Good morning, everyone, and thank you for joining us for today's Helios Towers full year 2024 results. My name is Drew, and I'll be the operator on today's call. After our prepared remarks, there will be a Q&A session. If you would like to register a question, please press star followed by one on your telephone keypad, and if you wish to withdraw your question, then it is star followed by two. It's now my pleasure to hand over to Tom Greenwood, CEO, to begin. Please go ahead.
Thanks very much, Drew. Hi, everyone, and welcome to the Helios Towers 2024 earnings call. I hope you and your families are all doing well, and thank you very much for your time today. I'm Tom Greenwood, Group CEO, and we're very excited to be here discussing our 2024 results, which included record tenancy additions and strong organic top-line and bottom-line growth. 2024 marks a pivotal point in the Helios Towers evolution, where we move into a surplus-free cash flow phase of our journey. Our rigorous capital allocation framework is serving us well. First, we invest CapEx in high-return projects to deliver this organic growth. Second, we optimize our balance sheet with the appropriate level of financial leverage.
What we saw over 2024 is that Helios Towers now has the scale in our business model where recurring surplus-free cash flow will be generated, with an improvement of $100 million over the course of the year to report $90 million of free cash flow for the full year. Our capital allocation framework will remain firmly in place, investing and continuing this organic growth, but with rising returns on our capital, the surplus-free cash flow will grow. We will move our capital allocation framework focus to the third bucket, that of shareholder return. You'll hear more on this topic as the year progresses, and I look forward to discussing this more with you, our shareholders, through the course of this year. Moving to page two, we've got the usual lineup for you of me, Tom, Manjit, and Chris.
As we see on page three, we'll cover the business, strategic, and financial highlights, and then be open for Q&A at the end. First of all, I'd like to say a huge thank you and well done to all of our people, partners, and customers across the business whose collective efforts have driven the strong performance in 2024. The business continues to be optimally positioned in closing the digital infrastructure gap across Africa and the Middle East, the region growing faster than anywhere else in the world. Our telecom tower leasing and power model, which involves hosting multiple mobile operators on individual sites, ensures a robust and predictable cash flow stream, which grows significantly as tower utilization increases with the proliferation and densification of mobile networks.
Our business model, coupled with our ability to execute operational excellence, has driven 10 years of uninterrupted EBITDA growth at 26% compounded annual growth rate since 2015. There is fundamental and structural growth across the region, with population growth of 3% per year, which means doubling by 2050. Coupled to this, only 50% of the population have a mobile phone today, which compares to 90% in Europe and North America. Subscribers are growing at 5% per year, and data consumption is forecast to grow by four times in the next five years, which is double the rate of the rest of the world. Through our laser-focused business excellence strategy, we aim to provide the best customer service in the market and deliver global quality standards to ensure we're the digital infrastructure partner of choice for our customers.
In doing so, we support the essential connectivity for the 150 million people who are covered by our mission-critical towers, where mobile is often the only available form of communication. As well as voice and messaging, this provides the platform for data applications such as banking, education, health, AI, social media, and streaming services essential for life in today's world. In short, our business provides investors with a unique opportunity of world-leading infrastructure growth rates and high-quality cash flow returns to deliver significant value as we move forward in our next chapter. Now to page five for the highlights. In 2024, I'm pleased to report that we delivered very strong growth and exceeded expectations across all key metrics. It was a particularly standout year because we inflected to bottom-line free cash flow generation for the first time following previous years of large platform investment.
We are now really seeing that switch in the business and motoring forward, going up the gears and accelerating performance and recurring surplus cash flow generation. We have made solid progress towards our 2.2 by 2026 tenancy ratio strategic objective, arriving at 2.1 tenants per site by the end of 2024, driven by adding close to 2,500 tenants in the year, most of which were co-locations. This was our highest year for organic tenancy additions of all time. The largest rollouts were in Tanzania and Oman, where respectively 4G and 5G coverage and densification were the key focus. Through our customer partnerships and operational capabilities, we were able to ensure safe and fast rollout of hundreds of new points of service, thereby enabling mobile access and improved quality of service to millions of people across the markets.
Organic tenancy growth and tenancy ratio increase are the main drivers for our strong financial metrics. In 2024, we delivered 10% revenue growth, 14% EBITDA growth, 1 percentage point ROIC increase, and very importantly, $100 million positive swing in our free cash flow versus the prior year. 2024 was the first year in our history where we delivered surplus-free cash flow of $19 million, whilst at the same time delivering strong top and bottom-line growth. This shows our strategy of increasing asset utilization to drive returns and cash flow is very much delivering. Furthermore, our leverage continues to decrease, now to 3.98. Our credit rating has now been re-rated upwards again for the second time within 12 months. We now stand at BB- with S&P.
We move forward with a strong balance sheet with fixed interest costs, meaning that growth in operational cash flow off of a fixed cost base drives amplified growth in bottom-line free cash flow. Turning our focus now to 2025, we see the momentum of 2024 very much continue in terms of operational business growth, cash flow generation, and leverage reduction. We are guiding to 2,000-2,500 tenancy additions, which drives EBITDA growth. With our CapEx focusing on high-returning tenancies being carefully controlled at similar levels to 2024, all of this drives 2025 bottom-line free cash flow surplus up two to three times from 2024 levels and leverage down half a turn, again to three and a half.
As we move into this new territory of lower leverage and surplus-free cash flow generation, we're very much looking forward to engaging with investors over the coming months on potential shareholder distributions from 2026. Moving now to page six, we can see here that the consistency of our delivery against guidance across the board. We've exceeded guidance on all metrics in 2024, following upgrades and tightening through last year, and feel very good about the strengths of our team in delivering this performance and our ability to continue our disciplined growth and delivery in 2025 and beyond. The 2025 year for all of us is about the operational metrics driving a steep step up in surplus-free cash flow to our guided range of $40 million-$60 million, and leverage coming down to the mid-3s.
Our focus and drive for future performance is backed up by our historical performance, as we see on page seven. 2024 marked 10 years of U.S. dollar EBITDA growth at an annual compounded rate of 26%, showing our resilience and ability to deliver. The drivers for this are threefold. One, the structural macroeconomic and mobile telecoms growth in our markets, which are growing multiple times faster than the rest of the world when it comes to population, GDP, mobile subscribers, and data. Number two, our long-term cash flow business model, which provides predictability, and I'll come to this on the next page. Three, the strategy and capability of our team to deliver customer service excellence in a structured and methodical way to our leading mobile operator customers, aiming to be the partner of choice for all mobile infrastructure needs.
With the growth dynamic set to continue for decades ahead and our team's dedication to customer partnership and operational excellence, we're ready to continually innovate and continue this trend for the next 10 years and beyond. Now on page eight, I'll talk you through our business model. Whilst the operational complexities of running thousands of sites across millions of miles of land, often with poor road and grid infrastructure, can sometimes be highly complex, the high-level unit economics of our business is beautifully simple. We're essentially a real estate and power company for mobile operators and create cash-on-cash returns in excess of our cost of capital through enabling the sharing of infrastructure. We own and operate the passive infrastructure of a site, which means the tower, the power, and the security equipment. We guarantee power-up time at close to 100%, providing maintenance and security services at the site.
In this way, the mobile operators have outsourced a non-core but essential activity to us, which means they can focus on the front-end radio and transmission networks and all the intricacies that come with that, whilst we keep the site powered up and manage site access. When we buy or build a site, it will always have at least one tenant on, the anchor tenant, from day one. We then increase the utilization of the tower over time through adding co-location tenants. The first tenant, the anchor, provides a cash-on-cash ROIC of 12%, covering our cost of capital. With the second and third tenant, the ROIC steps up to 25% and 34% respectively, reflecting the incremental revenue coming through on the relatively fixed cost base.
The long-term cash flows and resilience of the business come about through the long-term nature of mobile networks, which is mirrored in our lease contracts. These are typically 10-15 years, minimum term, include annual CPI and power price escalators, and the majority of our revenue is dollar or euro-based. As at the end of FY 2024, we had $5.1 billion of minimum contracted future lease revenue across all our tenancies, equating to an average seven years of lease length remaining. This is before renewals or adding any new tenancies. This provides a very robust future revenue stream base for the coming years, supporting our balance sheet and further growth as we add incremental tenancies to drive higher earnings and cash flow generation in the future. On the subject of adding tenancies, let's move to page nine.
Here it shows our consistent track record of successfully adding tenancies at a 7%-10% rate every year since 2019. This reflects our 24/7 relentless focus on delivering customer service excellence on power-up time, speed of rollout, and overall customer experience to ensure that we work with our customers as partners, understand their needs and requirements early so that we can be operationally ready to deliver for them when they need us. Our focus for 2025 is clear. We aim to deliver between 2,000-2,500 new tenancies, and we already have a strong pipeline at this point in the year. Now moving to page 10, I wanted to talk about how our tenancy ratio focus and 2.2 by 2026 target is directly driving ROIC and free cash flow returns.
In 2021 and 2022, we successfully acquired portfolios in four new markets, doubling the size of the platform and diversifying our business on a geographic and customer basis, whilst also increasing our hard currency earnings mix. We were acquiring tower portfolios from mobile operators, which are often inherently underutilized, and these four portfolios came with an average tenancy ratio of 1.2. Therefore, on a short-term basis, this brings about dilution of key metrics like tenancy ratio and ROIC, as well as being free cash flow consumptive with over $1 billion invested. Following ownership transfer to Helios Towers, we set about embedding our operational excellence on the assets to drive efficiencies and, most importantly, start adding second and third tenancies to the new towers we've just acquired.
We have made strong progress since 2022, with tenancy ratio going from 1.81 to 2.05, ROIC going from 10.3% to 12.9%, and free cash flow going from $721 million negative in 2022 to $19 million positive in 2024. In the space of two years since our last acquisition, ROIC is in excess of our WACC and growing, and free cash flow has inflected by almost $750 million to become positive in 2024, and the surplus will be stepping up steeply in 2025 and beyond. This brings me on to page 11 to reiterate again our disciplined capital allocation policy. We continue to prioritize capital-efficient and high-returning organic growth, principally co-locations and selected new builds. This drives our operational EBITDA and cash flow growth, meaning that we continue to deliver at about half a turn per year, now being below 4x and heading to 3x in 2026.
Having delivered positive surplus-free cash flow in 2024 and expecting for that to step up in 2025 and each year beyond, our cash flow profile and balance sheet will be in the position to support potential investor distributions from 2026, and we will be engaging with all investors on this over the coming months. M&A continues to be deprioritized for us for the foreseeable as we prioritize organic growth within our existing markets to drive high-quality cash flow generation and shareholder returns. With that, I'll hand over to Manjit for the financials and look forward to talking with you at the Q&A.
Thanks, Tom, and hello, everyone. Great to be speaking with you all today. Starting on slide number 13, I'll be going through the financial results.
As Tom has outlined, 2024 was a year of continued delivery across multiple metrics and free cash flow inflection, as is shown in the chart from this page. On the far left-hand chart, you'll see we've delivered another year of strong tenancy growth, beating our upsized guidance and improving lease-up by 0.1x. This has really been the key driver of our EBITDA growth of $51 million year-on-year. It is the combination of capital-efficient growth through co-location lease-up and also leveraging operational improvements, which has driven our return on invested capital by 1% to 13%. We're expecting similar progression in 2025, expecting to reach 14%. Importantly, we saw an inflection in our free cash flow. We had guided to neutral and ended 2024 with positive $19 million, which is a $100 million increase year-on-year.
You can really see the swing over the last few years on the far right-hand chart, where following key investments to expand to new high-growth markets, we have and will continue to leverage the expanded portfolio to drive capital-efficient organic growth in line with our capital allocation strategy, which Tom just went through. Excitingly, we see the cash compounding returns come through, and we expect to see 2025 ending at circa $40 million-$60 million of free cash flow. I think this page really sums up the key successes of 2024, but also sets out that this is just the springboard for 2025. Now to jump into some of the detail and moving on to page 14, our sites and tenancy growth. From a site perspective, we saw our sites growing by 2%, representing an incremental 228 sites year-on-year.
We are very selective in our approach to new site rollouts, ensuring the sites have clear lease-up potential, and try to partner with M&As to identify and build in the most attractive locations. From a tenancy perspective, we had record organic tenancy additions of 2,481 tenancies year-on-year, a 9% increase, and that was really driven by our three largest markets of Oman, Tanzania, and DRC. We are pleased to see that our tenancy ratio continues to track well to our 2.2 tenancy ratio target by 2026, following a 0.14 tenancy ratio expansion year-on-year ending at 2.05. Moving on to slide 15, our revenue growth. We have seen revenue growth of 10% year-on-year with growth in revenues across all three of our geographic regions. We have a strong hard currency profile, with 68% of our revenues being in hard currency, which translates to 71% of our adjusted EBITDA being in hard currency.
Four of our markets are innately hard currency, including DRC, Senegal, Oman, and Congo-Brazzaville being either dollarized or pegged to the euro, meaning that the revenues our customers receive are hard currency, which is also what they pay us. In our remaining markets, we also have a portion of revenues linked to hard currency, adding further to the overall mix. Our earnings are then further protected by contractual protections, including power and CPI escalators, with CPI escalators typically escalating in Q1 and power escalators escalating either quarterly or annually, depending on the contract. 98% of our revenue comes from the large blue-chip mobile network operators, with no single customer accounting for more than 26% of our revenue, as you can see in the second pie chart. Finally, we sign into long-term agreements with our M&A partners, with initial terms of 10-15 years and are largely non-cancelable.
Today, our contracted revenue of $5.1 billion has an average remaining initial life of 6.9 years. In other words, we have secured a minimum revenue stream of $5.1 billion without pursuing any new business, and this provides a strong underlying earnings stream that we can complement with further growth driven by tenancy rollout. All the dynamics mentioned in the bullet really do demonstrate the robust earnings stream we have, and moving on to slide number 16, we show how these dynamics work in action. Here we present the usual analysis showing the key drivers of revenue and EBITDA growth in a bit more detail. As with previous results presentations, the key driver of growth has been tenancy additions, with the escalators effectively working to offset macro movements to protect our EBITDA on a dollar basis.
This is shown clearly on the two bridges presented here, with power, CPI, and FX broadly offsetting one another to ensure growth is driven predominantly by tenancy additions and operational leverage. 10% revenue growth from organic tenancy additions drove 10% revenue growth year-on-year. 15% EBITDA growth from tenancy additions drove 14% EBITDA growth year-on-year. In short, the key driver of growth is through tenancy additions and operational leverage from lease-up, and we demonstrate again that the business structure continues to be robust and resilient and operating as designed. On to slide number 17. Here we present the correlation between our adjusted dollar EBITDA growth and tenancy additions over the past 10 years.
Despite movements in some FX rates and Brent crude, as shown in the dotted lines, our business model has continually delivered consistent U.S. dollar EBITDA growth over that time and demonstrates an extremely high correlation to tenancy growth, with an R-squared of 0.96, which is almost perfectly correlated. Again, this demonstrates that our business has been effectively set up to grow with tenancy additions, which, as you saw in Tom's section, has been remarkably consistent since IPO, and importantly, through structural growth dynamics, is expected to continue to grow over the long term and therefore drive further dollar growth. Now moving on to slide 18 and a look at our CapEx. CapEx is tightly controlled and focused on capital-efficient opportunities that drive return on invested capital expansion.
For the full year, we incurred total CapEx of $169 million, which is primarily made up of $93 million of growth CapEx, reflecting the record tenancy growth we've seen this year, and $42 million of non-discretionary CapEx. This was slightly below our guidance, largely reflecting the fact that we had a higher number of co-location additions. Looking out to FY 2025, we're guiding to $150 million-$180 million of full-year CapEx, of which $50 million is non-discretionary. On to slide number 19. Looking at our leverage and debt, our net leverage at the end of Q4 decreased by 0.4x year-on-year to just under 4 at 3.98 at two decimal places, and in line with guidance, we have approximately $255 million of undrawn facilities at both Group and OpCo levels, and together with $160 million cash on balance sheet means we have over $400 million of available funds.
As a reminder, 92% of our debt continues to be at fixed rates following our successful bond refinance earlier in 2024, and we have no near-term maturities until 2027. Finally, we were delighted to receive our second credit rating upgrade by S&P within a year to be awarded a BB- in February 2025, which reflects the combination of the business performance, but also the improved sovereign credit ratings of our markets, with Tanzania in particular receiving a positive update. On to slide 20. We set out a bridge here showing the drivers of our free cash flow. Our strong adjusted EBITDA performance supported portfolio free cash flow growth of 11% year-on-year. Our recurring leveraged free cash flow, and the bar that says RLFCF, is a metric that reflects the capital available to management to deploy on discretionary CapEx, debt paydowns, and/or shareholder distributions.
This increased by 59% to $148 million, demonstrating the leverage on our largely fixed cost finance costs and improving working capital. Importantly, we have now inflected our free cash flow deposit of $19 million, as mentioned earlier, and that reflects an improvement of $100 million year-on-year. With continued execution of our capital allocation strategy, again targeting capital-efficient organic growth investments, we expect to see further free cash flow growth in 2025 and beyond. This takes us to slide 21, where we provide guidance for 2025. As we continue to see progress in our 2.2 strategy, we target between 2,000 and 2,500 tenancies for the year. For adjusted EBITDA, we target between $460 million-$470 million, meaning we are estimating double-digit growth at the midpoint for 2025. CapEx, we target $150 million-$180 million, of which $100 million-$130 million is discretionary and $50 million is non-discretionary.
Free cash flow, we expect to be between $40 million and $60 million, more than doubling from 2024 levels. Finally, we expect to end 2025 at roughly 3.5 net leverage. All in all, we're really pleased with the delivery in 2024 and the two milestones of inflecting free cash flow and our 10th year of adjusted EBITDA growth, reflecting the efforts of our fantastic colleagues. I'm really very excited about the prospects for 2025 and beyond. With that, I'll pass back to Tom to wrap up.
Thank you very much, Manjit. I'm on page 22 now. Just for the takeaways, look, I think the business has really hit a good rhythm, and we've got great momentum coming into 2025. We're getting closer to our strategic target of 2.2 tenants per tower, making really good progress on that.
The operational and cash flow-related items are all growing significantly, as we've outlined, and we've got a solid, solid pipeline of further tenancies to come in 2025. As we talked about, big focus on free cash flow expansion this year, doubling or tripling from bottom-line surplus free cash flow that we delivered in 2024. We'll be engaging with investors over the coming months for potential shareholder distributions from 2026. Lots to be excited about, and we're very much looking forward to it. I'll hand back to Drew now to take the Q&A. Thanks, everyone.
Thank you. We will now start today's Q&A session. If you would like to register a question, please press star followed by one on your telephone keypad, and to withdraw your question, it's star followed by two. Our first question today comes from Karidis from Deutsche Bank. Your line is now open.
Please go ahead.
Thank you. Good morning. I'd like to sort of hit two topics, please. One, guidance for adjusted EBITDA in 2025, and secondly, frontier risk. Consensus estimates right now are a whisker away from the top end of your guidance for 2025. How do you feel about that? Secondly, can you talk about the consequences to Helios Towers of the strife that seems to be continuing between Rwanda and DRC? Thank you.
Yeah, thanks very much, John. I'll take both. Manjit, please chip in as well. I think we're feeling very confident about the business performance. The momentum that we're moving into 2025 with is strong. I think the guidance we've put out is solid growth. It's in line with market consensus. As we always do, we'll be keeping everyone updated as we move through the year.
We're confident of delivering well this year, like we always do. On DRC, DRC is one of our most exciting markets, always has been, and there's amazing opportunity there. We've operated in DRC for 15 years, so civil disturbances have been and is a part of working life there. We've had multiple elections, Ebola outbreaks, sometimes unrest. The key thing we focus on is we operate effectively in these environments by focusing relentlessly on the safety of our people and enabling the critical mobile services to continue. Indeed, we maintain our virtually 100% levels of power uptime during these times. That's the same today as it has been in the past. That's why our customers rely on us. We're focused. Our DRC team's doing a great job.
We've got a small number of towers, immaterial number for the group in the affected area at the moment. Of course, mobile services are very much continuing to support the millions of people who live and reside there.
Yeah, and if I can just add on the consensus point, I mean, one thing I would definitely point out here is that from an at least tenancy perspective, if you look back on the last few years, initial guidance, which by the way was also challenging, was always around 1,600-2,100. We're now effectively saying it's 2,000-2,500 from the beginning of the year, which shows a sign of confidence in terms of how we are seeing the year shape up. I think that's a really key positive. As I mentioned, at the midpoint, year-on-year, we're still seeing double-digit EBITDA growth on a dollar basis.
Whilst we're kind of keeping an eye on consensus, I think this is a very kind of it's going to be a good year that we expect, and we'll see how it comes out during the year, and we'll keep people updated probably half year in terms of how we're planning out.
Thank you both.
Thanks, John.
Our next question today comes from David Wright from Bank of America. Your line is now open. Please go ahead.
Hello, guys. Thank you so much for taking the questions. A couple from me, please. First, just conceptually on the cash return debate, what are the factors that you think could weigh on your decision-making? I would probably propose, and I'm sure you would agree with me, that the stock price does not reflect the value of the business. That could obviously represent very accretive M&A, so to speak.
You also have a liquidity issue. Just how you're thinking about the factors that drive the potential mix. The second question is a little bit more top-down. One of the attractive characteristics behind your business model is, of course, that mobile telephony is the dominant driver of connectivity across emerging markets because of the poor economics of fixed line. There is a new player in town, which is satellite. I'm just wondering to what extent you feel some of the operators are starting to think differently about network topography, whether it is essential to run mobile more deeply into rural areas, or whether they might consider partnerships with satellite operators. I'm interested in your thinking around that kind of top-down subject. Those two questions, please. Thank you.
Yeah, no, very good. Thank you, David. Great questions.
Manjit, why don't you take the first one on the capital allocation, and then I'll take the second.
Yeah, absolutely. Look, on capital allocation, not to go punt the debate, but the reality is at the moment, we're still sticking to the capital allocation framework that we have today, which is very much focused on driving the really good organic investments that we have, a real focus on deleveraging, and then looking at how that capital gets dispersed after that point. We would very much agree with you that the shares are undervalued. As we go through our next phase of engagement with investors and as we continue to update our thinking, we'll be looking at how we then look at that broader capital allocation framework thereafterwards. To my mind, I think it's very exciting on the basis that we're at this precipice.
We're at the point where we're now going to be generating further free cash flow. It really is then about that decision, how you then utilize it, whether it be dividend, buyback, combination of everything. We'll have to wait and see. That's kind of where we see things at the moment.
Thanks, Manjit. Yeah, Tom, I'm satisfied.
Yeah, no. Just to add, I mean, clearly there's a great buying opportunity for investors. I think when a business is inflecting on free cash flow with a clear trajectory upwards and giving itself options on introducing potential new shareholder distribution policies. By the way, we inflected on actually bottom-line profit, net income as well in 2024. It is really showing the direction of travel of the business and our ability to create real returns for investors in the coming months and years. Very exciting time.
On satellite, yeah, I mean, look, great question. Lots in the news about that at the moment. The satellites are a very kind of interesting area because I think what they do, they provide a complement and essentially increase the size of the pie of the connectivity market worldwide. There are huge differences between the spectrum capacity possible in a satellite beam versus a terrestrial beam, just to the extent that they will never be sort of directly comparable from a quality of service point of view with any sort of reasonable number of people using devices under that beam. To put some numbers around it, a LEO satellite beam has a diameter of between 25km-100 km. A terrestrial beam has a diameter of 0.5km or 1km , something like that. They are both using the same sort of spectral capacity.
The ability for satellites is very much for rural locations. It is very much for areas that power and terrestrial networks cannot get to, like shipping and airplanes and some IoT. Certainly, you can have a viable satellite business, particularly one with scale, because of all of that kind of growing demand in those areas. The minute there are enough users in a location, the terrestrial antenna. To the extent there are satellite companies doing partnerships with mobile operators, we think that is great. That opens up some ubiquitous coverage to areas that simply were impossible or uneconomical to cover currently. As and when there becomes a reasonably small mass of users in those areas, there will need to be terrestrial towers put up. In some circumstances, that could actually potentially see some acceleration of tower deployment, we think, in some rural locations.
Okay, super. Yeah.
Yeah, thanks for your thoughts, Tom.
Great. Thanks, David.
Our next question today comes from Emmet Kelly from Morgan Stanley. Your line's now open. Please proceed.
Yes, good morning, Tom. Good morning, Manjit. Thanks for taking the questions. I've also got a question, please, on the DRC. An announcement that actually came from a couple of your telco customers with Orange and Vodacom announcing a kind of a JV, a TowerCo partnership to extend their networks. I think they plan to construct up to 2,000 base stations with solar power in that market. Can you say a few words about this? Is this a complementary? Is it a threat to your business model? Is this something that we need to keep an eye on across emerging markets if telcos are building more of their own towers?
Then secondly, just on the capital allocation, you were pretty clear that M&A is off the table at the moment. You've said that you'll be selective about BTS. Can you say a few words about building towers, please? If you just set the balance sheet aside, would you rather build a lot more towers? As the balance sheet leverage comes down towards three, could we expect you maybe to build more towers in the future? Two connected questions, please. Thank you.
Yeah, thanks very much, Emmet. Great questions. Yeah, DRC, Vodacom and Orange are two of our key customers there, and we're continually working with them day in, day out. We very much enjoy working with them and very much continue to do so. They're looking at this TowerCo. We saw the release for that.
Yeah, look, that's very much focused on the kind of rural locations where ARPUs are low. It's not really viable or economical at the moment to have full-scale towers. We very much welcome that. It's going to improve connectivity across DRC. Remember, DRC is actually an outlier versus our other markets. It's over 100 million people, but only 60% of those live in an area with any coverage whatsoever today. There are 40 million people in DRC with no coverage, which is actually different to all our other markets where 90-95% plus people live in an area of some coverage. We're very pleased to see that progression. We continue to work with both of those customers and our other valued customers in DRC. It's been very busy this year as well in DRC on new record.
Capital allocation, Manjit, do you want to take that one?
Yeah, sure. This is really about the buying versus, sorry, the build cycle. Look, we had perhaps a light year in terms of builds during 2024. I think what we will see actually is some of those builds that we had in the hopper during 2024 actually coming into 2025. We will see a bit of a tick up during the course of 2025. I would not say leverage is necessarily the reason why we are not building. We will always go and build and look at optimized organic investments. What I mean by that is there are a number of really attractive build suits that you can do where you have high visibility in terms of potential lease-up, which is a good investment.
That will drive return on invested capital improvement, which is ultimately the aim of the game. Try and make that higher than our cost of capital. As Tom went through earlier, 12% day one, but really steps up there afterwards. We will have capital available to do that to support our M&A partners to build. We will see a bit more coming during the course of the year. We are very laser-focused, as always, in terms of ensuring that we are trying to find the best location so it has the most opportunity of lease-up and where we can partner with the most customers possible because that will actually, one, provide better coverage, and two, provide more of the not-cheaper coverage for the end consumer because you are sharing that fixed cost with more M&As, meaning that the end consumer should get a cheaper product as well.
It has a ripple-on effect. That is what we are doing at the moment.
Okay, great stuff. Thank you both.
Thanks, Emmet.
Our next question comes from Graham Hunt from Jefferies. Your line is now open. Please go ahead.
Yeah, thanks very much for the questions. Just from me, thank you. First one, if on DRC, is it possible just to quantify the number of sites you have in regions that you are, I suppose, tracking on the eastern borders that could be at risk? Just to get a sense of your site's exposure in terms of numbers. Second question, just coming back to Starlink. Am I understanding correctly that you do not—sorry? In terms of—sorry, I will just carry on. Second question on Starlink. Am I understanding correctly that you do not see that as a risk to the TAM that you are addressing, if anything, it is on top of?
If that's not right, I'd just be interested to understand, with your coverage rollout growth plans, how much of that you see as potentially exposed to alternative models like satellites. Thank you.
Yeah, no, thanks very much for the questions. Great questions. On DRC, the eastern side, as I mentioned before, operations are very much continuing there. The mobile service is essential for the millions of people who live there, as well as the UN, the Red Cross, and humanitarian efforts like that. It's a de minimis amount. It's kind of 1-2% of group towers are in that area. We're keeping a watchful eye on it. From a financial perspective, it's not material. We expect operationally to very much continue providing service there.
On the point around satellite companies, the real sort of use cases there are, as well as for things like shipping and airplanes and very rural locations, there are essentially two ways of doing it. One is direct-to-device, where largely the satellite company partners with the mobile operator to use a bit of the spectrum that the mobile operator has. Or it is a dish service whereby you have an antenna dish that you put on your house or your building, which uses the satellite frequencies. The spectrum capacity or spectrum density of the beam allows for a small number of users on a single beam, which enables people largely living in very rural locations to benefit from it. Obviously, you can use it in a city, but only a very small handful of people can use it in a city before it stops working.
Yes, it's very much complementary. It could, as I mentioned before, lead to potential accelerated rollout of some sites in some locations. This is partly because direct-to-device, if it happens, could get a few people using phones who didn't before. You need to put a tower up as soon as there's a small critical mass. That being said, the pricing point for people in rural locations in Africa is just not viable. That's a potential evolution, albeit difficult. The other one is actually using it for backhaul. Look, satellites have been used for backhaul for 30-40 years. This is nothing new, per se, to use satellites for backhaul. It's just with the LEO satellites, the pricing point is low and the connectivity is better than the previous versions, all that.
That could open up more sites and locations where there is no fiber in the ground and there is no line of sight to the next tower to ping the microwave signal. Usually, the maximum distance you can use for that is about 20 mi-25 mi due to the curvature of the Earth. In the past, there is some limitation of where you can put the next tower because you're more than 25 mi from the previous one. With the potential for better satellite backhaul, that could open up a few more locations to do it in. There are a few ways where there could be complementary elements to it. That's great. That's exciting for us and obviously the communities.
But in order to deliver real good quality to any kind of mass of people, you need terrestrial antennas because of the capacity requirements on the spectrum.
Thanks. That was very helpful.
As a reminder, if you'd like to ask a question on today's call, please press star followed by one on your telephone keypad. To withdraw your question, it's star followed by two. Our next question today comes from Gustavo Campos from Jefferies. Your line is now open. Please go ahead.
Hey, hello. Gustavo from Jefferies Fixed Income Desk team. Just a few questions from my side. Thank you for the presentation. Congratulations on the results. Firstly, if I'm understanding correctly, your EBITDA margins on your fourth quarter were slightly lower, around 51%. I was trying to understand if that's a one-off and if you could please elaborate on what happened there. That's my first question.
Thank you very much.
Yeah, thank you very much, Gustavo. Manjit, do you want to take that one?
Yeah, absolutely. I think in Q4, actually, it was actually coming out at around, well, for the half year, it was about 53% for Q4 on an EBITDA margin perspective. Actually, it was closer to, yeah, it was 53%, 52.6%. There might be a little bit of an error in the calc on your side. In general, I think as you go throughout the course of the year, it's bounced anywhere between 52%-54%. We're slap bang in the range of that. Yeah, I think nothing more to really mention. There weren't any one-offs or anything like that.
Understood. Yeah, thank you very much. The other question, I just wanted to quickly follow up on Graham's question.
As far as you know, the conflict in DRC and the surrounding areas, you mentioned that it represents 1%-2% of the towers. Is that towers of the total group or just the towers in the DRC? Thank you.
Yeah, that's of the group. Just to reiterate, operationally these very much continue and service very much continues. Remember, Gustavo, we've operated in DRC for 15 years. We're used to managing complex situations, and the mobile networks are absolutely critical infrastructure and critical service for everyone there because there is virtually no fixed line, and the mobile is how people communicate. It's a real critical service that we're providing, and our teams are very, very experienced in dealing with situations. We move on, and we continue to grow.
Understood. Yeah, that's very clear and very helpful. Thanks again.
I was also wondering if you're planning on meeting with Fitch. I think their update was sometime in the middle of last year. Are you expecting an upgrade from them as well? If you could elaborate on that, comment on that, that would be great. Thank you.
Yeah, I can take that one. We've got our annual catch-ups with both Moody's and Fitch, actually. So we'll be having hopefully some very constructive conversations with them, as we always have done. From our side, we'll be pushing, and we'll see where we get to on that one.
Sounds good. Thanks again. Last question, if I may. How much of your discretionary CapEx would you be able to reduce if needed? I'm just trying to understand. We understand that this is focused on expansion, but understanding your flexibility would also be very helpful. Thank you.
Yeah, sure.
I can pick up that one too. In terms of the CapEx guidance we give, the $150 million-$180 million, the $50 million is really the CapEx that we need to have to do normal cost maintenance and what we call non-discretionary. That is something that we very much expect that we will have to be incurring on an annual basis to look after the fleet of towers that we currently have today. Theoretically, and this is why we distinguish between non-discretionary and discretionary, the balance, i.e., the discretionary CapEx, could theoretically be switched off as you stand at the beginning of the year.
If you wanted to curtail a little bit of the growth because you're not going to be rolling out tenancies, etc., and run it for cash, that could theoretically go down to your free cash flow line. Clearly your EBITDA would be a bit lower. As it stands at the beginning of the year, the split would be $100 million-$130 million discretionary. Therefore, at that disposal of management, and the non-discretionary part, the $50 million is what we would need to do to keep the towers in good order.
Understood. Thanks again, and congratulations on the results again. Thank you.
Thanks, Gustavo.
Our next question comes from Rohit Modi from Citi. Your line is now open. Please go ahead.
Thank you so much for the opportunity. Most of my questions have been answered. Just a few follow-up and one other question.
Follow-up, firstly, in terms of site additions, your discretionary CapEx going down as an absolute amount from last year. Now, if I look at per tower CapEx, there will be inflation included. I am just trying to understand, are you expecting much lower site additions compared to last year? In that case, how much of your tenancies are already committed and tenancy guidance is committed, and how much is based on assumption? Second, on capital allocation again, sorry. Just trying to understand with your three times leverage guidance in 2026, I believe, based on not having any kind of shareholder return, or that includes some assumption of shareholder return as well. If not, what could change your view on capital allocation in the near term?
I mean, as you discussed around any rating upgrade or rate changes, anything that could change your view on capital allocation and expecting early shareholder return. Lastly, on some of your markets, smaller markets, Senegal, Madagascar, where you're not seeing the tenancy growth in line with other markets. And in terms of your return on investment capital, how it looks like in those markets, and what do you think about those markets in the future? Thank you.
Sure. Thanks very much. Let me take the—I’ll take the second two first, and then Manjit, if you take the CapEx one. Look, I think Rohit, on the capital allocation, I mean, we're very much on the track. We're not changing course on the capital allocation. We're very focused on, one, high-returning organic growth, two, cash flow generation and deleveraging. As you mentioned, tracking towards three in 2026.
The third bucket is shareholder distribution potential, which we'll be engaging with investors with over the coming months. We're very much continuing on that track. M&A is very much off the table for the foreseeable future. We're very confident in delivering on what I've just described across the first three buckets. Just on the kind of market questions, look, markets at different times are going to have different growth rates. That's just a simple factor of the investment cycles from the mobile operators. That basically is what drives it. I think we look at the business and the assets on a very long-term basis. These are extremely long-term infrastructure assets, which stand for decades. We're essentially providing that platform for the network to proliferate and densify over time.
In some markets, in some years, it's going to be very busy times. In some markets, in some years, it's going to be quieter times when there's a lull in rollout, for example. The key is to ensure that the quality of assets is high, the assets are in the right locations, and over time, those assets are going to be utilized more and more. That's our view. We're very happy with the overall performance of the portfolio as we move into 2025. Manjit, if you take the discretionary CapEx one.
Yeah, absolutely. From an overall quantum perspective, CapEx was still broadly aligned on a year-on-year basis.
One thing to kind of mention is that in prior years, you've had probably higher levels of upgrade CapEx, which is effectively the CapEx that we underwrite as part of our acquisition thesis, but is effectively used to get the newly acquired sites up to Helios Towers standards so that they're ready for co-location, etc. That is, as you can see on the charts on page 18, that is reducing over a period of time, and we can expect that to reduce further. Also, the acquisition earn-out payments will reduce as well. Actually, what you're finding is not necessarily a reduction. You're finding that the CapEx spend is flicking from being around upgrade and acquisition, flicking into growth. We'll see a bit more coming through on that basis.
All things being equal, we will see a few more sites being built during 2025 than we did see in 2024. Again, this expands the base to which we can then drive that really high-returning co-location growth on top. Yeah, I think it's looking to be a pretty good year in terms of the capital deployment.
Thank you so much.
Thanks.
Thanks, Rohit.
Our final question today comes from Ulle Adamson from T. Rowe Price. Your line's now open. Please go ahead.
Hi, good morning. Congratulations again on the good results. Just regarding your clients in countries where they sort of receive revenues in local currencies, do you get sort of any of them approaching you and trying to renegotiate the contracts, which you have, as you say, most set up in a way that it's effectively in hard currency in several cases?
Is there sort of a widespread tendency for that? Secondly, just sort of a willingness to outsource this service from the mobile operators across Africa. Do you sort of see that that willingness is growing or decreasing? Because given some of the examples of some of those operators being hurt by these hard currency contracts. Thank you.
Sure. I'll take first the first part of that question. In terms of the more kind of local currency market, I think the key distinction and the important part here is that when we do get a portion of revenues that might be linked to hard currencies, it is more often than not on a minority of that overall contract.
It is more in the periphery than being necessarily asking in a local currency market to receive 100% or a large portion of the revenue to come through to us in hard currency, i.e., passing all the FX risk onto the mobile network operator. In that regard, it is more fairly shared and therefore more sustainable. Is it an area of conversation? Occasionally, but I think what we provide as well is a sustainable pricing point as well. On average, across all of our contracts, we provide a pricing point that is 30% lower than the total cost of ownership that it would cost a mobile network operator to operate the sites by themselves. What that therefore means is that you have that buffer between what we are providing, not only in terms of quality in terms of what we are providing, but from a price point.
That means that if there are these kind of areas where sometimes FX might be a little bit of a determining factor, you have got that buffer to say, "Well, actually, we are still providing this at a vast, vast improvement versus what you can do yourselves." That therefore gives us a little bit more sustainability. Also, why you see year on year, we re-sign contracts. You do not see a change in our contracted revenue base or our contracted earnings. That is kind of the proof point, as it were. In terms of the propensity for mobile network operators to try and partner with tower companies, including ours, particularly in our markets, I will start, and then Tom, please feel free to add in. I think that pricing point and the quality point are really critical on this journey.
The fact that we are able to provide the highest levels of power-up time speed to market around really does proliferate competitive advantage, not just against peers, but also against the mobile network operators doing it themselves. We are able to do that very efficiently and keep that network up and running to the highest levels. Almost perfect power in a lot of situations when there is an imperfect broader infrastructure environment. We have a very, very good expanded portfolio, which is always ready for lease-up. If an MNO does want to roll out, we more often than not, in very, very valuable locations, have that site ready to go.
We can go to the MNO proactively to say, "If you want to put your equipment on our site, you can often go within 24 hours," meaning that they're able to get that revenue almost overnight on the investment that they've made in their active infrastructure. We're not seeing any reduction. In fact, given the guidance we've given for the year of 3,000-3,500, what we're effectively saying is we're seeing that partnership deepen and slightly accelerate.
That's really helpful. Thank you very much.
That does conclude today's Q&A session. I'll now hand it back over to Tom Greenwood for closing remarks.
Thank you very much, everyone today, for dialing in and spending time with us. Thank you to everyone asking the great questions we just went through.
We're really looking forward to seeing a lot of you on the roadshow over the next couple of weeks. Look forward to more discussion. We're really excited about the business for this year and beyond. The business is really motoring forward and generating high-quality cash flow. We're going to keep performing. We're going to keep delivering for our customers the world-class service that we aim to day in, day out. We're going to continue growing and generating those cash flows. Very much looking forward to engaging with everyone over the next couple of weeks and through this year and beyond. Take care and have a great day.
That concludes today's call. You may now disconnect your line.