American Tower Corp

NYSE:AMT

Earnings Call Analysis

Steady Growth and Strong Balance Sheet in 2023

The company ended 2023 on a high note, with property revenue, adjusted EBITDA, and attributable AFFO per share exceeding expectations due to a 6% organic tenant billings growth, led by a 300 basis point acceleration from the previous year. Its U.S. and international segments saw record growth, with CoreSite delivering significant new business, particularly in AI. Cost management and operational leverage contributed to an increase in cash adjusted EBITDA margin by approximately 170 basis points to 62.3%. The balance sheet was fortified by reducing floating rate debt and extending debt maturities. Looking ahead, they anticipate property revenue growth of over 1% year-over-year and around 3% on an FX-neutral basis for 2024. However, they forecast a negation of certain benefits upon the sale of their India business, resulting in a reduction in outlook midpoints and AFFO per share, while approaching a conservative stance on revenue reserves.

American Tower Exceeds Prior Outlook in 2023 with Strong Demand and Smart Asset Management

American Tower Corporation (AMT) showcased remarkable performance in 2023, surpassing its initial guidance with organic tenant billings growth accelerating 300 basis points compared to 2022, achieving over 6% growth. This was bolstered by record levels of colocation and amendment growth in its U.S. and Canada as well as international segments, plus significant new business signings at CoreSite in digital transformation areas, notably AI use cases. Cost management efforts and the operational advantages of the tower model resulted in meaningful margin expansion, while balance sheet improvements via deleveraging and strategic debt refinancing reduced the exposure to floating rate debt from 22% to under 11%. Additionally, the strategic divestitures including the sale of ATC India to Brookfield, alongside exits from the Mexico fiber and Poland businesses, have refined the global portfolio mix, enhancing the growth outlook and risk profile for sustained earnings growth.

2023 Financial Highlights and Commitment to High-Quality Portfolio

The company's growth trajectory was formidable, with property revenue increasing over 5% (nearly 7% FX-neutral) and tenant billings up by 7.2%. The construction of nearly 3,200 new towers underscored international expansion, and organic tenant billings rose by 6.3%, fueled by robust activity in the United States, Canada, and international platforms. The company's ability to reverse revenue reserves in India further augmented financial outcomes, paralleled by substantial contributions from the data center segment. Moving ahead, AMT is intent on optimizing organic growth across its assets and managing costs to drive profitability while keeping capital intensity and dividend payouts steady. The adjusted EBITDA and AFFO metrics saw notable increases, too, absorbing various financial impacts including financing costs and currency fluctuations, as the company navigates the year with a clear vision to enhance financial flexibility.

Outlook for 2024 Extending Growth Momentum

Americann Tower's outlook for 2024 hinges on organic tenant billings growth of approximately 4.7% in the U.S. and Canada, with international growth also contributing positively. The company eyes increased revenue and a consistent dividend, with strategic capital allocations towards development, particularly in existing CoreSite data center campuses and international new builds. Despite a challenging environment, attributed AFFO per share is projected to grow by 5% ($10.33 per share) on a background of increased cash adjusted EBITDA, tempered by rising financing costs, and cash taxes. AMT will maintain a focus on organic growth and quality earnings while prioritizing balance sheet strength and capital investments aimed at sustainable growth and robust returns.

Reinforcing the Balance Sheet and Focusing on Strategic Growth

The balance sheet is expressing strong resilience as the company looks to reach the upper end of a 3 to 5x net leverage range by the end of 2024. AMT remains dedicated to sustaining its investment-grade credit rating and enhancing its financial flexibility through disciplined growth, cost optimization, and strategic adjustments to its portfolio when needed. Looking further into 2024, these steps underscore the company's resolve to strengthen its leadership in global communications infrastructure, leverage growth opportunities, adapt to market challenges, and deliver attractive shareholder returns.

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower Fourth Quarter and Full Year 2023 Earnings Conference Call. As a reminder this conference is being recorded. [Operator Instructions] I would now like to turn the call over to your host, Adam Smith, Senior Vice President of Investor Relations. Please go ahead, sir.

[Adam Smith, executive]

Good morning, and thank you for joining American Tower's Fourth Quarter and Full Year 2023 Earnings Conference Call. We have posted a presentation, which we will refer to throughout our prepared remarks under the Investor Relations tab of our website, www.americantower.com.

I'm joined on the call today by Steve Vondran, our President and CEO; and and Rod Smith, our Executive Vice President, CFO and Treasurer. Following our prepared remarks, we will open up the call for your questions.

Before we begin, I'll remind you that our comments will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding future growth, including our 2024 outlook, capital allocation and future operating performance. Our expectations for the closing of the sale of our India business and the expected impacts of such sale on our business, our collections expectations in India and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements.

Such factors include the risk factors set forth in this morning's earnings press release, those that will be set forth in our upcoming Form 10-K for the year ended December 31, 2023, and in other filings we make with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances.

With that, I'll turn the call over to Steve.

[Steven Vondran, executive]

Thanks, Adam, and thanks to everyone for joining the call today. I'd like to start by saying it's an honor and a privilege to step into the role of CEO at American Tower. I want to thank Tom Bartlett for his leadership over the last 15 years of the company and congratulate him on an exceptional career.

I certainly recognize I have big shoes to fill and to all of our stakeholders, I look forward to continuing to build on the tremendous success we've achieved together to date. In recent weeks, I've been telling many of our employees, customers and investors that I'm more excited today by the opportunity ahead that I've been in my 20-plus years with the company. There are 2 key reasons for that.

First, we're still in the early stages of a mobility and computing-driven technology wave that suggests distributed digital infrastructure is going to be a higher demand for the foreseeable future. Second, we spent the last 2 decades developing a leading global portfolio with real estate, power and interconnection platforms that will serve as the core backbone of this wave.

I believe we're now positioned to harvest the benefits of the scaled, differentiated tower and data center platforms we've built to provide unique value for our customers and best-in-class growth, profitability and returns for our investors. To deliver on that opportunity, we're going to be zeroing in on a few key areas in 2024 and beyond. To begin, we're committed to operating the highest quality portfolio. This means owning and investing in assets in the most attractive geographies where secular demand trends signal the potential for long-term sustained growth. Equally it is important -- it means securing business with market leaders, maintaining contract structures that maximize organic growth and minimize downside risks as well as attracting and securing accretive development opportunities afforded by our in-market scale and leading operational capabilities.

We saw the clear benefits of these factors play out in 2023. In our ACO U.S. and Canada Tower business, the 5G investment cycle and contributions from our comprehensive MLAs drove a record of roughly $230 million in colocation and amendment growth. International performance was also driven by record organic new business growth contribution and further supported by critical CPI-linked escalator terms and growth from our build-to-suit and power as a service programs.

Furthermore, our differentiated CoreSite interconnection business saw second consecutive year of record signed new business. Going forward, we're going to continue our focus on maximizing organic growth across our existing assets and complement that incremental revenue generation through select development opportunities. At the same time, we'll continue to actively assess and challenge our prior capital allocation decisions to ensure the opportunity we see ahead across our global footprint is still supportive of our original underwriting thesis and apply what we've learned over the last 2 decades to our deployment plans going forward.

Ultimately, we're focused on operating a portfolio that provides the proper mix of risk exposure and can deliver high-quality, sustained top line growth supported by an operating structure that drives outsized rates of conversion to profitability and commands a premium in the market. That's a good segue into the next area of focus, which is delivering the most efficient global operating model centered around cost discipline, margin expansion and increasing returns on invested capital.

Our global regional scale and long operating track record present an opportunity to further improve on the operating leverage inherent in the neutral host infrastructure model. We're accelerating initiatives in our regional operations to bring down direct cost per site, we're also investing in experimentation and implementation of AI applications and other technologies that create a more cost and time-efficient equipment deployment cycle bring greater precision and lower cost to our maintenance operations and improved yields on renewable energy generation, just to make a few examples.

What it cost our overhead costs, as you'll see in our 2024 guidance, we're targeting a reduction in SG&A, which, combined with healthy top line growth is supporting an 80 basis point reduction in cash SG&A as a percentage of property revenue and approximately 200 basis point expansion in cash adjusted EBITDA margin since 2022.

Continued improvement to our cost structure and driving profitability is going to be a cornerstone in our both algorithm going forward. Next, and as we've highlighted on past calls, we're working today to further reinforce our balance sheet as a strategic asset. Our investment-grade credit rating is at the core of our strategy, and that's not going to change. In fact, I believe market access and cost of capital advantages may be of even more strategic importance in this cycle than they were over the last decade. As Rob will elaborate on further, we made substantial progress towards strengthening the balance sheet in 2023. And as we look to 2024 and beyond, our capital allocation program is going to prioritize resiliency and flexibility in this evolving economic environment.

Together with other strategic initiatives like reducing our overall capital intensity of executing on cost savings across the business, we'll hold the dividend relatively flat in 2024, subject to board approval. In turn, we'll prioritize a reduction to our gross debt balance and accelerate the pathway to achieving our net leverage target and enhance financial flexibility. As we've highlighted in the past, while M&A is not a priority today, as a company, we want to be in a position of strength when and have strategically relevant portfolios that meet our investment criteria do come to the market.

In our internal CapEx program, we'll continue investing to expand our existing tower and data center platforms by selecting the opportunities with the highest risk-adjusted rates of return. At American Tower, we've developed a unique ability to allocate capital between our U.S. and international tower businesses as well as our U.S.-based CoreSite platform. We see this as a distinct competitive advantage. While we continue to view the tower business as the best model out there, the flexibility we're building into our CapEx program and the robust cash flow assets generate allow us to be nimble and responsive to market conditions as we make capital allocation decisions over time, which in the near term means growing our exposure to developed markets. In our outlook for 2024, a larger share of our development capital is going toward the U.S. and Europe including expanding within our CoreSite footprint, where the same demand trends that have resulted in 2 consecutive years of record new leasing are expected to drive stabilized returns in the mid-teens for ongoing development projects.

We're balancing out the expectation to build around 3,000 new tower sites, primarily in our international markets. This does represent a decline in volumes compared to 2022 and 2023, particularly as we assess certain risks in our emerging market footprint, including the FX volatility we've seen recently in Africa. However, I want to reiterate that we continue to see partnering with market leaders to grow our tower portfolio globally as a key component of our long-term growth algorithm.

Simply put, the changes in the global macroeconomic environment we've seen over the last 24 months and our balance sheet priorities, have raised the bar when it comes to required returns. And you're seeing discipline and flexibility reflected in the capital allocation expectations that we're rolling out for 2024.

Finally, and foundational to our strategy are the people throughout the global business. Everything I've talked about today, hinge is of the dedication and performance of our teams across the globe and the impact we can make for our customers, investors and the communities we serve. I've been so impressed by the teams I've met with and heard from over recent weeks, and we're going to continue strengthening our organization around the world and focus on developing, attracting and rewarding the best talent in the industry.

In closing, I want to reiterate my comments from the outset. I believe there's tremendous opportunity ahead for American Tower. Evolving technology trends continue to drive demand for more ubiquitous, dense, low latency distributed networks. Against those trends, we're going to leverage our leading tower and data center platforms, balance sheet strength, capital allocation discipline and the dedicated teams that are supporting our global business to present a truly differentiated value proposition and compelling growth and return opportunities for shareholders.

With that, I'll hand the call over to Rod to discuss our 2023 results and 2024 outlook.

[Rodney Smith, executive]

Thanks, Steve. Good morning, and thank you for joining today's call. Before I dive into our 2023 financial results and our expectations for 2024, I will highlight a few key achievements from the past year. First, we closed a successful 2023 with a strong fourth quarter, exceeding our prior outlook midpoints across property revenue, adjusted EBITDA and attributable AFFO per share with full year 2023 results comfortably beating our initial guidance from a year ago. For the year, performance was anchored by continued demand for our diverse global asset portfolio resulting in over 6% consolidated organic tenant billings growth, an acceleration of over 300 basis points as compared to 2022.

With our U.S. and Canada and international segments each delivering record colocation and amendment growth of roughly $230 million in nearly $150 million, respectively. Additionally, we marked another record year of signed new business for CoreSite, supporting digital transformation across diverse workloads in emerging technologies, including more recently, AI use cases.

Furthermore, our focus on cost management, combined with the inherent operating leverage in the tower model and certain onetime benefits resulted in attractive year-over-year cash adjusted EBITDA margin expansion, which I'll touch on in a moment.

Second, we continue to strengthen our balance sheet through organic deleveraging and the successful issuance of approximately $7 billion in fixed rate debt. As a result of our 2023 actions, we've extended our average maturity and reduced our exposure to floating rate debt to less than 11% of the total debt stack, down from over 22% at the start of the year. Closing the fourth quarter with net leverage of 5.2x, we are on track to meet the upper end of our 3 to 5x net leverage goal by the end of 2024.

Finally, we concluded the strategic review of our India business earlier this year. reaching a definitive agreement to sell 100% of ATC India to Brookfield, which we will refer to as the India sale. We believe this transaction together with the Mexico fiber and Poland divestitures in 2023 enhances our global portfolio mix and risk profile and positions American Tower for sustained high-quality earnings growth over the long term.

Now let's discuss the details of our full year 2023 results. Turning to Slide 6. Full year consolidated property revenue growth was over 5% and nearly 7% on an FX-neutral basis, tenant billings growth was 7.2% with organic tenant billings growth of 6.3%, complemented by the construction of nearly 3,200 new builds, primarily in our international markets. In the United States and Canada, property revenue growth was over 4%, with organic tenant billings growth of 5.3% or 6.6% excluding Sprint churn. Our international property revenue grew by over 5%, including organic tenant billings growth of 7.7%, with each segment meeting or exceeding our prior outlook.

Additionally, in the fourth quarter, we were able to reverse approximately $38 million of prior revenue reserves associated with customer collections in India, contributing to outperformance versus our prior outlook, closing the year with a net revenue reserve associated with customer collections in India of approximately $28 million.

Finally, our data center segment contributed approximately $835 million to our total property revenue in 2023, representing year-over-year growth of nearly 9%, and as I mentioned earlier, delivering another record year of signed new business.

Moving on. Adjusted EBITDA grew nearly 7% or around 7.5% on an FX-neutral basis to over $7 billion. On a consolidated basis, cash adjusted EBITDA margins improved approximately 170 basis points year-over-year to 62.3%, primarily driven by strong organic growth and certain onetime benefits combined with a keen focus on cost management throughout the business, with cash, SG&A as a percent of total property revenue down over 30 basis points year-over-year to approximately 7%.

Moving to the right side of the slide, attributable AFFO and attributable AFFO per share grew by over 2% and 1%, respectively. Growth on a per share basis absorbed negative impacts of approximately 7% in financing costs and another 1% from FX. Now before I discuss the details of our outlook for 2024, I will start by summarizing a few key highlights and assumptions. First, and as Steve mentioned, we are committed to owning and operating the highest quality portfolio supported by a strong balance sheet.

With that commitment in mind, we are focused on continuing to drive compelling organic growth across our diverse portfolio of assets, while maximizing the conversion of top line growth to profitability by taking costs out of the business. Together with reducing our aggregate capital intensity for the second year in a row and maintaining a relatively flat dividend payout in 2024 as compared to 2023, subject to Board approval, we believe these collective actions will maximize recurring cash flow growth, further strengthen our balance sheet, and as a result, accelerate our pathway to financial flexibility and optionality. We'll get into more detail shortly.

Next, we are assuming a full year contribution of the India business in our outlook, representing over $1.16 billion in property revenue $360 million of adjusted EBITDA and $285 million for unlevered AFFO attributable to AMT common stockholders. Upon closing of the India sale, which we anticipate occurring during the second half of 2024, subject to customary conditions and regulatory approval.

We will then revise our outlook assumptions to incorporate the transaction. For added transparency, we have included Slide 20 in this earnings presentation, which shows the India contributions to our outlook by quarter, assuming a potential closing on October 1, 2024, for your reference, we would anticipate a reduction of $295 million and $95 million to our presented outlook midpoints for property revenue and adjusted EBITDA, respectively.

Furthermore, we would estimate an approximately $0.09 reduction to attributable AFFO per share, which assumes anticipated proceeds at closing are used to pay down existing indebtedness. Also within the India segment, we have included approximately $65 million in incremental revenue reserves for the full year, translating to a reduction of $0.14 to attributable AFFO per share. Although we are encouraged by the positive collection results realized in the second half of 2023, we believe it's prudent to take a conservative view at this point in time.

Additionally, we've assumed the forward rate curve to support our 2024 interest rate assumptions, including the cost of our floating rate debt and assumptions for refinancing our 2024 senior note maturities. Lastly, on the FX side, our outlook reflects estimated negative translational impact of $191 million on property revenue, 132 million for adjusted EBITDA and $82 million for attributable AFFO as compared to 2023.

With that, let's dive into the numbers. Moving to the details on Slide 7. At the midpoint of our outlook, we expect total property revenue of over $11.1 billion, representing an increase year-over-year of greater than 1% and 3% on an FX-neutral basis. Our guide includes cash revenue growth of around $200 million in the U.S. and Canada segment and $225 million of FX neutral growth in our international regions, excluding pass-through.

We also expect data centers to contribute roughly $80 million of growth in cash revenue in 2024, demonstrating nearly 10% growth year-over-year, excluding the impacts of straight line. Property revenue also includes an approximately $203 million step-down in noncash straight line revenue or approximately 2% headwind to growth partially offset by approximately $28 million increase in pass-through.

Lastly, as I mentioned in my earlier remarks, we anticipate an FX headwind of nearly 2% or $191 million to consolidated property revenue growth. Turning to Slide 8. We expect another solid year of organic growth contributions from our U.S. and Canada and International segments. In the U.S. and Canada, we anticipate organic tenant billings growth of approximately 4.7% or 6%, excluding Sprint churn. This expectation includes another healthy year of colocation and amendment growth contributions of $180 million to $190 million, reflecting the expected step down from our record level achievement in 2023 though still approximately 20% higher than our 2016 to 2022 average.

Internationally, starting with Africa, we expect a strong momentum from 2023 to continue with expected organic tenant billings growth of 11% to 12%. This includes colocation and amendment contributions of approximately 7%, along with escalator growth of 8% to 9%, partially offset by churn of around 4%, which would represent a notable year-over-year improvement after incurring the largest impacts from carrier consolidation in 2023.

Turning to Europe. 2024 organic tenant billings growth is expected to be 5% to 6%. On the colocation and amendment front, we anticipate growth of 3% to 4%, an acceleration as compared to 2023, while growth from escalators stand at roughly 3%, consistent with 2023, churn is expected to remain low at around 1%. In Latin America, consistent with our previous messaging, we expect organic tenant billings growth to step down as compared to 2023 to approximately 2% for the year as churn will remain elevated at around 5%, primarily due to [ oil ] in Brazil. Churn is offset by relatively consistent colocation and amendment activity of approximately 3% and contributions from escalators of approximately 4%.

Finally, in Asia Pacific we are guiding to approximately 2% organic tenant billings growth in 2024, including colocation and amendment growth of approximately 3.5%, roughly 2.5% from escalators and churn of around 4%. Moving on to Slide 9. At the midpoint of our outlook, we expect adjusted EBITDA growth of less than 1% and approximately 2.5% on an FX-neutral basis, while absorbing a negative impact of over 3% associated with net straight line. Complementing the strong revenue growth trends I mentioned earlier, we're planning to reduce cash SG&A by approximately $30 million as compared to 2023, contributing to cash adjusted EBITDA margin expansion of around 30 basis points.

Additionally, our outlook includes an expectation for approximately $17 million in year-over-year gross margin growth from our U.S. services business with the quarterly cadence, suggesting a ramp-up in carrier activity in the second half of the year. Turning to Slide 10. We expect attributable AFFO per share to grow approximately 5% year-over-year to $10.33 and approximately 6.5% on an FX-neutral basis. Growth in cash adjusted EBITDA and a reduction in maintenance CapEx is partially offset by an increase in financing costs and cash taxes, together with higher minority interest adjustments due to growth in our European and data center JVs.

Moving on to Slide 11. I'll review our capital plans for 2024 and our balance sheet priorities for the upcoming year. In 2024, we will continue to focus on organic growth, quality of earnings and operational efficiency, while prioritizing balance sheet strength, reducing risk and channel and discretionary spending into capital projects that support sustainable earnings growth and yield the most attractive risk-adjusted returns. Consistent with the messaging on our third quarter 2023 earnings call, the 2024 plan assumes maintaining an annual common dividend distribution of approximately $3 billion, representing a modest increase on an annual per share basis to $6.48 per share.

We also expect to evenly distribute the dividend across each quarter of the year, which would suggest a onetime sequential step down from our fourth quarter 2023 declared dividend of $1.70 to $1.62 in the first quarter of 2024, all subject to Board approval. In addition, we expect to deploy around $1.6 billion in CapEx, of which 90% will be discretionary. As Steve highlighted in his remarks, we view the flexibility of our CapEx deployments with options across a range of geographies and assets to be a distinct competitive advantage for American Tower and our ability to drive sustained attractive returns for our shareholders. In 2024, this means increasing our CapEx allocation and exposure towards our developed markets. This includes increasing development spend for existing CoreSite data center campuses to $450 million as we seek to replenish the record capacity sold in 2022 and 2023, and maintain appropriate levels of sellable capacity, while continuing to drive attractive targeted stabilized yields in the mid-teens.

The balance of the development CapEx spend will support another year of solid new build volumes internationally, which assumes the construction of 3,000 sites at the midpoint. Moving to the right side of the slide, and as I mentioned earlier, we made significant progress towards strengthening our balance sheet in 2023 through recurring business growth, augmented with cost discipline and combined with the strategic management of our capital allocation plans, we anticipate meeting the upper end of our 3 to 5x net leverage range by year-end. Our steadfast commitment to maintaining investment-grade credit rating and enhancing our balance sheet strength and financial flexibility remains unchanged.

Turning to Slide 12 and in summary, our global business continued to demonstrate solid core growth and resiliency in 2023, augmented by strategic initiatives aimed at enhancing our quality of earnings, driving operational efficiency and strengthening our already strong balance sheet. We believe successful execution of these initiatives provides a strong foundation for 2024 and enhances our position as a leader in the global communications infrastructure industry.

Looking ahead, we are well positioned to capitalize on opportunities, adapt to challenges and deliver compelling risk-adjusted returns to our shareholders for years to come.

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

[Operator]

[Operator Instructions] Your first question comes from the line of Simon Flannery from Morgan Stanley.

[Simon Flannery, analyst]

Great. And Steve, congrats on the new role and the very best for that. I appreciate the initial comments on your priorities. I wanted to come back to this highest quality portfolio point that you were making. Is there some sort of review process where you're sort of formally going through each of the markets and just looking at what fits and what doesn't and what you want to do about that? Or is it more kind of investing more in these developed markets? Any color around that? And I'm thinking about markets like Nigeria, where we've obviously had a challenging FX environment here. How do you think about some of those more challenged markets in the near and medium term. And then you mentioned data center several times in your comments, I know that Rod noted the CapEx was going up here. How are you thinking beyond the existing campuses either domestically or internationally, certainly, a huge opportunity in that business? And again, a business where scale really matters?

[Steven Vondran, executive]

Sure. Well, thanks, Simon. Thanks for the good wishes there. I'll take that in a couple of pieces here. So I'll start out with what do we mean by the highest quality portfolio. And what we mean by that is we're constantly reassessing all of our portfolios, both domestically and abroad and rechallenging all the decisions we made about capital allocation in the past and say, do they still meet our investment criteria. And if there's a challenge in the business, our first choice is to say what can we do to fix that? How can we get it to meet those criteria. And then the second thing we would look at is ongoing capital allocation and is it a market or a business we want to continue to put capital into.

So when we talk about the best quality portfolio, what we're saying is that we continue to look at that we found our assumptions there, and I did mention in my comments that if you look at a market like Nigeria, the macroeconomic conditions, including some of the FX translation issues have caused us to raise the bar in terms of acquired returns.

So when we talk about that portfolio, we're looking at the market, the asset class, the demand for the assets, the contract structures we have in place, what types of contractual protections we can get for something like an FX devaluation, and we're shaping the portfolio for that.

Now having said that, there's nothing to report beyond what we've already talked about in terms of the strategic review we did in India. We've been very clear that we're going to exit that market. We did exit Poland because it wasn't to scale for us and we did choose to exit Mexico fiber. And we'll continue to look at those other businesses that we have and make assessments on those. But there's nothing I would point to today to say that we're going to make any portfolio changes in the near term.

The second question, I think you asked was how do we think about a market like Nigeria, and we believe that the emerging market portfolio is still an important part of our growth algorithm going forward. And we think that having the appropriate level of risk there to complement our developed market strategy will continue to allow us to elongate our growth curve over time there. We are mindful that there are some near-term challenges that we're seeing there. And you're seeing that play out some of our capital allocation decisions as we're rotating some of our discretionary CapEx for developed markets versus the emerging markets.

You've also seen that play out in recent years with some of the inorganic acquisitions we've done. We did inside in the U.S., CoreSite in the U.S., Telsius in Europe. And those all had the effect of reducing our emerging market exposure, divesting India will reduce our emerging market exposure if we continue to allocate more of our development CapEx to developed markets versus emerging markets, that will also decrease our margin market exposure.

So what you're essentially seeing play out there is us rebalancing our portfolio a little bit in response to the macroeconomic conditions that we're seeing, which we think is the appropriate thing to do in any environment is to look at the portfolio and rebalance it. And so that leads back into that highest quality portfolio. The second question I think you had was around CoreSite and what are we focused on there? Right now, most of our development CapEx is focused on expanding our existing campuses. And if you look at how that business has performed, we've had 2 years of record leasing, and we need to replenish the capacity that we have sold in those campuses. And it's a very good use of our capital. Again, we're looking at stabilized returns in the mid-teens. And if you think about the projects we have in our development, they're more than 40% pre-leased as of the end of the year. And so when you think about that business, pre-leasing is something that wasn't as prevalent in CoreSite pre-acquisition and that pre-leasing really reduces the risk of all that development, and it shortens the time period that it takes to get to those stabilized mid-teens returns.

And so that's why you're seeing us pick up the investment there a bit. We do evaluate some Tier 2 markets in the U.S. You saw us buy a small data center in Miami, and we'll continue to look at whether there are sort of tuck-ins that we might want to do in the U.S. if we have an anchor tenant that's going to give us a good return going into it. And if we think it can turn into a more material campus for us later on. But it's not a huge priority for us. You're not going to see us put a lot of capital into that. And with respect to international expansion in data centers, that's not something we're leaning into at this point. We do have customers that would love for us to have a larger footprint than we do today. And we'll consider those opportunities. But there's nothing that I would point to today to say that we're going to do anything outside the U.S. in the near term?

[Rodney Smith, executive]

Simon, maybe I would complement Steve's comments on Nigeria just briefly here. But just as a reminder, I know you know this, but for others in Nigeria, we also look to protect ourselves in the contract structures that Steve mentioned. So just as a reminder, we've got about $400 million in revenue, property revenue in Nigeria. 40% of that is actually passed through. Much of that is power, which is pegged to U.S. pricing. So we avoid the FX risk on those pass-through numbers.

60% of that $400 million roughly is the is the leasing revenue and 50% of that adjusts annually pegged to the U.S. dollar. So again, that's protected or sheltered from the FX volatility. That leaves about 30% of the revenue in Nigeria that's actually directly exposed to the FX fluctuations. And then with that said, of course, we build the Fisher effect into our models. We look for risk-adjusted rates of returns, although in the short term, FX can be volatile, we do think our underwriting process catches the FX volatility that would be in a market like Nigeria and others over the long term.

[Operator]

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

[Michael Rollins, analyst]

Congrats again, Steve, on the official transition. Two topics for you this morning. First, can you share an update on the domestic leasing environment as to whether or not you're seeing any changes in the activity levels early this year? And can you share some of the data points and development that are contributing to the decision to include improving carrier activity during the second half within your services guidance?

And then just a second topic, what is the road map for the LatAm portfolio to normalize its level of organic growth? How long does it take to get there? And what is that level of organic growth that AMT can return to?

[Steven Vondran, executive]

Thanks, Michael. Thanks for the well wishes there. So I'll start with your first question about the U.S. So we are predicting our guidance for OTBG in the U.S. is approximately 4.7%. And as you know, that's underwritten largely by our comprehensive MLAs that we have with our carriers. So we have a degree of insulation from the variability that you see in the deployment cadence there. We do have 1 of our big 3 carrier MLAs that has rolled off of its comprehensive portion of that MLA.

And so that's gone to a little bit more of an a [indiscernible]. So you'll see that activity spread more through unloaded like it would have been in a comprehensive agreement. What we're seeing from the carriers in the U.S. is we are seeing an uptick in the conversations around activity, we've seen a modest increase in application levels already this year that's off to a pretty low base at the end of last year, but we are seeing some increase in activity.

But before we get the applications, there's a degree of conversation, an inquiry that happens with our carriers. And especially with respect to our services business, we have a lot of conversation around that. And we're engaged on the front end of the process when they're doing their RF design sheets and trying to figure out what they're going to do for the year. And that's what's led us to to believe that there's an uptick in activity, probably back-end loaded, and that's led to our increasing our guidance and our services business for next year.

Now I would point out that if you look at our services guide, it's a little bit lower margin than previously. That's a result of having a little bit more construction services in that guide. And I do want to point out our construction business. That's something that we've not grown aggressively over the past. And when you think about that services business, we don't do that nationwide. We do it in pockets where we have the right resources and can you lean on third-party contractors to do the work. So if there are variabilities in the demand that we see there that we can cut our costs pretty quickly there.

So that's 1 of the things we're seeing reflected in that services margin is a higher mix of construction services. But again, that's targeted by region, by carrier and it's not a huge business for us, but it's 1 that we think adds value to our customers, and it earns us a little bit more business.

[Rodney Smith, executive]

Michael, I'll hit the LatAm question on the organic tenant billings. So let me just kind of recap a little bit where we're at. Our guide for 2024 is about 2% organic tenant billings growth. That comes with a pretty steady co-location and amendment level of activity of around 3%. We also are benefiting from the escalators that are tied to local inflation across the region. That's at about 4%. So you have that gross growth coming in, in the upper single digits, 7%. We do also have 5% churn in for 2024. We've had a couple of churn events that we've worked through in Latin America over the last couple of years. Noticeably in 2023, we worked through the Telefonica churn down in Mexico. I think you're well aware of that. One of the primary drivers of the churn in 2024 is the oil churn in Brazil. So of that 5% churn, almost half of it is the oil churn that we're assuming is going to come through in 2024.

That's about $26 million of billings for [ oil ] that ends up coming off in 2024. So we look at the market there. And yes, we've gone through some consolidation churn. And that churn is really what's been reducing our overall organic tenant billings growth rate. We do expect to get through that churn and return to more normalized growth in the mid to upper mid-single digits but it's probably going to be a few years away before we get through that in the event, not that I want to talk too much about '25 and beyond, but the oil churn will persist for a couple of more years. That's the 1 sort of to watch and to see how it rolls through.

But once we get through that, we do see a good steady level of colocation amendment activity and the way our contracts are written. We do benefit from the escalations tied to inflation. We protect ourselves from some FX volatility as well.

[Operator]

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

[David Barden, analyst]

I guess, two, if I could. First, maybe just Steve, I think the biggest question I'm getting is that what we're hearing from American Tower about maybe a better second half of visibility into higher activity levels into the second half of the year is different than maybe what we heard yesterday from 1 of your peers, which is that the year is going to be more front-end loaded that the back part of the year could be slower than the jumping off point for 2024 and the 2025 might be slower. So could you kind of maybe talk a little bit about your conviction level that the second half activity levels can be higher, maybe some of the differences between some of the MLAs you might have that others don't DISH relationships, et cetera, that would be very helpful, I think, for people to kind of reconcile what we're hearing in the last couple of days.

And then the second question, Rod. Thank you for all the details around India. I think some people, I think, were surprised to see India in the full year guide, and people are trying to back out that 1 quarter in the back part of the year. Slide 20, you have an unlevered number that gets you to around $0.15, $0.16 per share. But in the text, you've got a number that you're pulling out for about $0.09 per share in the fourth quarter. Could you help us understand the difference between the unlevered and the levered numbers that in order to kind of get a level set for what we are really thinking will be the guide for 2024 AFFO per share.

[Steven Vondran, executive]

Okay. I'll start with the first question, and we'll talk about the U.S. growth. So I would just point out that as a result of our comprehensive MLAs that our revenue is decoupled from the levels of activity to some extent. So I think comparing us to someone else's estimations of leasing new business is a little bit tough, just given the fact that we have a level of locked-in activity. And a large part of our rental growth is it's locked in, it's either signed because it was signed last year, it's commencing this year. It's part of our comprehensive MLAs or there's a degree of carryover revenue and the OTBG number carries forward because the trailing 12-month metric there.

The better analog for activity is our services business. And as we've said in the past, it's notoriously hard to predict exactly where you're going to land. A couple of years ago, we had to take guidance up quite a bit. Last year, we brought it down. So what we're providing is our best estimate given the levels of activity we're seeing, but also some of it can be more market-driven. So it may be activity in a particular market versus more ubiquitous activity given that that's how we're performing some of that service has worked.

We do see a general uptick in conversation from our customers that make us believe that there will be an uptick in the second half of the year. But as you think about that activity and the service levels of the service business with that activity, you have to do quite a bit of services work before you actually sign a new lease, if you're driving an ala carte environment. So it could just be timing that we're referencing there. But at the end of the day, our belief is our property revenue growth or rental growth is largely locked in, and we feel confident in the portion that's not locked in, but that will come through in the cadence, we believe.

And on the services side, we believe that we'll see a continuing ramp in that activity and that's what led to the guide on that.

[Rodney Smith, executive]

David, Rod here. Regarding India, just a couple of points there. So you see in Page 20, we give you the breakdown for India, not just for the full year, but also on a quarterly basis so that to really help you figure out kind of what the impact may be up against a variety of closing dates, right? We expect the transaction to close in the second half of 2024. And the process that we're going through is it's being reviewed by the Competition Commission in India. So that's kind of the gating action there. And of course, we reviewed kind of that process with local -- with our local team, with local advisers, lawyers in India based, lawyers in the U.S. and as well as doing the proper diligence around interested parties within India, and we feel pretty good about that approval process.

With all that said, we do expect it to be approved and closed in the second half of the year, but we're not exactly sure what the date would be. So we wanted to give you the quarterly breakdown so that as we progress through the year, you'd have the ability to kind of look at it quarter by quarter. On a full year, we've got property revenue from India at about -- just under $1.2 billion [ adjusted ] EBITDA at about $360 million. And unlevered AFFO at $285 million and again, you can see the way that breaks down per quarter. Essentially, the difference between that unlevered AFFO and what we look at is the potential dilution of $0.30 to $0.40 for the year, maybe $0.09 dilution on a quarterly basis is the assumption that we would take the proceeds from the sale, roughly the $2 billion to $2.5 billion in pay down revolving debt that is in the -- not that I want to give you the guide in terms of our interest rate, but you can kind of know where revolving debt is these days for us up in the 6% range or so, approximately.

You put that -- those proceeds towards paying down that debt, and that's the differential that brings that dilution down into the $0.09 per quarter or between $0.30 and $0.40 for the year. The math is really that simple, David.

[Operator]

Your next question comes from the line of Rick Prentiss from Raymond James.

[Ric Prentiss, analyst]

Steve, I appreciate you giving us your view and the refinement raising the capital allocation by all good details. First question I've got is, Rod, piggybacking on David's question about India. There is obviously some concentration there at Brookfield as far as how many towers they have in the marketplace. Have you heard anything from the competitive commission there about their comfort level or would there be any required divestitures?

[Rodney Smith, executive]

Yes, Rick, thanks for the question. So we're working through the process. I don't want to get into detailed discussions. We certainly haven't talked directly to the Competition Commission, but we've certainly done a fair amount of diligence. We're not sure where that will end up. We're pretty confident, very confident it gets approved. There could be some level of divestitures that was contemplated within the agreement that we work through. So nothing there that would concern us overly.

And the other part is where Brookfield does have some towers the way they plan to run these also is competition friendly, I would say, is the way that we kind of -- we view it there. So I don't want to go into more detail than that, but we do expect that the transaction would be approved and would have the ability to close it in the second half of 2024.

[Ric Prentiss, analyst]

Okay. And then Steve, I appreciate the comments that you decouple service revenue really from leasing revenue because of the analyses versus others. Is it still kind of 3, 6 months from the time you're getting applications having these talks before it shows up in the financials? And then can you give us a little color kind of then on the pacing you expect of that. I think, Rod, you said $180 million to $190 million of new leasing activity in U.S., Canada.

[Steven Vondran, executive]

Sure. It's hard to give an exact time line, Rick, because it's different by different customers. So I would say from application to revenue showing up on an a la carte basis, there's a variability there from call it, 60 days to 6 months kind of what you referred to there. It really depends on the customer and how urgent they are to get on the site, to be honest with you.

In terms of the cadence for the contribution from the new leases and colocation, it's relatively flat across the period. Again, I just would point out that we had the comprehensive portion of 1 of our major MLAs expired at the end of last year. And so that got rid of some of the front-end loading that you saw in previous years. So it will be more evenly distributed this year.

[Ric Prentiss, analyst]

Okay. And the last one, Rod, you cited out that there's a probability that the dividend could go down from the $1.70 paid in the fourth quarter to what would be paid evenly spread over 24 or maybe $1.62, while keeping it fairly flat '24 versus '23 annually. Help people understand -- what was the thought process on why raise the dividend because we get this question a lot, why raise the dividend so much in 4Q '23 if you have to pull it optically down in 1Q '24, while keeping that flat for the year.

[Steven Vondran, executive]

Yes. Rick, I'll take that 1. Look, we didn't take the decision to hold the dividend flat lightly on that, and we were aware of the the optics problem with a step down from Q4 to Q1. But we had committed to our shareholders to a certain dividend in 2023. And when we decided to hold it flat in 2024. If we didn't have the step up in Q4, then we would have -- then we wouldn't have hit the number that we had committed to. And so we like to do what we say we're going to do, and that's the reason we kept it there. And we think this has been very well telegraphed. We're trying to be very clear on our Q3 call about what was happening, and we've talked about it since then. And this is a onetime event. And so agree that it wasn't -- it's not the ideal situation, but we wanted to do what we say we're going to do and handle the dividend flat.

[Ric Prentiss, analyst]

Do what they say they're going to do. And I do think going spread evenly through the year is probably good as well. So Steve, appreciate all the color is very insightful about how you're sitting in the seat on running the company.

[Operator]

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

[Eric Luebchow, analyst]

I appreciate the question. Steve, so you made it pretty clear deleveraging and investing in kind of more developed markets this year is a top priority. So maybe you could talk about the M&A environment right now as a potential use of capital? I know there are some consolidation opportunities out there in Europe. Just wondering if that's an area of expansion for you over time? And then 1 for Rod. I think you've talked aspirationally about getting to kind of a double-digit AFFO growth rate. Maybe you could just kind of update us longer term with the impact of refinancings in the coming years, the India transaction, where do you think you can get to when stripping out some of the noise from India and some of the changes in interest rates that we've seen recently?

[Steven Vondran, executive]

So I'll start talking about the M&A environment. Look, we continue to monitor what's going on in the M&A activity across the portfolio. We're still seeing a dislocation between public and private multiples. And so there's no portfolio out there today that's trading that we think is strategically important that would meet our investment criteria. And that's 1 of the reasons that we're a little bit out of that market right now. One of the reasons that we're very focused on bringing our leverage down to the high end of our target range is to make sure that we're in a position to take advantage of inorganic opportunities when and if they come to market that we think are strategically important, but also to meet our investment criteria. So we're optimistic that there will be portfolios in the future that are something that we would be interested in. But right now, there's just nothing that I would point to you that we think is is trading in a range that we would find compelling.

[Rodney Smith, executive]

Eric, Rod here. Thanks for the question. So regarding AFFO growth, let me just hit a couple of -- a couple of points. First, I'll just hit kind of generically what we look at as kind of a growth algorithm for the portfolio. And as Steve said, we're really pleased with the portfolio that we have the diversity that we have throughout developed markets as well as exposure to emerging markets.

I would remind you and everyone that in those emerging markets, those are some of the largest populated industries in the world that need more and more infrastructure over time. And we do think having exposure to that is going to be really good for us and our investors in this growth algorithm. But the algorithm is really pretty straightforward. We look at roughly 5% organic growth from the U.S. That includes some Sprint churn over the next -- the next few years there. We do expect that the non-U.S. properties will have incremental growth from there, maybe a couple of hundred basis points.

And we think that's possible, certainly from Africa and Latin America over time, maybe not every year, but on average over a long period of time, which we expect to be there. We're looking at upper single-digit, double-digit growth rates from CoreSite with very nice returns. So that looks very good. And of course, as you move down the P&L, you end up with higher growth rates at gross margin and EBITDA margin, particularly with our focus on cost discipline reducing cost, managing costs, both direct costs as well as SG&A and driving expanded margins. So by the time you get down to AFFO, does that 5% U.S. growth, 7% international, double-digit core side, all that can translate into upper single-digit AFFO growth pretty nicely. That's kind of what we look at.

And then if you just look at 2023 and in 2024, in '23, we came in AFFO per share growth at around 1% or so. I'll just remind you that included 7% headwind from financing in the year. It included an additional 100 basis point headwind for the VIL reserve and maybe a full percentage point for FX. If you kind of do the math backwards, that core underlying business is solidly upper single digit growth rate. In 2024, the guide is around 5%, getting us to that $10.33 per share.

Financing headwinds in that is about 100 basis points. We have the reserve, broadly speaking, for India, and that's about a 100 basis point headwind as well. And with the FX volatility that we're seeing, and that's about a 200 basis point headwind again, you back up into that and you're getting into that upper single-digit kind of core growth.

And I'll remind you that, that -- even that upper single-digit core growth has embedded in it higher-than-normal churn in some of the emerging markets as well as the Sprint churn in the U.S. As we go through that, being able to handle some modest FX and even financing items with churn being at a more normal level, certainly in the upper single-digit growth rates on AFFO and AFFO per share is in our line of sight.

[Operator]

Your next question comes from the line of Batya Levi from UBS.

[Batya Levi, analyst]

Can you talk a little bit more about your expectations for Europe in terms of new leasing revenue growth beyond this year? And how you think about your scale in the region? And I think there was a a bit of a -- write-down in Spain. Can you talk about what drove that?

[Steven Vondran, executive]

I'll start with some leasing trends, Rod you can pick it up. Yes. So what we're seeing in Europe is we continue to see build-outs by the carriers. And we do see substantial 5G population coverage from the leading MNOs in Germany and Spain. So pipeline of growth that we see remains solid, but it's more weighted toward colocations. In Germany, we are continuing to work through some of the market complexities that everyone's dealing with there, including some permitting delays and time for power connections. But we do feel good about the progress we've made there. We've brought in resources from other parts of our company to help with that and kind of utilizing best practices. So we do expect some improvement in our time lines there.

So that's what we would expect to continue to see in Europe. There's a little bit more colocation driven activity and they're through the bulk of their 5G upgrades in most of our markets.

[Rodney Smith, executive]

Batya, Rod here. So regarding Spain, you obviously saw that we had a write-down in our Spain market of about $80 million. That is exclusively rate driven based on the cost of capital as a function of our annual impairment testing. And I would also add to that, that the Spain market is performing very well in terms of hitting its metrics and milestones up against our original business case. I'd also remind you that the Spain business was really the only business in Europe that is 100% from the Telsius acquisition. There was no legacy business there prior to that transaction. But simply put, the impairment of about $80 million was exclusively a function of rising cost of capital running through a discounted cash flow impairment model.

[Operator]

Your next question comes from the line of Matt Niknam from Deutsche Bank.

[Matthew Niknam, analyst]

Just 1 on data centers and 1 housekeeping. First, on data centers, how are the nature of conversations with your customers changing or evolving if at all, as AI use cases become a little bit more pervasive across enterprises. And I'm really getting at, do you sense that, that sort of edge data center builds that maybe was part of the CoreSite acquisition maybe rationale at least initially, the micro data centers at the basis of your towers, is that becoming something that's a little bit more near term? Or is that more still of a long-term opportunity? And then maybe for Rod, on D&A, what's driving the review and the decision to potentially extend the useful lives of the tower assets? I saw a pretty big step down implied in D&A and your guide for this year?

[Steven Vondran, executive]

So I'll start with the data center question. In general, with CoreSite, what we're seeing is demand is still largely driven by enterprises moving to hybrid cloud environment. And that's people who either or either cloud native or primarily cloud or they were still in their on-prem facility. That's still a major driver. We are seeing AI inferencing pick up in our facilities. We've always had some AI applications that we're targeting our facilities. So we are seeing demand there.

More broadly speaking, AI is is reducing overall capacity in the market or overall supply of the markets, which is leading to some favorable pricing trends for us. When it comes to the Edge deployment, we do think that AI inferencing in particular, in the interface people have with AI will lead to opportunities there. Right now, the near-term opportunities that we're exploring are more niche markets. You may have seen 1 of our partners put out a blog that we're working with them on an Edge facility kind of in the automotive market to update software on their products.

We have a number of POCs that we're working on with various partners that are more niche applications in particular. I think the micro data centers at the base of the towers, facilitating AI is still a little bit further out. And we'll continue to update you guys if there's something to talk about there. But in the meantime, we just continue to work with our our customers or potential customers on iterating on what that's going to look like.

[Rodney Smith, executive]

Matt, regarding the tower life adjustment that you saw running through our numbers here, we essentially increased the tower life from 20 years to 30 years for book purposes for our GAAP books. And that was simply put, it's just a function of matching up the book life here more closely with what the actual realized life is for the assets. So nothing really more complicated than that other than a realization that these assets last a lot longer than 20 years. So our books will not reflect that going forward.

[Operator]

And your final question today comes from the line of Brandon Nispel from KeyBanc.

[Brandon Nispel, analyst]

So when we look at the capital spending to the data center segment and your development pipeline, does that imply your development pipeline -- with your development pipeline, does that imply capital spending expansion beyond 2024, really, how does that inform your decision on spending around your remaining businesses in your tower segments?

[Steven Vondran, executive]

Sure. Well, the record amount of sales that we've had is what's led to increasing the development pipeline there. And it really depends on what our sales are this year and how we continue to see the opportunities in that portfolio evolve as to what the future spending are. So it would be premature for me to kind of guide future years' capital there. What I would reinforce is that we have a degree of optionality in our capital spending and that we do have a structure with CoreSite where we also have partners in that business. And so there is some optionality in terms of how much capital we put in, and you could see us using our capital or somebody else's capital to expand if we thought that was a better option for us. But at this point, the development pipeline we have today, we're choosing to sell fine because we're achieving mid-teens stabilized returns, very low risk in our existing campuses, and we continue to see demand rise.

So we'll make that assessment into what's appropriate for 2025 and later a little bit later, and we'll share that with you guys at the appropriate time.

[Rodney Smith, executive]

Brandon, Rod here. The only thing I would add to Steve's comments there is that we have full optionality kind of going forward. I think Steve alluded to this, but going beyond 2024 the fact that we're investing $450 million in the data center business in 2024 does not commit us to that level or a higher level of capital spending in that business going forward. So we have a fair amount of flexibility to deploy capital towards towers, towards data centers, towards towers in developed markets, emerging markets, certain countries, not other countries as we go year-to-year. So we will be looking to secure that optionality, protect that optionality so we can always make decisions with our capital. follow the best risk-adjusted rates of return around the globe for any given year.

[Adam Smith, executive]

Thank you, everybody, for joining today's call. If you have any follow-up questions, please feel free to reach out to the Investor Relations team. Thank you all.

[Operator]

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.