American Tower Society. (NYSE: AMT) Second Quarter 2022 Earnings Conference Call July 28, 2022 8:30 a. m. m. ET
Participating companies
Adam Smith – Vice President of IR
Tom Bartlett – President and Chief Executive Officer
Rod Smith, Executive Vice President and Chief Financial Officer
Conference Call Participants
Michael Rollins – Citi
Simon Flannery – Morgan Stanley
Eric Luebchow – Wells Fargo
Ric Prentiss-Raymond James
David Barton – Bank of America
Matthew Niknam – Deutsche Bank
Batya Levi – UBS
Operator
Ladies and gentlemen, thank you for being here. Welcome to the call of American Tower’s 2022 quarter earnings convention. As a reminder, today’s convention call is recorded. After the comments ready, we will open the call for questions. [Operator Instructions]
Now I’d like to speak with your host, Adam Smith, vice president of investor relations. Please continue, sir.
Adam Smith
Thank you for participating in the American Tower 2022 quarter earnings convention call. We have published a presentation to which we will refer to our ready comments in the Investor Relations tab of our website, www. americantower. com.
During this morning’s call, Tom Bartlett, our President and Chief Executive Officer, will provide an update on our overseas operations. Next, Rod Smith, our executive vice president, chief financial officer and treasurer, will discuss the effects of the 2022 quarter and our revised outlook. for the full year. After those comments, we open the call for your questions.
Before we begin, I remind you that our comments involve forward-looking statements that involve a number of dangers and uncertainties. Examples of those statements come with our long-term growth expectations, adding our outlook for 2022, capital allocation, and long-term operating performance. ; our expectations related to the financing plan for the acquisition of CoreSite; adding the end of our Minority Investment of Stonepeak in our intermediate U. S. data business. In the U. S. , our expectations about the effect of COVID-19 and any other statements related to issues that are not old facts.
You should be aware that certain points could affect us in the long term and may also cause actual effects to differ materially from those expressed in those forward-looking statements. These points come with the threat points set out in this morning’s earnings press. release; those listed on our Form 10-K for the year ended December 31, 2021; and in other documents filed with the SEC. We invite you to take these points into consideration and remind you that we do not assume any legal responsibility to update the data contained in this call to reflect future occasions or circumstances.
With that, I pass the one to Tom.
tom bartlett
Thank you Adam. Et good morning to all. In line with our old practice for our momentary quarterly earnings call, my comments today will be about American Towers’ overseas business, before diving into the trends we see driving a long path of expansion in our overseas segment, I would like to take a moment to review the principles that have underpinned our foreign expansion strategy over the past two decades.
Since we began expanding outside the United States, entering Mexico and Brazil in 1999 and 2000, respectively, we have been guided by confidence that secular trends in demand and the basics of the tower’s business style would generate a huge price in the United States over a decades-long era would be replicated internationally. At the core of this thesis, the expected proliferation of wireless networks and the resulting immediate expansion and demand for cellular knowledge would require a shared wireless infrastructure across an unbiased host around the world. world.
We also believe that by leveraging our core functions developed here in the U. S. In the U. S. , we can position American Tower as one of the world’s leading communications and real estate providers and a key beneficiary of those trends. Moreover, given the relative lack of constant line infrastructure, accelerating population expansion and the early stages of the evolution of network generation in many parts of the world, we can simply build and make our overall consolidated expansion trajectory bigger.
We set out to build a geographically diversified platform of communications assets in the world’s largest democratic economies, while structuring relationships with the world’s leading cellular operators, primarily through the acquisition of portfolios with compelling underlying biological expansion and risk-adjusted retrospective profiles. we seek to leverage our scale, visitor relationships, and functions to execute high-performance structure opportunities and cutting-edge responses such as strength as a service that strengthened our competitive positioning and helped our consumers meet the desires of their network, while driving and structuring shareholders. value.
Today, as a result of those efforts, our global platform includes a foreign portfolio spanning more than 170,000 locations and contributing approximately 45% of our real estate cash and approximately 36% of the operating profit of our real estate segment. At the time of our new foreign structure program, we have built approximately 40,000 sites since the launch of our overseas operations more than two decades ago, with just over 22,000 of those sites built since the beginning of 2018 alone. We highlight this recent acceleration of our advancement in market positioning ahead of primary network deployments, our proven operational capabilities, and our cross-border partnerships with cellular network operators, all aligned with past strategic M&A expansion initiatives.
In total, those 40,000 tower structure sites in the U. S. U. S. infrastructure generates a hot NOI return of 25% due to the strong demand we have noticed for our infrastructure and the operational leverage inherent in the style of shared towers around the world. As forward-thinking sites, we will continue to pursue our ambition to upload 40,000 sites to another 50,000 sites in our foreign portfolio over the next few years.
With that, let’s take a few minutes to communicate about our foreign regions and the major trends that are emerging in our footprint. First, I will talk about Europe; we have a portfolio of over 30,000 locations and strong large-scale positions in Germany and Spain, which take advantage of many of the same trends that lead to strong expansion in the US. In the US, adding early 5G deployments and a new entrant.
As many of you know, we have taken a technique constantly measured to achieve scale on the continent. We started with a modest acquisition in Germany in 2012. We then spent most of the next decade comparing opportunities, which are a disciplined technique for capital allocation. , which led to our access to France in 2017 and, later, to a small-scale access to Poland. However, it wasn’t until the Telxius transaction in 2021 that we discovered an opportunity to scale up significantly to a portfolio that met the criteria of our global underwriting framework. These features come with high-quality, strategically located assets that deserve to gain advantages from ongoing investments in the network and attractive contractual terms, such as CPI-based indexations, which act as an herbal hedge opposed to local inflation. as well as a low abandonment profile, which combined generate attractive risk-adjusted returns for American Tower and our shareholders.
From a temporal perspective, we couldn’t be more pleased with our acquisition of Telxius’ tower portfolio, in Germany and Spain we have noticed several quarters of commercial acceleration as operators begin to soften mid- and low-band spectrum with new 5G equipment, while proceeding to invest in expanding knowledge intake into their existing 4G networks. At the same time, in Germany, the new participant 1
Earlier this year, we signed a framework with 1
In 2022, we plan to double our previous record and build around 400 sites across Europe. And we expect this trend of new upper structure activity to continue. Thanks to the call generated through such initiatives, the pipeline has secured through the Telxius transaction our position as a leading independent force operator on the continent, with a global reputation for operational excellence.
With this, let’s turn to our regions that are in the early stages of network technology, and where we see an opportunity to capitalize on a persistent higher demand environment over an extended period of time. There is probably no region where the benefits of local scale and operational experience gained through a leading independent operator are more pronounced than in Africa, where we place those benefits manifesting themselves on virtually each and every side of the business.
In recent years, we have noticed the proliferation of affordable smart devices and the adoption of mobile app usage instances by customers, resulting in a huge expansion in the use of cellular insights. And our multinational carrier customers across the region have worked to deploy their 4G networks in response.
For ATC Africa, this has resulted in an expansion of average biological turnover in top single-digit diversity in recent years, along with five consecutive years of record new structure activity. As a result, we built more than 1,000 sites in Africa in the first part of the year alone, more than 30% since the first part of 2021, and almost double the volumes achieved in the same era in 2020. These sites continue to show very high average NOI yields on day one, with our structures since the beginning of the year generating over 13%. And we look forward to continuing to capture opportunities to increase critical scale and generate strong returns in the region’s key markets for years to come.
While trends supporting a high-growth environment in the region are expected to persist, there are demanding operational situations to create unique opportunities in the African market, against the backdrop of disruptions in the global supply chain, the availability and reliability of the strength network, and the current volatility of the macroeconomy. It is here that the scale of our African business, the shared learnings of a global organization and an ingrained culture of innovation have resulted in a resilient and differentiated company across the region.
For example, we were able to leverage lessons learned from the global supply chain since the peak of the pandemic, as well as resources presented through our investment fitness check and strong foreign money to produce fabrics for a new structure program several quarters in advance. This translates not only into cost savings in an inflationary environment, but also in demanding operational situations in a key high-performance expansion domain for American Tower, while strengthening our reputation as an esteemed partner, able to offer new sites when we say we are going This forward-thinking technique for sourcing critical resources is also being implemented in a domain of our business in Africa. that perhaps we are most proud of in our energy program, where we have accelerated our innovation efforts in the region in recent years.
Today, we have deployed approximately $300 million in the region to equip nearly 16,000 sites with the ability to generate power from renewable energy and more energy-efficient resources, adding lithium-ion batteries and solar panels, and in our new structure program, where we try to make most of our newly built towers 0 or nearly 0 greenhouse gases.
In fact, through the end of the current quarter, we installed lithium-ion batteries and solar panels at approximately 70% at more than 40% of our sites in the region, respectively, resulting in a relief in our reliance on fossil fuel generators, considered our potential to rely on intermittent renewable resources and supported our progress toward our GHG emission reduction goals.
More recently, we have been able to leverage our position in the region to shape a strategic partnership with a supplier in our energy source chain. This alliance brings the gathering of products to the region, as we seek to build our environmentally and economically sustainable energy supply. energy solutions, which are places where the availability of electric power and access to effective and reliable resources can be challenging.
In addition, this local partnership will facilitate accelerating our progress toward meeting our emissions targets, reducing hazards in our supply chain, reducing the overall carbon footprint and burden of our procurement process, and supporting the local economy and the communities we serve, serve. proud of.
Let’s move on to Latin America, which is our first overseas expansion region, and where we have noticed an average biological expansion above single digit in tenant turnover in recent years. Going back on our ancient past in the region, which is made up of assets built or acquired before 2010, had a pullback of the U. S. dollar. of more than 40%.
Today, the M.
With respect to Brazil, specifically our most giant market in the region in terms of counting revenue, we are witnessing the final stages of a consolidation procedure that has resulted in a movement of network assets between the hands of giant multinational operators, with the functions of firepower. and monetary resources to build enhanced next-generation networks across the country.
In addition, with the completion of the 5G auctions, our local scale positions American Tower as a strategic spouse for our consumers and their networks, while allowing us to maximize the opportunities presented through the consolidation and expansion of operators’ investment obligations. Although we are in the early stages of an investment cycle in updating the network, we are already seeing increased demand for infrastructure that captures much of the initial cycle of urban change. get better capacity and performance, similar to the speed we expect in the US. This would result in a solid expansion for American Tower in the region over the next several years.
Our portfolio in the region is primarily comprised of our large-scale presence in India, as well as our more recently established presence in the Philippines and Bangladesh, where we leverage our expertise in deploying control to prudently assess opportunities in the high-performing region. structure programs, which has resulted in the structure of more than 400 s in the two markets combined since the beginning of the year.
In India, we continue to be encouraged by innovations in market structure, operator suitability, and government reforms aimed at easing the short-term monetary burden on operators and ensuring a competitive multiplayer ecosystem, which are driving constructive trends in India. communications infrastructure. countryside. And with the carrier consolidation cycle and related churn higher, the full-year outlook includes an expectation of positive biological expansion of tenant turnover in the region for the first time in several years. While demanding situations remain in the market and we could potentially see some variability in expansion from era to era, our optimism about the long-term opportunity in India remains. Against an exciting backdrop of a developing population of over 1. 4 billion people driving accelerated mobile data usage and a government demonstrating its commitment to a virtual transformation of the economy, we see the need for thousands of new mobile sites to serve 4G, and in all probability long-term 5G networks. We expect those catalysts to deliver an era of hot, sustained gross expansion, as well as continued acceleration of our new construction program, where we’re seeing low- to mid-single-digit NOI returns in the first day on average, and combined with moderation in En a turbulent environment, we remain confident that India and the Asia-Pacific region can make a strong contribution to achieving our long-term expansion goals on a consolidated basis.
In short, we are encouraged by the trends we are seeing in our global footprint, with an acceleration in the consumption of cellular knowledge, driving sustained visitor investments in existing and next-generation networks globally. Over the past two decades, we have followed a disciplined technique for market and asset selection, demonstrated a consistent track record of operational excellence, and developed a large-scale presence and strong consumer partnerships in a geographically varied and globally distributed footprint, which is a strong footprint. puts this on a distinctive competitive merit in a global 5G and beyond.
While we continue to compare opportunities to further enhance our scale from the same field perspective, we remain focused on optimizing our position and functions to generate additional pricing in our served markets. Our well-balanced global platform, combined with our highly complementary U. S. core business, provides American Tower with an unprecedented global portfolio that is preferentially positioned to take advantage of the multiple evolutions in network generation and virtual transformation opportunities for many years to come.
With that, I will give rod the floor to provide our most recent quarterly effects and an updated outlook. Fishing rod?
Rod Smith
Thank you, Tom. Hello, and thank you all for participating in today’s call. As you saw in today’s press release, we had a good quarter of functionality across our global business. Before reviewing the main points of our quarterly effects and revised outlook, we talk about some highlights of the quarter, as well as the financing projects we have executed in recent months.
First, we announced and partially closed our plans to raise approximately $4800 million in fair financing for the acquisition of our number one site, beginning with our issuance of non-unusual shares in early June and then, through our announced agreement, Stonepeak on our U. S. site. U. S. commercial intermediate knowledge. With those two transactions, we not only fulfill our wishes for fair financing for CoreSite, but we complete it in a way that maximizes price for shareholders and increases our high-quality credit ratings through our partnership with Stonepeak, which brings significant expertise and communications. Infrastructure, and while they like the long-term investment philosophy, we have created a platform to compare and fund additional expansion opportunities in our U. S. knowledge intermediate business. As the 5G ecosystem grows.
In addition, Stonepeak’s investment represents a full valuation compared to what we have invested today in our intermediate U. S. knowledge portfolio. It allows American Tower to retain operational control as well as the flexibility to execute our cellular edge strategy. this transaction in more detail later.
Second, we also continued our balance sheet through the leverage of debt capital markets, raising $1300 million in unsecured senior notes on advantageous terms. As a result of our quarterly pro forma financing activities for our personal equity products, which we expect to repay short-term floating rate debt, we will increase our constant debt percentage to nearly 80% from 66% at the end of the first quarter and reduce pro forma net leverage to approximately 5. 5 times. With our CoreSite investment now partially complete, we remain committed to delivering organically less than five times over the next two years.
Third, we are seeing strong secular trends driving higher network policy and densification projects among our customers, which translates into new and strong businesses globally, adding to the need for more mobile sites internationally, as Tom just pointed out. As evidenced by the good fortune of our new structures program, we have built more than 1500 sites in the second quarter, representing the 12th quarter of more than 1000 new structures since the beginning of 2019, a demonstration of the good fortune of our functions and experience, tailored to market positions, and strong customer relationships.
In addition, demand remains strong for our U. S. intermediate knowledge campuses. Consumers benefit from the dynamically scalable responses and interoperability provided through CoreSite’s national ecosystem, resulting in another strong quarter of new rentals and expansion agreements.
Finally, our functionality in the early part of the year and our confidence in our year-round outlook and long-term goals in a context of increased market volatility, emerging inflation and demanding operating situations are a testament to the resilience of our business and the ability of profits we generate on a regular basis. This is made imaginable through operational excellence and confidence in service, our investment fitness check, the soundness of our underlying contracts, the addition of subsidized foreign revenue through CPI scales, the ability to transfer a truly extensive portion of our direct pricing to our foreign regions, and the coincidence of the terms of the U. S. escalator. Between consumer rentals and land rentals, and most importantly, mobile data trends driving relentless demand for our communications assets.
With that, move on to slide 6 and I’ll review our current quarter real estate income and biological expansion in tenant billing. around 19% on an impartial currency basis compared to last year’s period. In the U. S. In the U. S. and Canada, real estate revenues were more or less flat due to the continued effects of Sprint’s rotation, while overseas expansion was about 19% or only about 23%, the effects of currency fluctuations, and includes approximately 12% contributed through Telxius assets.
In addition, our U. S. knowledge intermediate businesscontributed nearly $190 million in expansion the quarter. These expansion rates are indicative of the strong secular demand drivers that underpin the expansion of our communications infrastructure assets around the world as 4G and 5G deployments continue.
Moving to the right of the slide, you can see that we achieved a consolidated biological expansion of tenant turnover of 2. 6% for the quarter. In the U. S. and new raw biologics businesses on a $1 basis related to the timing of the MLA V debut in 2021, which we guided on our first quarter call, we continue to expect a reacceleration and new gross business in the current part of the year. Escalators were 2. 8%, which, as we also noted in the last quarter, was affected through some synchronization mechanisms within our MPs, although for the total year we expect climbers around 3%, in line with old trends. the expansion was offset by the effects of Sprint’s rotation, which continues to generate more than 4% headwind year-over-year.
Internationally, biological expansion 7. 8%. Starting with Europe, we recorded an 11. 2% expansion, which remains the best due to contributions from the Telxius portfolio, which were only partially included in our base for the second quarter of 2021. In the absence of Telxius, our former European business grew by approximately 6% and expanded through approximately 160 foundation issues compared to our expansion rates in the current quarter of 2021.
In Africa, we generated a 9% biological expansion of tenant turnover, including 8% gross biological contributions to new businesses, our quarter saw continued strength, and new rental activities in the region were complemented through the structure of just over 400 sites in the district. As we can see, 4G policy and densification projects continue to drive a strong expansion of performance gains in the region.
For Latin America, biological expansion of 8. 3%, of which about 8. 7% came from escalations. The stable gross biological expansion of rents was offset by the expected maximum abandonment rate, basically related to certain decommissioning agreements, as highlighted in past profit calls. Africa and Latin America, as we look ahead to the current time of the year, expect net biological expansion rates to decline compared to the first part due to the expected rate of consolidation abandonment, which remains in line with our previous forecast assumptions. .
At APAC, we recorded a 3. 9% biological expansion in line with our expectations and representing our fourth consecutive quarter of positive expansion, which is accompanied by a continuation of a forged new structure activity with only about 1,000 sites built in the quarter. It is vital to note that while we are encouraged by the positive endings we are seeing in our APAC expansion rates, we expect a modest sequential decline in the third quarter in sub-single-digit diversity before the fourth quarter recovery approaches this top end of our Guidance of 2-3% in a full year, which remains unchanged.
Moving on to slide seven, our adjusted EBITDA for the current quarter increased by just over 13% or more than 14% on an unbiased currency basis to approximately $1. 7 billion. Adjusted EBITDA margin 62. 5%, 170 fewer core issues than the previous year, due to the decreasing margin profile of newly acquired assets, dashboard conversion effects started, and higher pasture revenues, as a result of higher fuel costs.
Moving to the right of the slide, attributable AFFOs and attributable AFFOs consistent with a consistent percentage greater than 7% and 5%, respectively. 7%.
Now let’s move on to our revised outlook for the full year, where I’ll start by reviewing some of the key high-level drivers. First, our core information-consistent functionality remains robust across our business, allowing us to build on our EBITDA. consistent with the percentage of constant guidance for the year and building our expectations on an unbiased currency basis for real estate income and adjusted EBITDA.
Second, we reviewed our exchange rate assumptions from our popular methodology, resulting in headwinds between the outlook of approximately $100 million, approximately $50 million, $40 million, and approximately $0. 08 for real estate revenue, adjusted EBITDA, consolidated AFFO, and AFFO consistent with participation, respectively.
Finally, we updated our CoreSite funding assumptions to reflect our completed issuance of non-unusual shares and our expected end of personal equity funding. This update resulted in relief in our overall equity requirements, offset by additional debt and similar interest costs. .
In addition, we have thought about the effects on minority interests similar to stonepeak’s society and the updated end assumptions, which I will talk about in more detail in a moment. With that, let’s talk about the main points of our revised version. Expectations for the full year.
As you can see on slide 8, we continue to expect consolidated real estate earnings to expand year-over-year of nearly 14% at the midpoint. which were partially offset by more than $40 million of outperformance on core real estate earnings by leveraging the merits of the CPI in our foreign escalators and accelerating decommissioning agreements, as well as in our mid-segments of knowledge in the U. S. The U. S. and Canada and more than $40 million and other higher yields basically due to higher profits from foreign smugglers due to high fuel costs.
Moving on to slide 9, see our biological projections of tenant billing expansion, which have been slightly revised since our last call for results. While our expectations remain constant in the U. S. changes within our express foreign segments.
In Europe, we reduced our expansion to around 9%, reflecting our expectations of a transitional replacement and the timing of new business launch from the current part of 2022 to 2023. Demand remains very strong in the region, which prepares us well for 2022 to go out You will also see that we have raised the forecast for Latin America from around 7% in Africa to around 6. 5%, either above previous expectations of more than 6%, reflecting the continued benefits of the CPI escalation.
Moving on to slide 10, we are reducing our adjusted EBITDA outlook to $20 million from our previous outlook, due to negative currency effects, and expansion is expected to be approximately 10% year-over-year. While we are witnessing a strong upward conversion of core real estate revenue to overperformance on monetary margin, we have revised our view of general and administrative expenses, adding bad loan write-off expectations for the year. While collection trends were strong in the current quarter, we have rejected some of our assumptions similar to others that are relevant with past booking balances that we continue to expect on time.
On slide 11, we are raising our AFFO target according to the constant percentage attributable to $9. 74 from $9. 72, despite the absorption of negative currency effects and continued interest rate increases. I would like to spend a moment reviewing the moving elements of management related to our updated equity plan and the mechanisms of our company Stonepeak, which is composed of 1,750 million dollars, according to percentages, and 750 million euros in mandatory convertibles according to percentages. for a total stake of 29% in a foundation that is fully convertible into our intermediate knowledge business in the United States.
First, as I mentioned, we were able to reduce our overall equity needs from approximately $5. 5 billion to $4. 8 billion, adding $2. 3 billion in non-unusual percentage revenue, which particularly reduced our percentage issuance to approximately 9. 2 million percentages. Equity relief resulted in an accumulation in our debt balances, which, combined with the revised timing of the accumulation in equity, as well as higher interest rates, resulted in an accumulation in our interest expense outlook, which largely offsets the other relief of more than $50 million to AFFO compared to our previous outlook.
Then, in connection with our partnership with Stonepeak, the monetary effects of your minority investment will appear in two places. First, a $750 million coupon of mandatory convertible inventory with a mid-single-digit diversity charge will be identified as a deduction from the AFFO generated through our mid-knowledge segment and reflected in our consolidated AFFO, which represents approximately $14 million. in our 2022 guide, as shown on the slide.
Second, until the conversion of its preferred shares, which is expected to take place 4 years after the end date, Stonepeaks’ initial stake in our intermediate knowledge business will be 23%, anticipating a net debt of approximately $2 billion with U. S. knowledge. The U. S. middle. and will be a minority interest deduction for the purposes of attributable AFFOs, which equates to approximately $20 million in our outlook for 2022.
Note that we have also reduced the European minority interest assumption from $160 million in the past to $150 million, basically due to the exchange rate. Together, we are now moving toward a $170 million minority interest adjustment in 2022.
Finally, as I mentioned earlier, our updated outlook also takes into account the updated final equity assumptions. In the past, we had assumed they were definitive. We also assumed that our staff-consistent capital would close in the middle of the third quarter and that the proceeds from the plan would be used to pay off short-term floating rate debt. Overall, our revised CoreSite financing plan resulted in an accumulation of approximately $0. 06 over our previous outlook attributable to AFFO according to the constant percentage, which includes a negative impact of approximately $0. 03 due to constant interest rates on our debt financing compared to our previous assumptions.
Turning to slide 12, let’s take a look at our capital deployment expectations for 2022, which are updated from our previous landscape, as we proceed to reflect our purpose of generating strong and sustainable expansion in AFFO consistent with a consistent percentage. First, we now expect to spend approximately $2. 7 billion, subject to Board approval, on our 2022 dividends. This is a small reduction from our previous direction of $2. 8 billion, which is only based on relief in our common consistent percentage emissions and continues to constitute approximately 12. 5% expansion year over year consistent with the constant percentage.
In terms of capital expenditures, we are cutting our midpoint from our outlook to a total of $60 million, with progressive investment expenditures expanding to $15 million and capital expenditures on regression and land acquisition shrinking to $25 million and $50 million respectively. Our progress plan continues with the structure of approximately 6500 new international sites with yields.
In fact, of the nearly 3000 sites built in the first part of 2022, we saw a NOI that retreated on the first day of around 14%. largely related to progression expenses.
Let’s now turn to slide 13. With our CoreSite financing plan largely complete, I’ll talk briefly about the strength of our investment fitness control, which is critical to executing our positioning and delivery strategy. Leverage degrees and an appropriate mix of debt instruments advise control of our capital structure, which, combined with our strong business fundamentals, provides American Tower with continued access to capital markets on advantageous terms.
As you may recall, the U. S. Tower. The U. S. treasury is proactively entering debt capital markets in 2021, taking advantage of traditionally low prices, raising about $3 billion in senior unsecured notes in the current part of the year, at a combined charge of about 1. 6%. With our constant debt percentage at the time reaching over 85%, this allowed us to secure low-interest debt for long-term strategic initiatives, adding the acquisition of CoreSite, which in turn reduces our dependence on debt markets in 2022 as a component of our latest financing plan. We believe that strategic and effective control of our balance sheet puts us in a strong position as we close 2022 and look beyond. At the end of the current quarter on a pro forma basis for Stonepeak’s latest investment in our U. S. In the U. S. middle business knowledge, our average debt charge is approximately 2. 6% with an average residual term of more than six years.
Since 2010, we have reduced our average debt charge through approximately 250 base issues and increased the average duration of our debt [ph] for approximately one year until the long end of the yield curve to proactively refinance our debt and take merit of low-interest rating environments.
In addition, and more recently, we have also worked on the diversification and expansion of our resources and capital distribution through the issuance of debt securities denominated in euros, the construction of our ATM program and the good execution of public capital increases and partnership agreements with leading personal investors worldwide. Solid liquidity position of approximately $6. 7 billion on a pro forma basis, adding revenues from stonepeak and other financial activities after the end of the quarter into a gradual maturity profile, we feel well placed to move forward as we move forward in biological deleveraging to return to our overall net leverage diversity over the next two years.
Overall, we see the strength of our monetary position as a competitive merit to American Tower, whether implementing our expansion strategy in the face of economic downturns or money market volatility. And we remain focused and committed to our established monetary policies that have guided our monetary strategy over the past decade.
Finally, on slide 14, and in summary, the current quarter was another strong quarter, supported through a lease request for our entire global communications asset portfolio, strong execution of capital markets projects, adding financing from the Acquisition of CoreSite, and significant activity in the progression of new high-yield assets. Our combination of high-quality assets and established market positions continue to take advantage of the secular demand for trends driving 4G and 5G projects in our global presence, while the strength of our balance sheet and money positions us well placed to manage and grow the business through the volatility and uncertainty of the prospective market.
As we look ahead to the current time of the year, we are excited about our expansion trajectory and remain focused on executing our strategic initiatives, which are our long-term double-digit AFFO expansion aspirations.
With that, I call the operator again for questions and answers.
Q&A session
Operator
Thank you. [Operator Instructions] Let’s go to Michael Rollins with Citi. Continue.
michel rollin
Thank you and good morning. Two issues, if I may, first in the U. S. In the U. S. , curious about whether you can provide more information about the rental environment in the U. S. In particular, provide an update on how American Tower is following the expansion target provided in the past of at least 5% biological expansion starting next year. And then, sorry, just some other component of this is just you see a replacement in the vicinity with AT.
tom bartlett
Okay, Michael, I can start and Rod can join. We are on track with our expansion rates planned in the past for the future. We expect some kind of acceleration in the current part of 2022, and then even some other acceleration. so we have so much visibility in terms of our MPs that I think we’re in a very smart position to be able to track what the expansion looks like. But everything is on the right track, as we have explained. as far as AT is concerned.
Rod Smith
Oui. Et Tom, I’ll just go up to it. As for the deeper discussion of observation on the right track, we have been guided towards an expansion of around 2% on average for 2021 and 2022. And as you can see in Numbers, Michael, on the right track with that 2. 2% last year in the United States.
So a little bit at 1% this year. That puts us at only that 2%. I’ll remind you that there’s a pretty significant headwind from Sprint’s churn rate that affects the expansion rate. And that equates to a headwind of about 4% this year. 5 % if there had been no [technical difficulty]. And then the additional direction from 2023 to 2027 is about 5% on a reported basis with about 2% adjusted for the resulting type of Sprint abandonment. And we’re on the right track for that. Approximately two-thirds of this earnings expansion is already committed as a component of our overall agreement.
And we’re also seeing that in the co-location and modification contributions of new corporations in the U. S. So we’re on track with this metric for this year. This is the expansion compared to last year. We expect T3 and T4 to be in higher grades than we had in T1. So that’s the acceleration we’re seeing this year, and we’re forecasting degrees compared to next year based on how our holistic deals are made, the addition of DISH, as well as the acceleration of carrier spending.
michel rollin
Merci. Et just a query about India. I just checked the supplement on page 12, the ancient force matters. This shows in the APAC region, possibly in India, that there has been this negative adjustment in sales or only closures of towers that have been positioned at an annualized rate of 3% to 5%. And just curiosity, when this optimization can slow down or end particularly and if it then releases a headwind in the expansion of this segment.
tom bartlett
Just fast on the – sorry Mike, I had a little computer challenge here that I had to fix. So in terms of, the data on India, it’s literally related to the consolidation that we’ve noticed in the Indian market with the change that we’ve taken in recent years, as you well know with that, when we have single-tenant towers where we don’t see any more short-term rental opportunities, we end up eliminating them to simplify the operating expense facet of what we do in India. So while you see that the abandonment rate in India is moderating, which we have noticed to a large extent, in the last two years, we also see the activity of commissions to curb the recession. And there’s regularly a little lag between when you see the abandonment rate going through our profit numbers. And then when you see the tower, some towers actually come out of the tower counts.
michel rollin
Thank you so much.
Operator
And then we will move on to Simon Flannery with Morgan Stanley. Please continue.
Simon Flannery
Great, many gracias. Hola. Me wondered if you could tell us a little bit about the intermediate portfolio of knowledge. I think he referred in the slides to the superior performance there, it seemed like the sequential numbers were good. What do you see in terms of bookings, trfinishes, backlogs, things like bad costs in the industry. And then I think in the European guidelines, he talked about driving an activity from the end of 2022 to 2023. I think one of the other touring corporations in Europe had discussed something similar, can you elaborate a little bit on that and what gives you confidence that it’s just a matter of months and other things, given the kind of recession issues and the effect that electric power costs can have there?Thank you.
tom bartlett
Hello, Simon, maybe I will take care of the knowledge center. And we had another very strong quarter with all of our knowledge center businesses. In large part, we’ve finished integrating our sexuality-centric legacy, haven’t we?Solid sales, a counterfeit order book, a literally positive MDM cash, the abandonment rate is in line with the contract. So, we’re literally excited that they’re faster than Rod mentioned, we’ve advanced our recommendation compared to the activity we’ve noticed within CoreSite. So, a very strong profit expansion, a new and expanded sales activity, all very, very smart combined with new logos with a network, new activities, as well as with hyperscale. So literally balanced and strong expansion and interconnection, that I think it’s fundamental to that competitive merit that we see in the business and that we fully expect. So I couldn’t be more satisfied with what the company was able to generate from the start.
Rod Smith
Yes, Simon. And I would just add that, it is the ability to adopt some progression projects on the middle side of knowledge. So we have some, two of which are ongoing, that are driving CapEx’s major investments in the knowledge medium. industry. So, I think you’ve noticed our numbers, we have over three hundred million, 320 million CapEx, which is a little heavier than we would normally expect. But we have some amenities where demand is higher, we’ve embraced more opportunities for progress within the campus we operate.
And then, to answer your question about Europe, we see a slight moderation in terms of expansion in Europe, our previous forecasts were to have a biological expansion in full-year tenant turnover above nine. And we’ve reduced it to about 9%. And this is basically due to the fact that we see rental activity that we expected in the current part of 2022, which will return to 2023. So we see a very strong market in Europe, especially in Germany, with the addition of one-on-one coming and 5G, the initial launch of 5G networks. And the way that biological tenants qualify for Brookfield’s exit this year is going to be, you know, a kind of SP exit rate of 7%, which I think is a very strong number for us. We couldn’t be happier with the timing of what we see in Europe and the demand for our assets.
Through the Telxius portfolio, we have acquired many assets in fact focused on the city, adding many roofs, and we consider this to be very desirable in terms of operator business in the future. And that’s what motivates the expansion rates there. So this is just the time in Europe when expansion rates are excellent.
Simon Flannery
Super. Et about Tom’s data center, do you have any updated concepts about the edge opportunity now that you had it for more than six months?
tom bartlett
Yes, I mean, it’s yes, there is. I mean, we’ve really created an internal Edge Advisory Board, we’re setting up an Edge Lab, we’ve scanned our sites, and we’ve done the full assessment of our sites that can have one megawatt and two megawatts of activity. We plan to identify and begin construction of some of those megawatt services by the end of the year. And we’re in conversations with all the potential participants who are looking to take advantage of the opportunity. So, we’re still in the early days, because don’t forget that the explanation of why for this specific transaction was the underlying business itself, the diversification of our existing business into the broader virtual infrastructure, the industry, and then the possibility of being a major player in terms of reaching that advantage. And we’ll know more about it in our third-quarter call. We communicate more about technology, Simon.
Simon Flannery
Thank you.
Operator
And then we move on to Eric Luebchow’s lineage with Wells Fargo. Continue.
Eric Luebchow
Great, thanks for answering the question. First, I wanted to refer to. . . you discussed something about the dropout rate in Latin America. related to some of the dropout rates he’s had in Mexico, and how he sees that trend next year.
And then, Rod curious about the reserve of bad debts, discussed any color it can provide in terms of regions that it monitors strongly in terms of collection or payment activity that would be useful. Thank you.
Rod Smith
Yes. Hello, Eric. Thank you for joining us. So the term we see in Latin America is basically just phone in Mexico and then in the Brazilian market, we start to feel the oil turnover. So, oil has been consolidated with [Technical difficulty] the contract we have with oil really has six years remaining on average, it’s about 7500 bytes or so, and they already account for about 1% of our growth. We have plenty of time here to paint on the term, the oil, the oil restructuring that’s going on there. So that’s something that you’ll see in the next few years, maybe more than they’ve actually been with the countries that are recovering assets, to communicate maybe about restructuring our contracts, calculating the number of terms. But we’re in a pretty smart position with oil, because we have a lot of cash left over six years on the contract there.
And then in terms of bad debt, in terms of where we see bad activity, literally in India and a little bit in Africa, we recently decreased our reserves by about $8 million in the current quarter. And we have a plan in Outlook to reduce it further, totaling around $20 million. So, the push-ups in the current quarter were literally strong enough for us around the world, but specifically in India, where we are pleased to see this and based on all the discussions we have had, including to have with our clients, we expect the elections in India to remain with the expectations that are in our perspective, this would allow us to rebuild approximately $20 million [Ph] of bad debt reserves throughout the year. We have less of that, you will see in the presentation through about 10 million. And it’s only based on the timing of reversing some of those reservations that we’ve moderated. But it’s still good news for the year.
Eric Luebchow
Thank you so much.
Operator
And now we can talk about Ric Prentiss with Raymond James. Continue, please.
eric prentiss
Thank you, good morning everyone.
tom bartlett
Hello, Ric.
eric prentiss
A few questions. First of all, obviously, I think it is important that you concentrate on the imputable AFFOs. Help us understand what the impact of the new Stonepeak would be on a year-round basis in terms of converting the $14 million demand for the existing year and the $20 million minority stake?And then I have two more rapids.
tom bartlett
So the way we have forecasts for next year, or in the fourth quarter of this year, the usage rate of about $200 million for the total year. $50 million of that literally came here, into the intermediate knowledge business that we have. is a type of exit fee. The rest, about $150 million, is what we have in Europe. That’s what you might think of the minority interests of our AFFO coming next year. $200 million. 15 billion in Europe and about $50 million on the middle side of knowledge.
And it’s mandatory, see that with a deduction in our AFFO. The mandatory rate is approximately $750 million at an average single-digit interest rate. So, just calculate the calculation, and that’s what you see in terms of AFFO deductions from that.
eric prentiss
Secondly, you know clearly that I have actually focused on cutting the amortization of prepaid contracts from valuation and non-monetary items. Interestingly, a number smaller than the crown, the crown put a graph, talking about what they see. , in terms of amortizing the prepaid rent in the future, that’s all I would do and I have one of the quick ones those?
tom bartlett
I don’t know, Ric, if we would set up a table. But I can tell you that this year, for the full year, we’re at about $110 million in amortized earnings coming out of our numbers. That’s a little less than last year. year. Last year, we were around $140 million.
I think it’s based on a long-term implementation rate, if you think this budget item is around $25 million to $30 million quarterly. That’s what we’re seeing. We believe it will remain constant as we move forward. But you can think of our amortized profit in line with the $25 million to $30 million consistent with the quarter, and it will be $100 million this year.
eric prentiss
It makes sense, unless we lose, we get a lot of inquiries from investors about the means of knowledge. We talked about the expansion capital opportunity, where CoreSite. What do you think of CapEx maintenance in the knowledge media sector?The question we receive is what would make the means of knowledge obsolete or the means of knowledge obsolete?
Rod Smith
Yes, maybe I’ll stick with the first one, Tom, and then you can take care of the second one. Therefore, the majority capital expenditure is about 20 million this year, for us in our intermediate knowledge business. 3%, perhaps 4% of average knowledge income. We don’t see that conversion at all. So that’s what I’m thinking about the company’s main FX.
tom bartlett
And Ric in relation to your question of the moment. I mean, it actually all comes down to barriers to access. And if you think about the asset we have with CoreSite, the barriers to access are incredibly high, with the ability to connect to the cloud on ramps. So, it’s hard to believe in a world where our consumers might not be looking for these kinds of hybrid environments yet, to be able to connect to the cloud so they can use data centers as a sales channel for themselves as their interconnection within the enterprise. So, we don’t anticipate any kind of activity that you mentioned, however, I must say that I think this specific asset that we have within CoreSite, and that we’re developing, actually continues to create those barriers to access.
And, and it’s going to be critical. It’s a bit like commercial towers. We are building a strong barrier to access with the food and real estate that we have, that is our strategy to locate the assets that have those strong barriers that we can continue to develop.
eric prentiss
Which makes sense. Thanks guys. I love barriers to entry.
tom bartlett
Thank you Ric.
Operator
We will then turn to David Barton of Bank of America.
David Barton
Hi guys, thank you so much for answering the questions. First of all, I guess maybe Rod in his script when talking about the partnership with Stonepeak discussed anything that was creating a platform to invest in knowledge centers given Stonepeak’s delight in the non-unusual infrastructure space. I think one of the considerations that other people have about American Towers’ foray into knowledge centers is that it’s going to be a big call for Capitol on the periphery, and we just don’t know what the magnitude will be. So if you can clarify your thinking a little bit on this platform, you could make acquisitions, investments, and equity calls.
And then secondly, maybe, Tom, I don’t know if you have an opinion about it. But when it comes to American Tower, not having a holistic MLA with Verizon right now. Do you think that contributes to the expansion in the domestic market?May the retail point-of-sale sales of the same AMP-type store this year be simply because Verizon is assigning business to its other tower partners in the early stages of its C-shaped structure and we have to wait until they take it to an A customer?
tom bartlett
Hi David. Let me take that one and then I’ll leave Rod and then I’ll go back and upload it to the first one. Compared to the way Verizon builds its headquarters, man, it’s actually hard to say, in terms of whether this happens with other carriers that have a more holistic type of MLA compared to us, I don’t think so, frankly. I think Verizon is very, because they measure it through how they implement the C-band. And I would frankly be expecting during the next part of the year, and obviously until 2023, genuine investments that they will make on the site.
We constitute a significant portion of their portfolio and are strategically located in some critical markets, which I know Verizon will need to deposit in C-band on the site they need. And I hope it shows up in the moment. In terms of when we don’t have that, it’s hard to say if there was a time difference as to when we’re going to see this kind of activity, like I said, I don’t think so. But more importantly, it would be expect to see significant activity accentuated in the current part and in 2023, which is the maximum vital element.
Rod Smith
Yeah, and David, in regards to your query about knowledge interim expenses, this year we have a CapEx in the plan of around $300 million, maybe a little more were some progression projects, which would possibly not be repeated in May . So we’re looking at about $200 million of old annual capital projects and general CapEx, adding maintenance CapEx. And that’s where we plan to stay in the future, that would allow us to anticipate some type of net absorption, looking at the next couple of years, we want to make sure that each of our services has scalable megawatt capacity. And to do that, we planned to reinvest around that $200 million or so that CoreSite had made in the old days. Maybe ours is a little higher, maybe they were closer to 150, between 150 and 200, we’re probably going to be closer to 200, or maybe a little bit, a little bit more. Therefore, we do not seek to compete at the national level and in the intermediate space of knowledge. We bought CoreSite because of the cloud-centric network, the dense nature, the in-house nature of the assets, and the kind of geographic distribution in the United States, in very smart proximity to our tower sites with their services. And in Los Angeles and Silicon Valley, Chicago, Denver, Boston, New York, Northern Virginia, we have smart asset allocation. And because of the high quality nature, that’s what gives us smart expansion rates, as I mentioned earlier, around 10%, which is well above our subscription expectations. between 6% and 8%.
So, we’re seeing a huge demand for those high-quality products. And we’re looking to take those assets and potentially, in the future, attach them to our sales, the cloud on ramps, and the installation of accessories. on the tower sites, that’s the truly significant benefit. That said, we will reinvest CoreSite’s cash flow to stay one step ahead of those two years of capacity absorption in megawatts. And then you might see us adding a knowledge center here or there’s all over the West, but in fact it’s not a major replacement in capital allocation.
David Barton
It’s helpful, guys. Thank you so much.
Operator
And we’re moving on to Matt Niknam with Deutsche Bank. Please continue.
Matthieu Niknam
Thank you for answering the questions. Just to follow up on the previous one about platform expansion, I guess more broadly, beyond knowledge centers just thinking about the broader and non-unusual infrastructure portfolio, do you see more opportunities internationally, which possibly wouldn’t have been like providing a year?behind.
And then, secondly, as far as India is concerned, a biological growth of 4%. This quarter, we detected a significant drop in the dropout rate. Would this quarter possibly have the highest execution rate to consider, from the point of view of the abandonment rate in India in the future?Thank you.
tom bartlett
Hi Matt. I stay with the first, Rod can with the second. We’re very focused on the United States, as we said. Yes, there are many opportunities outside the United States. And, because of the positioning we have with CoreSite, many, many other players have contacted us to expand, but we’re very focused on the United States. And as Rod said, to the extent that there are outdoor capital expenditures, we’ll be incredibly measured as to how we spend that, but it will be on tower sites. Remember that the Edge is a matter of opportunity on the site itself. And we’ve identified, in large part, more than 1,000 sites that, with strength and interconnection, can help more than at least one megawatt of capacity. And then we’re going to take a look at where we can take it to one megawatt where we can take it to two, where we can take it to three. And to the extent that we can expand demand from the perspective of visitors, we will increase that kind of capacity, but it would be very measured. It will be founded by call. And it will be largely in the United States.
Rod Smith
And Matt, hello, thank you for joining the call. For example, for India, we aim for a biological expansion of 2% to 3% in candidate turnover. In India, in the current quarter, we saw a figure above about 4%, which is great to see. This has been motivated by a consistent type of solid biological new business, of course we have the indexation of 2%. And then we saw a relief in turnover and the second quarter compared to the first quarter and actually some other relief compared to last year’s quarter.
So as we go along, one thing I’ll point out is that in the third quarter, we see a higher point of abandonment in the third quarter compared to the current quarter. So don’t be surprised if you find that the biological data of tenants billing drops a bit from 4% to probably less than 2%, reaching 1%.
It will be transitory and will see it happen in the fourth quarter at a diversity of 3%. So I think for now, we’re positive about India. There are still occasions of unsubscribe that we are on, and we feel smart figure of 2% to 3% for this year. And certainly, as we move forward, we expect to see and expect to see continued moderation in the unsubscribe line, a strong new business activity that will allow us to move past this 2%. Biological expansion to 3% turnover. But of course, we will face this next February when we give rules for 2023.
Matthieu Niknam
It’s great. Thanks to both of them.
Operator
And then we can move on to Phil Cusick with JPMorgan.
unidentified analyst
Hi, I’m Richard [ph] from Phil. I just wanted to stick to the foreign tower structure of 40,000 to 50,000 in the next few years. I sought to get an idea of how much of that is in relation to which one you have a smart line of sight in. . .
Rod Smith
Yes, Richard would say, we have a smart line of sight on this. There are elements of that that are outsourced, and the Telxius transaction that we did in Europe, there are around 3000 sites that will be built for Telefonica over time. There is also a structure for Orange over the time it is contracted. I don’t need to put too many company numbers in terms of the orange coin. When it comes to India, Africa and Latin America, it is more opportunistic. But we have a very smart execution rate in terms of structure sites. This year we will build around 6500 towers, which is a little more than last year. And we see that the implementation rate is sustainable in the future.
And, of course, we note, those constructions are among our maximum hot capital deployment opportunities. And we’re seeing double-digit NOI returns from day one from those newly built sites around the world. So, we have a higher point of confidence on this figure of $40,000 to $50,000, some of which is contractual, some of which is more opportunistic, but the pipeline is solid.
unidentified analyst
Super. Et tracking the fact that returns are peaking on day one, yet what kind of placement, I guess, do you expect on those builds over time?Can you give us a color around that?
Rod Smith
Yes, I think we would, we would make them very similar to the rest of our towers, comparable to the market position in which they are located. Certainly, the towers we build, we like to see that they are, multiple entities, of course, and we know that the expansion in mobile data intake around the world continues to take positions at a very strong point in this diversity of 30%, or even more in some market positions. So, it’s very important to have more tenants on those sites so that we have a line of sight to see this. And we see with these new constructions, we see in the north NOI yields of 20% on the maximum of them, the maximum of the assets.
Time will tell, but given the demand for tower sites, the critical nature of those energy assets globally and the fact that many of those emerging markets, as well as Europe, are located in new technologies, either through emerging 4G networks or in the case of Europe’s transition from 5G is that there is a need to ask for more. in addition to tasks. This gives us the assurance that we will attract more tenants to those sites.
unidentified analyst
And the last follow-up for me on the middle side of knowledge, just to clarify, there is no more capital coming from Stonepeak with the new constructions, however, there may be something if it is an acquisition, a small one or anything else.
Rod Smith
Yes, I think that’s true. The way and we announce an investment of $ 2. 5 billion that provides them with a minority stake that will be when their desired investment is fully taxed, there will be 29%, owner of the medium knowledge company. And if there is any capital that wants to finance our knowledge. Medium-sized company, there will be a capital request for all investors, us and the veteran [Ph] in a prorated stock. And then if there are M&A opportunities that require capital requests, of course, again, it’s going to be the same scenario that we’ll be in and fund this, that together.
unidentified analyst
OK thanks.
Operator
And we have time for one last question. We want to align Batya Levi with UBS. Please continue.
Batya Levi
Thanks a lot. In the US, can you provide a little more information about the activity you see on DISH?And a consultation on capital allocation? Reports giant percentage buybacks after a factor or before a similar mandatory conversion. In the future, can we expect it to perhaps balance debt relief rather than opportunistic purchases?Thank you.
tom bartlett
Of course, I will do the former. At DISH, they are precisely where we think they would be. I mean, they’ve been very measured in terms of deployment. They have been very active. It has some critical markets that they mention. And we have an MPP complete with it, and we’re seeing smart activity across the country.
Rod Smith
So, regarding the capital allocation factor, you have heard us say this several times, however, the first priority, of course, is to finance our dividend. And only through financing, through dividend expansion. year we will have a double-digit expansion rate of 12. 5% on the dividend.
And in the existing environment in which we are located, we will in fact concentrate on reducing leverage. No wonder in the call, I’m sure, we’re a bit out of our target diversity of around 5x, below 5x. So we ended the quarter at around 5. 8x. That’s about 5. 5 times Stonepeak’s pro forma investment.
So we still have to make debt relief paintings, which we will focus on. We will focus on biological expansion, where we have targeted a 10% expansion in AFFO consistent with participation. We will concentrate on deleveraging. We will concentrate on our investment plans around the world, financing the structure of combinations that can generate very smart returns in all the markets we are in lately. from time to time or fund more mergers and acquisitions that are cumulative and consistent with our disciplined approach, we will balance them with investment opportunities and make the selection that is most productive for our shareholders and generates maximum AFFO expansion consistent with participation.
Batya Levi
Thank you so much.
Operator
And the speaker, I call you back.
Adam Smith
Thank you all for today’s call. Feel free to contact the Investor Relations team if you have any questions. Thank you all.
Operator
Merci. Et that concludes today’s appeal. The replay will be available after 10:30 this morning and will continue until August 11 at midnight. You can access the AT playback system