Tom Bartlett: Sure. I’ll start out and then, if you want to jump in, Rod. In terms of our service business, it’s inherently a non-run rate business, and that makes it difficult to predict. And you saw that in 2021 when we raised our guide materially over a couple of quarters, we’re seeing that this year as we’ve seen a moderation of activity. What I would say is because of our cooperative MLAs, that’s not a direct read across to our property revenue, because we are somewhat insulated from the peaks and valleys of activity with the customers on that. And it’s too early to be giving guidance for 2024 and where we see the activity levels going there. What I would just reiterate is this is consistent with what we’ve seen in other Gs of activity.
And the carriers have an initial build phase that starts out with kind of a [indiscernible] of activity, and you’ll see that moderate a little bit. We are seeing the capital spend moderate a bit, but it’s still settling at levels higher than it was in 4G. And even with our reduced expectations this year for our services business, it’s still higher than it was at the same point in 4G. So we’re very optimistic that customers will continue to build throughout the cadence of this 5G build. There will be a restart of that activity. We don’t know exactly when that’s going to happen and we’ll give better guidance on that in February as we get more visibility into 2024, what those activity levels are going to be.
Rod Smith: Yeah. And Matt, I’ll just add a couple of data points. When you think about the co-location amendment additions. This year, we’re anticipating a number of around $230 million for the U.S. You recall last year, we were around $150 million, we’re at about $58 million this quarter and our guide anticipates a further reduction, but still a number that’s greater than $50 million in Q4. I wouldn’t just take that Q4 number and annualize. And I think you’re better off and we won’t give guidance, as Steve suggest until next year. But for modeling purposes, if you look at this year and last year and you split the difference, that’s probably a safer place to put in your models today. And then, of course, we’ll guide in February, and we’ll be able to update that number.
The only other thing I would say on services is the $140 million number is still higher than the historical average for services, and we’re continuing to maintain a very nice gross margin in that business at all levels. So when we saw that go up to about $270 million, we were still in the 50s, low 50s, 53%, 54% margins as it tapered off a little bit to $140 million, we are able to drive up the margins based on the mix of the revenue and the way we service that revenue. So with a lower revenue, we’re still able to mitigate some of that with higher margins in the upper 50s at this point.
Matthew Niknam: Appreciate it. Thank you both.
Tom Bartlett: You’re welcome.
Operator: Thank you. And next, we’ll go to Eric Luebchow with Wells Fargo. Please go ahead.
Eric Luebchow: Great. Thanks for taking the question. Just a couple on capital allocation. So given the recent increases in interest rates and cost of capital, I mean, to influence at all as you look into next year, kind of your build-to-suit ambitions internationally or is there any kind of valuation of maybe slowing that to reinvest in other areas and that could potentially be data centers where it seems like you’ve had really strong performance year-to-date. It seems like growth continues to ramp and maybe you need to allocate more capital to your data center business and how you kind of balance that versus other forms of shareholder return? That would be very helpful. Thank you.
Rod Smith: Yeah. Good morning, Eric. Thanks for joining in. And absolutely, all those issues are on the table. We look at our capital allocation every year, certainly, and I would say, even more frequently than that in the idea and the approach is to make the best decisions we can to support long-term total shareholder return. With the increase in cost of capital, the increase in interest rates as well as other factors affecting our markets around the globe, those all play into how much capital we will be deploying, how many build-to-suits will be executing on and where those will be. So that certainly comes into play. I won’t get into a lot of detail in terms of decision-making there. I would just maybe highlight again that capital this year is lower than it was last year.
And the environment in interest rates, in particular, there’s still a fair amount of uncertainty. So we will be continuing to kind of look at that capital plan to decide if putting the capital into build-to-suits around the globe is better than some of the other options we have and a continuation of capital reductions is probably what you’ll end up seeing in this environment. That’s kind of where we’re looking at it. The other part of your question is absolutely, we look at putting capital into places that primarily or specifically drive and align with our priorities. So when you think about us focused on organic growth over the long term, we’re focused on quality of earnings. We’re focused on operational efficiencies and driving balance sheet strength, all of the different ways that we can execute on achieving those goals are in play.
If that means allocating more capital to higher quality markets versus emerging markets or vice versa. If it means putting less into CapEx and more into debt reduction, if it means reducing the growth of the dividend and putting more towards balance sheet and debt reduction. We think about those things all the time and it plays into our capital allocation and it will next year as well, and we’ll lay out what that will mean in February.
Eric Luebchow: Great. Thanks. And just one follow-up question. Latin America, you’ve talked about some delayed churn in that business. So maybe you could just kind of walk us through the cadence of when that you expect that churn to kind of layer through and when you may be on the other side of it. And then, obviously, it seems like given a pretty big reduction in inflation in some of those markets like Brazil, would seem to seem like the CPI-linked escalators will be a bit of a headwind at least into next year. So maybe just talk about some of the moving pieces and the growth outlook there? Thank you.
Rod Smith: Yeah. A couple of things that I’d – that I highlight relative to the LatAm market. I mean in 2022, we had roughly 5% churn that was part of embedded in our organic tenant billings growth. In Q3 here, it was 5.2%, so pretty consistent. For the full year of ’23, we’re projecting that to be around 6%. So that’s what’s driving. When we say elevated churn, that’s exactly kind of what we’re seeing there. We are seeing delays in churn. Much of that is tied to the oi churn (ph) that we’re experiencing and will continue to experience down in Brazil. We also see churn from Telefonica up in Mexico. Those are kind of the two primary places where we see churn. We’ve laid out a lot of the different pieces of the oi churn. I won’t do that again here.
But I would say, we do expect elevated churn to continue into next year. I think you’re absolutely right in terms of when inflation moderates in some of these markets, that will potentially lower the organic tenant billings growth from that perspective as well. So we’ll be watching all of those issues. I think when it comes to LatAm, we’ll be watching the churn as we go into next year. I can’t tell you yet that we’re beyond the peak here because of this churn that was delayed and potentially pushed into next year. But over the next couple of years, LatAm because of the reduction in inflation that could happen and the elevated churn, we could be in the low single digits in terms of organic tenant billings growth as we head into next year.
Eric Luebchow: Okay. Great. Thank you, Rob. Appreciate it.
Rod Smith: You’re welcome.
Operator: And next, we can go to Nick Del Deo with Moffett Nathanson. Please go ahead.
Nick Del Deo: Hey. Thanks for taking my questions. And first of all, I want to echo others’ comments and congratulate both Tom and Steve on the upcoming changes.
Tom Bartlett: All right. Thank you.
