Rod Smith
Executive Vice President, Chief Financial Officer and Treasurer at American Tower
Thanks, Tom, and thank you, everyone, for joining today's call. I hope you and your families are well. As you saw in our press release, we had a strong second quarter, driven by solid global demand for our communication sites as carriers continued to deploy meaningful capital to augment and extend their networks. We expect carriers across our global portfolio to spend upwards of $70 billion in capex for the full year, which is expected to support attractive growth for our global business. Before getting into the details of our second quarter results and raised full year outlook, I want to touch on a few key achievements for the quarter. First, we closed on approximately 27,000 sites across Europe and Latin America as part of our Telxius acquisition, and are on track to add the remaining 4,000 or so German rooftop sites in early August. Overall, including the Telxius deal, other small-scale M&A and our new build program, we expanded our global site count by nearly 15% in the quarter. Second, we financed the Telxius transaction in what we believe to be an optimal way, including agreements to add CDPQ and Allianz as strategic minority partners in Europe.
We also raised approximately $2.4 billion in the euro debt markets at highly attractive rates and issued more than $2 billion in common equity. We are well positioned to continue to deploy growth capital, while at the same time effectively managing our leverage and maintaining our strong investment-grade balance sheet. Finally, as expected, demand for both existing and new assets across our global footprint accelerated in the quarter, with sequentially higher organic growth and continued strong new build activity. In addition, we booked a record quarter in our U.S. services segment, reflecting an attractive demand environment that, combined with our existing comprehensive MLAs, is expected to drive higher levels of gross new business in our property segment in the coming quarters. With that, please turn to slide six, and I'll review our Q2 property revenue and organic tenant billings growth. As you can see, our consolidated property revenue of $2.2 billion grew by approximately 18% year-over-year or nearly 16% on an FX-neutral basis. This included U.S. property revenue growth of 13% and international property revenue growth of 24% or 19% on a constant currency basis. These growth rates reflect the advantages of our global diversification and our ability to benefit from multiple concurrent deployments of network technology around the globe.
Growth was also favorably impacted by one month of contributions from the Telxius sites, U.S. M&A transactions that closed late in 2020, higher levels of pass-through and straight-line revenue and some nonrecurring elements and revenue reserve -- reversals. Moving to the right side of the slide, organic growth was again a significant contributor to our overall revenue growth. On a consolidated basis, organic tenant billings growth was 4.8%, reflecting a sequential acceleration of around 70 basis points. This included a step-up in our U.S. and Canada growth from 3.6% last quarter to 4.4% in Q2, driven primarily by the flow-through of activity under our comprehensive MLAs. We saw a nearly 20% sequential acceleration in the contribution of colocations and amendment activity to organic tenant billings growth. Escalations were over 3% and churn was 1.9%. 5G activity in the marketplace continues to advance, and all of the major U.S. carriers were active in their deployments during the quarter. Outside of the U.S. and Canada, we drove organic tenant billings growth of 5.3%, up from 5% last quarter. Latin America led the way with organic tenant billings growth of 8.4%, driven by solid new business commencements in higher escalators, primarily in Brazil.
Organic tenant billings growth across our African markets was 8.2%, including 11% growth in Nigeria where we continue to benefit from an MOA signed last year with a major customer. We also had a solid quarter in Europe, with organic tenant billings growth rising more than 100 basis points sequentially to 4.4%. Notably, our legacy German business drove gross organic growth of more than 8%, driven by accelerating 5G deployments and continuing investments in 4G. Meanwhile, in India, we saw an organic tenant billings decline of 1.7%, essentially flat to the first quarter. This included fairly healthy gross new business activity, but also continued elevated levels of churn. Turning to slide seven. Our Q2 adjusted EBITDA grew nearly 22% or around 20% on an FX-neutral basis to $1.5 billion. Adjusted EBITDA margin was 64.2%, up 90 basis points over the prior year, driven by continued organic growth, prudent cost controls throughout the business and benefits from higher levels of straight-line revenues. Cash, SG&A as a percent of total property revenue was around 7.7%. Moving to the right side of the slide, consolidated AFFO growth was nearly 19%, with per share growth of about 17%. Continued solid organic trends, contributions from our newly acquired and constructed assets and cost controls throughout the business, along with cost efficient balance sheet management and about $20 million in FX favorability, were the main drivers of this growth.
On an FX neutral basis, consolidated AFFO growth would have been over 16%, and consolidated AFFO per share growth would have been around 15%. AFFO attributable to AMT common stockholders per share was $2.39, reflecting a year-over-year growth rate of right around 19%. Let's now turn to our raised outlook for the full year. I'll start by reviewing a few of the key updated assumptions. First, we have layered in the impacts of the more than 27,000 Telxius sites we have closed to date as well as the remaining 4,000 Telxius rooftop sites in Germany that we expect to purchase in the first week of August. Second, we have assumed that our agreements with CDPQ and Allianz close in mid-Q3. We expect to receive over $3 billion in total proceeds from these transactions. And after the closing, CDPQ will own 30% of ATC Europe, with Allianz owning 18%. This is higher than the initial 10% that we discussed as Allianz has exercised its option to increase its stake in the business. Additionally, PGGM has converted its prior holdings in ATC Europe to minority stakes in our local German and Spanish operating companies. Given this more meaningful minority interest component, we have added net income attributable to AMT common stockholders and AFFO attributable to AMT common stockholders as outlook metrics and would expect to feature both in our financial reporting going forward.
Finally, as a result of recent favorable FX trends in many of our markets, our current outlook reflects positive FX impacts of $41 million for property revenue, $26 million for adjusted EBITDA and $20 million for consolidated AFFO as compared to our prior expectations. With that, let's move to the details of our increased full year expectations. As you can see on slide eight, we are now projecting consolidated year-over-year property revenue growth of nearly 14% at the midpoint, up 6% versus our prior outlook. The increase includes approximately $383 million in total revenue from Telxius, including $141 million in pass-through. Further, we now expect about $58 million in additional pass-through revenue throughout the rest of the business, mostly due to higher fuel prices in India as well as $19 million or so in higher global straight-line revenue. Moving to slide nine. You'll see that as part of our property revenue outlook increase, we are raising our organic tenant billings growth projections on a consolidated basis to around 4%, up from between 3% and 4% previously as a result of higher growth expectations internationally. In the U.S., we're maintaining our projections for approximately 3% organic tenant billings growth, including the impacts of Sprint churn in Q4.
We continue to expect 5G deployments to drive accelerating gross new business activity and believe we have a long runway of solid growth ahead of us as carriers invest in network densification over a multiyear period. In Latin America, we're raising our organic tenant billings growth expectations to over 7% for the year, as customers continue to increase their mobile data usage and carriers respond with incremental network investments despite some continued challenges associated with COVID-19. As compared to our prior outlook, we now expect slightly lower churn across the region, although we do still expect churn to trend higher in the back half of the year as some carrier consolidation occurs in markets like Mexico. We continue to drive value additive contractual arrangements in the region and recently signed a significant colocation deal with a major customer in Colombia, which we expect to inflect growth higher in that market in the coming quarters. Meanwhile, in Africa, we are reaffirming our expectations of organic tenant billings growth in excess of 8% as we continue to see encouraging leasing trends in the region. As I alluded to earlier, growth rates in Nigeria are especially strong, where we are continuing to benefit from an MLA signed last year with a major customer.
This, along with solid trends in other African markets, are expected to drive an acceleration in regional organic tenant billings growth to above 9% in the second half of the year. Moving on to Europe. We now expect organic tenant billings growth of over 5% for the full year, up around 150 basis points versus our prior outlook. This is being driven primarily by two factors. First, we expect higher levels of gross new business in our legacy Europe business, where we're continuing to see strong 5G-driven activity, particularly in Germany. Organic tenant billings growth for our legacy European assets is now expected to come in at above 4%, up more than 50 basis points as compared to our prior expectations. And second, the colocation and amendment growth that we expect to see in the second half of the year on the Telxius assets, which is included in our organic tenant billings growth metric, is driving another 100 basis points or so of upside. We view this expected activity as reinforcing our long-term expectations for compelling growth on the Telxius assets. Finally, in India, we continue to expect roughly flat organic tenant billings for the year.
We are seeing encouraging levels of gross activity in the market but also continued elevated levels of churn. And while we remain optimistic that the market will return to solid growth over the long term, we're not expecting a significant inflection point in growth in 2021, which is consistent with our prior outlook. Moving to slide 10. We are raising our adjusted EBITDA outlook and now expect year-over-year growth of nearly 15%, including a $183 million contribution from the Telxius assets, roughly $26 million in positive translational FX impacts as compared to our prior outlook and about $20 million in higher net straight line. In addition, we now expect $25 million in incremental expected services gross margin as services activity in the U.S. continues to outstrip our expectations. For the year, we expect to book roughly $105 million in services operating profit from total services revenue of $220 million. These positive items are being partially offset by roughly $30 million in incremental bad debt assumed for the full year, the majority of which is in India. Overall collections trends in the market remain solid, but we are taking a slightly more conservative approach for the back half of the year within our projections.
The remaining bad debt is focused in Mexico, where Altan has recently filed for the equivalent of Chapter 11 bankruptcy. Given its government backing and recent progress within the business, we remain optimistic on the prospects of collecting billings with Altan in full. But because we expect the collections to be slow, we have made the bad debt entries for now, consistent with our historical approach in similar instances. Turning to slide 11. We are also raising our expectations for full year consolidated AFFO and now expect year-over-year growth of nearly 14%, with an implied outlook midpoint of $9.50 per share. The flow-through of incremental cash adjusted EBITDA as well as around $20 million in FX tailwinds are being offset by approximately $15 million, $31 million and $25 million in incremental maintenance capex, cash taxes and net cash interest expense, respectively, primarily driven by the Telxius transaction. On a per share basis, we now expect growth of right around 12% for the year. Finally, AFFO attributable to ATC common stockholders per share is expected to grow by nearly 10% versus 2020. This takes into account the expected closing of our transactions with CDPQ and Allianz in mid-Q3 and the corresponding minority interest impacts.
The growth rates for the attributable metric is about 2% lower than our projected consolidated AFFO per share growth, primarily due to the fact that the onetime cash interest expense item associated with our prior African joint venture in 2020 did not apply to the AFFO attributable to ATC common stockholders. Notably, across both of these metrics, we are well positioned to meet our target of driving double-digit growth for 2021. Moving on to slide 12. Let's review our updated capital deployment expectations for 2021, which now contemplates the Telxius transaction and reflect our consistent focus on driving strong sustainable growth in AFFO per share. First, we continue to expect to dedicate approximately $2.3 billion towards our dividend in 2021, implying a year-over-year growth rate of around 15%, subject to Board approval. With regards to capex, we are raising our overall projections by $125 million at the midpoint. This includes around $65 million in startup capex attributable to the Telxius sites as well as $65 million in additional deployment capex as part of our revised expectations of constructing 7,000 sites this year, up from our previous outlook of 6,500. We continue to drive highly attractive returns through our program.
And including our revised 2021 expectations, we have added around 24,000 new sites since 2016. Notably, our average day one NOI yields on build so far this year have been 11%. We are also adding $15 million in maintenance capex as we are accelerating a few maintenance projects over the rest of the year. This is being partially offset by about $20 million in lower anticipated land capex. On the acquisition front, we have deployed just under $9 billion so far this year, primarily on the Telxius transaction, and expect to spend another $600 million in early August to purchase the remaining 4,000 Telxius rooftop sites located in Germany. Of our nearly $14 billion in expected capital deployments for the year, over 80% is composed of discretionary capex in M&A. On the debt side of the equation, we ended the second quarter with net leverage of 5.7 times and expect that metric to trend down into the mid-5 times range after closing the CDPQ and Allianz stake sales. We remain firmly committed to our investment grade rating and continue to expect that solid long-term adjusted EBITDA growth will allow us to naturally delever to the upper end of our three to 5 times range over a multiyear period. Over the next few quarters, we expect to be opportunistic in evaluating the potential benefits of terming out a portion of our floating rate debt into long-term fixed-rate instruments as we continually work to optimize our balance sheet.
Looking back over the last decade, we have utilized this strategy to essentially reduce our weighted average cost of debt by half to 2.4% as of Q2. Turning to slide 13. I want to take a few minutes to highlight several elements of our disciplined capital deployment strategy, honing in on two international regions where we have been quite active recently, Europe and Africa. Since the end of 2019, our most transformational international investments have been in Africa, through our acquisition of Eaton Towers, and most recently in Europe through the Telxius deal. As the chart to the left shows, organic colocations and amendment contributions in both regions have been accelerating. More importantly, we expect gross colocation and amendment activity to remain at elevated levels over a multiyear period, positioning us well to drive strong growth and attractive returns across our recently acquired assets in both regions. In addition to acquiring high-quality strategic site portfolios, we have also been ramping up our new build programs across both regions, as you can see in the middle chart on the slide. In fact, we've gone from constructing in average of less than 100 sites annually back in the early 2010 to a forecast of around 1,600 sites in 2021, primarily in Africa.
Importantly, the return characteristics of these builds have remained extremely attractive, with average day one NOI yields of approximately 10% expected this year. As you can also see, yields have risen sharply on older vintages of new build sites as a result of the strong lease-up trends I just mentioned, and we expect to continue to drive meaningful colocation and amendment revenue on our new build sites in the future. Further, we continue to focus on building and leasing sites to high-quality, large investment-grade tenants who we believe will drive the bulk of the network investments in these regions for the foreseeable future. We anticipate the demand for new builds across Africa and also in Europe, where we have inherited a robust pipeline with Telefonica as part of the Telxius acquisition, to remain strong as carriers address their coverage and capacity needs to meet 4G and 5G demand. We are also focused on growing our business sustainably, while driving industry leadership and innovation. A perfect example of this is what we've been doing in Africa with energy efficiency and renewable energy, where, by the end of 2021, we will have invested upwards of $250 million on lithium-ion batteries, solar power solutions and other energy-efficient technology.
While we are still fairly early in the overall progression of these investments, the initial results have been compelling, with average diesel consumption per site declining by around 35%, coupled with improved battery and generator efficiency and elevated uptime levels that we believe are best-in-class. Through these initiatives, not only are we earning an attractive return on investment, but we are also helping to build and enhance a sustainable global digital ecosystem. This approach to capital deployment in Africa and Europe is indicative of our overall global investment philosophy. We continue to look for compelling opportunities to deploy capital in responsible, sustainable ways where we can generate attractive, long-term returns and solid growth while partnering with large multinational mobile network operators as they bring enhanced connectivity to their customers. And we believe that the global diversification that we've built into the business will benefit us for years to come. Finally, on slide 14 and in summary, Q2 was another quarter of solid organic growth, margin expansion, meaningful new build activity and consistent dividend growth.
This was achieved while closing on and beginning to integrate the vast majority of our Telxius acquisition, issuing over $2 billion in euro-denominated debt at record low rates, completing a successful common equity issuance and partnering with two world-class strategic investors in CDPQ and Allianz. For all of this, I'd like to offer a huge thank you to our nearly 6,000 global employees, including those who have recently joined us from Telxius. Their hard work, unwavering dedication and numerous talents have positioned us extremely well to continue driving compelling total returns for our stockholders. We look forward to finishing 2021 strong and are more excited than ever about our long-term growth trajectory based on the continuing global rise in mobile data demand and our durable competitive advantage throughout our served markets.
With that, I'll turn the call back over to the operator for Q&A.