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TMCNet:  AMERICAN TOWER CORP /MA/ - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[February 27, 2013]

AMERICAN TOWER CORP /MA/ - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) The discussion and analysis of our financial condition and results of operations that follow are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ significantly from these estimates under different assumptions or conditions. This discussion should be read in conjunction with our consolidated financial statements herein and the accompanying notes thereto, and the information set forth under the caption "Critical Accounting Policies and Estimates" below.



Our continuing operations are reported in three segments, domestic rental and management, international rental and management and network and development services. Among other factors, management uses segment gross margin and segment operating profit in its assessment of operating performance in each business segment. We define segment gross margin as segment revenue less segment operating expenses, excluding stock-based compensation recorded in costs of operations; depreciation, amortization and accretion; selling, general, administrative and development expense; and other operating expense. We define segment operating profit as segment gross margin less selling, general, administrative and development expense attributable to the segment, excluding stock-based compensation expense and corporate expenses. Segment gross margin and segment operating profit for the international rental and management segment also include interest income, TV Azteca, net (see note 20 to our consolidated financial statements included herein). These measures of segment gross margin and segment operating profit are also before interest income, interest expense, loss on retirement of long-term obligations, other income (expense), net income (loss) attributable to noncontrolling interest, income (loss) on equity method investments, income taxes and discontinued operations.

Executive Overview Our primary business is leasing antenna space on multi-tenant communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. In addition to the communications sites in our portfolio, we manage rooftop and tower sites for property owners under various contractual arrangements. We also hold property interests that we lease to communications service providers and third-party tower operators. We refer to this business as our rental and management operations, which accounted for approximately 97% of our total revenues for the year ended December 31, 2012 and includes our domestic rental and management segment and our international rental and management segment. Through our network development services segment, we offer tower-related services domestically, including site acquisition, zoning and permitting services and structural analysis services, which primarily support our site leasing business and the addition of new tenants and equipment on our sites. We began operating as a REIT for federal income tax purposes effective January 1, 2012.

29 -------------------------------------------------------------------------------- Table of Contents The following table details the number of communications sites we own or operate in the countries in which we operate as of December 31, 2012: Number of Number of Country Owned Sites Operated Sites(1) United States 16,378 6,421 International: Brazil 4,193 155 Chile 1,181 - Colombia 2,298 706 Germany 2,031 - Ghana 1,931 - India 10,383 - Mexico 5,581 199 Peru 500 - South Africa 1,604 - Uganda 1,043 - (1) All of the sites we operate are held pursuant to long-term capital leases, including those subject to purchase options.

The majority of our tenant leases with wireless carriers are typically for an initial non-cancellable term of five to ten years, with multiple five-year renewal terms thereafter. Accordingly, nearly all of the revenue generated by our rental and management operations during the year ended December 31, 2012 is recurring revenue that we should continue to receive in future periods. Based upon foreign currency exchange rates and the tenant leases in place as of December 31, 2012, we expect to generate approximately $20 billion of non-cancellable tenant lease revenue over future periods, excluding the impact of straight-line lease accounting. In addition, most of our tenant leases have provisions that periodically increase the rent due under the lease, typically annually based on a fixed percentage (on average approximately 3.5% in the United States), inflation, or inflation with a fixed minimum or maximum escalation for the year. Revenue generated by rent increases based on fixed escalation clauses is recognized on a straight line basis over the non-cancellable term of the applicable agreement. We also routinely seek to extend our leases with our tenants, which increases the non-cancellable term of the lease and creates incremental growth in our revenues.

The revenues generated by our rental and management operations may also be affected by cancellations of existing tenant leases. As discussed above, most of our tenant leases with wireless carriers and broadcasters are multi-year contracts, which typically are non-cancellable; however in some instances, a lease may be cancelled upon the payment of a termination fee.

Revenue lost from either cancellations of leases at the end of their terms or rent negotiations historically have not had a material adverse effect on the revenues generated by our rental and management operations. During the year ended December 31, 2012, loss of annual revenue from tenant lease cancellations or renegotiations represented less than 1.3% of our rental and management operations revenues.

Rental and Management Operations Revenue Growth. The primary factors affecting the revenue growth for our domestic and international rental and management segments are: • Recurring revenues from tenant leases generated from sites which existed in our portfolio as of the beginning of the prior year period ("legacy sites"); • Contractual rent escalations on existing tenant leases, net of cancellations; • New revenue generated from leasing additional space on our legacy sites; and • New revenue generated from new sites acquired or constructed since the beginning of the prior year period ("new sites").

30 -------------------------------------------------------------------------------- Table of Contents We continue to believe that our site leasing revenue is likely to increase due to the growing use of wireless communications services and our ability to meet that demand by adding new tenants and new equipment for existing tenants on our legacy sites, which increases the utilization and profitability of our sites. In addition, we believe the majority of our site leasing activity will continue to come from wireless service providers. Our legacy site portfolio and our established tenant base provide us with new business opportunities, which have historically resulted in consistent and predictable organic revenue growth as wireless carriers seek to increase the coverage and capacity of their networks as well as roll out next generation wireless technologies. In addition, we intend to continue to supplement the organic growth on our legacy sites by selectively developing or acquiring new sites in our existing and new markets where we can achieve our risk adjusted return on investment criteria.

Rental and Management Operations Organic Revenue Growth. Consistent with our strategy to increase the utilization and return on investment of our legacy sites, our objective is to add new tenants and new equipment for existing tenants through collocation. Our ability to lease additional space on our sites is primarily a function of the rate at which wireless carriers deploy capital to improve and expand their wireless networks. This rate, in turn, is influenced by the growth of wireless communications services and related infrastructure needs, the financial performance of our tenants and their access to capital, and general economic conditions. The following key trends within each market that we serve provide opportunities for organic revenue growth: • Domestic. As a result of the rapid subscriber adoption of wireless data applications, wireless service providers in the United States continue to invest in their wireless networks by adding new cell sites as well as additional equipment to their existing cell sites. This level of wireless communications services growth has driven wireless providers in the United States to deploy consistent levels of annual wireless capital investment and as a result, we have experienced strong demand for our communications sites.

We expect the following key industry trends will result in incremental revenue opportunities for us: • The deployment of advanced wireless technology across existing wireless networks will provide higher speed data services and enable fixed broadband substitution. As a result, our tenantscontinue to deploy additional equipment across their existing networks.

• Wireless service providers compete based on the overall capacity and coverage of their existing wireless networks. To maintain or improve their network performance as overall network usage increases, our tenants continue to deploy additional equipment across their existing sites as well as add new cell sites.

• Wireless service providers are also investing in reinforcing their networks through incremental backhaul and the utilization of on-site generators, which results in additional equipment leased at the tower site.

• Wireless service providers continue to acquire additional spectrum, and as a result are expected to add additional equipment to their network as they seek to optimize their network configuration.

We signed holistic master lease agreements with three of our four major tenants in the United States, which provide for consistent, long-term revenue growth and a reduction in the potential impact of churn. Typically, these agreements include built-in annual escalators, fixed annual charges which permit our tenants to place a pre-determined amount of equipment on our sites and provisions for incremental lease payments if the equipment levels are exceeded.

Our holistic master lease agreements build and foster strong strategic partnerships with our tenants and have significantly reduced collocation cycle times, thereby providing our tenants with the ability to rapidly deploy technology on our sites.

• International. Most of our international markets are less advanced with respect to the current technologies deployed for wireless services. As a result, demand for our communications sites is predominantly driven by continued voice network investments, new market entrants and initial third generation ("3G") data network deployments. For example, in India, nationwide voice networks 31 -------------------------------------------------------------------------------- Table of Contents continue to be deployed as wireless service providers are beginning their investments in 3G data networks. Similarly, in Ghana and Uganda, wireless service providers continue to build out their voice and data networks in order to satisfy increasing demand for wireless services. In South Africa, where voice networks are in a more advanced stage of development, carriers are beginning to deploy 3G data networks across spectrum acquired in recent spectrum auctions. In Mexico and Brazil, where nationwide voice networks have also been deployed, some incumbent wireless service providers continue to invest in their 3G data networks, and recent spectrum auctions have enabled other incumbent wireless service providers to begin their initial investments in 3G data networks. In markets such as Chile, Peru and Colombia, recent or anticipated spectrum auctions are expected to drive investment in nationwide voice and 3G data networks. In Germany, our most mature international wireless market, demand is currently being driven by a government-mandated rural fourth generation network build-out, as well as other tenant initiatives to deploy next generation wireless services. We believe incremental demand for our tower sites will continue in our international markets as wireless service providers seek to remain competitive by increasing the coverage of their networks while also investing in next generation data networks.

Rental and Management Operations New Site Revenue Growth. During the year ended December 31, 2012, we grew our portfolio of communications real estate through acquisitions and construction activities, including the acquisition and construction of approximately 8,810 sites. In a majority of our international markets, the acquisition or construction of new sites results in increased pass-through revenues and expenses. We continue to evaluate opportunities to acquire larger communications real estate portfolios, both domestically and internationally, to determine whether they meet our risk adjusted hurdle rates and whether we believe we can effectively integrate them into our existing portfolio.

New Sites (Acquired or Constructed) 2012 2011 2010 Domestic 960 470 950 International(1) 7,850 10,000 6,870 (1) The majority of sites acquired or constructed in 2012 were in Brazil, Germany, India and Uganda; in 2011 were in Brazil, Colombia, Ghana, India, Mexico and South Africa; and in 2010 were in Chile, Colombia, India and Peru.

Network Development Services Segment Revenue Growth. As we continue to focus on growing our rental and management operations, we anticipate that our network development services revenue will continue to represent a relatively small percentage of our total revenues. Through our network development services segment, we offer tower-related services, including site acquisition, zoning and permitting services and structural analysis services, which primarily support our site leasing business and the addition of new tenants and equipment on our sites, including in connection with provider network upgrades.

Rental and Management Operations Expenses. Direct operating expenses incurred by our domestic and international rental and management segments include direct site level expenses and consist primarily of ground rent, property taxes, repairs and maintenance, security and power and fuel costs, some of which may be passed through to our tenants. These segment direct operating expenses exclude all segment and corporate selling, general, administrative and development expenses, which are aggregated into one line item entitled selling, general, administrative and development expense in our consolidated statements of operations. In general, our domestic and international rental and management segments selling, general, administrative and development expenses do not significantly increase as a result of adding incremental tenants to our legacy sites and typically increase only modestly year-over-year. As a result, leasing additional space to new tenants on our legacy sites provides significant incremental cash flow. We may incur additional segment selling, general, administrative and development expenses as we increase our presence in geographic areas where we have recently launched operations or are focused on expanding our portfolio. Our profit margin growth is therefore positively impacted by the addition of new tenants to our legacy sites and can be temporarily diluted by our development activities.

32-------------------------------------------------------------------------------- Table of Contents REIT Conversion. We began operating as a REIT effective January 1, 2012. The REIT tax rules require that we derive most of our income, other than income generated by a TRS, from investments in real estate, which for us primarily consists of income from the leasing of our communications sites. Under the Code, maintaining REIT status generally requires that no more than 25% of the value of the REIT's assets be represented by securities of one or more TRSs and other non-qualifying assets.

A REIT must annually distribute to its stockholders an amount equal to at least 90% of its REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). During the year ended December 31, 2012, we paid an aggregate of approximately $355.6 million in regular cash distributions to our stockholders. We intend to continue paying regular distributions in 2013. The amount, timing and frequency of future distributions will be at the sole discretion of our Board of Directors and will be declared based upon various factors, a number of which may be beyond our control, including our financial condition and operating cash flows, the amount required to maintain REIT status and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in our existing and future debt instruments, our ability to utilize NOLs to offset, in whole or in part, our distribution requirements, limitations on our ability to fund distributions using cash generated through our TRSs and other factors that our Board of Directors may deem relevant.

For more information on the requirements to qualify as a REIT, see Item 1 of this Annual Report under the caption "Business-Overview," and Item 1A of this Annual Report under the caption "Risk Factors-If we fail to qualify as a REIT or fail to remain qualified as a REIT, we would be subject to tax at corporate income tax rates, which would substantially reduce funds otherwise available" and "-Certain of our business activities may be subject to corporate level income tax and foreign taxes, which reduce our cash flows, and may have deferred and contingent tax liabilities." Non-GAAP Financial Measures Included in our analysis of our results of operations are discussions regarding earnings before interest, taxes, depreciation, amortization and accretion, as adjusted ("Adjusted EBITDA"). We define Adjusted EBITDA as net income before: income (loss) on discontinued operations, net; income (loss) from equity method investments; income tax provision (benefit); other income (expense); loss on retirement of long-term obligations; interest expense; interest income; other operating expenses; depreciation, amortization and accretion; and stock-based compensation expense.

Adjusted EBITDA is not intended to replace net income or any other performance measures determined in accordance with GAAP. Rather, Adjusted EBITDA is presented as we believe it is a useful indicator of our current operating performance. We believe that Adjusted EBITDA is useful to an investor in evaluating our operating performance because (1) it is a key measure used by our management team for purposes of decision making and for evaluating the performance of our operating segments; (2) it is a component of the calculation used by our lenders to determine compliance with certain debt covenants; (3) it is widely used in the tower industry to measure operating performance as depreciation, amortization and accretion may vary significantly among companies depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (4) it provides investors with a meaningful measure for evaluating our period to period operating performance by eliminating items which are not operational in nature; and (5) it provides investors with a measure for comparing our results of operations to those of different companies by excluding the impact of long-term strategic decisions which can differ significantly from company to company, such as decisions with respect to capital structure, capital investments and the tax jurisdictions in which companies operate.

Our measurement of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. A reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, has been included below.

33-------------------------------------------------------------------------------- Table of Contents Results of Operations Years Ended December 31, 2012 and 2011 (in thousands, except percentages) Revenue Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Rental and management Domestic $ 1,940,689 $ 1,744,260 $ 196,429 11 % International 862,801 641,925 220,876 34 Total rental and management 2,803,490 2,386,185 417,305 17 Network development services 72,470 57,347 15,123 26 Total revenues $ 2,875,960 $ 2,443,532 $ 432,428 18 % Total revenues for the year ended December 31, 2012 increased 18% to $2,876.0 million. The increase was primarily attributable to an increase in both of our rental and management segments, including organic revenue growth attributable to our legacy sites and revenue growth attributable to the approximately 19,280 new sites that we have constructed or acquired since January 1, 2011.

Domestic rental and management segment revenue for the year ended December 31, 2012 increased 11% to $1,940.7 million. This growth was comprised of: • Revenue growth from legacy sites of approximately 8%, which includes approximately 2% attributable to contractual rent escalations, net of tenant lease cancellations, and approximately 6% due to incremental revenue primarily generated from new tenant leases and amendments to existing tenant leases on our legacy sites, which includes the positive impact of approximately 1% due to customer settlements during the first quarter of 2012; • Revenue growth from new sites of approximately 2%, resulting from the construction or acquisition of approximately 1,430 new sites, as well as land interests under third-party sites since January 1, 2011; and • An increase of over 1% from the impact of straight-line lease accounting.

International rental and management segment revenue for the year ended December 31, 2012 increased 34% to $862.8 million. This growth was comprised of: • Revenue growth from new sites of approximately 38%, resulting from the construction or acquisition of approximately 17,850 new sites since January 1, 2011; • Revenue growth from legacy sites of approximately 10%, which includes approximately 7% due to incremental revenue primarily generated from new tenant leases and amendments to existing tenant leases on our legacy sites, approximately 2% attributable to contractual rent escalations, net of tenant lease cancellations, and approximately 1% for the reversal of revenue reserves; and • A decline of over 14% attributable to the negative impact from foreign currency translation.

Network development services segment revenue for the year ended December 31, 2012 increased 26% to $72.5 million. The growth was comprised of: • Revenue growth of 32% primarily attributable to an increase in structural engineering services as a result of an increase in customer lease applications which are primarily associated with our tenants' next generation technology network upgrades during the year ended December 31, 2012; and • A decline of 6% resulting from a favorable one-time item recognized in connection with the reversal of amounts previously reserved during the year ended December 31, 2011.

34 -------------------------------------------------------------------------------- Table of Contents Gross Margin Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Rental and management Domestic $ 1,583,134 $ 1,390,802 $ 192,332 14 % International 548,726 420,430 128,296 31 Total rental and management 2,131,860 1,811,232 320,628 18 Network development services 37,640 27,887 9,753 35 Domestic rental and management segment gross margin for the year ended December 31, 2012 increased 14% to $1,583.1 million, which was comprised of: • Gross margin growth from legacy sites of approximately 11%, primarily associated with the increase in revenue, as described above, which was partially offset by an increase in direct operating costs primarily from increased straight-line rent expense and an increase in repairs and maintenance activity; and • Gross margin growth from new sites of approximately 3%, resulting from the construction or acquisition of approximately 1,430 new sites, as well as land interests under third-party sites since January 1, 2011.

International rental and management segment gross margin for the year ended December 31, 2012 increased 31% to $548.7 million, which was comprised of: • Gross margin growth from new sites of approximately 37%, resulting from the construction or acquisition of approximately 17,850 new sites since January 1, 2011; • Gross margin growth from legacy sites of approximately 8%, primarily associated with the increase in revenue, as described above; and • A decline of approximately 14% attributable to the negative impact from foreign currency translation.

Network development services segment gross margin for the year ended December 31, 2012 increased 35% to $37.6 million. The increase was primarily attributable to the increase in revenue described above.

Selling, General, Administrative and Development Expense Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Rental and management Domestic $ 85,663 $ 77,041 $ 8,622 11 % International 95,579 82,106 13,473 16 Total rental and management 181,242 159,147 22,095 14 Network development services 6,744 7,864 (1,120 ) (14 ) Other 139,315 121,813 17,502 14 Total selling, general, administrative and development expense $ 327,301 $ 288,824 $ 38,477 13 % Total selling, general, administrative and development expense ("SG&A") for the year ended December 31, 2012 increased 13% to $327.3 million. The increase was attributable to an increase in both of our rental and management segments, as well as an increase in our Other SG&A.

35-------------------------------------------------------------------------------- Table of Contents Domestic rental and management segment SG&A for the year ended December 31, 2012 increased 11% to $85.7 million. The increase was primarily attributable to the impact of initiatives that we launched during 2011, designed to drive growth and to support a growing portfolio, including increased staffing in field operations, sales and finance and other functions supporting the expansion of our business.

International rental and management segment SG&A for the year ended December 31, 2012 increased 16% to $95.6 million. The increase was primarily attributable to the launch of operations in our new markets as well as our continued investments in international expansion initiatives in foreign operations, partially offset by the reversal of approximately $3.8 million of bad debt expense in Mexico for amounts previously reserved.

Network development services segment SG&A for the year ended December 31, 2012 decreased 14% to $6.7 million. The decrease was primarily attributable to the reversal of bad debt expense upon the receipt of a customer payment for amounts previously reserved, partially offset by higher personnel related costs.

Other SG&A for the year ended December 31, 2012 increased 14% to $139.3 million.

The increase was primarily due to a $12.4 million increase in corporate expenses and a $5.1 million increase in SG&A related stock-based compensation expense.

The increase in corporate expenses was primarily attributable to incremental employee costs of approximately $8.7 million associated with supporting a growing global organization and a $3.7 million non-recurring state tax expense.

Operating Profit Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Rental and management Domestic $ 1,497,471 $ 1,313,761 $ 183,710 14 % International 453,147 338,324 114,823 34 Total rental and management 1,950,618 1,652,085 298,533 18 Network development services 30,896 20,023 10,873 54 Domestic rental and management segment operating profit for the year ended December 31, 2012 increased 14% to $1,497.5 million. The growth was primarily attributable to the increase in our domestic rental and management segment gross margin (14%) as described above, and was partially offset by increases in our domestic rental and management segment SG&A (11%), as described above.

International rental and management segment operating profit for the year ended December 31, 2012 increased 34% to $453.1 million. The growth was primarily attributable to the increase in our international rental and management segment gross margin (31%) as described above, and was partially offset by increases in our international rental and management segment SG&A (16%), as described above.

Network development services segment operating profit for the year ended December 31, 2012 increased 54% to $30.9 million. The growth was primarily attributable to the increase in network development services segment gross margin and the decrease in SG&A, as described above.

Depreciation, Amortization and Accretion Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Depreciation, amortization and accretion $ 644,276 $ 555,517 $ 88,759 16 % 36 -------------------------------------------------------------------------------- Table of Contents Depreciation, amortization and accretion for the year ended December 31, 2012 increased 16% to $644.3 million. The increase was primarily attributable to the depreciation, amortization and accretion associated with the acquisition or construction of approximately 19,280 sites since January 1, 2011, which resulted in an increase in property and equipment.

Other Operating Expenses Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Other operating expenses $ 62,185 $ 58,103 $ 4,082 7 % Other operating expenses for the year ended December 31, 2012 increased 7% to $62.2 million. This change was primarily attributable to an increase of approximately $17.0 million in impairment charges and loss on disposal of assets, which included an impairment charge of $10.8 million of one of our outdoor DAS networks, upon the termination of a tenant lease during the year ended December 31, 2012. This increase was partially offset by a decrease of approximately $12.9 million in acquisition related costs and non-recurring consulting and legal costs incurred in 2011 associated with our REIT Conversion.

Interest Expense Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Interest expense $ 401,665 $ 311,854 $ 89,811 29 % Interest expense for the year ended December 31, 2012 increased 29% to $401.7 million. The increase was primarily attributable to an increase in our average debt outstanding of approximately $1,617.3 million, which was primarily used to fund our recent acquisitions, and an increase in our annualized weighted average cost of borrowing from 5.32% to 5.37%.

Other Expense Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Other expense $ 38,300 $ 122,975 $ (84,675 ) (69 )% Other expense for the year ended December 31, 2012 decreased 69% to $38.3 million. The decrease was primarily a result of a decline in unrealized currency losses of $96.8 million. During the year ended December 31, 2012, we recorded unrealized foreign currency losses of approximately $34.3 million resulting primarily from fluctuations in the foreign currency exchange rates associated with our intercompany notes and similar unaffiliated balances denominated in a currency other than the subsidiaries' functional currencies and other expenses of approximately $4.0 million. During the year ended December 31, 2011, we recorded unrealized foreign currency losses of approximately $131.1 million and other miscellaneous income of $8.1 million.

Income Tax Provision Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Income tax provision $ 107,304 $ 125,080 $ (17,776 ) (14 )% Effective tax rate 15.3 % 24.7 % 37 -------------------------------------------------------------------------------- Table of Contents The income tax provision for the year ended December 31, 2012 decreased 14% to $107.3 million. The effective tax rate ("ETR") for the year ended December 31, 2012 decreased to 15.3% from 24.7%. This decrease was primarily attributable to our dividend paid deduction and decreased state taxes during the year ended December 31, 2012, partially offset by an increase in foreign taxes and valuation allowance on certain deferred tax assets. The deferred tax assets arose primarily as a result of purchase accounting and existing NOLs, which were generated partly from interest on intercompany debt.

As a REIT, we may deduct earnings distributed to stockholders against the income generated in our QRSs and, in addition, we are able to offset income in both our TRSs and QRSs by utilizing our NOLs, subject to specified limitations.

The ETR on income from continuing operations for the years ended December 31, 2012 and 2011 differs from the federal statutory rate primarily due to our expected qualification for taxation as a REIT effective as of January 1, 2012 and to adjustments for foreign items.

Net Income/Adjusted EBITDA Year Ended December 31, Amount of Percent Increase Increase 2012 2011 (Decrease) (Decrease) Net income $ 594,025 $ 381,840 $ 212,185 56 % Income on equity method investments (35 ) (25 ) 10 40 Income tax provision 107,304 125,080 (17,776 ) (14 ) Other expense 38,300 122,975 (84,675 ) (69 ) Loss on retirement of long-term obligations 398 - 398 N/A Interest expense 401,665 311,854 89,811 29 Interest income (7,680 ) (7,378 ) 302 4 Other operating expenses 62,185 58,103 4,082 7 Depreciation, amortization and accretion 644,276 555,517 88,759 16 Stock-based compensation expense 51,983 47,437 4,546 10 Adjusted EBITDA $ 1,892,421 $ 1,595,403 $ 297,018 19 % Net income for the year ended December 31, 2012 increased 56% to $594.0 million.

The increase was primarily attributable to an increase in our rental and management segments operating profit, as described above, as well as decreases in unrealized foreign currency losses and income tax provision, partially offset by increases in depreciation, amortization and accretion and interest expense.

Adjusted EBITDA for the year ended December 31, 2012 increased 19% to $1,892.4 million. Adjusted EBITDA growth was primarily attributable to the increase in our rental and management segments gross margin, and was partially offset by an increase in SG&A.

Years Ended December 31, 2011 and 2010 (in thousands, except percentages) Revenue Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease)Rental and management Domestic $ 1,744,260 $ 1,565,474 $ 178,786 11 % International 641,925 370,899 271,026 73 Total rental and management 2,386,185 1,936,373 449,812 23 Network development services 57,347 48,962 8,385 17 Total revenues $ 2,443,532 $ 1,985,335 $ 458,197 23 % 38 -------------------------------------------------------------------------------- Table of Contents Total revenues for the year ended December 31, 2011 increased 23% to $2,443.5 million. The increase was primarily attributable to an increase in both of our rental and management segments, including organic revenue growth attributable to our legacy sites and revenue growth attributable to the approximately 18,290 new communications sites, and property interests that we lease to communications service providers and third-party tower operators under approximately 1,810 communications sites, acquired since January 1, 2010.

Domestic rental and management segment revenue for the year ended December 31, 2011 increased 11% to $1,744.3 million. This growth was comprised of: • Approximately 9% from organic revenue growth, which was due to the incremental revenue generated from adding new tenants to legacy sites, existing tenants adding more equipment to legacy sites, contractual rent escalations, and a positive impact from straight-line lease accounting due to extending thousands of leases with one of our major tenants, partially offset by tenant lease cancellations; and • Revenue growth of approximately 2%, which was a result of the construction or acquisition of approximately 1,420 new domestic communications sites and the acquisition of property interests that we lease to communications service providers and third-party tower operators under approximately 1,810 communications sites since January 1, 2010.

International rental and management segment revenue for the year ended December 31, 2011 increased 73% to $641.9 million. This growth was comprised of: • Approximately 9% from organic revenue growth, which was due to the incremental revenue generated from adding new tenants to legacy sites, existing tenants adding more equipment to legacy sites, contractual rent escalations, a decrease in revenue reserves, the positive impact of foreign currency translation and the positive impact from straight-line lease accounting, and was partially offset by tenant lease cancellations; and • Revenue growth from new sites of approximately 64%, which was a result of the construction or acquisition of approximately 16,870 new international sites since January 1, 2010.

Network development services segment revenue for the year ended December 31, 2011 increased 17% to $57.3 million. The increase was primarily attributable to a number of favorable one-time items.

Gross Margin Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Rental and management Domestic $ 1,390,802 $ 1,240,114 $ 150,688 12 % International 420,430 262,842 157,588 60 Total rental and management 1,811,232 1,502,956 308,276 21 Network development services 27,887 22,005 5,882 27 Domestic rental and management segment gross margin for the year ended December 31, 2011 increased 12% to $1,390.8 million. The growth was primarily attributable to the increase in revenue as described above, and was partially offset by a 9% increase in direct operating costs, of which 6% was attributable to expense increases on our legacy domestic sites and 3% was attributable to the incremental direct operating costs associated with the addition of approximately 1,420 new domestic sites since January 1, 2010.

International rental and management segment gross margin for the year ended December 31, 2011 increased 60% to $420.4 million. The growth was primarily attributable to the increase in revenue as described above, and was partially offset by a 93% increase in direct operating costs, including pass-through expenses, of which 9% was attributable to expense increases on our legacy international sites and changes in foreign currency exchange 39-------------------------------------------------------------------------------- Table of Contents rates, and 84% was attributable to the incremental direct operating costs associated with the addition of approximately 16,870 new international sites since January 1, 2010.

Network development services segment gross margin for the year ended December 31, 2011 increased 27% to $27.9 million. The increase was primarily attributable to the increase in nonrecurring revenue described above.

Selling, General, Administrative and Development Expense Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Rental and management Domestic $ 77,041 $ 62,295 $ 14,746 24 % International 82,106 45,877 36,229 79 Total rental and management 159,147 108,172 50,975 47 Network development services 7,864 6,312 1,552 25 Other 121,813 115,285 6,528 6 Total selling, general, administrative and development expense $ 288,824 $ 229,769 $ 59,055 26 % Total SG&A for the year ended December 31, 2011 increased 26% to $288.8 million.

The increase was primarily attributable to an increase in both of our rental and management segments.

Domestic rental and management segment SG&A for the year ended December 31, 2011 increased 24% to $77.0 million. The increase was primarily attributable to initiatives designed to drive growth and to support a growing portfolio, including increased staffing in field operations, sales and finance, and other functions supporting the expansion of our business.

International rental and management segment SG&A for the year ended December 31, 2011 increased 79% to $82.1 million. The increase was primarily attributable to our increased international expansion initiatives in our foreign operations.

Network development services segment SG&A for the year ended December 31, 2011 increased 25% to $7.9 million. The increase was primarily attributable to costs incurred to support our new tower development and our site acquisition, zoning and permitting services.

Other SG&A for the year ended December 31, 2011 increased 6% to $121.8 million.

The increase was primarily due to a $14.0 million increase in corporate expenses, which was partially offset by a $7.4 million decrease in SG&A related stock-based compensation expense. The increase in corporate expenses was primarily attributable to incremental employee and increased information technology costs associated with supporting a growing global organization. The decrease in stock-based compensation expense was primarily attributable to the capitalization of approximately $3.1 million, which is now included in property and equipment as part of our cost to construct tower assets, and the recognition of approximately $2.3 million in costs of operations during the year ended December 31, 2011.

40 -------------------------------------------------------------------------------- Table of Contents Operating Profit Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Rental and management Domestic $ 1,313,761 $ 1,177,819 $ 135,942 12 % International 338,324 216,965 121,359 56 Total rental and management 1,652,085 1,394,784 257,301 18 Network development services 20,023 15,693 4,330 28 Domestic rental and management segment operating profit for the year ended December 31, 2011 increased 12% to $1,313.8 million. The growth was primarily attributable to the increase in our domestic rental and management segment gross margin (12%) as described above, and was partially offset by increases in our domestic rental and management segment SG&A (24%), as described above.

International rental and management segment operating profit for the year ended December 31, 2011 increased 56% to $338.3 million. The growth was primarily attributable to the increase in our international rental and management segment gross margin (60%) as described above, and was partially offset by increases in our international rental and management segment SG&A (79%), as described above.

Network development services segment operating profit for the year ended December 31, 2011 increased 28% to $20.0 million. The growth was primarily attributable to the increase in gross margin as described above.

Depreciation, Amortization and Accretion Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Depreciation, amortization and accretion $ 555,517 $ 460,726 $ 94,791 21 % Depreciation, amortization and accretion for the year ended December 31, 2011 increased 21% to $555.5 million. The increase was primarily attributable to the depreciation, amortization and accretion associated with the acquisition or construction of approximately 18,290 sites since January 1, 2010, which resulted in an increase in property and equipment.

Other Operating Expenses Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease)Other operating expenses $ 58,103 $ 35,876 $ 22,227 62 % Other operating expenses for the year ended December 31, 2011 increased 62% to $58.1 million. The increase was primarily attributable to an increase of approximately $21.5 million in acquisition related costs, including contingent consideration, and consulting and legal costs associated with our REIT Conversion that are non-recurring in nature.

Interest Expense Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Interest expense $ 311,854 $ 246,018 $ 65,836 27 % 41 -------------------------------------------------------------------------------- Table of Contents Interest expense for the year ended December 31, 2011 increased 27% to $311.9 million. The increase was primarily attributable to an increase in average debt outstanding of approximately $1.4 billion, primarily attributable to our recent acquisitions, partially offset by a reduction in our annualized weighted average cost of borrowing from 5.52% to 5.32%.

Other (Expense) Income Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Other (expense) income $ (122,975 ) $ 315 $ (123,290 ) N/A During the year ended December 31, 2011, we recorded unrealized foreign currency losses resulting primarily from fluctuations in the foreign currency exchange rates associated with our intercompany notes and similar unaffiliated balances denominated in a currency other than the subsidiaries' functional currencies of approximately $131.1 million and other miscellaneous income of $8.1 million.

During the year ended December 31, 2010, we recorded unrealized foreign currency gains of approximately $4.8 million and other miscellaneous expense of $4.5 million.

Income Tax Provision Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Income tax provision $ 125,080 $ 182,489 $ (57,409 ) (31 )% Effective tax rate 24.7 % 32.8 % The income tax provision for the year ended December 31, 2011 decreased 31% to $125.1 million. The ETR for the year ended December 31, 2011 decreased to 24.7% from 32.8%. The decrease in ETR during the year ended December 31, 2011 is primarily attributable to the impact of our reversal of deferred tax assets and liabilities for assets and liabilities no longer subject to income taxes at the REIT level of $121 million, which was partially offset by an increase in the income tax provision from continuing operations.

The ETRs on income from continuing operations for the years ended December 31, 2011 and 2010 differ from the federal statutory rate primarily attributable to adjustments for foreign items, non-deductible stock-based compensation expense, tax reserves and state taxes.

42-------------------------------------------------------------------------------- Table of Contents Net Income/Adjusted EBITDA Year Ended December 31, Amount of Percent Increase Increase 2011 2010 (Decrease) (Decrease) Net income $ 381,840 $ 373,606 $ 8,234 2 % Income from discontinued operations, net - (30 ) (30 ) (100 ) Income from continuing operations 381,840 373,576 8,264 2 Income on equity method investments (25 ) (40 ) (15 ) (38 ) Income tax provision 125,080 182,489 (57,409 ) (31 ) Other expense (income) 122,975 (315 ) (123,290 ) N/A Loss on retirement of long-term obligations - 1,886 (1,886 ) (100 ) Interest expense 311,854 246,018 65,836 27 Interest income (7,378 ) (5,024 ) 2,354 47 Other operating expenses 58,103 35,876 22,227 62 Depreciation, amortization and accretion 555,517 460,726 94,791 21 Stock-based compensation expense 47,437 52,555 (5,118 ) (10 ) Adjusted EBITDA $ 1,595,403 $ 1,347,747 $ 247,656 18 % Net income for the year ended December 31, 2011 increased 2% to $381.8 million.

The increase was primarily attributable to increases in our rental and management and network development services segment operating profit, as described above, partially offset by an increase in other expense (income), depreciation, amortization and accretion and interest expense.

Adjusted EBITDA for the year ended December 31, 2011 increased 18% to $1,595.4 million. Adjusted EBITDA growth was primarily attributable to the increase in our rental and management segments gross margin and network development services segment gross margin, and was partially offset by an increase in selling, general, administrative and development expenses, excluding stock-based compensation expense.

Liquidity and Capital Resources Overview As a holding company, our cash flows are derived primarily from the operations of, and distributions from, our operating subsidiaries or funds raised through borrowings under our credit facilities and debt offerings. As of December 31, 2012, we had approximately $1,103.2 million of total liquidity, comprised of $368.6 million in cash and cash equivalents and the ability to borrow up to $734.6 million, net of any outstanding letters of credit, under our $1.0 billion unsecured credit facility entered into in April 2011 (the "2011 Credit Facility") and our $1.0 billion unsecured credit facility entered into in January 2012 (the "2012 Credit Facility"). In January 2013, we completed a registered public offering of $1.0 billion aggregate principal amount of 3.50% senior unsecured notes due 2023 ("3.50% Notes") and used the net proceeds to partially repay amounts outstanding under the 2011 Credit Facility and 2012 Credit Facility, which increased our total liquidity by $1.0 billion. Summary cash flow information for the years ended December 31, 2012, 2011 and 2010 is set forth below (in thousands).

Year Ended December 31, 2012 2011 2010 Net cash provided by (used for): Operating activities $ 1,414,391 $ 1,165,942 $ 1,020,977 Investing activities (2,558,385 ) (2,790,812 ) (1,300,902 ) Financing activities 1,170,366 1,086,095 910,330 Net effect of changes in exchange rates on cash and cash equivalents 12,055 (14,997 ) 6,265 Net increase (decrease) in cash and cash equivalents $ 38,427 $ (553,772 ) $ 636,670 43 -------------------------------------------------------------------------------- Table of Contents We use our cash flows to fund our operations and investments in our business, including tower maintenance and improvements, communications site construction and managed network installations, and tower and land acquisitions.

Additionally, we use our cash flows to make distributions of our REIT taxable income in order to maintain our REIT qualification under the Code and fund our stock repurchase program. Our significant financing transactions in 2012 included the following: • We increased our borrowing capacity by entering into the 2012 Credit Facility and a $750.0 million unsecured term loan (the "2012 Term Loan").

• We completed a registered public offering of $700.0 million aggregate principal amount of 4.70% senior notes due 2022 (the "4.70% Notes").

• We repurchased 872,005 shares of our common stock for an aggregate purchase price of $62.7 million, including commissions and fees, pursuant to our stock repurchase program.

As of December 31, 2012, we had total outstanding indebtedness of approximately $8.8 billion. During the year ended December 31, 2012, we generated sufficient cash flow from operations to fund our capital expenditures and debt service obligations, as well as our required REIT distributions in 2012. We believe cash generated by our operations for the year ending December 31, 2013 will also be sufficient to fund our capital expenditures, our debt service (interest and principal repayments) obligations and REIT distribution requirements for 2013.

If our pending acquisitions, capital expenditures or debt repayments exceed the cash generated by operations, we believe we have sufficient borrowing capacity under our credit facilities to fund our activities. As of December 31, 2012, we had approximately $156.8 million of cash and cash equivalents held by our foreign subsidiaries, of which $63.6 million was held by our joint ventures.

Historically, it has not been our practice to repatriate cash from our foreign subsidiaries primarily due to our ongoing expansion efforts and related capital needs. However, in the event that we do repatriate any funds, we may be required to accrue and pay taxes.

As a REIT, we are subject to a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders an amount equal to at least 90% of our REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). Generally, we expect to distribute all or substantially all of our REIT taxable income so as not to be subject to the income or excise tax on undistributed REIT taxable income. In 2012, we declared aggregate distributions of $0.90 per share and made total distributions of $355.6 million to our stockholders. We intend to continue paying regular distributions in 2013. The amount, timing and frequency of distributions will be at the sole discretion of our Board of Directors and will be based upon various factors. See Item 5 of this Annual Report under the caption "Dividends" for a discussion of those factors considered.

For more information regarding our financing transactions in 2012, see "-Cash Flows from Financing Activities" below.

Cash Flows from Operating Activities For the year ended December 31, 2012, cash provided by operating activities was $1,414.4 million, an increase of $248.4 million as compared to the year ended December 31, 2011. This increase was primarily due to an increase in the operating profit of our rental and management segments and an increase in cash provided by working capital. This increase was partially offset by an increase in cash paid for interest and income taxes during the year ended December 31, 2012.

For the year ended December 31, 2011, cash provided by operating activities was $1,165.9 million, an increase of $145.0 million as compared to the year ended December 31, 2010. This increase was primarily comprised of an increase in the operating profit of our rental and management segments and our network development services segment, partially offset by an increase in cash paid for interest and income taxes.

44 -------------------------------------------------------------------------------- Table of Contents Cash Flows from Investing Activities For the year ended December 31, 2012, cash used for investing activities was $2,558.4 million, a decrease of approximately $232.4 million, as compared to the year ended December 31, 2011. This decrease was primarily attributable to a decrease in acquisition-related activity during the year ended December 31, 2012.

During the year ended December 31, 2012, payments for purchases of property and equipment and construction activities totaled $568.0 million, including $279.0 million of capital expenditures for discretionary capital projects, such as completion of the construction of approximately 2,360 communications sites and the installation of approximately 600 shared generators domestically, $82.3 million spent to acquire land under our towers that was subject to ground agreements (including leases), $120.0 million of capital expenditures related to capital improvements and corporate capital expenditures primarily attributable to information technology improvements and $86.7 million for the redevelopment of existing sites to accommodate new tenant equipment. In addition, during the year ended December 31, 2012, we spent $1,998.0 million to acquire approximately 6,450 communications sites in our served markets, approximately 24 property interests under third-party communications sites in the United States and for the payment of amounts previously recognized in accounts payable or accrued expenses in the consolidated balance sheets for communications sites we acquired in Chile, Colombia, Ghana and South Africa during the year ended December 31, 2011.

For the year ended December 31, 2011, cash used for investing activities was $2,790.8 million, an increase of approximately $1,489.9 million, as compared to the year ended December 31, 2010. This increase was primarily comprised of increased spending for acquisitions during the year ended December 31, 2011.

During the year ended December 31, 2011, payments for purchases of property and equipment and construction activities totaled $523.0 million, including $296.9 million of capital expenditures for discretionary capital projects, such as completion of the construction of approximately 1,850 communications sites, $91.3 million spent to acquire land under our towers that was subject to ground agreements (including leases), $79.5 million of capital expenditures related to capital improvements and corporate capital expenditures primarily attributable to information technology improvements and $55.3 million for the redevelopment of existing sites to accommodate new tenant equipment. In addition, during the year ended December 31, 2011, we spent $2,320.7 million to acquire approximately 8,620 communications sites in the United States, Brazil, Chile, Colombia, Ghana, Mexico and South Africa and approximately 2,150 property interests under communications sites in the United States.

We plan to continue to allocate our available capital after our REIT distribution requirements among investment alternatives that meet our return on investment criteria. Accordingly, we expect to continue to deploy our discretionary capital through our annual discretionary capital expenditure program, including land purchases and new site construction and through acquisitions. We expect that our 2013 total capital expenditures will be between approximately $550 million and $650 million, including between $130 million and $140 million for capital improvements and corporate capital expenditures, between $95 and $105 million for the redevelopment of existing communications sites, between $85 million and $105 million for ground lease purchases and between $240 million and $300 million for other discretionary capital projects including the construction of approximately 2,250 to 2,750 new communications sites.

Cash Flows from Financing Activities For the year ended December 31, 2012, cash provided by financing activities was $1,170.4 million, as compared to $1,086.1 million during the year ended December 31, 2011.

Cash provided by financing activities during the year ended December 31, 2012 was primarily due to (i) borrowings under the 2011 Credit Facility of $890.0 million, (ii) borrowings under the 2012 Credit Facility of $1,692.0 million, (iii) net proceeds from our 2012 Term Loan of $746.4 million, (iv) net proceeds from our registered offering of 4.70% Notes of $693.0 million, (v) proceeds from other long-term borrowings of $177.3 million, (vi) proceeds of $55.4 million from the exercise of stock options and (vii) net contributions from non-controlling interest holders of $52.8 million.

45-------------------------------------------------------------------------------- Table of Contents These borrowings were partially offset by repayment of (i) $1.0 billion under our $1.25 billion senior unsecured revolving credit facility (the "Revolving Credit Facility"), (ii) $700.0 million under the 2012 Credit Facility, (iii) $625.0 million under the 2011 Credit Facility (iv) $325.0 million of term loan commitments (the "2008 Term Loan"), and (v) net short-term borrowings of $55.3 million. In addition, we made distributions to our stockholders in the aggregate of $355.6 million and we paid $62.7 million for the repurchase of our common stock under our stock repurchase program.

For the year ended December 31, 2011, cash provided by financing activities was $1,086.1 million, as compared to cash provided by financing activities of approximately $910.3 million for the year ended December 31, 2010. The $1,086.1 million of cash provided by financing activities during the year ended December 31, 2011 partially relates to borrowings under our Revolving Credit Facility of $925.0 million, net proceeds from our registered offering of the 5.90% senior notes due 2021 (the "5.90% Notes") of $495.2 million, proceeds from other long-term borrowings of $212.8 million, proceeds from short-term borrowings of $128.1 million, proceeds from stock options, warrants and stock purchase plans of $85.6 million and borrowings under our other credit facilities of $80.0 million. These borrowings were partially offset by payments for the repurchase of our common stock of $437.4 million, which consisted of $426.1 million of stock repurchases under our stock repurchase programs ($423.9 million, including commissions and fees, and a decrease in accrued treasury stock of $2.2 million) and $11.2 million of amounts surrendered for the satisfaction of employee tax obligations in connection with the vesting of restricted stock units, repayment of notes payable, amounts outstanding under our credit facilities and capital leases of $395.4 million and distributions to stockholders of $137.8 million in connection with the one-time special cash distribution to our stockholders in December 2011.

Revolving Credit Facility and 2008 Term Loan. On January 31, 2012, we repaid and terminated the Revolving Credit Facility and repaid the 2008 Term Loan with proceeds from borrowings under the 2011 Credit Facility and the 2012 Credit Facility.

2011 Credit Facility. As of December 31, 2012, we had $265.0 million outstanding under the 2011 Credit Facility and had approximately $5.7 million of undrawn letters of credit. On January 8, 2013, we repaid the amount outstanding with net proceeds received from the offering of the 3.50% Notes. We continue to maintain the ability to draw down and repay amounts under the 2011 Credit Facility in the ordinary course.

The 2011 Credit Facility has a term of five years and matures on April 8, 2016.

The current margin over London Interbank Offered Rate ("LIBOR") that we would incur on borrowings is 1.850% and the current commitment fee on the undrawn portion of the 2011 Credit Facility is 0.350%.

As of February 11, 2013, there were no amounts outstanding under the 2011 Credit Facility.

2012 Credit Facility. On January 31, 2012, we entered into the 2012 Credit Facility. The 2012 Credit Facility has a term of five years and matures on January 31, 2017. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The 2012 Credit Facility may be paid prior to maturity in whole or in part at our option without penalty or premium.

We have the option of choosing either a defined base rate or LIBOR as the applicable base rate for borrowings under the 2012 Credit Facility. The interest rate ranges between 1.075% to 2.400% above LIBOR for LIBOR based borrowings or between 0.075% to 1.400% above the defined base rate for base rate borrowings, in each case based upon our debt ratings. A quarterly commitment fee on the undrawn portion of the 2012 Credit Facility is required, ranging from 0.125% to 0.450% per annum, based upon our debt ratings. The current margin over LIBOR that we would incur on borrowings is 1.625%, and the current commitment fee on the undrawn portion of the 2012 Credit Facility is 0.225%.

The loan agreement contains certain reporting, information, financial and operating covenants and other restrictions (including limitations on additional debt, guaranties, sales of assets and liens) with which we must comply. Any failure to comply with the financial and operating covenants of the loan agreement would not only 46 -------------------------------------------------------------------------------- Table of Contents prevent us from being able to borrow additional funds, but would constitute a default, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable.

As of December 31, 2012, we had $992.0 million outstanding under the 2012 Credit Facility and had approximately $2.7 million of undrawn letters of credit. On January 8, 2013, we repaid $719.0 million of the amount outstanding with net proceeds received from the offering of the 3.50% Notes and cash on hand. We continue to maintain the ability to draw down and repay amounts under the 2012 Credit Facility in the ordinary course.

As of February 11, 2013, we had $422.0 million drawn under the 2012 Credit Facility.

2012 Term Loan. On June 29, 2012, we entered into the 2012 Term Loan. We received net proceeds of approximately $746.4 million, of which $632.0 million were used to repay certain existing indebtedness under the 2012 Credit Facility.

The 2012 Term Loan has a term of five years and matures on June 29, 2017. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The 2012 Term Loan may be paid prior to maturity in whole or in part at our option without penalty or premium.

We have the option of choosing either a defined base rate or LIBOR as the applicable base rate. The interest rate ranges between 1.25% to 2.50% above LIBOR for LIBOR based borrowings or between 0.25% to 1.50% above the defined base rate for base rate borrowings, in each case based upon our debt ratings. As of December 31, 2012, the interest rate under the 2012 Term Loan is LIBOR plus 1.75%.

The loan agreement contains certain reporting, information, financial and operating covenants and other restrictions (including limitations on additional debt, guaranties, sales of assets and liens) with which we must comply. Any failure to comply with the financial and operating covenants of the loan agreement would constitute a default, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable.

As of December 31, 2012, we had $750.0 million outstanding under the 2012 Term Loan.

Colombian Short-Term Credit Facility. The 141.1 billion Colombian Peso ("COP") denominated short-term credit facility (the "Colombian Short-Term Credit Facility") was executed by one of our Colombian subsidiaries ("ATC Sitios"), on July 25, 2011, to refinance the credit facility entered into in connection with the purchase of the exclusive use rights for towers from Telefónica S.A.'s Colombian subsidiary, Colombia Telecomunicaciones S.A. E.S.P. On November 30, 2012, the Colombian Short-Term Credit Facility was repaid in full with proceeds from the Colombian Long-Term Credit Facility, described below.

Colombian Long-Term Credit Facility. On October 19, 2012, ATC Sitios entered into a loan agreement for a COP denominated long-term credit facility (the "Colombian Long-Term Credit Facility"), which it used to refinance the Colombian Short-Term Credit Facility on November 30, 2012.

The Colombian Long-Term Credit Facility generally matures on November 30, 2020, subject to earlier maturity as a result of any mandatory prepayments. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity. The Colombian Long-Term Credit Facility may be prepaid in whole or in part, subject to certain limitations and prepayment consideration, at any time.

Under the terms of the Colombian Long-Term Credit Facility, ATC Sitios paid the lenders a one-time structuring fee and upfront fee of 2.9 billion COP (approximately $1.6 million), including value added tax. Principal and interest are payable quarterly in arrears with principal due in accordance with the repayment schedule included in the loan agreement. Interest accrues at a per annum rate equal to 5% above the quarterly advanced Inter-bank Rate ("IBR") in effect at the beginning of each Interest Period (as defined in the loan agreement). The interest rate in effect at December 31, 2012 was 9.10%.

47-------------------------------------------------------------------------------- Table of Contents The Colombian Long-Term Credit Facility is secured by, among other things, liens on towers owned by ATC Sitios. The loan agreement contains certain reporting, information, financial ratios and operating covenants. Failure to comply with certain of the financial and operating covenants would constitute a default, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable. The loan agreement also requires that ATC Sitios manage exposure to variability in interest rates on at least fifty percent of the amounts outstanding under the Colombian Long-Term Credit Facility for the first four years of the loan, and seventy-five percent thereafter. Accordingly, ATC Sitios entered into interest rate swap agreements with an aggregate notional value of 101.3 billion COP (approximately $57.3 million) with certain of the lenders under the Colombian Long-Term Credit Facility on December 5, 2012.

As of December 31, 2012, 135.0 billion COP (approximately $76.3 million) were outstanding under the Colombian Long-Term Credit Facility. As of December 31, 2012, the interest rate, after giving effect to the interest rate swap agreements, was 10.36%.

Colombian Bridge Loans. In connection with the acquisition of communications sites from Colombia Movil S.A. E.S.P., another of our Colombian subsidiaries entered into five COP denominated bridge loans. As of December 31, 2012, the aggregate principal amount outstanding under these bridge loans was 94.0 billion COP (approximately $53.2 million). As of December 31, 2012, the bridge loans had an interest rate of 7.99% and mature on June 22, 2013.

Colombian Loan. In connection with the establishment of our joint venture with Millicom International Cellular S.A. ("Millicom") and the acquisition of certain communications sites in Colombia, ATC Colombia B.V., a 60% owned subsidiary of American Tower, entered into a U.S. Dollar-denominated shareholder loan agreement (the "Colombian Loan"), as the borrower, with our wholly owned subsidiary (the "ATC Colombian Subsidiary"), and a wholly owned subsidiary of Millicom (the "Millicom Subsidiary"), as the lenders. The Colombian Loan accrues interest at 8.30% and matures on February 22, 2022. The portion of the Colombian Loan made by the ATC Colombian Subsidiary is eliminated in consolidation, and the portion of the Colombian Loan made by the Millicom Subsidiary is reported as outstanding debt of American Tower. As of December 31, 2012, an aggregate of $19.2 million was payable to the Millicom Subsidiary.

South African Facility. Our 1.2 billion South African Rand ("ZAR") denominated credit facility ("South African Facility") was executed in November 2011 to refinance the bridge loan entered into in connection with the acquisition of communications sites from Cell C (Pty) Limited by our local South African subsidiaries ("SA Borrower"). The South African Facility is secured by, among other things, liens on towers owned by one of our South African subsidiaries. On August 8, 2012 and September 14, 2012, we borrowed an additional 123.0 million ZAR (approximately $15.1 million) and 24.2 million ZAR (approximately $2.9 million), respectively. The South African Facility generally matures on March 31, 2020, subject to earlier maturity resulting from repayment increases tied either to SA Borrower's excess cash flows or permitted distributions to SA Borrower's parent. Principal and interest are payable quarterly in arrears with principal due in accordance with the repayment schedule included in the loan agreement. Interest accrues at a rate equal to 3.75% per annum, plus the three month Johannesburg Interbank Agreed Rate ("JIBAR"). The interest rate in effect at December 31, 2012 was 8.88%. We entered into interest rate swap agreements to manage our exposure to variability in interest rates. As of December 31, 2012, 834.3 million ZAR (approximately $98.5 million) was outstanding under the South African Facility, and after giving effect to the interest rate swap agreements, the facility accrues interest at a weighted average rate of 9.84%.

Ghana Loan. In connection with the establishment of our joint venture with MTN Group Limited ("MTN Group") and acquisitions of communications sites in Ghana, Ghana Tower Interco B.V., a 51% owned subsidiary of American Tower, entered into a U.S. Dollar-denominated shareholder loan agreement ("Ghana Loan"), as the borrower, with our wholly owned subsidiary ("ATC Ghana Subsidiary") and Mobile Telephone Networks (Netherlands) B.V., a wholly owned subsidiary of MTN Group (the "MTN Ghana Subsidiary"), as the lenders. Pursuant to the terms of the Ghana Loan, loans were made to the joint venture in connection with the acquisition of communications sites from MTN Ghana. The Ghana Loan accrues interest at 9.0% and matures on May 4, 48 -------------------------------------------------------------------------------- Table of Contents 2016. The portion of the loans made by the ATC Ghana Subsidiary is eliminated in consolidation and the portion of the loans made by the MTN Ghana Subsidiary is reported as outstanding debt of American Tower. As of December 31, 2012, an aggregate of $131.0 million was payable to the MTN Ghana Subsidiary.

Uganda Loan. In connection with the establishment of our joint venture with MTN Group and acquisitions of communications sites in Uganda, Uganda Tower Interco B.V., a 51% owned subsidiary of American Tower, entered into a U.S. Dollar-denominated shareholder loan agreement (the "Uganda Loan"), as the borrower, with our wholly owned subsidiary (the "ATC Uganda Subsidiary"), and a wholly owned subsidiary of MTN Group (the "MTN Uganda Subsidiary"), as the lenders. The Uganda Loan matures on June 29, 2019 and accrues interest at 5.30% above LIBOR, reset annually, which as of December 31, 2012 was 6.368%. The portion of the Uganda Loan made by the ATC Uganda Subsidiary is eliminated in consolidation, and the portion of the Uganda Loan made by the MTN Uganda Subsidiary is reported as outstanding debt of American Tower. As of December 31, 2012, an aggregate of $61.0 million was payable to the MTN Uganda Subsidiary.

Senior Notes Offerings. On March 12, 2012, we completed a registered public offering of $700.0 million aggregate principal amount of our 4.70% Notes. The net proceeds to us from the offering were approximately $693.0 million, after deducting commissions and expenses. We used the net proceeds to repay a portion of the outstanding indebtedness incurred under the 2011 Credit Facility and the 2012 Credit Facility, which had been used to fund recent acquisitions.

On January 8, 2013, we completed a registered public offering of $1.0 billion aggregate principal amount of our 3.50% Notes. The net proceeds to us from the offering were approximately $983.4 million, after deducting commissions and expenses. We used $265.0 million of the net proceeds to repay the outstanding indebtedness under the 2011 Credit Facility and $718.4 million to partially repay a portion of the outstanding indebtedness under the 2012 Credit Facility.

The 4.70% Notes mature on March 15, 2022, and interest is payable semi-annually in arrears on March 15 and September 15. We began making interest payments on the 4.70% Notes on September 15, 2012. The 3.50% Notes mature on January 31, 2023, and interest is payable semi-annually in arrears on January 31 and July 31 of each year. We will begin making interest payments on the 3.50% Notes on July 31, 2013. We may redeem the 4.70% Notes or the 3.50% Notes at any time at a redemption price equal to 100% of the principal amount, plus a make-whole premium, together with accrued interest to the redemption date. Interest on the 4.70% Notes began to accrue on March 12, 2012 and interest on the 3.50% Notes began to accrue on January 8, 2013, and each is computed on the basis of a 360-day year comprised of twelve 30-day months.

If we undergo a change of control and ratings decline (each as defined in the indentures governing the 4.70% Notes and the 3.50% Notes), we will be required to offer to repurchase all of the 4.70% Notes and 3.50% Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest up to but not including the repurchase date. Each of the 4.70% Notes and the 3.50% Notes rank equally with all of our other senior unsecured debt and are structurally subordinated to all existing and future indebtedness and other obligations of our subsidiaries. The indentures contain certain covenants that restrict our ability to merge, consolidate or sell assets and our (together with our subsidiaries') ability to incur liens. These covenants are subject to a number of exceptions, including that we and our subsidiaries may incur certain liens on assets, mortgages or other liens securing indebtedness, if the aggregate amount of such liens does not exceed 3.5x Adjusted EBITDA, as defined in the indentures.

Stock Repurchase Program. In March 2011, our Board of Directors approved the 2011 Buyback, pursuant to which we are authorized to purchase up to $1.5 billion of common stock.

During the year ended December 31, 2012, we repurchased 872,005 shares of our common stock for an aggregate of $62.7 million, including commissions and fees, pursuant to the 2011 Buyback. As of December 31, 2012, we had repurchased a total of approximately 4.3 million shares of our common stock under the 2011 Buyback for an aggregate of $243.9 million, including commissions and fees.

49-------------------------------------------------------------------------------- Table of Contents Between January 1, 2013 and January 21, 2013, we repurchased an additional 15,790 shares of our common stock for an aggregate of $1.2 million, including commissions and fees, pursuant to the 2011 Buyback. As of January 21, 2013, we had repurchased a total of approximately 4.3 million shares of our common stock under the 2011 Buyback for an aggregate of $245.2 million, including commissions and fees.

Under the 2011 Buyback, we are authorized to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices in accordance with securities laws and other legal requirements, and subject to market conditions and other factors. To facilitate repurchases, we make purchases pursuant to trading plans under Rule 10b5-1 of the Exchange Act, which allow us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

We expect to continue to manage the pacing of the remaining $1.3 billion under the 2011 Buyback in response to general market conditions and other relevant factors. In the near term, we expect to fund any further repurchases of our common stock through a combination of cash on hand, cash generated by operations and borrowings under our credit facilities. Purchases under the 2011 Buyback are subject to us having available cash to fund repurchases.

Sales of Equity Securities. We receive proceeds from sales of our equity securities pursuant to our employee stock purchase plan and upon exercise of stock options granted under our equity incentive plans. For the year ended December 31, 2012, we received an aggregate of $55.4 million in proceeds from sales of shares pursuant to our employee stock purchase plan and upon exercises of stock options.

Distributions. As a REIT, we must annually distribute to our stockholders an amount equal to at least 90% of our REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain).

Generally, we expect to distribute all or substantially all of our REIT taxable income so as to not be subject to income tax or excise tax on undistributed REIT taxable income. The amount, timing and frequency of future distributions, however, will be at the sole discretion of our Board of Directors and will be declared based upon various factors, a number of which may be beyond our control, including our financial condition and operating cash flows, the amount required to maintain REIT status and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in our existing and future debt instruments, our ability to utilize NOLs to offset our distribution requirements, limitations on our ability to fund distributions using cash generated through our TRSs and other factors that our Board of Directors may deem relevant.

During the year ended December 31, 2012, we paid an aggregate of $355.6 million in regular cash distributions to our stockholders, which included our fourth quarter distribution of approximately $94.8 million to stockholders of record at the close of business on December 17, 2012. For detail on the other regular cash distributions paid to our stockholders during 2012, see Item 5 of this Annual Report under the caption "Dividends." We will accrue distributions on unvested restricted stock unit awards granted subsequent to January 1, 2012, which will be payable upon vesting. As of December 31, 2012, we had accrued $0.7 million of distributions payable upon the vesting of restricted stock units.

50-------------------------------------------------------------------------------- Table of Contents Contractual Obligations. Our contractual obligations relate primarily to the Commercial Mortgage Pass-Through Certificates, Series 2007-1 issued in our May 2007 securitization transaction (the "Securitization"), borrowings under our credit facilities, our outstanding notes and our operating leases related to the ground under our towers. The following table sets forth information relating to our contractual obligations payable in cash as of December 31, 2012 (in thousands): Contractual Obligations 2013 2014 2015 2016 2017 Thereafter Total Commercial Mortgage Pass-Through Certificates, Series 2007-1(1) $ - $ 1,750,000 $ - $ - $ - $ - $ 1,750,000 2011 Credit Facility(2) - - - 265,000 - - 265,000 2012 Credit Facility(2) - - - - 992,000 - 992,000 2012 Term Loan - - - - 750,000 - 750,000 Unison Notes, Series 2010-1 Class C, Series 2010-2 Class C and Series 2010-2 Class F notes(3) - - - - 67,000 129,000 196,000 Colombian Long-Term Credit Facility(4) - 763 3,054 10,689 12,216 49,625 76,347 Colombian Bridge Loans(5) 53,169 - - - - - 53,169 Colombian Loan(6) - - - - - 19,176 19,176 South African Facility(7) 2,461 5,957 11,322 15,753 17,722 45,241 98,456 Ghana Loan(6) - - - 130,951 - - 130,951 Uganda Loan(6) - - - - - 61,023 61,023 4.625% senior notes - - 600,000 - - - 600,000 7.00% senior notes - - - - 500,000 - 500,000 4.50% senior notes - - - - - 1,000,000 1,000,000 7.25% senior notes - - - - - 300,000 300,000 5.05% senior notes - - - - - 700,000 700,000 5.90% senior notes - - - - - 500,000 500,000 4.70% senior notes - - - - - 700,000 700,000 Long-term obligations, excluding capital leases 55,630 1,756,720 614,376 422,393 2,338,938 3,504,065 8,692,122 Cash interest expense 398,000 342,000 295,000 284,000 214,000 448,000 1,981,000 Capital lease payments (including interest) 8,242 7,316 5,377 5,485 4,897 164,520 195,837 Total debt service obligations 461,872 2,106,036 914,753 711,878 2,557,835 4,116,585 10,868,959 Operating lease payments(8) 364,427 352,624 343,478 328,826 317,533 2,878,866 4,585,754 Other non-current liabilities(9)(10) 506 21,895 4,967 18,690 1,632 1,541,956 1,589,646 Total $ 826,805 $ 2,480,555 $ 1,263,198 $ 1,059,394 $ 2,877,000 $ 8,537,407 $ 17,044,359 (1) Anticipated repayment date; final legal maturity date is April 2037.

(2) On January 8, 2013, we repaid $265.0 million outstanding under our 2011 Credit Facility and $719.0 million outstanding under our 2012 Credit Facility with proceeds from the 3.50% Notes and cash on hand.

51 -------------------------------------------------------------------------------- Table of Contents (3) The Unison Notes, Series 2010-1 Class C, Series 2010-2 Class C and Series 2010-2 Class F notes were assumed by us in connection with the Unison Acquisition, and have anticipated repayment dates of April 15, 2017, April 15, 2020 and April 15, 2020, respectively, and a final maturity date of April 15, 2040.

(4) The Colombian Long-Term Credit Facility is denominated in Colombian Pesos.

(5) The Colombian Bridge Loans are denominated in Colombian Pesos. The maturity dates may be extended from time to time.

(6) Denominated in U.S. Dollars.

(7) The South African Facility is denominated in South African Rand.

(8) Operating lease payments include payments to be made under non-cancellable initial terms, as well as payments for certain renewal periods at our option because failure to renew could result in a loss of the applicable communications sites and related revenues from tenant leases, thereby making it reasonably assured that we will renew the lease.

(9) Primarily represents our asset retirement obligations and excludes certain other non-current liabilities included in our consolidated balance sheet, primarily our straight-line rent liability for which cash payments are included in operating lease payments and unearned revenue that is not payable in cash.

(10) Other non-current liabilities exclude $34.3 million of liabilities for unrecognized tax positions and $28.7 million of accrued income tax related interest and penalties included in our consolidated balance sheet as we are uncertain as to when and if the amounts may be settled. Settlement of such amounts could require the use of cash flows generated from operations. We expect the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this timeframe. However, based on the status of these items and the amount of uncertainty associated with the outcome and timing of audit settlements, we are currently unable to estimate the impact of the amount of such changes, if any, to previously recorded uncertain tax positions.

Off-Balance Sheet Arrangements. We have no material off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Interest Rate Swap Agreements. As of December 31, 2012, we held ten interest rate swap agreements, all of which have been designated as cash flow hedges, and which had an aggregate notional amount of $107.3 million, interest rates ranging from 5.78% to 7.25% and expiration dates through November 2020.

Factors Affecting Sources of Liquidity Internally Generated Funds. Because the majority of our tenant leases are multi-year contracts, a significant majority of the revenues generated by our rental and management operations as of the end of 2012 is recurring revenue that we should continue to receive in future periods. Accordingly, a key factor affecting our ability to generate cash flow from operating activities is to maintain this recurring revenue and to convert it into operating profit by minimizing operating costs and fully achieving our operating efficiencies. In addition, our ability to increase cash flow from operating activities is dependent upon the demand for our communications sites and our related services and our ability to increase the utilization of our existing communications sites.

Restrictions Under Loan Agreements Relating to the 2011 Credit Facility, the 2012 Credit Facility and the 2012 Term Loan. The loan agreements for the 2011 Credit Facility, the 2012 Credit Facility and the 2012 Term Loan contain certain financial and operating covenants and other restrictions applicable to us and all of our subsidiaries that are not designated as unrestricted subsidiaries on a consolidated basis. These include limitations on additional debt, distributions and dividends, guaranties, sales of assets and liens. The loan agreements also contain covenants that establish three financial tests with which we and our restricted subsidiaries must comply related to total leverage, senior secured leverage and interest coverage, as set forth below. Where we designate 52 -------------------------------------------------------------------------------- Table of Contents certain of our subsidiaries as unrestricted subsidiaries in accordance with the respective agreements, those subsidiaries are excluded for purposes of the covenant calculations. As of December 31, 2012, we were in compliance with each of these covenants.

• Consolidated Total Leverage Ratio: This ratio requires that we not exceed a ratio of Total Debt to Adjusted EBITDA (each as defined in the loan agreements) of 6.00 to 1.00. Based on our financial performance for the 12 months ended December 31, 2012, we could incur approximately $2.5 billion of additional indebtedness and still remain in compliance with this ratio.

In addition, if we maintain our existing debt levels and our expenses do not change materially from current levels, our revenues could decrease by approximately $412 million and we would still remain in compliance with this ratio.

• Consolidated Senior Secured Leverage Ratio: This ratio requires that we not exceed a ratio of Senior Secured Debt (as defined in the loan agreements) to Adjusted EBITDA of 3.00 to 1.00. Based on our financial performance for the 12 months ended December 31, 2012, we could incur approximately $3.4 billion of additional Senior Secured Debt and still remain in compliance with this ratio, (effectively, however, this ratio would be limited to $2.5 billion to remain in compliance with other covenants). In addition, if we maintain our existing Senior Secured Debt levels and our expenses do not change materially from current levels, our revenues could decrease by approximately $1.1 billion and we would still remain in compliance with this ratio.

• Interest Coverage Ratio: This ratio requires that we maintain a ratio of Adjusted EBITDA to Interest Expense (as defined in the loan agreements) of not less than 2.50 to 1.00. Based on our financial performance for the 12 months ended December 31, 2012, our interest expense, which was $391 million for that period, could increase by approximately $356 million and we would still remain in compliance with this ratio. In addition, if our interest expense does not change materially from current levels, our revenues could decrease by approximately $891 million and we would still remain in compliance with this ratio.

The loan agreements for our credit facilities also contain reporting and information covenants that require us to provide financial and operating information within certain time periods. If we are unable to provide the required information on a timely basis, we would be in breach of these covenants.

Any failure to comply with the financial maintenance tests and operating covenants of the loan agreements for our credit facilities would not only prevent us from being able to borrow additional funds under these credit facilities, but would constitute a default under these credit facilities, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable. If this were to occur, we would not have sufficient cash on hand to repay such indebtedness. The key factors affecting our ability to comply with the debt covenants described above are our financial performance relative to the financial maintenance tests defined in the loan agreements for the credit facilities and our ability to fund our debt service obligations. Based upon our current expectations, we believe our operating results during the next twelve months will be sufficient to comply with these covenants.

Restrictions Under Loan Agreement Relating to the Securitization. The loan agreement related to the Securitization involves assets related to 5,295 broadcast and wireless communications towers owned by two special purpose subsidiaries of the Company (the "Borrowers"), through a private offering of $1.75 billion of Commercial Mortgage Pass-Through Certificates, Series 2007-1 (the "Certificates"). As of December 31, 2012, 5,278 broadcast and wireless communications towers are owned by the two special purpose subsidiaries.

The Securitization loan agreement includes certain financial ratios and operating covenants and other restrictions customary for loans subject to rated securitizations. Among other things, the Borrowers are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets. The Borrowers' organizational documents contain provisions consistent with rating agency securitization criteria for special purpose entities, including the requirement that the Borrowers maintain at least two independent 53-------------------------------------------------------------------------------- Table of Contents directors. The Securitization loan agreement also contains certain covenants that require the Borrowers to provide the trustee with regular financial reports and operating budgets, promptly notify the trustee of events of default and material breaches under the Securitization loan agreement and other agreements related to the towers subject to the Securitization, and allow the trustee reasonable access to the towers, including the right to conduct site investigations.

Under the terms of the Securitization loan agreement, the loan will be paid solely from the cash flows generated by the towers subject to the Securitization, which must be deposited, and thereafter distributed, solely pursuant to the terms of the Securitization loan. The Borrowers are required to make monthly payments of interest on the Securitization loan. On a monthly basis, all cash flow in excess of amounts required to make debt service payments, to fund required reserves, to pay management fees and budgeted operating expenses and to make other payments required under the Securitization loan, referred to as excess cash flow, is to be released to the Borrowers for distribution to us. During the year ended December 31, 2012, the Borrowers distributed excess cash to us of approximately $576.8 million.

In order to distribute this excess cash flow to us, the Borrowers must maintain several specified ratios with respect to their debt service coverage ("DSCR").

For this purpose, DSCR is tested as of the last day of each calendar quarter and is generally defined as four times the Borrowers' net cash flow for that quarter divided by the amount of interest, servicing fees and trustee fees that the Borrowers must pay over the succeeding 12 months on the Securitization loan.

Pursuant to one such test, if the DSCR as of the end of any calendar quarter were 1.75x or less (the "Cash Trap DSCR"), then all excess cash flow would be placed in a reserve account and would not be released to the Borrowers for distribution to us until the DSCR exceeded the Cash Trap DSCR for two consecutive calendar quarters.

Additionally, while the anticipated repayment date is not until April 2014, excess cash flow would be applied to principal during an "Amortization Period" under the Securitization loan until April 2014. An "Amortization Period" would commence under the Securitization loan if the DSCR as of the end of any calendar quarter fell below 1.45x (the "Minimum DSCR").

In such a case, all excess cash flow and any amounts then in the reserve account because the Cash Trap DSCR was not met would be applied to pay principal of the Securitization loan on each monthly payment date until the DSCR exceeded the Minimum DSCR for two consecutive calendar quarters, and so would not be available for distribution to us.

Consequently, a failure to comply with the covenants in the Securitization loan agreement could prevent the Borrowers from taking certain actions with respect to the towers. Additionally, a failure to meet the noted DSCR tests could prevent the Borrowers from distributing excess cash flow to us, which could affect our ability to fund our discretionary expenditures, including tower construction and acquisitions, pay REIT distribution requirements and fund our stock repurchase program. In addition, if the Borrowers were to default on the loan related to the Securitization, the trustee could seek to foreclose upon or otherwise convert the ownership of the towers subject to the Securitization, in which case we could lose the towers and the revenue associated with the towers.

As of December 31, 2012, the Borrowers' DSCR was 3.89x. Based on the Borrowers' net cash flow for the calendar quarter ended December 31, 2012 and the amount of interest, servicing fees and trustee fees payable over the succeeding 12 months on the Securitization loan, the Borrowers could endure a reduction of approximately $211.3 million in net cash flow before triggering a Cash Trap DSCR, and approximately $240.9 million in net cash flow before triggering an Amortization Period.

As discussed above, we use our available liquidity and seek new sources of liquidity to refinance and repurchase our outstanding indebtedness. In addition, in order to fund capital expenditures, future growth and expansion initiatives, satisfy our REIT distribution requirements and fund our stock repurchase program, we may need to raise additional capital through financing activities. If we determine that it is desirable or necessary to 54-------------------------------------------------------------------------------- Table of Contents raise additional capital, we may be unable to do so, or such additional financing may be prohibitively expensive or restricted by the terms of our outstanding indebtedness. If we are unable to raise capital when our needs arise, we may not be able to fund capital expenditures, future growth and expansion initiatives, satisfy our REIT distribution requirements, refinance our existing indebtedness or fund our stock repurchase program.

In addition, our liquidity depends on our ability to generate cash flow from operating activities. As set forth under the caption "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K, we derive a substantial portion of our revenues from a small number of tenants and, consequently, a failure by a significant tenant to perform its contractual obligations to us could adversely affect our cash flow and liquidity.

Critical Accounting Policies and Estimates Management's discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related disclosures of contingent assets and liabilities. We evaluate our policies and estimates on an ongoing basis, including those related to impairment of assets, asset retirement obligations, accounting for acquisitions, revenue recognition, rent expense, stock-based compensation and income taxes. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We have reviewed our policies and estimates to determine our critical accounting policies for the year ended December 31, 2012. We have identified the following policies as critical to an understanding of our results of operations and financial condition. This is not a comprehensive list of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management's judgment in its application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result.

• Impairment of Assets-Assets Subject to Depreciation and Amortization: We review long-lived assets, including intangibles, for impairment at least annually or whenever events, changes in circumstances or other indicators or evidence indicate that the carrying amount of our assets may not be recoverable. We review our tower portfolio and network location intangible assets for indications of impairment at the lowest level of identifiable cash flows, typically at an individual tower basis. Possible indicators include a tower not having current tenant leases or having expenses in excess of revenues. A cash flow modeling approach is utilized to assess recoverability and incorporates, among other items, the tower location, the tower location demographics, the timing of additions of new tenants, lease rates and estimated length of tenancy and ongoing cash requirements.

To the extent that cash flows generated under this approach are not sufficient to recover the carrying value of the towers, an impairment charge is recognized for the towers and network location intangible assets. We record any related impairment charge in the period in which we identify such impairment.

We monitor our customer-related intangible assets on a customer by customer basis for indications of impairment, such as high levels of turnover or attrition, non-renewal of a significant number of contracts, or the cancellation or termination of a relationship. We assess recoverability by determining whether the carrying value of the customer-related intangible assets will be recovered through projected undiscounted cash flows. If we determine that the carrying value of the customer-related intangible asset may not be recoverable, we measure any impairment based on the fair value of the asset as determined by the projected future discounted cash flows to be provided from the asset, as compared to the asset's carrying value. We record any related impairment charge in the period in which we identify such impairment.

55-------------------------------------------------------------------------------- Table of Contents • Impairment of Assets-Goodwill: We review goodwill for impairment at least annually (as of December 31) or whenever events or circumstances indicate the carrying value of an asset may not be recoverable.

Goodwill is recorded in our domestic and international rental and management segments and network development services segment. We utilize the two step impairment test when testing goodwill for impairment. When conducting this test, we employ a discounted cash flow analysis. The key assumptions utilized in the discounted cash flow analysis include current operating performance, terminal sales growth rate, management's expectations of future operating results and cash requirements, the current weighted average cost of capital and an expected tax rate. Under the first step of this test, we compare the fair value of the reporting unit, as calculated under an income approach using future discounted cash flows, to the carrying value of the applicable reporting unit. If the carrying value exceeds the fair value, we conduct the second step of this test, in which the implied fair value of the applicable reporting unit's goodwill is compared to the carrying amount of that goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss would be recognized.

During the year ended December 31, 2012, no potential impairment was identified under the first step of the test. The fair value of each of our reporting units was in excess of its carrying value and passed with a substantial margin; except for two reporting units, whose fair value exceed the carrying value by approximately $87.2 million. For these two reporting units, we performed a sensitivity analysis on our significant assumptions and determined that none of the following negative changes in our assumptions individually, which we determined to be reasonable, would impact our conclusions: • A 5% reduction in projected net income, or a 110 basis point increase in the weighted average cost of capital, or a 15% reduction in terminal sales growth rate.

The goodwill recorded in these two reporting units approximated $41.9 million as of December 31, 2012, and is the result of recently completed acquisitions.

Accordingly, the sensitivity of projections to changes in the various assumptions is due, in part, to the timing of the underlying acquisitions(s), current levels of cash flows and amounts of cash flows generated in excess of the planned amounts. Due to the proximity of the acquisition date to the measurement date, the fair value of intangible assets and goodwill used to test for impairment is in line with the fair value used to initially measure the business.

• Asset Retirement Obligations: We recognize asset retirement obligations associated with our obligation to retire tangible long-lived assets and the related asset retirement costs, which are principally obligations to remediate leased land on which certain of our tower assets are located, in the period in which they are incurred, if a reasonable estimate of a fair value can be made, and we accrete such liability through the obligation's estimated settlement date. The associated retirement costs are capitalized as part of the carrying amount of the related tower assets and depreciated over their estimated useful lives or captured as a component of purchase accounting.

We updated our assumptions used in estimating our aggregate asset retirement obligation, which resulted in a net increase in the estimated obligation of $6.6 million during the year ended December 31, 2012. The change in 2012 primarily resulted from changes in timing of certain settlement date and cost assumptions.

Fair value estimates of liabilities for asset retirement obligations generally involve discounted future cash flows, and periodic accretion of such liabilities due to the passage of time is recorded as an operating expense. The significant assumptions used in estimating our aggregate asset retirement obligation are: timing of tower removals; cost of tower removals; timing and number of land lease renewals; expected inflation rates; and credit-adjusted risk-free interest rates that approximate our incremental borrowing rate. While we feel the assumptions are appropriate, there can be no assurances that actual costs and the probability of incurring obligations will not differ from these estimates.

We will continue to review these assumptions periodically and we may need to adjust them as necessary.

56 -------------------------------------------------------------------------------- Table of Contents • Acquisitions: For those acquisitions that meet the definition of a business combination, we allocate the purchase price, including any contingent consideration, to the assets acquired and the liabilities assumed at their estimated fair values as of the date of the acquisition with any excess of the purchase price paid over the estimated fair value of net assets acquired recorded as goodwill. For those transactions that do not meet the definition of a business combination, we allocate the purchase price to property and equipment for the fair value of the towers and to identifiable intangible assets (primarily acquired customer-related and network location intangibles). The fair value of the assets acquired and liabilities assumed is typically determined by using either estimates of replacement costs or discounted cash flow valuation methods. When determining the fair value of tangible assets acquired, we must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset.

When determining the fair value of intangible assets acquired, we must estimate the applicable discount rate and the timing and amount of future customer cash flows, including rate and terms of renewal and attrition.

The determination of the final purchase price and acquisition-date fair values of the identifiable assets acquired and liabilities assumed may extend over more than one period and result in adjustments to the preliminary estimate recognized.

• Revenue Recognition: Rental and management revenues are recognized on a monthly basis under lease or management agreements when earned and when collectability is reasonably assured, regardless of whether the payments from the tenants are received in equal monthly amounts. Fixed escalation clauses present in non-cancellable lease agreements, excluding those tied to the Consumer Price Index or other inflation-based indices, and other incentives present in lease agreements with our tenants are recognized on a straight-line basis over the fixed, non-cancellable terms of the applicable leases. Total rental and management straight-line revenues for the years ended December 31, 2012, 2011 and 2010 approximated $165.8 million, $144.0 million and $105.2 million, respectively. Amounts billed up-front for certain services provided in connection with the execution of lease agreements are initially deferred and recognized as revenue over the terms of the applicable leases. Amounts billed or received prior to being earned are deferred and reflected in unearned revenue in the consolidated balance sheets until the criteria for recognition has been met.

We derive the largest portion of our revenues, corresponding trade receivables and the related deferred rent asset from a small number of tenants in the telecommunications industry, and approximately 51% of our revenues are derived from four tenants in the industry. In addition, we have concentrations of credit risk in certain geographic areas. We mitigate the concentrations of credit risk with respect to notes and trade receivables by actively monitoring the credit worthiness of our borrowers and tenants. In recognizing customer revenue we must assess the collectibility of both the amounts billed and the portion recognized on a straight-line basis. This assessment takes tenant credit risk and business and industry conditions into consideration to ultimately determine the collectability of the amounts billed. To the extent the amounts, based on management's estimates, may not be collectible, recognition is deferred until such point as the uncertainty is resolved. Any amounts that were previously recognized as revenue and subsequently determined to be uncollectible are charged to bad debt expense. Accounts receivable are reported net of allowances for doubtful accounts related to estimated losses resulting from a tenant's inability to make required payments and allowances for amounts invoiced whose collectibility is not reasonably assured.

• Rent Expense: Many of the leases underlying our tower sites have fixed rent escalations, which provide for periodic increases in the amount of ground rent payable over time. We calculate straight-line ground rent expense for these leases based on the fixed non-cancellable term of the underlying ground lease plus all periods, if any, for which failure to renew the lease imposes an economic penalty to us such that renewal appears to be reasonably assured. Certain of our tenant leases require us to exercise available renewal options pursuant to the underlying ground lease, if the tenant exercises its renewal option. For towers with these types of tenant leases at the inception of the ground lease, we calculate our straight-line ground rent over the term of the ground lease, including all renewal options required 57 -------------------------------------------------------------------------------- Table of Contents to fulfill the tenant lease obligation. In addition to the straight-line ground rent expense recorded, we also record an associated straight-line rent liability in other non-current liabilities in the accompanying consolidated balance sheets. Leases may contain complex terms that often are subject to interpretation.

• Stock-Based Compensation: We measure stock-based compensation cost at the accounting measurement date based on the fair value of the award and the fair value is recognized as an expense over the service period, which generally represents the vesting period. The expense recognized over the service period is required to include an estimate of the awards that will not fully vest and be forfeited. The fair value of a stock option is determined using a Black-Scholes option-pricing model that takes into account a number of assumptions at the accounting measurement date including the stock price, the exercise price, the expected life of the option, the volatility of the underlying stock, the expected distributions, and the risk-free interest rate over the expected life of the option. These assumptions are highly subjective and could significantly impact the value of the option and hence the compensation expense. The fair value of restricted stock units is based on the fair value of our common stock on the grant date. We recognize stock-based compensation in either selling, general, administrative and development expense, costs of operations or as part of the costs associated with the construction of our tower assets.

• Income Taxes: We will elect to be taxed as a REIT under the Code effective January 1, 2012, and will generally not be subject to federal and state income taxes on our QRSs' taxable income that we distribute to our stockholders provided we meet certain organization and operating requirements. However, even as a REIT, we will remain obligated to pay income taxes on earnings from our TRS assets. In addition, our international assets and operations continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted.

Accounting for income taxes requires us to estimate the timing and impact of amounts recorded in our financial statements that may be recognized differently for tax purposes. To the extent that the timing of amounts recognized for book purposes differs from the timing of recognition for tax purposes, deferred tax assets or liabilities are required to be recorded. Deferred tax assets and liabilities are measured based on the rate at which we expect these items to be reflected in our tax returns, which may differ from the current rate. At December 31, 2011, we reversed deferred tax assets and liabilities related to our REIT activities as a result of a reduction of the expected tax rate. As a REIT, we will not pay federal income tax on our QRSs, because a dividends paid deduction will be available to offset our taxable income. Additionally, we will be permitted to use NOLs to offset our REIT taxable income. We do not expect to pay federal taxes on our REIT taxable income.

We periodically review our deferred tax assets, and we record a valuation allowance to reduce our net deferred tax asset to the amount that management believes is more likely than not to be realized. As of December 31, 2012, we have provided a valuation allowance of approximately $95.6 million on deferred tax assets for certain of our subsidiaries, which primarily relates to foreign NOLs. We have not provided a valuation allowance for the remaining deferred tax asset, primarily our foreign and federal NOLs related to other TRS entities, as we believe that we will have sufficient taxable income to realize these NOLs during the applicable carryforward period. Valuation allowances may be reversed if related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the assets' recoverability.

The recoverability of our U.S. federal net deferred tax asset has been assessed utilizing projections based on our current operations. Accordingly, the recoverability of our net deferred tax asset is not dependent on material asset sales or other non-routine transactions. Based on our current outlook of future taxable income during the carryforward period, management believes that our net deferred tax asset will be realized. If we are unable to generate sufficient taxable income in the future, we will be required to reassess our deferred tax assets and consider an adjustment to our valuation allowances.

58-------------------------------------------------------------------------------- Table of Contents Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on our consolidated results of operations, cash flows or financial position.

We recognize the benefit of uncertain tax positions when, in management's judgment, it is more likely than not that positions we have taken in our tax returns will be sustained upon examination, which are measured at the largest amount that is greater than 50% likely of being realized upon settlement. We adjust our tax liabilities when our judgment changes as a result of the evaluation of new information or information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which additional information is available or the position is ultimately settled under audit.

We expect the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this timeframe, or if the applicable statute of limitations lapses. We believe that the amount of the change could range from zero to $1.3 million. As of December 31, 2012, we have classified approximately $34.3 million of reserves for uncertain tax positions as other non-current liabilities in the consolidated balance sheet. We also classified approximately $28.7 million of accrued income tax-related interest and penalties as other non-current liabilities in the consolidated balance sheet as of December 31, 2012.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws, regulations and administrative practices in a multitude of jurisdictions across our operations.

From time to time, we are subject to examination by various tax authorities in jurisdictions in which we have significant business operations, and we regularly assess the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. We believe that adequate provisions have been made for income taxes for all periods through December 31, 2012.

We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs.

We have not recorded a deferred tax liability related to the U.S. federal and state income taxes and foreign withholding taxes on approximately $101 million of undistributed earnings of foreign subsidiaries indefinitely invested outside of the United States. Should we decide to repatriate the foreign earnings, we may have to adjust the income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside of the United States.

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