American Tower Q2 2024 Earnings Call Transcript

Participants

Corporate Executives

• Adam Smith, Senior Vice President of Investor Relations
• Steven Vondran, President and Chief Executive Officer
• Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer

Analysts

• Simon Flannery, Morgan Stanley
• Michael Rollins, Smith Barney Citigroup
• Ric Prentiss, Raymond James
• David Barden, Bank of America Securities
• Matthew Niknam, Deutsche Bank Aktiengesellschaft
• Jim Snyder, The Goldman Sachs Group, Inc.
• Eric Luebchow, Wells Fargo & Company
• Nick Del Deo, Moffett Nathanson
• Batya Levi, UBS Group AG

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower Second Quarter, 2024 Earnings Conference Call. As a reminder, today's conference call is being recorded. Following the prepared remarks. We will open the call for questions.[Operator Instructions]

I would now like to turn the call over to your host, Adam Smith, Senior Vice President of Investor Relations and FP&A. Please go ahead, sir.

[Adam Smith, Senior Vice President of Investor Relations at American Tower]

Good morning. And thank you for joining American Tower's second quarter earnings conference call. We have posted a presentation, which we will refer to throughout our prepared remarks under the Investor Relations tab of our website, www.americantower.com. I'm joined on the call today by Steven Vondran, our President and CEO, and Rod Smith, our Executive Vice President, CFO and Treasurer.

Following our prepared remarks, we will open up the call for your questions. Before we begin, I'll remind you that our comments will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding future growth, including our 2024 outlook, capital allocation, and future operating performance, our expectations for the closing of the sale of our India business, any expected impacts of such sale on our business, our collections expectations in India, and any other statements regarding matters that are not historical facts.

You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's earnings Press Release, those set forth in our most recent Annual Report on Form 10-K, and other risks described in documents we subsequently file from time to time with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. With that, I'll turn the call over to Steve.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Good morning, and thanks to everyone for joining the call today. As you can see in our Q2 results and our revised full-year outlook, we continue to build on the strength we saw in the underlying business at the outset of the year, with further validation of our initial expectations for strong activity across our platforms in 2024. I want to start today's remarks by thanking our teams across the globe for their commitment to operational excellence and dedication to maximizing sales, bringing down costs, and expanding margins across the portfolio.

My comments today will focus on our latest views on our international portfolio and aim to address some of the recurring questions related to our international strategy in both developed and emerging markets that we've received from investors in recent months. As we've communicated in the past, our international investment thesis is two-pronged. First, we see that the fundamentals that are driven performance in the U.S., such as ongoing exponential growth in mobile data consumption and a business model that benefits from tremendous operating leverage, generally hold true across international markets. Second, by exporting our successful U.S. model through investments in a diversified portfolio of assets that balance various risks and return profiles, we expect to expand and augment our long-term growth potential. Executing on this thesis has resulted in a footprint that includes diverse and sometimes complicated geographies.

Entering these markets as a U.S. business involves creating value while solving for two types of risk, operational and financial. On the operational front, I can confidently tell you that we have the best operating teams in each geography across our portfolio, and we've overcome operational risks on a consistent basis through our shared global expertise and experience. In many cases, we leverage operating challenges to create new business opportunities and enhance existing or introduce new competitive advantages. This capability has been demonstrated through our reliable speed to market delivery on new tower builds, a global reputation and sophisticated regulatory approach that has afforded opportunities to effectively assess new markets and assets, and the development of innovative powers-of-service model that provides best-in-class network uptime and supports initiatives among American Tower, our M&O customers, and the communities we serve to deliver cleaner telecommunications networks. This is one of the key synergies American Tower brings, an unmatched global knowledge and support platform to create value through operational excellence.

Our investors benefit from our ability to utilize that platform to realize expanded market share of new business, drive best-in-class margins, and leverage cost-to-capital advantages derived from our global balance sheet. When you take all these together, these benefits translate to an enhanced value of the assets under the American Tower umbrella, commanding a premium relative to the market implied sum of the parts on a comparable basis. And where this has not held true, we've taken corrective actions, which I'll touch on a little bit later.

As I mentioned in previous remarks, our exposure to financial risk has been more acute in our emerging market portfolio, particularly over the past several years, as global macroeconomic [Phonetic] factors have had an outsized impact on emerging markets. In many cases, those financial risks have, quite frankly, outpaced what we originally underwrote. And together with care and [Phonetic] consolidation have contributed to financial results in certain emerging markets that fall short of our standards.

We're taking action to improve those results. We've talked previously about our focus on cost controls, and I'm happy to say that those are paying off. At the midpoint of our guidance this year, we anticipate savings of over $40 million in SG&A, including bad debt, relative to 2023.

Our emerging market footprint has been a meaningful contributor to our cost efficiency progress to date, where we're shifting our focus from aggressively growing those portfolios to maximizing the return on our investments. We've also previously commented on raising the hurdle rates for the deployment of additional capital in those markets. These proactive actions and a refined strategic focus have corresponded to an expected 2024 reduction of over 40% in discretionary capital across Latin America, Africa, and APAC, compared to 2021.

Conversely, in parts of our developed market footprint, such as Europe and now CoreSite [Phonetic], where we're underwriting compelling mid-teens US dollar yields, we're increasing our investments alongside our capital partners. With an expanded developed market platform inclusive of the US and Canada, we've been able to more than double our discretionary capital in those markets over the same period. As a result, as you can see on Slide 6, the allocation toward emerging markets has reduced from around two-thirds of our total in 2021 to less than a third in our 2024 guidance.

You'll likely see that number continue to trend down as we satisfy some of our previously contracted obligations in certain markets. Complementing our approach to discretionary capital allocation and supporting our proactive steps to enhance our global portfolio, in 2023, we divested non-core, subscale, or underperforming assets like Mexico Fiber and our Poland operations. And earlier this year, we announced our pending exit from India.

Additionally, over the past several years, we've further expanded our developed market exposure through our M&A focus across the US and Europe, all just to name a few examples of the key strategic actions we've taken to date. Pro forma for the anticipated sale of our India business, our attributable AFFO exposure to emerging markets will be approximately 25%. As a result of these actions, and those I'll touch on later, we believe our emerging market operations and our business as a whole are in a better position to deliver the higher quality, sustainable earnings growth that makes investing in communications infrastructure so compelling.

However, given the impacts of the financial risks and the stability and quality of earnings our investors rightfully demand from the tower and communications infrastructure models, we expect to further reduce our relative exposure to emerging markets over time as we continue to focus on incremental investments in developed economies. Now, that doesn't mean that you should assume that we plan to divest any particular markets. For our full Management team and our Board who regularly assess all options, including divestitures, and we're going to remain opportunistic as we continue to actively manage our portfolio, we believe today that more long-term value is created by continuing to operate these portfolios, expand our gross margins, and reduce capital intensity, while repatriating cash flows to fund other global priorities, such as deleveraging, paying our dividend, develop market investments with the highest quality return profiles, and looking ahead to potential for share buybacks.

Meanwhile, continuing to operate these portfolios means that we retain the optionality to reinvest into those markets if economic conditions and growth outlooks evolve. With that in mind, here's what we're focused on in our International segment going forward. First, just as in the U.S., owning and operating the highest quality assets and partnering with leading carriers in each market helps provide more stable growth and reduce long-term earnings volatility resulting from consolidation. This is a critical lesson learned from our experience in India, where consolidation posed significant headwinds to growth over a multi-year period. Today, the vast majority of our revenues in Europe, Africa, and Latin America come from leading customers with competitive in-market scale. Meaningful enhancements to our counterparty profile over the past several years have come in part due to carrier consolidation, but also as a result of proactively aligning growth initiatives and capital allocation, whether through development or M&A, toward doing business with market leaders.

And we remain committed to growing with Tier 1 global M&Os across our footprint. In some cases, particularly where growth capital is not required, we may also support network rollouts of new entrants or smaller operators. However, anytime we assess expansion capex for carriers that fit this profile, the underwriting standards will be adjusted to account for potential incremental risks on a case-by-case basis.

Next, scale is perhaps the most critical component that the international value creation flywheel. At a high level, our scale allows us to operate more profitably by leveraging shared overhead and a global balance sheet that creates cost of capital advantages. Importantly [Phonetic], scale also enables us to develop nationwide agreements that present a differentiated general market solution for leading M&Os at contract terms that we view as critical.

In particular, securing full lease up rights on the assets we acquire, including the ability to monetize both co-location and M&A activity, is crucial to our ability to drive long-term organic growth. Over the past decade, we've encountered stale lease-backed [Phonetic] opportunities with restrictive contract terms that limit the lease-up monetization. These terms are non-starters for us.

Similarly, while recent currency devaluations in certain markets have exceeded our initial underwriting expectations, CPI-linked escalators have proven to be a critical tool to help mitigate long-term currency risks over the last decade. As we look forward to the balance of 2024 and the next several years, we believe we're uniquely positioned to create differentiated value for our customers. To maximize the benefits of the scale portfolio we have in place, we're reinforcing a customer service-driven approach to everything we do [Phonetic], and our internal departments in each region are focused on supporting our sales team's ability to find new business with market leaders and deliver strong organic growth.

Further, our global model allows our best-in-class operating teams to remain flexible in addressing the ebbs and flows of demand through cross-border shared resources, allowing for sustained speed to market delivery for our customers while also supporting our focus on cost management. To that end, we remain committed to extending the global efficiency and cost management achievements we've made to date. For 2018 and at the midpoint of our 2024 outlook, we expect to reduce cash SG&A excluding bad debt as a percentage of revenue by roughly 210 basis points in Europe, Africa, and LatAm in aggregate. We're now in the process of further globalizing our business functions to identify additional areas where we can leverage scale and technology to support continued growth and customer service in the most cost-efficient manner.

In closing, we believe we have an opportunity to leverage our learnings from the last two-plus decades of global operations to continue managing and developing a best-in-class business that's capable of delivering high-quality, long-term earnings growth. We're going to continue actively managing our portfolio to ensure a compelling mix of geographies and assets that are well-positioned to support and monetize growing data demand, and where our operating capabilities can continue to serve as a sustained competitive advantage.

As our actions have demonstrated over the past year, we're prepared to make appropriate strategic decisions to ensure that we have a portfolio of the highest quality. Going forward, we believe that through a focus on maximizing organic growth, disciplined and flexible reinvestment of cash flows into growth opportunities, and further leveraging our global scale to maximize profitability and returns, we can provide a value proposition that can't be replicated elsewhere, translating into expanded returns on capital over time. With that, I'll hand it over to Rod to discuss future results and a revised outlook.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Thanks, Steve. Good morning, and thank you for joining today's call. As highlighted in this morning's press release, we had a strong second quarter, driven by the resilient demand for our assets and resulting in robust performance across several key areas.

Given the critical nature of our global portfolio and the growth trends in mobile data consumption, we head into the back half of the year confident in our ability to drive strong growth, execute on our cost management initiatives, enhance our quality of earnings, and deliver compelling total shareholder returns. Before I discuss the specifics of our Q2 results and revised full year outlook, I'll summarize a few of the highlights.

First, activity levels on our tower assets remain strong. Our consolidated organic tenant billings growth of 5.3% continues to demonstrate the strength of the fundamentals [Phonetic] that fuel our business. And our U.S. services Segment performed in line with our expectations for accelerating tower activity in 2024, with revenues and gross profit each increasing over 50% versus Q1, and more than double that of Q4 of 2023. Next, CoreSite executed another exceptionally strong quarter, with double-digit revenue growth, their second-highest quarter of signed new leasing in the company's history and record cash backlog.

Additionally, our data center projects currently under development are roughly 60% pre-leased, four times the historical average, providing confidence and visibility to an accelerated pathway to realizing CoreSite's best-in-class returns on invested capital. Furthermore, in India, the positive collection trends we saw over the last several quarters continued in Q2, allowing us to reverse approximately $67 million of previously reserved revenue and clearing the majority of the outstanding AR we have with a key customer. Separately, we made further progress in accelerating certain payments included in the approximately $2.5 billion of potential total proceeds associated with our pending sale of ATC India. In the quarter, we repatriated more than $210 million back to the U.S., and we are in the process of repatriating an additional approximately $20 million, largely associated with the monetization of the VIL OCD's net of fees. To date, total accelerated proceeds stand at approximately $345 million, inclusive of funds received in Q1, and we expect the remaining proceeds, potentially of approximately $2.1 billion, to be received at closing. As we make progress towards closing, which we continue to target the second half of 2024, we anticipate incurring incremental costs within the business between SG&A and maintenance capex, a modest offset to the upside realized through strong collections. I will touch on these items and how they impact our outlook later.

Finally, we continue to effectively execute on our balance sheet initiatives, highlighted in the quarter by the issuance of 1 billion Euro-denominated senior unsecured notes [Phonetic] at a weighted average cost of 4%. The proceeds were used to pay down floating rate debt, lowering our ratio back to 89% fixed to 11% floating.

Turning to second quarter property revenue and organic tenant billings growth on Slide 8, consolidated property revenue growth was 4.6%, or over 6.5% excluding non-cash straight line revenue, while absorbing roughly 230 basis points of FX headwinds. U.S. and Canada property revenue growth was approximately 1%, or over 4% excluding straight line and includes an approximately 1% negative impact from sprint [Phonetic] churn. International revenue growth was approximately 7%, or over 12% excluding the impacts of currency fluctuations, which includes an over 8% benefit associated with improved collections in India.

Finally, data center revenues increased over 12% as demand for hybrid and multi-cloud IT architecture continues unabated, AI-driven demand picks up and the backlog of record new business signed over the last two years continues to commence. Moving to the right side of the Slide, consolidated organic tenant billings growth was 5.3%, supported by strong demand for our assets across our global portfolio. In our U.S. and Canada Segment, organic tenant billings growth was 5.1%, and over 6% absent sprint-related churn. We expect a similar growth rate in Q3 before a step-down in Q4 as we commence the final Toronto contracted sprint churn, all supportive of our 2024 outlook expectation of approximately 4.7%. Our International segment drove 5.5% in organic tenant billings growth, reflecting additional moderation in CPI-linked escalators as expected, and a sequential step-down in co-location and amendment contributions, most notably in APAC.

However, in Europe, we saw another quarter of accelerating new business, moving organic tenant billings growth in the region to 5.7%, and giving us confidence to modestly raise our full-year outlook for the segment, which I'll touch on shortly.

Turning to Slide 9, adjusted EBITDA grew 8.1%, or nearly 12%, excluding the impacts of non-cash straight line, while absorbing approximately 210 basis points in FX headwinds. Cash adjusted EBITDA margins improved approximately 300 basis points year-over-year to 64.7%, which includes a roughly 80 basis point benefit in the quarter associated with the India reserve reversals, as compared to a drag of nearly 50 basis points in the year-ago period. Absent these one-time items, we're continuing to demonstrate meaningful cash margin improvements, supported by the inherent operating leverage in the tower model and continued cost management throughout the business. In fact, cash SG&A, excluding bad debt, declined approximately 2.5% year-over-year in the quarter.

Moving to the right side of the Slide, attributable AFFO and attributable AFFO per share grew by 13.5% and 13.4%, respectively, supported by a high conversion of cash adjusted EBITDA growth to attributable AFFO. Now, shifting to our revised full-year outlook, I'll start with a few key updates. First, as I mentioned earlier, we've had a strong start to the year. Core performance remains solid, and our continued focus on driving cost discipline and margin expansion across the business is paying off through exceptional conversion rates of top-line results through adjusted EBITDA and AFFO.

As you'll see in the next several slides, our core results to date and expectations for the remainder of the year are contributing to outperformance across key metrics for 2024, as compared to our prior expectations. Next, having now come off several consecutive quarters of solid collections in India, we've reassessed expectations for the year. In our prior outlook, we had assumed nearly $50 million in revenue reserves from Q2 to Q4, or just over $16 million per quarter.

As I mentioned earlier, through positive collections in Q2, we've reversed $67 million of previously reserved revenue, translating to an upside of $84 million, as compared to our prior outlook assumption for the quarter. We now have confidence to fully remove our previous reserve assumption for the second half of the year, representing an incremental $32 million in upside, which, together with Q2 results, is driving an outlook-to-outlook increase of around $116 million across property revenue, adjusted EBITDA, and attributable AFFO.

Finally, we have revised our FX assumptions, providing an incremental headwind of $51 million, $33 million, and $28 million to property revenue, adjusted EBITDA, and attributable AFFO, respectively.

Turning to Slide 10, we are increasing our expectations for property revenue by approximately $20 million compared to prior outlooks. Outperformance includes $116 million associated with positive collection trends in India, partially offset by a decrease of $45 million, which consists of a decrease of $58 million in pass-through, primarily due to fuel costs, net of an increase of $13 million in straight-line revenue. Consolidated core property revenue remains unchanged, with certain offsetting movements between segments. Growth was partially also offset by $51 million [Phonetic] associated with negative FX impacts.

Moving to Slide 11, expectations for consolidated, U.S. and Canada, total International, and APAC organic tenant buildings growth remain unchanged. However, we have raised expectations for Africa to greater than 12% and Europe to approximately 6%, up from 11% to 12%, and 5% to 6%, respectively. In addition, we have lowered our expectations for Latin America to greater than 1.5%, down from approximately 2%.

Turning to Slide 12, we are increasing our adjusted EBITDA outlook by $130 million as compared to the prior outlook. Outperformance is driven by the flow-through of FX neutral property revenue upside and direct expense savings, partially offset by additional SG&A costs in India and $33 million of FX headwinds.

Moving to Slide 13, we are raising our expectations for AFFO attributable to common stockholders by $85 million at the midpoint and $0.18 on a per-share basis, moving the midpoint to $10.60. Cash adjusted EBITDA outperformance is partially offset by incremental maintenance capex, split between the U.S. and Canada, where we're prioritizing certain incremental projects, and India. Growth is partially offset by $28 million in FX headwinds. Excluding India, outperformance on an FX neutral basis was $27 million as compared to prior outlook.

Turning to Slide 14, you'll see our capital allocation plans remain relatively consistent, including unchanged expectations for our 2024 dividend distribution, which is subject to board approval. On the capital program side, we are increasing our plan for 2024 by $55 million, which includes $30 million associated with maintenance capex, as I previously mentioned, and additional success-based development investments in our U.S. data center business to maximize sellable capacity on the back of ongoing record demand.

Additionally, we have reallocated certain discretionary capital buckets, including an increase towards our strategically important U.S. land acquisition program, partially offset by savings and redevelopment. Moving to the right side of the slide, we remain focused on strengthening our balance sheet and accelerating our pathway to additional financial flexibility. This commitment is demonstrated through our successful execution in the capital markets, including the issuance of over $2 billion in fixed rate debt since the start of the year. A strategic and disciplined approach towards our capital deployment priorities, highlighted through reductions in discretionary capital spend in each of the last several years, together with a rebalancing of strategic priorities between geographies and risk profiles, and a continued cost focus across the business. These strategic actions have translated into meaningful progress towards achieving our net leverage target and an improved fixed-to-floating rate debt profile over the past 24 months.

Turning to Slide 15, and in summary, we are pleased with our execution through the first half of the year, demonstrating the strength of the fundamentals that underpin our business through solid organic growth and a diligent focus on cost management throughout our Company. Combined with our prudent approach to capital allocation, while reinforcing and enhancing our balance sheet strength and financial flexibility, we believe we are well-positioned to drive strong sustainable growth and long-term shareholder value while being a best-in-class operation for our stakeholders across the globe.

With that, operator, we can open the line for questions.

Questions and Answers

[Operator]

Okay. [Operator Instructions] And one moment, please, for your first question.

Your first question comes from the line of Simon Flannery from Morgan Stanley. Please go ahead.

[Simon Flannery, Analyst at Morgan Stanley]

Thanks a lot. Good morning, Steve. Thanks for the comments on the International strategy approach.

I was wondering if you could just give us a little bit of a [Phonetic] update on how you're seeing the opportunities to do additional M&A in the U.S., Europe, other developed markets. What are you seeing in terms of interesting properties? When the SBA [Phonetic] last night was talking about potential for material deals, are you seeing the same sort of thing here, how are valuations looking?

And then kind of related to that on data centers, you're continuing to invest heavily in that business. Do you see opportunities for inorganic expansion beyond some of the small tuck-ins you've done either in the U.S. and or Europe? Thank you.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Yes, thanks, Simon. So with respect to material M&A in the U.S. and Europe, there are some rumors of portfolios becoming available, and so I won't comment on any specific portfolios out there. But what I would reiterate is we're very focused on our current capital allocation priorities, and in particular, de-levering down below 5% [Phonetic].

Now, we did get below 5% [Phonetic] this quarter as a result of some of the one-time items, but that'll likely go up above 5% [Phonetic] next quarter. So we're focused on getting durably below 5% [Phonetic]. And we're also focused on our internal capex programs and the other capital priorities we've laid out there.

And at this point, we haven't seen anything that we've evaluated that would take us off those priorities. So there's nothing that we're evaluating today that would be compelling for us today. And, you know, just as a reminder, anything that we would buy would need to be better than buying background stock. So when we look at those acquisition opportunities, we have to see an opportunity for that one plus one to equal three versus, just kind of a growth for growth's sake. So while we're very interested in trying to grow our portfolios in the U.S. and Europe, and pretty much any of the developed markets that we're in, we aren't seeing opportunities today that look to be the right price, the right asset group, for us to see that kind of synergy that would give us that opportunity today. Having said that, our teams are always evaluating everything out there.

And anything that comes to market, we'll evaluate. And if that evaluation changes, we'll let you guys know. When it comes to CoreSite, we have a lot of opportunity to invest in our existing campuses. And that's going to give us the best return with the lowest risk of any capex that we can deploy. And just to kind of put a fine point on it, we've got 44 megawatts under construction today, and 61% of that's pre-leased. And so, you know, there's quite a bit of capex going into those campuses today that, we feel very confident that we're going to get our mid-teens stabilized yields or better in those campuses that we're investing in.

There are some tuck-ins. Miami is one example. And whenever you see us do that, the reason for us to do a tuck-in market like that is to try to build a new campus. We're very committed to our business model. We think it gives us the most resilient asset, the one that has the most durability over time, and the best returns. And if we can create more campuses that have high interconnection, cloud on-ramps, and that ecosystem that commands a premium in the market, we'll try to develop those. Now, those take time to develop, and so we do start small. And that's what you're more likely to see with us. Again, we're very committed to our business model being an interconnection hub. And there aren't many inorganic opportunities that would contribute to that model. If something did come available that fit that profile, we'd look at it. But today, we think we have ample opportunity to invest in that core business that's performing so well for us.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Hey, Simon. Good morning. This is Rod.

Maybe I'll just add and complement what Steve is saying with a couple of numbers on capex for the data center business. So notwithstanding the fact that our overall capex program year over year has come down because of our capital priorities and the focus on balance sheet strength, de-levering, all the things Steve talked about, notwithstanding that decline, we have increased our investments, our capex investments in CoreSite for '24 over '23. By roughly $100 million, we did the same '23 over '22. So we are seeing very compelling opportunities. We are following those and leaning in. The numbers in grand scheme of things are meaningful, albeit modest, but we do have the ability to dynamically allocate that capital. And just because you see our capex program go down somewhat, it doesn't mean we're not leaning into the very best opportunities to deploy capex.

[Simon Flannery, Analyst at Morgan Stanley]

Great. Very clear. Thanks.

[Operator]

Your next question comes from the line of Michael Rollins from Citi. Please go ahead.

[Michael Rollins, Analyst at Smith Barney Citigroup]

Thanks and good morning. A couple of questions. First, I'm just curious if you can unpack a bit more of what you're seeing in the U.S. leasing environment with respect to geography, the types of activity between densification and amendments, and where A&P may be differentiating itself and its results relative to the commentary that we hear from some of your competitors. And then secondly, just curious, your current view on dividend policy exiting 2024 and how that should relate to the level and growth of ASFO per share over time. Thanks.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Sure. Thanks for the question. So in the U.S., we're seeing 2024 play out much as we expected. We've seen a modest increase in application volume Q2 over Q1. It is fairly broad-based. The main driver continues to be our carrier customers continuing to build out their 5G networks. So it is largely still amendment-driven, although we do see an uptick somewhat in nuclear [Phonetic] locations over prior years. I wouldn't point to that as quite a densification phase yet. There's still a lot of room for the carriers to continue to expand their 5G presence.

And while we're not getting specific about individual carriers, we would say that over half of our sites are now upgraded with mid-band 5G, but one carrier is ahead of the other two. And we have one that's over 80%, one that's a little over 60% now, and one that's a little bit further behind. So there's a lot of runway there for them to continue to roll out mid-band 5G across the portfolio, and we expect them to continue to do that.

With respect to our services guide, we are holding our guide for the year. Now, there's always a degree of risk in that services guide because it's near-term, but what we're seeing in our application flow and our services pipeline is supportive of that full-year guide. So we do still feel good about the U.S. activity levels kind of hitting those levels that we saw at the beginning of the year. I believe the carrier capital spend projections are right in line with that kind of $34 billion to $36 billion, is what they've said publicly. And that's, again, supportive of a level of development that we think is typical of this phase of a build. So we feel good about the U.S., and we think we're going to continue to see that uptick. We're also seeing usage patterns by the consumer continue to drive demand on those networks, and we're seeing the continued drive of that 20% to 30% uptick in consumer demand that's going to continue to put pressure on the networks. And we're seeing that 5G is working for the carriers. It's letting them produce more gigabytes at lower cost.

So we think that that's going to continue to be a compelling business proposition for them to build 5G. And with the addition of fixed wireless and some of the positive trends we're seeing in ARPUs and things like that, we're very confident that the U.S. market will continue to grow and build, and that densification [Phonetic] phase will come.

Oh, sorry, the dividend question.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Hey, Michael. This is Rod. Good morning. Thanks for the question. So regarding the dividend, you know, as everyone on the call knows, we held our dividend flat in 2024. That was really one of many things that we

[Michael Rollins, Analyst at Smith Barney Citigroup]

I retrieved them. I'm getting them back.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Is everyone [Indecipherable] on the call?

[Michael Rollins, Analyst at Smith Barney Citigroup]

Sorry. Please go ahead.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Great. Thank you. So I'll start over, Michael. Thank you. This is Rod. So regarding the dividend, everyone on the call knows that in 2024, we chose to hold the dividend flat. The reasons behind that really was given the macroeconomic backdrop, the uncertainty around rates, we decided to favor balance sheet strength, operational growth, organic growth. And it was one of many things that we decided to do as we leaned into de-levering. We really focused on driving organic growth. We were focused on expanding margins, controlling direct expenses, focused on actually reducing SG&A, becoming more efficient, reducing costs, and reducing our overall capex program and our capex investments, holding the dividend flat and putting the extra funds that we had into de-levering and into reducing exposure to floating rate debt in the environment. So that was one of many things that we did. When you think about going forward into beyond 2024, of course, it's too early to talk about specific guidance for '25 or beyond.

I would remind you and everyone that we target our dividend distribution to equal about 100% of our pre-tax income. That's an important point. From a long-term perspective, I would say that we see pre-tax income growing in line with AFFO and AFFO per share growth on average and over time. So you can think about the trajectory in terms of the growth rate of the dividend being similar to the trajectory in the growth rate of AFFO and AFFO per share. That doesn't mean it will match every single year, but over a multiyear period and on average, we believe that it will match up pretty well. Certainly the dividend is a meaningful piece of the overall total shareholder return that we look to deliver. And as always, anything with respect to our dividend and dividend policy needs to be approved by the board, certainly. So, that's kind of the way we think about it. We would expect that the dividend growth would resume in 2025 based on what we're seeing in the numbers going beyond 2024.

[Michael Rollins, Analyst at Smith Barney Citigroup]

That's helpful. Thank you.

[Steven Vondran, President and Chief Executive Officer at American Tower]

You're welcome.

[Operator]

Your next question comes from the line of Rick Prentice from Raymond Janes. Please go ahead.

[Ric Prentiss, Analyst at Raymond James]

Thanks. Good morning, guys.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Hey Ric.

[Ric Prentiss, Analyst at Raymond James]

A couple of questions. Hey, a couple of questions on my side. Thanks for the update on the India collections process. Nice to get that money on hand. And what's left at closing, how should we think about the status of that approval process? And then how long, once you get through the competitive committee in India, would it take to close the transaction?

[Steven Vondran, President and Chief Executive Officer at American Tower]

At this point, Ric, there's no update on that. We're still waiting for the approval. And what we've said consistently is we believe it'll be the second half of the year closing. So not sure when that's going to come out. It's hard to predict. But we do still anticipate getting that in that relevant timeframe.

And in terms of closing afterwards, I think you could expect that to occur in kind of four to six weeks afterwards, somewhere in that timeframe.

[Ric Prentiss, Analyst at Raymond James]

Make sense [Phonetic]. Probably tie it to a month end or a quarter end, too, just for the accounting purposes, probably.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Yes, if we had that choice, Ric, we probably would. We'll see, We'll see exactly how it unfolds.

[Ric Prentiss, Analyst at Raymond James]

Okay. Second question, thanks for the update on the mid-band spectrum deployment in the U.S. That's helpful to see kind of at least some over half the sites and how it kind of varies by carrier. Internationally, any update there when your competitors, peers suggested that, obviously, international is way behind those kind of numbers. Any broad stroke as far as 5G deployment internationally is on?

[Steven Vondran, President and Chief Executive Officer at American Tower]

Sure. I'll give a little bit of color on that. I think it depends on the geography that you're in.

If you look at Europe, they've been able to deploy 5G to a large proportion of the population there. I think, high 80s, low 90s in Spain and Germany for the most part. That's a combination of low and mid-band spectrum though [Phonetic]. So there's still a runway of continued opportunity there to get the mid-band deployed there. I don't have specific stats on the percentage of mid-band because it's a little bit more nuanced in that market. And in France, we have one carrier that's a little bit further ahead in terms of 5G than the other. So it's a little bit of a mixed bag there. When you look at Africa, you are seeing some 5G deployments in some of the major cities, but it's still pretty nascent there. They're still focused on their 4G networks, augmenting those and improving the network quality over time. But we do think that you'll see 5G being deployed there, especially where the population centers are, over time. So there's still some runway there for those 5G upgrades to occur in Africa.

In Latin America, you have a little bit of 5G that's been deployed in Brazil and a couple of the other markets, but most of those markets are a little bit further behind. And even in Brazil, I'd say it's probably nascent in terms of the 5G deployments today. In many of those markets, there's been a delay in getting 5G spectrum in the hands of the carriers. Some of that is auctions that have been delayed, and some of it is the carriers pushing for a lower entry price there.

And so I think as we see that play out over time, we'll continue to see [Technical Issues] opportunity there. The other thing that's happening in Brazil is the incumbents there are still integrating the old [Phonetic] assets they bought, and that's depressing the activities there a little bit, and they deal with those integrations and combining those networks together. So I'd say it's very consistent with the way we kind of view the international markets, that they're a little bit behind than [Phonetic] developed markets in deployment of 5G. And we are starting to see some green sheets in some of those markets where they need those cheaper gigabytes that 5G delivers, and we're seeing some deployments there. But there's a lot of runway ahead to deploy it there.

[Ric Prentiss, Analyst at Raymond James]

All right. And the last one for me, I think on the cost management side, is site decommissioning kind of one of the things that's helping to drive that? It looked like some significant decommissionings in the U.S., Canada. Maybe it's related to sprint towers that are naked once they get off them. But just maybe a little update on what you're doing with decommissioning towers and how that's benefiting costs and how we should think about running that forward.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Yes, thanks, Ric. We're looking at everything in terms of cost management. And, you know, our goal is to enhance our margin profile by direct cost savings in addition to SG&A. So what you're seeing there is exactly what you would expect. We're looking at that portfolio and where we have underperforming assets that we don't think are going to see near-term activity, we are decommissioning those to save the op-ex on those and doing what's right. So we are doing some accelerated work there.

Rod, did you want to touch on some of the other elements?

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Yes, I'll just add in there, in terms of the decommissioning, I think you'll see in the numbers in LatAm, we took down about 250 sites. In the U.S., we took down about 300. That's just normal portfolio pruning and managing the portfolio from time to time. We certainly have sites without tenants on them here and there. And we'll try to lease those up again. And if it doesn't work, we end up taking them down to save the cost.

So that is a driver, but it's not the only, you know, it's not the only driver. We're also seeing lower land rent escalations, that was certainly good. We're doing some things with property tax, which resulted in a one-time reduction, which was certainly good. And in our capex, we're leaning into investing in our ground [Phonetic] leases and reducing ground expense. So that's another area where we're allocating capital to the most accretive and value-creating opportunities.

So we're seeing lower land rents based on capital allocation. So there's a number of different things that are playing into that direct cost reduction.

[Ric Prentiss, Analyst at Raymond James]

Great. Appreciate the color. Thanks, guys.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Yes. Thanks, Rick.

[Operator]

Your next question comes from the line of David Barden from Bank of America. Please go ahead.

[David Barden, Analyst at Bank of America Securities]

Hey, guys. Thanks so much for taking the question. So, you guys made this bold prediction about activity levels and services accelerating through the course of the year. Not everyone, I think, is seeing the same thing.

Assuming that the service revenue guide is still $195 million, it implies yet another big step up into the second half on a quarterly basis. But, the temptation would then be to extrapolate that as a leading indicator for leasing activity. But as I understand it, the MLAs kind of already contemplate all that. So, buy the drink bottle, this activity might foreshadow some increased leasing. But because of the MLAs, you might not see that same kind of sensitivity. So, if you could kind of validate that perspective. And then I guess a related question is the holistic MLA that you guys signed with AT&T in September 2019. Theoretically, if it's a five-year term, it's going to be coming up for renewal or not in the third quarter. You've highlighted that these holistic MLAs typically have far shorter durations than your underlying kind of core MLAs. I was wondering if you could talk a little about what this means, for the business outlook in the second half and into 2025. Thanks.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Sure. Let me start with the services piece of that. So, our, our Q1 services gross margin was about twice what our Q4 2023 was. And our Q2 was about 50% up from Q1. So, we are seeing acceleration in that services business. And again, we believe from the pipeline that we're looking at today that we're on track to hit our full year services guide on that. And again, there's risk in that services pipeline and we've seen it play out a couple times in the past. But our teams are confident at this point that we're on track to be able to do that.

With respect to our MLAs, what we were -- what we've disclosed is that we had one customer that rolled off the MLA earlier this year. And so, we haven't really talked specifically about anything beyond that. But because we telegraphed that pretty clearly, I think you can get an idea that that's where we, kind of where we are. Those comprehensive portions are typically three to five years. So, it's not just five years. There's a different range on those. And since we do have one customer that's off of that kind of use of right feed [Phonetic] that underpins that smoothing out a growth over time, that customer is a little bit more dependent on the volumes that they're doing.

And so, there'll be a little bit more, peaks and valleys in terms of activity with them. But we're convinced that we're fine either way on that. We take a long-term view of these agreements. And if getting into another holistic type agreement makes sense, we will. And if we don't think it does, we'll stay and pay for a drink. And we're very confident in our ability to monetize it that way.

Now, with respect to the activity and how that translates into our organic growth over time, it's too early to be giving kind of a 2025 guide at this point. We'll do that in February like we always do. But, we are encouraged by the growth that we see in terms of the activity by the carriers. We do have one major customer who is off the holistic portion of their agreement. They still have an underlying MLA, but the holistic portion is expired. And so, if those volumes continue, that's a positive.

We also have what we call our Vertical Market segment, which are smaller customers. And that's also very much dependent on volume and timing on that. And we're seeing good activity there as well. So, we're encouraged by that. When we look at, out into the future, we do have a level of contractually locked in growth for 2025 via our comprehensive MLAs. And that's similar to what we see in 2024, as well as consistent growth from the escalator of about 3%.

On the churn side in 2025, we're going to continue to see a level of elevated sprint churn. The final tranche of that sprint churn commences in Q4 of this year. That's about $70 million of annualized monthly run rate. That will impact our growth rates through Q3 of next year. In terms of kind of the swing factors that you would see in terms of 2025, there's a portion of the growth that's not locked in via the comprehensive MLAs. Again, I mentioned one of the big three carriers and the vertical markets. So, that's a swing factor.

We also have our eye on the timing and scale of any potential churn from U.S. cellular over the next couple of years in the event that deal is approved and closes. We'd expect the overlap to be modest, but the timing and the scale of that churn could put some pressure on rates temporarily. And who knows? We could end up signing another comprehensive MLA or another agreement that would also potentially impact what that number looks like. So, there's a number of swing factors for 2025, and that's why we can't really give guidance until we get to February.

But at the end of the day, we're still confident that we're going to have, continued growth supportive of our longer-term guide.

[David Barden, Analyst at Bank of America Securities]

Thanks, Steve. Really helpful. Appreciate it.

[Operator]

Your next question comes from the line of Matt Nicknam from Deutsche Bank. Please go ahead.

[Matthew Niknam, Analyst at Deutsche Bank Aktiengesellschaft]

Hey, guys. Thanks so much for taking the questions. One question, one follow-up.

First, Steve, you spoke a little bit about emerging markets making up roughly 25% of AFFO per share today. Where do you see that going over time, and how does that inform forward uses of discretionary capital in your M&A strategy? And then just to follow up maybe for Rod, if you can quantify the benefit, the property taxes that you saw in the quarter, and just clarify if it's one-time in nature or not. Thank you.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Thanks for the question. Let me just clarify that 25% is pro forma for the India transaction. So, it's a little bit higher today. Once we close the India transaction, we'll be at roughly 25%. And as we look at some of the macroeconomic conditions, particularly the FX headwinds that we've been seeing, that's kind of given us the choice to start pivoting a little bit more away from the exposure into those emerging market economies, given what we're seeing in the macroeconomic conditions today. So, what we're doing is pivoting more of our discretionary capex to the developed markets. This isn't a new thing. We've been doing that for the last several years, and we haven't done an emerging market transaction in quite a few years now. And the bulk of our capex has been going toward developed markets.

What that will do if that trend continues, and we expect it to, is it will reduce that emerging market exposure over time. We're not setting a kind of line in the sand today for where we think it should be, but we do think it's appropriate to work that percentage down over time by focusing on our developed markets. Having said that, we will continue to support our tier 1 M&Os in those markets. We'll make some discretionary capex investments where it makes sense or where they meet the return criteria that we set out for those markets. But in terms of expanding in those markets or looking to double down or anything, that's not something you're likely to see us do given our desire to reduce the exposure we have to that -- those emerging market economies.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Hey, Matt, Rod here. So on the on one of the charts, you can see on the adjusted EBITDA, we're showing roughly a $50 million benefit to Outlook on cash gross margins. The way to think about that is much of that is driven, almost all of that is driven by benefits or improvements in that direct expense line. From a high level, think about it as 50-50 mixed in terms of what may be run rate and what may be one time in nature. And then when you, when you think about that, roughly a quarter of the entire piece was a property tax accrual. But there's a lot of other kind of knits and knots [Phonetic] and things going through that, that section there.

Things like the accelerated e-commerce [Phonetic] we just talked about with the rent [Phonetic] and the land purchases, as well as just some operational improvements around the way we do R&M and, and, and contractor management and other things. So roughly the $49 million of improvement in cash gross margin, think of it 50-50 as one time versus durable and reoccurring going forward and property tax one time benefit was roughly a quarter of the whole thing.

[Matthew Niknam, Analyst at Deutsche Bank Aktiengesellschaft]

Awesome, thank you.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

You're welcome.

[Operator]

Your next question comes from the line of Jim Snyder [Phonetic] from Goldman Sachs. Please go ahead.

[Jim Snyder, Analyst at The Goldman Sachs Group]

Good morning. Thanks for taking my question. Steve, you delivered a, relatively concise message on the strategy for international markets and emerging markets in particular, and the higher hurdle rates for organic investment. Can you maybe just comment on, broadly speaking, whether you'd be more likely to dispose of some of those non-core emerging market assets, if they were able to fetch higher multiples in the market? And then secondly, you also delivered a pretty clear theme around higher returns and portfolio optimization. Can you maybe quantify for us what are your consolidated returns inhibitions are, where they are relative to where they stand today?

[Steven Vondran, President and Chief Executive Officer at American Tower]

Sure, I'll hit the first part of that. Rod can hit the second. We always are looking to actively manage our portfolio. So the Management team and the Board regularly review our portfolio and look at the assets under our management. And we're always looking to say what's going to create the best long term shareholder value. And so when you think about some of the benefits that American Tower brings to these portfolios, I touched on this a little bit in my preparatory remarks, but I'll reiterate it.

We have operational excellence across the globe. And that operational excellence lets us drive best in class margins, it lets us optimize the amount of new business we get, so the organic growth is better under American Tower. And so we believe that we create a lot more value for those assets that are under our umbrella than anybody else can.

Now, where that doesn't hold true, if we think that somebody else can create more value, we would look at divesting it. And that's what we do with India. So absolutely, price is one of the considerations that would factor in when we think about whether a disposition would create more value than continue to operate it. But at this point, we think the best thing that we can do is keep those assets under our umbrella, continue to operate them in the way that we do, and continue to focus on the gross margin and the growth of the organic revenue there. And if we ever do decide that a disposition is more desirable at that point, it's going to be more valuable, because we've created more cash flow on the assets. So right now, that's, that's where our decision point is. But we'll always be nimble, and we'll always look to maximize the long term value.

Now, there are some subscale portfolios and some ancillary businesses that, we would think about, if you look at what we've done over the past couple years, we did divest Mexico Fiber, we did divest Poland, one, because it was subscale, the other because we thought somebody else could maximize their business better. And so when you look at some of those portfolios, and our in our overall portfolio, that's the type of thing that we think about. But there's no process we've announced today, and nothing I would point to have any scale that that we would think would make sense in the short term.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Hey, Jim, Rod here, I'll just sit on your Return On Invested capital question. So one thing I would point out right at the start here is we do give in the disclosures, A, the NOI yield in U.S. dollar terms for vintage [Phonetic]. So I think you've probably seen that, but dig into that there's a lot of interesting information in there.

One thing I would point out is that the NOI yields in U.S. dollar terms typically are higher than the U.S. when you're looking at these emerging markets. So for built-to-suits and other investments, that's been, that's been the case, and they need to be because we, as Steve talked about, have risk adjusted return requirements, of course, not just per region, but by, by country and even deal specific. So we do require an additional spread or risk adjusted spread, sometimes even over and above the detailed country level cost of capital that we calculate will require a spread over that. That could be meaningful to, compensate for other things that we see either in the market or in the portfolio. So that certainly is key. But when you look at, that analysis, you'll see that the that the vintage analysis shows that the NOI yields over time go up. Certainly, when you think about the emerging markets, we're looking at low teens here and heading upwards, we would expect them all to be in the upper teens and certainly in places like Africa, above 20% over time would certainly be where we where we would target that.

So, broadly speaking, you've heard us say it before. But when you think about Africa, we're looking for, high teens north of 20% returns. And then depending on the country, it can even be higher, at the high end of that and even higher. Today, we're we're below that. But if you look at our return on invested capital across the region, as reported, we're in the mid teens for Return On Invested capital. But these are long term assets. So our focus on driving organic growth margin expansion, really driving SG&A cost being super efficient when it comes to the way we operate, the markets, including Africa, but LatAm and even in India while while we have it.

In combining that, coupling that with very disciplined capex programs, maybe even lower capex programs are all meant to drive return on invested capital up for us so that we can reach our hurdle rate and get beyond it. But again, these are long term assets and LatAm is in a maybe a little better of a position, but similar, they're in the low teens from a Return On Invested capital. The requirements there is going to be more in the mid teens, not necessarily north of 20%. So you may recall, we've done a fair amount of building and acquiring there over the last several years.

So again, the focus on operational execution and excellence in these markets, we really talk about that we plan that and we drive that in the business to help accelerate these returns on invested capital over the long term. But these are long term assets, and we're very bullish on the underlying fundamentals of the business, not just in the U.S., Europe, and CoreSite, but the fundamentals underpinning [Phonetic] the operating results across LatAm and Africa are very good. In Europe, we're actually seeing an acceleration in new business, contributions in organic tenant billings '24 over '23. So that is certainly a very positive sign. Hopefully that addresses the question, Jim.

[Jim Snyder, Analyst at The Goldman Sachs Group]

Yes, thank you.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

You're welcome.

[Operator]

Your next question comes from the line of Eric Luebchow from Wells Fargo. Please go ahead.

[Eric Luebchow, Analyst at Wells Fargo & Company]

Great, thanks for taking the question. I wanted to touch on the Data center segment with CoreSite. You mentioned you had your second highest bookings quarter this quarter. So could you talk about what the demand backdrop looks like there? Is it the -- Do you see more -- larger footprint opportunities tied to either cloud or AI? Or is your performance more related to kind of traditional enterprise workloads?

[Steven Vondran, President and Chief Executive Officer at American Tower]

Yes, thanks for the question. I'll address demand and then I'll address who we're leasing to, separate issues. We're seeing broad based demand from a lot of different sectors. Part of that there's a scarcity of supply in some of the markets that we're in. But our key customer base that's driving long term demand in CoreSite continues to be enterprises that are deploying hybrid cloud deployments -- hybrid cloud technology. And we see a very long tail of that business.

And it's probably helpful for me to talk a little bit about how we curate our customer mix. CoreSite doesn't just lease to just anybody who wants to lease space in their facilities, particularly when we're looking at our scale and hyperscale space that's available. We want to lease to customers that help build the ecosystem. And that's why we are pretty selective in terms of who we lease to. And so that hybrid cloud deployment is the perfect type of customer to help build that ecosystem. We are seeing demand from AI and the inferencing layer of AI is perfectly suited for a highly interconnected ecosystem like CoreSite because it helps distribute the content that the AI is generating. And so we do see some demand there. We're being selective in terms of who we're willing to lease to in that. We do recognize that not all customers are kind of built the same in that space so we want to make sure that we're partnering with people who have good long term business plans there. But what's driving the overall demand is just a general scarcity of supply there. But we're continuing to lease to that core customer base, expanding our enterprise reach for hybrid cloud deployments, a little bit of AI, and then continuing to serve a lot of customers that we already have there as they expand their needs. And those are the primary drivers from who are leasing to you.

[Eric Luebchow, Analyst at Wells Fargo & Company]

Great, thanks, Steve. And just one follow up for Rod. You touched on the deleveraging path and the potential for buybacks. So if you look into '25, any kind of early reads on how, what key variables you may look at when making that decision, whether it's, ASFO yields versus implied cost of capital or any other variables to keep in mind. And when, the buyback conversation may become a little more tangible.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Yes, it's a good question, Eric, I would say. First off, we saw in the numbers, we're at about 4.8 times levered, our stated range is 3 times to 5 times. So we're below that. We're also at about 5 times at the end of Q1. Leverage for Q1 and Q2 were materially supported or helped by some one time non recurring benefits. With that said, and Steve alluded to this earlier, we do expect leverage to tick back up to 5.0 times [Phonetic] or 5.1 times [Phonetic] during Q3 and Q4. We'll see where that goes. But we're very confident that we are on the right path driving towards getting to that 5.0 times [Phonetic]. And we will get there, most likely, the second half of this year, if not the very beginning of next year. So with that, we do feel as though we'll be in a position to have financial flexibility, and kind of manage the business without a, hyper focus on the delevering.

And with that said, we'll be very disciplined, we'll be looking at all of our capital allocation options, including our capex programs, not in general, but specifically country by country, deal by deal, asset by asset, and there's some compelling things that we can invest our capital in. As Steve outlined in his kind of strategic prepared remarks, and in some of the QA, so the capex programs are still very much supportive of long term total shareholder return. So that, that's an opportunity.

When it comes to buybacks, the buybacks, it has to create more shareholder value over the long term, then deploying it towards capex, or an M&A program or delevering. There are simple ways to look at it in terms of just few buyback, a share of stock is the yield, above or below the cost of debt, we'll certainly be looking at that. But longer term growth rates are really important too, on our own business as well as where we invest. So we'll be looking at the returns beyond day one, as well. But rest assured, we will be doing a lot of work being very opportunistic and disciplined when it comes to capital allocation across the board and buying back shares will be one of the options that we have in our toolkit that we'll be continuing to evaluate.

[Eric Luebchow, Analyst at Wells Fargo & Company]

Thanks, guys.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

You're welcome.

[Operator]

Your next question comes from the line of Nick Del Deo from Moffett Nathanson. Please go ahead.

[Nick Del Deo, Analyst at Moffett Nathanson]

Hey, good morning. Thanks for taking my questions. First going back to CoreSite. Yes, I think you're planning your first aggregation edge data center in Raleigh. And I also saw a footnote that you're launching a JV with Stone Peak in Denver. So I guess, can you talk about what you're hoping to achieve with those projects? The rationale for the deal structure in Denver, and whether we should expect more projects like these in the coming years?

[Steven Vondran, President and Chief Executive Officer at American Tower]

Sure. Those are two very different projects. So I'll start with the Raleigh.

So the Raleigh data center is really being done by our U.S. Tower division working with CoreSite. And that is our continued evolution. As we work with various partners on the edge, we needed a little bit more of a sandbox for them to play in. And Raleigh was a good market. It has low power costs, there's a lot of enterprise there, they're working on edge applications. And so we think it's a good place for us to kind of start there. And we are seeing demand in that market that we think we can serve there. That one's expandable. It's on a tower site. So we were able to get easy access to land, there's power, there's fiber, it was just a great location for us. And so we'll see how that plays out over time. Again, that's part of our experimentation on the edge. And we do have some clear visibility into monetizing that as well. So that's a benefit of having a sandbox that makes money.

The second one, DE3. So this is a little bit different. This is our first purpose built data center in Denver. And while we do have a small presence in Denver, it's not really a campus effect yet. And what we've said over, over time is we're open to structures where we're a minority partner, where it gives us the ability to build a campus over time. So for that particular facility, we're taking advantage of the opportunity that we have to meet, to meet the demand for strategic customer to support the ecosystem in Denver. And we're utilizing our partnership and the capital flexibility that we have with that partnership to not redirect any of our current cash flow that our current capex program can have [Phonetic]. And our partners is happy to fund that development. And the reason we're doing that is to really start building that campus in Denver, and to do it in a capital efficient way for us. And so we think that's the right structure for that facility. That parcel is large enough to build other buildings, we have retained ownership of those other buildings in CoreSite. And so if we build future pieces of campus that would likely be done in CoreSite. And we do have the ability to buyback when it's being built there, if we decide that that's the right thing to do, as we build an ecosystem over time.

And that structure today is it's very similar to what you've seen other data centers do with private capital partners. CoreSite is going to own 15%, Stonepeak will own 85% as we develop that first facility there in Denver.

[Nick Del Deo, Analyst at Moffett Nathanson]

Okay, that's great. Thanks for those details, Steve. Second, kind of turning back to emerging markets towers, in your prepared remarks, you said that scale is the most critical driver of value creation overseas.

How do you define and measure scale? Is it, is it just a given number of towers? Is it a share of towers? Is it exposure to top carriers? When you look at scale by region versus country? Just interested in any reach [Phonetic] on that front, so we can better understand kind of what you what you're looking for.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Sure, like at a high level, you want to be the number one or number two independent power company in a market, if you can, that that's your ideal situation to be in. At a broad level, scale means being strategically relevant to your customers. So you can have some localized scale, without having national scale, as long as you're relevant enough to, to have some leverage in the negotiations with the customer there. And so that's really how we think about scale. We have some market where we [Phonetic] subscale, but we're able to leverage regional scale in those, in those by using operating leverage. And what I mean by that is we can serve some of those underscale markets with the, the human capital we have in other parts of those markets.

So we might operate a small country from a larger country that's nearby. And that's how we're getting some operational scale that helps us get even better returns in there than you really would naturally get in a subscale market. But at the end of the day, we want to be, kind of the number one or two in the market is in terms of independence, capitals [Phonetic] are a little bit different, because they have different dynamics with it. But that's how we think about it overall. And we do have, if you look at Latin America, about 97% of our sites are in markets where we're the leader. In Africa, it's, well over half of the sites that we're, that we're the market leader and a little bit lower in Europe today. But overall, we felt we have, adequate scale in all those markets to be strategically relevant to the customers and to get the cost synergies that you get.

[Nick Del Deo, Analyst at Moffett Nathanson]

Okay, that's great. Thanks, Steve.

[Operator]

And your final question today comes from the line of Batia Levi from UBS. Please go ahead.

[Batya Levi, Analyst at UBS Group]

Great, thank you. Comprehensive MLAs have helped provide visibility for domestic growth. Can you talk about if you're also seeing opportunities to implement the same strategy internationally? And could that change the growth trajectory? Also wanted to follow up on AFFO growth with solid revenue growth and good cost control. If you just put effects and fluctuations and rates aside, do you think that we're back on a trend for high single digit AFFO growth for the next few years?

Thank you.

[Steven Vondran, President and Chief Executive Officer at American Tower]

Sure, I'll take the part about the MLAs and Rod can touch on the growth. The comprehensive MLAs that we have in the U.S. are pretty much uniquely in the U.S. right now. We've talked to partners internationally about those contract structures and there's some interest in learning more about them. But because they haven't been using those markets before, there's some understandable concern on the counterparty side about being the first one to take the leap into that. So we've encouraged them to talk to our U.S. customers to understand the benefits of that. So I'm hopeful that we can export those because, again, those create value for both parties.

It gives us predictability on the revenue side, it gives the customers predictability on their cost side. It vastly simplifies the deployment of networks by the customers. So I'm hopeful that our international customers will embrace that. And we'll continue talking with them about it until they do. But none to announce right now, Batya.

[Batya Levi, Analyst at UBS Group]

Got it.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Hey, Batya. Hey, Batya, Rod here. I'll take the AFFO piece. So, I'll start off by saying we believe in the fundamentals of the portfolio that we've built around the globe. Certainly, when you think about our ability to drive AFFO per share growth, it really starts with revenue growth. So I could give you a very short answer to your question. I'll give you the medium, the medium answer here. So the way we think about the bits and pieces that support and drive AFFO per share growth, certainly in the U.S., we're continuing to see demand and activity levels that are in line with our previous long-term guide on OTBG, Organic Tenant Billings Growth, in and around that 5%. You've heard us say it, we continue to see demand for our emerging markets. And in Europe, we're seeing escalating new business growth, which is really good. That's all very supportive over the long term for the international towers that we have to deliver higher Organic Tenant Billings Growth than the U.S. does by maybe a couple hundred basis points. That is certainly kind of front and center.

CoreSite, as you heard from Steve and you see in our numbers and you have for several quarters, is outperforming our expectations and very accretive to overall growth rates. And that's been really nice to see. And we do, we continue to build sites very opportunistically and disciplined, maybe not as many as we used to, but we build sites that adds to that growth rate and revenue.

So you put all that together and you're, you're in the upper single digits in terms of revenue growth, call it a 6% or 7%, somewhere in that range. And then, we're focused on margin expansion, controlling the direct cost, driving margins up. That means you get into that range around the gross margin point. SG&A, this year alone, SG&A is going down $30 million [Phonetic] year over year, declined last year as well. So SGA cost control is also, supportive and accretive to those growth rates. So when you think about all the things that we've done and everything that we see, the fundamentals in this business for our towers globally is really strong and could potentially deliver upper single digit AFFO growth on the towers around the globe.

Now, the things that you do need to watch, we certainly watch and pay a lot of attention to. Some of these are not under our control. Of course, interest rates could go up or down. That could be positive or negative from time to time. FX, same thing, could go up, could go down, could be positive, could be negative. And then in particular, very specifically, we have the ATC India sale, which we are very confident will close out during the second half of this year, just like we previously guided. That will be, slightly diluted, maybe about $0.08 to $0.09 on a per quarter basis. So if we close it early in October, you might see $0.08 or $0.09 dilution from that. And then you'll see the follow-on kind of tail of that into next year.

But absent [Phonetic] interest rates or assuming, interest rates are flat, FX is flat in, eliminating the ATC India, we have a portfolio of assets here that are performing very well operationally with the fundamentals that could deliver upper single digit AFFO per share growth.

[Batya Levi, Analyst at UBS Group]

That's very helpful. Thank you.

[Rod Smith, Executive Vice President, Chief Financial Officer and Treasurer at American Tower]

Welcome.

[Adam Smith, Senior Vice President of Investor Relations at American Tower]

All right. Thanks, everyone, for joining the call today. Please feel free to reach out to the investor relations team with any questions.

Thanks again.

[Operator]

[Operator Closing Remarks]