Unidentified Analyst: Perfect. Thank you.
Operator: Our next question comes from Batya Levi. Please go ahead.
Batya Levi: Great. Thank you. A couple of follow-ups. On the network services side, can you talk a little bit about the slowdown you saw in the quarter? And I think you’re tracking below your annual guidance. Should we expect this quarter to be the trough and continue to improve from here? And maybe on the tower side, can you give an update on what percent of your sites have been upgraded with 5G equipment now? Thank you.
Brendan Cavanagh: Sure. On the services business, yes, it’s down a little bit, but we — as you saw, we did not change our full year outlook. And we do expect that the second half of the year will be slightly higher than the first half of the year. I mentioned in my comments that we saw an increase in our services backlog from the end of the year to the end of the first quarter that is supportive of that. And all those little things around applications being up services backlog being higher support that I think we will see a little bit more services activity in the second half of the year. But I think we’ll be able to give you more clarity on that on the next call. On the tower side, 5G percentage, we’re a little more than half now.
I think we’ve said we were around half in the past. We’re still, while we’ve seen some increase obviously through the first quarter with volumes being a little bit lower, it’s only a little more than half. So the actual percentage is left to be upgraded is still significant.
Batya Levi: Got it. Thank you.
Operator: Our next question comes from Richard Choe. Please go ahead.
Richard Choe: Hi. I have two follow-ups also. I’m not sure if you can tell, but with the new lease densification applications, are they mainly in markets where there’s a significant amount of fixed wireless?
Brendan Cavanagh: I can’t tell you that for sure, Richard. But that would not be an unreasonable assumption, but I can’t tell you that for sure.
Richard Choe: Got it. And then on the decommissioning and cost savings, is there a significant delay from when the commissions happen and when you do the cost savings given maybe the ground leases underlying? Or can you kind of get ahead of it and kind of close that timing gap.
Brendan Cavanagh: Well, our goal is to achieve those savings as quickly as we can. And you’re right that there will be many cases where we’re able to do that ahead of the decommissioning. In fact, in some cases, it would be our desire to not do the decommissioning and simply put those costs on hold to allow enough time to see what happens. So I think it will be a mix. But where we’re able to do that, obviously, it accelerates our ability to generate the cost savings. So that’s our first priority.
Richard Choe: Great. Thank you.
Operator: Our next question comes from Matt Niknam. Please go ahead.
Matthew Niknam: Hey guys, thanks for getting me on the call. Just two, if I could. First, on the debt maturities. I think you talked about evaluating a variety of options in relation to that. Is there any more color you can share in terms of what’s being evaluated in terms of alternative sources of capital? And is there the potential for cap recycling with where multiples and valuations are in the private markets? And then just secondarily on the tower decommissioning. Is that — it’s more of a housekeeping item. Is that what’s driving the boost to tower cash flow ex FX relative to the slight reduction insight leasing tied to the Oi churn? Thanks.
Brendan Cavanagh: Your second question, the answer is yes. That is the primary driver. I mean it’s smaller, obviously, you’re talking about a $4 million for the year, but yes, that’s the driver. On the first question, I’m mostly, when I talk about different options, we’re mostly referring to different markets, debt types of debt that we might issue to refinance it on the question about the cap recycling type of solution. At this point, I think I would defer on that. But the bottom line is we’re open to looking at all the different options that are available to us trying to find the most creative and cost-effective solutions that we can. And we’ll let you know as we secure something.
Matthew Niknam: Great. Thank you.
Operator: Our next question comes from Eric Luebchow. Please go ahead.
Eric Luebchow: Great. Thanks for taking the question. Brendan, maybe you could talk a little bit about the comprehensive MLA you signed with AT&T last year. Any kind of early learnings on whether you think that’s helped generate more activity on your site with that customer? And whether there may be appetite for similar agreements with some of your other customers? I know — I believe that T-Mobile had an agreement that expired relatively recently?
Brendan Cavanagh: Yes, it’s been — it’s actually been very good in the sense that we have, I think it’s kind of loosen the gears up, if you between the two companies. They have a lot of work to do, and we’re a big supplier of theirs in terms of tower space. So the ability to have a much easier free flowing kind of understood process by which we they make requests and we help satisfy those requests has been a positive. And so I think that in and of itself is something that we love to have with all of our customers. And I think we generally do, but with AT&T, perhaps it was the one that given that we have never really had any kind of master agreement with them. There was a little more low-hanging fruit there to address.
In terms of the others, every agreement, I think, is very specific to the relationship with that customer and what their needs are and their existing relationship with us. So we’re certainly open to master agreements. We’ve had them in the past with the others. In the case of the T-Mobile agreement, we actually, you mentioned that it expired, that’s true, but we actually did extend it for a period of time while we kind of look at the longer-term needs for them and how we might structure something that’s favorable for both companies in the future. So I think that evidence is the fact that we work together well with our customers and are able to find solutions that are beneficial for both parties.
Eric Luebchow: Great. And just one follow-up from one of the earlier questions. I think you talked about getting to 1% U.S. tower churn, excluding Sprint in the next few years. So just a glide path to get there. Is that coming more from some of your smaller customers? Are you also seeing some current opportunities with the big 3 or 4 customers? Does it have anything to do with less competitive activity from tower over builders or anything you can cite to kind of get down to those levels?
Brendan Cavanagh: Yes, I think it’s both. You have less smaller guys just in general. And so therefore, there’s just less of a pool of potential leases chart with the kind of more narrow band type of tenants that we have. So that is a contributor. And with the bigger guys, I think as you have these master agreements, you have less of these as you said over builders that are out there and others that are trying to find ways to take existing tenants, while not particularly successful in the past, there were some amount of that I think that’s sort of gone its way, and you’ll see less and less of that happening in general. So I believe all of those factors will play into it.
Eric Luebchow: Okay, thanks Brendan.
Operator: Our next question comes from Walter Piecyk. Please go ahead.
Walter Piecyk: Thanks. And thank you to the operator. That was the perfect pronunciation of my name for the first time ever. I just want to go back to the math on the debt reduction and the share repurchase because I think basically, the way you described it is you noticed what was going on longer and higher, but then you continue to buy stock back into April, which, I guess, if you could comment on that because I’m not sure how those two things fit. But then if you look at kind of the reduction on an empirical basis, in 2023, you reduced at $600 million. Obviously, you’re not on the pace of that yet this year for any reduction, but then you again, piece milling. I know 3 or 4 people asked this question, but you kind of referenced the $800 million of debt maturities.
So if we look at you using another 100 already in the June quarter and then just the free cash flow in advance of those maturities, it would seem to me that you basically have to turn that spigot off for any share repurchase for the remainder of the quarter and into Q3 in order — if you’re specifically targeting those maturities. I get it that you’re looking for other ways to, I guess, refi it or whatever, but — so if you could just comment on why you were buying stock back when things change, should we expect more than 600 given the comments that you mean? And how can you do share repurchase if you’ve got these maturities that you want to address?
Brendan Cavanagh: Yes. I’m not sure if there’s just a moment in time when things change. We bought back stock in late March and basically the first few days of April. So, and I think that, that still is a good return on investment. The reality, Walt, is it’s hard to be that precise and exact time in all these things. And I think as we go forward, it doesn’t mean that we won’t buy stock back at all. I’m just telling you that directionally, as I look at it today, that I think pay downs of debt is slightly more accretive than buying back stock where it is right now. But that doesn’t mean there won’t be opportunities to do both, and I expect we will do both going forward. But we’re going to see what other options we have available to us as we move through the balance of the year, and that will influence how it plays out.
Mark DeRussy: Well, I will add one thing here and that’s that buybacks have a certain mechanic to them, where when we were in a blackout period, we typically put a plan in place. And those plans typically prevent us from actually making decisions. So the decisions are made ahead of time. And I think that may help explain the timing of this relative to your comments.
Walter Piecyk: That’s fine, Mark. I appreciate that. Just one follow-up though. Again, just based on math, right, this is a very predictable business, right? We can see what the free cash flow is. I don’t like if you think it’s more — if you think share repurchase is more important for these reasons that you’ve outlined, which I don’t disagree with, right? And assuming that, that view doesn’t change, all of a sudden, the Fed doesn’t start talking dropping rates less than right in the upcoming near future, again, unlikely. I just don’t see like how that does it mean that you have to mostly turn off the share repurchase stage at least through the end of the year. Like it’s just the math of the free cash flow and what’s available in terms of at least trying to top the $600 million reduction that you did last year?
Brendan Cavanagh: Yes. No, that’s true. There is a certain amount of cash that’s available under the current structure that we’ve got. We’re producing a certain amount of AFFO and the proportion allocated to the dividend, and there’s the rest, right? And the rest will go to one of these buckets or a mix of these buckets. So what you’re saying is right. But things may adjust. Frankly, we may end up with an acquisition opportunity that we think is actually better than all, and that would put both of these things to the side. So I’m retaining some flexibility. But yes, if we’re going to buy — we’re going to pay down a meaningful amount of debt. Obviously, we have to stop spending on everything else.
Walter Piecyk: Just got just one last operational question. I guess I’ll phrase it this way. Have you seen outside of the big three operators in DISH? Have you seen anyone demonstrating interest in or submitting applications for CBRS spectrum to deploy on your towers?
Brendan Cavanagh: Nothing material. No, nothing really.
Walter Piecyk: Got it. Thank you.
Operator: Our next question comes from Brandon Nispel. Please go ahead.
Brandon Nispel: Good. Hi, thanks for taking the question. Quick one for Mark. Could you just quantify the impact of customer consolidation churn versus normal core trends in the quarter, both domestically and internationally? And for Brendan, maybe sit there looking at your leasing and churn numbers…
Brendan Cavanagh: Brandon, I’m sorry. Brandon, sorry to interrupt you, but we’re having a little bit of a hard time hearing you, you’re a little garbled. You may have to rev that first.
Brandon Nispel: Can you hear me better now?
Brendan Cavanagh: Yes, that’s much better. Thanks.
Brandon Nispel: Okay. I’ll just start over. So a quick question for Marc. Could you just quantify the impact of customer consolidation driven churn domestically in international versus normal course churn in the quarter? And then, Brendan, for you with where you’re sitting today from a leasing standpoint and churn standpoint, internationally and domestically and what you know about your maturities coming up. What do you think is a reasonable level of AFFO per share growth looking out to 2025 and 2026 when your heaviest maturities are coming due? Thanks.
Brendan Cavanagh: On the second question, AFFO per share growth. I think, Brandon, I mean, the real trick in answering that is that interest rates and interest expense play such a big role in it. So if it weren’t for that, if I could tell you exactly what it was going to cost refinance debt and what the timing was going to be. I could answer that question with a little more precision. Obviously, we make certain assumptions internally here, but I’d rather not speculate on that. If you kind of took that away, I think, a mid-single-digit percentage growth rate for AFFO per share would be what we would achieve even with the churn, but the interest headwinds are going to be a challenge to that. And then the first question was the customer consolidation or percentage, Marc?
Marc Montagner: Yes. So in domestically, Sprint was more than half of the [Indiscernible] in the U.S. And internationally, I would say that the majority was known for this first quarter, but all is going to pick up in Brazil. So I think we said overall the [Indiscernible] or churn outside of the in Brazil would be about $15 million for the year.
Brandon Nispel: Great. Thank you.
Operator: And our next question comes from Brendan Lynch. Please go ahead.
Brendan Lynch: Yes, Brendan Lynch. Thanks for taking the questions. Maybe just on the re-financings coming up this year. To what extent are you comfortable using the revolver to refinance that debt, if not longer term, at least in the in the short term?
Brendan Cavanagh: Yes. I mean that’s one option that’s obviously on the table. The advantage to it, of course, is that it would allow you to retire it quickly over time or as you could over time without having to lock into a longer-term maturity date. But, hey Bren, the negative is that it’s some of the most expensive debt that we have right now would be more expensive than obviously whatever we would refinance it with in a different market. So it’s an option.
