Great. And then last, I guess, finishing up, the potential for the US business we've been thinking about, in the past, the company has talked about a range of 6% to 8% growth, but in May when we saw you, you said that might be too high, given the company's size at this point. Now, at 7.4% and with it looking like US carriers are still ramping, do you think that 8% is still out of bounds for next year?

James Taiclet -- Chairman, President and Chief Executive Officer

Well, we're not going to predict next year yet, Phil. We need all of our input variables, unfortunately, we've got half a dozen engineers running this place and we don't make predictions until we get data, generally. We can't call anything out of the question, but a lot of things have to go really well for our industry for us to get 8% on the size of this US business now that we have in American Tower. So we'd love to see all those things fall in place, whether it's dish or others or an accelerated FirstNet. I mean, there's a lot of ways to get there. But look, the history and the regression analysis on our customers' behavior has been $30 billion plus or minus $2 billion or $3 billion over the last few years as far as what their spending capacity is as an industry and so that's where we tend to look to as we think about the future. But could it be higher? It could, but you'd have to have whether it's cable or dish or somebody else show up with some more capital probably.

Phil Cusick -- J.P. Morgan -- Analyst

Thanks, Jim.

Igor Khislavsky -- Senior Director, Investor Relations

Well, already. Well, thanks everyone. That wraps the call. Have a good day.

James Taiclet -- Chairman, President and Chief Executive Officer

All right. Take care. Have a great weekend everybody.

Operator

Today's conference will be available for replay. You can find that information on the American Tower Company's website. And that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference Service. You may now disconnect.

Duration: 60 minutes

Call participants:

Igor Khislavsky -- Senior Director, Investor Relations

James Taiclet -- Chairman, President and Chief Executive Officer

Thomas Bartlett -- Executive Vice President and Chief Financial Officer

Amir Rozwadowski -- Barclays -- Analyst

Colby Synesael -- Cowen & Company -- Analyst

Amy Yong -- Macquarie -- Analyst

Ric Prentiss -- Raymond James -- Analyst

Jonathan Atkin -- RBC Capital Markets -- Analyst

Matthew Niknam -- Deutsche Bank -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

Phil Cusick -- J.P. Morgan -- Analyst

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