EDGAR 10-K Filing

Company CIK: 1034054
Filing Year: 2022
Filename: 1034054_10-K_2022_0001034054-22-000002.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
General
We are a leading independent owner and operator of wireless communications infrastructure, including tower structures, rooftops, and other structures that support antennas used for wireless communications, which we collectively refer to as “towers” or “sites.” Our principal operations are in the United States and its territories. In addition, we own and operate towers in South America, Central America, Canada, South Africa, the Philippines and, effective January 4, 2022, Tanzania. Our primary business line is our site leasing business, which contributed 97.4% of our total segment operating profit for the year ended December 31, 2021. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of December 31, 2021, we owned 34,177 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. In addition, on January 4, 2022, we closed on 1,445 towers under our previously announced deal in Tanzania. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks.
Business Strategy
Our primary strategy is to continue to focus on expanding our site leasing business through organic growth and expansion of our tower portfolio to create shareholder value. We believe that the long-term and repetitive nature of our site leasing business will permit us to maintain a stable, recurring cash flow stream and reduce our exposure to cyclical changes in customer spending which arises in our site development business. Key elements of our strategy include:
Organic Growth.
Maximizing our Tower Capacity. We generally have constructed or acquired towers that accommodate multiple tenants and a majority of our towers are high capacity tower structures. Most of our towers have significant capacity available for additional antennas, and we believe that increased use of our towers’ structural capacity can generate additional lease revenue and be achieved at a low incremental cost. We measure the available capacity of our existing sites to support additional tenants by assessing several factors, including tower height, tower type, wind loading, environmental conditions, existing equipment on the tower and zoning and permitting regulations in effect in the jurisdiction where the tower is located. We actively market space on our towers through our internal sales force. As of December 31, 2021, we had an average of 1.8 tenants per tower structure.
Capitalizing on our Scale and Management Experience. We are a large owner, operator and developer of towers, with substantial capital, human, and operating resources. We have been developing towers for wireless service providers in the U.S. since 1989 and owned and operated towers for ourselves since 1997. We believe our size, experience, capabilities, and resources make us a preferred partner for wireless service providers both in the U.S. and internationally. Our management team has extensive experience in site leasing and site development, with some of the longest tenures in the tower and site development industries. We believe that our industry expertise and strong relationships with wireless service providers will permit us to continue to organically grow our site leasing and site development services.
Systematic Tower Portfolio Growth. We believe that our tower operations are highly scalable. Consequently, we believe that we are able to materially increase our domestic and international tower portfolio without proportionately increasing selling, general, and administrative expenses. We intend to continue to grow our tower portfolio, domestically and internationally, through tower acquisitions and the construction of new tower structures. We believe that one of the best uses of our liquidity, including cash from operating activities and borrowings, is to acquire and/or build new towers at prices that we believe will be accretive to our shareholders both in the short and long term and which allow us to maintain our long-term target leverage ratios.
Disciplined Tower Acquisitions. In our tower acquisition program, we pursue towers from third parties that meet or exceed our internal guidelines regarding current and future potential returns. For each acquisition, we prepare various analyses that include projections of several different investment return metrics, review of available capacity, future lease up projections, and a summary of current and future tenant/technology mix.
International Tower Growth. The majority of our international markets typically have less mature wireless networks with limited wireline infrastructure and lower wireless data penetration rates than those in the United States. Accordingly, our tower growth in these markets is primarily driven by (1) wireless service providers seeking to increase the quality and coverage of their networks, (2) increased consumer mobile data traffic, such as media streaming, mobile apps and games, web browsing, and email, and (3) incremental spectrum auctions as well as incremental voice and data network deployments.
International Market Expansion. We believe that we can create substantial value by expanding our site leasing services into select international markets which we believe have a high-growth wireless industry and relatively stable political and regulatory environments. We consider various factors when identifying a market for our international expansion, including:
oCountry analysis - We consider the country’s economic and political stability, and whether the country’s general business, legal and regulatory environment is conducive to the sustainability and growth of our business.
oMarket potential - We analyze the expected demand for wireless services, and whether a country has multiple wireless service providers who are actively seeking to invest in deploying voice and data networks, as well as spectrum auctions that have occurred or that are anticipated to occur.
oRisk adjusted return criteria - We consider whether buying or building towers in a country, and providing our management and leasing services, will meet our return criteria. As part of this analysis, we consider the risk of entering into an international market (for example, the impact of foreign currency exchange rates and inflation, real estate, permitting, and taxation risks), and how our expansion meets our long-term strategic and financial objectives for the region and our business generally.
New Build Program. We build new towers domestically and internationally. In our new build program, we construct tower structures (1) under build-to-suit arrangements or (2) in locations that are strategically chosen by us. Under build-to-suit arrangements, we build tower structures for wireless service providers at locations that they have identified. Under these arrangements, we retain ownership of the tower structure and the exclusive right to co-locate additional tenants. When we construct tower structures in locations chosen by us, we utilize our knowledge of our customers’ network requirements to identify locations where we believe multiple wireless service providers need, or will need, to locate antennas to meet capacity or service demands. We seek to identify attractive locations for new tower structures and complete pre-construction procedures necessary to secure the site concurrently with our leasing efforts. We generally will have at least one signed tenant lease for each new build tower structure on the day that it is completed and expect that some will have multiple tenants.
Using our Local Presence to Build Strong Relationships with Major Wireless Service Providers. Given the nature of towers as location-specific communications facilities, we believe that substantially all of what we do is done best locally. Consequently, we have a broad field organization that allows us to develop and capitalize on our experience, expertise and relationships in each of our local markets which in turn enhances our customer relationships. We seek to replicate this operating model internationally. Due to our presence in local markets, we believe we are well positioned to organically grow our site leasing business and to capture new tower build opportunities in our markets and identify and participate in site development projects across our markets.
Controlling our Underlying Land Positions. We believe that a primary component of a strong site leasing business is the ability to control the underlying land positions. Consequently, we have acquired perpetual easements, long-term leases, or other property interests for the land that underlies our tower structures and intend to continue to do so, to the extent available at commercially reasonable prices. We believe that these perpetual easements, long-term leases, and other property interests will increase our margins, improve our cash flow from operations, and minimize our exposure to increases in rents for property interests in the future. As of December 31, 2021, approximately 72% of our tower structures were located on land that we own or control for more than 20 years and the average remaining life under our ground leases and other property interests, including renewal options under our control, was 37 years. As of December 31, 2021, approximately 10.7% of our tower structures had ground leases or other property interests maturing in the next 10 years.
Exploring Opportunities in Evolving Technologies and Ancillary Services. In addition to our traditional tower-related services, we are currently exploring ancillary services and evolving technologies that we believe will allow us to create additional value by leveraging our current assets, capabilities, and relationships with wireless service providers and others by expanding SBA’s business within the growing communications ecosystem. This includes supporting efforts for edge data centers and private networks utilizing Citizens Broadband Radio Service (“CBRS”) technology. For example, we are exploring ways to participate in edge computing infrastructure to support existing and future customers’ increasing need to deploy computing capabilities to locations closer to their end users, such as regional data centers and smaller local data centers located at the base of our towers. SBA owns two regional data centers and multiple tower-based data centers in support of this initiative. With regard to private networks, SBA has partnered with different school districts in developing pilots to help close the digital divide through the deployment of private CBRS networks. These network deployments are designed to leverage school-owned assets and SBA tower assets to extend the network to the students in their homes. We are also exploring opportunities to leverage tower assets and infrastructure to provide energy as a service, including through the deployment of on-site battery backup systems powered by solar energy.
Industry Developments
We believe that growing wireless data traffic will require wireless service providers to continue to increase the capacity of their networks, and we believe that the continued capacity increases will require our customers to install equipment at new sites and add new equipment at existing sites. We expect that the wireless communications industry will continue to experience growth as a result of the following trends:
Consumers are increasing their demand for wireless connectivity due to the adoption of bandwidth-intensive wireless data applications, such as video, gaming, social networking and enhanced web browsing, and the growth in machine-to-machine applications. According to a report published by Ericsson in November 2021, global total mobile data traffic was estimated to reach around 65 exabytes per month by the end of 2021 and is projected to grow by a factor of around 4.4 to reach 288 exabytes per month in 2027.
The velocity of spectrum development is expected to remain dynamic as carriers continue to deploy new bands and optimize bands that are currently in service, both of which activities we expect will require carriers to install equipment at new sites and add new equipment at existing sites. For example, recent and future spectrum auctions, such as the C-Band auction and Auction 110 in the U.S. are expected to contribute to growth in the upcoming years. In addition, the continued deployment of 5G wireless technologies is expected to increase equipment installation at existing sites.
Consumers list network quality as a key contributor when terminating or changing service. To remain competitive and to decrease subscriber churn rates, wireless carriers have made substantial capital investments into their wireless networks to improve service quality and expand coverage. We expect wireless carriers to continue to expend capital to differentiate their product offerings.
We believe that the worldwide wireless industry will continue to grow and is reasonably well-capitalized, highly competitive and focused on quality and advanced services. Therefore, we expect that we will see a multi-year trend of additional demand for tower space from our customers, which we believe will translate into steady leasing growth for us.
Our Businesses
Site Leasing Services
Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts in the United States, South America, Central America, Canada, South Africa, the Philippines and, effective January 4, 2022, Tanzania. We derive site leasing revenues primarily from wireless service provider tenants. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual site. Our site leasing business generates substantially all of our total segment operating profit, representing 97.4% or more of our total segment operating profit for the past three fiscal years. Our site leasing business is classified into two reportable segments, domestic site leasing and international site leasing.
Domestic Site Leasing
As of December 31, 2021, we owned 17,356 sites in the United States and its territories. For the year ended December 31, 2021, we generated 79.9% of our total site leasing revenue from these sites. We derive domestic site leasing revenues primarily from T-Mobile, AT&T, and Verizon Wireless. In the United States, our tenant leases are generally for an initial term of five years to 10 years with multiple renewal periods at the option of the tenant. These tenant leases typically contain specific rent escalators, which average 3-4% per year, including renewal option periods. Our ground leases and other property interests in the United States are generally for an initial term of five years or more with multiple renewal periods, at our option, and provide for rent escalators which typically average 2-3% annually. As of December 31, 2021, no U.S. state or territory accounted for more than 10% of our total tower portfolio by tower count, and no U.S. state or territory accounted for more than 10% of our total revenues for the year ended December 31, 2021.
International Site Leasing
We currently own and operate towers in 15 international markets throughout South America, Central America, Canada, South Africa, the Philippines, and effective January 4, 2022, Tanzania. Our largest international market is Brazil. As of December 31, 2021, we owned 16,821 sites in our international markets, of which approximately 30% of our total towers are located in Brazil and no other international markets (each country is considered a market) represented more than 4% of our total towers. In addition, on January 4, 2022, we closed on 1,445 towers under our previously announced deal in Tanzania. Our operations in our international
markets are primarily in the site leasing business, and we continue to focus on growing our international site leasing business through the acquisition and development of towers and organic growth.
We derive international site leasing revenues from all the major carriers in each of the 15 countries in which we operate. In our international markets, our tenant leases are generally for an initial term of five years to 15 years with multiple renewal periods at the option of the tenant. In Canada and in our Central American markets, tenant leases typically contain specific rent escalators, which average 3-4% per year, including the renewal option periods. In our South American markets, South Africa, and the Philippines, tenant leases typically escalate annually in accordance with an inflationary index. In Tanzania, tenant leases typically escalate using a combination of fixed and inflation adjusted escalators. Site leases in our South American markets typically provide for a fixed rental amount and a pass through charge for the underlying rent related to ground leases and other property interests. In South Africa, our site leases contain pass through charges related to utilities, and in Tanzania, our site leases include components related to utilities and fuel. The utility and fuel portion of our Tanzanian site leases adjust periodically in accordance with changes in diesel fuel and electricity prices. In certain markets such as Brazil, tenant leases are typically governed by master lease agreements, which provide for the material terms and conditions that will govern the terms of the use of the site.
In our international markets, ground leases and other property interests are generally for an initial term of five years or more with multiple renewal periods, which are at our option. In our Central American markets, Canada, and the Philippines, ground leases and other property interests provide for fixed rent escalators which typically average 2-3% annually, and in our South American markets and South Africa, ground leases adjust in accordance with an inflationary index.
In our Central American markets and Ecuador, significantly all of our revenue, expenses, and capital expenditures arising from our new build activities are denominated in U.S. dollars. Specifically, most of our ground leases and other property interests, tenant leases, and tower-related expenses are paid in U.S. dollars. In our Central American markets, our local currency obligations are principally limited to (1) permitting and other local fees, (2) utilities, and (3) taxes. In Brazil, Canada, Chile, South Africa, and the Philippines, significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in local currency. In Colombia, Argentina, Peru and Tanzania, our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in a mix of local currency and U.S. dollars.
Site Development Services
Our site development business, which is conducted in the United States only, is complementary to our site leasing business and provides us the ability to keep in close contact with the wireless service providers that generate substantially all of our site leasing revenue and to capture ancillary revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development services revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas on existing infrastructure; (4) support in leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others on a local basis, through regional, market and project offices. These market offices are responsible for all site development operations.
Customers
We lease tower space to and perform site development services for all of the large U.S. wireless service providers. In both our site leasing and site development businesses, we work with large national providers and smaller regional, local or private operators. Internationally, we lease tower space to all the major service providers in South America, Central America, Canada, South Africa, the Philippines and, effective January 4, 2022, Tanzania.
We depend on a relatively small number of customers for our site leasing and site development revenues. The following customers represented at least 10% of our total revenues during the last three years:
For the year ended December 31,
Percentage of Total Revenues
T-Mobile (1)
36.2%
34.5%
35.1%
AT&T Wireless
22.2%
24.1%
23.8%
Verizon Wireless
14.7%
14.1%
14.0%
(1)Amounts have been adjusted to reflect the merger of T-Mobile and Sprint on April 1, 2020.
In addition to the Big 3 wireless carriers (T-Mobile, AT&T, and Verizon Wireless), we have also provided services or leased space to a number of customers including:
Cellular South
MTN
Tigo
Claro
NII Holdings
TIM
Digicel
Oi S.A.
Telefonica
DISH Wireless
SouthernLinc
U.S. Cellular
Liberty Technologies
Telkom
Vodacom
Sales and Marketing
Our sales and marketing goals are to:
use existing relationships and develop new relationships with wireless service providers to lease antenna space on and sell related services with respect to our owned towers or managed properties, enabling us to grow our site leasing business; and
successfully bid and win those site development services contracts that will contribute to our operating margins and/or provide a financial or strategic benefit to our site leasing business.
We approach sales on a company-wide basis, involving many of our employees. We have a dedicated sales force that is supplemented by members of our executive management team. Our dedicated salespeople are based regionally as well as in our corporate office. We also rely on our vice presidents, directors, and other operations personnel to sell our services and cultivate customer relationships. Our strategy is to delegate sales efforts by geographic region or to those employees of ours who have the best relationships with our customers. Most wireless service providers have national corporate headquarters with regional and local offices. We believe that wireless service providers make most decisions for site development and site leasing services at the regional and local levels with input from their corporate headquarters. Our sales representatives work with wireless service provider representatives at the regional and local levels and at the national level when appropriate. Our sales staff’s compensation is heavily weighted to incentive-based goals and measurements.
Competition
Domestic Site Leasing - In the U.S., our primary competitors for our site leasing activities are (1) large independent tower companies including American Tower Corporation and Crown Castle International, (2) a number of regional independent tower owners, (3) wireless service providers that own and operate their own towers and lease, or may in the future decide to lease, antenna space to other providers, and (4) owners and operators of alternative facilities such as rooftops, outdoor and indoor distributed antenna system (“DAS”) networks, billboards, utility poles and electric transmission towers.
International Site Leasing - Internationally, our competition consists of wireless service providers that own and operate their own tower networks, large multinational, national and regional independent tower companies, and alternative facilities such as rooftop, outdoor and indoor DAS networks, billboards, utility poles and electric transmission towers. We believe that tower location and capacity, quality of service, density within a geographic market and price historically have been and will continue to be the most significant competitive factors affecting the domestic and international site leasing business.
Site Development - The site development business is competitive and price sensitive. We believe that the majority of our competitors in the U.S. site development business operate within local region and market areas, while some firms offer their services nationally. The market includes participants from a variety of market segments offering individual, or combinations of, competing services. The field of competitors includes site development companies, zoning consultants, real estate firms, wireless construction companies, tower owners, telecommunications equipment vendors, which provide end-to-end site development services through multiple subcontractors, and wireless service providers’ internal staff. We believe that providers base their decisions for site development services on a number of criteria, including company experience, price, track record, local reputation, geographic reach, and time for completion of a project.
Human Capital
Our corporate offices are located in Boca Raton, Florida. We also have employees located in our international, regional, and local offices. We consider our employee relations to be good. As of December 31, 2021, we had 1,596 employees of which 464 were based outside of the U.S. and its territories.
Diversity, Equity, and Inclusion. We recognize and appreciate the impact that our employees have on the success of our company, our customers and the communities we serve. We pride ourselves in promoting an inclusive environment that celebrates and encourages all forms of diversity. As of December 31, 2021, women represented 42% of our global workforce and 40% of our U.S. employees identified as a racial or ethnic minority.
We value all those who serve our country and are proud to support military veterans and their families as they transition out of the military. SBA has earned the distinction of being a Military Friendly Employer and a Veteran Employer.
Talent Management. We see diversity of thought and experience as critical factors to the long-term success of SBA. As such, we are committed to building a pipeline of future business leaders through the strategic identification of diverse candidates to join our organization. We invest in our employees’ professional growth and development by providing resources and opportunities to develop their skills and expand their expertise.
The well-being of our employees is a critical element of our culture, employee engagement, and productivity. We offer a competitive total rewards package which includes market-based pay, performance-based annual incentive awards, healthcare and retirement benefits, holiday and paid time off, and tuition assistance.
Health and Safety. At SBA, providing a safe and healthy work environment for the protection of our employees is paramount. The safety of our tower climbers has been a key focus of the company since it started in 1989. In 2013, we opened our internal facility "Tower U" which provides a rigorous multi-day safety certification program that is required for all our employed tower climbers. We are proud of the fact that our average lost-day incident rate in the U.S. (days away from work due to workplace incidents) for 2021 was below the 2020 Bureau of Labor benchmark. Our "Tower U" safety professionals offer tower rescue training to first responders because we recognize that the safety of these first responders is paramount to the communities in which we operate.
We temporarily transitioned to telecommuting in early 2020 and put in place various programs and safety protocols to support our team members and their families as they navigated the COVID-19 pandemic. In partnership with a local leading hospital in South Florida, we held regular informational sessions during which our global team members could ask questions to management and health professionals. We also proudly supported our local communities’ COVID-19 response and relief efforts. In preparation for a safe return to work, we invested in upgrades to our offices to improve air quality and allow for greater social distancing.
Regulatory and Environmental Matters
Federal Regulations. In the U.S., which accounted for 79.9% of our total site leasing revenue for the year ended December 31, 2021, both the Federal Communications Commission (the “FCC”) and the Federal Aviation Administration (the “FAA”) regulate towers. Many FAA requirements are implemented in FCC regulations. These regulations govern the construction, lighting, and painting or other marking of towers, as well as the maintenance, inspection, and record keeping related to towers, and may, depending on the characteristics of particular towers, require prior approval and registration of towers before they may be constructed, altered or used. Wireless communications equipment and radio or television stations antennas operating on towers are separately regulated and may require independent customer licensing depending upon the particular frequency or frequency band used. In addition, any applicant for an FCC tower structure registration (through the FCC’s Antenna Structure Registration System) must certify that, consistent with the Anti-Drug Abuse Act of 1988, neither the applicant nor its principals are subject to a denial of federal benefits because of a conviction for the possession or distribution of a controlled substance. New tower construction also requires approval from the state or local governing authority for the proposed site; compliance with the National Environmental Policy Act (“NEPA”); compliance with the National Historic Preservation Act (“NHPA”); compliance with the Endangered Species Act (“ESA”); and may require notification to the FAA.
Pursuant to the requirements of the Communications Act of 1934, as amended, the FCC, in conjunction with the FAA, has developed standards to consider proposals involving new or modified towers. These standards mandate that the FCC and the FAA consider the height of the proposed tower, the relationship of the tower to existing natural or man-made obstructions, and the proximity of the tower to runways and airports. Proposals to construct or to modify existing towers above certain heights must be reviewed by the FAA to ensure the structure will not present a hazard to air navigation. The FAA may condition its issuance of a no-hazard determination upon compliance with specified lighting and/or painting requirements. Towers that meet certain height and
location criteria must also be registered with the FCC. A tower that requires FAA clearance will not be registered with the FCC until it is cleared by the FAA. Upon registration, the FCC may also require special lighting and/or painting. Owners of wireless communications towers may have an obligation to maintain painting and lighting or other marking in conformance with FAA and FCC regulations. Tower owners and FCC spectrum licensees that operate on those towers also bear the responsibility of monitoring any lighting systems and notifying the FAA of any lighting outage or malfunction.
Owners and operators of towers may be subject to, and therefore must comply with, environmental laws, including NEPA, NHPA and ESA. Any licensed radio facility on a tower is subject to environmental review pursuant to the NEPA, among other statutes, which requires federal agencies to evaluate the environmental impact of their decisions under certain circumstances. The FCC has issued regulations implementing the NEPA. These regulations place responsibility on applicants to investigate potential environmental effects of their operations and to disclose any potential significant effects on the environment in an environmental assessment prior to constructing or modifying a tower and prior to commencing certain operations of wireless communications or radio or television stations from the tower. In the event the FCC determines the proposed structure or operation would have a significant environmental impact based on the standards the FCC has developed, the FCC would be required to prepare an environmental impact statement, which will be subject to public comment. This process could significantly delay the registration of a particular tower.
We generally indemnify our customers against any failure to comply with legal requirements applicable to tower owners or operators relating to the construction, modification, or placement of towers. Failure to comply with the applicable requirements may lead to civil penalties.
The Telecommunications Act of 1996 amended the Communications Act of 1934 by preserving state and local zoning authorities’ jurisdiction over the construction, modification, and placement of towers. The law, however, limits local zoning authority by prohibiting any action that would discriminate among different providers of personal wireless services or ban altogether the construction, modification or placement of radio communication towers. Finally, the Telecommunications Act of 1996 and the FCC’s rules implementing that Act require the federal government to help licensees for wireless communications services gain access to preferred sites on federal property for their facilities. This may require that federal agencies and departments work directly with licensees to make federal property available for tower facilities.
Operators of towers must also take into consideration certain radio frequency (“RF”) emissions regulations that impose a variety of procedural and operating requirements. Certain proposals to operate wireless communications and radio or television stations from tower structures are also reviewed by the FCC to ensure compliance with requirements relating to human exposure to RF emissions. Exposure to high levels of RF energy can produce negative health effects. The potential connection between low-level RF energy and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific community in recent years.
Environmental Regulation. As an owner and operator of real property, we are subject to certain environmental laws that impose strict, joint and several liability for the cleanup of on-site or off-site contamination and related personal injury or property damage. We are also subject to certain environmental laws that govern tower placement and may require pre-construction environmental studies. Our screening for environmental impacts includes evaluation of those of our tower site locations (1) that might be located in a wilderness area or a wildlife preserve, (2) that might affect threatened and endangered species or their habitat (ESA), (3) that might affect properties included in, or eligible for inclusion, in the National Register of Historic Places (NRHP) or Indian religious and cultural sites, (4) that might affect World Heritage areas and IUCN Category I-IV protected areas, (5) that will be located in a floodplain and where facility equipment will not be placed at least one foot above the base flood elevation of the floodplain, (6) whose construction will involve significant changes in surface features (e.g., in wetlands, water diversions, considerable ground disturbance, deforestation), (7) that might affect migratory birds if the towers are over 450 feet, (8) that involve high-intensity lighting in a residential area or would cause RF radiation over FCC-established limits and (9) that would involve similar considerations under the laws or best practices of our international markets. When a tower site is impacted by any of the listed categories, we promptly complete an environmental assessment and obtain approval from the appropriate regulatory agency, which may include steps to mitigate the impact of construction or operation of the site. Our regional site managers typically inspect our tower sites annually and report on the presence of new bird nests. This ensures we minimize our impact and remain environmentally compliant during the operational life of our assets.
We believe that we are in substantial compliance with and we have no material liability under any applicable environmental laws. These costs of compliance with existing or future environmental laws and liability related thereto may have a material adverse effect on our prospects, financial condition or results of operations.
State and Local Regulations. Most states regulate certain aspects of real estate acquisition, leasing activities, and construction activities. Where required, we conduct the site acquisition portions of our site development services business through licensed real
estate brokers’ agents, who may be our employees or hired as independent contractors, and conduct the construction portions of our site development services through licensed contractors, who may be our employees or independent contractors. Local regulations include city and other local ordinances, zoning restrictions and restrictive covenants imposed by community developers. These regulations vary greatly from jurisdiction to jurisdiction, but typically require tower owners to obtain approval from local officials or community standards organizations, or certain other entities prior to tower construction and establish regulations regarding maintenance and removal of towers. FCC rules establish presumptively reasonable time periods for state and local authorities to act on applications to collocate a facility or deploy a facility, such as a tower. In addition, many local zoning authorities require tower owners to post bonds or cash collateral to secure their removal obligations. Local zoning authorities generally have been unreceptive to construction of new towers in their communities because of the height and visibility of the towers, and have, in some instances, instituted moratoria. However, in August 2018, the FCC issued a declaratory ruling stating that express and de facto moratoria on deployment of telecommunications facilities violate the Communications Act. This FCC ruling has been affirmed by a federal appellate court.
International Regulations. Regulatory regimes outside of the U.S. and its territories vary by country and locality; however, these regulations typically require tower owners and/or licensees to obtain approval from local officials or government agencies prior to tower construction or modification or the addition of a new antenna to an existing tower. Additionally, some regulations include ongoing obligations regarding painting, lighting, and maintenance. Our international operations may also be subject to limitations on foreign ownership of land in certain areas. Based on our experience to date, these regimes have been similar to, but not more rigorous, burdensome or comprehensive than, those in the U.S. Non-compliance with such regulations may lead to monetary penalties or deconstruction orders. Our international operations are also subject to various regulations and guidelines regarding employee relations and other occupational health and safety matters. As we expand our operations into additional international geographic areas, we will be subject to regulations in these jurisdictions.
Availability of Reports and Other Information
SBA Communications Corporation was incorporated in the State of Florida in March 1997 and is a real estate investment trust (“REIT”) for federal income tax purposes. Our corporate website is www.sbasite.com. We make available, free of charge, access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), on our website under “Investor Relations - Reports and Results - SEC Filings,” as soon as reasonably practicable after we file electronically such material with, or furnish it to, the United States Securities and Exchange Commission (the “Commission”).

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Risks Related to Our Business
If our wireless service provider customers combine their operations to a significant degree, our future operating results, ability to service our indebtedness, and stock price could be adversely affected.
Our wireless service providers have and may continue to be subject to consolidation pressures. Significant consolidation among our wireless service provider customers has resulted, and is expected to continue to result, in our customers failing to renew existing leases for tower space as a result of overlapping coverage or reducing future capital expenditures in the aggregate because their existing networks and expansion plans may overlap or be very similar. Historically, T-Mobile, AT&T, and Verizon have grown through acquisitions of other wireless service providers. As a result, the combined companies have rationalized duplicative parts of their networks, or networks have been discontinued. During 2020, the consolidation of T-Mobile and Sprint was completed, and we began to experience non-renewal (“churn”) of certain leases as a result of this merger. We currently expect that this churn will represent an aggregate of between $140.0 million and $190.0 million of cash site leasing revenue over the next six years. The aggregate churn estimate includes both overlapping and adjacent Sprint leases. We do not expect the annual churn to be uniform over this period as the timing of the churn will depend on termination rights as well as the needs of the carrier.
Consolidation of wireless service providers has also occurred in some of our international markets and could continue to occur. For example, in January 2019, Claro acquired Telefonica’s assets in Guatemala; in July 2020, Liberty Latin America acquired Telefonica’s assets in Costa Rica; and in September 2021, Cable & Wireless announced its plan to acquire Claro’s assets in Panama; three markets in which we own and operate towers. Furthermore, Telefonica has announced it may reduce its operations in its Latin American markets, other than Brazil. In Brazil, as a result of Oi S.A.’s (“Oi”) recent restructuring, the Court has approved the sale of all of Oi’s wireless tower assets to the three other telecommunications providers in Brazil: Telefonica, Claro, and TIM. The sale received regulatory and anti-trust authorizations, and we have received a preliminary listing of which assets will be assigned to each
carrier. Approximately 1,568 of our 7,525 tower leases that we had with Oi as of December 31, 2021 overlap with leases from the other three telecommunications providers and therefore may be subject to non-renewal upon expiration of the leases. As of December 31, 2021, our leases with Oi have an average remaining current term of approximately 12.4 years.
If our wireless service provider customers continue to consolidate as a result of, among other factors, limited wireless spectrum, these consolidations could significantly impact the number of tower leases that are not renewed or the number of new leases that our wireless service provider customers require to expand their networks, which could materially and adversely affect our future operating results and our ability to service our indebtedness. These risks could be exacerbated due to changes in governmental policy that may favor industry consolidation.
We depend on a relatively small number of customers for most of our revenue, and the loss, consolidation or financial instability of any of our significant customers may materially decrease our revenue and adversely affect our financial condition.
We derive a significant portion of our revenue from a small number of customers. Consequently, a reduction in demand for site leasing, reduced future capital expenditures on the networks, or the loss, as a result of bankruptcy, merger with other customers of ours or otherwise, of any of our largest customers could materially decrease our revenue and have an adverse effect on our growth.
We derive revenue through numerous site leasing and site development contracts. In the United States and our international markets, each site leasing contract relates to the lease of space at an individual tower and is generally for an initial term of five years to 15 years with multiple renewal periods at the option of the tenant. However, if any of our significant site leasing customers were to experience financial difficulty, substantially reduce their capital expenditures or reduce their dependence on leased tower space and fail to renew their leases with us, our revenues, future revenue growth and results of operations would be adversely affected. In addition, many of our tenants in our international markets are subsidiaries of global telecommunications companies. These subsidiaries may not have the explicit or implied financial support of their parent entities, which may impact their creditworthiness.
Our site development customers engage us on a project-by-project basis, and a customer can generally terminate an assignment at any time without penalty. In addition, a customer’s need for site development services can decrease, and we may not be successful in establishing relationships with new customers. Furthermore, our existing customers may not continue to engage us for additional projects.
While the U.S. wireless service provider market has recently reduced to three nationwide wireless service providers, AT&T, T-Mobile and Verizon, we and most of the industry anticipate that the number of nationwide wireless service providers will increase to four again once DISH successfully builds out its nationwide network. If DISH is unable to successfully build-out its wireless network or is unable to successfully compete for customers once its network is built out, then our dependence on the three U.S. wireless service providers for our financial and operational growth will be exacerbated.
The following is a list of significant customers (representing at least 10% of revenue in any of the last three years) and the percentage of our total revenues for the specified time periods derived from these customers:
For the year ended December 31,
Percentage of Total Revenues
T-Mobile (1)
36.2%
34.5%
35.1%
AT&T Wireless
22.2%
24.1%
23.8%
Verizon Wireless
14.7%
14.1%
14.0%
(1)Amounts have been adjusted to reflect the merger of T-Mobile and Sprint on April 1, 2020.
We also have customer concentrations with respect to revenues in each of our financial reporting segments:
For the year ended December 31,
Percentage of Domestic Site Leasing Revenue
T-Mobile (1)
40.2%
40.5%
40.6%
AT&T Wireless
30.5%
32.2%
32.1%
Verizon Wireless
19.8%
18.5%
18.6%
For the year ended December 31,
Percentage of International Site Leasing Revenue
Oi S.A.
28.3%
28.7%
31.3%
Telefonica
16.3%
18.1%
26.9%
Claro
13.7%
14.5%
11.6%
For the year ended December 31,
Percentage of Site Development Revenue
T-Mobile (1)
78.2%
66.8%
67.5%
(1)Amounts have been adjusted to reflect the merger of T-Mobile and Sprint on April 1, 2020.
We have a substantial level of indebtedness which may have an adverse effect on our business or limit our ability to take advantage of business, strategic or financing opportunities.
As indicated below, we have and will continue to have a significant amount of indebtedness. The following table sets forth our total principal amount of debt and shareholders’ deficit as of December 31, 2021 and 2020.
As of December 31,
(in thousands)
Total principal amount of indebtedness
$
12,396,000
$
11,180,000
Shareholders' deficit
$
(5,283,404)
$
(4,824,382)
Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal, interest, or other amounts due on our indebtedness. Subject to certain restrictions under our existing indebtedness, we and our subsidiaries may also incur significant additional indebtedness in the future, which may have the effect of increasing our total leverage.
As a consequence of our indebtedness, (1) demands on our cash resources may increase, (2) we are subject to restrictive covenants that further limit our financial and operating flexibility and (3) we may choose to institute self-imposed limits on our indebtedness based on certain considerations including market interest rates, our relative leverage and our strategic plans. For example, as a result of our substantial level of indebtedness and the uncertainties arising in the credit markets and the U.S. economy:
•we may be more vulnerable to general adverse economic and industry conditions;
•we may have to pay higher interest rates upon refinancing or on our variable rate indebtedness if interest rates rise, thereby reducing our cash flows;
•we may find it more difficult to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements that would be in our best long-term interests;
•we may be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt, reducing the available cash flow to fund other investments, including share repurchases, tower acquisition and new build capital expenditures, or to satisfy our REIT distribution requirements;
•we may have limited flexibility in planning for, or reacting to, changes in our business or in the industry;
•we may have a competitive disadvantage relative to other companies in our industry that are less leveraged; and
•we may be required to sell debt or equity securities or sell some of our core assets, possibly on unfavorable terms, in order to meet payment obligations.
Our variable rate indebtedness and refinancing obligations subject us to interest rate risk, which could cause our debt service obligations to increase significantly.
Pursuant to the terms of our Credit Agreement, the interest rate that we pay on indebtedness incurred under the Revolving Credit Facility and the Term Loans varies based on a fixed margin over either a base rate or a Eurodollar rate which references the LIBOR rate. As of December 31, 2021, this indebtedness represented approximately $2.7 billion, or 21.5% of our total indebtedness. As a result, we are exposed to interest rate risk. Interest rates, including LIBOR, fluctuate periodically and as such may increase in future periods. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Due to inflationary pressures on the U.S. economy, it appears likely that interest rates will increase during 2022 and may continue to increase, which may decrease our net income. In addition, the increasing interest rates may result in higher interest expense on our current fixed rate indebtedness upon a refinancing.
Although we have used interest rate swaps to mitigate our interest rate risk from time to time, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk. Furthermore, the increase in our use of derivative instruments increases our exposure to counterparty credit risk to the extent that a counterparty to the instrument fails to meet or perform the terms of the instrument. As of December 31, 2021, we had interest rate swaps on a portion of our 2018 Term Loan that fixed $1.95 billion in notional value for approximately 4.25 years receiving interest at one-month LIBOR plus 175 basis points and paying a fixed rate of 1.874%.
The discontinuation of LIBOR could adversely affect our operating results and financial condition.
LIBOR has been the subject of recent proposals for reform. The IBA ceased the publication of USD LIBOR for the 1 week and 2 month tenors on December 31, 2021 and intends to cease all other tenors on June 30, 2023. These reforms will cause the establishment of an alternative reference rate(s). The U.S. Federal Reserve of New York’s ARRC working group is proposing to replace U.S. dollar LIBOR with Secured Overnight Financing Rate (SOFR), which is calculated based on repurchase agreements with the Federal Reserve which are fully secured by U.S. treasury securities. This alternative rate, if adopted, would be used to calculate our interest rates and/or payments on our variable rate indebtedness under our Credit Agreement, which matures beyond 2021. Any new interest rate may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been applicable to our obligations if LIBOR was available in its current form. As such, the potential effect of any such event is uncertain, but were it to occur, our cost of capital, financial results, cash flows and results of operations may be adversely affected. At the current time, it is uncertain which of the various alternative reference rates will attain industry-wide market acceptance as a replacement for LIBOR.
Our interest rate expense may materially increase as a result of the transition from LIBOR to an alternative reference rate. While we have amended our Revolving Credit Facility to provide mechanics relating to a transition away from LIBOR as a benchmark interest rate and the replacement of LIBOR by an alternative benchmark rate, it is unclear the extent to which the alternative benchmark rates will be as predictable as LIBOR or if such rates will be more expensive or more volatile than LIBOR. Unfortunately, there are various SOFR rates and none have gained widespread industry acceptance. Consequently, post termination of LIBOR, our variable rate indebtedness may be at interest rates that are higher than the interest rates that would have been applicable to our obligations if LIBOR was available in its current form.
Furthermore, as a result of the termination of LIBOR, the interest rate on our interest rate swaps may not exactly conform to whatever new fallback interest rate is utilized under our Credit Agreement. Moreover, if an entirely different interest rate is utilized for our Credit Agreement than the fallback rate on the interest rate swap, we may need to unwind our swap agreement and enter into a new swap agreement which would result in us incurring breakage costs on our existing swap agreement which we would need to pay to the swap agreement provider and those costs may be significant. If the fallback LIBOR rate under our interest rate swaps differs from the fallback LIBOR rate under our Credit Agreement but we keep our swap agreement outstanding, our interest rate swaps would be at least partially ineffective as a hedge and could require us to mark-to-market the ineffective portion of the interest rate swap through our income statement, although FASB has stated that it is expected to grant temporary relief at the outset of the termination of LIBOR from marking-to-market the ineffective portion of swap agreements should a portion of the swap agreement become ineffective due to the fallback to a rate that is different than the LIBOR fallback rate under the swap agreements. However, if this temporary relief should end while our swap agreement and Credit Agreement were still outstanding, it may have an adverse impact on our income statement.
Increasing competition in the tower industry may create pricing pressures or result in non-renewals that may materially and adversely affect us.
Our industry is highly competitive, and our wireless service provider customers sometimes have alternatives for leasing antenna space. We believe that tower location and capacity, quality of service, density within a geographic market and price historically have been and will continue to be the most significant competitive factors affecting the site leasing business. However, competitive pricing pressures for tenants on towers from competitors could materially and adversely affect our lease rates or lead to non-renewals of existing leases. Furthermore, pricing pressures could lead to more prevalent network sharing, both domestically and internationally, which could reduce the demand for our tower space or lead to non-renewals of existing leases. In addition, the increasing number of towers (1) may provide customers the ability to relocate their antennas to other towers if they determine that a more suitable, efficient or economical location exists, which could lead to non-renewal of existing leases, or (2) may adversely impact our ability to enter into new customer leases. This impact may be exacerbated if competitors construct towers near our existing towers. Any of these factors could materially and adversely affect our growth rate and our future operations.
In the site leasing business, we compete with:
•wireless service providers that own and operate their own towers and lease, or may in the future decide to lease, antenna space to other providers;
•national and regional tower companies who may be substantially larger and have greater financial resources than we do;
•international tower companies who have been in the international market for a longer period of time than we have; and
•alternative facilities such as rooftops, outdoor and indoor DAS networks, billboards and electric transmission towers.
The site development segment of our industry is also competitive. There are numerous large and small companies that offer one or more of the services offered by our site development business. As a result of this competition, margins in this segment may come under pressure. Many of our competitors have lower overhead expenses and therefore may be able to provide services at prices that we consider unprofitable. If margins in this segment were to decrease, our consolidated revenues and our site development segment operating profit could be adversely affected.
Increasing competition may negatively impact our ability to grow our communication site portfolio long term.
We intend to continue growing our tower portfolio, domestically and internationally, through acquisitions and new builds. Our ability to meet our growth targets significantly depends on our ability to build or acquire existing towers that meet our investment requirements. Traditionally, our acquisition strategy has focused on acquiring towers from smaller tower companies, independent tower developers and wireless service providers. However, as a result of consolidation in the tower industry, there are fewer of these mid-sized tower transactions available, and there is more competition to acquire existing towers. Increased competition for acquisitions may result in fewer acquisition opportunities for us, higher acquisition prices, and increased difficulty in negotiating and consummating agreements to acquire such towers. Furthermore, to the extent that the tower acquisition opportunities are for significant tower portfolios, some of our competitors and financial sponsors are significantly larger and have greater financial resources than we do. Finally, laws regulating competition, domestically and internationally, may limit our ability to acquire certain portfolios. As a result of these risks, the cost of acquiring these towers may be higher than we expect, or we may not be able to meet our annual and long-term tower portfolio growth targets. If we are not able to successfully address these challenges, we may not be able to materially increase our tower portfolio in the long-term through acquisitions.
Our ability to build new towers is dependent upon the availability of sufficient capital to fund construction, our ability to locate, and acquire at commercially reasonable prices, attractive locations for such towers and our ability to obtain the necessary zoning and permits. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers, vary greatly, but typically require antenna tower and structure owners to obtain approval from local officials or community standards organizations prior to tower or structure construction or modification. With respect to our international new builds, our tower construction may be delayed or halted as a result of local zoning restrictions, inconsistencies between laws or other barriers to construction in international markets. Due to these risks, it may take longer to complete our new tower builds than anticipated, domestically and internationally, and the costs of constructing these towers may be higher than we expect, or we may not be able to add as many towers as planned in 2022. If we are not able to increase our new build tower portfolio as anticipated, it could negatively impact our ability to achieve our financial goals.
Our international operations are subject to economic, political and other risks that could materially and adversely affect our revenues or financial position.
Our current business operations in developing markets, and our expansion into any other international markets in the future, could result in adverse financial consequences and operational problems not typically experienced in the United States. The site
leasing revenues generated by our international operations were approximately 20.1% during the year ended December 31, 2021, and we anticipate that our revenues from our international operations will continue to grow in the future. Accordingly, our business is and will in the future be subject to risks associated with doing business internationally, including:
•laws and regulations that dictate how we operate our towers and conduct business, including zoning, maintenance and environmental matters, and laws related to ownership of real property;
•changes in a specific country’s or region’s political or economic conditions, including inflation or currency devaluation;
•laws affecting telecommunications infrastructure including the sharing of such infrastructure;
•laws and regulations that tax or otherwise restrict repatriation of earnings or other funds or otherwise limit distributions of capital;
•changes to existing or new domestic or international tax laws, new or significantly increased municipal fees directed specifically at the ownership and operation of towers, which may be applied and enforced retroactively and could materially affect the profitability of our operations;
•expropriation and governmental regulation restricting foreign ownership or requiring reversion or divestiture;
•governmental regulations and restrictions impacting tower licenses, spectrum licenses and concessions, including additional restrictions on the use or revocation of such licenses, concessions or spectrum and additional conditions to receive or maintain such licenses;
•laws and regulations governing our employee relations, including occupational health and safety matters and employee compensation and benefits matters;
•our ability to comply with, and the costs of compliance with, anti-bribery laws such as the Foreign Corrupt Practices Act and similar local anti-bribery laws;
•uncertainties regarding legal or judicial systems, including inconsistencies between and within laws, regulations and decrees, and judicial application thereof, and delays in the judicial process;
•challenges arising from less-developed infrastructure in certain markets;
•difficulty in recruiting and retaining trained personnel; and
•our ability to provide power to our sites in those international markets that do not have an available electric grid at our tower sites.
We are also exposed to risks operating in countries with high levels of inflation, including the risk that inflation rates exceed our fixed escalator percentages in markets where our leases include fixed escalators and the risk that adverse economic conditions may discourage growth in consumer demand and consequently reduce our customers’ demand for our site leasing services. As of December 31, 2021, approximately 20% of our tenant leases in our international markets include fixed escalators.
Currency fluctuations may negatively affect our results of operations.
Our operations in Central America and Ecuador are primarily denominated in U.S. Dollars. In Brazil, Canada, Chile, South Africa, and the Philippines, significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in local currency. In Colombia, Argentina, Peru, and Tanzania, our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in a mix of local currency and U.S. dollars. Our foreign currency denominated revenues and expenses are translated into U.S. dollars at average exchange rates for inclusion in our consolidated financial statements.
For the year ended December 31, 2021, approximately 20.1% of our total site leasing revenue was generated by our international operations, of which 15.1% was generated in non-U.S. dollar currencies, including 11.4% which was denominated in Brazilian Reais. The exchange rates between our foreign currencies and the U.S. Dollar have fluctuated significantly in recent years and may continue to do so in the future. For example, the Brazilian Real has historically been subject to substantial volatility and weakened 5.3% when comparing the average rate for the years ended December 31, 2021 and 2020. This trend has affected, and may in the future continue to affect, our reported results of operations.
Changes in exchange rates between these local currencies and the U.S. dollar will affect the recorded levels of site leasing revenue, segment operating profit, assets and/or liabilities. Volatility in foreign currency exchange rates can also affect our ability to plan, forecast and budget for our international operations and expansion efforts.
Furthermore, we have intercompany loan agreements with our foreign subsidiaries to borrow in U.S. Dollars. As of December 31, 2021 and 2020, the aggregate amount outstanding under the intercompany loan agreements subject to remeasurement with our foreign subsidiaries was $872.9 million and $909.8 million, respectively. In accordance with ASC 830, we remeasure foreign denominated intercompany loans with the corresponding change in the balance being recorded in Other income (expense), net in our Consolidated Statements of Operations as settlement is anticipated or planned in the foreseeable future. Consequently, if the U.S. Dollar strengthens against the Brazilian Real or the South African Rand, our results of operations would be adversely affected. For the years ended December 31, 2021 and 2020, we recorded a $44.3 million loss and a $145.6 million loss, net of taxes, respectively, on
the remeasurement of intercompany loans due to changes in foreign exchange rates. For the year ended December 31, 2021, we repaid $149.9 million under our intercompany loan with our Brazilian subsidiary.
A slowdown in demand for wireless services could materially and adversely affect our future growth and revenues.
We expect a significant portion of our future revenue growth will result from investments in the deployment of new or fallow spectrum by our wireless service provider customers, including the build-out by DISH of a fourth nationwide network in the U.S. Wireless service providers typically invest in their networks in response to consumer demand for additional or higher quality service. If consumers significantly reduce their use of wireless services or fail to widely adopt and use new wireless technologies and their products and applications, our wireless service provider customers could experience a reduction in the rate of growth of or a decrease in demand for their services and therefore reduce the amount they invest in their network.
Delays in the roll-out of new spectrum or deployment of new technologies could materially and adversely affect our future growth and revenues.
Our ability to grow is dependent on the ability and willingness of our wireless service provider customers to invest in the roll-out of new spectrum or new technologies. Much of the future capital investment by domestic wireless service providers is expected to result from the roll-out of 5G. However, the roll-out of prior spectrum, including 3G and 4G was often delayed and the roll-out of this spectrum may encounter similar interruptions. For example, in January 2022, several major U.S. wireless carriers had to temporarily delay deployment of new wireless facilities that were meant to facilitate the evolution of their wireless networks to 5G technology in response to concerns of the aviation industry that those 5G facilities could interfere with equipment used for aviation and could impede aviation safety. Although the FCC, FAA, the wireless telecommunications industry and the aviation industry are working on solutions to alleviate those concerns, the timing for resolution is unclear, and such uncertainty could further impact the amount of and timing for network investment by our customers.
The FCC continues to auction new bands of spectrum, including C-Band and Auction 110. Our customers have been and are expected to be the primary winners of these auctions and subsequently deploy this spectrum on our portfolio which would provide us with a revenue growth opportunity. Any delays or failure of these auctions could negatively impact future demand for our towers. Similarly, any delays in the clearing or availability of this spectrum subsequent to these auctions could delay the related demand for our towers.
If our wireless service provider customers are unable to access sufficient capital to invest in their infrastructure or spectrum, it could reduce our ability to meet our growth expectations.
Each wireless service provider must have substantial capital resources and capabilities to deploy new spectrum in their wireless networks, including licenses for spectrum. For example, DISH Wireless has stated that it expects capital expenditures for its 5G network deployment to total approximately $10.0 billion. If some or all of our wireless service provider customers are unable to access sufficient capital, or unwilling based on the economic cost of such capital, to invest in the expansion of their networks, it could adversely affect our revenue growth.
New technologies or network architecture or changes in a customer’s business model may reduce demand for our wireless infrastructure or negatively impact our revenues.
Improvements or changes in the efficiency, architecture, and design of wireless networks or changes in a wireless service provider customer's business model may reduce the demand for our wireless infrastructure. Also, as customers deploy increased capital to develop and implement new technologies, they may allocate less of their budgets to lease space on our towers. For example, new technologies that may promote network sharing, joint development, or resale agreements by our wireless service provider customers, such as signal combining technologies or network functions virtualization, may reduce the need for our wireless infrastructure, or may result in the decommissioning of equipment on certain sites because portions of the customers' networks may become redundant. In addition, other technologies and architectures, such as WiFi, DAS, femtocells, other small cells, or satellite (such as low earth orbiting) and mesh transmission systems may, in the future, serve as substitutes for, or alternatives to, the traditional macro site communications architecture that is the basis of substantially all of our site leasing business. The majority of our tower portfolio comprises traditional macro sites and therefore is not as diversified into non-macro sites and other technologies and architectures as some of our competitors. In addition, new technologies that enhance the range, efficiency, and capacity of wireless equipment could reduce demand for our wireless infrastructure. For example, our wireless service provider customers have engaged in increased use of network sharing, roaming, or resale arrangements, resulting in reduced capital spending or a decision to sell or not renew their spectrum licenses or concessions. Any significant reduction in demand for our wireless infrastructure resulting from new technologies or new architectures or changes in a customer's business model may negatively impact our revenues or otherwise have a
material adverse effect. Any such event may have a disproportionate impact on our business compared to our competitors, whose portfolios may be more technologically and architecturally diversified than ours. In addition, while we are exploring and investing in ancillary services and emerging technologies, including our mobile edge computing initiative and private networks, those investments may not prove to be profitable.
These factors could also have a material adverse effect on our growth rate since growth opportunities and demand for our tower space as a result of new technologies may not be realized at the times or to the extent anticipated. Any of these factors could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results.
Our real property interests relating to the land under our tower structures consist primarily of leasehold and sub-leasehold interests, fee interests, easements, licenses, rights-of-way, and other similar interests. From time to time, we experience disputes with landowners regarding the terms of the agreements for the land under our tower structures, which can affect our ability to access and operate such towers. Further, landowners may not want to renew their agreements with us, they may lose their rights to the land, or they may transfer their property interests to third parties, including property interest aggregators and our competitors, which could affect our ability to renew agreements on commercially viable terms or at all. We currently have 35-year non-terminable leases with Oi, one of Brazil’s largest telecommunications providers, with respect to 2,113 towers that we acquired in 2013. The land underneath these towers is currently subject to a concession from the Federal Republic of Brazil that expires in 2025. At the end of the term, the Brazilian government will have the right to (1) renew the concession upon newly negotiated terms or (2) terminate the concession and take possession of the land and the tower on such land. At the time we acquired the towers, we also entered into a right of first refusal to purchase such land to the extent that the Brazilian regulations permit those assets to be sold. Brazil has recently adopted a new telecommunications law that is expected to provide Oi and/or the Brazilian government rights to sell the land underlying these assets; however, as the regulations implementing this new law have not yet been promulgated, the amount, if at all, that we would be required to pay to purchase such interests is undetermined. If the concession is not renewed and we are unable to purchase the land, then our site leasing revenue from co-located tenants would terminate prior to the end of such lease in 2048. For the year ended December 31, 2021, we generated 6.3% of our total international site leasing revenue from these 2,113 towers.
As of December 31, 2021, the average remaining life under our ground leases and other property interests, including renewal options under our control, was approximately 37 years, and approximately 10.7% of our tower structures have ground leases or other property interests maturing in the next 10 years. Failure to protect our rights to the land under our towers may have a material adverse effect on our business, results of operations or financial condition.
We may not be able to fully recognize the anticipated benefits of towers that we acquire.
A key element of our growth strategy is to increase our tower portfolio through acquisitions. We are subject to a number of risks and uncertainties as a result of those acquisition activities. These activities may fail to achieve the benefits we expected from the acquisition or the acquired assets may not meet our internal guidelines for current and future returns, particularly if we are required to place greater reliance on the financial and operational representations and warranties of the sellers in individually material acquisitions. The impact of these risks is further enhanced in acquisitions of towers in international markets, where it may be more challenging to analyze and verify all relevant information with respect to the assets being acquired. These risks could adversely affect our revenues and results of operations.
In addition, acquisitions which would be material in the aggregate may exacerbate the risks inherent with our growth strategy, such as (1) an adverse financial impact if the acquired towers do not achieve the projected financial results, (2) the impact of unanticipated costs associated with the acquisitions on our results of operations, (3) increased demands on our cash resources that may impact our ability to explore other opportunities, (4) undisclosed and assumed liabilities that we may be unable to recover, (5) an adverse impact on our existing customer relationships, (6) additional expenses and exposure to new regulatory, political and economic risks, and (7) diversion of managerial attention.
As part of new acquisitions of tower assets in natural disaster-prone areas, we may assess asset exposure to physical risks and inspect assets for signs of climate-related damage to help us understand the degree of exposure to tornadoes, fires, hurricanes, floods, and earthquakes the site may face over the longer term. However, our environmental due diligence may not uncover all natural disaster-related risks to tower assets that we acquire and our mitigation measures may not be successful, which could require us to incur significant expenditures and may have an adverse effect on our operations or financial condition.
The process of integrating any acquired towers into our operations is also subject to a number of risks and financial impacts, including unforeseen operating difficulties, large expenditures, diversion of management attention, the loss of key customers and/or
personnel, our inability to retain or timely find suitable replacements for key employees and management needed to operate the acquired business, and exposure to unanticipated liabilities. These risks may be exacerbated in acquisitions of a material number of towers. There can be no assurance that we will be successful in integrating domestic and international acquisitions into our existing business.
The documents governing our indebtedness contain restrictive covenants that could adversely affect our business by limiting our flexibility.
The indentures governing the 2020 Senior Notes and the 2021 Senior Notes, the Senior Credit Agreement, and the agreement for the mortgage loan underlying the Tower Securities contain restrictive covenants imposing significant operational and financial restrictions on us, including restrictions that may limit our ability to engage in acts that may be in our long-term best interests. Among other things, the covenants under each instrument limit our ability to:
•merge, consolidate or sell assets;
•make restricted payments, including pay dividends or make other distributions;
•enter into transactions with affiliates;
•enter into sale and leaseback transactions; and
•issue guarantees of indebtedness.
Additionally, the agreement governing the mortgage loan relating to our Tower Securities contains financial covenants that require that the borrowers maintain, on a consolidated basis, a minimum debt service coverage ratio. To the extent that the debt service coverage ratio, as of the end of any calendar quarter, falls to 1.30 times or lower, then all cash flow in excess of amounts required to make debt service payments, to fund required reserves, to pay management fees and budgeted operating expenses and to make other payments required under the loan documents, referred to as “excess cash flow,” will be deposited into a reserve account instead of being released to the borrowers. The funds in the reserve account will not be released to the borrowers unless the debt service coverage ratio exceeds 1.30 times for two consecutive calendar quarters. If the debt service coverage ratio falls below 1.15 times as of the end of any calendar quarter, then an “amortization period” will commence and all funds on deposit in the reserve account will be applied to prepay the mortgage loan until such time that the debt service coverage ratio exceeds 1.15 times for a calendar quarter.
We are required to maintain certain financial ratios under the Senior Credit Agreement. The Senior Credit Agreement, as amended, requires SBA Senior Finance II to maintain specific financial ratios, including (1) a ratio of Consolidated Net Debt to Annualized Borrower EBITDA not to exceed 6.5 times for any fiscal quarter and (2) a ratio of Annualized Borrower EBITDA to Annualized Cash Interest Expense (calculated in accordance with the Senior Credit Agreement) of not less than 2.0 times for any fiscal quarter.
These covenants could place us at a disadvantage compared to some of our competitors which may have fewer restrictive covenants and may not be required to operate under these restrictions. Further, these covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, new tower development, merger and acquisitions or other opportunities. If we fail to comply with these covenants, it could result in an event of default under our debt instruments. If any default occurs, all amounts outstanding under our outstanding notes and the Senior Credit Agreement may become immediately due and payable.
Our dependence on our subsidiaries for cash flow may negatively affect our business.
We are a holding company with no business operations of our own. Our only significant assets are, and are expected to be, the outstanding capital stock and membership interests of our subsidiaries. We conduct, and expect to continue conducting, all of our business operations through our subsidiaries. Accordingly, our ability to pay our obligations is dependent upon dividends and other distributions from our subsidiaries to us. Most of our indebtedness is owed directly by our subsidiaries, including the mortgage loan underlying the Tower Securities, the Term Loans and any amounts that we may borrow under the Revolving Credit Facility. Consequently, the first use of any cash flow from operations generated by such subsidiaries will be payments of interest and principal, if any, under their respective indebtedness. Other than the cash required to repay amounts due under our 2020 Senior Notes and 2021 Senior Notes and funds to be utilized for stock repurchases and dividend payments, we currently expect that substantially all the earnings and cash flow of our subsidiaries will be retained and used by them in their operations, including servicing their respective debt obligations. The ability of our operating subsidiaries to pay dividends or transfer assets to us is restricted by applicable state law and contractual restrictions, including the terms of their outstanding debt instruments.
The loss of the services of certain of our key personnel or a significant number of our employees may negatively affect our business.
Our success depends to a significant extent upon performance and active participation of our key personnel. We cannot guarantee that we will be successful in retaining the services of these key personnel. Although we have employment agreements with Jeffrey A. Stoops, our President and Chief Executive Officer, Kurt L. Bagwell, our Executive Vice President and President-International, Thomas P. Hunt, our Executive Vice President, Chief Administrative Officer and General Counsel, and Brendan T. Cavanagh, our Executive Vice President and Chief Financial Officer, these agreements do not ensure that those members will continue with us in their current capacity for any particular period of time. We do not have employment agreements with any of our other key personnel. If any of our key personnel were to leave or retire, we may not be able to find an appropriate replacement on a timely basis and our results of operations could be negatively affected. Further, the loss of a significant number of employees or our inability to hire a sufficient number of qualified employees could have a material adverse effect on our business.
Our business is subject to government regulations and changes in current or future regulations could harm our business.
We are subject to federal, state and local regulation of our business, both in the U.S. and internationally. In the U.S., both the FAA and the FCC regulate the construction, modification, and maintenance of towers and structures that support antennas used for wireless communications and radio and television broadcasts. In addition, the FCC separately licenses or otherwise regulates wireless communications equipment, wireless radio stations, and radio and television broadcast stations operating from such towers. FAA and FCC regulations govern construction, lighting, painting, and marking of towers and may, depending on the characteristics of the tower, require registration of the tower. Certain proposals to construct new towers, or to modify or add new equipment to existing towers, are reviewed by the FAA to ensure that the tower will not present a hazard to air navigation. Further, as a result of our recent acquisition of a building containing a data center, we also acquired a limited number of residential apartment units and became subject to additional federal, state and local laws and regulations such as building, zoning, landlord/tenant, health and safety, and accessibility governing residential housing.
Tower owners may have an obligation to mark or paint such towers or install lighting to conform to FAA and FCC regulations and to maintain such marking, painting and lighting. Tower owners may also bear the responsibility of notifying the FAA of any lighting outages. Certain proposals to operate wireless communications and radio or television broadcast stations from towers are also reviewed by the FCC to ensure compliance with environmental impact requirements established in federal statutes, including NEPA, NHPA and ESA. Failure to comply with existing or future applicable requirements may lead to civil penalties or other liabilities and may subject us to significant indemnification liability to our customers against any such failure to comply. In addition, new regulations may impose additional costly burdens on us, which may affect our revenues and cause delays in our growth. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers, vary greatly, but typically require tower owners to obtain approval from local officials or community standards organizations prior to tower construction or modification. Local regulations can delay, prevent, or increase the cost of new construction, co-locations, or site upgrades, thereby limiting our ability to respond to customer demand. In addition, new regulations may be adopted that increase delays or result in additional costs to us. In our international operations, the impact of these zoning, permitting and related regulations and restrictive covenants on our new builds, co-locations and operations could be exacerbated as some of these markets may lack established permitting processes for towers, have inconsistencies between national and local regulations and have other barriers to timely construction and permitting of towers. As a result, tower construction in some of our international markets may be delayed or halted or our acquired towers may not perform as anticipated. These factors could have a material adverse effect on our future growth and operations.
Security breaches and other disruptions could compromise our information, which would cause our business and reputation to suffer.
As part of our day-to-day operations, we rely on information technology and other computer resources and infrastructure to carry out important business activities and to maintain our business records. Our computer systems, or those of our cloud or Internet-based providers, could fail on their own accord and are subject to interruption or damage from power outages, computer and telecommunications failures, computer viruses, security breaches (including through cyber-attack, data theft and exploiting potentially vulnerable services, such as virtual private networks and collaboration platforms as a result of increased remote working caused by COVID-19), errors, catastrophic events such as natural disasters and other events beyond our control. If our or our vendors’ computer systems and backup systems are compromised, degraded, damaged, or breached, or otherwise cease to function properly, we could suffer interruptions in our operations or unintentionally allow misappropriation of proprietary or confidential information (including information about our tenants or landlords). This could damage our reputation and disrupt our operations and the services we provide to customers, which could adversely affect our business and operating results. In addition, security incidents that impact our customers and other business partners could adversely affect our business and operating results. Furthermore, our investments in ancillary services and emerging technologies, including data centers and our mobile edge computing initiative, may leave us more vulnerable to
security incidents, create new exposure for us to different types of security incidents or exacerbate the impact of such incidents on our business and operating results.
Data privacy and protection laws are evolving globally and present risks related to our handling of sensitive data that could result in regulatory penalties or litigation.
A portion of the activities that support our business involve collection, storage and transfer of sensitive data of our employees, tenants, ground lessors and other third parties, including residential tenants as a result of our recent data center acquisition that included a limited number of residential apartment units. In recent years there has been increased public attention regarding the protection of personal data and security of data transfers, accompanied by legislation and regulations intended to strengthen data protection and information security. The evolving nature of privacy laws in the U.S., and the other countries where we have operations could impact our compliance costs in handling such data. Many data privacy regulations also grant private rights of action, including Brazil's General Data Protection Law and certain state laws, such as California's Consumer Privacy Act. As interpretation and enforcement of these and other future data privacy regulations and industry standards evolve, we may incur costs related to litigation or regulatory penalties if we are alleged to be non-compliant.
Damage from natural disasters and other unforeseen events could adversely affect us.
Our towers are subject to physical climate-related risks associated with natural disasters (including as a result of any potential effects of climate change) such as tornadoes, fires, hurricanes, floods, and earthquakes or may collapse for any number of reasons, including structural deficiencies. In addition, we have energy sources on some of our tower sites, and any unforeseen incident may cause damage to surrounding property. We maintain insurance to cover the estimated cost of replacing damaged towers and damage to surrounding property, but these insurance policies are subject to loss limits, deductibles, and retentions. We also maintain third party liability insurance, subject to loss limits, deductibles, and retentions, to protect us in the event of an accident involving a tower. An incident involving our towers or tower sites for which we are uninsured or underinsured, or damage to a significant number of our towers or surrounding property, could require us to incur significant expenditures and may have a material adverse effect on our operations or financial condition and may harm our reputation.
To the extent that we are not able to meet our contractual obligations to our customers, due to a natural disaster or other catastrophic circumstances, our customers may not be obligated or willing to pay their lease expenses; however, we may be required to continue paying our fixed expenses related to the affected tower, including expenses for ground leases and other property interests. If we are unable to meet our contractual obligations to our customers for a material portion of our towers, our operations could be materially and adversely affected.
We could have liability under environmental laws that could have a material adverse effect on our business, financial condition and results of operations.
Our operations, like those of other companies engaged in similar businesses, are subject to the requirements of various federal, state, local and foreign environmental and occupational safety and health laws and regulations (including climate-related), including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials, and wastes. As owner, lessee, or operator of numerous tower structures, we may be liable for substantial costs of remediating soil and groundwater contaminated by hazardous materials without regard to whether we, as the owner, lessee, or operator, knew of or were responsible for the contamination. We may be subject to potentially significant fines, penalties, or taxes if we fail to comply with any of these requirements. The current cost of complying with these laws is not material to our financial condition or results of operations. However, the requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future. It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on our business, financial condition and results of operations.
We could suffer adverse tax and other financial consequences if taxing authorities do not agree with our tax positions.
We are periodically subject to a number of tax examinations by taxing authorities in the states and countries where we do business. We also have significant net operating losses (“NOLs”) in U.S. federal and state taxing jurisdictions. Generally, for U.S. federal and state tax purposes, NOLs generated prior to the 2018 tax year can be carried forward and used for up to 20 years, and all of our tax years will remain subject to examination until three years after our NOLs are used or expire. NOLs generated starting in the 2018 tax year can be carried forward indefinitely but are subject to the 80% utilization limitation. We expect that we will continue to be subject to tax examinations in the future. In addition, U.S. federal, state and local, as well as international, tax laws and regulations are extremely complex and subject to varying interpretations. If our tax benefits, including from our use of NOLs or other tax
attributes, are challenged successfully by a taxing authority, we may be required to pay additional taxes or penalties, or make additional distributions, which could have a material adverse effect on our business, results of operations and financial condition.
Our issuance of equity securities and other associated transactions may trigger a future ownership change which may negatively impact our ability to utilize NOLs in the future.
The issuance of equity securities and other associated transactions may increase the chance that we will have a future ownership change under Section 382 of the Internal Revenue Code of 1986 (“Code”). We may also have a future ownership change, outside of our control, caused by future equity transactions by our current shareholders. Depending on our market value at the time of such future ownership change, an ownership change under Section 382 could negatively impact our ability to utilize our NOLs and could result in us having to make additional cash distributions.
Our costs could increase and our revenues could decrease due to perceived health risks from RF energy.
The U.S. and other foreign governments impose requirements and other guidelines relating to exposure to RF energy. Exposure to high levels of RF energy can cause negative health effects. The potential connection between exposure to low levels of RF energy and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific community in recent years. According to the FCC, the results of these studies to date have been inconclusive. However, public perception of possible health risks associated with cellular and other wireless communications technologies (such as 5G) could slow the growth of wireless companies and deployment of new technologies, which could in turn slow our growth. In particular, negative public perception of, and regulations regarding, health risks could cause a decrease in the demand for wireless communications services. Moreover, if a connection between exposure to low levels of RF energy and possible negative health effects, including cancer, were demonstrated, we could be subject to numerous claims. Our current policies provide no coverage for claims based on RF energy exposure. If we were subject to claims relating to exposure to RF energy, even if such claims were not ultimately found to have merit, our financial condition could be materially and adversely affected.
The ongoing COVID-19 pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our business operations, results of operations, cash flows and financial condition.
Despite recent progress in the administration of vaccines, the continued COVID-19 pandemic and recent variants, including Delta and Omicron, and the related responsive containment and mitigation measures that have been put in place across the world, such as the imposition of travel restrictions, quarantines, adoption of remote working, and impact on business and government services, could adversely impact our business and operations and those of our customers. In addition, the pandemic continues to significantly impact worldwide economic conditions, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets. Among other things, the pandemic and the responsive measures that have been adopted may adversely affect:
the ability of our suppliers and vendors to provide products and services to us;
demand for our wireless infrastructure, including as a result of decreases in consumer spending;
our ability to build new towers or the ability of our customers to install new antennas on an existing tower, including as a result of delays or suspensions in the issuance of permits or other authorizations needed to increase the number of our tenants or amend our tenant leases;
the availability and cost of skilled employees and contractors;
the ability of our customers to procure telecommunications equipment through their supply chains;
interest rates and the overall availability and cost of capital, which could affect our ability to continue to grow our asset portfolio or pursue new business initiatives;
the financial condition of wireless service providers, including their ability to maintain liquidity;
the ability and willingness of wireless service providers to maintain or increase capital expenditures;
the ability of our tenants to make lease payments on a timely basis; and
the willingness of our tenants to renew their existing leases for additional terms.
Inflationary pressures, whether caused by the COVID-19 pandemic or otherwise, may further exacerbate these risks. In addition, our results of operations may be negatively affected by foreign currency adjustments resulting from the COVID-19 pandemic, including the recent strengthening of the U.S. Dollar against the currencies in certain international markets in which we operate. The extent of the impact of COVID-19 on our business operations, results of operations, cash flows, and financial condition, will depend on future developments, such as the duration of the pandemic, new information on the severity of COVID-19 or its variants, and methods taken to contain or treat the outbreak of COVID-19 including the vaccine distribution program, all of which are uncertain and cannot be predicted. Additionally, if the COVID-19 pandemic results in a global recession, the negative impacts of the pandemic on our operating results may worsen or be prolonged.
Risks Related to Our Status as a REIT
Complying with the REIT requirements may cause us to liquidate assets or hinder our ability to pursue otherwise attractive asset acquisition opportunities.
To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the nature and diversification of our assets, the sources of our income and the amounts we distribute to our shareholders. For example, to qualify as a REIT, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code), including towers and certain mortgage loans and securities. The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a taxable REIT subsidiary (“TRS”)) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a TRS) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate assets.
In addition to the asset tests set forth above, to qualify and be subject to tax as a REIT, we will generally be required to distribute at least 90% of our REIT taxable income after the utilization of any available NOLs (determined without regard to the dividends paid deduction and excluding net capital gain) each year to our shareholders. Our determination as to the timing or amount of future dividends will be based on a number of factors, including investment opportunities around our core business and the availability of our existing NOLs. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our REIT taxable income (after the application of available NOLs, if any), we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders for a calendar year is less than a minimum amount specified under the Code. These distribution requirements could hinder our ability to pursue otherwise attractive asset acquisition opportunities. Furthermore, our ability to compete for acquisition opportunities in domestic and international markets may be adversely affected if we need, or require, the target company to comply with certain REIT requirements. These actions could have the effect of reducing our income, amounts available for distribution to our shareholders and amounts available for making payments on our indebtedness.
Qualifying as a REIT involves highly technical and complex provisions of the Code. If we fail to qualify as a REIT or fail to remain qualified as a REIT, to the extent we have REIT taxable income and have utilized our NOLs, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our shareholders.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.
If we fail to qualify as a REIT in any taxable year, to the extent we have REIT taxable income and have utilized our NOLs, we would be subject to U.S. federal income tax on our taxable income at regular corporate rates, and dividends paid to our shareholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact on the value of our common stock. Unless we were entitled to relief under certain provisions of the Code, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. If we fail to qualify for taxation as a REIT, we may need to borrow additional funds or liquidate assets to pay any additional tax liability. Accordingly, funds available for investment and making payments on our indebtedness would be reduced.
We may be required to borrow funds, sell assets, or raise equity to satisfy our REIT distribution requirements.
From time to time, we may generate REIT taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. If we do not have other funds available in these situations, we may need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions are not favorable for these borrowings,
sales or offerings, to enable us to satisfy the REIT distribution requirement and to avoid U.S. federal corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs and our leverage, decrease our Adjusted Funds From Operations or require us to distribute amounts that would otherwise be invested in future acquisitions or stock repurchases.
Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock. Furthermore, compliance with the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth, or expansion initiatives, which would increase our total leverage.
Covenants specified in our current and future debt instruments may limit our ability to make required REIT distributions.
The Senior Credit Agreement, the mortgage loan agreement related to our securitization transactions and the indentures governing our 2020 Senior Notes and 2021 Senior Notes contain certain covenants that could limit our ability to make distributions to our shareholders. Under the Senior Credit Agreement, our subsidiaries may make distributions to us to satisfy our REIT distribution requirements and additional amounts to distribute up to 100% of our REIT taxable income, so long as SBA Senior Finance II’s ratio of Consolidated Net Debt to Annualized Borrower EBITDA does not exceed 6.5 times for any fiscal quarter. In addition, under the mortgage loan agreement related to our securitization transactions, a failure to comply with the Debt Service Coverage Ratio in that agreement could prevent our borrower subsidiaries from distributing any excess cash from the operation of their towers to us. Finally, while the indentures governing the 2020 Senior Notes and 2021 Senior Notes permit us to make distributions to our shareholders to the extent such distributions are necessary to maintain our status as a REIT or to avoid entity level taxation, this authority is subject to the conditions that no default or event of default exists or would result therefrom and that the obligations under the 2020 Senior Notes or 2021 Senior Notes, as applicable, have not otherwise been accelerated.
If these limitations prevent us from satisfying our REIT distribution requirements, we could fail to qualify for taxation as a REIT. If these limitations do not jeopardize our qualification for taxation as a REIT but do nevertheless prevent us from distributing 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax, and potentially the nondeductible 4% excise tax, on the retained amounts.
Our payment of cash distributions in the future is not guaranteed and the amount of any future cash distributions may fluctuate, which could adversely affect the value of our Class A common stock.
REITs are required to distribute annually at least 90% of their REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gain). As of December 31, 2021, $654.7 million of our federal NOLs are attributes of the REIT. We may use these NOLs to offset our REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized, which may adversely affect the market value of our Class A common stock. The Code places limitations upon the future availability of NOLs based upon changes in our equity. If these occur, our ability to offset future income with existing NOLs may be limited.
The amount of future distributions will be determined, from time to time, by our Board of Directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases, when we believe our stock price is below its intrinsic value. The actual timing and amount of distributions will be as determined and declared by our Board of Directors and will depend on, among other factors, our NOLs, our financial condition, earnings, debt covenants and other possible uses of such funds. Consequently, our future distribution levels may fluctuate.
Certain of our business activities may be subject to corporate level income tax and foreign taxes, which would reduce our cash flows, and would have potential deferred and contingent tax liabilities.
We may be subject to certain federal, state, local and foreign taxes on our income and assets, including alternative minimum taxes, taxes on any undistributed income and state, local or foreign income, franchise, property and transfer taxes. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Code to maintain qualification for taxation as a REIT. In addition, we may incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm’s length basis. Any of these taxes would decrease our earnings and our available cash.
Our TRS assets and operations also will continue to be subject, as applicable, to federal and state corporate income taxes and to foreign taxes in the jurisdictions in which those assets and operations are located. If we continue our international expansion, we may have additional TRS assets and operations subject to such taxes. Any of these taxes would decrease our earnings and our available cash.
Our use of TRSs may cause us to fail to qualify as a REIT.
The net income of our TRSs is not required to be distributed to us, and such undistributed TRS income is generally not subject to our REIT distribution requirements. However, if the accumulation of cash or reinvestment of significant earnings in our TRSs causes the fair market value of our securities in those entities, taken together with other non-qualifying assets, to represent more than 20% (25% for taxable years beginning prior to December 31, 2017) of the value of our total assets, in each case, as determined for REIT asset testing purposes, we would, absent timely responsive action, fail to qualify as a REIT. If we continue our international expansion, we may have increased net income from TRSs, which may cause us to rise above these thresholds.
Legislative or other actions affecting REITs could have a negative effect on us.
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the Treasury. Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect our investors or us. We cannot predict how changes in the tax laws might affect our investors or us. New legislation, U.S. Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences to our investors and us of such qualification.
Our Board’s ability to revoke our REIT qualification, without shareholder approval, may cause adverse consequences to our shareholders.
Our articles of incorporation provide that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to shareholders, if any, in computing our taxable income, and to the extent we have taxable income and have utilized our NOLs, we will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our shareholders.
We began operating as a REIT in 2016, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy debt service obligations.
We began operating as a REIT in 2016 and may not be able to continue to operate successfully as a REIT. In addition, we are required to maintain substantial control systems and procedures in order to maintain our status as a REIT. We have also incurred additional legal, accounting and other expenses that we did not incur prior to operating as a REIT and our management and other personnel have devoted additional time to comply with these rules and regulations and controls required for continued compliance with the Code. These factors may adversely affect our performance as a REIT. If our performance is adversely affected, it could affect our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable to U.S. shareholders that are individuals, trusts and estates is currently 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates applicable to qualified dividends. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock. REIT ordinary income distributions are generally eligible for a 20% deduction to the extent distributed out of the REIT’s taxable income.
Risks Related to Ownership of our Class A Common Stock
The REIT-related ownership and transfer restrictions may restrict or prevent our shareholders from engaging in certain transfers of our common stock.
In order for us to satisfy the requirements for REIT qualification, no more than 50% in value of all classes or series of our outstanding shares of stock may be owned, beneficially or constructively, by 5 or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year (other than the first year for which an election to be subject to tax as a REIT has been made). In addition, our capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (other than the first year for which an election to be taxed as a REIT has been made). Our articles of incorporation contain REIT-related ownership and transfer restrictions that generally restrict shareholders from owning more than 9.8%, by value or number of shares, whichever is more restrictive, of our
outstanding shares of Class A common stock, or 9.8% in aggregate value of the outstanding shares of all classes and series of our capital stock. Under applicable constructive ownership rules, any shares of stock owned by certain affiliated owners generally would be added together for purposes of the ownership limits. These ownership and transfer restrictions could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for our capital stock or otherwise be in the best interest of our shareholders.
Our articles of incorporation, our bylaws and Florida law provide for anti-takeover provisions that could make it more difficult for a third party to acquire us.
Provisions of our articles of incorporation, our bylaws and Florida law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders. These provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of our Class A common stock, or could limit the ability of our shareholders to approve transactions that they may deem to be in their best interests.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
We own our headquarters in Boca Raton, Florida where we currently have approximately 160,000 square feet of office space. We also own or have entered into long-term leases for international and regional locations convenient for the management and operation of our site leasing activities, and in certain site development office locations where we expect our activities to be longer-term. We believe our existing facilities are adequate for our current and planned levels of operations and that additional office space suited for our needs is reasonably available in the markets within which we operate.
Our interests in towers and the land beneath them are comprised of a variety of fee interests, leasehold interests created by long-term lease agreements, perpetual easements, easements, licenses, rights-of-way, and other similar interests. As of December 31, 2021, approximately 72% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land that have an interest that extends beyond 20 years. The average remaining life under our ground leases and other property interests, including renewal options under our control, is 37 years. In rural areas, support for our towers, equipment shelters, and related equipment requires a tract of land typically up to 10,000 square feet. Less than 2,500 square feet is required for a monopole or self-supporting tower of the kind typically used in metropolitan areas for wireless communications towers. Ground leases and other property interests are generally for an initial term of five years or more with multiple renewal periods, for a total of 30 years or more.
Most of our towers have significant capacity available for additional antennas. We measure the available capacity of our existing facilities to support additional tenants and generate additional lease revenue by assessing several factors, including tower height, tower type, wind loading, environmental conditions, existing equipment on the tower and zoning and permitting regulations in effect in the jurisdiction where the tower is located. As of December 31, 2021, we had an average of 1.8 tenants per tower structure.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
We are involved in various legal proceedings relating to claims arising in the ordinary course of business. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, financial condition, results of operations or liquidity.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for our Class A Common Stock
Our Class A common stock commenced trading under the symbol “SBAC” on The NASDAQ National Market System on June 16, 1999. We now trade on the NASDAQ Global Select Market, a segment of the NASDAQ Global Market, formally known as the NASDAQ National Market System.
As of February 18, 2022, there were 281 record holders of our Class A common stock.
Dividends
As a REIT, we are required to distribute annually at least 90% of our REIT taxable income after the utilization of any available NOLs (determined before the deduction for dividends paid and excluding any net capital gain). As of December 31, 2021, $654.7 million of the federal NOLs are attributes of the REIT. We may use these NOLs to offset our REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as our NOLs have been fully utilized. The amount of future distributions will be determined, from time to time, by our Board of Directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases when we believe our stock price is below its intrinsic value. The actual amount, timing and frequency of future dividends, will be at the sole discretion of our Board of Directors and will be declared based upon various factors, many of which are beyond our control.
Issuer Purchases of Equity Securities
The following table presents information related to our repurchases of Class A common stock during the fourth quarter of 2021:
Total
Total Number of Shares
Approximate Dollar Value
Number
Average
Purchased as Part of
of Shares that May Yet Be
of Shares
Price Paid
Publicly Announced
Purchased Under the
Period
Purchased
Per Share
Plans or Programs (1)
Plans or Programs
10/1/2021 - 10/31/2021
601,107
$
332.72
601,107
$
125,132,569
11/1/2021 - 11/30/2021
145,381
$
343.36
145,381
$
950,081,337
12/1/2021 - 12/31/2021
39,859
$
344.04
39,859
$
936,368,149
Total
786,347
$
335.26
786,347
$
936,368,149
(1)On October 28, 2021, our Board of Directors authorized a new $1.0 billion stock repurchase plan, replacing the prior plan authorized on November 2, 2020, which had a remaining authorization of $125.1 million. Our Board of Directors authorizes us to purchase, from time to time, outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. Once authorized, the repurchase plan has no time deadline and will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion. Subsequent to December 31, 2021, we repurchased 1.0 million shares of our Class A common stock for $350.0 million, at an average price per share of $334.40. Shares repurchased were retired. As of the date of this filing, we had $586.4 million remaining under the current authorized share repurchase plan.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. RES ERVED

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the information contained in our consolidated financial statements and the notes thereto. The following discussion includes forward-looking statements that involve certain risks and uncertainties, including, but not limited to, those described in Item 1A. Risk Factors. Our actual results may differ materially from those discussed below. See “Special Note Regarding Forward-Looking Statements” and Item 1A. Risk Factors.
We are a leading independent owner and operator of wireless communications infrastructure, including tower structures, rooftops, and other structures that support antennas used for wireless communications, which we collectively refer to as “towers” or “sites.” Our principal operations are in the United States and its territories. In addition, we own and operate towers in South America, Central America, Canada, South Africa, the Philippines and, effective January 4, 2022, Tanzania. Our primary business line is our site leasing business, which contributed 97.4% of our total segment operating profit for the year ended December 31, 2021. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of December 31, 2021, we owned 34,177 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. In addition, on January 4, 2022, we closed on 1,445 towers under our previously announced deal in Tanzania. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks.
Site Leasing
Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts in the United States, South America, Central America, Canada, South Africa, the Philippines and, effective January 4, 2022, Tanzania. As of December 31, 2021, no U.S. state or territory accounted for more than 10% of our total tower portfolio by tower count, and no U.S. state or territory accounted for more than 10% of our total revenues for the year ended December 31, 2021. In addition, as of December 31, 2021, approximately 30% of our total towers are located in Brazil and no other international markets (each country is considered a market) represented more than 4% of our total towers. We derive site leasing revenues primarily from wireless service provider tenants, including T-Mobile, AT&T, Verizon Wireless, Oi S.A., Telefonica, Claro, Tigo, TIM, and DISH Wireless. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual site.
In the United States and our international markets, our tenant leases are generally for an initial term of five years to 15 years with multiple renewal periods at the option of the tenant. In Canada and in our Central American markets, tenant leases typically contain specific rent escalators, which average 3-4% per year, including the renewal option periods. In our South American markets, South Africa, and the Philippines, tenant leases typically escalate annually in accordance with an inflationary index. In Tanzania, tenant leases typically escalate using a combination of fixed and inflation adjusted escalators. Site leases in our South American markets typically provide for a fixed rental amount and a pass through charge for the underlying rent related to ground leases and other property interests. In South Africa, our site leases contain pass through charges related to utilities and, in Tanzania, our site leases include components related to utilities and fuel. The utility and fuel portion of our Tanzanian site leases adjust periodically in accordance with changes in diesel fuel and electricity prices. In certain markets such as Brazil, tenant leases are typically governed by master lease agreements, which provide for the material terms and conditions that will govern the terms of the use of the site.
Cost of site leasing revenue primarily consists of:
•Cash and non-cash rental expense on ground leases and other underlying property interests;
•Property taxes;
•Site maintenance and monitoring costs (exclusive of employee related costs);
•Utilities;
•Property insurance;
•Fuel (in those international markets that do not have an available electric grid at our tower sites); and
•Lease initial direct cost amortization.
In the United States and our international markets, ground leases and other property interests are generally for an initial term of five years or more with multiple renewal periods, which are at our option. In our Central American markets, Canada, and the Philippines, ground leases and other property interests provide for fixed rent escalators which typically average 2-3% annually, and in our South American markets and South Africa, ground leases adjust in accordance with an inflationary index. As of December 31, 2021, approximately 72% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land in which we have a leasehold interest that extends beyond 20 years. For any given tower, costs are relatively fixed over a monthly or an annual time period. As such, operating costs for owned towers do not generally increase as a result of adding additional customers to the tower. The amount of property taxes varies from site to site depending on the taxing jurisdiction and the height and age of the tower. The ongoing maintenance requirements are typically minimal and include replacing lighting systems, painting a tower, or upgrading or repairing an access road or fencing.
In our Central American markets and Ecuador, significantly all of our revenue, expenses, and capital expenditures arising from our new build activities are denominated in U.S. dollars. Specifically, most of our ground leases and other property interests, tenant leases, and tower-related expenses are paid in U.S. dollars. In our Central American markets, our local currency obligations are principally limited to (1) permitting and other local fees, (2) utilities, and (3) taxes. In Brazil, Canada, Chile, South Africa, and the
Philippines, significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in local currency. In Colombia, Argentina, Peru, and Tanzania, our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in a mix of local currency and U.S. dollars.
As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit. For information regarding our operating segments, see Note 15 of our Consolidated Financial Statements included in this annual report.
For the year ended
Segment operating profit as a percentage of
December 31,
total operating profit
Domestic site leasing
80.7%
81.0%
80.7%
International site leasing
16.7%
17.4%
17.0%
Total site leasing
97.4%
98.4%
97.7%
We believe that the site leasing business continues to be attractive due to its long-term contracts, built-in rent escalators, high operating margins, and low customer churn (which refers to when a customer does not renew its lease or cancels its lease prior to the end of its term) other than in connection with customer consolidation or cessation of a particular technology. We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers lease additional antenna space on our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements.
During 2022, we expect organic site leasing revenue in both our domestic and international segments to increase over 2021 levels due in part to wireless carriers deploying unused spectrum. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary capital expenditures. Due to the relatively young age and mix of our tower portfolio, we expect future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows by (1) adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service providers to bear all or a portion of the cost of tower modifications and (2) executing monetary amendments as wireless service providers add or upgrade their equipment. Furthermore, because our towers are strategically positioned, we have historically experienced low tenant lease terminations as a percentage of revenue other than in connection with customer consolidation or cessations of a specific technology.
During 2020, the consolidation of T-Mobile and Sprint was completed, and we began to experience non-renewal of certain leases as a result of this merger. We currently expect that this churn will represent an aggregate of between $140.0 million and $190.0 million of cash site leasing revenue over the next six years. The aggregate churn estimate includes both overlapping and adjacent Sprint leases.
Site Development
Our site development business, which is conducted in the United States only, is complementary to our site leasing business and provides us the ability to keep in close contact with the wireless service providers who generate substantially all of our site leasing revenue and to capture ancillary revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas on existing infrastructure; (4) support in leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others on a local basis, through regional, market, and project offices. The market offices are responsible for all site development operations.
For information regarding our operating segments, see Note 15 of our Consolidated Financial Statements included in this annual report.
Capital Allocation Strategy
Our capital allocation strategy is aimed at increasing shareholder value through investment in quality assets that meet our return criteria, stock repurchases when we believe our stock price is below its intrinsic value, and by returning cash generated by our operations in the form of cash dividends. While the addition of a cash dividend to our capital allocation strategy in 2019 has provided us with a new tool to return value to our shareholders, we will also continue to make investments focused on increasing Adjusted
Funds From Operations per share. To achieve this, we expect to continue to deploy capital to portfolio growth and stock repurchases, subject to compliance with REIT distribution requirements, available funds and market conditions, while maintaining our target leverage levels. Key elements of our capital allocation strategy include:
Portfolio Growth. We intend to continue to grow our asset portfolio, domestically and internationally, primarily through tower acquisitions and the construction of new towers that meet our internal return on invested capital criteria.
Stock Repurchase Program. We currently utilize stock repurchases as part of our capital allocation policy when we believe our share price is below its intrinsic value. We believe that share repurchases, when purchased at the right price, will facilitate our goal of increasing our Adjusted Funds From Operations per share.
Dividend. Cash dividends are an additional component of our strategy of returning value to shareholders. We do not expect our dividend to require any changes in our leverage and believe that, due to our low dividend payout ratio, we can continue to focus on building and buying quality assets and opportunistically buying back our stock. While the timing and amount of future dividends will be subject to approval by our Board of Directors, we believe that our future cash flow generation will permit us to grow our cash dividend in the future.
COVID-19 Update
We have experienced minimal impact to our business or results of operations from the coronavirus (COVID-19) pandemic. The extent to which COVID-19 could adversely affect our future business operations will depend on future developments such as the duration of the outbreak, new information on the severity of COVID-19 or its variants, and methods taken to contain or treat the outbreak of COVID-19 including a vaccine distribution program. While the full impact of COVID-19 is not yet known, we will continue to monitor these developments and the potential effects on our business.
Critical Accounting Policies and Estimates
We have identified the policies and significant estimation processes below as critical to our business operations and the understanding of our results of operations. The listing is not intended to be a comprehensive list. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 of our Consolidated Financial Statements for the year ended December 31, 2021, included herein. Our preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant.
Revenue Recognition and Accounts Receivable
Site leasing revenues
Revenue from site leasing is recognized on a straight-line basis over the current term of the related lease agreements, which are generally five years to 10 years. Receivables recorded related to the straight-lining of site leases are reflected in other assets on the Consolidated Balance Sheets. Rental amounts received in advance are recorded as deferred revenue on the Consolidated Balance Sheets. Revenue from site leasing represents 91% of our total revenue for the year ended December 31, 2021.
Site development revenues
Site development projects in which we perform consulting services include contracts on a fixed price basis that are billed at contractual rates. Revenue is recognized over time based on milestones achieved, which are determined based on costs incurred. Amounts billed in advance (collected or uncollected) are recorded as deferred revenue on our Consolidated Balance Sheets.
Revenue from construction projects is recognized over time, determined by the percentage of cost incurred to date compared to management’s estimated total cost for each contract. This method is used because management considers total cost to be the best
available measure of progress on the contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on the contracts nears completion. Refer to Note 5 in our Consolidated Financial Statements included in this annual report for further detail of costs and estimated earnings in excess of billings on uncompleted contracts. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined to be probable.
The site development segment represents approximately 9% of our total revenues for the year ended December 31, 2021. We account for site development revenue in accordance with ASC 606, Revenue from Contracts with Customers. Payment terms do not result in any significant financing arrangements. Furthermore, these contracts do not typically include variable consideration; therefore, the transaction price that is recognized over time is generally the amount of the total contract.
Accounts receivable
The accounts receivable balance for the years ended December 31, 2021 and 2020 was $102.0 million and $74.1 million, respectively, of which $24.6 and $14.3 million related to the site development segment, respectively. We perform periodic credit evaluations of our customers. In addition, we monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon historical experience, specific customer collection issues identified, and past due balances as determined based on contractual terms. Interest is charged on outstanding receivables from customers on a case by case basis in accordance with the terms of the respective contracts or agreements with those customers. Amounts determined to be uncollectible are written off against the allowance for doubtful accounts in the period in which uncollectibility is determined to be probable. Refer to Note 15 in our Consolidated Financial Statements included in this annual report for further detail of the site development segment.
Lease Accounting
We adopted ASU No. 2016-02, Leases (“Topic 842”) using the modified retrospective adoption method with an effective date of January 1, 2019. This standard requires all lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. The adoption of the new lease standard had a significant impact on our Consolidated Balance Sheets but did not have a significant impact on our lease classification or a material impact on our Consolidated Statements of Operations and liquidity. Additionally, the adoption of Topic 842 did not have a material impact on our debt covenant compliance under our current agreements. We have elected to not separate nonlease components from the associated lease component for all underlying classes of assets.
In order to calculate our lease liability, we make certain assumptions related to lease term and discount rate. In making the determination of the period for which we are reasonably certain to remain on the site, we will assume optional renewals are reasonably certain of being exercised for the greater of: (1) a period sufficient to cover all tenants under their current committed term where we have provided rights to the tower not to exceed the contractual ground lease terms including renewals and (2) a period sufficient to recover the investment of significant leasehold improvements located on the site. For the discount rate, we use the rate implicit in the lease when available to discount lease payments to present value. However, our ground leases and other property interests generally do not provide a readily determinable implicit rate. Therefore, we estimate the incremental borrowing rate to discount lease payments based on the lease term and lease currency. We use publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Refer to Note 2 in our Consolidated Financial Statements included in this annual report for further discussion on lease accounting.
Reference Rate Reform
ASU 2020-04 and ASU 2021-01, Reference Rate Reform, provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. An entity may elect to apply the amendments prospectively through December 31, 2022. The ICE Benchmark Administration Limited (“IBA”) ceased the publication of USD LIBOR for the 1 week and 2 month tenors on December 31, 2021 and will cease all other tenors on June 30, 2023. On July 7, 2021, we amended our Credit Facility to provide mechanics relating to a transition away from LIBOR as a benchmark interest rate and the replacement of LIBOR by an alternative benchmark rate. Refer to “Debt Instruments and Debt Service Requirements” below for further discussion of the Credit Facility. As of December 31, 2021, we have not modified any other contracts as a result of reference rate reform and are evaluating the impact this standard may have on our consolidated financial statements.
RESULTS OF OPERATIONS
This report presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of realized and unrealized gains and losses on our intercompany loans.
Year Ended 2021 Compared to Year Ended 2020
Revenues and Segment Operating Profit:
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
Revenues
(in thousands)
Domestic site leasing
$
1,681,372
$
1,558,311
$
-
$
123,061
7.9%
International site leasing
422,715
396,161
(8,016)
34,570
8.7%
Site development
204,747
128,666
-
76,081
59.1%
Total
$
2,308,834
$
2,083,138
$
(8,016)
$
233,712
11.2%
Cost of Revenues
Domestic site leasing
$
258,612
$
256,673
$
-
$
1,939
0.8%
International site leasing
127,779
117,105
(2,766)
13,440
11.5%
Site development
159,093
102,750
-
56,343
54.8%
Total
$
545,484
$
476,528
$
(2,766)
$
71,722
15.1%
Operating Profit
Domestic site leasing
$
1,422,760
$
1,301,638
$
-
$
121,122
9.3%
International site leasing
294,936
279,056
(5,250)
21,130
7.6%
Site development
45,654
25,916
-
19,738
76.2%
Revenues
Domestic site leasing revenues increased $123.1 million for the year ended December 31, 2021, as compared to the prior year, primarily due to (1) revenues from 961 towers acquired (including wireless tenant licenses on 713 utility transmission structures from the PG&E transaction) and 21 towers built since January 1, 2020 and (2) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals.
International site leasing revenues increased $26.6 million for the year ended December 31, 2021, as compared to the prior year. On a constant currency basis, international site leasing revenues increased $34.6 million. These changes were primarily due to (1) revenues from 263 towers acquired and 623 towers built since January 1, 2020 and (2) organic site leasing growth from new leases, amendments, and contractual escalators, partially offset by lease non-renewals. Site leasing revenue in Brazil represented 11.1% of total site leasing revenue for the period. No other individual international market represented more than 4% of our total site leasing revenue.
Site development revenues increased $76.1 million for the year ended December 31, 2021, as compared to prior year, as a result of increased carrier activity driven primarily by T-Mobile and DISH Wireless.
Operating Profit
Domestic site leasing segment operating profit increased $121.1 million for the year ended December 31, 2021, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2020 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.
International site leasing segment operating profit increased $15.9 million for the year ended December 31, 2021, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit increased $21.1 million. These changes were primarily due to additional profit generated by (1) towers acquired and built since January 1, 2020 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.
Site development segment operating profit increased $19.7 million for the year ended December 31, 2021, as compared to the prior year, as a result of increased carrier activity driven primarily by T-Mobile and DISH Wireless.
Selling, General, and Administrative Expenses:
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Domestic site leasing
$
115,458
$
102,889
$
-
$
12,569
12.2%
International site leasing
37,768
34,905
(271)
3,134
9.0%
Total site leasing
$
153,226
$
137,794
$
(271)
$
15,703
11.4%
Site development
20,636
17,663
-
2,973
16.8%
Other
46,167
38,810
-
7,357
19.0%
Total
$
220,029
$
194,267
$
(271)
$
26,033
13.4%
Selling, general, and administrative expenses increased $25.8 million, on an actual and constant currency basis, for the year ended December 31, 2021, as compared to the prior year. These changes were primarily as a result of increases in noncash compensation, personnel, and other support related costs.
Acquisition and New Business Initiatives Related Adjustments and Expenses:
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Domestic site leasing
$
14,452
$
10,331
$
-
$
4,121
39.9%
International site leasing
13,169
6,251
(161)
7,079
113.2%
Total
$
27,621
$
16,582
$
(161)
$
11,200
67.5%
Acquisition and new business initiatives related adjustments and expenses increased $11.0 million for the year ended December 31, 2021, as compared to the prior year. On a constant currency basis, acquisition and new business initiatives related adjustments and expenses increased $11.2 million. These changes were primarily as a result of an increase in third party acquisition and integration costs as well as incremental costs incurred in support of new business initiatives as compared to the prior year.
Asset Impairment and Decommission Costs:
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Domestic site leasing
$
20,135
$
28,887
$
-
$
(8,752)
(30.3%)
International site leasing
12,763
11,210
(81)
1,634
14.6%
Total site leasing
$
32,898
$
40,097
$
(81)
$
(7,118)
(17.8%)
Other
-
-
-%
Total
$
33,044
$
40,097
$
(81)
$
(6,972)
(17.4%)
Asset impairment and decommission costs decreased $7.1 million, on an actual and constant currency basis, for the year ended December 31, 2021, as compared to the prior year. These changes were primarily as a result of a decrease in impairment charges resulting from our regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying
value of the investment in those towers, as well as a decrease in costs related to sites decommissioned in the year ended December 31, 2021 compared to the prior year period.
Depreciation, Accretion, and Amortization Expenses:
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Domestic site leasing
$
514,234
$
539,399
$
-
$
(25,165)
(4.7%)
International site leasing
177,059
174,073
(4,443)
7,429
4.3%
Total site leasing
$
691,293
$
713,472
$
(4,443)
$
(17,736)
(2.5%)
Site development
2,295
2,356
-
(61)
(2.6%)
Other
6,573
6,142
-
7.0%
Total
$
700,161
$
721,970
$
(4,443)
$
(17,366)
(2.4%)
Depreciation, accretion, and amortization expense decreased $21.8 million for the year ended December 31, 2021, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense decreased $17.4 million. These changes were primarily due to the impact of assets that became fully depreciated since the prior year period, partially offset by an increase in the number of towers we acquired and built since January 1, 2020.
Operating Income (Expense):
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Domestic site leasing
$
758,481
$
620,132
$
-
$
138,349
22.3%
International site leasing
54,177
52,617
(294)
1,854
3.5%
Total site leasing
$
812,658
$
672,749
$
(294)
$
140,203
20.8%
Site development
22,723
5,897
-
16,826
285.3%
Other
(52,886)
(44,952)
-
(7,934)
17.6%
Total
$
782,495
$
633,694
$
(294)
$
149,095
23.5%
Domestic site leasing operating income increased $138.3 million for the year ended December 31, 2021, as compared to the prior year, primarily due to higher segment operating profit, decreases in depreciation, accretion, and amortization expense and asset impairment and decommission costs, partially offset by increases in selling, general, and administrative expenses and acquisition and new business initiatives related adjustments and expenses.
International site leasing operating income increased $1.6 million for the year ended December 31, 2021, as compared to the prior year. On a constant currency basis, international site leasing operating income increased $1.9 million. These changes were primarily due to higher segment operating profit, partially offset by increases in depreciation, accretion, and amortization expense, selling, general, and administrative expenses, asset impairment and decommission costs, and acquisition and new business initiatives related adjustments and expenses.
Site development operating income increased $16.8 million for the year ended December 31, 2021, as compared to the prior year, primarily due to higher segment operating profit driven by more activity from T-Mobile and DISH Wireless, partially offset by an increase in selling, general, and administrative expenses.
Other Income (Expense):
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Interest income
$
3,448
$
2,981
$
(112)
$
19.4%
Interest expense
(352,919)
(367,874)
14,928
(4.1%)
Non-cash interest expense
(47,085)
(24,870)
-
(22,215)
89.3%
Amortization of deferred financing fees
(19,589)
(20,058)
-
(2.3%)
Loss from extinguishment of debt, net
(39,502)
(19,463)
-
(20,039)
103.0%
Other expense, net
(74,284)
(222,159)
153,172
(5,297)
293.8%
Total
$
(529,931)
$
(651,443)
$
153,087
$
(31,575)
7.3%
Interest expense decreased $15.0 million for the year ended December 31, 2021, as compared to the prior year. This change was primarily due to a lower weighted average interest rate due in part to the interest rate swap entered into during third quarter of 2020, partially offset by a higher average principal amount of cash interest bearing debt outstanding.
Non-cash interest expense increased $22.2 million for the year ended December 31, 2021, as compared to the prior year primarily related to amortization of accumulated losses related to our interest rate swaps de-designated as cash flow hedges.
Loss from extinguishment of debt was $39.5 million for the year ended December 31, 2021 representing the payment of a $13.4 million call premium and the write-off of $10.3 million of the unamortized financing fees related to the redemption of the 2016 Senior Notes in November 2021, the payment of a $7.5 million call premium and the write-off of $4.2 million of the unamortized financing fees related to the redemption of the 2017 Senior Notes in February 2021, the write-off of $2.0 million of unamortized financing fees related to the repayment of the 2017-1C Tower Securities in May 2021, and the write-off of $2.0 million of unamortized financing fees related to the repayment of the 2013-2C Tower Securities in October 2021. Loss from extinguishment of debt was $19.5 million for the year ended December 31, 2020 representing the payment of a $9.1 million call premium and the write-off of $7.7 million of the original issuance discount and unamortized financing fees related to the redemption of the 2014 Senior Notes in February 2020, as well as the write-off of $2.6 million of unamortized financing fees related to the repayment of the 2015-1C Tower Securities and 2016-1C Tower Securities in July 2020.
Other expense, net includes a $66.3 million loss on the remeasurement of U.S. dollar denominated intercompany loans with foreign subsidiaries for the year ended December 31, 2021, while the prior year period included a $220.4 million loss.
(Provision) Benefit for Income Taxes:
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
(Provision) benefit for income taxes
$
(14,940)
$
41,796
$
(51,624)
$
(5,112)
15.5%
Provision for income taxes increased $56.7 million for the year ended December 31, 2021, as compared to the prior year. On a constant currency basis, provision for income taxes increased $5.1 million. These changes were primarily due to increases in deferred foreign and state taxes.
Net Income:
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Net income
$
237,624
$
24,047
$
101,169
$
112,408
68.0%
Net income was $237.6 million for the year ended December 31, 2021, as compared to net income of $24.0 million in the prior year period. This change was primarily due to an increase in operating income, fluctuations in foreign currency exchange rates including changes recorded on the remeasurement of the U.S. dollar denominated intercompany loans with foreign subsidiaries, and a
decrease in cash interest expense related to the interest rate swaps. This was partially offset by increases in non-cash interest expense, loss from the extinguishment of debt, and provision for income taxes.
Year Ended 2020 Compared to Year Ended 2019
For a discussion of our 2020 Results of Operations, including a discussion of our financial results for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019, refer to Part I, Item 7 of our annual report on Form 10-K filed with the SEC on February 25, 2021.
NON-GAAP FINANCIAL MEASURES
This report contains information regarding Adjusted EBITDA, a non-GAAP measure. We have provided below a description of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure and an explanation as to why management utilizes this measure. This report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of the remeasurement of our intercompany loans.
Adjusted EBITDA
We define Adjusted EBITDA as net income excluding the impact of non-cash straight-line leasing revenue, non-cash straight-line ground lease expense, non-cash compensation, net loss from extinguishment of debt, other income and expenses, acquisition and new business initiatives related adjustments and expenses, asset impairment and decommission costs, interest income, interest expenses, depreciation, accretion, and amortization, and income taxes.
We believe that Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance. Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations. Management believes that Adjusted EBITDA helps investors or other interested parties to meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is similar to the measure of current financial performance generally used by our lenders to determine compliance with certain covenants under our Senior Credit Agreement and the indentures relating to the 2020 Senior Notes and 2021 Senior Notes. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
For the year ended
Constant
December 31,
Foreign
Constant
Currency
Currency Impact
Currency Change
% Change
(in thousands)
Net income
$
237,624
$
24,047
$
101,169
$
112,408
68.0%
Non-cash straight-line leasing revenue
(30,117)
(3,475)
(106)
(26,536)
763.6%
Non-cash straight-line ground lease expense
7,766
13,955
(6,261)
(44.9%)
Non-cash compensation
84,402
68,890
(33)
15,545
22.6%
Loss from extinguishment of debt, net
39,502
19,463
-
20,039
103.0%
Other expense, net
74,284
222,159
(153,172)
5,297
(293.8%)
Acquisition and new business initiatives
related adjustments and expenses
27,621
16,582
(161)
11,200
67.5%
Asset impairment and decommission costs
33,044
40,097
(81)
(6,972)
(17.4%)
Interest income
(3,448)
(2,981)
(579)
19.4%
Interest expense (1)
419,593
412,802
(27)
6,818
1.7%
Depreciation, accretion, and amortization
700,161
721,970
(4,443)
(17,366)
(2.4%)
Provision (benefit) for income taxes (2)
15,847
(40,895)
51,624
5,118
15.1%
Adjusted EBITDA
$
1,606,279
$
1,492,614
$
(5,046)
$
118,711
8.0%
(1)Total interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees.
(2)Provision (benefit) for taxes includes $907 and $901 of franchise taxes for the year ended 2021 and 2020, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statement of Operations.
Adjusted EBITDA increased $113.7 million for the year ended December 31, 2021, as compared to the prior year. On a constant currency basis, Adjusted EBITDA increased $118.7 million. These changes were primarily due to an increase in segment operating profit, partially offset by an increase in cash selling, general, and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
SBAC is a holding company with no business operations of its own. SBAC’s only significant asset is 100% of the outstanding capital stock of SBA Telecommunications, LLC (“Telecommunications”), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications’ subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries.
A summary of our cash flows is as follows:
For the year ended December 31,
(in thousands)
Cash provided by operating activities
$
1,189,896
$
1,126,033
Cash used in investing activities
(1,423,260)
(446,366)
Cash provided by (used in) financing activities
339,264
(469,017)
Change in cash, cash equivalents, and restricted cash
105,900
210,650
Effect of exchange rate changes on cash, cash equiv., and restricted cash
(13,082)
(8,962)
Cash, cash equivalents, and restricted cash, beginning of year
342,808
141,120
Cash, cash equivalents, and restricted cash, end of year
$
435,626
$
342,808
Operating Activities
Cash provided by operating activities was $1.2 billion for the year ended December 31, 2021 as compared to $1.1 billion for the year ended December 31, 2020. The increase was primarily due to an increase in operating profit, partially offset by an increase in cash outflows associated with working capital changes.
Investing Activities
A detail of our cash capital expenditures is as follows:
For the year ended
December 31,
(in thousands)
Acquisitions of towers and related intangible assets
$
(274,752)
$
(181,473)
Acquisition of right-of-use assets (1)
(950,536)
-
Land buyouts and other assets (2)
(32,416)
(89,945)
Construction and related costs on new builds
(61,202)
(54,736)
Augmentation and tower upgrades
(33,103)
(38,340)
Tower maintenance
(34,541)
(29,395)
General corporate
(4,848)
(6,095)
Other investing activities
(31,862)
(46,382)
Net cash used in investing activities
$
(1,423,260)
$
(446,366)
(1)During the year ended December 31, 2021, we acquired the exclusive right to lease and operate 713 utility transmission structures, which included existing wireless tenant licenses from PG&E. The difference between the agreed upon purchase price of $972.0 million and the cash acquisition amount is due to working capital adjustments.
(2)Excludes $16.3 million and $12.3 million spent to extend ground lease terms for the years ended December 31, 2021 and 2020, respectively. In addition, the year ended December 31, 2020 includes amounts paid related to the acquisition of data centers.
On January 4, 2022, we closed on 1,445 sites under the previously announced deal with Airtel Tanzania for $176.1 million. Legal title was fully transferred at closing for 963 of the towers. The remaining 482 towers are pending post-closing site level documentation and due diligence and will be initially accounted for as acquired right-of-use assets until the full transfer of title for these towers is completed, which we anticipate to be in tranches through the end of the second quarter of 2023. During this period of time, we have all the economic rights and obligations related to these towers. Additionally, subsequent to the fourth quarter of 2021, we purchased or are under contract to purchase 371 communication sites for an aggregate amount of $137.1 million. We anticipate that these acquisitions will be consummated by the end of the third quarter of 2022.
For 2022, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $45.0 million to $55.0 million and discretionary cash capital expenditures, based on current or potential acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of $525.0 million to $545.0 million. We expect to fund these cash capital expenditures from cash on hand, cash flow from operations, and borrowings under the Revolving Credit Facility or new financings. The exact amount of our future cash capital expenditures will depend on a number of factors, including amounts necessary to support our tower portfolio, our new tower build and acquisition programs, and our ground lease purchase program.
Financing Activities
A detail of our financing activities is as follows:
For the year ended December 31,
(in thousands)
Net repayments under Revolving Credit Facility (1)
$
(30,000)
$
(110,000)
Proceeds from issuance of Senior Notes, net of fees (1)
1,485,373
1,479,484
Repayment of Senior Notes (1)
(1,870,909)
(759,143)
Proceeds from issuance of Tower Securities, net of fees (1)
2,924,005
1,335,895
Repayment of Tower Securities (1)
(1,335,000)
(1,200,000)
Termination of interest rate swap
-
(176,200)
Repurchase and retirement of common stock (2)
(582,578)
(859,335)
Payment of dividends on common stock
(253,580)
(207,689)
Proceeds from employee stock purchase/stock option plans
86,688
99,129
Payments related to taxes on net settlement of stock options and restricted stock units
(71,904)
(45,080)
Other financing activities
(12,831)
(26,078)
Net cash provided by (used in) financing activities
$
339,264
$
(469,017)
(1)For additional information regarding our debt instruments and financings, refer to “Debt Instruments and Debt Service Requirements” below.
(2)For additional information, refer to Item 5. Issuer Purchases of Equity Securities.
For a discussion of our Liquidity and Capital Resources for the fiscal year ended December 31, 2020 compared to the fiscal year ended December 31, 2019, refer to Part I, Item 7 of our annual report on Form 10-K filed with the SEC on February 25, 2021.
‎
Dividend
For the year ended December 31, 2021, we paid the following cash dividends:
Payable to Shareholders
of Record at the Close
Cash Paid
Aggregate Amount
Date Declared
of Business on
Per Share
Paid
Date Paid
February 19, 2021
March 10, 2021
$0.58
$63.4 million
March 26, 2021
April 26, 2021
May 20, 2021
$0.58
$63.4 million
June 15, 2021
August 1, 2021
August 26, 2021
$0.58
$63.6 million
September 23, 2021
November 1, 2021
November 18, 2021
$0.58
$63.1 million
December 16, 2021
Dividends paid in 2021 and 2020 were ordinary taxable dividends.
Subsequent to December 31, 2021, we declared the following cash dividends:
Payable to Shareholders
Cash to
of Record at the Close
be Paid
Date Declared
of Business on
Per Share
Date to be Paid
February 27, 2022
March 10, 2022
$0.71
March 25, 2022
The amount of future distributions will be determined, from time to time, by our Board of Directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases when we believe our stock price is below its intrinsic value. The actual amount, timing and frequency of future dividends, will be at the sole discretion of our Board of Directors and will be declared based upon various factors, many of which are beyond our control.
Registration Statements
We have on file with the Commission a shelf registration statement on Form S-4 registering shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or antenna sites and related assets or companies who own wireless communication towers, antenna sites, or related assets. During the year ended December 31, 2021, we did not issue any shares of Class A common stock under this registration statement. As of December 31, 2021, we had approximately 1.2 million shares of Class A common stock remaining under this registration statement.
We have on file with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3ASR which enables us to issue shares of our Class A common stock, preferred stock, debt securities, warrants, or depositary shares as well as units that include any of these securities. We will file a prospectus supplement containing the amount and type of securities each time we issue securities under our automatic shelf registration statement on Form S-3ASR. No securities were issued under this registration statement through the date of this filing.
Debt Instruments and Debt Service Requirements
Terms of the Senior Credit Agreement
On July 7, 2021, we, through our wholly owned subsidiary, SBA Senior Finance II LLC, amended our Revolving Credit Facility to (1) increase the total commitments under the Facility from $1.25 billion to $1.5 billion, (2) extend the maturity date of the Facility to July 7, 2026, (3) lower the applicable interest rate margins and commitment fees under the Facility, (4) provide mechanics relating to a transition away from LIBOR as a benchmark interest rate and the replacement of LIBOR by an alternative benchmark rate, (5) incorporate sustainability-linked targets which will adjust the Facility’s applicable interest and commitment fee rates upward or downward based on how we perform against those targets, and (6) amend certain other terms and conditions under the Senior Credit Agreement.
The Senior Credit Agreement, as amended, requires SBA Senior Finance II to maintain specific financial ratios, including (1) a ratio of Consolidated Net Debt to Annualized Borrower EBITDA not to exceed 6.5 times for any fiscal quarter, (2) a ratio of Consolidated Net Debt (calculated in accordance with the Senior Credit Agreement) to Annualized Borrower EBITDA for the most recently ended fiscal quarter not to exceed 6.5 times for 30 consecutive days and (3) a ratio of Annualized Borrower EBITDA to Annualized Cash Interest Expense (calculated in accordance with the Senior Credit Agreement) of not less than 2.0 times for any
fiscal quarter. The Senior Credit Agreement contains customary affirmative and negative covenants that, among other things, limit the ability of SBA Senior Finance II and its subsidiaries to incur indebtedness, grant certain liens, make certain investments, enter into sale leaseback transactions, merge or consolidate, make certain restricted payments, enter into transactions with affiliates, and engage in certain asset dispositions, including a sale of all or substantially all of their property. The Senior Credit Agreement is also subject to customary events of default. Pursuant to the Second Amended and Restated Guarantee and Collateral Agreement, amounts borrowed under the Revolving Credit Facility, the Term Loans and certain hedging transactions that may be entered into by SBA Senior Finance II or the Subsidiary Guarantors (as defined in the Senior Credit Agreement) with lenders or their affiliates are secured by a first lien on the membership interests of SBA Telecommunications, LLC, SBA Senior Finance, LLC and SBA Senior Finance II and on substantially all of the assets (other than leasehold, easement and fee interests in real property) of SBA Senior Finance II and the Subsidiary Guarantors.
The Senior Credit Agreement, as amended, permits SBA Senior Finance II, without the consent of the other lenders, to request that one or more lenders provide SBA Senior Finance II with increases in the Revolving Credit Facility or additional term loans provided that after giving effect to the proposed increase in Revolving Credit Facility commitments or incremental term loans the ratio of Consolidated Net Debt to Annualized Borrower EBITDA would not exceed 6.5 times. SBA Senior Finance II’s ability to request such increases in the Revolving Credit Facility or additional term loans is subject to its compliance with customary conditions set forth in the Senior Credit Agreement including compliance, on a pro forma basis, with the financial covenants and ratios set forth therein and, with respect to any additional term loan, an increase in the margin on existing term loans to the extent required by the terms of the Senior Credit Agreement. Upon SBA Senior Finance II’s request, each lender may decide, in its sole discretion, whether to increase all or a portion of its Revolving Credit Facility commitment or whether to provide SBA Senior Finance II with additional term loans and, if so, upon what terms.
Revolving Credit Facility under the Senior Credit Agreement
The Revolving Credit Facility consists of a revolving loan under which up to $1.5 billion aggregate principal amount may be borrowed, repaid and redrawn, based upon specific financial ratios and subject to the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest, at SBA Senior Finance II’s election, at either (1) the Eurodollar Rate plus a margin that ranges from 112.5 basis points to 150.0 basis points or (2) the Base Rate plus a margin that ranges from 12.5 basis points to 50.0 basis points, in each case based on the ratio of Consolidated Net Debt to Annualized Borrower EBITDA, calculated in accordance with the Senior Credit Agreement. In addition, SBA Senior Finance II is required to pay a commitment fee of between 0.15% and 0.25% per annum on the amount of unused commitment. Borrowings under the Revolving Credit Facility may be used for general corporate purposes. SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of the period may not be reflective of the total amounts outstanding during such period.
During the year ended December 31, 2021, we borrowed $1.9 billion and repaid $2.0 billion of the outstanding balance under the Revolving Credit Facility. As of December 31, 2021, the balance outstanding under the Revolving Credit Facility was $350.0 million accruing interest at 1.516% per annum. In addition, SBA Senior Finance II was required to pay a commitment fee of 0.15% per annum on the amount of the unused commitment. As of December 31, 2021, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement.
Subsequent to December 31, 2021, we borrowed an additional $210.0 million under the Revolving Credit Facility, and as of the date of this filing, $560.0 million was outstanding.
Term Loan under the Senior Credit Agreement
2018 Term Loan
On April 11, 2018, we, through our wholly owned subsidiary, SBA Senior Finance II LLC, obtained a term loan (the “2018 Term Loan”) under the amended and restated Senior Credit Agreement. The 2018 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $2.4 billion that matures on April 11, 2025. The 2018 Term Loan accrues interest, at SBA Senior Finance II’s election at either the Base Rate plus 75 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 175 basis points (with a zero Eurodollar Rate floor). The 2018 Term Loan was issued at 99.75% of par value. As of December 31, 2021, the 2018 Term Loan was accruing interest at 1.860% per annum. Principal payments on the 2018 Term Loan are made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $6.0 million. We incurred financing fees of approximately $16.8 million in relation to this transaction, which are being amortized through the maturity date.
During the year ended December 31, 2021, we repaid an aggregate of $24.0 million of principal on the 2018 Term Loan. As of December 31, 2021, the 2018 Term Loan had a principal balance of $2.3 billion.
On August 4, 2020, we, through our wholly owned subsidiary, SBA Senior Finance II, entered into an interest rate swap for $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan.
Secured Tower Revenue Securities
Tower Revenue Securities Terms
As of December 31, 2021, we, through the Trust, had issued and outstanding an aggregate of $6.7 billion of Secured Tower Revenue Securities (“Tower Securities”). The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of certain of our subsidiaries that are borrowers on the mortgage loan (the “Borrowers”) under which there is a loan tranche for each Tower Security outstanding with the same interest rate and maturity date as the corresponding Tower Security. The mortgage loan will be paid from the operating cash flows from the aggregate 9,902 tower sites owned by the Borrowers as of December 31, 2021. The mortgage loan is secured by (1) mortgages, deeds of trust, and deeds to secure debt on a substantial portion of the tower sites, (2) a security interest in the tower sites and substantially all of the Borrowers’ personal property and fixtures, (3) the Borrowers’ rights under certain tenant leases, and (4) all of the proceeds of the foregoing. For each calendar month, SBA Network Management, Inc., an indirect subsidiary (“Network Management”), is entitled to receive a management fee equal to 4.5% of the Borrowers’ operating revenues for the immediately preceding calendar month.
The table below sets forth the material terms of our outstanding Tower Securities as of December 31, 2021:
Security
Issue Date
Amount Outstanding
Interest Rate
Anticipated Repayment Date
Final Maturity Date
2014-2C Tower Securities
Oct. 15, 2014
$620.0 million
3.869%
Oct. 8, 2024
Oct. 8, 2049
2018-1C Tower Securities
Mar. 9, 2018
$640.0 million
3.448%
Mar. 9, 2023
Mar. 9, 2048
2019-1C Tower Securities
Sep. 13, 2019
$1.165 billion
2.836%
Jan. 12, 2025
Jan. 12, 2050
2020-1C Tower Securities
Jul. 14, 2020
$750.0 million
1.884%
Jan. 9, 2026
Jul. 11, 2050
2020-2C Tower Securities
Jul. 14, 2020
$600.0 million
2.328%
Jan. 11, 2028
Jul. 9, 2052
2021-1C Tower Securities
May 14, 2021
$1.165 billion
1.631%
Nov. 9, 2026
May 9, 2051
2021-2C Tower Securities
Oct. 27, 2021
$895.0 million
1.840%
Apr. 9, 2027
Oct. 10, 2051
2021-3C Tower Securities
Oct. 27, 2021
$895.0 million
2.593%
Oct. 9, 2031
Oct. 10, 2056
The Borrowers may prepay any of the mortgage loan components, in whole or in part, with no prepayment consideration, (1) within twelve months (in the case of the component corresponding to the 2018-1C Tower Securities, 2019-1C Tower Securities, 2020-1C Tower Securities, 2021-1C Tower Securities, and 2021-2C Tower Securities) or eighteen months (in the case of the components corresponding to the 2014-2C Tower Securities, 2020-2C Tower Securities, and 2021-3C Tower Securities) of the anticipated repayment date of such mortgage loan component, (2) with proceeds received as a result of any condemnation or casualty of any tower owned by the Borrowers or (3) during an amortization period. In all other circumstances, the Borrowers may prepay the mortgage loan, in whole or in part, upon payment of the applicable prepayment consideration. The prepayment consideration is determined based on the class of the Tower Securities to which the prepaid mortgage loan component corresponds and consists of an amount equal to the net present value associated with the portion of the principal balance being prepaid and calculated in accordance with the formula set forth in the mortgage loan agreement.
To the extent that the mortgage loan components corresponding to the Tower Securities are not fully repaid by their respective anticipated repayment dates, the interest rate of each such component will increase by the greater of (1) 5% and (2) the amount, if any, by which the sum of (x) the 10 year U.S. treasury rate plus (y) the credit-based spread for such component (as set forth in the mortgage loan agreement) plus (z) 5%, exceeds the original interest rate for such component.
Pursuant to the terms of the Tower Securities, all rents and other sums due on any of the towers owned by the Borrowers are directly deposited by the lessees into a controlled deposit account and are held by the indenture trustee. The monies held by the indenture trustee after the release date are classified as short-term restricted cash on the Consolidated Balance Sheets (see Note 4). However, if the Debt Service Coverage Ratio, defined as the net cash flow (as defined in the mortgage loan agreement) divided by the amount of interest on the mortgage loan, servicing fees and trustee fees that the Borrowers are required to pay over the succeeding twelve months, as of the end of any calendar quarter, falls to 1.30x or lower, then all cash flow in excess of amounts required to make
debt service payments, to fund required reserves, to pay management fees and budgeted operating expenses and to make other payments required under the loan documents, referred to as “excess cash flow,” will be deposited into a reserve account instead of being released to the Borrowers. The funds in the reserve account will not be released to the Borrowers unless the Debt Service Coverage Ratio exceeds 1.30x for two consecutive calendar quarters. If the Debt Service Coverage Ratio falls below 1.15x as of the end of any calendar quarter, then an “amortization period” will commence and all funds on deposit in the reserve account will be applied to prepay the mortgage loan until such time that the Debt Service Coverage Ratio exceeds 1.15x for a calendar quarter. In addition, if any of the Tower Securities are not fully repaid by their respective anticipated repayment dates, the cash flow from the towers owned by the Borrowers will be trapped by the trustee for the Tower Securities and applied first to repay the interest, at the original interest rates, on the mortgage loan components underlying the Tower Securities, second to fund all reserve accounts and operating expenses associated with those towers, third to pay the management fees due to Network Management, fourth to repay principal of the Tower Securities and fifth to repay the additional interest discussed above. Furthermore, the advance rents reserve requirement states that the Borrowers are required to maintain an advance rents reserve at any time the monthly tenant Debt Service Coverage Ratio is equal to or less than 2:1 and for two calendar months after such coverage ratio again exceeds 2:1. The mortgage loan agreement, as amended, also includes covenants customary for mortgage loans subject to rated securitizations. Among other things, the Borrowers are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets.
Risk Retention Tower Securities
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act, SBA Guarantor, LLC, a wholly owned subsidiary, purchased (1) $33.7 million of Secured Tower Revenue Securities Series 2018-1R (the “2018-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.949% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2018-1C Tower Securities, (2) $61.4 million of Secured Tower Revenue Securities Series 2019-1R (the “2019-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.213% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2019-1C Tower Securities, (3) $71.1 million of Secured Tower Revenue Securities Series 2020-2R (the “2020-2R Tower Securities”) issued by the Trust with a fixed interest rate of 4.336% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2020-2C Tower Securities, (4) $61.4 million of Secured Tower Revenue Securities Series 2021-1R (the “2021-1R Tower Securities”) issued by the Trust with a fixed interest rate of 3.625% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2021-1C Tower Securities, and (5) $94.3 million of Secured Tower Revenue Securities Series 2021-3R (the “2021-3R Tower Securities”) issued by the Trust with a fixed interest rate of 4.090% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2021-3C Tower Securities. Principal and interest payments made on the 2018-1R Tower Securities, 2019-1R Tower Securities, 2020-2R Tower Securities, 2021-1R Tower Securities, and 2021-3R Tower Securities eliminate in consolidation.
Debt Covenants
As of December 31, 2021, the Borrowers met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement.
Senior Notes
The table below sets forth the material terms of our outstanding senior notes as of December 31, 2021:
Senior Notes
Issue Date
Amount Outstanding
Interest Rate Coupon
Maturity Date
Interest Due Dates
Optional Redemption Date
2020 Senior Notes
Feb. 4, 2020
$1.5 billion
3.875%
Feb. 15, 2027
Feb. 15 & Aug. 15
Feb. 15, 2023
2021 Senior Notes
Jan. 29, 2021
$1.5 billion
3.125%
Feb. 1, 2029
Feb. 1 & Aug. 1
Feb. 1, 2024
Each of our senior notes is subject to redemption, at our option, in whole or in part on or after the date set forth above. During the subsequent three twelve-month periods, the senior notes are redeemable, at our option, at reducing redemption prices based on the applicable interest rate coupon (as set forth in the indenture) plus accrued and unpaid interest. Subsequent to such date, the senior notes become redeemable until maturity at 100% of the principal plus accrued and unpaid interest. In addition, prior to February 15, 2023 (in the case of the 2020 Senior Notes) and February 1, 2024 (in the case of the 2021 Senior Notes), we may, at our option, use the net proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the notes originally issued at a redemption price of 103.875% (in the case of the 2020 Senior Notes) and 103.125% (in the case of the 2021 Senior Notes) plus accrued and unpaid interest.
Indentures Governing Senior Notes
The Indentures governing the Senior Notes contain customary covenants, subject to a number of exceptions and qualifications, including restrictions on the ability of SBAC and Telecommunications to (1) incur additional indebtedness unless the Consolidated Indebtedness to Annualized Consolidated Adjusted EBITDA Ratio (as defined in the Indenture), pro forma for the additional indebtedness does not exceed, with respect to any fiscal quarter, 9.5x for SBAC, (2) merge, consolidate or sell assets, (3) make restricted payments, including dividends or other distributions, (4) enter into transactions with affiliates, and (5) enter into sale and leaseback transactions and restrictions on the ability of the Restricted Subsidiaries of SBAC (as defined in the Indentures) to incur liens securing indebtedness.
Debt Service
As of December 31, 2021, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months.
The following table illustrates our estimate of our debt service requirement over the next twelve months ended December 31, 2022 based on the amounts outstanding as of December 31, 2021 and the interest rates accruing on those amounts on such date (in thousands):
Revolving Credit Facility
$
7,031
2018 Term Loan (1)
67,349
2014-2C Tower Securities
24,185
2018-1C Tower Securities
22,270
2019-1C Tower Securities
33,409
2020-1C Tower Securities
14,368
2020-2C Tower Securities
14,159
2021-1C Tower Securities
19,371
2021-2C Tower Securities
16,752
2021-3C Tower Securities
23,491
2020 Senior Notes
58,125
2021 Senior Notes
46,875
Total debt service for the next 12 months
$
347,385
(1)Total debt service on the 2018 Term Loan includes the impact of the interest rate swap entered into on August 4, 2020 which swapped $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan.
Inflation
The impact of inflation on our operations has not been significant to date. However, we cannot assure you that a high rate of inflation in the future will not adversely affect our operating results particularly in light of the fact that our site leasing revenues are governed by long-term contracts with pre-determined pricing that we will not be able to increase in response to increases in inflation other than our contracts in South America, South Africa, the Philippines, and Tanzania which have inflationary index based rent escalators.
‎

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our financial instruments. These instruments arise from transactions entered into in the normal course of business.
The following table presents the future principal payment obligations, fair values, and interest payments associated with our long-term debt instruments assuming our actual level of long-term indebtedness as of December 31, 2021:
Thereafter
Total
Fair Value
(in thousands)
Revolving Credit Facility
$
-
$
-
$
-
$
-
$
350,000
$
-
$
350,000
$
350,000
2018 Term Loan
24,000
24,000
24,000
2,244,000
-
-
2,316,000
2,289,945
2014-2C Tower Securities (1)
-
-
620,000
-
-
-
620,000
641,793
2018-1C Tower Securities (1)
-
640,000
-
-
-
-
640,000
650,163
2019-1C Tower Securities (1)
-
-
-
1,165,000
-
-
1,165,000
1,174,728
2020-1C Tower Securities (1)
-
-
-
-
750,000
-
750,000
746,498
2020-2C Tower Securities (1)
-
-
-
-
-
600,000
600,000
605,268
2021-1C Tower Securities (1)
-
-
-
-
1,165,000
-
1,165,000
1,144,846
2021-2C Tower Securities (1)
-
-
-
-
-
895,000
895,000
883,213
2021-3C Tower Securities (1)
-
-
-
-
-
895,000
895,000
902,446
2020 Senior Notes
-
-
-
-
-
1,500,000
1,500,000
1,550,790
2021 Senior Notes
-
-
-
-
-
1,500,000
1,500,000
1,446,975
Total debt obligation
$
24,000
$
664,000
$
644,000
$
3,409,000
$
2,265,000
$
5,390,000
$
12,396,000
$
12,386,665
Interest payments (2)
$
323,385
$
305,322
$
296,008
$
213,448
$
180,432
$
236,391
$
1,554,986
(1)For information on the anticipated repayment date and final maturity date for each tower security, refer to Debt Instruments and Debt Service Requirements above.
(2)Represents interest payments based on the 2014-2C Tower Securities interest rate of 3.869%, the 2018-1C Tower Securities interest rate of 3.448%, the 2019-1C Tower Securities interest rate of 2.836%, the 2020-1C Tower Securities interest rate of 1.884%, the 2020-2C Tower Securities interest rate of 2.328%, the 2021-1C Tower Securities interest rate of 1.631%, the 2021-2C Tower Securities interest rate of 1.840%, the 2021-3C Tower Securities interest rate of 2.593%, the 2018 Term Loan at an average interest rate of 1.872% (which includes the impact of interest rate swaps) as of December 31, 2021, the Revolving Credit Facility at an average interest rate of 1.516% as of December 31, 2021, the 2020 Senior Notes interest rate of 3.875%, and the 2021 Senior Notes interest rate of 3.875%.
Our current primary market risk exposure is (1) interest rate risk relating to our ability to refinance our debt at commercially reasonable rates, if at all, and (2) interest rate risk relating to the impact of interest rate movements on the variable portion of our 2018 Term Loan and any borrowings that we may incur under our Revolving Credit Facility, which are at floating rates. We manage the interest rate risk on our outstanding debt through our large percentage of fixed rate debt, including interest rate swaps. On August 4, 2020, we, through our wholly owned subsidiary, SBA Senior Finance II, entered into an interest rate swap for $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan. While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis. The IBA ceased the publication of USD LIBOR for the 1 week and 2 month tenors on December 31, 2021 and will cease all other tenors on June 30, 2023. The discontinuation of LIBOR after 2021 and the replacement with an alternative reference rate may adversely impact interest rates and our interest expense could increase. On July 7, 2021, we amended our Revolving Credit Facility to provide mechanics relating to a transition away from LIBOR as a benchmark interest rate and the replacement of LIBOR by an alternative benchmark rate.
We are exposed to market risk from changes in foreign currency exchange rates in connection with our operations in Brazil, Canada, Chile, Peru, Argentina, Colombia, South Africa, the Philippines, Tanzania, and to a lesser extent, our markets in Central America. In each of these countries, we pay most of our selling, general, and administrative expenses and a portion of our operating expenses, such as taxes and utilities incurred in the country in local currency. In addition, in Brazil, Canada, Chile, South Africa, and the Philippines, we receive significantly all of our revenue and pay significantly all of our operating expenses in local currency. In Colombia, Argentina, Peru, and Tanzania, we receive our revenue and pay our operating expenses in a mix of local currency and U.S. dollars. All transactions denominated in currencies other than the U.S. Dollar are reported in U.S. Dollars at the applicable exchange rate. All assets and liabilities are translated into U.S. Dollars at exchange rates in effect at the end of the applicable fiscal reporting period, and all revenues and expenses are translated at average rates for the period. The cumulative translation effect is included in
equity as a component of Accumulated other comprehensive income (loss). For the year ended December 31, 2021, approximately 13.5% of our revenues and approximately 17.9% of our total operating expenses were denominated in foreign currencies.
We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in the Brazilian Real from the quoted foreign currency exchange rates at December 31, 2021. As of December 31, 2021, the analysis indicated that such an adverse movement would have caused our revenues and operating income to decline by approximately 0.9% and 0.5%, respectively, for the year ended December 31, 2021.
As of December 31, 2021, we had intercompany debt, which is denominated in a currency other than the functional currency of the subsidiary in which it is recorded. As settlement of this debt is anticipated or planned in the foreseeable future, any changes in the foreign currency exchange rates will result in unrealized gains or losses, which will be included in our determination of net income. A change of 10% in the underlying exchange rates of our unsettled intercompany debt at December 31, 2021 would have resulted in approximately $77.8 million of unrealized gains or losses that would have been included in Other income (expense), net in our Consolidated Statements of Operations for the year ended December 31, 2021.
Special Note Regarding Forward-Looking Statements
This annual report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this annual report contains forward-looking statements regarding:
•our expectations on the future growth and financial health of the wireless industry and the industry participants, the drivers of such growth, the demand for our towers, the future capital investments of our customers (including with respect to the roll-out of 5G), future spectrum auctions, the trends developing in our industry, and competitive factors;
•our ability to capture and capitalize on industry growth and the impact of such growth on our financial and operational results;
•our expectations regarding consolidation of wireless service providers and the impact of such consolidation on our financial and operational results;
•our intent to grow our tower portfolio domestically and internationally and expand through acquisitions, new builds and organic lease up on existing towers;
•our belief that over the long-term, site leasing revenues will continue to grow as wireless service providers increase their use of our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements;
•our expectation regarding site leasing revenue growth, on an organic basis, in our domestic and international segments, and the drivers of such growth;
•our focus on our site leasing business and belief that our site leasing business is characterized by stable and long-term recurring revenues, reduced exposure to changes in customer spending, predictable operating costs, and minimal non-discretionary capital expenditures;
•our expectation that, due to the relatively young age and mix of our tower portfolio, future expenditures required to maintain these towers will be minimal;
•our expectation that we will grow our cash flows by adding tenants to our towers at minimal incremental costs and executing monetary amendments;
•our expectations regarding churn rates, including with respect to legacy Sprint leases and Oi leases;
•our belief that DISH Wireless will become a nationwide carrier, and its expectations regarding the capital expenditures necessary to deploy its network;
•our expectations regarding the timing for closing of pending acquisitions;
•our election to be subject to tax as a REIT and our intent to continue to operate as a REIT;
•our belief that our business is currently operated in a manner that complies with the REIT rules and our intent to continue to do so;
•our plans regarding our distribution policy, and the amount and timing of, and source of funds for, any such distributions;
•our expectations regarding the use of NOLs to reduce REIT taxable income;
•our expectations regarding our capital allocation strategy, including future allocation decisions among portfolio growth, stock repurchases, and dividends, the impact of our election to be taxed as a REIT on that strategy, and our goal of increasing our Adjusted Funds From Operations per share;
•our expectations regarding dividends and our ability to grow our dividend in the future and the drivers of such growth;
•our expectations regarding our future cash capital expenditures, both discretionary and non-discretionary, including expenditures required for new builds and to maintain, improve, and modify our towers, ground lease purchases, and general corporate expenditures, and the source of funds for these expenditures;
•our expectations regarding the timing for closing of refinancing transactions;
•our expectations regarding our business strategies, including our strategy for securing rights to the land underlying our towers, and the impact of such strategies on our financial and operational results;
•our intended use of our liquidity;
•our intent to maintain our target leverage levels, including in light of our dividend;
•our expectations regarding our debt service in 2022 and our belief that our cash on hand, capacity under our Revolving Credit Facility, and our cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months; and
•our expectations and estimates regarding certain tax and accounting matters, including the impact on our financial statements.
These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:
•the impact of consolidation among wireless service providers, including the impact of T-Mobile and Sprint;
•the ability of DISH Wireless to become and compete as a nationwide carrier;
•our ability to continue to comply with covenants and the terms of our credit instruments and our ability to obtain additional financing to fund our capital expenditures;
•our ability to successfully manage the risks associated with international operations, including risks relating to political or economic conditions, inflation, tax laws, currency restrictions and exchange rate fluctuations, legal or judicial systems, and land ownership;
•our ability to successfully manage the risks associated with our acquisition initiatives, including our ability to satisfactorily complete due diligence on acquired towers, the amount and quality of due diligence that we are able to complete prior to closing of any acquisition, our ability to accurately anticipate the future performance of the acquired towers, our ability to receive required regulatory approval, the ability and willingness of each party to fulfill their respective closing conditions and their contractual obligations, and, once acquired, our ability to effectively integrate acquired towers into our business and to achieve the financial results projected in our valuation models for the acquired towers;
•the health of the South African and Tanzanian economies and wireless communications market, and the willingness of carriers to invest in their networks in that market;
•developments in the wireless communications industry in general, and for wireless communications infrastructure providers in particular, that may slow growth or affect the willingness or ability of the wireless service providers to expend capital to fund network expansion or enhancements;
•our ability to secure as many site leasing tenants as anticipated, recognize our expected economies of scale with respect to new tenants on our towers, and retain current leases on towers;
•our ability to secure and deliver anticipated services business at contemplated margins;
•our ability to build new towers, including our ability to identify and acquire land that would be attractive for our customers and to successfully and timely address zoning, permitting, weather, availability of labor and supplies and other issues that arise in connection with the building of new towers;
•competition for the acquisition of towers and other factors that may adversely affect our ability to purchase towers that meet our investment criteria and are available at prices which we believe will be accretive to our shareholders and allow us to maintain our long-term target leverage ratios while achieving our expected portfolio growth levels;
•our capital allocation decisions and the impact on our ability to achieve our expected tower portfolio growth levels;
•our ability to protect our rights to the land under our towers, and our ability to acquire land underneath our towers on terms that are accretive;
•our ability to sufficiently increase our revenues and maintain expenses and cash capital expenditures at appropriate levels to permit us to meet our anticipated uses of liquidity for operations, debt service and estimated portfolio growth;
•the impact of rising interest rates on our results of operations and our ability to refinance our existing indebtedness at commercially reasonable rates or at all;
•the extent and duration of the impact of the COVID-19 pandemic on the global economy, on our business and results of operations, and on foreign currency exchange rates;
•our ability to successfully estimate the impact of regulatory and litigation matters;
•natural disasters and other unforeseen damage for which our insurance may not provide adequate coverage;
•a decrease in demand for our towers;
•the introduction of new technologies or changes in a tenant’s business model that may make our tower leasing business less desirable to existing or potential tenants;
•our ability to qualify for treatment as a REIT for U.S. federal income tax purposes and to comply with and conduct our business in accordance with such rules;
•our ability to utilize available NOLs to reduce REIT taxable income; and
•our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements and the availability of sufficient NOLs to offset future REIT taxable income.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are on pages through.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures - We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
In connection with the preparation of this Annual Report on Form 10-K, as of December 31, 2021, an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on such evaluation, our CEO and CFO concluded that, as of December 31, 2021, our disclosure controls and procedures were effective.
There has been no change in our internal control over financial reporting during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2021. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our system of internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of SBAC; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of SBAC are being made only in accordance with authorizations of management and directors of SBAC; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of SBAC’s assets that could have a material effect on the financial statements.
Management performed an assessment of the effectiveness of SBAC’s internal control over financial reporting as of December 31, 2021 based upon criteria in Internal Control - Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, management determined that SBAC’s internal control over financial reporting was effective as of December 31, 2021 based on the criteria in Internal Control - Integrated Framework (2013 Framework) issued by COSO.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has issued an attestation report on SBAC’s internal control over financial reporting.
‎
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of SBA Communications Corporation and Subsidiaries
Opinion on Internal Control over Financial Reporting
We have audited SBA Communications Corporation and Subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SBA Communications Corporation and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020 and the related consolidated statements of operations, comprehensive income (loss), shareholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boca Raton, Florida
March 1, 2022
‎

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e)
On October 1, 2021, we entered into an amendment (the “Amendment”) to the Employment Agreement with Jeffrey A. Stoops, our President and Chief Executive Officer, dated August 3, 2020. The Amendment modified the Employment Agreement to, among other things, provide that the severance payment in connection with a termination of employment for cause or resignation for good reason of an amount equal to the “applicable multiple” (as defined in the Employment Agreement) multiplied by the sum of Mr. Stoops’ (i) base salary for the year in which the termination or resignation occurs, (ii) “reference bonus” (as defined in the Employment Agreement) and (iii) “reference benefits value” (as defined in the Employment Agreement), which was provided for in the Employment Agreement, will only be payable to the extent Mr. Stoops is not “retirement eligible” as defined in our equity plan retirement policy (or if he is retirement eligible and such termination or resignation occurs after a change of control or within six months of a change of control). If at the time of such termination or resignation (a) Mr. Stoops is retirement eligible and (b) a change of control has not occurred, then Mr. Stoops would not receive this severance amount and would instead be eligible to receive the entitlements provided under our equity plan retirement policy. In addition, the Amendment modified the Employment Agreement to provide that, if Mr. Stoops’ employment is terminated due to death or disability, he would be entitled to the pro rata portion of the minimum annual bonus target for the period of service in the year in which the termination occurs. All other material terms of the Employment Agreement with Mr. Stoops remained the same.
Also on October 1, 2021, we entered into amended and restated employment agreements with each of Brendan Cavanagh, Executive Vice President and Chief Financial Officer, Thomas P. Hunt, Executive Vice President, General Counsel and Chief Administrative Officer, and Kurt L. Bagwell, Executive Vice President and President of International. The prior employment agreements with each of Messrs. Cavanagh, Hunt and Bagwell were set to expire by their terms on December 31, 2021. The amended and restated employment agreements for Messrs. Cavanagh, Hunt, and Bagwell expire on December 31, 2024 and provide for each to continue to serve in their present positions. The amended and restated employment agreements also modified the prior employment agreements to, among other things, provide that the severance payment in connection with a termination of employment for cause or resignation for good reason of an amount equal to the “applicable multiple” (as defined in the amended and restated employment agreements) multiplied by the sum of such officer’s (i) base salary for the year in which the termination or resignation occurs and (ii) the minimum annual bonus target, which was provided for in the prior employment agreements, will only be payable to the extent such officer is not “retirement eligible” as defined in our equity plan retirement policy (or if he is retirement eligible and such termination or resignation occurs after a change of control or within six months of a change of control). If at the time of such termination or resignation (a) such officer is retirement eligible and (b) a change of control has not occurred, then such officer would not receive this severance amount and would instead be eligible to receive the entitlements provided under our equity plan retirement policy. All other material terms of the employment agreements remained the same.
The Amendment with Mr. Stoops and the amended and restated employment agreements with Messrs. Cavanagh, Hunt and Bagwell are filed with this annual report as Exhibits 10.35J, 10.85F, 10.58G and 10.57G, respectively.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Code of Ethics is located on our internet web site at www.sbasite.com under “Investors - Governance - Governance Documents.” We intend to provide disclosure of any amendments or waivers of our Code of Ethics on our website within 4 business days following the date of the amendment or waiver.
The remaining items required by Part III, Item 10 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2022 Annual Meeting of Shareholders to be filed on or before April 30, 2022.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The items required by Part III, Item 11 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2022 Annual Meeting of Shareholders to be filed on or before April 30, 2022.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The items required by Part III, Item 12, other than the information regarding the Registrant’s equity plans set forth below required by Item 201(d) of Regulation S-K, are incorporated herein by reference from the Registrant’s Proxy Statement for its 2022 Annual Meeting of Shareholders to be filed on or before April 30, 2022.
Equity Compensation Plan
The following table summarizes information with respect to the Registrant’s compensation plans under which the Registrant’s equity securities are authorized for issuance as of December 31, 2021:
Equity Compensation Plan Information
As of December 31, 2021
(in thousands, except exercise price)
Number of Securities
Number of Securities
Weighted Average
Remaining Available for
to be Issued
Exercise Price
Future Issuance Under
Upon Exercise of
of Outstanding
Equity Compensation Plans
Outstanding Options,
Options, Warrants
(Excluding Securities
Warrants and Rights
and Rights
Reflected in first column (a))
(a)
(b)
(c)
Equity compensation plans approved by
security holders
2010 Plan
2,183
(1)
$
137.22
-
2020 Plan
(2)
-
2,776
Equity compensation plans not approved by
security holders
-
-
Total
2,440
$
122.78
2,776
(1)Included in the number of securities in column (a) is 140,992 restricted stock units and 143,072 performance-based restricted stock units, which have no exercise price. The weighted average exercise price of outstanding options, warrants, and rights (excluding restricted stock units) is $157.76.
(2)Included in the number of securities in column (a) is 102,262 restricted stock units and 154,528 performance-based restricted stock units, which have no exercise price. There were no other outstanding options, warrants, or rights under the 2020 Plan.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The items required by Part III, Item 13 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2022 Annual Meeting of Shareholders to be filed on or before April 30, 2022.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The items required by Part III, Item 14 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2022 Annual Meeting of Shareholders to be filed on or before April 30, 2022.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report:
(1) Financial Statements
See Item 8 for Financial Statements included with this Annual Report on Form 10-K.
(1)Financial Statement Schedules
Schedule III-Schedule of Real Estate and Accumulated Depreciation (see below)
All other schedules are omitted because they are not applicable or because the required information is contained in the financial statements or notes thereto included in this Form 10-K.
Schedule III-Schedule of Real Estate and Accumulated Depreciation
Gross
Accumulated
Life on Which
Cost
Amount
Depreciation/
Depreciation
Capitalized
Carried
Amortization
in Latest
Initial
Subsequent
at Close
at Close
Income
Cost to
to
of Current
of Current
Date of
Date
Statement is
Description
Encumbrances
Company
Acquisition
Period
Period
Construction
Acquired
Computed
(in thousands)
34,177 sites
(1)
$
9,396,000
(2)
(3)
(3)
$
7,068,208
(4)(5)
$
(3,644,238)
(5)
Various
Various
Up to 70 years
(5)
(1)No single site exceeds 5% of the aggregate gross amounts at which the assets were carried at the close of the period set forth in the table above.
(2)As of December 31, 2021, certain assets secure debt of $9.4 billion.
(3)The Company has omitted this information, as it would be impracticable to compile such information on a site-by-site basis.
(4)Does not include those sites under construction.
(5)Amounts include the acquisition of the exclusive right to lease and operate 713 utility transmission structures, which included existing wireless tenant licenses from PG&E.
(in thousands)
Gross amount at beginning
$
5,963,048
$
5,833,338
$
5,561,005
Additions during period:
Acquisitions (1)
995,063
80,582
111,734
Construction and related costs on new builds
45,802
40,493
48,975
Augmentation and tower upgrades
32,953
36,211
63,998
Land buyouts and other assets
24,944
28,918
39,298
Tower maintenance
34,611
28,426
28,960
Other (2)
20,052
19,142
-
Total additions
1,153,425
233,772
292,965
Deductions during period:
Cost of real estate sold or disposed
(192)
-
(856)
Impairment
(15,552)
(17,064)
(9,587)
Other (3)
(32,521)
(86,998)
(10,189)
Total deductions
(48,265)
(104,062)
(20,632)
Balance at end
$
7,068,208
$
5,963,048
$
5,833,338
(1)Inclusive of changes between the final purchase price allocation and the preliminary purchase price allocations. In addition, amounts as of December 31, 2021 include the acquisition of the exclusive right to lease and operate 713 utility transmission structures, which included existing wireless tenant licenses from PG&E.
(2)Represents changes to the Company’s asset retirement obligations.
(3)Primarily represents cumulative translation adjustments related to changes in foreign currency exchange rates.
(in thousands)
Gross amount of accumulated depreciation at beginning
$
(3,383,370)
$
(3,133,061)
$
(2,868,507)
Additions during period:
Depreciation (1)
(273,655)
(275,947)
(269,606)
Other (2)
(91)
(38)
(83)
Total additions
(273,746)
(275,985)
(269,689)
Deductions during period:
Amount of accumulated depreciation for assets sold or disposed
3,638
4,244
2,887
Other (2)
9,240
21,432
2,248
Total deductions
12,878
25,676
5,135
Balance at end
$
(3,644,238)
$
(3,383,370)
$
(3,133,061)
(1)Amounts as of December 31, 2021 include accumulated depreciation related to the acquisition of the exclusive right to lease and operate 713 utility transmission structures, which included existing wireless tenant licenses from PG&E.
(2)Primarily represents cumulative translation adjustments related to changes in foreign currency exchange rates.
(3) Exhibits
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
Period Covered or Date of Filing
3.1
Amended and Restated Articles of Incorporation of SBA Communications Corporation, effective as of January 13, 2017.
8-K
01/17/17
3.2
Articles of Merger, effective as of January 13, 2017.
8-K
01/17/17
3.3
Second Amended and Restated Bylaws of SBA Communications Corporation, effective as of January 14, 2017.
8-K
01/18/17
4.1
Description of Capital Stock
8-K
01/17/17
4.30
Indenture dated as of February 4, 2020, between SBA Communications Corporation and U.S. Bank National Association
8-K
02/07/20
4.30A
Supplemental Indenture dated as of May 26, 2020, between SBA Communications Corporation and U.S. Bank National Association to the Indenture, dated as of February 4, 2020, between SBA Communications Corporation and U.S. Bank National Association.
8-K
05/28/20
4.31
Form of 3.875% Senior Notes due 2027 (included in Exhibit 4.30)
8-K
02/07/20
4.32
Indenture dated as of January 29, 2021, between SBA Communications Corporation and U.S. Bank National Association.
8-K
01/29/21
4.33
Form of 3.125% Senior Notes due 2029 (included in Exhibit 4.32).
8-K
01/29/21
10.1
SBA Communications Corporation Registration Rights Agreement dated as of March 5, 1997, among the Company, Steven E. Bernstein, Ronald G. Bizick, II and Robert Grobstein.
S-4
‎(333-50219)
04/15/98
10.2
Purchase Agreement, dated January 14, 2021, among SBA Communications Corporation and J.P. Morgan Securities LLC, as representative of the several initial purchasers listed on Schedule I thereto.
8-K
01/29/21
10.3
Registration Rights Agreement, dated January 29, 2021, between SBA Communications Corporation and J.P. Morgan Securities LLC, as representative of the several initial purchasers listed on Schedule I thereto.
8-K
01/29/21
10.4
Purchase Agreement, dated April 29, 2021, among SBA Senior Finance, LLC, Deutsche Bank Trust Company Americas, as trustee, and the several initial purchasers listed on Schedule I thereto.
8-K
05/03/21
10.5
Purchase Agreement, dated October 8, 2021, among SBA Senior Finance, LLC, Deutsche Bank Trust Company Americas, as trustee, and the several initial purchasers listed on Schedule I thereto.
8-K
10/13/21
10.7B
2018 Refinancing Amendment, dated as of April 11, 2018, among SBA Senior Finance II LLC, as borrower, the banks and other financial institutions or entities party hereto as refinancing revolving lenders, continuing term lenders, additional term lenders or incremental amended term lenders and Toronto Dominion (Texas) LLC, as administrative agent and issuing lender.
8-K
04/11/18
10.7C
2021 Refinancing Amendment, dated as of July 7, 2021, among SBA Senior Finance II LLC, as borrower, the banks and other financial institutions or entities party hereto as refinancing revolving lenders, continuing term lenders, additional term lenders or incremental amended term lenders and Toronto Dominion (Texas) LLC, as administrative agent and issuing lender.
8-K
07/09/21
10.8
Second Amended and Restated Guarantee and Collateral Agreement, dated as of February 7, 2014, among SBA Communications Corporation, SBA Telecommunications, LLC, SBA Senior Finance, LLC, SBA Senior Finance II LLC and certain of its subsidiaries, as identified in the Second Amended and Restated Guarantee and Collateral Agreement, in favor of Toronto Dominion (Texas) LLC, as administrative agent.
8-K
02/13/14
10.12
Second Amended and Restated Loan and Security Agreement, dated as of October 15, 2014, among SBA Properties, LLC, SBA Sites, LLC, SBA Structures, LLC, SBA Infrastructure, LLC, SBA Monarch Towers III, LLC, SBA 2012 TC Assets PR, LLC, SBA 2012 TC Assets, LLC, SBA Towers IV, LLC, SBA Monarch Towers I, LLC, SBA Towers USVI, Inc., SBA GC Towers, LLC, SBA Towers VII, LLC and any Additional Borrower or Borrowers that may become a party thereto and Midland Loan Services, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee.
10-Q
Quarter ended September 30, 2014
10.12A
First Loan and Security Agreement Supplement and Amendment, dated as of October 14, 2015, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee.
8-K
10/20/15
10.12B
Second Loan and Security Agreement Supplement, dated as of July 7, 2016, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee.
8-K
07/08/16
10.12C
Third Loan and Security Agreement Supplement and Amendment, dated as of April 17, 2017, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee.
8-K
04/21/17
10.12D
Fourth Loan and Security Agreement Supplement, dated as of March 9, 2018, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee.
8-K
03/15/18
10.12E
Fifth Loan and Security Agreement Supplement, dated as of September 13, 2019, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee.
8-K
09/13/19
10.12F
Sixth Loan and Security Agreement Supplement, dated as of July 14, 2020, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee.
8-K
07/20/20
10.12G
Seventh Loan and Security Agreement Supplement, dated as of May 14, 2021, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee
8-K
05/18/21
10.12H
Eighth Loan and Security Agreement Supplement, dated as of September 10, 2021, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee
10.12I
Ninth Loan and Security Agreement Supplement, dated as of October 27, 2021, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee
8-K
10/29/21
10.35I
Employment Agreement, dated August 3, 2020, between SBA Communications Corporation and Jeffrey A. Stoops.†
10-Q
Quarter ended September 30, 2020
10.35J
Amendment to Employment Agreement, dated December 22, 2021, between SBA Communications Corporation and Jeffrey A. Stoops.†
10.50
Management Agreement, dated as of November 18, 2005, by and among SBA Properties, Inc., SBA Network Management, Inc. and SBA Senior Finance, Inc.
10-K
Year ended December 31, 2005
10.50A
Joinder and Amendment to Management Agreement, dated November 6, 2006, by and among SBA Properties, Inc., SBA Towers, Inc., SBA Puerto Rico, Inc., SBA Sites, Inc., SBA Towers USVI, Inc., and SBA Structures, Inc., and SBA Network Management, Inc., and SBA Senior Finance, Inc.
10-K
Year ended December 31, 2016
10.57G
Amended and Restated Employment Agreement, dated as of October 1, 2021, between SBA Communications Corporation and Kurt Bagwell.†
10.58G
Amended and Restated Employment Agreement, dated as of October 1, 2021, between SBA Communications Corporation and Thomas P. Hunt.†
10.75B
SBA Communications Corporation 2018 Employee Stock Purchase Plan.†
S-8
(333-225139)
05/23/18
10.76
Form of Indemnification Agreement dated January 15, 2009 between SBA Communications Corporation and its directors and certain officers.
10-K
Year ended December 31, 2008
10.85F
Amended and Restated Employment Agreement, dated as of October 1, 2021, between SBA Communications Corporation and Brendan T. Cavanagh.†
10.89A
SBA Communications Corporation 2010 Performance and Equity Incentive Plan, as amended and restated.†
10-Q
Quarter ended June 30, 2017
10.90
SBA Communications Corporation 2020 Performance and Equity Incentive Plan.†
10-Q
Quarter ended June 30, 2020
10.91
Form of Incentive Stock Option Agreement (U.S. and non-U.S. employees and officers) pursuant to SBA Communications Corporation 2010 Performance and Equity Incentive Plan, as amended and restated.†
10-Q
Quarter ended September 30, 2018
10.92
Form of Restricted Stock Unit Agreement (U.S. and non-U.S. employees and officers) pursuant to SBA Communications Corporation 2010 Performance and Equity Incentive Plan, as amended and restated.†
10-Q
Quarter ended September 30, 2018
10.95
Purchase Agreement, dated January 21, 2020, between SBA Communications Corporation and Citigroup Global Markets Inc., as representative of the several initial purchasers listed on Schedule I thereto.
8-K
02/07/20
10.96
Form of Restricted Stock Unit Agreement (Time and Performance Based) pursuant to SBA Communications Corporation 2010 Performance and Equity Incentive Plan.†
10-Q
Quarter ended March 31, 2020
Subsidiaries.*
23.1
Consent of Ernst & Young LLP.*
31.1
Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
32.2
Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
101.INS
XBRL Instance Document.*
101.SCH
XBRL Taxonomy Extension Schema Document.*
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.*
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.*
Cover Page Interactive File (formatted in Inline XBRL and contained in Exhibit 101).*
______________
† Management contract or compensatory plan or arrangement.
* Filed herewith.
** Furnished herewith.