Good morning everybody, thank you for making the time to join us for our H1 2020 trading update. Joining me on the call are the two duos as usual, albeit they're in their different capacities in their new roles that we announced during the last month or so. Tom Greenwood joins us as Chief Operating Officer, Manjit Dhillon is our Interim Chief Financial Officer. I'm Kash Pandya, CEO. I'm going to move on to slide two. The agenda of the call will cover off the highlights of the performance up to H1 2020. We'll talk a little bit about the Senegal transaction, then go into our financial performance. At the end of the call, there'll be plenty of time for questions and answers through our Call Coordinator, Adam. Moving on to slide four, key highlights for half one.
Well, look, we continue to deliver a solid, strong revenue growth where half year came in at 7% revenue growth, delivering $204 million year-over-year. As you'd expect with a business model like ours, our EBITDA has grown faster than the revenue has, growing by 10 percentage points in terms of adjusted EBITDA coming in at $109 million year-over-year. That's also allowed us to grow our margin by one percentage point to 53% EBITDA margin. In terms of cash generation, again, as you'll remember, we've been growing our cash portfolio of free cash flow over the last few years, and we've increased 12% year-over-year this half year to $89 million. There are the financial key metrics that we report on.
In terms of our operating metrics around site growth, we've seen good momentum on site growth at 3% and 6% tenancy growth at just under 15,000 tenancies for our portfolio of a little over 7,000 towers, giving us a tenancy ratio of 2.1x tenants per tower. We've also announced a number of acquisitions in the last few weeks. The largest one, which we announced yesterday, which we're going to go into a lot more detail. Tom's going to take us through that. At a high level, we've signed an agreement to enter Senegal and acquiring just a little over 1,200 towers on the financial numbers that we quote on this slide. We've also added a couple of in-market M&A, small ones in South Africa, Eagle Towers, as well as in Congo, Brazzaville, Airtel Towers, the Warid portfolio that they haven't sold.
We're very excited about continuing to do M&As in our existing markets. This is something that will continue to occur in the- A ll the markets we're already in. We can touch on a little bit about the M&A strategy during the presentation as we go forward. As you would have seen in terms of our financing structure, we've got a much more efficient financing structure in place now, thanks to Manjit and the finance team. We placed a $750 million at 7% coupon, which is a lot more efficient than the previous coupon at 9.125%. In addition, we've got a $200 million term loan facility in place, as well as an RCF of $70 million.
This is all capacity for us to continue to drive M&A and expand, and deliver on the strategy we've articulated a number of times over the last 12 months or so. Part of that focus on M&A and expansion is the organization changes I made in July with appointing Tom Greenwood, from the CFO role he had, to a Chief Operating Officer. This is really with a view that we have a lot going on on our expansion process. Actually, Tom and the team have signed their first deal since Tom taking on the role in July. Good momentum, glad to see. Moving on to slide five. Well, look, we continue to deliver on what we say. We changed this slide from the previous slide we used to have, showing consecutive quarter-on-quarter growth. Excuse me.
We think that it's time now to focus on three key metrics for the business in terms of EBITDA, adjusted EBITDA growth, portfolio free cash flow and ROIC. It's not to say that we don't and aren't going to continue delivering quarter-on-quarter growth. Actually, Q2 of 2020 is a 22nd consecutive quarter of growth. We think that this slide is a better way of showing the business's performance going forward. Some 7% adjusted EBITDA growth last quarter, annualized coming at $205 million compared to full year 2019. In terms of portfolio free cash flow, we've delivered $173 million, some 2% growth since full year 2019. Our ROIC is at stable and around the target we've set the business, set ourselves between 14% and 15%, reflecting our growth in free cash flow, but also reflecting the recent acquisitions and the growth investment we're making.
We will continue to report on a quarterly basis, as I said, on these three KPIs. Moving on to slide 16. Look, I'm sure you're very interested in the way our business has performed during the COVID-19 pandemic that's taken hold across the planet. One of the advantages we have is the business model we operate in. What we found, while we've been very focused on keeping our staff and our partners' staff safe in the environment we're in currently, we've continued to execute and actually improve our performance in terms of customer service. In terms of field operations, we already had an isolated field operation, while typical our field engineers travel around in their four-wheel drive pickups on their own to go to sites to do maintenance, and that has continued without any glitches at all.
We've moved our office-based staff to home working in mid-March across all our markets, and that has continued. We see this as an ongoing process for the remainder of this year. In terms of our revenue and liquidity, while we still have close to $3 billion worth of contracted revenue ahead of us and a little under seven years of contract life on average remaining. Pretty predictable revenue stream and EBITDA stream as far as we're concerned. As I said earlier, our liquidity position is solid. We have access of close to $500 million between cash and undrawn debt facilities to drive expansion and organic growth in our business.
In terms of customer rollouts, while we've seen a little bit of a slowdown in Q2 when the severity of the lockdown was impacting our markets, we're starting to see a freeing of the lockdown, and we're expecting more tenancies to occur in the second half of this year. That's why we're holding our full-year guidance of between 1,000 and 1,500 tenancies to be brought onto our towers over the course of 2020, which is not dissimilar to what we've been delivering over the past few years. Supply chain management, while part of our strategy, has been to really focus on our supply chain over the last few years. We have 12 core suppliers that we work with for our core strategic components to drive our OpEx as well as CapEx investments.
We've seen no impact on that because we've been proactively ordering on a three-month advance stages anyway. Finally, in terms of rigor and monitoring, we have a weekly update with our board and executive management reviews on the impact of COVID-19 on a daily basis, utilizing all the digital solutions you'd expect us to utilize in terms of video conferencing, mobile apps to monitor maintenance activity, cloud-based systems, et cetera. Just reiterating, full-year guidance is maintained for our business, albeit the virus is causing the world some challenges, but we're managing to work through these in our markets. Moving on to slide seven. We wanted to give you an update on our sustainable business strategy roadmap. We talked a little bit about this in Q1 as well.
I want to first emphasize that we already have a sustainable business model in what we do today in Africa by bringing digital connectivity to rural communities and helping these communities to get access to simple things like educational materials, healthcare advice, banking, and commercial data to help agriculture products to be sold at a cost-effective pricing, as an example. We are continuing to focus our strategy around the three pillars outlined on this slide around Business Excellence and efficiency to lead the way in terms of power up time and connectivity reliability. Access to the network in our markets is through the investment into new towers and expansion of the network in the markets we operate in, and that allows social economic development of the communities we serve.
Of course, we have focused over the last few years, actually five years or so, in empowering and investing in our staff and our partner staff to the extent I'm proud to say today that in Africa, 100% of our staff are Africans, and 96%+ of our staff in the markets we operate in are from within those markets. That's come about because we've really looked at investing in competency building in our colleagues who live and work in Africa. These three strong pillars are underpinned by strong governance and values that we established some five years ago, these values being integrity, partnership, and excellence in everything we do. During Q3, we will be deploying KPIs and targets that we will communicate with our internal and external stakeholders.
We're planning face-to-face meetings with investors, shareholders during Q4 to take all those who are interested in taking calls with us on our sustainability strategy. We will have a sustainability business report in our Q1 results as part of our annual report to give you confidence that we're taking this matter with the seriousness it needs. Moving on to slide eight, recent developments. Well, look, I touched and mentioned our operational focus. I'm pleased to say during the last six months, we hit in June our record power uptime performance, and we measured this in the form of downtime per tower per week. We actually hit one minute and three seconds downtime on average across 7,000 towers, downtime per tower per week.
This is a milestone we've been working hard to achieve for a long time, and it speaks to our target of Lean Six Sigma levels of performance. 95% of our towers now achieve Lean Six Sigma levels. Just to reiterate what that is for us, that's two seconds downtime per tower per week, demonstrating our continuous focus on deploying the Lean Six Sigma methodology across our portfolio. In terms of board governance, well, I'm pleased to say, effective from now, we are a compliant board. We have now five independent non-executive directors, two shareholder directors, two executive board members, and an independent chair. We're also pleased that we've now added two non-execs over the last few weeks, Carole and Sally. Now we have a gender diverse and ethnic diverse board as well. We will continue to strengthen our board when the right opportunities come about.
Regarding Tanzania listing, some of you may have been aware that there was a local requirement for infrastructure and telecoms license holders in Tanzania to list 25% of their local entity on the Dar Stock Exchange. I'm pleased to say that legislation effective from July 1st in Tanzania was changed, that no longer tower operators in Tanzania need to list their stock on the stock exchange in Dar. Not that we were concerned about that, we always thought that this was going to be something that would come about, and it has done literally a little over a month ago. In terms of our M&A strategy, I'm going to let Tom talk about our entry to Senegal, and the detail about that transaction in the next slide.
I just want to emphasize that we're very focused as a management team in expanding our organization into new markets. We remain confident about delivering on what we articulated during the IPO, and that is to go from five markets to eight markets or more over the course of the next five years. Actually now we've entered or are about to enter Senegal as our sixth market. Our tower count is still targeted at 12,000 or more over the next five years, and we're excited about moving forward on that KPI as well. On that note, I'm going to hand over to Tom.
Thanks very much, Kash. Hi, everyone. I'm on page 10 now of the presentation. As Kash mentioned, and as you've seen, we announced yesterday, a major acquisition for us, our first major acquisition post IPO, and hopefully there will be more to come on that. This acquisition is exactly in line with our growth strategy. It meets all of our investment criteria. It provides very good diversification for us, and will be immediately accretive to earnings when it comes on stream. Moving on to the transaction highlights on page 11. The transaction overview sees us acquire just over 1,200 sites for EUR 160 million. Also we have a commitment for 400 build-to-suit sites over the next five years, and there's an earn out of EUR 40 million attached to the delivery of those orders, which again, is great.
Overall, that would see us have around 1,600 sites in Senegal. That obviously excludes building any other sites for any of the other mobile operators there. Our counterpart for the transaction is a mobile operator called Free Senegal. They're the number two in the market, with 26% market share. They're backed by Xavier Niel, the Iliad's founder, as well as some minority investors. Very solid counterpart with good growth ambitions for the country. As well as the sites that we're buying and the build-to-suits that we have committed, this deal comes with a 15-year initial term service contract, with renewals thereafter. It's a very long-term contract, with all the usual features which we have in our contracts, including automatic escalation, things like that. The currency of Senegal is the West African franc, which is obviously pegged to the euro, which is great.
A lot of hard currency-based revenue for us here in this transaction. In terms of day one financials, on a run-rate basis, the asset is expected to deliver EUR 32 million of revenue and EUR 16 million of EBITDA on day one. We're expecting a lot of further growth on top of that in the months and years thereafter. Financing. We will be financing this through cash and balance sheet and available debt lines. Closing, we expect probably in Q1, after the usual conditions are satisfied. We've already set up our 100-day plan which is already in motion, which will see us set up in the country with an office and get staff on board and the usual things like that. Moving on to slide 12 now. A look at how this deal meets all of our criteria.
Senegal is a very exciting market in West Africa, with a population of around 16 million people, with 5% GDP growth forecast, and 3% population forecast. Very high growth, which is one of the things we look for in acquisition. It has a very attractive mobile operator landscape in the country. Three strong operators, all with decent market share. We have three. Our counterpart, which is 26% market share and is the number two in the country, Orange, which is the number one with about 50%, and Expresso, which is the third with about 21%. A very good competitive environment. Of course, we will be the only independent tower company in the country with a view to serving all three customers as they deliver their growth plans over their next phase of their business.
The currency, as I mentioned, is very attractive, pegged to the euro and a low inflationary environment, with inflation typically at around 1% over the past five years. Very much similar to the eurozone in that respect. There's a big power infrastructure gap in the country. Average subscribers per point of service is around 4,500, which compares to about 1,100 in the U.S. We think that as the proliferation of mobile expands in the country, as more 4G comes, and 5G one day, there will be a reduction in that KPI there, which as the networks become more dense over time, which is great news for us as a tower company. Finally, the mobile penetration is around 50%, growing at 4% per year. Of course, last but not least, and most importantly, this deal is accretive to our group returns.
Moving on now to the next page 13. Just looking at how this supports our five-year vision, where we set out last year at IPO, of course, to expand from five markets to eight markets and 7,000 sites to 12,000 sites over the next five years. Clearly this acquisition is a very good stepping stone in that direction, moving to six markets, moving to about 8,500 towers. As mentioned before, we would be aiming to build on this acquisition with others in other markets over the near term as well. Now moving to page 14. What is the asset that we've bought? Well, it's a very strong asset. It's the second-largest tower portfolio in the country with 1,200 sites. Of course, that will be 1,600 sites once the build-to-suit commitment has been rolled out.
One of the most attractive areas of this asset is the tenancy ratio is very close to 1x . As we see in other markets where tower companies don't exist, typically mobile operators don't particularly like sharing towers with each other. You often find networks with a very low tenancy ratio, which is exactly what we've done here. Of course, the first thing we did will be to try and get that tenancy ratio up by selling space and services to Orange and Expresso. The financial KPIs I mentioned before are there. Then on the left-hand side here, you see the sites spread and locations around the country. Obviously, a lot focused around Dakar, which is a big urban center in Senegal. Around 70% of the sites are urban, which is great, and 30% rural.
That is slanted towards urban a bit more than our group average, which is excellent. About 53% are greenfield and 47% rooftop. The rooftops principally being in the urban centers, particularly Dakar. These sites will be very attractive, we think, for the other mobile operators in the country, particularly as densification is required for 4G and 5G, which will be coming soon. Next, moving on to page 15. Here we see our pro forma KPIs based on this deal. Site count, as I mentioned, going up to, at the top end, 8,700, including the 400 build-to-suits. Revenues going up from $409 million to $447 million, and EBITDA going from $220 million to $239 million. I should note that these revenue and EBITDA numbers are just related to the 1,200 sites on day one. They do not include the revenue and EBITDA from the 400 build-to-suits, which are contracted.
There's a bit of upside there. Next, and finally, we move on to slide 16. Again, just looking at what this does for our group from a customer and currency point of view. First of all, customer, as you know, we have a good spread of customers at the moment. This pro forma for this acquisition would see Free come in as 8% of our overall group total. Vodacom, Airtel, Tigo, and Orange still being our major customers across the group. Then from a currency point of view, you see the increase in the euro-based currency that we have there, up to 13%. Overall, our revenues from a hard currency perspective moved from 59% as currently to 63% with this transaction. Overall, a very good addition to our portfolio. With that, I will hand over to Manjit to take us through the financial section.
Thanks, Tom. Moving on to the financial results and starting on slide 18. Here we summarize the main KPIs, which I will be talking through over the next few slides. On slide 19, we see continued upward growth in our tenancies. Over the last 12 months, we have added 806 tenancies across our portfolio, and the quarter-on-quarter growth of 229 tenancies is driven predominantly by in-market bolt-ons in South Africa and Congo Brazzaville, and steady organic tenancy growth. Tenancy growth for a tower business is never completely linear and comes in fits and bursts, and we expect there to be a strong rollout during H2.
Our tenancy pipeline is strong, and as mentioned earlier, our full year guidance has been maintained, and we expect to see tenancy growth for 2020 being in the range of 1,000 to 1,500 tenancies, with the majority of that rollout expected towards the end of the year. On to slide 20, looking at our revenues and EBITDA. We've seen solid growth in Q2, with revenue growth of 5% year-on-year, flat quarter-on-quarter, and EBITDA growth of 10% year-on-year and 2% quarter-on-quarter. Our adjusted EBITDA margin has stepped up 1 percentage point to 54% and just shy of our target range of 55% to 60%, which we expect to hit by the end of the year. If you move on to slide 21, you'll see the usual breakdowns provided, which are very consistent from previous quarterly updates.
Our customer mix, FX mix, and operating company split are largely unchanged, with 86% of our H1 2020 revenue coming from Africa's Big Five mobile network operators being Airtel, MTN, Orange, Tigo, and Vodacom. 59% of our revenue was in hard currency, be either US dollar or euro pegged, which translates to approximately 65% of our EBITDA being in hard currency, which provides a strong natural hedge for the business and which is further complemented by our annual inflation escalators, which we have in our contracts with our customers. On to slide 22, a look at our gross profit per tower and operating expenses. Gross profit per tower has stepped up by 7% year-on-year, demonstrating the continued operational leverage of our platform.
As we continue to increase our number of co-location, we will see significant bottom line flow-through from these incremental tenancies, increasing our gross profit per tower and further increasing our EBITDA margin. Operating expenses have decreased slightly in the quarter, and as a percentage of revenue, it has reduced to 32%, a record low for the group. Moving on now to slide 23, here we look at CapEx. For H1 2020, our expenditure was $38 million. As we have increased tenancy rollout during H2, we should see CapEx also increase. As Kash mentioned earlier, we are reiterating our full year guidance. For CapEx, that means we expect to incur $110 million for organic CapEx investments, of which $20 million-$25 million is related to maintenance and corporate CapEx.
We also expect to incur $30 million for inorganic in-market bolt-on acquisitions, and we have deployed $10 million of this during Q2, which related to the Eagle Towers acquisition in South Africa. We do expect to announce more in-market acquisitions in due course. Moving now on to slide 24, and here we show a summary of our financial debt. We were pleased to announce in June that we were able to refinance our debt facilities, and thereby reduce our cost of funding as well, as well as raising additional facilities for growth opportunities. We successfully raised this $750 million senior unsecured notes with a coupon of 7% payable semi-annually. That's a reduction of 2.125% from our maiden bonds coupon.
The proceeds were used to refinance the $600 million 2022 notes, repay the $75 million drawn term loan, and cover transaction fees with excess funds going to the balance sheet for general corporate purposes. In addition, we increased our RCF facility from $60 million to $70 million and raised a new $200 million term loan, which will be used for expansionary purposes and general corporate purposes. As of H1, our net leverage was 3x , and continues to be below our target range of 3.5x-4.5x. However, we expect to be within our target range within the short to medium term as we start to draw the facilities for utilization for our expansionary growth. Finally, on slide 25, our cash flow.
Our cash conversion continues to be very strong at 82% in H1 2020, which is a 16 percentage point improvement since 2017, representing a significant increase in cash conversion. We've also seen an improvement in net receivables, with net receivables days reducing by 12 days from the end of 2019 to now being 45 days. As we said in previous quarters, cash receipts can be lumpy, and we've seen some inflation in the quarter. Generally, net receivables days remain broadly stable versus FY 2017 and FY 2019. With that, I'll pass back on to Kash to go through slide 26.
Thanks, Manjit. This is the last slide before we go to Q&A. Look, summarizing the H1 results, we've first of all delivered on our acquisition growth strategy, but that's not the end of the delivery. We continue to look at and will continue to add more markets.
In due course. We've delivered robust operational performance in H1. We've significantly improved our balance sheet, extended our maturity in terms of our debt structure, and we've got a lower cost of debt, which provides more capital for expansion and organic growth. We've got a robust organic and inorganic pipeline, and we're very excited about continuing to drive the growth of our business in those two dimensions. Finally, we maintained our full year guidance, and we see improvements coming in the second half of the year in terms of tenancy growth. On that note, I'm going to hand over to Adam, our Call Coordinator, to help with the questions. Thanks, Adam.
Ladies and gentlemen, if you would like to register a question, you may do so by pressing star followed by one on your telephone keypad now. If you're joining us via the web today, it is the Request to Speak flag icon. When preparing to ask your question, please ensure that your line is unmuted locally, and if you do change your mind at any time, it is star followed by two. We have our first question. It comes from Giles Thorne of Jefferies. If you'd like to go ahead with your question, please, Giles.
My first question, acquisition. It would be useful to get a feeling for how competitive that process was, and why, in your view, you feel like you were ultimately chosen. Now, price will obviously be a feature of that. Any other qualitative commentary around why you were the winning bidder would be useful. Secondly, sticking with Senegal, it would be useful to understand the nature of the assets that you bought. The urban and rural split is useful, but if we could also have some color around how the sites look under the criteria of overlap, consolidation, and unique zones is some language you've previously used. That would be very useful, too.
My final question, sticking with the theme of M&A, I wanted to get your comments on the latest Ethiopia headlines, where we've seen the government move to block foreign telecom infrastructure operators buying assets or being part of the Ethiopia privatization and overall market liberalization. I'm guessing it's hard for you to comment, but getting your comments nonetheless would be useful. Thanks.
Thanks, Giles. Thank you for the question. Let me take the first aspect on the Senegal competitive dynamic and why we were chosen. I think I'll let Tom pick up on the other aspects of Senegal. We'll touch on Ethiopia at the end. Look, I think, first of all, we're not aware in terms of hard data, but we believe all three independent tower operators in Africa would have been involved in this transaction looking to enter Senegal. Why? Well, it's the first-mover advantage. We're the only independent player now in Senegal. Low levels of penetration, three customers operating there with success, and the currency. These are compelling reasons to want to enter Senegal, as far as we're concerned. I think we've competed with all of the tower operators in Africa, but I'm sure there were other players involved with private equity backing as well.
Why do we think we were chosen? Well, we think that we were fast out the blocks in terms of the process. We maintained the momentum in terms of the DD activities with the other side. I think also our reputation over the last 10 years of operating in Africa and the ethos we have on customer service and partnership really played into the selection process. We're pleased that we recognized our performance in other markets and the way we operate. Tom, do you want to pick up on the other aspects of the transaction?
Absolutely. Look, in terms of the portfolio itself, as mentioned, Giles, it's 70% urban, which we like. In terms of the splits on the assets and how we classify them, we haven't released that publicly. We would expect over a five-year period that we get to roughly 1.5x tenancy ratio. Today it's at one. It's roughly 0.1x each year is what we would anticipate.
Ethiopia, Giles. Yes, we've also picked up on the media. Look, our assessment is, first of all, that this is actually Ethio Telecom's CEO who's made these comments rather than the official government line. Our experience operating in the continent is that there will be some ups and downs, but Ethiopia will end up liberalizing because it needs to in terms of being able to expand the basic mobile infrastructure it needs to provide to the population. We're still keeping momentum there. We're still maintaining our presence and if it's not during the course of this year, it's likely to be the course of next year when MNO licenses are issued and tower infrastructure licenses are issued. We still remain very positive on Ethiopia.
Okay. Is Ethiopia within that 12,000 target?
Ethiopia is, but there are a number of other markets. In our view, that target is for the end of 2025. In our view, the pace and the intensity of M&A over the last six months has picked up. In addition to Ethiopia, we're looking at a number of deals, and we're very excited about, actually, as Tom mentioned, being ahead of the M&A target for the strategy.
Understood. Thank you very much.
Our next question comes from John Karidis of Numis. If you'd like to go ahead with your question, please, John.
Thank you very much. Hello, everyone. Well done on finishing a very hectic and successful quarter. I just wanted to ask one point of detail. You said that because of the Senegal acquisition, your revenue share from hard currency goes from 59% to 63%. What's the equivalent moved at the EBITDA level, please? From 65% to what? Is it 70% or more than that? Secondly, I'd be very grateful if you could talk around the various issues that may have caused revenue growth in the second quarter to differ from the revenue growth in the first quarter. I'm sure it's something to do with COVID, but more color from you would be good. I'm aware that you have a number of hedges or escalators against power costs and local inflation.
Unfortunately, they don't match the end of quarters or the end of years. Is it the case that you were hit during the second quarter because of these things, but you're likely to sort of catch up in the very near term? Thank you.
Thanks, John. Manjit, do you want to pick up on those questions?
Yeah, absolutely. On the first question about the EBITDA bit, we'd expect that to be broadly around the 70% mark, but we'll provide that once we close as well. Yeah, increasing from 65% to broadly 70%. On your second question about the revenue being flat, really, the main reason for that was the majority of tenancies came in later in the quarter and really came in the June month. We should really see that revenue picking up within Q3 as we get a full quarter's worth of revenue coming from that. On the escalation points that you raised, yeah, sometimes we may see a slight discrepancy in timing between when a price may move and when the escalator kicks in.
When it comes to fuel, in particular, the majority of our contracts are on a quarterly basis, and so the differential should only be one to two months at a maximum.
Thank you. Is it at all possible to get some sort of, if I may, sorry, ask one follow-up question, some sort of list? In the past, we've asked you about M&A targets, and you've given us a very long list of names. Is there any chance of figuring out roughly what the sort of top five priorities might be or opportunities in the next six to 12 months, please, Kash?
Sure. Look, it's difficult to say because it's so competitive out there, John.
Yeah.
We are very active. I think in the past we've quoted that we've got over 20 M&A opportunities we're tracking and involved in. I would say that we're intensely involved in between 7 to 10 opportunities today. Beyond that, it's difficult for us to say more detail because we want to carry on doing what we did in Senegal, being very aggressive and take advantage of some of these opportunities.
Very clear. Thank you. Good luck.
Thank you, John.
Our next question comes from Alexander Vengranovich of Renaissance Capital. If you would like to go ahead with your question, please.
Yes. Good morning, gentlemen. I have a couple of small questions, I think. First one, I have noticed there were some strong profitability improvements in Ghana in the second quarter this year, despite some weakness in the revenue in dollar terms. Can you just comment on the reasons behind this strong improvement? Second question is a very quick one also on South Africa. In your real press release, you kind of provided sort of a zero adjusted EBITDA for the quarter for South Africa. I just wanted to understand whether it is actually zero or just you preferred not to provide any additional details on South Africa. The third question is on the accounting treatment of Senegal acquisition. As far as I understand, the deal is supposed to be closed first quarter next year.
Should we assume that you will start accounting for the acquired sites only once the deal is fully closed? Thank you.
Thanks, Alex. I'll pick up this one. With regards to Ghanaian EBITDA margin improvement, so really that's driven by two factors. The first one has been some growth in co-locations in that market, so really driving some of the top line there. Really also a key driver here is going to be some of the OpEx improvements that we're having and the operational excellence program, which is still ongoing across our markets. That's really one of the main drivers there. With regards Senegal, the main time we'll put this into our accounts will be upon closing. We will expect to start accounting for Senegal after Q1 of 2021, as soon as that is fully closed within the business.
As for South Africa EBITDA?
Oh, sorry. On the South African EBITDA, it's actually at zero. It's flat for the quarter. That's why you're seeing that nil on the statement.
Okay. Thanks.
Our next question comes from Florian Henrichs of Bank of America. If you would like to go ahead with your question, please.
Yes, sure. Thanks for taking my question. I had two. Firstly, on also on the Senegal deal. I was just wondering, given you have now delivered sort of the first big deal since your IPO, how should we think about the pace of the deal flow going forward? Should we expect things maybe to pick up, or is it still likely more gradual given the sort of challenging environment we have with COVID? I guess by definition, you only pursue sort of value-enhancing deals for yourselves, but if you were to rank the Senegal deal now versus other opportunities you're looking at, just be interested in how that would stack up in your view.
Yes. Hey, Florian, it's Tom here. Look, for us, the Senegal deal is a very attractive deal. It's value accretive. I don't want to put that on a scale of other deals because obviously, that's very commercially sensitive in competitive processes. No comment on that. You can be sure that it's a very value accretive deal for us. In terms of deal flow, again, just to echo what Kash said, there are a number of opportunities going on right now. Predicting timing of these can sometimes be a little bit challenging given all the parties involved. Our ambition is to sign more in the near term, and certainly the potential to do that is there. The potential to significantly surpass our five-year stated target is also there if we convert some of these.
I won't give exact timing, but the ingredients are there to make it happen in the near term.
Yeah. Okay. Thank you very much. Just the second one, also on the sort of the firepower you're always talking about. I guess the Senegal deal will consume sort of a good chunk of, I think you previously mentioned around $300 million-$350 million if we keep some of the cash on balance sheet. While I appreciate your business generates plenty of cash organically, I was wondering how you think about sort of external financing options, and if we could expect you to come to the capital markets, either debt or equity, any time in the near term.
In conjunction to this, I was just wondering, if you were to hypothetically lever up to your sort of the upper end of your leverage base, so to the four and a half times, and assuming average deal multiples you have paid in the past, what would be the sort of the total firepower you have then, and how many towers could that buy, if you have some numbers here?
Yeah, sure.
Sure.
The short answer is yes, we would go to the capital markets, but I'll let Manjit talk it through.
Yeah. Thanks, Tom. As you rightly say, we have about $300 million, $350 million of firepower as it stands right now. That's split between cash on balance sheet and the available debt lines that we have. Our priority would be to utilize further debt first. As we start to, as you say, increase our leverage up to the range of 4.5x, we'd then look to the equity markets to potentially raise further capital. Given the amount of opportunities that we have available now in terms of our M&A pipeline, it is certainly in excess of what we've currently got in terms of our available firepower.
Certainly, we would be looking to do further raisings in the future on that. With regards, as we start to get towards the 4.5x, the high level guidance we would give, I think is you guys get potentially a build-to-suit calculation on a per site basis for the number of sites we purchased. Five-year target is to get from our existing 8,000 towers to 12,000, about 2,000 to 3,000 of those would be purchased through the available facilities that we have right now.
Okay. Thank you very much.
Thanks.
Our next question comes from Simon Coles of Barclays. If you would like to go ahead with your question, please, Simon.
Hi, guys. Thanks for taking the question. Sorry, another one on M&A, but you talked about how opportunities you're seeing an uptick, and I think you hinted towards that on the last conference call as well. I'm just wondering, as your scale is increasing, you've done some more deals this quarter, so more people are aware of the capabilities you can bring. Are the opportunities increasing by, say, bigger portfolios that operators you have relationships are now more willing to discuss with you? Or are you seeing new operators come to the table, offering sites potentially for sale? That's the first one. Secondly, just on tenancies, you reiterated the guidance. The first half was maybe a little bit slower than we might have expected. I consciously can't necessarily give 2021 guidance.
That's not necessarily what I'm asking, is the run rate that will pick up in 2H, can we continue to think that is the sort of run rate that should carry on in the future? If we ignore Senegal for a second, which it sounds like we'll add about 100 tenancies a year. Thank you.
Yeah. Hey, Simon. It's Tom here. I'll take the first one on the M&A, and then Manjit will take the second one. Yeah, look, it's a mixture of mobile operators. Some of them we know very well. They're big customers of ours, and we've done deals with them in the past. Others are new ones who perhaps haven't really gone down the sale and leaseback route before, but perhaps now they're in their heads that selling their towers is the right thing to do because they're non-strategic and they want to raise finance things for their 5G rollout and all that stuff. It really is a mixture. We're obviously leveraging our existing relationships and the great service that we provide our existing customers today, as a way of trying to be in there for new deals with them.
We're also, clearly, as demonstrated yesterday with this Senegal deal announcement, able to put forward our case for operational excellence with new mobile operators who we haven't worked with before. Yeah, very much a mixture. That's what we'd expect going forward. I'll hand over to Manjit for the question on the tenancies.
Thanks, Tom. Yeah, we've had a slower tenancy rollout during H1, but as we look at our pipeline, we have a very strong pipeline, and we expect there to be an increased rollout during H2. You're still getting within our target range. As I said a bit earlier, the tenancy growth for TowerCo is not linear and can be lumpy, coming in fits and bursts throughout the year. As we get towards the latter end of the year, we should find that that will be a higher rollout than normal.
I wouldn't say that would be necessarily the run rate, as you say, but I think you need to look at it on a full year basis, and we would expect that the number of tenancies within the target range of 1,000-1,500 being broadly similar for the following year as well, excluding Senegal, obviously.
Very clear. Thanks, guys.
Thanks, Simon.
Ladies and gentlemen, a reminder, if you would like to ask a question on today's presentation, it was star followed by one on your telephone keypad or the Request to Speak icon via the web today. We have another question. This one is from Rahul Bhat of JP Morgan. If you'd like to go ahead with your question, please.
Hi, guys. Thank you for the call. I just had a quick couple of questions. Firstly, on the $30 million of acquisitions guidance that you have for this year, I just wanted to confirm, so that is excluding the Senegal acquisition. Is that correct? Secondly, also more of a clarification on cash upstreaming from your markets. Is everything going okay? Because of COVID and other reasons, have there been any restrictions on cash upstreaming for the markets? How does Senegal look in this perspective as well? I'm not really aware of their financial controls. Can capital move freely in and out of the country over there? Thank you.
Thanks, Rahul.
Go ahead, Manjit.
Thanks. Yes, the $30 million is for in-market bolt-on acquisitions, so that does not include Senegal. That'll be for our five markets that we have as of today. With regards to the upstreaming of payments, we have not found any problems with that. We've actually seen continued upstreaming month-on-month from all of our operating companies. We have a very efficient route of upstreaming of funds. It's done by electronic bank transfer, and it's very, very quick as long as you have the documentation in place, which we do. We expect that to continue for the rest of the year. With regard to Senegal, as far as it currently stands, it has a similar position as our other markets, and upstreaming of funds shouldn't have any problems there either.
Understood. Thank you.
Our next question comes from Sumit Kanodia of Ninety One. If you'd like to go ahead with your question, please.
Hey, guys. Congrats on the Senegal acquisition. Just one question. Just to confirm, obviously, you say it's pegged to the euro. Do you take any de-pegging risk, or is that covered in the contract with Free? How does that work?
Yeah, absolutely. First of all, our view is that the peg will continue, and that is obviously backed up by the French Treasury. There are provisions in the contract which do protect us to some extent if there was a de-pegging. We don't view that as a likely scenario at all, actually.
Okay. One other question. Orange is obviously quite a strong number one in Senegal. Do you have existing relationships already with them? Do you expect them to be a large part of your growth in Senegal or is it mainly from, I guess, the third operator going forward?
Yeah, we very much hope both of them and expect both of them will. Orange is, as you said, the number one. They have about 50% market share, so they've got a pretty decent network of towers themselves. We very much expect them to co-locate with us, particularly as 4G and soon to come 5G arrive. We think that our network portfolio positioning, particularly in the big cities like Dakar, is going to be really helpful for that. It's a dense city, it's fairly difficult to build big towers in the downtown area. Our position of having a lot of these sites on the top of the buildings, which can have co-location on, we think will be very attractive for both mobile operators with the onset of data networks. Yeah.
Orange is already a customer of ours in DRC, so we do have good relationships with them.
Great. Thank you.
Thanks, Sumit.
Our final question comes from Dilawer Farazi of Loomis Sayles. If you would like to go ahead with your question, please.
Hi, guys. Congratulations on the acquisition again. Just a couple of quick questions about the funding of the transaction. Obviously you've got over $200 million of cash on the balance sheet, and you've got your term loan as well on the RCF. Have you now drawn down on the term loan? Is that how you're doing it mechanics-wise? In terms of the net leverage as a result, sort of 3.55x based on LQA. Is that about right? Is your leverage target still in line with the 3.5x, 4.5x times that you've guided in the past?
Hey, Dilawer.
Hi.
We have not yet drawn the facilities as it currently stands, but we expect to draw it upon closing, and that will help to fund the acquisition. As we draw, we'd expect the net leverage to increase to just shy of 3.5x. Still slightly below our target range. Our target range remains unchanged. It will still be between 3.5x-4.5x.
Brilliant. Thanks a lot, guys, and congrats again.
Thanks, Dilawer.
Thank you.
That concludes the question and answer session for today. I would now like to hand back over to Kash Pandya for today's close.
Thanks, Adam. Well, thank you very much, everybody, for taking the time to join us on this call. We look forward to talking to you during November or end of October, actually, October 31st, for our Q3 trading update. Thank you. Bye-bye.