SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 29, 2001
(March 29, 2001)
AMERICAN TOWER CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 001-14195 65-0723837
(State or Other Jurisdiction (COMMISSION FILE (IRS EMPLOYER
of Incorporation) NUMBER) IDENTIFICATION NO.)
116 Huntington Avenue
Boston, Massachusetts 02116
(Address of Principal Executive Offices) (Zip Code)
(617) 375-7500
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
ITEM 9. REGULATION FD DISCLOSURE.
On October 30, 2000, American Tower Corporation (the "Company") filed a
Current Report on Form 8-K to furnish certain information about the Company that
it planned to present to current and prospective stockholders and other
persons and institutions who may be interested in the Company and its business,
finances or securities in various forums, including presentations at industry
conferences and one-on-one or group meetings with investors or other interested
parties. This information included excerpts from the Company's vision statement
for 2005 and other investor relations presentation materials.
The purpose of this filing is to update some of the information previously
furnished and to provide other information that the Company may use in
presentations as described above. The Company views the information in its
vision statement for 2005 as long-term goals. The Company believes that this
vision represents a possible scenario of what it may look like in the year 2005.
All statements from the vision statement, as well as the other statements that
are furnished in this report under the caption "Certain Information That
May Be Included In Company Presentations" are forward-looking statements.
Forward-looking statements are statements about the Company's projections,
plans, objectives, future events or performance and underlying assumptions and
other statements which are not statements of historical fact. Forward-looking
statements are subject to important factors that could cause actual results to
differ materially from those indicated in the forward-looking statements. These
important factors include, but are not limited to, the factors set forth below
under the caption "Factors That May Affect Future Results". The Company
undertakes no obligation to update forward-looking statements to reflect
subsequently occurring events or circumstances.
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Certain Information That May Be Included In Company Presentations
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The Company goal for new construction in the year 2001 is to build at least
2,000 towers.
The Company believes that one possible scenario for achieving its weighted
average cost per tower goal of $250,000 for a 25,000 site portfolio in 2005
would be by creating a portfolio of the following components:
Sites Average Cost Total Cost
------ ------------ --------------
New Construction 13,000 $190,000 $2,500,000,000
Carrier Acquisitions 6,000 300,000 1,800,000,000
Other Acquisitions 6,000 315,000 1,900,000,000
Weighted Avg. Cost $250,000
Total Investment $6,200,000,000
The Company believes that towers with an average cost of $250,000 should
produce a Return on Assets, as defined as revenue less operating cost divided by
tower cost (ROA), in excess of 20% based on the following assumptions:
. The industry standard assumption for a typical broadband rental revenue
rate in the year 2001 is $18,000 per year.
. Typical rental rates escalate between 3% and 5% per year through 2005.
. The Company achieves its average broadband equivalent tenant per tower
goal of three.
. The Company's assumption for typical site operating costs in the year
2001 is $10,000 per year.
. Typical operating costs escalate between 5% and 6% per year through 2005.
If the Company exceeds its average broadband tenant per tower goal and
achieves an average of 3.5 broadband tenants per tower, the ROA could exceed
25%.
As of December 31, 2000, the Company had achieved the following
annualized revenue per tower, broadband equivalent (BBE) tenants per tower, and
tower cash flow (TCF) margins for towers added to its portfolio over the past
four years:
Percent of Date Annualized BBE TCF
Total Towers Added Revenue/Tower Tenants Margin
-------------- --------- ------------- ------- -------
5% 1997 $66,800 3.7 77%
17% 1998 43,200 2.4 73%
22% 1999 32,100 1.8 63%
56% 2000 20,100 1.1 61%
44% 1997-1999 40,100 2.2 70%
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In the first quarter 2001, the Company estimates that new business was
driven primarily by U.S. broadband customers representing 67% of new business.
Estimated additional new business was driven by Mexican broadband customers
representing 11% of new business; fixed wireless, satellite and narrowband
customers representing 11% of new business; data and internet representing 5% of
new business, broadcast representing 5% of new business, and other representing
1% of new business.
The Company believes that demand for co-location is driven by four basic
customer needs. Based on communications with customers, the Company estimates
that actual co-locations in the year 2000 and expected co-locations for the year
2001 are broken down as follows:
Need Driven By 2000 2001 Expected
- ------------------------- -------------------- ---- -------------
Capacity Minutes of Use 40% 55%
Fill-In Quality Demands 15% 10%
Coverage Growth Initiatives 45% 25%
Equipment Upgrades Growth Initiatives & Minimal 10%
Competitive Need to
Maintain Advanced
Technology
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Factors That May Affect Future Results
--------------------------------------
We operate in a rapidly changing environment that involves a number of
risks, some of which are beyond our control. The following discussion
highlights some of the risks that may affect future operating results.
DECREASE IN DEMAND FOR TOWER SPACE WOULD MATERIALLY AND ADVERSELY AFFECT OUR
CASH FLOW AND WE CANNOT CONTROL THAT DEMAND.
Many of the factors affecting the demand for tower space, and to a lesser
extent our services business, affect our cash flow. Those factors include:
. consumer demand for wireless services;
. the financial condition of wireless service providers and their
preference for owning rather than leasing antenna sites;
. the growth rate of wireless communications or of a particular wireless
segment;
. the number of wireless service providers in a particular segment,
nationally or locally;
. governmental licensing of broadcast rights;
. increased use of roaming and resale arrangements by wireless service
providers. These arrangements enable a provider to serve customers
outside its license area, to give licensed providers the right to enter
into arrangements to serve overlapping license areas and to permit
nonlicensed providers to enter the wireless marketplace. Wireless
service providers might consider such roaming and resale arrangements as
superior to constructing their own facilities or leasing antenna space
from us;
. zoning, environmental and other government regulations; and
. technological changes.
The demand for antenna space is dependent, to a significantly lesser extent,
on the needs of television and radio broadcasters. Among other things, certain
technological advances, including the development of satellite-delivered
radio, may reduce the need for tower-based broadcast transmission. We could
also be affected adversely should the development of digital television be
delayed or impaired, or if demand for it were to be less than anticipated
because of delays, disappointing technical performance or cost to the
consumer.
A significant general slow down in the economy in 2001 or beyond could
negatively affect the foregoing factors influencing demand for tower space and
tower related services. For example, such a slow down could reduce consumer
demand for wireless services, thereby causing providers to delay implementation
of new systems and technologies. We also believe that the economic slow down in
2001 has already harmed, and may continue to harm, the financial condition of
some wireless service providers.
OUR SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT
OUR CASH FLOW AND OUR ABILITY TO MAKE PAYMENTS ON OUR SENIOR NOTES.
We have a substantial amount of outstanding indebtedness. After giving
effect to our sale of 10.0 million shares of Class A common stock in January
2001, our sale of $1.0 billion of 9 3/8% senior notes due 2009 in January 2001
and borrowings that we assume we would have made to close acquisitions that
were pending as of December 31, 2000, we would have had at December 31, 2000
approximately $3.4 billion of consolidated debt and a debt to equity ratio of
1.05 to 1. Our substantial level of indebtedness increases the possibility
that we may be unable to generate cash sufficient to pay when due the
principal of, interest on or other amounts due in respect of our indebtedness.
We may also obtain additional long-term debt and working capital lines of
credit to meet future financing needs. This would have the effect of
increasing our total leverage.
Our substantial leverage could have significant negative consequences,
including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. limiting our ability to obtain additional financing;
. requiring the dedication of a substantial portion of our cash flow from
operations to service our indebtedness, thereby reducing the amount of
our cash flow available for other purposes, including capital
expenditures;
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. requiring us to sell debt or equity securities or to sell some of our
core assets, possibly on unfavorable terms, to meet payment obligations;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industries in which we compete; and
. placing us at a possible competitive disadvantage with less leveraged
competitors and competitors that may have better access to capital
resources.
A significant portion of our outstanding indebtedness bears interest at
floating rates. As a result, our interest payment obligations on such
indebtedness will increase if interest rates increase.
RESTRICTIVE COVENANTS IN OUR CREDIT FACILITIES AND OUR SENIOR NOTES COULD
ADVERSELY AFFECT OUR BUSINESS BY LIMITING FLEXIBILITY.
The indenture for our senior notes due 2009 and our credit facilities
contain restrictive covenants that limit our ability to take various actions
and engage in various types of transactions. These restrictions include:
. paying dividends and making distributions or other restricted payments;
. incurring more debt, guaranteeing indebtedness and issuing preferred
stock;
. issuing stock of certain subsidiaries;
. making certain investments;
. creating liens;
. entering into transactions with affiliates;
. entering into sale-leaseback transactions; and
. merging, consolidating or selling assets.
These covenants could have an adverse effect on our business by limiting our
ability to take advantage of financing, merger and acquisition or other
corporate opportunities.
BUILD-TO-SUIT CONSTRUCTION PROJECTS AND MAJOR ACQUISITIONS FROM WIRELESS
SERVICE PROVIDERS INCREASE OUR DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS,
THE LOSS OF WHICH COULD MATERIALLY DECREASE REVENUES, AND MAY ALSO INVOLVE
LESS FAVORABLE TERMS.
Our increasing focus on major build-to-suit projects for wireless service
providers and related acquisitions entail several unique risks. First is our
greater dependence on a limited number of customers and the risk that customer
losses could materially decrease revenues. Another risk is that our agreements
with these wireless service providers have lease and control terms that are
more favorable to them than the terms we give our tenants generally. In
addition, although we have the benefit of an anchor tenant in build-to-suit
projects, we may not be able to find a sufficient number of additional
tenants. In fact, one reason wireless service providers may prefer build-to-
suit arrangements is to share or escape the costs of an undesirable site. A
site may be undesirable because it has high construction costs or may be
considered a poor location by other providers.
OUR EXPANDED CONSTRUCTION PROGRAM INCREASES OUR EXPOSURE TO RISKS THAT COULD
INCREASE COSTS AND ADVERSELY AFFECT OUR EARNINGS AND GROWTH.
Our expanded construction activities involve substantial risks. These risks
include:
. increasing our debt and the amount of payments on that debt;
. increasing competition for construction sites and experienced tower
construction companies, resulting in significantly higher costs and
failure to meet time schedules;
. failing to meet time schedules, which could result in our paying
significant penalties to prospective tenants, particularly in build-to-
suit situations; and
. possible lack of sufficient experienced personnel to manage an expanded
construction program.
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IF WE ARE UNABLE TO CONSTRUCT OR ACQUIRE NEW TOWERS AT THE PACE, IN THE
LOCATIONS AND AT THE COSTS THAT WE DESIRE, OUR BUSINESS WOULD BE ADVERSELY
AFFECTED.
Our growth strategy depends in part on our ability to construct and acquire
towers in locations and on a time schedule that meets the requirements of our
customers. If our tower construction and acquisition projects fail to meet the
requirements of our customers, or fail to meet their requirements at our
projected costs, our business would be adversely affected. If we are unable to
build new towers where and when our customers require them, or where and when
we believe the best opportunity to add tenants exists, we could fail to meet
our contractual obligations under build-to-suit agreements, and we could lose
opportunities to lease space on our towers. Our ability to construct a tower
at a location, on a schedule and at a cost we project can be affected by a
number of factors beyond our control, including:
. zoning, and local permitting requirements and national regulatory
approvals;
. environmental opposition;
. availability of skilled construction personnel and construction
equipment;
. adverse weather conditions; and
. increased competition for tower sites, construction materials and labor.
INCREASING COMPETITION IN THE SATELLITE AND FIBER NETWORK ACCESS SERVICES
MARKET MAY SLOW VERESTAR'S GROWTH AND ADVERSELY AFFECT ITS BUSINESS.
In the satellite and fiber network access services market, Verestar competes
with other satellite communications companies that provide similar services,
as well as other communications service providers. Some of Verestar's existing
and potential competitors consist of companies from whom Verestar currently
leases satellite and fiber network access in connection with the provision of
Verestar's services to its customers. Increased competition could result in
Verestar being forced to reduce the fees it charges for its services and may
limit Verestar's ability to obtain, on economical terms, services that are
critical to its business. We anticipate that Verestar's competitors may
develop or acquire services that provide functionality that is similar to that
provided by Verestar's services and that those competitive services may be
offered at significantly lower prices or bundled with other services. Many of
the existing and potential competitors have financial and other resources
significantly greater than those available to Verestar.
IF WE CANNOT KEEP RAISING CAPITAL, OUR GROWTH WILL BE IMPEDED.
Without additional capital, we would need to curtail our acquisition and
construction programs that are essential for our long-term success. We expect
to use borrowed funds to satisfy a substantial portion of our capital needs.
However, we must continue to satisfy financial ratios and to comply with
financial and other covenants in order to do so. If our revenues and cash flow
do not meet expectations, we may lose our ability to borrow money or to do so
on terms we consider to be favorable. Conditions in the capital markets also
will affect our ability to borrow, as well as the terms of those borrowings.
All of these factors could also make it difficult or impossible for us
otherwise to raise capital, particularly on terms we would consider favorable.
IF WE CANNOT SUCCESSFULLY INTEGRATE ACQUIRED SITES OR BUSINESSES OR MANAGE
OUR OPERATIONS AS WE GROW, OUR BUSINESS WILL BE ADVERSELY AFFECTED AND OUR
GROWTH MAY SLOW OR STOP.
A significant part of our growth strategy is the continued pursuit of
strategic acquisitions of independent tower operators and consolidators,
wireless service providers and service and teleport businesses. We cannot
assure you, however, that we will be able to integrate successfully acquired
businesses and assets into our existing business. During 2000, we have
consummated more than 60 transactions involving the acquisition of more than
4,600 communications sites and related businesses and several satellite and
fiber network access services businesses and related businesses. Our growth
has placed, and will continue to place, a significant strain on our management
and operating and financial systems. Successful integration of these and any
future acquisitions will depend primarily on our ability to manage these
assets and combined operations and, with
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respect to the services and satellite and fiber network access services
businesses, to integrate new management and employees into our existing
operations.
IF OUR CHIEF EXECUTIVE OFFICER LEFT, WE WOULD BE ADVERSELY AFFECTED BECAUSE
WE RELY ON HIS REPUTATION AND EXPERTISE, AND BECAUSE OF OUR RELATIVELY SMALL
SENIOR MANAGEMENT TEAM.
The loss of our chief executive officer, Steven B. Dodge, has a greater
likelihood of having a material adverse effect upon us than it would on most
other companies of our size because of our comparatively smaller executive
group and our reliance on Mr. Dodge's expertise. Our growth strategy is highly
dependent on the efforts of Mr. Dodge. Our ability to raise capital also
depends significantly on the reputation of Mr. Dodge. You should be aware that
we have not entered into an employment agreement with Mr. Dodge. The tower
industry is relatively new and does not have a large group of seasoned
executives from which we could recruit a replacement for Mr. Dodge.
EXPANDING OPERATIONS INTO FOREIGN COUNTRIES COULD CREATE EXPROPRIATION,
GOVERNMENTAL REGULATION, FUNDS INACCESSIBILITY, FOREIGN EXCHANGE EXPOSURE AND
MANAGEMENT PROBLEMS.
Our recent expansion into Canada and Mexico, and other possible foreign
operations in the future, could result in adverse financial consequences and
operational problems not experienced in the United States. We have made a
substantial loan to a Mexican company and are committed to construct a sizable
number of towers in that country. We have also invested in a Canadian joint
venture that intends to acquire and construct towers in that country. We may
also engage in comparable transactions in other countries in the future. Among
the risks of foreign operations are governmental expropriation and regulation,
inability to repatriate earnings or other funds, currency fluctuations,
difficulty in recruiting trained personnel, and language and cultural
differences, all of which could impair our ability to manage and control
operations.
NEW TECHNOLOGIES COULD MAKE OUR TOWER ANTENNA LEASING SERVICES LESS DESIRABLE
TO POTENTIAL TENANTS AND RESULT IN DECREASING REVENUES
The development and implementation of signal combining technologies, which
permit one antenna to service two different transmission frequencies and,
thereby, two customers, may reduce the need for tower-based broadcast
transmission and hence demand for our antenna space.
Mobile satellite systems and other new technologies could compete with land-
based wireless communications systems, thereby reducing the demand for tower
lease space and other services we provide. The Federal Communication
Commission has granted license applications for several low-earth orbiting
satellite systems that are intended to provide mobile voice or data services.
In addition, the emergence of new technologies could reduce the need for
tower-based transmission and reception and have an adverse effect on our
operations. The growth in delivery of video services by direct broadcast
satellites could also adversely affect demand for our antenna space.
WE COULD HAVE LIABILITY UNDER ENVIRONMENTAL LAWS.
Under various federal, state and local environmental laws, we, as an owner,
lessee or operator of more than 13,600 real estate sites, after giving effect to
our pending transactions, may be liable for the substantial costs of remediating
soil and groundwater contaminated by hazardous wastes. Certain of these laws
impose cleanup responsibility and liability without regard to whether the owner
or operator of the real estate or facility knew of or was responsible for the
contamination, and whether or not operations at the property have been
discontinued or title to the property has been transferred. The owner or
operator of contaminated real estate also may be subject to common law claims by
third parties based on damages and costs resulting from off-site migration of
the contamination. In connection with our former and current ownership or
operation of our properties, we may be potentially liable for those types of
environmental costs.
OUR BUSINESS IS SUBJECT TO GOVERNMENT REGULATIONS AND CHANGES IN CURRENT OR
FUTURE LAWS OR REGULATIONS COULD RESTRICT OUR ABILITY TO OPERATE OUR BUSINESS
AS WE CURRENTLY DO.
We are subject to federal, state and local and foreign regulation of our
business. Both the FCC and the FAA regulate towers used for wireless
communications and radio and television antennae. In addition, the FCC
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separately regulates wireless communication devices operating on towers and
licenses and regulates television and radio stations broadcasting from towers.
Similar regulations exist in Mexico, Canada and other foreign countries
regarding wireless communications and the operation of communications towers.
Failure to comply with applicable requirements may lead to monetary penalties
and may require us to indemnify our customers against any such failure to
comply. New regulations may impose additional costly burdens on us, which may
affect our revenues and cause delays in our growth. On January 16, 2001, the
FCC issued a NOTICE OF APPARENT LIABILITY FOR FORFEITURE against us for
apparent violations of some FCC rules regarding the registration of
communication towers and, in one instance, the lighting requirements for
communication towers. This action involves a proposed fine of $212,000. In
addition, the FCC has ordered its Enforcement Division to conduct a further
investigation of our administrative compliance. At this time we are unable to
predict the outcome of the NOTICE OF APPARENT LIABILITY FOR FORFEITURE or any
further investigation.
OUR COSTS COULD INCREASE AND OUR REVENUES COULD DECREASE DUE TO PERCEIVED
HEALTH RISKS FROM RADIO EMISSIONS, ESPECIALLY IF THESE PERCEIVED RISKS ARE
SUBSTANTIATED.
Public perception of possible health risks associated with cellular and
other wireless communications media could slow the growth of wireless
companies, which could in turn slow our growth. In particular, negative public
perception of, and regulations regarding, these perceived health risks could
slow the market acceptance of wireless communications services.
If a connection between radio emissions and possible negative health
effects, including cancer, were established, our operations, costs and
revenues would be materially and adversely affected. We do not maintain any
significant insurance with respect to these matters.
CONTROL BY OUR PRINCIPAL STOCKHOLDERS COULD DETER MERGERS WHERE YOU COULD GET
MORE THAN CURRENT MARKET PRICE FOR YOUR STOCK.
Steven B. Dodge, together with his affiliates, owned approximately 26.0% of
our total voting power as of February 28, 2001. Control by Mr. Dodge and
others may discourage a merger or other takeover of our company in which
holders of common stock may be paid a premium for their shares over then-
current market prices. Mr. Dodge, together with a limited number of our
directors, may be able to control or block the vote on mergers and other
matters submitted to the common stockholders.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN TOWER CORPORATION
(Registrant)
Date: March 29, 2001 By: /s/ Justin D. Benincasa
----------------------------------
Name: Justin Benincasa
Title: Senior Vice President and
Corporate Controller
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