RBI asks banks not to levy excessive rates on credit cards

MUMBAI: Seeking to tighten the leash on credit card issuing banks, the Reserve Bank has asked them not to charge excessive interest rates on personal loans and prescribe a ceiling rate on small advances, a move that will benefit lakhs of card users.

While issuing fresh guidelines for credit card operations, the RBI has also directed the banks not to reject credit card applications of customers without assigning reasons in writing.

The central bank also made it clear that the banks would be liable for misuse of unsolicited cards and “the persons in whose name the card has been issued cannot be held responsible for the same (misuse of credit cards by other persons).''

As regards the interest rates, the RBI said the banks “should prescribe a ceiling rate of interest, including processing and other charges, in respect of small value personal loans and loans of similar nature...the instructions would apply to credit card dues also.''

Although the RBI has not specified the limit of the interest rates that can be charged by the banks issuing credit cards, it had earlier clarified that “the total cost to the borrower, including interest and all other charges levied on a loan, should be justifiable having regard to the total cost incurred by the bank in extending the loan.''

In case the unsolicited card is activated and misused without the consent of the recipient, the RBI said issuing bank will be required to reverse the charges and pay a penalty to which would be twice the amount of the charges reversed.

The central banks issued the guidelines on Wednesday based on a study of credit card operations in the backdrop of complaints received by the RBI and Banking Ombudsmen. - PTI

Crown Castle International Q2 2008 Earnings Call Transcript

Executives

Fiona McKone - Vice President, Finance

Jay Brown - Chief Financial Officer, Senior Vice President

W. Benjamin Moreland - President, Chief Executive Officer, Director

John P. Kelly - Executive Vice Chairman of the Board

Analysts

Richard Prentiss - Raymond James

Jason Armstrong - Goldman Sachs

David Barden - Banc of America Securities

Simon Flannery - Analyst

Michael Rollins - Citigroup

Bret Feldman - Analyst

Analyst for Jonathan Shetalcro - Analyst

Brad Quartz - Analyst

Presentation

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Crown Castle International Corp. second quarter 2008 earnings conference. (Operator Instructions) I would now like to turn the conference over to Miss Fiona McKone, VP of Finance. Please go ahead, Madam.

Fiona McKone

Thank you. Good morning, everyone and thank you for joining us as we review our second quarter 2008 results. With me on the call this morning are Ben Moreland, Crown Castle's CEO; Jay Brown, Crown Castle's CFO; and John Kelly, Crown Castle's Executive Vice Chairman.

This conference call will contain forward-looking statements and information based on management’s current expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurances that such expectations will prove to have been correct.

Such forward-looking statements are subject to certain risks, uncertainties, and assumptions. Information about the potential factors that could affect the company’s financial results are available in the press release and in the risk factors sections of the company’s filings with the SEC.

Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary significantly from those expected.

In addition, today’s call includes discussion of certain non-GAAP financial measures, including adjusted EBITDA, recurring cash flow, and recurring cash flow per share. Tables reconciling such non-GAAP financial measures are available under the investors section of the company’s website at crowncastle.com.

With that, I will turn the call over to Jay.

Jay Brown

Thanks, Fiona and good morning, everyone. As you’ve seen in the press release, we reported another excellent quarter of results. During the second quarter, we generated revenues of $379.5 million. Site rental revenue increased $26.2 million to $348.5 million, or up approximately 8% from the second quarter 2007, in line with our target. Substantially all of this growth was achieved organically across the assets that we owned as of the second quarter 2007.

Service revenue was $31 million, up approximately 50% from the same period last year. Gross margin was site revenue rental defined as tower revenues less the cost of operations was $234.8 million, an increase of $24.6 million, or up 12% from $210 million for the second quarter 2007.

Adjusted EBITDA for the second quarter 2008 was $213 million, an increase of $26.6 million, or up 14% from the second quarter 2007, ahead of our expectation. As a result of diligently managing our direct tower expenses in G&A, in the second quarter we were able to convert 100% of our year-over-year growth in site rental revenue into adjusted EBITDA.

Recurring cash flow defined as adjusted EBITDA less interest expense, less sustaining capital expenditures increased 31% to $119.2 million from $90.9 million in the second quarter 2007.

We significantly exceeded our targeted annual growth rate of 20% to 25% growth in recurring cash flow per share by achieving 34% growth from the second quarter of 2007. Our continued strategy of investing cash to maximize long-term cash flow per share, coupled with the strong operating performance of our towers has enabled us to deliver results above our target. I believe our operating results demonstrate our ability to consistently growth revenues and cash flow even in challenging economic times.

During the quarter, capital expenditures were $140.7 million. Sustaining capital expenditures totaled approximately $5 million. Revenue generating capital expenditures were $135.7 million. This was comprised of $73.5 million for land purchases, $18.4 million of CapEx for revenue enhancing activities on existing sites, and $43.8 million on the acquisition and construction of new sites.

Turning to the balance sheet as of June 30, 2008, at quarter end we had approximately $98.8 million of cash, excluding restricted cash. Total debt to adjusted EBITDA as of June 30, 2008 was 7.2 times, and interest coverage, or adjusted EBITDA to interest expense was 2.4 times. Securitized tower revenue notes totaled $5.3 billion and other debt totaled approximately $856 million, for total debt at the end of the quarter of $6.1 billion. The other debt was comprised of $792 million under our corporate credit facility, and $63.7 million of our 4% convertible notes. We also had $314.3 million of our 6.25 convertible preferred stock outstanding as of June 30, 2008. Lastly, we had $100 million of availability under our revolving credit facility

Regulation Day

Regulators were circling the financial sector Thursday, homing in on what they regard as some of the unbridled behavior that has marked credit and commodity markets.

In pointed action, New York Attorney General Andrew Cuomo announced that he has sued two units of Swiss banking giant UBS for allegedly misrepresenting auction-rate securities to clients as safe and liquid investments. The market for auction-rate securities allowed municipalities, charitable institutions, student-loan companies and mutual-fund companies to borrow money for long periods of time at short-term interest rates through auctions that reset the interest rate every week or month. In February, the $330 ..

Housing bill most likely to benefit builders, nonprofits

WASHINGTON – The Senate is poised to approve a massive housing bill today that may rescue some troubled homeowners in North Texas but is most likely to benefit homebuilders and nonprofit groups that may scoop up foreclosed homes.

The $25 billion bill is the product of months of intense lobbying and compromise and was driven by lawmakers and business interests hardest hit by foreclosures and bad loans.

Still, it's not expected to be a cure-all for the housing market, even for North Texas' big homebuilders, whose losses each quarter are now at or near $1 billion.

"It's helpful, but I don't think it's a silver bullet, either," said Timothy Eller, chief executive of Dallas-based Centex, the country's third-largest homebuilder. "There may be more that needs to be done or that Congress wants to do."

The housing plan gained urgency in recent weeks, as fears grew about the ability of mortgage giants Fannie Mae and Freddie Mac to survive a huge number of borrower defaults.

The bill allows the Treasury Department to offer an unlimited line of credit to the government-sponsored enterprises should they need big doses of new capital.

But the bill also is loaded with targeted measures.

Homebuilders such as Centex and D.R. Horton of Fort Worth would benefit from a $7,500 federal tax credit for first-time buyers, helping clear excess inventory.

In higher-cost markets outside Texas, the homebuilders should benefit from an increase in the size of loans that may be guaranteed by the Federal Housing Administration.

The FHA has already increased its loan volume as lenders stopped offering subprime loans and other exotic mortgages.

Its portfolio would swell even more under the new law, as the agency could insure up to $300 billion in refinanced loans, many originally made to subprime borrowers who are facing sharp interest-rate adjustments.

To offset the risk posed by so many new mortgages, Congress would eliminate a popular FHA program that flourished in Texas over the past six years. It allowed FHA borrowers to get a down payment donation from a nonprofit, which recouped its contribution from the home seller.

Such loans have much higher default rates than other FHA loans, according to the Department of Housing and Urban Development.

The program grew so popular that J.P. Morgan said in a research note that its elimination meant "the overall bill could result in more harm than good near term" for homebuilders.

Prohibition "is going to have a negative effect absolutely," said Scott Norman, interim executive director of the Texas Association of Builders.

Although Texas hasn't suffered as many foreclosures as coastal and Midwestern states, the bill would send almost $170 million to the state via grants that could be used to buy foreclosed properties.

Texas would channel the money into cities and urban counties that could award the grants to organizations that would buy foreclosed homes and rehabilitate them.

The plan is meant to minimize the impact of widespread foreclosures on local property values.

Under the Senate formula, the Dallas-Fort Worth area would get about $54.3 million, according to data prepared by the Center for American Progress, a liberal think tank. The money could buy and rehabilitate about 16,116 foreclosed properties, according to the center.

Most North Texas lawmakers have voted against the bill, saying it would bail out unscrupulous lenders and borrowers.

Republicans such as Rep. Pete Sessions of Dallas said they objected to a new affordable-housing trust fund that could dole out money to politically active charities.

Texas Sen. John Cornyn said Friday that he's likely to vote against the bill.

A spokesman for Sen. Kay Bailey Hutchison said she hasn't decided how to vote.

Mr. Cornyn and Ms. Hutchison voted for a previous version of the bill in April that contained a provision that would have allowed businesses to get tax refunds by applying current losses to previous, profitable years. Big homebuilders such as D.R. Horton and Centex lobbied for the provision.

The so-called loss-carryback measure was dropped from the bill after it was rejected by the House.

Mr. Cornyn said the bill has grown more expensive since April, when it was scored to cost about $10 billion.

Build good credit, then house hunt

The rate and terms you get on a mortgage will depend largely on three factors: your FICO credit scores, your down payment and your income.
To improve your credit scores, you need to get -- and use -- credit. Credit cards are a good way to build your credit history and your scores. So are installment loans, such as auto loans and personal loans.
If you don't currently have a credit card or a loan, apply for a secured card. You can find good ones at CardRatings.com or Bankrate.com. To get a secured card, you make a deposit at the issuing bank (typically $200 to $1,000) and in return get an account with a line of credit in the same amount.
You'll want to use the card lightly but regularly, and pay your bill on time and in full every month. Don't use more than about 30% of your credit line at any given time, and don't believe the myth that you need to carry a balance to improve your credit. That's hogwash.
Choose a credit card that reports to all three credit bureaus and that converts to a regular, unsecured credit card after 12 to 18 months of on-time payments.
After several months of using and paying off the card in full to build a credit history, consider getting a small personal loan from your local credit union and paying that off.
Also, consider signing up for a credit monitoring service that gives you access to your FICO scores. (Some credit monitoring services offer other types of credit scores, but you'll want to look at your FICOs, since those are the same scores the lenders will be using.) That way you can monitor your improvement over time.

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