Brendan T. Cavanagh
President and Chief Executive Officer at SBA Communications
Thank you, Mark. Good afternoon.
Operationally, the third quarter ended up rolling out largely as we expected with leasing results in line with our outlook and services results a little ahead of our outlook. Foreign exchange rates were a little stronger than our estimates a quarter ago and domestic new carrier activity was up from the first half of the year. All of these items combined to allow us to increase our full year 2024 outlook across all of our key financial metrics. In the U.S., new business executions were up from the prior three quarters and applications and inquiries have increased as well. We are beginning to see a shift in the makeup of our new business signed-up and applications with a growing percentage coming from new lease co-locations versus amendments to existing leases. We anticipate this trend continuing into 2025.
All of our major customers have significant network needs over the next few years as mobile network consumption continues to grow at a healthy pace. The limitation of new spectrum availability over the next several years will challenge our customers to meet the demands on their networks through incremental equipment deployment and densification of sites. Our macro tower portfolio should be a beneficiary of this dynamic. Other growth drivers, which we have discussed before, such as fixed wireless access, incorporation of new generative AI capabilities into handsets, regulatory build-out commitments, and remaining 5G coverage expansion, will all contribute to a healthy network investment environment over the next several years.
In addition, our customer relationships are strong. We are a trusted and valued partner to each of them. We are very focused on helping them to achieve their objectives through providing exceptional service and quality. As I mentioned on last quarter's call, we are in the business of long-term assets and long-term customer relationships. Things don't change much from quarter-to-quarter, but consistently delivering over time, as we have done for the past 35 years, is the best way to be our customers' first choice provider and ultimately to maximize growth for our shareholders. Internationally, we have adopted the same philosophy, and as a result, we are seen as a valued partner to our carrier customers in each of our largest markets.
The quarter was solid with international leasing results in line with our expectations and we expect a solid finish to the year. The broader market internationally though still presents some challenges as we manage through customer consolidations and network rationalizations. However, we see light at the end of this tunnel as the surviving customers are stronger and better positioned to invest in growing their wireless product offerings and their ARPUs. To accomplish this, increased network investment will be required. 5G upgrades across all of our international markets are really just at the very beginning and wireless broadband consumption is growing across our markets just as fast, if not faster than the U.S. Overall, we believe our international business will continue to be additive to our organic growth profile over time and the long-term prospects are still very good.
As part of maximizing the long-term prospects of our International business, we continue to strategically review our operations and future potential in each of our existing markets. As I have shared with you before, we believe that in order to create the longest -- the greatest, excuse me, long-term stability and opportunity to maximize growth in a particular market, it is important to be of scale and positioned as an industry leader in that market and to be closely aligned with the leading wireless carriers in the market as well. In alignment with that effort, we are very pleased to share with you today's announcement of a purchase agreement signed with Millicom International Cellular for the acquisition of over 7,000 sites throughout Central America for an initial cash purchase price of approximately $975 million.
Pro forma for this transaction, SBA will be the largest tower company across the region. We are very excited to increase our partnership with Millicom and to help them grow their business for many years to come. The assets are located across five countries in Central America, increasing SBA's scale in four of those countries where we already have operations. The assets are anticipated to produce approximately $129 million in site leasing revenue and $89 million in tower cash flow during the first full year of operations after closing, and significantly all of the cash flow will be denominated in U.S. dollars. Millicom will be attended on each site under a leaseback arrangement in which they have committed to an initial 15-year term. In addition, as part of the leasing arrangement, Millicom has agreed to extend all of their approximately 1,500 existing leases with SBA that exist on our existing assets in the region for a new 15-year term.
SBA and Millicom have also entered into a new build-to-suit agreement under which SBA will exclusively build up to 2,500 new sites in Central America for Millicom over the next seven years. The transaction is subject to regulatory approvals and customary closing conditions, and we expect it will close sometime in mid to late 2025. The Millicom transaction demonstrates one way in which we are carrying out the learnings from our strategic review of each market, increasing our scale in existing markets and establishing long-term relationships with the leading customers in those markets. In some markets, however, we may conclude this type of opportunity is not available to us. In those cases, we will consider divesting markets where we are subscale. One example of this is in the Philippines.
Our original strategy in the Philippines was to gain scale through build-to-suit arrangements with local carriers and continue to grow our portfolio through organic growth, smaller acquisitions, and further builds. Unfortunately, over the past two years, the market has changed with the leading carriers awarding large build-to-suit opportunities to tower companies as a component of significant sale leaseback transactions with those tower companies at very high valuations. We have successfully built a valuable portfolio of tower assets in the Philippines, but today there are over 30 independent tower companies in the market and our market share is still less than 1%. Given our lack of broader presence in the region and a limited path to scale over the near-to-medium term, we have begun a process to exit the market through a sale of our existing business.
We will continue our strategic review of all of our operations and markets with a focus on stabilizing long-term cash flows and positioning ourselves to maximize organic growth opportunities in each market. Some markets may grow and others we may exit, but I am confident that each decision will strengthen SBA's prospects for the long-term. Pivoting now to our Services business, we had a very good third quarter. Revenue was up over 23% from the second quarter and gross profit was up over 33%. Our carrier customers meaningfully stepped up their construction activity in the quarter, contributing to better results than we had anticipated. As a result, we have increased our full year outlook for services revenue from the outlook provided last quarter. And our full year adjusted EBITDA outlook also benefited from these strong results. Our services teams continue to execute very well and they provide a true differentiation for SBA with our customers.
During the third quarter, we also made significant progress in managing our balance sheet with three very positive capital markets transactions, which Marc will discuss in a moment. These transactions demonstrate our access to attractively priced capital and our position as a preferred issuer across the debt markets in which we participate. Our leverage remains near historical lows. We have one debt maturity over the next two years and our $2 billion revolver is fully undrawn. So we are in excellent shape in terms of capital structure and liquidity. In addition, we continue a targeted approach to capital allocation. Completing our recent refinancings provides us with flexibility to opportunistically allocate capital into strategic and value-enhancing asset investment with a key example being the Millicom transaction. During the third quarter, we also acquired a portfolio of high cash flowing sites in the U.S. at an attractive price and we will continue to look for opportunities to grow our asset base at appropriate valuations, as well as to opportunistically repurchase our stock.
Our business continues to perform well and our customers continue to enhance their networks. As a result, we are set up well for a strong finish to the year. Before turning it over to Marc to share more specifics on our third quarter results, I'd like to thank our team members and our customers for their contributions to our success. Our operations teams deserve a special thank you for the tremendous job they did through the recent hurricanes affecting the Southeastern United States. Between the two storms, we had over 1,000 sites in the path of one or both -- or both storms. Our sites once again demonstrated their resiliency with relatively little structural damage. More impressive though was the quick and dedicated response from our team members to assess the damage, clear access, and assist our customers in getting their networks up and running as quickly as possible. I greatly appreciate the dedication and commitment of our teams on the ground in these challenging situations.
With that, I will now turn things over to Marc who will provide additional details.
