Son Nguyen - VP Corporate Finance Jay Brown - President and CEO Daniel Schlanger - SVP and CFO.

Brett Feldman - Goldman Sachs Simon Flannery - Morgan Stanley Matthew Niknam - Deutsche Bank Jonathan Atkin - RBC Capital Markets Amir Rozwadowski - Barclays Nick Del Deo - MoffettNathanson Colby Synesael - Cowen and Company Tim Horan - Oppenheimer Mike Rollins - Citi Walter Piecyk - BTIG Batya Levi - UBS Spencer Kurn - New Street Research Brandon Nispel - Keybanc Capital Markets.

Good day, and welcome to the Crown Castle International Q3 2017 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Son Nguyen. Please go ahead..

Thank you, Gina, and good morning, everyone. Thank you for joining us today as we review our third quarter 2017 results. With me on the call this morning are Jay Brown, Crown Castle's Chief Executive Officer; and Dan Schlanger, Crown Castle's Chief Financial Officer.

To aid the discussion, we have posted supplemental materials in the Investor section of our website at crowncastle.com, which we will refer to throughout the call this morning.

This conference call will contain forward-looking statements, which are subject to certain risks, uncertainties and assumptions, and actual results may vary materially from those expected. Information about potential factors which could affect our results is available in the press release and the Risk Factors section of the Company's SEC filings.

Our statements are made as of today, October 19, 2017, and we assume no obligations to update any forward-looking statements. In addition, today's call includes discussion of certain non-GAAP financial measures.

Tables reconciling these non-GAAP financial measures are available in the supplemental information package in the Investor section of the Company's website at crowncastle.com. With that, I'll turn the call over to Jay..

Thanks, Son, and thank you everyone, for joining us on the call this morning. As you saw from our press release yesterday, we continue to build on our track record of delivering great financial results with another strong quarter that exceeded our expectations.

As Dan will discuss in further detail, our third results and 2018 outlook clearly demonstrate how strong our business is performing today and our expectation of positive trends will continue into 2018.

As a result of the sustainability and growth in our cash flow we’re increasing our quarterly common stock dividend by a 11% per share reflecting our expectations of continued growth in 2018 and the anticipated contribution from the pending acquisition of Lightower which remains on track to close by year end.

As we look beyond 2018, we see a tremendous opportunity to leverage our unparallel portfolio of towers, small cells and fiber to deliver 7% to 8% long term annual growth and dividends per share by capitalizing on the attractive secular growth trends, driving demands for our leading portfolio of shared communications infrastructure assets.

To keep pace with the anticipated growth and data we expect significant investments by our customers across our towers, small cells and fiber for years to come.

According to industry estimate mobile data is expected to grow nearly 40% annually through 2021 largely tied to 4G use cases including the continued adoption of high bandwidth application such as mobile video and the increasing number of connective devices.

These trends further highlighted by the carriers recent moves to unwanted data plans in the U.S. which we believe are likely to result in our customer competing our network quality and speed. Similar to the wireless industry, the expected 20% annual growth in wired data traffic is driving additional demand across our dense natural fiber asset.

To meet this demand our strategy is to provide differentiated fiber solution that serve high bandwidth, multi location customers such as large enterprises, healthcare providers, educational institution and carriers.

This strategy allows us to enhance our competitive position in small cells by increasing the opportunities we serve with the underlying fiber assets, thereby improving the already attractive shared economic model we see in our small cell business.

Turning to the bigger picture, our portfolio of towers, small cells and fiber uniquely positions Crown Castle to take advantage of the investments our customers are making to augment their network.

Our asset provides the mission critical infrastructure required for the ongoing shift to a world where mobile is the platform of choice for an ever more digital economy. This transition is impacting every industry and will serve to increase the long term value of our infrastructure asset.

We believe all of this expected investment activity will provide a long run way of growth, cash flow, sustained growth over across our portfolio of assets supporting our long term annual dividend growth target of 7% to 8%. To-date we’ve underwritten our investments based on 4G and existing applications alone. But we believe there is more to come.

This is similar to the late 1990s when we underwrote tower acquisitions assuming all these voice applications. Overtime as the wireless used cases had expanded the infrastructure has played a vital role and our growth and returns have followed. We believe a sequel to that movie is coming.

As we look further out the development of 5G has the potential to revolutionize how businesses in all industries operate and further extend a runway of growth across our infrastructure asset. We believe the faster data speed and lower latency powered by 5G will create new business models that are hard to imagine today.

Much in the same way that 10 years ago the iPhone and a transition from 3G to 4G dramatically changed the way consumers live and work. To-date mobile data traffic has been largely one way with end users primarily pulling data from the wireless network.

As we look forward and consider the potential impact of the merging technology including virtual and augmented reality, autonomous and smart city applications to name just a few we believe these applications will likely drive additional data growth as the traffic becomes two way, exchange of across the wireless network.

As an example, Intel estimate set of single autonomous vehicle would generate approximately 4 terabytes of data per hour and a half of drive path. To put that into perspective that equals the same amount of data used by approximately a 1,000 mobile subscribers on a monthly basis.

The trend towards greater reliance on wireless network points to the need for carriers to continue to invest in hyper dense network that powers the small cells all connected by high capacity fiber.

In advance of deploying 5G the architecture of wireless networks will continue to evolve as carriers preposition their networks to support new business models and applications towered by 5G.

Importantly our customers are making many of those investments today by augmenting their macro network with the deployment of fiber asset small cells and RAM to increase the capacity, efficiency and agility of their network as they meet their demand of a 4G world.

As they evolve we believe the critical elements of the wireless network will continue to consist of towers which provide the critical foundation for coverage and capacity. Small cells which are flowed traffic and bolstered capacity in areas of the network where data demand is the greater.

And fiber which provides the connective tissue needed to create any integrated network of towers and small cells. With approximately 40, 000 towers, 50, 000 small cells on air who are under contract and more than 60,000 route miles of dense metro fiber performance for the Lightower acquisition.

Crown Castle is the only infrastructure provider in the U.S. that can provide these elements at scale. We have positioned the company for both what is needed now and for what we believe will be needed as wireless networks continue to densify the needs of coming data demand or other while creating value for our shareholders.

A significant driver of our shareholder value creation is our dividend. Over the last four years, we have tripled our dividends from an annualized $1.40 per share to the current $4.20 per share.

Looking forward we remain confident if our ability to deliver on our stated goal, driving long term annual growth and dividends of 7% to 8% supported by expected growth and AFFO which when combined with our current yield offers a very compelling investment opportunity.

Over the last 20 years, we’ve intentionally positioned our firm through thoughtful and disciplined investment to be at the leading edge of the deployment of wireless network. Our team has consistently made those strategic investments well in advance when the market opportunity had fully materialized.

For example, as I mentioned before we began investing in towers in 1996 and have simply assembled our leading portfolio of towers across all of the top U.S. market.

Well, it is compliant with those early investments to turn into the tower business we know today, the belief in the underlying fundamentals of the shared infrastructure model drove our team to make those investment decision.

The same is true today of small cells where more recently we’ve strategically built upon our expertise and shared wireless infrastructure to extend our capability to include small cells and fiber in 23 of the top 25 U.S. markets pro forma for the pending lightower acquisition.

As with the early tower investments, we started investing in small cells in advance of the market fully appreciating their importance and the development of networks starting with our acquisition of new path in 2010.

Open away, our strategy is to grow our dividend by being a leading provider of the essential infrastructure needed to deploy wireless networks in the U.S. driven by our focus on meeting our customers’ needs while positioning Crown Capital for the long term.

Since 2007 pursuing this strategy has resulted in us doubling our tower portfolio, developing a market leadership position in small cells and securing more than 60,000 route miles of high capacity, dense fiber in top U.S. markets.

All the while growing our AFFO per share by 13% on an annualized basis returning approximately $6 billion to our shareholders in dividends and share purchases and delivering shareholders more than two times the total returns generated by the S&P 500 over that time period and I believe there is much more to come.

And with that I’ll turn the call over to Dan..

Thanks Jay, and good morning everyone. We’ve a lot of good things to discuss today including our 2018 outlook. But I would like to start with an overview of third quarter results on slide 4.

Our third quarter results for site rental revenues and adjusted EBITDA were at the high end of our previously provided third quarter 2017 outlook, while asset sale exceeded the high end of guidance driven in large part by the continued help and low keeping environment.

For AFFO, the quarter benefited from approximately $5 million lower than expected sustaining capital expenditures. This benefit was due to timing and we expect that capital will now be spent during the fourth quarter. Adjusting for the time use benefit we still would have exceeded the high end of our third quarter outlook for AFFO.

Moving onto investment activity, during the third quarter we invested approximately $288 million in capital expenditures consisting of $24 million of sustaining capital expenditures and approximately $264 million for discretionary investment opportunities including $24 million of land acquisition.

In July we raised approximately $7 billion of equity in debt capital which will impact full year 2017 results. As that capital is year marked upon the pending acquisition of Lightower which we expect to close by the end of this year.

During the quarter we continued to return significant capital to our shareholders through our quarterly common stock dividend of $386 million in the aggregate or $0.95 per share.

Turning to slide five, our updated full year 2017 outlook reflects the out-performance during the third quarter and a modest increase in leasing expectations during the fourth quarter offset by expected higher repair and maintenance expenses driven by hurricanes Harvey, Irma and Jose.

The increase in repair and maintenance expense from these three hurricanes is primarily related to having crews on standby in preparation for the storms as well as inspection, debris removal and responding to customers following the hurricanes.

I want to thank all of our employees who have worked tirelessly in the wake of these natural disasters to help get our customers assets back on online. During through very stressful times they went above and beyond the call of duty and I'm proud to work at a company with employees like ours.

Importantly though our assets did not sustain significant damage and we do not anticipate additional impact from those hurricanes subsequent to the fourth quarter 2017.

Given these puts and takes and adjusting to exclude the impact of the Lightower financings our full year 2017 outlook for AFFO and AFFO per share remains unchanged from our previous guidance of $ 1.826 billion and $4.99 per share respectively.

Turning to slide six, our full year 2018 outlook highlights include 10% growth in AFFO per share from a 2017 figure of $4.99 per share which exclude the impact of the Lightower financings, the $5.50 per share in 2018 and a 11% increase to our dividends from an annualized $3.80 per share to an annualized $4.20 per share demonstrating our confidence in the organic growth of our business in the expected accretion in the pending acquisition of Lightower and an acceleration of new leasing activity during 2018.

Focusing on these specifics as shown on slide seven, our expectations for growth and site rental revenues of approximately $1.044 billion at the midpoint is driven by approximately $205 million of organic contribution to site rental revenues plus the full year contribution of Lightower an additional half year from the Wilcon.

Approximately $205 million of organic contribution site rental revenues is comprised of new leasing activity of approximate $205 million compared to approximately $172 million in 2017. The expected acceleration includes new leasing activity in 2018 of approximately $110 million for towers up from $105 million in 2017.

$55 million for small cells up from $40 million in 2017 and $45 million for fiber solutions up from $25 million in 2017. In addition to new leasing activity, organic growth is also supported by annual contracted tenant escalators which we expect will contribute approximately $85 million in growth during 2018 in line with 2017.

Growth from tenant escalation is offset by tenant non-renewal of approximately $85 million which is slightly lower than what we expect in 2017 to arrive at an organic growth of approximately $205 million up from approximately $166 million in 2017.

Change in straight line adjustment is expected to remain consistent with 2017 offsetting organic contribution to site rental revenues by approximately $55 million in 2018. We have not included any contribution from the FirstNet as part of our 2018 outlook.

We are however optimistic about the FirstNet rollout and recognize there is additional growth potential once the deployment begins. Turning to slide eight, I would like you to the expected AFFO of approximately $460 million at the midpoint of outlook from 2017 to 2018.

Similar to site rental revenues Lightower is expected to be a significant contributor to AFFO growth in 2019 adding approximately $345 million to AFFO meta-finance. Starting on the left organic contribution to site rental revenues growth at the midpoint of $205 million is partially offset by $65 million increase in operating and G&A expense.

Beyond the typical cost escalations in the business this increase is primarily related to the additional staff we've added throughout 2017 to support growth at our small cell business including investments related to increasing annual node production as we work through our robust backlog of nodes to be brought on air through 2019.

A significant portion of the increased headcount will be in place as we exit 2017. Continuing on contribution to network services is expected to be in line with 2017 and finally 2018 AFFO growth is expected to be negatively impacted by approximately $20 million on a net basis of other items.

These items include changes in cash interest expense, sustaining capital expenditures, and contribution from acquisitions that closed in 2017. We expect to generate 10% growth in AFFO per share in 2018 based on the midpoint of our initial guidance after excluding the impact of the Lightower financings in 2017.

As we previously mentioned with the significant opportunities ahead and based on our expectations for 2018 including the contribution from Lightower we've increased our quarterly dividend by 11% per share further adding to our track record of dividend growth.

Returning capital to shareholders through a growing dividend aligns well with our business profile defined by high-quality in growing long-term recurring cash flows.

To wrap up we remain confident that our shared communication infrastructure portfolio is well-positioned to generate significant growth of the long-term as our strategy aligns with where the market is today and where we believe it is headed in future while at the same time allowing us to return significant capital to our shareholders through dividends.

Our visibility in the near-term fundamental and positioning over the long-term give us confidence in our ability to grow AFFO, return capital to shareholders and invest in the future all while we deliver on our target long-term dividend growth rate of 7% to 8% per year over the coming years. With that Gina, I would like to open the call to questions.

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Thank you. [Operator Instruction] And we will take our first question from Brett Feldman of Goldman Sachs..

Thanks for taking the questions. I was hoping we can try and spend a little more time on packing the outlook you have for organic leasing activity in 2018, it sounds like your towers is going to be pretty stable but you're expecting a step up on the small cell side.

So I was hoping you could maybe help us understand what's giving you the visibility into that and then just on the quarter itself I am curious how much of the growth in the small cell business, how much is the organic growth was coming from fiber, you had already deployed.

So you're getting more revenue on existing fiber versus how much that was deployed in the new fiber? Thanks..

So on the first one Brett, to your comment in each of the three areas that we talked ABOUT both towers, small cells and fiber we expect the contribution from new revenue growth to be higher in 2018 than it was in 2017.

Towers is up about 5% from about 105 million to 110 million, small cells is up from about 40 million to 55 million and then fiber, fiber solutions is up 25 to 45. So we are seeing that growth across the board in each of the three areas where we are selling communications space on communication asset.

To your second question I think I would point to the comments that made recently which would reflect the entire pipeline of small cells.

This would be true in the quarter as well as true in our outlook for 18 that we expect about 70% of the activity that we are seeing on small cell to be anchored builds and we would describe that as building new fiber to cover geographic range plus the accretion for Lightower and we are were pretty, we think the Lightower deal is going to close by the end of the year and so we are confident and not wanted to declare the dividend based on that.

But I think it's both a gift and part of Lightower though to answer your first question.

On the second question on FirstNet, I don't get specifically into any one customer what we assumed in the growth but we did not in the 2018 outlook that we did not put in anything from assuming that with any deployment of FirstNet obviously we’ve read and had conversations about what that will likely look like over time but at this point we don't have enough visibility to really put it into our 2018 numbers to the extent we had develops as we get into the course of 18 we will happy to update the outlook based on it..

Thanks Jay and if I could just ask one follow-up so I know that you guys when you guide to the churn for the metro, I believe clear wire you kind of look at the – you go to the worst possible case in terms of tearing down sites immediately and the highest revenue sites first but obviously given general conversations that we've been hearing and reported in the market has there been any change in activity level and decommissioning in that portfolio of towers that you have been able to detect?.

You are right, and in fact to say, we’ve talked about churn over the years. We have always put in kind of the book end and think about it and talk about at the book end ultimately what's realized tends to be less than that bookend of the worst case scenario.

As we would think about 2018 our outlook would assume basically what we have visibility to and still some of the worst case if everything comes down.

Our experiences has been it's not as significant as the bookend assuming that everything comes down but I would tell you based on kind of when we talk big picture about 7% to 8% growth in dividends over the long-term we try to be balanced in that view.

So a part of that balancing is what's going to happen with churn and we assume kind of the worst case scenario in that longer term view and then our short term view we will adjust that based on what we actually earned from the carriers as we get closer to those conversations..

Okay. Thanks Jay..

And we will take our next question from Simon Flannery of Morgan Stanley..

Thank you very much. Good morning. Maybe you can just touch on the current small cell activity just I know sometimes you give us some examples of co-location activity, the tenants per node and so forth.

Any color you could give us about sort of the operational performance this quarter would be great? And then on Lightower, any more color on what you need to do to get this closed this right, going to right at year end or might be earlier the map?.

On the first question, small cell activity is continuing to deliver what we expected, obviously as you can see from the step to 18 we think the activity level is going to increase in 18, the teams are working at those nodes on air and based on how we’ve been able to align the operations, you’re seeing the step in the results in 18 as a result of the operating capabilities of the team.

The other thing I would point to is some of the case studies that we talked to when we did the Lightower acquisition on the call, we’re see those return dynamics continue to play out for the assets that we’ve owned for a long period of time and the densest markets in the U.S.

those are continuing to see healthy leasing activity at a rate that’s about twice a level of lease out that we’ve seen historically in the tower business so we’ve continued to see that play out.

And then from a return standpoint, the returns continue to be very attractive initial yields in the 6% to 7% with anchor build and then as we add additional tenants the returns move into the teams and beyond as we lease up beyond that and that’s been the operating performance that’s continued to remain in the quarter.

On Lightower we’re far enough along in terms approvals as we go through federal and state approvals that were required on the transaction to be confident that at this point that we will be able to close it before we get to the end of the year.

We’re obviously working as hard as we can to close it as quickly as we can and to the extent that we clear all of the hurdles we will give you an update when we clear those hurdles as to the exact timing. But for now we’re confident we will have it closed by the time we get to January 1st which is why we included in the outlook..

On the guidance any concerns around some of the California obviously you just beat the infrastructure – is that any hindrance here or do you think you can still work with what the current status there?.

We will be able to work with the current status there, so it doesn’t give us any concerns about our ability to deliver on the timelines that we provided..

Great, thank you..

Our next question is from Matthew Niknam from Deutsche Bank..

Hi guys, thank you for taking the questions. Just two if I could, one of the competitive front around small cells, I know in the past you talked about pretty strong win rates, just curious whether you have seen any change in terms of competitive dynamics there.

And then secondly, more broadly I guess around fiber, if you could maybe shed some more light particularly around how those segments and some of the various recent acquisitions are operating on just sort of a new structure within Crown Castle.

And wondering maybe if you can give us a little more color on the real step up you expect in fiber from 25 million to 45 million within your guidance? Thanks..

Sure. On the win rates for small cells they continue to about what we believe is about half of the total activities that’s going in the market which is consistent to the last few quarters at least maybe the last year or so.

And we continue to see some more market dynamics in terms of the carrier self performing some portion of that building around fiber and prices.

And then us winning about half of those opportunities, we continue to believe based on the market dynamics that the prices where the infrastructure can be shared that’s the most cost effective model and that continues to be playing out in our win rate.

On the fiber segment I would describe that as, our base to fiber has gotten larger and so our growth in revenue has continued to increase product mix again as I mentioned in my comments still focused on large enterprises, educational facilities, healthcare providers where we’re doing multi-location and a high capacity of bandwidth that’s required.

As we’ve increased the asset base and grown the number of miles of fiber that we have we’re increasing the revenue associated..

And generally this is performing very much in-line with what we expected when we did the acquisitions. So this is – the outlook that we provided for 2018 is much to what we would have expected at this point..

Got it, thank you..

We will take our next question from Jonathan Atkin from RBC Capital Markets..

Thanks. So Jay you spent a lot of time talking about 5G and a number of the used cases and bandwidth required and so forth and I wonder perhaps does it make sense to talk a little bit about [Paper IO] in that context and kind of your thoughts around that investment and activity? Thank you..

Paper IO is a company that provides many datacenters at the edge of the network which is an important component of – in a 5G of reducing the latency, we made a relatively small investment last year in paper that as in early stage of deployment.

We’ve used them in a number of trials that we’ve done with more hard traditional customers as well as other customers that we believe will likely be meaningful customers to us overtime.

I would describe that as an opportunity that we think will leverage our real estate assets over a long period of time, the tower sites that we have today, we believe will likely be hubs environment in a sea ran environment and those tower, our towers will become increasingly important as the market develops towards sea ran in a 5G environment.

So it's more of a trial small investment that gives us an opportunity to get some insight into the way people are thinking about the importance of moving computing power to the very edge of the network..

So how soon do you think it might be, is it quarter, years or just no comment at this point in terms of when you might start to utilize your will assets and monetize them in that type of manner?.

I would describe it in the broad broadest sense, our aim over time is to gain as much revenue and cash flow off of the assets that we own and as I described in my comments we believe towers are important to that, small cells are important to that and fiber is the connective tissue that connects both towers and small cells and we are looking at every opportunity we can to drive revenue growth and cash flow growth across those assets.

Some of the things that we look are near term that we are comfortable underwriting investments based on. As I mentioned in my comments we underwrote all of the investments that we made based on 4G applications and what we currently see consumers using today but we also have a view that there's more than just current applications to come.

I would describe mobile edge computing as one of the areas that we believe has the potential to provide upsides to our revenue cash flow growth as well as returns and extends the runway of growth from the infrastructure over a long period of time.

So it's just one of many opportunities that are – that is directly tied as I mentioned in my comments to the deployment of 5G. So if not near-term it's not going to show up in the 18 and likely probably not 19 results. It's a longer dated activity that we are keeping our eye on and positioning ourselves to benefit from..

And on small cell is there any way you kind of ballpark these increments?.

Jon, you are breaking up for your question.

Can you ask it again?.

Hi Gina, let's move onto the next question and then we can put John back in the queue..

Okay. Our next question is from Amir Rozwadowski from Barclays..

Thanks very much and good morning folks. Two questions if I may, if we think about the sort of the site listing activity of a macro side I mean it seems like you're continually see healthy activity levels you have obviously mentioned that FirstNet is not included in your outlook.

Can you talk to us about what type of initiatives you're seeing from the operators at the moment that's giving you sort of that improved activity levels at this point. I know you can't talk about carrier specific initiatives but just holistically is this a reaction to some of the unlimited data plan that we seen in the marketplace.

Any color on that would be helpful?.

We are seeing each of the carriers work on increasing both the capacity of the network and speed of the networks so we are seeing combination of new co-locations where they are densifying the network through self splitting as well as going back on sites that are already on and amending their existing installations to provide additional spectrum band in some cases or additional capacity in the network.

So it's similar to what we seen in the past just frankly more of it..

That's very helpful and then if we can shift gears over to the fiber and small cell side clearly you guys have bolstered your fiber footprint and that's driving additional growth initiatives going forward.

How do we think about sort of your current fiber footprint, I mean if we think Jay about sort of how you are thinking about the longer-term evolution owning this sort of connectivity tissue, there does seem to be other areas where you could potentially bolster the footprint in order to position the company for that longer-term densification initiatives? Are there thought process about other inorganic activities building additional fiber? How should we think about sort of those initiatives going forward?.

Couple of things I would say about that Amir. First of all the pipeline that we have in the notes to be constructed in some cases we are building additional fiber. The vast majority of that fiber build as I mentioned in my earlier comments about 70% of the total notes relate to places where we are building additional fiber.

That additional fiber build is primarily in those top 25 markets in the U.S. so we are getting a more dense portfolio of assets in the top 25 markets primarily from what we are constructing in terms of fiber.

On the inorganic side Lightower is obviously a very sizable transaction and it's going to take us some time to digest that and integrate it into the portfolio so you should look for us to do anything of scale in the near term as we focus on integrating that asset and beginning to expand the returns on the assets as we articulated when we did it.

We certainly believe there are significant revenue synergies across both sets of assets both the fiber that we bring to the transaction that has not been utilized to its fullest opportunity for fiber solutions as well as the fiber that they bring to the two companies where they've not been utilized to the fullest extent from the small cell side.

So we see revenue synergies there and we are going to be focused on gaining those revenue synergies because we think it's the best way to drive the returns on the assets over a long period of time. So over time we may turn our eyes back towards looking at opportunities to acquire assets.

Those will need to go through the same filter that we put Lightower and FiberNet and will call other transactions through but we got a believe that over the long term it has the ability to increase and grow our dividend and be additive to our growth rate and that the assets have the opportunity to add significant small cells on them in order to drive those returns..

Thanks very much for the incremental color..

And we will take the next question from Philip Cusick from JP Morgan. .

Hi this is Richard for Phil.

Just wanted to get more color on the piecing of the revenue for each of the segments for the growth in towers, small cells and fire solutions should be steady through the year or is it more backend loaded and they might differ by category?.

Richard they are similar to pass the business is backend loaded if you go through the course of these any year. So roughly probably about 55% 60% of the growth would be in the second half of the year and about 40% to 45% would be in the first half of the year.

Obviously the results as they play out you bet only speaking to the small incremental change so if you think about – if you did it in totality the year is pretty evenly loaded but if you're just looking at the incremental growth you would see someone in the neighborhood of about 55% to 60% of the incremental growth in the back half of the year..

And that's already baked into how we provided the outlook. So we think that we are on EBITDA and AFFO and takes that to the next..

And then on the churn side it looks like the non-acquired node churns are going to be higher this year that just of getting back to a normal level of activity now that the acquired node churn is gone or is there something else going on there?.

I think the churn is flat basically on a nominal basis which on a bigger base of business is actually lower year-over-year. So we are seeing that the churn profile is what we would expect it to be on towers and small cells for the non-consolidation portion of our churn..

Got it and then final question that escalated the dollar numbers pretty much the same year-over-year but masterpieces is bigger is that because the asset base of some of the acquisitions don't have escalators and or is there something else going on there that the escalator is actually coming down for other parts of the business..

No the escalator is not coming down. It's going consistently what has been historically.

There is a portion of it where we had a holistic MLA roll off in 16 that had a lot over effect that so it continued in the 17 and therefore did come down a little bit in the 18 but that was already understood I think by everybody in part of what is the normal escalator is now what we think going forward but you're right there is some portion of it were we are bringing in businesses that don't typically have escalators on the fiber solutions which as we add that revenue and pull down at our percentage basis but we are seeing very similar trends in pricing and the escalator in the core business and then towers and small cell side..

Great, thank you..

And we will take our next question from Nick Del Deo of MoffettNathanson..

Hey thanks for taking my questions.

First can you quantify your expectations for changes in the amortization prepaid rents in 18 versus 17 and how much can that contributes to your 2018 recent forecast by segment?.

The prepaid rent is going to be in the neighborhood of growth the same way it was from 16 to 17, so it's consistent and so we think the trends that we laid out in terms of the new leasing activities across towers and small cell and fiber are very representative of what is whether you include or I exclude the prepaid rent the way we think about it thought that it's all cash.

It just depends on when we get that cash. And so we are making investments over the long-term that are generating good cash on cash return which is the way we think about business. So we think that those the numbers that I talked about earlier in terms of new leasing activity or what we think are the new leasing growth in the business..

And as the reason is not stepping up because the small cell installs are kind of backend loaded or only start when the side is tuned on the air..

What you said is turn but I would say that reason is not increasing. I think that overall the business it is increasing just not anything that would change the trajectory or the growth that we talked about..

Maybe one more if I can, if I remember correctly, in your Q1 call you said it was your expectation that most of your small cell backlog would get turned up in the second half of 18 with some fall in the 2019, does that remain the case or has it been pushed back some? I might be reading too much into it but in some of your earlier comment you seem to have suggested your small cell growth in 2018 is more functional of the words than you got in 2016 not necessarily 2017?.

Yes Nick, I think when we talked about the big step up earlier this year, we said it was 2019 not 2018. We thought it as being as being a 2019 event.

So our view on timing of when we will turn these nodes on has not changed from we thought about previously, we are seeing obviously an increase in small cell revenue growth that's the function of what we want in 2016 which was a step up from the activity that we saw in 2015..

Okay. Got it. Thanks for your color..

And we will take our next question from Colby Synesael from Cowen and Company. .

Thank you. Two questions if I may, the first question I was hoping if you could provide some color on 2018 discretionary CapEx and if so you are able to break out what's coming from Lightower versus the standalone business? And then secondly you are spending $20 million to $40 million in 18 on integration.

I was wondering give you a little bit of color on what's being done, have each of the – you have done a lot of fiber acquisition over the last year.

Is your intention now to from the technical perspectives integrate those so for example combining billing systems, combining the OSS just talk about what's been done thus far and what the intention is 2018 would be helpful? Thank you..

Sure Colby. Discretionary CapEx we anticipate that the discretionary CapEx in Lightower is around what has historically been $300 million range. The business will be a step up from 17 because of the big growth in the small cells that we are putting on air.

So we anticipate overall discretionary CapEx to be up $200 million to $300 million I would say, 18 over 17..

I am sorry. So that sounds $300 million for Lightower in that –.

And then on a base business another 200 or 300 because of the small cell that we are putting on air.

On the integration what we are planning on doing is integrating all of the fiber solutions companies we have bought recently into the new operating structure that we announced not too long ago with Jim Young and we would anticipate trying to put it all on a platform and same operating platform and management style and the timing of that happening is still unclear because we haven't got into we haven't closed on Lightower to have enough of those conversations but the overall goal is to run that as one business that we can get the most out of the expertise that we got with the Lightower team along with the expertise we already have in place and then providing asset base across the US as oppose to pockets but we think there will be a lot of revenue synergy that we can get from putting all those things together which is Jay was talking about earlier was really the driver behind Lightower transaction, get access to the fiber and then drive additional revenue across that fiber..

So the $20 million to $40 million will go towards that in 2018 but in terms of when that project actually gets completed and we start to see the synergies whether it's revenue or OpEx that's still PBD?.

Well, to be clear we have not announced any synergies on the OpEx side, but the revenue synergies will be to be determined. They are not baked into our outlook so we didn't put these small cell on Lightowers fiber but we put any revenues synergies on the fiber outside of light tower footprint. .

Thank you..

We will take our next question from Tim Horan from Oppenheimer..

Thanks guys.

On the pricing on small cell and fiber is that a change or is that been fairly consistent over the last couple years are you seeing any improvements there?.

Tim the pricing on both small cell and fiber tuition is consistent with what we've seen in past years..

Great and how about for carrier demand? I think it has been a little bit concentrated in the past in terms of the carriers over the point of small cells.

Is that pretty broad's spread out at this point?.

We have seen the demand across all of the carriers and what I would describe as maybe a change from the past has been the market they have focused on prior to the conversation that we started having at the beginning of this year where we saw significant increase in the number of nodes that we were getting from carriers I would have described the vast majority of our activity coming close to probably 90% of the activity occurring in the top 10 markets in the U.S.

and really focus on the top five market specifically. And what we've seen over the last 12 months is that has moved outside of the top 5 - 10 markets to the top 25 market.

So the increase in volume has followed with multiple carriers, but really function of the number of markets that are being focused on and the overall quantum of nodes being deployed..

Great and then lastly it looks like soft bank is looking to partner into the U.S. market wireless infrastructure market.

Do you think there is an opportunity for you guys to partner with them? Do you see them as kind of being more competitive going forward?.

I think there is, we are always open to having partnership conversation with folks and I saw their announcement earlier this week and I think it affirms the great returns that are in our business so I am not surprised that a firm like Linley would desire to come into the U.S.

market given the returns that we've been able to demonstrate over a long period of time and further and so I think they find the returns and opportunities per capital to work is attractive and that's why they are willing to put funds into it. So not surprising and would be open to have a partnership conversation if they wanted to..

Thank you. .

And our next question comes from Mike Rollins from Citi..

Hi thanks for taking the questions. First if you get us help level set so if you take the midpoint of your organic growth guidance for 2018 can you split that percentage growth rate and help us with what the comparable tower number would be versus the small cell fiber growth rate and then I will follow-up with the second question if I could..

So Mike I think what we try to do given the new leasing activity we will split it up.

So $205 million new leasing activity and we said we are going to it's about $110 million from towers, about $55 million from small cells and about $45 million from fiber and that should give you a pretty good sense of where we are overall and those – like Jay was mentioning earlier those have each increased over 2017 so we see increasing growth across each of our businesses..

Right so what would be –.

I think we would say Mike maybe one of the way to think about it is we've increased the organic leasing activity on a consolidated basis that's up several – that's up about 40 basis points about 1% over 2017 activity that we saw is organic leasing going to 6% in 2018. It was unchanged in 2017..

Right.

So we and if you take that – is that six the total business so if you wanted to look at towers as a growth rate and small cells as a growth rate what would comparative be for those two pieces?.

Yes so small cells is growing as we talked about in the high teens percentages year-over-year and towers is still in the 5% to 6% range as it has been growing a little bit but like Jay was mentioning a lot of that because the base of the business and towers is so much of the base that in order for the whole thing to growth hat much towers has to be accelerating on top..

Okay.

So five to six is the range for towers to think about for 2018?.

Sure..

And just a follow-up when we look at the revenue bridge that you provide there's a difference in the way that you look at new leasing for towers versus new leasing for small cells in that towers my understanding is you don't include the builder suits, but in fiber you are including the builder suits what would the growth rate in fiber look like if you didn't include the builder suits?.

As going back to what Jay was talking about earlier, about 70% of what we are building in small cells and fiber is anchor builds and we anticipate those are for both current growth and in future growth to come but as we put on more and more of these nodes and get more and more co-locations a lot of it will come through that 30% of co-location.

It's just the bigger numbers are also including the bigger anchor built. So the number would be lower if we didn't include the 70%. We just look at it as this is part of our business going forward. This is part of what we are doing and it's really not part of the business of the towers to build the suit at this point.

So it's just a difference in how we think about the business. There are small cell businesses in the investment and growth phase and we are including both the capital in the revenues associated with that..

Well, last question when you are selling co-location whether it's in tower or small cells what percentage of the deals are bundling the two services together versus kind of like ala carte search rings.

Is there a measure we should be tracking on that basis?.

Mike the folks at the carriers are looking at the use of both macro side and small cell. So it's the same group inside of the carrier. So when we are having conversations with them there is a conversation about both. When you get down to when things actually get signed and done, the nature of those two it's very different.

So from a small cell standpoint, there is a significant amount of RF engineering and design that goes into how our carriers utilize those assets. There is far less of that on a traditional tower site where it's leasing at in essence of a spot on the map. So the conversations are happening with the same people at the carriers.

I wouldn't describe it as a bundling because it's not a cookie-cutter solution on the small cell side. So we got to have a more robust conversation regarding small cell than we need to have on the tower side..

Thanks very much. .

And we will take the next question from Walter Piecyk from BTIG..

Thanks.

So I am just going to go back to couple of earlier answers, did you say when the deal closes there will be or won't be an incremental dividend increase?.

There will not be..

Got it. Thank you. And then on the prepaid rent as far as looking 2018 similar growth rates if you look at 2017 it looks like you are pacing at 18% growth so based on your prepaid grow 18% in 2018 that's in, I guess what you would consider reported organic growth so for excluding –.

So the prepaid rent is running by similar dollar amount from 17 to 18 than it did from 16 to 17..

Similar dollar amount, 240 right that’s fine but -- so if you are aiming up at 240 for prepaid for the year then you are looking like 280 for 2018..

We take this conversation offline and have it where we can talk about numbers more specifically as to we can make sure that the question you are asking is being answered appropriately. It's hard to follow all the numbers you are trying to get to in this type of form.

Can we just talk about it after the call?.

It just relates to the growth rates you guys are talking about as far you’re going, but okay. .

I am not trying to -- question if you really wanted to be answered here it's just really hard to follow 240 I don't know what you are talking about so if you like we can go –.

These are numbers you report whatever I can go with it offline and it's in your press release but whatever.

I guess just give us an update on any of the trial that you have talked in the past from nontraditional wireless providers? How is it going how they proceed, how they ended and if you think that they can contribute anything to revenue in 2018?.

Yes we will talk on the trials we have done. I would describe this is more – they are opportunities for us to learn and understand how the networks are being deployed, I made the comments earlier about edge computing and some of things that we have done with Safer and other components of the real estate we have done some of those with fiber.

As we have done those they are designed more to learn. They are generally relatively small in terms of dollar amount so they are not going to affect our 2018 results.

They're much more of learning opportunities for us to understand how the market is developing and what's going to be necessary in C ran 5G and as we get into things like Internet of Things and all the connected devices..

Got it, thank you..

Our next question comes from Batya Levi from UBS..

Thank you. One question on the pipeline for the small cell node build, do you had mentioned that you had about 25,000 in the beginning of the year for the next 18 to 24 months.

How does that figure look right now and if we get the federal regulatory for month attachment do you think that you can beat the delivery of the pipeline?.

Yes, the pipeline is up and we continue to win new nodes. It's not a meaningful step so as we think about the G&A as Dan mentioned in his comments around the cost structure we think we sized the cost structure to be able to handle the level of activity to the extent that we see a step up meaningfully from where we are currently.

We will come back and give you an update on that. Second question was around the federal legislation speeding up of time. With the federal legislation and frankly even the state legislation is helpful is it gives clarity of the outcome.

Small cell towers are forever going to have the necessity of us working closely with the local municipality to work through planning and zoning and requirements.

So we don't anticipate over the long period of time that the legislative experts are going to meaningfully speed up the activity but they will give greater clarity to both the municipality to the carriers then to ourselves as an infrastructure provider of the path of deploying that infrastructure.

So to the extent we see federal legislation and we are working towards that or state legislation I think it gives greater clarity but I wouldn't necessarily guide you to assume that our timeline where we talked about two years to get nodes on air that gets shorten meaningfully.

If after the facts that it does we will come back and update you on that but our working assumption is that the two-year time frame is likely to be about what it's going to be even if we do get new legislation..

Got it and one follow-up on the new leasing activity. 190 to 200 million that you laid out that 220 laid out that also organic based. Correct but it doesn't include new growth coming from Lightower. Okay..

That's true. All the Lightower are held on to the right in the acquisition chart..

And in terms of your expectations for Lightower next year can you give us a sense of in terms of the mainly the activity growth versus churn how you expect the transition to show up next year?.

Yes so what we talked about when we talked about the transaction to begin with is light tower has grown the revenue in the high single digits per year and since we anticipate that to continue and if the churn rates will be included in that and those have also been in the high single digits on a percentage basis so those remain in line with what we continue to believe..

Okay. Thank you..

And the next question comes from Spencer Kurn from New Street Research..

Hey guys thanks. I wanted to talk about your small cell backlogs. So you have been aggressively rolling out fiber, but it seems like two of your main customers have also been making more meaningful push throughout their own fiber this year.

Have the dynamic shifted, have we typed any shift in dynamics of your sort of pipeline in the future or how do you sort of see both of these dynamics playing out over the next several years?.

Spencer we haven't seen any change in the dynamic. What we have seen is the change in the quantum of activity which is up meaningfully in 2017 from what we have seen in past years. Our win rate has remained about the same winning about half of the activity in the market.

I continue to believe that you're going to see the carriers self perform some portion of the deployment of small cells and fiber and the network.

I think we will see other providers of shared infrastructure model in the market that will provide some portion of that activity and then we certainly expect to continue to provide a meaningful portion of it.

Similar to what we seen on towers where there is tower builds or small cells I think in the places where the shared infrastructure model is available and makes sense from a return standpoint you'll see provider such as ourselves going to put capital in because of the economics and the returns of it being shared.

There are going to be other places though where there may not be a shared model.

We may not have an interest in participating in it and in those places I think you're likely to see some other unlikely self performed by the carriers where fiber is going to be needed and we just we can't justify the economics and the likely returns there and so we don't participate..

Got it..

Go ahead Spence..

Wrap it up. You can wrap it up sir..

We have time for one more question..

Spencer you have one more we will take – if you had a follow-up go ahead..

I just wanted to – sorry I just clarify the so the message is either your carrier customers I guess aren't where you're there, doesn’t sound like they are deploying fiber in similar markets and then also even though you are capturing 50% of win rate today, that might go down but the overall magnitude of volume is so great that even if you're losing share modestly your backlog should still continue to ramp for next couple of years..

Yes, I think with regards to the market themselves some of the markets are the same. They just may not be in the same areas of those markets.

So we could be in same markets, it's not in the same area inside of the market and longer term based on where we believe the world is going I think that total number of small cells to be deployed and therefore the fiber to be required very well could result in our win rate coming down over time but the actual amount of activity that we have in front of us in the revenue growth is associated with that could continue to increase even though our win rate is coming down.

So I believe the number of small cells that are going to be needed in the market as we move towards the 5G environment are significant enough that they are going to need to be multiple different providers in the market in order to provide the kind of capital required to do that..

Got it thanks again..

And we will take our last question from Brandon Nispel from Keybanc Capital Markets..

Hey thanks for squeezing me in. I guess in the market where you have the small cell systems in place what's the ratio that you are seeing in terms of number of small cells to macro towers today and where do you think that could go in one to two year period.

And then on the CapEx that you guys called out in the first quarter I think it was $1.2 billion, can you remind us where you are in that build process and how many route miles of fiber you're planning on building? Thanks..

On the first question it would be very, very small the ratio of small cells to tower. What we typically see and so it's not something that that we would look at Brandon may be a better way to think about it is if we think about building about a mile of fiber we will see roughly 2 small cell, 2 to 2.5 small cell per mile of fiber.

It's about the density of small cells that they are deploying across the market is a pretty good guess of that but if you would take the quantum of towers in marketing and compare that to the small cells it would be highly weighted towards towers..

On the 1.2 billion what we're talking about on that is we – so now we had an addition of about 25,000 nodes to our pipeline. It was going to take about $1.2 billion to get those on air like Jay said, I was going to 2019 that is part of the increase in capital that we are discussing earlier from 2017 to 18.

We believe we will still have some of that to spend in 2019 but we are in the midst of spending that money currently..

I would like to thank everyday for joining the call this morning.

Obviously we are excited about how the business is performing and certainly optimistic as we go into 2018 based on things increased revenue activity across all of our businesses and then lastly I just like to echo something that Dan mentioned earlier in the call I would really like to express my appreciation to our employees who have worked incredibly hard over the last, through the last couple of months dealing with some really significant hurricanes.

They have done a terrific job delivering for customers and we certainly appreciate how hard they have worked hard to get networks back on air and to maintain the assets. So, thanks to all our folks, thanks everybody for joining this morning..

This concludes today's call. Thank you for your participation. You may now disconnect..