AMERICAN TOWER CORP MA

Previous wording

We are one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. Our primary business is the leasing of space on 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 other telecommunications infrastructure and property interests that we lease primarily to communications service providers and third-party tower operators, and, as discussed further below, we hold a portfolio of highly interconnected data center facilities and related assets in the United States. Our customers include our tenants, licensees and other payers. We refer to the business encompassing the above as our property operations, which accounted for 99% of our total revenues for the three months ended March 31, 2024 and includes our U.S. & Canada property, Asia-Pacific property, Africa property, Europe property and Latin America property segments and Data Centers segment.

Current wording

We are one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. Our primary business is the leasing of space on 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 other telecommunications infrastructure and property interests that we lease primarily to communications service providers and third-party tower operators, and, as discussed further below, we hold a portfolio of highly interconnected data center facilities and related assets in the United States. Our customers include our tenants, licensees and other payers. We refer to the business encompassing the above as our property operations, which accounted for 98% and 99% of our total revenues for the three and six months ended June 30, 2024, respectively, and includes our U.S. & Canada property, Asia-Pacific property, Africa property, Europe property and Latin America property segments and Data Centers segment.

Previous wording

In most of our markets, our tenant leases for our communications sites with wireless carriers generally have initial non-cancellable terms of five to ten years with multiple renewal terms. Accordingly, the vast majority of the revenue generated by our property operations during the three months ended March 31, 2024 was recurring revenue that we should continue to receive in future periods. Most of our tenant leases for our communications sites have provisions that periodically increase or “escalate” the rent due under the lease, typically based on (a) an annual fixed escalation (averaging approximately 3% in the United States), (b) an inflationary index in most of our international markets, or (c) a combination of both. In addition, certain of our tenant leases provide for additional revenue primarily to cover costs (pass-through revenue), such as ground rent or power and fuel costs.

Current wording

In most of our markets, our tenant leases for our communications sites with wireless carriers generally have initial non-cancellable terms of five to ten years with multiple renewal terms. Accordingly, the vast majority of the revenue generated by our property operations during the six months ended June 30, 2024 was recurring revenue that we should continue to receive in future periods. Most of our tenant leases for our communications sites have provisions that periodically increase or “escalate” the rent due under the lease, typically based on (a) an annual fixed escalation (averaging approximately 3% in the United States), (b) an inflationary index in most of our international markets, or (c) a combination of both. In addition, certain of our tenant leases provide for additional revenue primarily to cover costs (pass-through revenue), such as ground rent or power and fuel costs.

Previous wording

Based upon existing customer leases and foreign currency exchange rates as of March 31, 2024, we expect to generate nearly $60 billion of non-cancellable customer lease revenue over future periods, before the impact of straight-line lease accounting.

Current wording

Based upon existing customer leases and foreign currency exchange rates as of June 30, 2024, we expect to generate over $57 billion of non-cancellable customer lease revenue over future periods, before the impact of straight-line lease accounting.

Previous wording

In February 2023, and as amended in August 2023, VILissued optionally convertible debentures (the “VIL OCDs”) to our subsidiary, ATC Telecom Infrastructure Private Limited (“ATC TIPL”), in exchange for VIL’s payment of certain amounts towards accounts receivables. The VIL OCDs are (a) to be repaid by VIL with interest or (b) convertible into equity of VIL. If converted and following registration, such equity shall be free to trade in the open market beginning on the one year anniversary of the date of issuance of the VIL OCDs. The VILOCDs were issued for an aggregate face value of 16.0 billion Indian Rupees (“INR”) (approximately $193.2 million on the date of issuance). The fair value of the VIL OCDs at issuance was approximately $116.5 million.

Current wording

In February 2023, and as amended in August 2023, VILissued optionally convertible debentures (the “VIL OCDs”) to our subsidiary, ATC Telecom Infrastructure Private Limited (“ATC TIPL”), in exchange for VIL’s payment of certain amounts towards accounts receivables. The VIL OCDs were (a) to be repaid by VIL with interest or (b) convertible into equity of VIL. If converted and following registration, such equity shall be free to trade in the open market beginning on the one year anniversary of the date of issuance of the VIL OCDs. The VILOCDs were issued for an aggregate face value of 16.0 billion Indian Rupees (“INR”) (approximately $193.2 million on the date of issuance). The fair value of the VIL OCDs at issuance was approximately $116.5 million.

Previous wording

On March 23, 2024, we converted an aggregate face value of 14.4 billion INR (approximately $172.7 million) of VIL OCDs into 1,440 million shares of equity of VIL (the “VIL Shares”), which were unregistered as of March 31, 2024. The fair value of the VIL Shares as of March 31, 2024 was $172.7 million. The VIL Shares were registered on April 16, 2024 and we completed the sale of the VIL Shares on April 29, 2024 for total net proceeds of approximately $216.0 million, as further discussed in note 15 to our consolidated financial statements included in this Quarterly Report.

Current wording

On March 23, 2024, we converted an aggregate face value of 14.4 billion INR (approximately $172.7 million) of VIL OCDs into 1,440 million shares of equity of VIL (the “VIL Shares”).

Previous wording

On January 4, 2024, through our subsidiaries, ATC Asia Pacific Pte. Ltd. and ATC TIPL, which holds our operations in India, we entered into an agreement with Data Infrastructure Trust (“DIT”), an infrastructure investment trust sponsored by an affiliate of Brookfield Asset Management, pursuant to which DIT will acquire a 100% ownership interest in ATC TIPL (the “Pending ATC TIPL Transaction”). We will retain the full economic benefit associated with the VIL OCDs, the VIL Shares and rights to payments on certain existing customer receivables. Subject to certain pre-closing terms, total aggregate consideration would potentially represent up to approximately 210 billion Indian Rupees (“INR”) (approximately$2.5 billion), including the value of the VIL OCDs and the VIL Shares, payments on certain existing customer receivables, the repayment of existing intercompany debt and the repayment, or assumption, of our existing term loan in India, by DIT. During the three months ended March 31, 2024, ATC TIPL distributed approximately 9,603 million INR (approximately $115.1 million) to us, which will be deducted from the total aggregate consideration to be received by us at closing. The Pending ATC TIPL Transaction is expected to close in the second half of 2024, subject to customary closing conditions, including government and regulatory approval.

Current wording

On January 4, 2024, through our subsidiaries, ATC Asia Pacific Pte. Ltd. and ATC TIPL, which holds our operations in India, we entered into an agreement with Data Infrastructure Trust (“DIT”), an infrastructure investment trust sponsored by an affiliate of Brookfield Asset Management, pursuant to which DIT will acquire a 100% ownership interest in ATC TIPL (the “Pending ATC TIPL Transaction”). Subject to certain pre-closing terms, total aggregate consideration would potentially represent up to approximately 210 billion Indian Rupees (“INR”) (approximately$2.5 billion), including the value of the VIL OCDs and the VIL Shares, payments on certain existing customer receivables, the repayment of existing intercompany debt and the repayment, or assumption, of our existing term loan in India, by DIT. During the six months ended June 30, 2024, we sold the VIL Shares and the remaining VIL OCDs (each as discussed in note 7 to our consolidated and condensed consolidated financial statements included in this Quarterly Report) and ATC TIPL distributed approximately 27.2 billion INR (approximately $325.9 million) to us. ATC TIPL expects to make a final distribution of approximately 2.4 billion INR (approximately $28.5 million), which includes the satisfactionof the economic benefit associated with the rights to payments on certain existing customer receivables. Each such distribution will be deducted from the total aggregate consideration to be received by us at closing. The Pending ATC TIPL Transaction is expected to close in the second half of 2024, subject to customary closing conditions, including government and regulatory approval.

Previous wording

The revenues generated by our property operations may be affected by cancellations of existing tenant leases. As discussed above, most of our tenant leases with wireless carriers and broadcasters are multiyear 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 tenant lease cancellations or the non-renewal of leases or rent renegotiations, which we refer to as churn, has historically not had a material adverse effect on the revenues generated by our consolidated property operations. During the three months ended March 31, 2024, churn was approximately 3% of our tenant billings, primarily driven by churn in our U.S. & Canada property segment, as discussed below.

Current wording

The revenues generated by our property operations may be affected by cancellations of existing tenant leases. As discussed above, most of our tenant leases with wireless carriers and broadcasters are multiyear 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 tenant lease cancellations or the non-renewal of leases or rent renegotiations, which we refer to as churn, has historically not had a material adverse effect on the revenues generated by our consolidated property operations. During the six months ended June 30, 2024, churn was approximately 2% of our tenant billings, primarily driven by churn in our U.S. & Canada property segment, as discussed below.

Previous wording

•Partially offset by a decrease of $29.5 million in other revenue, which includes a $27.9 million decrease due to straight-line accounting.

Current wording

•Partially offset by a decrease of $45.8 million in other revenue, which includes a $38.0 million decrease due to straight-line accounting.

Previous wording

Segment revenue growth was not meaningfully impacted by foreign currency translation related to fluctuations in Canadian Dollar.

Current wording

Segment revenue growth was not meaningfully impacted by foreign currency translation related to fluctuations in Canadian Dollar (“CAD”).

Previous wording

•An increase of $37.5 million in other revenue, primarily due to the recognition of $19.8 million of previously deferred revenue as compared to reserves taken in the prior year period related to the VIL Shortfall (as discussed above);

Current wording

•An increase of $53.4 million in pass-through revenue, primarily due to the recognition of $35.8 million of previously deferred revenue as compared to reserves taken in the prior year period related to the VIL Shortfall (as discussed above);

Previous wording

•$1.2 million generated from sites acquired or constructed since the beginning of the prior-year period (“newly acquired or constructed sites”); and

Current wording

•$0.7 million generated from sites acquired or constructed since the beginning of the prior-year period (“newly acquired or constructed sites”);

Previous wording

•A decrease of $22.5 million in pass-through revenue, primarily due to a decrease in energy costs;

Current wording

•Partially offset by a decrease of $2.9 million in pass-through revenue, primarily due to a decrease in energy costs.

Previous wording

◦$1.1 million from churn in excess of contractual escalations; and

Current wording

•$0.5 million from churn in excess of contractual escalations; and

Previous wording

Segment revenue decline was partially offset by an increase of $23.7 million, attributable to the impact of foreign currency translation, which included, among others, positive impacts of $13.3 million related to fluctuations in Mexican Peso, $9.3 million related to fluctuations in Brazilian Real, $5.4 million related to fluctuations in Colombian Peso, offset by negative impacts of $4.4 million related to fluctuations in Chilean Peso.

Current wording

Segment revenue growth was partially offset by a decrease of $6.6 million, attributable to the impact of foreign currency translation, which included, among others, negative impacts of $8.8 million related to fluctuations in Brazilian Real and $4.3 million related to fluctuations in Chilean Peso (“CLP”), offset by positive impacts of $4.1 million related to fluctuations in Mexican Peso (“MXN”) and $3.3 million related to fluctuations in Colombian Peso (“COP”).

Previous wording

•An increase of $13.6 million in rental, related and other revenue, primarily due to new lease commencements, customer expansions and rent increases upon customer renewals;

Current wording

•An increase of $15.8 million in rental, related and other revenue, primarily due to new lease commencements, customer expansions and rent increases upon customer renewals;

Previous wording

•An increase of $8.0 million in power revenue from new lease commencements, increased power consumption and pricing increases from existing customers; and

Current wording

•An increase of $8.9 million in power revenue from new lease commencements, increased power consumption and pricing increases from existing customers; and

Previous wording

•An increase of $2.5 million in interconnection revenue, primarily due to customer interconnection net additions and set-up fees;

Current wording

•An increase of $3.1 million in interconnection revenue, primarily due to customer interconnection net additions and set-up fees;

Previous wording

•Partially offset by a decrease of $2.5 million in straight-line revenue.

Current wording

•Partially offset by a decrease of $1.9 million in straight-line revenue.

Previous wording

Segment revenue growth included an increase of $2.6 million primarily attributable to the positive impact of foreign currency translation related to fluctuations in Euro (“EUR”).

Current wording

Segment revenue growth included an increase of $0.5 million attributable to the positive impact of foreign currency translation related to fluctuations in EUR.

Previous wording

•A decrease of $53.9 million in other revenue, primarily attributable to a decrease in tenant settlements in Mexico and the sale of one of our subsidiaries in Mexico that held fiber assets (“Mexico Fiber”) in the prior year period;

Current wording

•A decrease of $49.6 million in other revenue, primarily attributable to a decrease in tenant settlements in Mexico and the sale of one of our subsidiaries in Mexico that held fiber assets (“Mexico Fiber”) in the prior year period, partially offset by the recognition of previously deferred revenue in Brazil;

Previous wording

Services segment revenue decrease of $22.5 million was primarily attributable to a decrease in site application, zoning and permitting and structural and mount analyses services, partially offset by an increase in construction management services.

Current wording

Services segment revenue decrease of $18.2 million was primarily attributable to a decrease in site application, zoning and permitting and structural and mount analyses services, partially offset by an increase in construction management services.

Previous wording

•The increase in U.S. & Canada property segment gross margin was primarily attributable to the increase in revenue described above and a decrease in direct expenses of $1.0 million.

Current wording

•The increase in U.S. & Canada property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $3.7 million.

Previous wording

•The increase in Africa property segment gross margin was primarily attributable to a decrease in direct expenses of $11.1 million, primarily due to a decrease in costs associated with pass-through revenue, including fuel costs, partially offset by the decrease in revenue described above. Direct expenses also benefited by $14.7 million from the impact of foreign currency translation.

Current wording

•The decrease in Africa property segment gross margin was primarily attributable to the decrease in revenue described above, partially offset by a decrease in direct expenses of $0.9 million, primarily due to a decrease in costs associated with pass-through revenue, including fuel costs, partially offset by increases in repair and maintenance spending. Direct expenses also benefited by $15.5 million from the impact of foreign currency translation.

Previous wording

•The increase in Data Centers segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $9.1 million, primarily due to an increase in costs associated with power revenue, including utility costs.

Current wording

•The increase in Data Centers segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $15.6 million, primarily due to an increase in costs associated with power revenue, including utility costs.

Previous wording

•The increase in Asia-Pacific property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $3.9 million, primarily due to an increase in costs associated with pass-through revenue, including fuel costs. Direct expenses also benefited by $1.6 million from the impact of foreign currency translation.

Current wording

•The increase in Asia-Pacific property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $0.6 million, primarily due to an increase in costs associated with pass-through revenue, partially offset a decrease in property taxes. Direct expenses also benefited by $3.9 million from the impact of foreign currency translation.

Previous wording

•The increase in Europe property segment gross margin was primarily attributable to the increase in revenue described above and a decrease in direct expenses of $0.5 million. Direct expenses were also negatively impacted by $0.9 million from the impact of foreign currency translation.

Current wording

•The increase in Europe property segment gross margin was primarily attributable to the increase in revenue described above and a decrease in direct expenses of $3.9 million, primarily due to a decrease in costs associated with pass-through revenue, including energy costs. Direct expenses were also negatively impacted by $0.2 million from the impact of foreign currency translation.

Previous wording

•The decrease in Latin America property segment gross margin was primarily attributable to the decrease in revenue described, partially offset by a decrease in direct expenses of $4.8 million, primarily due to the sale of Mexico Fiber in the prior year period. Direct expenses were also negatively impacted by $7.2 million from the impact of foreign currency translation.

Current wording

•The decrease in Latin America property segment gross margin was primarily attributable to the decrease in revenue described, partially offset by a decrease in direct expenses of $6.2 million, including a decrease due to the sale of Mexico Fiber in the prior year period. Direct expenses were also negatively impacted by $5.2 million from the impact of foreign currency translation.

Previous wording

•The decrease in Services segment gross margin was primarily attributable to the decrease in revenue described above, partially offset by a decrease in direct expenses of $5.2 million.

Current wording

•The decrease in Services segment gross margin was primarily attributable to the decrease in revenue described above, partially offset by a decrease in direct expenses of $0.4 million.

Previous wording

•The increase in our Europe property segment SG&A was primarily driven by increased professional services costs.

Current wording

•The decrease in our Asia-Pacific property segment SG&A was primarily driven by a decrease in bad debt expense and lower canceled construction costs, partially offset by increased professional services costs and increased personnel and related costs to support our business.

Previous wording

•The increase in our Asia-Pacific property segment SG&A was primarily driven by net recoveries of bad debt expense in the prior year period, partially offset by lower canceled construction costs. For the three months ended March 31, 2023, the impact of the VIL Shortfall was reflected in revenue reserves, as described above, as we were deferring the recognition of revenue until uncertainties were resolved.

Current wording

•The increase in our Asia-Pacific property segment SG&A was primarily driven by increased professional services costs and an increase in bad debt expense due to recoveries in the prior year period, partially offset by lower canceled construction costs.

Previous wording

•The decrease in our Africa property segment SG&A was primarily driven by a benefit from the impact of foreign currency translation of $4.0 million and a net decrease in bad debt expense.

Current wording

•The decrease in our Africa property segment SG&A was primarily driven by a benefit from the impact of foreign currency translation of $7.9 million and a net decrease in bad debt expense.

Previous wording

•The increase in other SG&A was primarily attributable to an increase in corporate SG&A, including an increase in personnel and related costs to support our business.

Current wording

•The decrease in other SG&A was primarily attributable to a decrease in stock-based compensation expense of $3.7 million, partially offset by an increase in corporate SG&A, including an increase in personnel and related costs to support our business.

Previous wording

•The increases in operating profit for the three months ended March 31, 2024 for our U.S. & Canada and Africa property segments and our Data Centers segment were primarily attributable to increases in our segment gross margin and decreases in our segment SG&A.

Current wording

•The increases in operating profit for the three and six months ended June 30, 2024 for our U.S. & Canada property segment were primarily attributable to increases in our segment gross margin and decreases in our segment SG&A.

Previous wording

Three Months Ended March 31, 2024 and 2023

Current wording

•The increase in operating profit for the three months ended June 30, 2024 for our Asia-Pacific property segment was primarily attributable to an increase in our segment gross margin and a decrease in our segment SG&A. The increase in operating profit for the six months ended June 30, 2024 for our Asia-Pacific property segment was primarily attributable to an increase in our segment gross margin, partially offset by an increase in our segment SG&A.

Previous wording

•The decreases in operating profit for the three months ended March 31, 2024 for our Latin America property segment and our Services segment were primarily attributable to decreases in our segment gross margin, partially offset by decreases in our segment SG&A.

Current wording

•The decreases in operating profit for the three and six months ended June 30, 2024 for our Africa property segment were primarily attributable to decreases in our segment gross margin, partially offset by decreases in our segment SG&A.

Previous wording

•The increases in operating profit for the three months ended March 31, 2024 for our Asia-Pacific and Europe property segments were primarily attributable to increases in our segment gross margin, partially offset by increases in our segment SG&A.

Current wording

•The increases in operating profit for the three and six months ended June 30, 2024 for our Europe property segment were primarily attributable to increases in our segment gross margin, partially offset by increases in our segment SG&A.

Previous wording

The decrease in depreciation, amortization and accretion expense for the three months ended March 31, 2024 was primarily attributable to the change in estimated useful lives of our tower assets.

Current wording

The decreases in depreciation, amortization and accretion expense for the three and six months ended June 30, 2024 were primarily attributable to the change in estimated useful lives of our tower assets.

Previous wording

During the three months ended March 31, 2024, we finalized our reviews of the estimated useful lives of our tower assets and estimated settlement dates for our asset retirement obligations. Based on information obtained, we determined that our estimated asset lives and our estimated settlement dates should be extended, which is expected to result in an estimated $730 million decrease in depreciation and amortization expense and an estimated $75 million decrease in accretion expense for the year ended December 31, 2024. For more information on the change in the estimated useful lives of our tower assets and the change in the estimated settlement dates for our asset retirement obligations, see the information under the captions “Property and Equipment” and “Asset Retirement Obligations” included in note 1 to our consolidated financial statements included in this Quarterly Report.

Current wording

During the six months ended June 30, 2024, we finalized our reviews of the estimated useful lives of our tower assets and estimated settlement dates for our asset retirement obligations. Based on information obtained, we determined that our estimated asset lives and our estimated settlement dates should be extended, which is expected to result in an estimated $730 million decrease in depreciation and amortization expense and an estimated $75 million decrease in accretion expense for the year ended December 31, 2024. For more information on the change in the estimated useful lives of our tower assets and the change in the estimated settlement dates for our asset retirement obligations, see the information under the captions “Property and Equipment” and “Asset Retirement Obligations” included in note 1 to our consolidated financial statements included in this Quarterly Report.

Previous wording

The decrease in other operating expenses during the three months ended March 31, 2024 was primarily attributable to a decrease in losses on sales or disposals of assets of $87.1 million, primarily attributable to the loss on the sale of Mexico Fiber of $80.0 million in the prior year period and a decrease in impairment charges.

Current wording

The change in other operating (income) expense during the three months ended June 30, 2024 was primarily attributable to a decrease in impairment charges of $37.7 million and a decrease in integration and acquisition related costs, including benefits related to pre-acquisition contingencies and settlements. The decrease in other operating (income) expense during the six months ended June 30, 2024 was primarily attributable to a decrease in losses on sales or disposals of assets of $91.1 million, primarily attributable to the loss on the sale of Mexico Fiber of $80.0 million in the prior year period, a decrease in impairment charges of $68.1 million and a decrease in integration and acquisition related costs, including benefits related to pre-acquisition contingencies and settlements.

Previous wording

The decrease in total other expense during the three months ended March 31, 2024 was primarily due to foreign currency gains of $127.6 million in the current period, as compared to foreign currency losses of $84.1 million in the prior-year period.

Current wording

The decrease in total other expense during the three months ended June 30, 2024 was primarily due to a decrease in foreign currency losses of $85.9 million and a gain of $46.4 million on the sales of the VIL Shares and the VIL OCDs. Total other expense during the three months ended June 30, 2024 also includes $40.7 million in unrealized gains from equity securities in the United States. The decrease in total other expense during the six months ended June 30, 2024 was primarily due to foreign currency gains of $105.9 million in the current period, as compared to foreign currency losses of $191.7 million in the prior-year period and a gain of $46.4 million on the sales of the VIL Shares and the VIL OCDs. Total other expense during the three months ended June 30, 2024 also includes $26.0 million in unrealized gains from equity securities in the United States.