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According to Fitch, AMT's ratings are underpinned by company's high margin, which was 67 percent for the last twelve months and reflective of the significant scale, the favorable operating environment and the lower business risk that results in a higher degree of expected financial stability and cash flow sustainability. The stability and long-term nature of the business makes any material changes in the operating risk profile unlikely during the next several years. Over the longer-term, Fitch expects American Tower as well as the rest of the tower industry will benefit from the recent Advanced Wireless Services and 700 MHz spectrum auctions. Fitch believes the above characteristics more than offset AMT's sizable share repurchase program and the higher financial leverage for its rating category.
Fitch views AMT's liquidity position as strong relative to other telecom companies due to the meaningful free cash flow generation, its balance sheet cash and favorable maturity schedule relative to their available liquidity. Free cash flow (FCF) for the last twelve months was in excess of $500 million. For 2008, with higher capital spending expected for land purchases, new tower construction and augmentation of existing sites, FCF levels should be comparable to 2007.
The ratings firm also noted AMT's revolver capacity is considered below average as the company has currently less than 50 percent capacity on its $1.25 billion credit facility. As of March 31, AMT had drawn $650 million on its revolver that matures in 2012. This is due in part to AMT's use of its revolver to fund a portion of its share repurchases. In March 2008, AMT entered into a new $325 million senior unsecured term loan to repay existing revolver indebtedness.
Share repurchases since the initial inception back in 2005 have totaled in excess of $2.2 billion. During 2008, AMT's Board of Directors approved a new stock repurchase program to purchase up to an additional $1.5 billion of its Class A common stock. As a result, expectations are for debt to increase by at least $400 million in 2008 with leverage likely staying in the mid 4 times range, according to FItch.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, fitchratings.com.
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