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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 assumptions 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 from these estimates and such differences could be material to the financial statements. This discussion should be read in conjunction with our consolidated financial statements included in this Annual Report and the accompanying notes, and the information set forth under the caption “Critical Accounting Policies and Estimates” below.

We report our results in five segments: U.S. property, Asia property, EMEA property, Latin America property and Services. In evaluating financial performance in each business segment, management uses, among other factors, segment gross margin and segment operating profit (see note 20 to our consolidated financial statements included in this Annual Report).

Executive Overview

We are one of the largest global REITs 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 to communications service providers and third-party tower operators. We refer to this business as our property operations, which accounted for 99% of our total revenues for the year ended December 31, 2017 and includes our U.S. property segment, Asia property segment, EMEA property segment and Latin America property segment.

We also offer tower-related services in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily support our site leasing business, including the addition of new tenants and equipment on our sites.

The following table details the number of communications sites, excluding managed sites, that we owned or operated as of December 31, 2017:

Number of Owned TowersNumber of Operated Towers (1)Number of Owned DAS Sites
Domestic:
United States24,23116,009378
Asia:
India57,681—353
EMEA:
France2,1683079
Germany2,208——
Ghana2,178—23
Nigeria4,757——
South Africa (2)2,530——
Uganda1,431——
EMEA total15,27230732
Latin America:
Argentina (3)7—1
Brazil16,5512,25781
Chile1,295—9
Colombia3,7067771
Costa Rica492—2
Mexico (4)8,86219978
Paraguay836——
Peru637127—
Latin America total32,3863,360172
(1)Approximately 98% of the operated towers are held pursuant to long-term capital leases, including those subject to purchase options.
(2)In South Africa, we also own fiber.
(3)In Argentina, we also own or operate urban telecommunications assets, fiber and the rights to utilize certain existing utility infrastructure for future telecommunications equipment installation.
(4)In Mexico, we also own or operate urban telecommunications assets, including fiber, concrete poles and other infrastructure.

In most of our markets, our tenant leases with wireless carriers have an initial non-cancellable term of at least ten years, with multiple renewal terms. Accordingly, the vast majority of the revenue generated by our property operations during the year ended December 31, 2017 was 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, 2017, we expect to generate over $32 billion of non-cancellable tenant lease revenue over future periods, before the impact of straight-line lease accounting. Most of our tenant leases have provisions that periodically increase the rent due under the lease, typically based on an annual fixed escalation (averaging approximately 3% in the United States) or an inflationary index in our international markets, or a combination of both. In addition, certain of our tenant leases provide for additional revenue primarily to cover costs, such as ground rent or power and fuel costs.

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 cancellations or the non-renewal of leases or rent renegotiations historically has not had a material adverse effect on the revenues generated by our property operations. This was again the case during the year ended December 31, 2017, in which loss of tenant billings from tenant lease cancellations, non-renewal or renegotiations represented approximately 2% of our tenant billings. We do anticipate an increase in revenue lost from cancellations or non-renewals in 2018 primarily due to carrier consolidation-driven churn in Asia, which is likely to result in a modestly higher impact on our revenues, including tenant billings, as compared to the historical average.

Property Operations Revenue Growth. Due to our diversified communications site portfolio, our tenant lease rates vary considerably depending upon numerous factors, including, but not limited to, amount, type and position of tenant equipment on the tower, remaining tower capacity and tower location. We measure the remaining tower capacity by assessing several factors, including tower height, tower type, environmental conditions, existing equipment on the tower and zoning and permitting regulations in effect in the jurisdiction where the tower is located. In many instances, tower capacity can be increased with relatively modest tower augmentation expenditures.

The primary factors affecting the revenue growth of our property segments are:

•Growth in tenant billings, including:
•New revenue attributable to leases in place on day one on sites acquired or constructed since the beginning of the prior-year period;
•New revenue attributable to leasing additional space on our sites (“colocations”) and lease amendments; and
•Contractual rent escalations on existing tenant leases, net of churn.
•Revenue growth from other items, including additional tenant payments primarily to cover costs, such as ground rent or power and fuel costs included in certain tenant leases (“pass-through”), straight-line revenue and decommissioning.

We continue to believe that our site leasing revenue is likely to increase due to the growing use of wireless services globally and our ability to meet the corresponding incremental demand for our communications real estate. By adding new tenants and new equipment for existing tenants on our sites, we are able to increase these sites’ utilization and profitability. We believe the majority of our site leasing activity will continue to come from wireless service providers, with tenants in a number of other industries contributing incremental leasing demand. Our 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 existing networks, while also deploying next generation wireless technologies. In addition, we intend to continue to supplement our organic growth by selectively developing or acquiring new sites in our existing and new markets where we can achieve our risk-adjusted return on investment objectives.

Property Operations Organic Revenue Growth. Consistent with our strategy to increase the utilization and return on investment from our sites, our objective is to add new tenants and new equipment for existing tenants through colocation and lease amendments. Our ability to lease additional space on our sites is primarily a function of the rate at which wireless carriers and other tenants deploy capital to improve and expand their wireless networks. This rate, in turn, is influenced by the growth of wireless services, the penetration of advanced wireless devices, the level of emphasis on network quality and capacity in carrier competition, the financial performance of our tenants and their access to capital and general economic conditions.

Based on industry research and projections, we expect that a number of key industry trends will result in incremental revenue opportunities for us:

•In less advanced wireless markets where initial voice and data networks are still being deployed, we expect these deployments to drive demand for our tower space as carriers seek to expand their footprints and increase the scope and density of their networks. We have established operations in many of these markets at the early stages of wireless development, which we believe will enable us to meaningfully participate in these deployments over the long term.
•Subscribers’ use of mobile data continues to grow rapidly given increasing smartphone and other advanced device penetration, the proliferation of bandwidth-intensive applications on these devices and the continuing evolution of the mobile ecosystem. We believe carriers will be compelled to deploy additional equipment on existing networks while also rolling out more advanced wireless networks to address coverage and capacity needs resulting from this increasing mobile data usage.
•The deployment of advanced mobile technology across existing wireless networks will provide higher speed data services and further enable fixed broadband substitution. As a result, we expect that our tenants will continue deploying additional equipment across their existing networks.
•Wireless service providers compete based on the quality of their existing networks, which is driven by capacity and coverage. To maintain or improve their network performance as overall network usage increases, our tenants continue deploying additional equipment across their existing sites while also adding new cell sites. We anticipate increasing network densification over the next several years, as existing network infrastructure is anticipated to be insufficient to account for rapidly increasing levels of wireless data usage.
•Wireless service providers continue to acquire additional spectrum, and as a result are expected to add additional sites and equipment to their networks as they seek to optimize their network configuration and utilize additional spectrum.
•Next generation technologies centered on wireless connections have the potential to provide incremental revenue opportunities for us. These technologies may include autonomous vehicle networks and a number of other internet-of-things, or IoT, applications, as well as other potential use cases for wireless services.

As part of our international expansion initiatives, we have targeted markets in various stages of network development to diversify our international exposure and position us to benefit from a number of different wireless technology deployments over the long term. In addition, we have focused on building relationships with large multinational carriers such as Bharti Airtel Limited, Telefónica S.A. and Vodafone Group PLC, among others. We believe that consistent carrier network investments across our international markets position us to generate meaningful organic revenue growth going forward.

In emerging markets, such as Ghana, India, Nigeria and Uganda, wireless networks tend to be significantly less advanced than those in the United States, and initial voice networks continue to be deployed in underdeveloped areas. A majority of consumers in these markets still utilize basic wireless services, predominantly on feature phones, while advanced device penetration remains low. In more developed urban locations within these markets, data network deployments are underway. Carriers are focused on completing voice network build-outs while also investing in initial data networks as mobile data usage and smartphone penetration within their customer bases begin to accelerate.

In India, the ongoing transition from 2G technology to 4G technology has included and is expected to continue to include a period of carrier consolidation over the next several years, whereby the number of carriers operating in the marketplace will be reduced through mergers, acquisitions and select carrier exits from the marketplace. Over the long term, this consolidation process is expected to result in a more favorable structural environment for both the wireless carriers as well as communications infrastructure providers. In the shorter term, the consolidation process has resulted and is likely to further result in elevated levels of churn within our India business, as certain components of the combined carrier networks and carrier exits are decommissioned to allow for a more robust 4G deployment in the future.

In markets with rapidly evolving network technology, such as South Africa and most of the countries in Latin America where we do business, initial voice networks, for the most part, have already been built out, and carriers are focused on 3G and 4G network build outs. Consumers in these regions are increasingly adopting smartphones and other advanced devices, and, as a result, the usage of bandwidth-intensive mobile applications is growing materially. Recent spectrum auctions in these rapidly evolving markets have allowed incumbent carriers to accelerate their data network deployments and have also enabled new entrants to begin initial investments in data networks. Smartphone penetration and wireless data usage in these markets are advancing rapidly, which typically requires that carriers continue to invest in their networks to maintain and augment their quality of service.

Finally, in markets with more mature network technology, such as Germany and France, carriers are focused on deploying 4G data networks to account for rapidly increasing wireless data usage among their customer base. With higher smartphone and advanced device penetration and significantly higher per capita data usage, carrier investment in networks is focused on 4G coverage and capacity.

We believe that the network technology migration we have seen in the United States, which has led to significantly denser networks and meaningful new business commencements for us over a number of years, will ultimately be replicated in our less advanced international markets. As a result, we expect to be able to leverage our extensive international portfolio of approximately 109,565 communications sites and the relationships we have built with our carrier tenants to drive sustainable, long-term growth.

We have master lease agreements with certain of our tenants that provide for consistent, long-term revenue and reduce the likelihood of churn. Certain of those master lease agreements are holistic in nature and further build and augment strong strategic partnerships with our tenants and have significantly reduced colocation cycle times, thereby providing our tenants with the ability to rapidly and efficiently deploy equipment on our sites.

Property Operations New Site Revenue Growth. During the year ended December 31, 2017, we grew our portfolio of communications real estate through the acquisition and construction of approximately 6,885 sites globally, as well as the acquisition of certain urban telecommunications assets in Mexico. In a majority of our Asia, EMEA and Latin America markets, the revenue generated from newly acquired or constructed sites resulted in increases in both tenant and pass-through revenues (such as ground rent or power and fuel costs) and expenses. We continue to evaluate opportunities to acquire 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)201720162015
U.S.6356511,595
Asia1,13543,8652,330
EMEA2,7556654,910
Latin America2,3607156,535

Property Operations Expenses. Direct operating expenses incurred by our property segments include direct site level expenses and consist primarily of ground rent and power and fuel costs, some or all of which may be passed through to our tenants, as well as property taxes, repairs and maintenance. 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 property segments’ selling, general, administrative and development expenses do not significantly increase as a result of adding incremental tenants to our sites and typically increase only modestly year-over-year. As a result, leasing additional space to new tenants on our sites provides significant incremental cash flow. We may, however, incur additional segment selling, general, administrative and development expenses as we increase our presence in our existing markets or expand into new markets. Our profit margin growth is therefore positively impacted by the addition of new tenants to our sites but can be temporarily diluted by our development activities.

Services Segment Revenue Growth. As we continue to focus on growing our property operations, we anticipate that our services revenue will continue to represent a small percentage of our total revenues.

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”), Funds From Operations, as defined by the National Association of Real Estate Investment Trusts (“Nareit FFO”) attributable to American Tower Corporation common stockholders, Consolidated Adjusted Funds From Operations (“Consolidated AFFO”) and AFFO attributable to American Tower Corporation common stockholders.

We define Adjusted EBITDA as Net income before Income (loss) from equity method investments; Income tax benefit (provision); Other income (expense); Gain (loss) on retirement of long-term obligations; Interest expense; Interest income; Other operating income (expense); Depreciation, amortization and accretion; and stock-based compensation expense.

Nareit FFO attributable to American Tower Corporation common stockholders is defined as net income before gains or losses from the sale or disposal of real estate, real estate related impairment charges, real estate related depreciation, amortization and accretion and dividends on preferred stock, and including adjustments for (i) unconsolidated affiliates and (ii) noncontrolling interests. In this section, we refer to Nareit FFO attributable to American Tower Corporation common stockholders as “Nareit FFO (common stockholders).”

We define Consolidated AFFO as Nareit FFO (common stockholders) before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) the deferred portion of income tax; (iv) non-real estate related depreciation, amortization and accretion; (v) amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges; (vi) other income (expense); (vii) gain (loss) on retirement of long-term obligations; (viii) other operating income (expense); and adjustments for (ix) unconsolidated affiliates and (x) noncontrolling interests, less cash payments related to capital improvements and cash payments related to corporate capital expenditures.

We define AFFO attributable to American Tower Corporation common stockholders for the year ended December 31, 2017 as Consolidated AFFO, excluding the impact of noncontrolling interests on both Nareit FFO (common stockholders) and the other adjustments included in the calculation of Consolidated AFFO. In this section, we refer to AFFO attributable to American Tower Corporation common stockholders as “AFFO (common stockholders).”

Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) are not intended to replace net income or any other performance measures determined in accordance with GAAP. None of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO or AFFO (common stockholders) represents cash flows

from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities, as a measure of liquidity or a measure of funds available to fund our cash needs, including our ability to make cash distributions. Rather, Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) are presented as we believe each is a useful indicator of our current operating performance. We believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for decision making purposes and for evaluating our operating segments’ performance; (2) Adjusted EBITDA is a component underlying our credit ratings; (3) Adjusted EBITDA is widely used in the telecommunications real estate sector 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) Consolidated AFFO is widely used in the telecommunications real estate sector to adjust Nareit FFO (common stockholders) for items that may otherwise cause material fluctuations in Nareit FFO (common stockholders) growth from period to period that would not be representative of the underlying performance of property assets in those periods; (5) each provides investors with a meaningful measure for evaluating our period-to-period operating performance by eliminating items that are not operational in nature; and (6) each provides investors with a measure for comparing our results of operations to those of other companies, particularly those in our industry.

Our measurement of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) to net income, the most directly comparable GAAP measure, have been included below.

Results of Operations

Years Ended December 31, 2017, 2016 and 2015

(in millions, except percentages)

We have converted our disclosure from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior year disclosed amounts.

Revenue

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Property
U.S.$3,605.7$3,370.1$3,157.57%7%
Asia1,164.4827.6242.241242
EMEA626.2529.5395.11834
Latin America1,169.6985.9885.61911
Total property6,565.95,713.14,680.41522
Services98.072.691.135(20)
Total revenues$6,663.9$5,785.7$4,771.515%21%

Year ended December 31, 2017 - Revenue

U.S. property segment revenue growth of $235.6 million was attributable to:

•Tenant billings growth of $206.6 million, which was driven by:
•$151.2 million due to colocations and amendments;
•$42.9 million from contractual escalations, net of churn;
•$11.5 million generated from newly acquired or constructed sites; and
•$1.0 million from other tenant billings; and
•$29.0 million of other revenue growth, primarily due to a $66.4 million impact of straight-line accounting, partially offset by a $37.4 million net decrease in other revenue, primarily due to the absence of $38.8 million in decommissioning revenue recognized in the prior year.

Asia property segment revenue growth of $336.8 million was attributable to:

•Tenant billings growth of $192.2 million, which was driven by:
•$143.7 million generated from newly acquired sites, due to the Viom Acquisition;
•$58.8 million due to colocations and amendments; and
•$6.8 million generated from newly constructed sites;
•Partially offset by,
▪A decrease of $16.8 million from churn in excess of contractual escalations; and
▪A decrease of $0.3 million from other tenant billings;
•Pass-through revenue growth of $129.3 million, primarily due to the Viom Acquisition; and
•A decrease of $20.2 million in other revenue, primarily due to an increase of $13.1 million in revenue reserves.

Segment revenue also increased by $35.5 million attributable to the impact of foreign currency translation related to fluctuations in Indian Rupees (“INR”).

EMEA property segment revenue growth of $96.7 million was attributable to:

•Tenant billings growth of $99.1 million, which was driven by:
•$62.4 million generated from newly acquired or constructed sites, primarily due to the FPS Acquisition;
•$17.9 million due to colocations and amendments;
•$17.8 million from contractual escalations, net of churn; and
•$1.0 million from other tenant billings;
•Pass-through revenue growth of $35.3 million; and
•$3.4 million of other revenue growth, primarily attributable to the impact of straight-line accounting.

Segment revenue growth was partially offset by a decrease of $41.1 million attributable to the negative impact of foreign currency translation, which included, among others, $35.0 million related to fluctuations in Nigerian Naira (“NGN”) and $14.5 million related to fluctuations in Ghanaian Cedi (“GHS”), partially offset by an increase of $9.8 million related to fluctuations in South African Rand (“ZAR”).

Latin America property segment revenue growth of $183.7 million was attributable to:

•Tenant billings growth of $92.4 million, which was driven by:
•$38.9 million due to colocations and amendments;
•$32.7 million from contractual escalations, net of churn;
•$18.7 million generated from newly acquired or constructed sites; and
•$2.1 million from other tenant billings;
•Pass-through revenue growth of $22.2 million; and
•$17.6 million of other revenue growth, due in part to $7.1 million from our newly acquired fiber business in Mexico and a $7.0 million reduction in revenue in the prior-year period resulting from a judicial reorganization of a tenant in Brazil, partially offset by the impact of straight-line accounting.

Segment revenue also increased $51.5 million attributable to the positive impact of foreign currency translation, which included, among others, $49.9 million related to fluctuations in Brazilian Reais (“BRL”) and $2.8 million related to fluctuations in Colombian Pesos (“COP”), partially offset by a decrease of $3.3 million related to fluctuations in Mexican Pesos (“MXN”).

The increase in services segment revenue of $25.4 million was primarily attributable to an increase in site acquisition projects.

Year ended December 31, 2016 - Revenue

U.S. property segment revenue growth of $212.6 million was attributable to:

•Tenant billings growth of $257.1 million, which was driven by:
•$128.8 million due to colocations and amendments;
•$91.3 million generated from newly acquired or constructed sites, including sites associated with the Verizon Transaction;
•$34.1 million from contractual escalations, net of churn; and
•$2.9 million from other tenant billings.

Segment revenue growth was partially offset by a decrease of $44.5 million, primarily due to the impact of straight-line accounting.

Asia property segment revenue growth of $585.4 million was attributable to:

•Tenant billings growth of $368.9 million, which was driven by:
•$341.2 million generated from newly acquired sites, primarily due to the Viom Acquisition;
•$22.2 million due to colocations and amendments; and
•$8.6 million generated from newly constructed sites;
•Partially offset by,
▪A decrease of $2.2 million from churn in excess of contractual escalations; and
▪A decrease of $0.9 million from other tenant billings;
•Pass-through revenue growth of $243.6 million, primarily due to the Viom Acquisition; and
•$6.3 million of other revenue growth, primarily due to the impact of straight-line accounting.

Segment revenue growth was partially offset by a decrease of $33.4 million attributable to the negative impact of foreign currency translation related to fluctuations in INR.

EMEA property segment revenue growth of $134.4 million was attributable to:

•Tenant billings growth of $124.1 million, which was driven by:
•$82.8 million generated from newly acquired or constructed sites, including sites acquired from Airtel in Nigeria;
•$22.1 million due to colocations and amendments;
•$17.4 million from contractual escalations, net of churn;
•$1.8 million from other tenant billings; and
•Pass-through revenue growth of $65.6 million;
•Partially offset by a decrease of $4.6 million, attributable in part to the impact of straight-line accounting.

Segment revenue growth was partially offset by a decrease of $50.7 million attributable to the negative impact of foreign currency translation, which included, among others, $29.0 million related to fluctuations in NGN, $12.1 million related to fluctuations in ZAR and $5.5 million related to fluctuations in GHS.

Latin America property segment revenue growth of $100.3 million was attributable to:

•Tenant billings growth of $131.3 million, which was driven by:
•$49.5 million generated from newly acquired or constructed sites;
•$42.5 million from contractual escalations, net of churn;
•$37.2 million due to colocations and amendments;
•$2.1 million from other tenant billings;
•Pass-through revenue growth of $60.6 million; and
•$5.7 million of other revenue growth, primarily due to a $12.8 million impact of straight-line accounting offset in part by a $7.0 million reduction in revenue resulting from a judicial reorganization of a tenant in Brazil.

Segment revenue growth was partially offset by a decrease of $97.3 million attributable to the negative impact of foreign currency translation, which included, among others, $57.5 million related to fluctuations in MXN, $28.2 million related to fluctuations in BRL and $9.4 million related to fluctuations in COP.

The decrease in services segment revenue of $18.5 million was primarily attributable to a decrease in zoning, permitting and site acquisition projects.

Gross Margin

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Property
U.S.$2,859.2$2,636.7$2,479.08%6%
Asia515.4361.7115.342214
EMEA387.9305.8231.32732
Latin America794.3658.8592.22111
Total property4,556.83,963.03,417.81516
Services64.245.658.141%(22)%

Year ended December 31, 2017 - Gross Margin

•The increase in U.S. property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $13.1 million.
•The increase in Asia property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $163.1 million, primarily due to the Viom Acquisition. Direct expenses increased by an additional $20.0 million attributable to the impact of foreign currency translation.
•The increase in EMEA property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $35.1 million attributable to the impact of foreign currency translation on direct expenses, partially offset by an increase in direct expenses of $49.7 million, partially due to the FPS Acquisition.
•The increase in Latin America property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $29.6 million, partially due to our acquisitions of

urban telecommunications assets and fiber, in Mexico and Argentina. Direct expenses increased by an additional $18.6 million due to the impact of foreign currency translation.

•The increase in services segment gross margin was primarily due to an increase in site acquisition projects.

Year ended December 31, 2016 - Gross Margin

•The increase in U.S. property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $54.9 million. Direct expense growth was primarily due to sites associated with the Verizon Transaction.
•The increase in Asia property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $18.6 million attributable to the impact of foreign currency translation on direct expenses, partially offset by an increase in direct expenses of $357.6 million. Direct expense growth was primarily due to sites associated with the Viom Acquisition.
•The increase in EMEA property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $32.8 million attributable to the impact of foreign currency translation on direct expenses, partially offset by an increase in direct expenses of $92.7 million. Direct expense growth was primarily due to sites acquired from Airtel.
•The increase in Latin America property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $31.9 million attributable to the impact of foreign currency translation on direct expenses, partially offset by an increase in direct expenses of $65.6 million. Direct expense growth was primarily due to newly acquired or constructed sites.
•The decrease in services segment gross margin was attributable to the decrease in revenue described above.

Selling, General, Administrative and Development Expense (“SG&A”)

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Property
U.S.$151.4$147.6$138.63%6%
Asia82.448.222.771112
EMEA67.960.948.71125
Latin America77.560.762.228(2)
Total property379.2317.4272.21917
Services13.712.515.710(20)
Other244.1213.5209.9142
Total selling, general, administrative and development expense$637.0$543.4$497.817%9%

Year Ended December 31, 2017 - SG&A

•The increases in each of our property segments’ SG&A were primarily driven by increased personnel costs to support our business, including additional costs as a result of the Viom Acquisition in our Asia property segment and the FPS Acquisition in our EMEA property segment. The increase in our Asia property segment SG&A was partially driven by an increase in bad debt expense of $24.6 million as a result of aged receivables with certain tenants and the increase in our EMEA property segment SG&A was partially offset by the impact of foreign currency fluctuations and a reduction in bad debt expense of $3.7 million.
•The increase in our services segment SG&A was primarily attributable to an increase in personnel costs within our tower services group.
•The increase in other SG&A was primarily attributable to an increase in stock-based compensation expense of $18.1 million and an increase in corporate SG&A.

Year Ended December 31, 2016 - SG&A

•The increases in each of our U.S., Asia and EMEA property segments’ SG&A were primarily driven by increased personnel costs to support our business, including additional costs associated with the Viom Acquisition in our Asia property segment. The EMEA property segment SG&A increase also included an increase in bad debt expense of $2.2 million and was partially offset by the impact of foreign currency fluctuations. The increase in the Asia property segment SG&A was partially offset by the reversal of bad debt expense of $1.4 million.
•The decrease in our Latin America property segment SG&A was primarily due to the impacts of foreign currency fluctuations and a decrease in bad debt expense, partially offset by increased personnel costs to support the growth of our business.
•The decrease in our services segment SG&A was primarily attributable to a decrease in personnel costs from a lower volume of business in our tower services group.
•The increase in other SG&A of $4.6 million was attributable to an increase in corporate and international headquarters SG&A, partially offset by a decrease in stock-based compensation expense of $1.0 million.

Operating Profit

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Property
U.S.$2,707.8$2,489.1$2,340.49%6%
Asia433.0313.592.638239
EMEA320.0244.9182.63134
Latin America716.8598.1530.02013
Total property4,177.63,645.63,145.61516
Services50.533.142.453%(22)%

Year Ended December 31, 2017 - Operating Profit

The growth in operating profit for each of our property segments was primarily attributable to an increase in our segment gross margin, partially offset by increases in our segment SG&A.

The growth in operating profit for our services segment was primarily attributable to an increase in our segment gross margin, partially offset by an increase in our segment SG&A.

Year Ended December 31, 2016 - Operating Profit

The growth in operating profit for each of our property segments was primarily attributable to an increase in our segment gross margin. The increases in our U.S., Asia and EMEA property segments were partially offset by increases in our segment SG&A. The growth in operating profit in our Latin America property segment was also attributable to a slight decrease in our segment SG&A.

The decrease in operating profit for our services segment was primarily attributable to a decrease in our segment gross margin, partially offset by a decrease in our segment SG&A.

Depreciation, Amortization and Accretion

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Depreciation, amortization and accretion$1,715.9$1,525.6$1,285.312%19%

The increases in depreciation, amortization and accretion expense were primarily attributable to the acquisition, lease or construction of new sites since the beginning of the prior-year period, which resulted in an increase in property and equipment and intangible assets subject to amortization.

Other Operating Expenses

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Other operating expenses$256.0$73.3$66.8249%10%

The increase in other operating expenses for the year ended December 31, 2017 was primarily attributable to an increase in impairment charges of $182.9 million. These charges included $81.0 million related to tower and network intangible assets and $100.1 million related to tenant relationships in our Asia property segment, primarily due to carrier consolidation-driven churn. The increase in other operating expenses also included an increase of $7.7 million in losses on sales or disposals of assets and $10.0 million to fund our charitable foundation. These items were partially offset by aggregate purchase price refunds of $22.2 million of acquisition costs, primarily relating to an acquisition in Brazil completed in 2014.

The increase in other operating expenses for the year ended December 31, 2016 was primarily attributable to an increase of $23.8 million in losses on sales or disposals of assets and impairments, partially offset by a decrease of $17.3 million in integration, acquisition and merger related expenses.

Total Other Expense

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Total Other expense$742.3$727.1$782.82%(7)%

Total other expense consists primarily of interest expense and realized and unrealized foreign currency gains and losses. We record unrealized foreign currency gains or losses as a result of foreign currency fluctuations primarily associated with our intercompany notes and similar unaffiliated balances denominated in a currency other than the subsidiaries’ functional currencies.

The increase in total other expense during the year ended December 31, 2017 was primarily due to a loss on retirement of long-term obligations of $70.2 million attributable to the redemptions of the 7.25% senior unsecured notes due 2019 (the “7.25% Notes”) and the 4.500% senior unsecured notes due 2018 (the “4.500% Notes”) and the repayment of the Secured Cellular Site Revenue Notes, Series 2012-2 Class A, Series 2012-2 Class B and Series 2012-2 Class C and Secured Cellular Site Revenue Notes, Series 2010-2, Class C and Series 2010-2, Class F, compared to the year ended December 31, 2016, where we recorded a gain on retirement of long-term obligations of $1.2 million attributable to the repayment of the Secured Tower Cellular Site Revenue Notes, Series 2012-1, Class A and the Secured Cellular Site Revenue Notes, Series 2010-1, Class C. The increase was also attributable to additional interest expense of $32.5 million due to a $0.9 billion increase in our average debt outstanding. These items were partially offset by foreign currency gains of $26.4 million compared to foreign currency losses of $48.9 million in the prior-year period, as well an additional $9.8 million in interest income compared to the prior-year period.

The decrease in total other expense during the year ended December 31, 2016 was primarily due to foreign currency losses of $48.9 million in the current period, compared to foreign currency losses of $134.7 million in 2015, and a gain on retirement of long-term obligations of $1.2 million in the current period attributable to the repayment of the Secured Cellular Site Revenue Notes, Series 2012-1 Class A and the Secured Cellular Site Revenue Notes, Series 2010-1, Class C compared to the year ended December 31, 2015, where we recorded a loss of $79.6 million, primarily due to the redemption of the 7.000%

senior notes due 2017 and 4.625% senior notes due 2015. This decrease was partially offset by incremental interest expense of $121.2 million, due to an increase of $2.1 billion in our average debt outstanding and an increase in our annualized weighted average cost of borrowing from 3.67% to 3.92%.

Income Tax Provision

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Income tax provision$30.7$155.5$158.0(80)%(2)%
Effective tax rate2.4%13.8%19.0%

As a REIT, we may deduct earnings distributed to stockholders against the income generated by our REIT operations. In addition, we are able to offset certain income by utilizing our NOLs, subject to specified limitations. Consequently, the effective tax rate on income from continuing operations for each of the years ended December 31, 2017, 2016 and 2015 differs from the federal statutory rate.

The decrease in the income tax provision for the year ended December 31, 2017 was primarily attributable to lower uncertain tax position reserve recorded in 2017 than in 2016, a decrease in foreign earnings in India due to impairments, as well as changes in tax laws in certain foreign jurisdictions.

The decrease in the income tax provision for the year ended December 31, 2016 was primarily attributable to a tax election filed in 2015, pursuant to which MIPT no longer operates as a separate REIT for federal and state income tax purposes. In connection with this and related elections, we incurred a one-time cash tax charge of $93.0 million and a one-time deferred income tax benefit of $5.8 million for the year ended December 31, 2015. These items were offset by a one-time increase in tax reserves for the year ended December 31, 2016.

Net Income / Adjusted EBITDA and Net Income / Nareit FFO attributable to American Tower Corporation common stockholders / Consolidated AFFO / AFFO attributable to American Tower Corporation common stockholders

Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Net income$1,225.4$970.4$672.026%44%
Income tax provision30.7155.5158.0(80)(2)
Other (income) expense(31.3)47.7135.0(166)(65)
Loss (gain) on retirement of long-term obligations70.2(1.2)79.6(5,950)(101)
Interest expense749.6717.1595.9520
Interest income(35.4)(25.6)(16.5)3855
Other operating expenses256.073.366.824910
Depreciation, amortization and accretion1,715.91,525.61,285.31219
Stock-based compensation expense108.589.990.521(1)
Adjusted EBITDA$4,089.6$3,552.7$3,066.615%16%
Year Ended December 31,Percent Change 2017 vs 2016Percent Change 2016 vs 2015
201720162015
Net income$1,225.4$970.4$672.026%44%
Real estate related depreciation, amortization and accretion1,516.91,358.91,128.31220
Losses from sale or disposal of real estate and real estate related impairment charges244.454.529.434885
Dividends on preferred stock(87.4)(107.1)(90.2)(18)19
Dividend to noncontrolling interest(13.2)——100—
Adjustments for unconsolidated affiliates and noncontrolling interests(189.1)(88.2)(6.3)(114)(1,271)
Nareit FFO attributable to American Tower Corporation common stockholders$2,697.0$2,188.5$1,733.22326
Straight-line revenue(194.4)(131.7)(155.0)48(15)
Straight-line expense62.367.856.1(8)21
Stock-based compensation expense108.589.990.521(1)
Deferred portion of income tax(105.8)59.21.0(279)6,506
Non-real estate related depreciation, amortization and accretion199.0166.7157.0196
Amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges26.823.122.6162
Other (income) expense (1)(31.3)47.7135.0(166)(65)
Loss (gain) on retirement of long-term obligations70.2(1.2)79.6(5,950)(101)
Other operating expenses (2)11.618.837.3(38)(50)
Capital improvement capital expenditures(114.2)(110.2)(89.9)423
Corporate capital expenditures(17.0)(16.4)(16.4)4—
Adjustments for unconsolidated affiliates and noncontrolling interests189.188.26.31141,271
MIPT one-time cash tax charge (3)——93.0N/A(100)
Consolidated AFFO$2,901.8$2,490.4$2,150.317%16%
Adjustments for unconsolidated affiliates and noncontrolling interests (4)(147.0)(90.2)(34.0)63%166%
AFFO attributable to American Tower Corporation common stockholders$2,754.8$2,400.2$2,116.315%13%
(1)Includes unrealized (gains) losses on foreign currency exchange rate fluctuations of ($26.5 million), $23.4 million and $71.5 million, respectively.
(2)Primarily includes acquisition-related costs and integration costs. For the year ended December 31, 2017, amount also includes refunds for acquisition costs and a charitable contribution.
(3)As the one-time tax charge incurred in connection with the MIPT tax election is nonrecurring, we do not believe it is an indication of our operating performance and believe it is more meaningful to present AFFO excluding this impact. Accordingly, we present AFFO for the year ended December 31, 2015 before this charge.
(4)Includes adjustments for the impact on both Nareit FFO attributable to American Tower Corporation common stockholders as well as the other line items included in the calculation of Consolidated AFFO.

Year Ended December 31, 2017 - Adjusted EBITDA & AFFO metrics

The increase in net income was primarily due to an increase in our operating profit, decreases in our income tax provision and foreign currency losses included in other expense, partially offset by an increase in depreciation, amortization and accretion expense, and increases in other operating expenses, interest expense and a loss on retirement of long-term obligations of $70.2 million.

The increase in Adjusted EBITDA was primarily attributable to the increase in our gross margin and was partially offset by an increase in SG&A of $75.5 million, excluding the impact of stock-based compensation expense.

The growth in Consolidated AFFO and AFFO attributable to American Tower Corporation common stockholders was primarily attributable to the increase in our operating profit and a decrease in dividends on preferred stock, partially offset by increases in straight-line revenue, cash paid for interest and income taxes and corporate SG&A and capital improvement expenditures.

Year Ended December 31, 2016 - Adjusted EBITDA & AFFO metrics

The increase in net income was primarily due to an increase in our operating profit, a decrease in foreign currency losses included in other expense, a reduction of $80.8 million in loss on retirement of long-term obligations, partially offset by increases in depreciation, amortization and accretion expense and interest expense.

The increase in Adjusted EBITDA was primarily attributable to the increase in our gross margin and was partially offset by an increase in SG&A of $46.6 million, excluding the impact of stock-based compensation expense.

The growth in Consolidated AFFO and AFFO attributable to American Tower Corporation common stockholders was primarily attributable to the increase in our operating profit, partially offset by increases in cash paid for interest and income taxes, other than the MIPT one-time cash tax charge, and an increase in capital improvement expenditures.

Liquidity and Capital Resources

Overview

During the year ended December 31, 2017, we increased our financial flexibility and our ability to grow our business while maintaining our long-term financial policies. Our significant 2017 financing transactions included:

•A registered public offering of 500.0 million Euros ($532.2 million at the date of issuance) aggregate principal amount of 1.375% senior unsecured notes due 2025 (the “1.375% Notes”).
•A registered public offering of $750.0 million aggregate principal amount of 3.55% senior unsecured notes due 2027 (the “3.55% Notes”).
•Registered public offerings of $700.0 million aggregate principal amount of 3.000% senior unsecured notes due 2023 (the “3.000% Notes”) and $700.0 million aggregate principal amount of 3.600% senior unsecured notes due 2028 (the “3.600% Notes”).
•Amendment of our multicurrency senior unsecured revolving credit facility entered into in June 2013, as amended (the “2013 Credit Facility”), our senior unsecured revolving credit facility entered into in January 2012, as amended and restated in September 2014, as further amended (the “2014 Credit Facility”) and our unsecured term loan entered into in October 2013, as amended (the “Term Loan”) to, among other things, extend the maturity dates by one year and reduce the Applicable Margins (as defined in the 2013 Credit Facility) and the commitment fees set forth in the 2013 Credit Facility.
•Redemptions of the 7.25% Notes and the 4.500% Notes for an aggregate of $1.3 billion.

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 or equity offerings.

The following table summarizes our liquidity as of December 31, 2017 (in millions):

Available under the 2013 Credit Facility$674.4
Available under the 2014 Credit Facility1,505.0
Letters of credit(10.3)
Total available under credit facilities, net2,169.1
Cash and cash equivalents802.1
Total liquidity$2,971.2

Subsequent to December 31, 2017, we borrowed an additional $325.0 million under the 2013 Credit Facility and $600.0 million under the 2014 Credit Facility, which were primarily used for general corporate purposes.

Summary cash flow information is set forth below for the years ended December 31, (in millions):

201720162015
Net cash provided by (used for):
Operating activities$2,925.6$2,701.7$2,166.9
Investing activities(2,800.9)(2,102.3)(7,741.7)
Financing activities(113.0)(99.3)5,593.1
Net effect of changes in foreign currency exchange rates on cash and cash equivalents6.7(26.5)(29.1)
Net increase (decrease) in cash and cash equivalents, and restricted cash$18.4$473.6$(10.8)

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, including distributions of our REIT taxable income to maintain our qualification for taxation as a REIT under the Code. We may also repay or repurchase our existing indebtedness or equity from time to time. We typically fund our international expansion efforts primarily through a combination of cash on hand, intercompany debt and equity contributions.

As of December 31, 2017, we had total outstanding indebtedness of $20.3 billion, with a current portion of $775.0 million. During the year ended December 31, 2017, we generated sufficient cash flow from operations to fund our capital

expenditures and debt service obligations, as well as our required distributions. We believe the cash generated by operating activities during the year ending December 31, 2018, together with our borrowing capacity under our credit facilities, will be sufficient to fund our required distributions, capital expenditures, debt service obligations (interest and principal repayments) and signed acquisitions. As of December 31, 2017, we had $632.8 million of cash and cash equivalents held by our foreign subsidiaries, of which $289.9 million was held by our joint ventures. While certain subsidiaries may pay us interest or principal on intercompany debt, it has not been our practice to repatriate earnings 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.

Cash Flows from Operating Activities

For the year ended December 31, 2017, cash provided by operating activities increased $223.9 million as compared to the year ended December 31, 2016. The primary factors that impacted cash provided by operating activities as compared to the year ended December 31, 2016, include:

•An increase in our operating profit of $549.4 million;
•An increase of approximately $67.0 million in cash paid for interest;
•An increase of approximately $62.7 million in straight-line revenue: and
•An increase of approximately $40.3 million in cash paid for taxes.

For the year ended December 31, 2016, cash provided by operating activities increased $534.8 million as compared to the year ended December 31, 2015. The primary factors that impacted cash provided by operating activities as compared to the year ended December 31, 2015, include:

•An increase in our operating profit of $490.7 million;
•An increase of approximately $67.1 million in cash paid for interest; and
•A decrease of approximately $60.9 million in cash paid for taxes.

Cash Flows from Investing Activities

Our significant investing activities during the year ended December 31, 2017 are highlighted below:

•We spent approximately $2.0 billion for acquisitions, primarily related to the funding of the FPS Acquisition, as well as tower acquisitions in the United States, and the acquisition of urban telecommunications assets in Mexico.
•We spent $824.2 million for capital expenditures, as follows (in millions):
Discretionary capital projects (1)$170.0
Ground lease purchases131.2
Capital improvements and corporate expenditures (2)131.2
Redevelopment204.5
Start-up capital projects187.3
Total capital expenditures (3)$824.2
(1)Includes the construction of 1,960 communications sites globally.
(2)Includes $31.8 million of capital lease payments included in Repayments of notes payable, credit facilities, senior notes, term loan and capital leases in the cash flow from financing activities in our consolidated statements of cash flows.
(3)Net of purchase credits of $11.2 million on certain assets, which are reported in operating activities in our consolidated statements of cash flows.

Our significant investing transactions in 2016 included the following:

•We spent approximately $1.1 billion for the Viom Acquisition.
•We spent $701.4 million for capital expenditures, as follows (in millions):
Discretionary capital projects (1)$149.7
Ground lease purchases153.3
Capital improvements and corporate expenditures (2)126.7
Redevelopment147.4
Start-up capital projects124.3
Total capital expenditures$701.4
(1)Includes the construction of 1,869 communications sites globally.
(2)Includes $18.9 million of capital lease payments included in Repayments of notes payable, credit facilities, term loan, senior notes and capital leases in the cash flow from financing activities in our consolidated statement of cash flows.

We plan to continue to allocate our available capital, after satisfying our distribution requirements, among investment alternatives that meet our return on investment criteria, while maintaining our commitment to our long-term financial policies. Accordingly, we expect to continue to deploy capital through our annual capital expenditure program, including land purchases and new site construction, and through acquisitions. We expect that our 2018 total capital expenditures will be between $850 million and $950 million, as follows (in millions):

Discretionary capital projects (1)$255to$285
Ground lease purchases150to170
Capital improvements and corporate expenditures155to175
Redevelopment210to230
Start-up capital projects80to90
Total capital expenditures$850to$950
(1)Includes the construction of approximately 2,500 to 3,500 communications sites globally.

Cash Flows from Financing Activities

Our significant financing activities were as follows (in millions):

Year ended December 31,
201720162015
Proceeds from issuance of senior notes, net$2,674.0$3,236.4$1,492.3
Proceeds from (repayments of) credit facilities, net628.6(1,277.1)2,105.0
Distributions paid on common and preferred stock(1,164.4)(993.2)(795.5)
Purchases of common stock(766.3)——
Repayments of securitized notes(302.5)(161.1)(964.9)
Contributions from noncontrolling interest holders, net (1)264.3238.57.2
Repayment of senior notes(1,300.0)—(1,100.0)
(Repayments of) proceeds from term loan—(1,000.0)500.0
Proceeds from the issuance of common stock, net——2,440.3
Proceeds from the issuance of preferred stock, net——1,337.9
Proceeds from issuance of securitized notes——875.0

(1) 2017 contributions primarily relate to the funding of the FPS Acquisition.

Senior Notes

1.375% Senior Notes Offering. On April 6, 2017, we completed a registered public offering of the 1.375% Notes. The net proceeds from this offering were approximately 489.8 million Euros (approximately $521.4 million at the date of issuance), after deducting commissions and estimated expenses. We used the net proceeds to repay existing indebtedness under the 2013 Credit Facility and for general corporate purposes.

The 1.375% Notes will mature on April 4, 2025 and bear interest at a rate of 1.375% per annum. Accrued and unpaid interest on the 1.375% Notes will be payable in Euros in arrears on April 4 of each year, beginning on April 4, 2018. Interest on the 1.375% Notes will be computed on the basis of the actual number of days in the period for which interest is being calculated and the actual number of days from and including the last date on which interest was paid on the 1.375% Notes and commenced accruing on April 6, 2017.

3.55% Senior Notes Offering. On June 30, 2017, we completed a registered public offering of the 3.55% Notes. The net proceeds from this offering were approximately $741.8 million, after deducting commissions and estimated expenses. We used the net proceeds to repay existing indebtedness under the 2013 Credit Facility.

The 3.55% Notes will mature on July 15, 2027 and bear interest at a rate of 3.55% per annum. Accrued and unpaid interest on the 3.55% Notes will be payable in U.S. Dollars semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2018. Interest on the 3.55% Notes is computed on the basis of a 360-day year comprised of twelve 30-day months and commenced accruing on June 30, 2017.

3.000% Senior Notes and 3.600% Senior Notes Offerings. On December 8, 2017, we completed registered public offerings of the 3.000% Notes and the 3.600% Notes. The net proceeds from these offerings were approximately $1,382.9 million, after deducting commissions and estimated expenses. We used the net proceeds to repay existing indebtedness under the 2013 Credit Facility and 2014 Credit Facility.

The 3.000% Notes will mature on June 15, 2023 and bear interest at a rate of 3.000% per annum. The 3.600% Notes will mature on January 15, 2028 and bear interest at a rate of 3.600% per annum. Accrued and unpaid interest on the 3.000% notes will be payable in U.S. Dollars semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2018. Accrued and unpaid interest on the 3.600% notes will be payable in U.S. Dollars semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2018. Interest on the 3.000% Notes and the 3.600% Notes is computed on the basis of a 360-day year comprised of twelve 30-day months and commenced accruing on December 8, 2017. We entered into interest rate swaps, which were designated as fair value hedges at inception, to hedge against changes in fair value of $500.0 million of the $700.0 million under the 3.000% Notes resulting from changes in interest rates. As of December 31, 2017, the interest rate on the 3.000% Notes, after giving effect to the interest rate swap agreements, was 2.49%.

We may redeem each series of senior notes at any time, subject to the terms of the applicable supplemental indenture, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes plus a make-whole premium, together with accrued interest to the redemption date. If we redeem the 1.375% Notes on or after January 4, 2025, the 3.55% Notes on or after April 15, 2027 or the 3.600% Notes on or after October 15, 2027, we will not be required to pay a make-whole premium. In addition, if we undergo a change of control and corresponding ratings decline, each as defined in the applicable supplemental indenture, we may be required to repurchase all of the applicable notes at a purchase price equal to 101% of the principal amount of such notes, plus accrued and unpaid interest (including additional interest, if any), up to but not including the repurchase date. The 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.

Each applicable supplemental indenture for the notes contains 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 applicable supplemental indenture.

Redemption of 7.25% Senior Notes. On February 10, 2017, we redeemed all of the 7.25% Notes at a price equal to 112.0854% of the principal amount, plus accrued and unpaid interest up to, but excluding, February 10, 2017, for an aggregate redemption price of $341.4 million, including $5.1 million in accrued and unpaid interest. The redemption was funded with borrowings under the 2013 Credit Facility and cash on hand. Upon completion of the redemption, none of the 7.25% Notes remained outstanding.

Redemption of 4.500% Senior Notes. On July 31, 2017, we redeemed all of the 4.500% Notes at a price equal to 101.3510% of the principal amount, plus accrued and unpaid interest up to, but excluding, July 31, 2017, for an aggregate redemption price of $1.0 billion, including $2.0 million in accrued and unpaid interest. The redemption was funded with borrowings under the 2013 Credit Facility and cash on hand. Upon completion of the redemption, none of the 4.500% Notes remained outstanding.

Bank Facilities

In December 2017, we entered into amendment agreements with respect to the 2013 Credit Facility, the 2014 Credit Facility and the Term Loan, which, among other things, (i) extend the maturity dates by one year to June 28, 2021, January 31, 2023 and January 31, 2023, respectively and (ii) reduces the Applicable Margins (as defined in the loan agreement) of the 2013 Credit Facility and the commitment fees set forth therein.

2013 Credit Facility. We have the ability to borrow up to $2.75 billion under the 2013 Credit Facility, which includes a $1.0 billion sublimit for multicurrency borrowings, a $200.0 million sublimit for letters of credit and a $50.0 million sublimit for swingline loans. During the year ended December 31, 2017, we borrowed an aggregate of $3.8 billion and repaid an aggregate of $2.3 billion of revolving indebtedness. We primarily used the borrowings to fund acquisitions, repay existing indebtedness and for general corporate purposes. We currently have $4.0 million of undrawn letters of credit and maintain the ability to draw down and repay amounts under the 2013 Credit Facility in the ordinary course.

2014 Credit Facility. We have the ability to borrow up to $2.0 billion under the 2014 Credit Facility, which includes a $200.0 million sublimit for letters of credit and a $50.0 million sublimit for swingline loans. During the year ended December 31, 2017, we borrowed an aggregate of $815.0 million and repaid an aggregate of $1.7 billion of revolving indebtedness. We primarily used the borrowings to fund acquisitions and for general corporate purposes. We currently have $6.3 million of undrawn letters of credit and maintain the ability to draw down and repay amounts under the 2014 Credit Facility in the ordinary course.

The Term Loan, the 2013 Credit Facility and the 2014 Credit Facility do not require amortization of principal and 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 the London Interbank Offered Rate (“LIBOR”) as the applicable base rate for borrowings under the Term Loan, the 2013 Credit Facility and the 2014 Credit Facility. The interest rate on the 2013 Credit Facility ranges between 0.875% to 1.750% above LIBOR for LIBOR based borrowings or up to 0.750% above the defined base rate for base rate borrowings, in each case based upon our debt ratings. The current margin over LIBOR and the base rate for the 2013 Credit Facility is 1.125% and 0.125%, respectively. The interest rates on the Term Loan and the 2014 Credit Facility range between 1.000% to 2.000% above LIBOR for LIBOR based borrowings or up to 1.000% above the defined base rate for base rate borrowings, in each case based upon our debt ratings. The current margin over LIBOR and the base rate for each of the Term Loan and the 2014 Credit Facility is 1.250% and 0.250%, respectively.

The 2013 Credit Facility and the 2014 Credit Facility are subject to two optional renewal periods and we must pay a quarterly commitment fee on the undrawn portion of each facility. The commitment fee for the 2013 Credit Facility ranges from 0.100% to 0.350% per annum, based upon our debt ratings, and is currently 0.1250%. The commitment fee for the 2014 Credit Facility ranges from 0.100% to 0.400% per annum, based upon our debt ratings, and is currently 0.150%.

The loan agreements for each of the Term Loan, the 2013 Credit Facility and the 2014 Credit Facility contain 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. Failure to comply with the financial and operating covenants of the loan agreements could not only prevent us from being able to borrow additional funds under the revolving credit facilities, but may 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.

India indebtedness. Amounts outstanding and key terms of the India indebtedness consisted of the following as of December 31, 2017 (in millions, except percentages):

Amount Outstanding (INR)Amount Outstanding (USD)Interest Rate (Range)Maturity Date (Range)
Term loans26,740$418.77.90% - 8.65%January 24, 2018 - November 30, 2024
Debenture6,000$93.99.55%April 28, 2020
Working capital facilities0$08.05% - 8.75%March 18, 2018 - October 23, 2018

The India indebtedness includes several term loans, ranging from one to ten years, which are generally secured by the borrower’s short-term and long-term assets. Each of the term loans bear interest at the applicable bank’s Marginal Cost of Funds based Lending Rate (as defined in the applicable agreement) or base rate, plus a spread. Interest rates on the term loans are fixed until certain reset dates. Generally, the term loans can be repaid without penalty on the reset dates; repayments at dates other than the reset dates are subject to prepayment penalties, typically of 1% to 2%. Scheduled repayment terms include either

ratable or staggered amortization with repayments typically commencing between six and 36 months after the initial disbursement of funds.

The debenture is secured by the borrower’s long-term assets, including property and equipment and intangible assets. The debenture bears interest at a base rate plus a spread of 0.6%. The base rate is set in advance for each quarterly coupon period. Should the actual base rate be between 9.75% and 10.25%, the revised base rate is assumed to be 10.00% for purposes of the reset. Additionally, the spread is subject to reset 36 and 48 months from the issuance date of April 27, 2015. The holders of the debenture must reach a consensus on the revised spread and the borrower must redeem all of the debentures held by holders from whom consensus is not achieved. Additionally, the debenture is required to be redeemed by the borrower if it does not maintain a minimum credit rating.

The India indebtedness includes several working capital facilities, most of which are subject to annual renewal, and which are generally secured by the borrower’s short-term and long-term assets. The working capital facilities bear interest at rates that are comprised of the applicable bank’s Marginal Cost of Funds based Lending Rate (as defined in the applicable agreement) or base rate, plus a spread. Generally, the working capital facilities are payable on demand prior to maturity.

India preference shares. On March 2, 2017, ATC TIPL issued 166,666,666 mandatorily redeemable preference shares (the “Preference Shares”) and used the proceeds to redeem the preference shares previously issued by Viom (the “Viom Preference Shares”). The Preference Shares are to be redeemed on March 2, 2020 and have a dividend rate of 10.25% per annum. As of December 31, 2017, ATC TIPL had 166,666,666 mandatorily redeemable preference shares (the “Preference Shares”) outstanding, which are required to be redeemed in cash. Accordingly, we recognized debt of 1.67 billion INR ($26.1 million) related to the Preference Shares.

Stock Repurchase Programs. We have two stock repurchase programs, the 2011 Buyback and the 2017 Buyback.

During the year ended December 31, 2017, we resumed the 2011 Buyback and repurchased 6,099,150 shares of our common stock thereunder for an aggregate of $766.3 million, including commissions and fees. We had no repurchases under the 2017 Buyback.

Under each program, we are authorized to purchase shares from time to time through open market purchases, in privately negotiated transactions not to exceed market prices, and (with respect to such open market purchases) pursuant to plans adopted in accordance with Rule 10b5-1 under the Exchange Act in accordance with securities laws and other legal requirements, and subject to market conditions and other factors.

We expect to continue managing the pacing of the remaining $344.8 million under the 2011 Buyback and the $2.0 billion authorized under the 2017 Buyback in response to general market conditions and other relevant factors. We expect to fund 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 and the 2017 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 (the “ESPP”) and upon exercise of stock options granted under our equity incentive plans. For the year ended December 31, 2017, we received an aggregate of $119.7 million in proceeds upon exercises of stock options and sales pursuant to the ESPP.

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 have distributed, and expect to continue to distribute, all or substantially all of our REIT taxable income after taking into consideration our utilization of NOLs. We have distributed an aggregate of approximately $4.3 billion to our common stockholders, including the dividend paid in January 2018, primarily classified as ordinary income.

The amount, timing and frequency of future distributions will be at the sole discretion of our Board of Directors and will depend on various factors, a number of which may be beyond our control, including our financial condition and operating cash flows, the amount required to maintain our qualification for taxation as a REIT and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in our existing and future debt and preferred equity 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.

We had two series of preferred stock, the Series A Preferred Stock, with a dividend rate of 5.25%, and the Series B Preferred Stock, with a dividend rate of 5.50%. Dividends were payable quarterly in arrears, subject to declaration by our Board of Directors. During the year ended December 31, 2017, we paid dividends of $2.625 per share, or $15.8 million, to Series A

preferred stockholders of record and $55.00 per share, or $75.6 million, to Series B preferred stockholders of record. During the year ended December 31, 2017, all outstanding shares of the Series A Preferred Stock converted at a rate of 0.9337 per share into an aggregate of 5,602,153 shares of our common stock pursuant to the provisions of the Certificate of Designations governing the Series A Preferred Stock.

In addition, on February 15, 2018, we paid dividends of $13.75 per share, or $18.9 million, to Series B Preferred Stockholders of record at the close of business on February 1, 2018. On February 15, 2018, all outstanding shares of the Series B Preferred Stock converted at a rate of 8.7420 per share of Series B Preferred Stock, or 0.8742 per depositary share, each representing a 1/10th interest in a share of Series B Preferred Stock, into shares of our common stock pursuant to the provisions of the Certificate of Designations governing the Series B Preferred Stock. As a result of the conversions of the Series B Preferred Stock in 2018, we issued an aggregate of 12,020,064 shares of our common stock.

During the year ended December 31, 2017, we paid $2.50 per share, or $1.1 billion, to common stockholders of record. In addition, we declared a distribution of $0.70 per share, or $300.2 million, paid on January 16, 2018 to our common stockholders of record at the close of business on December 28, 2017.

We accrue distributions on unvested restricted stock units, which are payable upon vesting. As of December 31, 2017, the amount accrued for distributions payable related to unvested restricted stock units was $10.1 million. During the year ended December 31, 2017, we paid $3.0 million of distributions upon the vesting of restricted stock units.

For more details on the cash distributions paid to our common and preferred stockholders during the year ended December 31, 2017, see note 15 to our consolidated financial statements included in this Annual Report.

Contractual Obligations. The following table summarizes our contractual obligations as of December 31, 2017 (in millions):

Contractual Obligations20182019202020212022ThereafterTotal
Long-term debt, including current portion:
American Tower Corporation debt:
2013 Credit Facility$—$—$—$2,075.6$—$—$2,075.6
Term Loan—————1,000.01,000.0
2014 Credit Facility—————495.0495.0
3.40% senior notes—1,000.0————1,000.0
2.800% senior notes——750.0———750.0
5.050% senior notes——700.0———700.0
3.300% senior notes———750.0——750.0
3.450% senior notes———650.0——650.0
5.900% senior notes———500.0——500.0
2.250% senior notes————600.0—600.0
4.70% senior notes————700.0—700.0
3.50% senior notes—————1,000.01,000.0
3.000% senior notes—————700.0700.0
5.00% senior notes—————1,000.01,000.0
1.375% senior notes—————600.2600.2
4.000% senior notes—————750.0750.0
4.400% senior notes—————500.0500.0
3.375% senior notes—————1,000.01,000.0
3.125% senior notes—————400.0400.0
3.55% senior notes—————750.0750.0
3.600% senior notes—————700.0700.0
Total American Tower Corporation debt—1,000.01,450.03,975.61,300.08,895.216,620.8
American Tower subsidiary debt:
Series 2013-1A securities (1)500.0—————500.0
Series 2013-2A securities (2)—————1,300.01,300.0
Series 2015-1 notes (3)——350.0———350.0
Series 2015-2 notes (4)—————525.0525.0
India indebtedness (5)196.859.1138.733.033.052.1512.7
India preference shares (6)——26.1———26.1
Shareholder loans (7)—66.5———34.1100.6
Other subsidiary debt (8)53.949.152.429.645.217.5247.7
Total American Tower subsidiary debt750.7174.7567.262.678.21,928.73,562.1
Long-term obligations, excluding capital leases750.71,174.72,017.24,038.21,378.210,823.920,182.9
Cash interest expense720.2674.4610.3502.9385.3721.73,614.8
Capital lease payments (including interest)34.230.525.921.417.7166.5296.2
Total debt service obligations1,505.11,879.62,653.44,562.51,781.211,712.124,093.9
Operating lease payments (9)923.5887.1847.9810.8768.46,533.310,771.0
Other non-current liabilities (10)(11)11.110.714.67.11.73,038.63,083.8
Total$2,439.7$2,777.4$3,515.9$5,380.4$2,551.3$21,284.0$37,948.7
(1)Represents anticipated repayment date; final legal maturity is March 15, 2043.
(2)Represents anticipated repayment date; final legal maturity is March 15, 2048.
(3)Represents anticipated repayment date; final legal maturity is June 15, 2045.
(4)Represents anticipated repayment date; final legal maturity is June 15, 2050.
(5)Denominated in INR. Debt includes India working capital facility, remaining debt assumed by us in connection with the Viom Acquisition and debt that has been entered into by ATC TIPL.
(6)Mandatorily redeemable preference shares classified as debt.
(7)Reflects balances owed to our joint venture partners in Ghana and Uganda. The Ghana loan is denominated in GHS and the Uganda loan is denominated in UGX.
(8)Includes the BR Towers debentures, which are denominated in BRL and amortize through October 15, 2023, the South African credit facility, which is denominated in ZAR and amortizes through December 17, 2020, the Colombian credit facility, which is denominated in COP and amortizes through April 24, 2021 and the Brazil credit facility, which is denominated in BRL and matures on January 15, 2022.
(9)Includes payments under non-cancellable initial terms, as well as payments for certain renewal periods at our option, which we expect to renew because failure to renew could result in a loss of the applicable communications sites and related revenues from tenant leases.
(10)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.
(11)Excludes $94.8 million of liabilities for unrecognized tax positions and $29.0 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.

Factors Affecting Sources of Liquidity

Our liquidity depends on our ability to generate cash flow from operating activities, borrow funds under our credit facilities and maintain compliance with the contractual agreements governing our indebtedness. We believe that the debt agreements discussed below represent our material debt agreements that contain covenants, our compliance with which would be material to an investor’s understanding of our financial results and the impact of those results on our liquidity.

Internally Generated Funds. Because the majority of our tenant leases are multiyear contracts, a significant majority of the revenues generated by our property operations as of the end of 2017 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 depends 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 Our Credit Facilities. The loan agreements for the 2013 Credit Facility, the 2014 Credit Facility and the Term Loan contain certain financial and operating covenants and other restrictions applicable to us and our subsidiaries that are not designated as unrestricted subsidiaries on a consolidated basis. These restrictions include limitations on additional debt, distributions and dividends, guaranties, sales of assets and liens. The loan agreements also contain covenants that establish financial tests with which we and our restricted subsidiaries must comply related to total leverage and senior secured leverage, as set forth in the table below. In the event that our debt ratings fall below investment grade, we must maintain an interest coverage ratio of Adjusted EBITDA to Interest Expense (each as defined in the applicable loan agreement) of at least 2.50:1.00. As of December 31, 2017, we were in compliance with each of these covenants.

Compliance Tests For 12 Months Ended December 31, 2017 ($ in billions)
Ratio (1)Additional Debt Capacity Under Covenants (2)Capacity for Adjusted EBITDA Decrease Under Covenants (3)
Consolidated Total Leverage RatioTotal Debt to Adjusted EBITDA ≤ 6.00:1.00~ $5.0~ $0.8
Consolidated Senior Secured Leverage RatioSenior Secured Debt to Adjusted EBITDA ≤ 3.00:1.00~ $9.0 (4)~ $3.0 (4)

(1) Each component of the ratio as defined in the applicable loan agreement.

(2) Assumes no change to Adjusted EBITDA.

(3) Assumes no change to our debt levels.

(4) Effectively, however, additional Senior Secured Debt under this ratio would be limited to the capacity under the Consolidated Total Leverage Ratio.

The loan agreements for our credit facilities also contain reporting and information covenants that require us to provide financial and operating information to the lenders 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.

Failure to comply with the financial maintenance tests and certain other covenants of the loan agreements for our credit facilities could not only prevent us from being able to borrow additional funds under these credit facilities, but may 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 may 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 these credit facilities and our ability to fund our debt service obligations. Based upon our current expectations, we believe our operating results during the next 12 months will be sufficient to comply with these covenants.

Restrictions Under Agreements Relating to the 2015 Securitization and the 2013 Securitization. The indenture and related supplemental indentures governing the American Tower Secured Revenue Notes, Series 2015-1, Class A (the “Series 2015-1 Notes”) and the American Tower Secured Revenue Notes, Series 2015-2, Class A (the “Series 2015-2 Notes,” and, together with the Series 2015-1 Notes, the “2015 Notes”) issued by GTP Acquisition Partners I, LLC (“GTP Acquisition Partners”) in the 2015 Securitization and the loan agreement related to the 2013 Securitization include certain financial ratios and operating covenants and other restrictions customary for transactions subject to rated securitizations. Among other things, American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC (together, the “AMT Asset Subs”) and GTP Acquisition Partners are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets, subject to customary carve-outs for ordinary course trade payables and permitted encumbrances (as defined in the applicable agreement).

Under the agreements, amounts due will be paid from the cash flows generated by the assets securing the 2015 Notes or the assets securing the nonrecourse loan that secures the Secured Tower Revenue Securities, Series 2013-1A and Series 2013-2A issued in the 2013 Securitization (the “Loan”), as applicable, which must be deposited into certain reserve accounts, and thereafter distributed solely pursuant to the terms of the applicable agreement. On a monthly basis, after payment of all required amounts under the applicable agreement, subject to the conditions described in the table below, the excess cash flows generated from the operation of such assets are released to GTP Acquisition Partners or the AMT Asset Subs, as applicable, which can then be distributed to, and used by, us. As of December 31, 2017, $107.3 million held in such reserve accounts was classified as restricted cash.

Certain information with respect to the 2015 Securitization and the 2013 Securitization is set forth below. The debt service coverage ratio (“DSCR”) is generally calculated as the ratio of the net cash flow (as defined in the applicable agreement) to the amount of interest, servicing fees and trustee fees required to be paid over the succeeding 12 months on the principal amount of the 2015 Notes or the Loan, as applicable, that will be outstanding on the payment date following such date of determination.

Issuer or BorrowerNotes/Securities IssuedConditions Limiting Distributions of Excess CashExcess Cash Distributed During Year Ended December 31, 2017DSCR as of December 31, 2017Capacity for Decrease in Net Cash Flow Before Triggering Cash Trap DSCR (1)Capacity for Decrease in Net Cash Flow Before Triggering Minimum DSCR (1)
Cash Trap DSCRAmortization Period
2015 SecuritizationGTP Acquisition PartnersAmerican Tower Secured Revenue Notes, Series 2015-1 and Series 2015-21.30x, Tested Quarterly (2)(3)(4)$195.48.42x$190.0$194.0
2013 SecuritizationAMT Asset SubsSecured Tower Revenue Securities, Series 2013-1A and Series 2013-2A1.30x, Tested Quarterly (2)(3)(5)$548.212.14x$520.9$528.1
(1)Based on the net cash flow of the applicable issuer or borrower as of December 31, 2017 and the expenses payable over the next 12 months on the 2015 Notes or the Loan, as applicable.
(2)Once triggered, a Cash Trap DSCR condition continues to exist until the DSCR exceeds the Cash Trap DSCR for two consecutive calendar quarters. During a Cash Trap DSCR condition, all cash flow in excess of amounts required to make debt service payments, fund required reserves, pay management fees and budgeted operating expenses and make other payments required under the applicable transaction documents, referred to as excess cash flow, will be deposited into a reserve account (the “Cash Trap Reserve Account”) instead of being released to the applicable issuer or borrower.
(3)An amortization period commences if the DSCR is equal to or below 1.15x (the “Minimum DSCR”) at the end of any calendar quarter and continues to exist until the DSCR exceeds the Minimum DSCR for two consecutive calendar quarters.
(4)No amortization period is triggered if the outstanding principal amount of a series has not been repaid in full on the applicable anticipated repayment date. However, in such event, additional interest will accrue on the unpaid principal balance of the applicable series, and such series will begin to amortize on a monthly basis from excess cash flow.
(5)An amortization period exists if the outstanding principal amount has not been paid in full on the applicable anticipated repayment date and continues to exist until such principal has been repaid in full.

A failure to meet the noted DSCR tests could prevent GTP Acquisition Partners or the AMT Asset Subs from distributing excess cash flow to us, which could affect our ability to fund our capital expenditures, including tower construction and acquisitions, meet REIT distribution requirements and make preferred stock dividend payments. During an “amortization period,” all excess cash flow and any amounts then in the applicable Cash Trap Reserve Account would be applied to pay principal of the 2015 Notes or the Loan, as applicable, on each monthly payment date, and so would not be available for distribution to us. Further, additional interest will begin to accrue with respect to any series of the 2015 Notes or subclass of Loan from and after the anticipated repayment date at a per annum rate determined in accordance with the applicable agreement. With respect to the 2015 Notes, upon the occurrence and during an event of default, the applicable trustee may, in its discretion or at the direction of holders of more than 50% of the aggregate outstanding principal of any series of the 2015 Notes, declare such series of 2015 Notes immediately due and payable, in which case any excess cash flow would need to be used to pay holders of such notes. Furthermore, if GTP Acquisition Partners or the AMT Asset Subs were to default on a series of the 2015 Notes or the Loan, the applicable trustee may seek to foreclose upon or otherwise convert the ownership of all or any portion of the 2015 Secured Sites or the 2013 Secured Towers, respectively, in which case we could lose such sites and the revenue associated with those assets.

As discussed above, we use our available liquidity and seek new sources of liquidity to fund capital expenditures, future growth and expansion initiatives, satisfy our distribution requirements and repay or repurchase our debt. If we determine that it is desirable or necessary to 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 and debt service obligations, pay preferred stock dividends or refinance our existing indebtedness.

In addition, our liquidity depends on our ability to generate cash flow from operating activities. As set forth under Item 1A of this Annual Report under the caption “Risk Factors,” 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 assumptions 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. 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 amounts 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, 2017. 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. See note 1 to our consolidated financial statements included in this Annual Report for a summary of our significant 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 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 indicators 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.

We review our tenant-related intangible assets on a tenant by tenant basis for indicators 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 amount of the tenant-related intangible assets will be recovered primarily through projected undiscounted future cash flows.

If the sum of the estimated undiscounted future cash flows of our long-lived assets is less than the carrying amount of the assets, an impairment loss may be recognized. An impairment loss would be based on the fair value of the asset, which is based on an estimate of discounted future cash flows to be provided from the asset. We record any related impairment charge in the period in which we identify such impairment.

In October 2017, one of our tenants in Asia, Tata Teleservices, informed the Department of Telecommunications in India of its intent to exit the wireless telecommunications business and announced plans to transfer its business to another telecommunications provider.

We considered these recent developments regarding these events when conducting our annual impairment test for the Tata Teleservices tenant relationship, which did not result in an impairment since the estimated probability-weighted undiscounted cash flows were in excess of the carrying value of this asset by approximately $33.5 million, or 7%.

Key assumptions included in the undiscounted cash flows were future revenue projections, estimates of ongoing tenancies, operating margins and the probability weightings assigned to the future cash flow scenarios. For this tenant relationship intangible asset, we performed a sensitivity analysis on our significant assumptions and determined that a 7% reduction on projected cash flows, which we determined to be reasonable, would impact our conclusion that the undiscounted future cash flows to be generated from the tenant relationship exceeds its carrying value.

We will continue to monitor the status of these developments, as it is possible that the estimated future cash flows may differ from current estimates and changes in estimated cash flows from Tata Teleservices could have an impact on previously recorded tangible and intangible assets, including amounts originally recorded as tenant-related intangibles, which have a current net book value of $436.4 million.

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

Goodwill is recorded in the applicable segment and assessed for impairment at the reporting unit level. We utilize the two step impairment test and employ a discounted cash flow analysis when testing goodwill for impairment. 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 amount of the applicable reporting unit. If the carrying amount 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 for the amount of the excess.

During the year ended December 31, 2017, no potential impairment was identified as the fair value of each of our reporting units was in excess of its carrying amount. The fair value of our India reporting unit, which is based on the present value of forecasted future value cash flows (the income approach) exceeded the carrying value by approximately $99.1 million, or 3%. As a result of the telecommunications carrier consolidation occurring in the India market, we lowered our discounted cash flow projections, which increases the sensitivity of these projections to changes in the key assumptions used in determining the fair value of the India reporting unit as of December 31, 2017. Key assumptions include future revenue growth rates and operating margins, capital expenditures, terminal period growth rate and the weighted-average cost of capital, which were determined considering historical data and current assumptions related to the impacts of the carrier consolidation.

For this reporting unit, we performed a sensitivity analysis on our significant assumptions and determined that (i) a 6% reduction on projected revenues, (ii) a 21 basis point increase in the weighted-average cost of capital or (iii) a 10% reduction in terminal sales growth rate, individually, each of which we determined to be reasonable, would impact our conclusion that the fair value of the India reporting unit exceeds its carrying value. Events that could negatively affect our India reporting units financial results include increased customer attrition exceeding our forecast resulting from the ongoing carrier consolidation, carrier tenant bankruptcies, and other factors set forth in Item 1A of this Annual Report under the caption “Risk Factors.”

The carrying value of goodwill in the India reporting unit was $1,095.0 million as of December 31, 2017, which represents 19% of our consolidated balance of $5,638.4 million.

•Asset Retirement Obligations: When required, we recognize the fair value of obligations to remove our tower assets and remediate the leased land upon which certain of our tower assets are located. Generally, the associated retirement costs are capitalized as part of the carrying amount of the related tower assets and depreciated over their estimated useful lives and the liability is accreted through the obligation’s estimated settlement date.

We updated our assumptions used in estimating our aggregate asset retirement obligation, which resulted in a net increase in the estimated obligation of $68.3 million during the year ended December 31, 2017. The change in 2017 primarily resulted from changes in timing of certain settlement date and cost assumptions. Fair value estimates of liabilities for asset retirement obligations generally involve discounting of estimated future cash flows. Periodic accretion of such liabilities due to the passage of time is included in Depreciation, amortization and accretion expense in the consolidated statements of operations. 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.

•Acquisitions: We evaluate each of our acquisitions under the accounting guidance framework to determine whether to treat an acquisition as an asset acquisition or a business combination. For those transactions treated as asset acquisitions, the purchase price is allocated to the assets acquired, with no recognition of goodwill. For those acquisitions that meet the definition of a business combination, we apply the acquisition method of accounting where assets acquired and liabilities assumed are recorded at fair value at the date of each acquisition, and the results of operations are included with our results from the dates of the respective acquisitions. Any excess of the purchase price paid over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill. We continue to evaluate acquisitions for a period not to exceed one year after the applicable acquisition date of each transaction to determine whether any additional adjustments are needed to the allocation of the purchase price paid for the assets acquired and liabilities assumed. 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 tenant cash flows, including rate and terms of renewal and attrition.
•Revenue Recognition: Our revenue from leasing arrangements, including fixed escalation clauses present in non-cancellable lease arrangements, is reported on a straight-line basis over the term of the respective leases when collectibility is reasonably assured. Escalation clauses tied to the Consumer Price Index or other inflation-based indices, and other incentives present in lease agreements with our tenants are excluded from the straight-line calculation. Total property straight-line revenues for the years ended December 31, 2017, 2016 and 2015 were $194.4 million, $131.7 million and $155.0 million, respectively. Amounts billed upfront in connection with the execution of lease agreements are initially deferred and reflected in Unearned revenue in the accompanying consolidated balance sheets and recognized as revenue over the terms of the applicable leases. Amounts billed or received for services prior to being earned are deferred and reflected in Unearned revenue in the accompanying consolidated balance sheets until the criteria for recognition have 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, with 53% of our revenues derived from four tenants. 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 creditworthiness of our borrowers and

tenants. In recognizing tenant revenue we 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 collectibility 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. In addition, 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. 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.
•Income Taxes: 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 financial reporting purposes differs from the timing of recognition for tax reporting 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. 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 if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Valuation allowances would be reversed as a reduction to the provision for income taxes, if related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the assets’ recoverability.

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.

The Tax Act significantly changes how the U.S. taxes corporations. The Tax Act contains several key provisions including, among other things, a one-time mandatory deemed repatriation of all post-1986 untaxed foreign earnings and profits, a reduction in the corporate income rate from 35% to 21% for tax years beginning after December 31, 2017 and the introduction of a new U.S. tax on certain off-shore earnings referred to as Global Intangible Low-Taxed Income (“GILTI”).

The SEC staff issued guidance to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act and allows the registrant to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. We have recognized the provisional impacts of the Tax Act in our consolidated financial statements for the year ended December 31, 2017. We estimated these amounts to not be material, however, our estimates are provisional and subject to further analysis.

The Financial Accounting Standards Board also provided additional guidance to address the accounting for the effects of the provisions related to the taxation of GILTI, noting that companies should make an accounting policy election to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to include the tax expense in the year it is incurred. We have not completed our analysis of the effects of the GILTI provisions and will further consider the accounting policy election within the permitted measurement period.

Accounting Standards Update

For a discussion of recent accounting standards updates, see note 1 to our consolidated financial statements included in this Annual Report.

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