Earnings Call: H1 2020

Aug 13, 2020

Good morning, everybody, and thank you for making the time to join us for our H1 twenty twenty 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 and Manjit Dhillon is our Interim Finance Chief Finance Officer. And 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 twenty twenty. We'll talk a little bit about the Senegal transaction and then go into our financial performance. And 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. Half year came in at 7% revenue growth, delivering $2.00 $4,000,000 year over year. And as you'd expect with a business model like ours, our EBITDA has grown faster than the revenue has, growing by 10% points in terms of adjusted EBITDA coming in at $109,000,000 year over year. And 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 free cash flow over the last few years, and we've increased 12% year over year this half year to $89,000,000 So 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 36% 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 go into a lot more detail, Tom is going to take us through that. But 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 and A, small ones in South Africa, Eagle Towers as well as in Congo, Brazil, Airtel Towers, the Wari portfolio that they haven't sold. And so we're very excited about continuing to do M and As in our existing markets. And this is something that will continue to occur in the off markets we're already in. And we can touch on a little bit about the M and 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 Manju and the finance team, we placed the $750,000,000 to 7% coupon, which is a lot more efficient than the previous coupon at 9.8%. In addition, we've got a $200,000,000 term loan facility in place as well as an RCF of $70,000,000 And this is all capacity for us to continue to drive M and A and expand and deliver on the strategy we've articulated a number of times over the last twelve months or so. And part of that focus on M and A and expansion is the organization changes I made in July with our colleague Tom Greenwood from the CFO role he had to a Chief Operating Officer. And this is really with a view that we have a lot going on, on our expansion process. And actually, Tom and the team have signed their first deal since Tom taking on the role in July. So good momentum for us 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. And 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, 2020 is a twenty second consecutive quarter of growth. But we think that this slide is a better way of showing the business' performance going forward. Some 7% EBITDA adjusted EBITDA growth last quarter annualized coming at two zero five million dollars compared to full year 2019. In terms of portfolio free cash flow, we've delivered $173,000,000 some two percentage growth since full year 2019. And our ROIC is at stable and around the target we've set the business, set ourselves between 1415%, reflecting our growth in free cash flow, but also reflecting the recent acquisitions and the growth investment we're making. And 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-nineteen pandemic that's taken hold across the planet. One of the advantages we have is the business model we operate in. And what we found, while we've been very focused in keeping up our staff and our partners' staff, we stay in the environment we're in currently, we've continued execute and actually improve our performance in terms of customer service. So 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 moved our staff office based staff to homeworking 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, well, we still have close to $3,000,000,000 worth of contracted revenue ahead of us and a little under seven years of contract life on average remaining. So pretty predictable revenue stream and EBITDA stream as far as we're concerned. And as I've said earlier, our liquidity liquidity position is solid. We have access over close to $500,000,000 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 severe severity of the lockdown was impacting our markets, we're starting to see freedom a freeing of the lockdown, and we're expecting more tendencies to occur in the second half of this year. And that's why we are holding our full year guidance of between 2,500 for tenancies to be brought on to 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, well, 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 OpEx as well as CapEx investments. And we've seen no impact on that because we've been proactively ordering on a three month advance stages anyway. And finally, in terms of rigor and monitoring, we have a weekly update with our Board and executive management reviews on the impact of COVID-nineteen 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, etcetera. So 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. Now moving on to Slide seven. We wanted to give you an update on our sustainable business strategy road map. We talked a little bit about this in Q1 as well. I want to first emphasize that we already have a sustainable model in the 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, health care advice, banking and commercial data to help agriculture products to be sold at a cost effective pricing, as an example. And 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. And 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 plus percent of our staff in the markets we operate in are from within those markets. And that's come about because we've really looked at investing in competency building in our colleagues who live and work in Africa. And these three strong pillars are underpinned by strong governance and values that we established from 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 meeting with investors, shareholders during Q4 to take all our those who are interested in taking calls with us on our sustainability strategy, and 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 record power uptime performance, and we measured this in the form of downtime per tower per week. And we actually hit one minute and three seconds downtime on average across seven thousand hours downtime per tower per week. And 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. And just to reiterate what that is for us, that's two seconds downtime per tower per week, demonstrating our continuous focus on deploying 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 nonexecutive directors, two shareholder directors, two executive Board members and an independent chair. And we're also pleased that we've now added two non execs over the last few weeks, Carol and Sally. And now we have a gender diverse and ethnic diverse board as well, and we'll continue to strengthen our Board when the right opportunities come about. Regarding Tanzania listing, so 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 DA stock exchange. I'm pleased to say that legislation effective from July 1 in Tanzania was changed so that no longer tower operators in Tanzania need to list their stock on the stock exchange in DAO. 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. And in terms of our M and A strategy, I'm going to really let Tom talk about our entry to Senegal and the detail about that transaction in the next slide. But 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. And actually now we've entered or about to enter Senegal as our sixth market. And 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. So on that note, I'm going to hand over to Tom. Thanks very much, Kash. So I'm on Page 10 now of the presentation. So 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. So this acquisition is exactly in line with our growth strategy. It meets all of our investment criteria. It provides very diversification for us and will be immediately accretive to earnings when it comes on stream. Moving on to the transaction highlights on Page 11. So the transaction overview sees acquire just over 1,200 sites for €160,000,000 And then also, we have a commitment for 400 build to suit sites over the next five years, and there's an earn out of CHF 40,000,000 attached to the delivery of those orders, which again is great. So overall, that would see us have around 1,600 sites in Senegal, and 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, and they're backed by Xavier Neil, the Iliad founder, as well as some minority investors. So 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 fifteen year initial term service contract with renewals thereafter. It's a very long term contract and with all the usual features which we have in our contracts, including automatic escalations and things like that. The currency of Senegal is the West African francs, which is the euro, which is great. So 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 €32,000,000 of revenue and €16,000,000 of EBITDA on day one, and 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 on balance sheet and available debt lines. And closing, we expect probably in Q1 after the usual conditions are satisfied. We've already set up our 100 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. So Senegal is a very exciting market in West Africa with a population of around 16,000,000 people with 5% GDP growth forecast and 3% population forecast. So very high growth as with which is one of the things we look for in acquisitions. It has a very attractive mobile operator landscape in the country, three strong operators all with decent decent market share. We have three that 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 Espresso, which is the third with about 21%. So a very good competitive environment. And 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 at a low inflationary environment, with inflation typically at around 1% over the past five years, so very much similar to the Eurozone in that respect. There's 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 US. So we think that as the proliferation of mobile expands in the country, as more four gs comes and five gs one day, there will be a reduction in that KPI there, which will which is as the networks become more dense over time, which is great news for us as a power company. Finally, the mobile penetration is around 50%, growing at 4% per year. And of course, last but not least and most importantly, this deal is accretive to our group returns. Moving on now to the next page, Page 13, just looking at how this supports our five year vision, where we set out last year an IPO, of course, to expand from five markets to eight markets and 7,000 sites to 12,000 sites over the next five years. And clearly, this acquisition is a very good stepping stone in that direction, moving to six markets and moving to about 8,500 towers. And 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. So what is the asset that we bought? Well, it's a very strong asset. It's the second largest power portfolio in the country with 1,200 sites. And 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 one times. As we see in other markets where power companies don't exist, typically mobile operators don't particularly like sharing towers with each other. And so you often find networks with a very low tenancy ratio, which is exactly what we've done here. And 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 Espresso. The financial KPIs mentioned before, are there. And then on the left hand side here, you see the slight spread and locations around the country. Obviously, a lot focused around Dakar, which is a big urban center in Senegal. And around 70% of the sites are urban, which is great, and 30% rural. So that it's slanted towards urban a bit more than our group average, which is excellent. And about 53% of greenfield and 47% rooftop, the rooftops principally being in the urban centers, particularly Dakar. And these sites will be very attractive, we think, for the other mobile operators in the country, particularly as densification is required for four gs and five gs, which will be coming soon. Next, moving on to Page 15. Here, we see our pro form a KPIs based on this deal. So site count, as I mentioned, going up to, at the top end, 8,700, including the 400 build to suits revenues going up from four zero nine to four forty seven and EBITDA going from two twenty to two thirty nine. And it's we 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. So 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. So first of all, customer, as you know, we have a good spread of customers at the moment. And this pro form a for this acquisition would see three come in as 8% of our overall group total, Vodacom, Airtel, CEGO and Orange still being our major customers across the group. And then from a currency point of view, you see the increase in the euro based currency that we have there up to 13%. So overall, our revenues from a hard currency perspective moved from 59% as currently to 63 with this transaction. So overall, a very good addition to our portfolio. So 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. So on Slide 19, we see continued upward growth in our tenancies. Over the last twelve months, we have added eight zero six tenancies across our portfolio, and the quarter on quarter growth of two twenty nine 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 have 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 is set up one 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 h one twenty twenty revenue coming from Africa's big five mobile network operators being Airtel, MCN, Orange, TIGO, and Vodacom. 59% of our revenue was in hard currency, be it either US dollar or euro peg, 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 locations, 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 32%, a record low for the group. Moving on now to Slide 23, and here we look at CapEx. And for H1 twenty twenty, our expenditure was 38,000,000 As we have increased tenancy rollout during H2, we should see CapEx also increase. And as Kash mentioned earlier, we are reiterating our full year guidance. And for CapEx, that means we expect to incur $110,000,000 for organic CapEx investments, of which 20,000,000 to €25,000,000 is related to maintenance and corporate CapEx. And we also expect to incur €30,000,000 for inorganic in market bolt on acquisitions, and we have deployed 10,000,000 of this during Q2, which relates to the Eagle Towers acquisition in South Africa. And 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 as well as raising additional facilities for growth opportunities. We successfully raised the $750,000,000 senior unsecured notes with a coupon of 7% payable semiannually. That's a reduction of 2.125% from our maiden bond coupon. The proceeds were used to refinance the €600,000,000.20 '22 notes, repaid the €75,000,000 drawn term loan and covered transaction fees with excess funds going to the balance sheet for general corporate purposes. In addition, we increased our RCF facility from €60,000,000 to €70,000,000 and raised a new €200,000,000 term loan, which will be used for expansionary purposes and general corporate purposes. As of H1, our net leverage was three times and continues to be below our target range of 3.5 to 4.5. 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 twenty twenty, 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 twelve days from the 2019 to now being forty five days. And as we said in previous quarters, cash receipts can be lumpy, and we've seen some inflows in the quarter. But generally, net receivables days remain broadly stable versus FY 2017 and FY 2019. And with that, I'll pass back on to Kash to go through Slide '26. Thanks, Manjit. So this is last slide before we go to Q and A. Look, summarizing the H1 results, so we've, first of all, delivered on our acquisition growth strategy and but that's not the end of the delivery. We continue to look at and we'll continue to add more markets in due course. We've delivered robust operational performance in H1. We've improved our 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. And finally, we maintained our full year guidance, and we see improvements coming in the second half of the year in terms of currency growth. So on that note, I'm going to hand over to Adam, our conference coordinator, to help with the questions. Thanks, We have our first question. It comes from Giles Thorne of Jefferies. My first question, acquisition. It would be useful to get a feeling for how competed that process was and why in your view you feel like you were ultimately chosen and now price will obviously be a feature of that. But 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, it's some language you previously used. That would be very useful too. And then my final question, sticking with the theme of M and 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 ECO 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, Charles. Thank you for the questions. Let me take the first aspect on the Senegal competitive dynamic and why we have chosen. And then I think I'll ask Tom to pick up on the other aspects of Senegal, and we'll touch on Ethiopia at the end. So look, I think, first of all, we believe and we're not aware in terms of hard data, but we believe all three independent power owners and assets that 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. So I think we've competed with a number of well, 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 faster off the blocks in terms of the process. We maintained the momentum in terms of the DD activities with the other side. But I think also our reputation over the last ten years from operating in Africa and the ethos we have on customer service and partnership really played into the selection process. And 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? Yes, absolutely. So look, in terms of the portfolio itself, as mentioned, Giles, it's 70% urban, which we like. Now in terms of the splits on the assets and how we classify them, we haven't released that publicly. But we would expect over a five year period that we get to roughly 1.5 tenancy ratio. And today, it's at one. So it's roughly 0.1 each year is what we would anticipate. And Ethiopia, Giles, yes, we've also picked up on the media. Look, our assessment is, first of all, that this is actually Ethiopalis Telecom's CEO who's made these comments rather than the official government line. But it you know, our experience operating in 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. So 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. And we still remain very positive on Ethiopia. Okay. And is Ethiopia within that 4,000 target? Well, Ethiopia is, but there are a number of other markets. In our view, that target is for the 2025. In our view, the pace and the of the intensity of M and 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 and A target Understood. Thank you very much. Our next question comes from John Carradis of Numis. Well done on finishing a very hectic and successful quarter. I just wanted to ask one point of detail. So you said that because of the Senecola acquisition, your revenue share from hard currency goes from 59 to 63. What's the equivalent moved at the EBITDA level, please? So from 65 to what? Is it 70 or more than that? And then 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. And also, I'm aware that you have a number of hedges or escalators against power costs and local inflation. But unfortunately, they don't match the end of quarters or the end of years. So is it the case that you were hit during the second quarter because of these things and but you're lucky to sort of catch up in the very near term? Thank you. Thanks, John. Manjir, do you want to pick up on those questions? Yes, absolutely. So on the first question about the EBITDA split, we'd expect that to be broadly around the 70 mark, but we'll provide that since we close as well. But yes, 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. And so we should really see that revenue picking up within Q3 as we get a full quarter's worth of revenue coming from that. And on the escalation points that you raised, yeah, sometimes you may see a slight discrepancy in timing between when, you know, a price may move or when the escalator kicks in. But 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 this at all possible to get some sort of if I may, sorry, ask one follow-up question, some sort of list so in the past, we've asked you about M and 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 twelve months, please, Kash? Sure. Look, we are it's difficult to say because it's so competitive out there, John. We are very, very active. I mean I think in the past, we've quoted that we've got over 20 M and A opportunities we're tracking and involved in. And I would say that we're intensely involved in between seven to 10 opportunities today. And so but beyond that, it's difficult for us to say more detail because we want carry on doing what we did in Senegal, being very aggressive and take advantage of some of these opportunities. Our next question comes from Alexander Vengarevich 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've noticed there were some strong profitability improvement in Ghana in the second quarter this year despite some like a weakness in the revenue in U. S. Dollar terms. Can you just comment on the reasons behind this strong improvement? Second question is very quick one also on South Africa. In your 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's actually zero or just preferred not to provide any additional details on South Africa? And the third question is on the accounting treatment of Senegal acquisition. So 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? Thanks, Alex. I'll pick up this one. So 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 lines there. But 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, and that's really one of the main drivers there. With regards Senegal, the main driver here sorry, the main time we'll put this into our accounts will be upon closing. So we will expect to start accounting for Senegal after 2021 as soon as that is fully closed in the business. And as for South Africa EBITDA? Sorry, on South African EBITDA, it's actually at zero, so it's flat for the quarter. So that's why you've seen I'm seeing nil on the statement. Thank you. Thanks. Our next question comes from Florian Hamrichs 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. So firstly, also on the Senegal deal. I was just wondering, given you have now delivered sort of the first bigger deal since your IPO, how should we think about the pace of the deal flow going forward? So 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? And then I guess, by definition, you only pursue sort of value enhancing deals for yourselves. But if you were to rank the Senegal deal versus other opportunities, you're looking at just being interested in how that would stack up in your view. Hi, Florian. It's Tom here. So look, for us, the Sunnyvale 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. So no comment on that, but 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. But, you know, our ambition is to, you know, sign more in the near term. And certainly, the the potential to do that is there. And the potential to significantly surpass our five year stated target is also there if we convert some of these. So I won't give exact timing, but the ingredients are there to make it happen in the near term. Yes. Okay. Thank you very much. And just a 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 300,000,000 to $350,000,000 if you if we keep some of the cash on balance sheet. So what I appreciate, your business generates plenty of cash organically. And 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, anytime in the near term? And in conjunction to this, maybe just I was just wondering, I mean, if you were to hypothetically lever up to your sort of the upfront on your leverage ratio, so to the 4.5x, 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? Sure. The short answer is yes, we would go to the Capital Markets, but I'll let Manjeet talk it through. Yes. Thanks, Tom. So yes, as you rightly say, we have about $300,000,000 to $350,000,000 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. So as we start to, as you say, increase our leverage up to the range of 4.5, we then look to the equity markets to potentially raise further capital. And given the amount of opportunities that we have available now in terms of our M and A pipeline, it is certainly in excess of what we've currently got in terms of our available firepower. So certainly, we would be looking to further raisings in the future on that. And then with regards, as we start to get towards the 4.5 times, I mean, the high level guidance we would give, I think, is you guys can potentially a build to suit calculation on a per site basis for the number of sites we purchased. So our mid year target is to get to five in 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 Cowles of Barclays. Sorry, another one on M and A. But you talked about how opportunities you're seeing an uptick, and I think you've 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, more people are aware of the capabilities you can bring. Are the opportunities increasing by, say, bigger portfolios that the 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? So that's the first one. And then secondly, it's 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. But 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 will add about 100 tenancies a year? Simon, it's Tom here. I'll take the first one on the M and A, then Manjik will take the second one. So yes, look, I mean, it's a mix here 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 leaseback route before, but are perhaps now there in their heads that doing selling their towers is the right thing to do because they're nonstrategic and they want to raise financing for their five gs rollout and all that stuff. So 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. But we're also clearly, as demonstrated yesterday with the Senegal deal announcement, able to put forward our case for operational excellence with new mobile operators who we haven't worked with before. So yes, very much a mixture. That's so yes, that's what we'd expect going forward. So I'll hand over to Manjit for the question on the penances. Thanks, Tom. So yes, we've had a slower tenancy rollout during H1. But as we look at our pipeline, pipeline, we'd have a very strong pipeline, and we expect there to be an increased rollout during H2. So you're still getting within our target range. As I said a bit earlier, the tenancy growth for tower codes is not linear and can be lumpy, coming in fits and bursts throughout the year. So as we get towards the latter end of the year, we should find that that would be a higher rollout than normal. I wouldn't say that would be necessarily the run rate as as you say, but I think you should look at it on a full year basis, and we would expect that the number of tenancies within target range of 1,000 to 1,500 being broadly similar for the following year as well, excluding Senegal, obviously. Very clear. Thanks, guys. Thanks, Simon. We have another question. This one is from Rahul Bhat of JPMorgan. I just had a quick couple of questions. Firstly, on the $30,000,000 of acquisitions guidance that you have for this year, I just wanted to confirm, so that is excluding the Senegal acquisition. Is that correct? And secondly, also more of a clarification on cash upstreaming from your markets. Is everything going okay? Or because of COVID and other reasons? Have there been any restrictions on cash upstreaming for the market? And how does Senegal look in this perspective as well? Do they have I'm I'm not really aware of their financial controls. So this can capital move freely in and out of the country over there? Thank you. Thanks. Thanks, Rahul. So market. Thanks, Kash. So, yes, the 30,000,000 is for in market bolt on acquisitions, so that does not include Senegal. So that will 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, you know, a very efficient route of upstreaming of funds. It's done by electronic bank transfer, and it's and it's very, very quick as long as you have the documentation in place, which we do, and we expect that to continue for the rest of the year. With regards 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. Thank you. Our next question comes from Samit Kanodia of ninety one. If you would like to go ahead with your question please. Hey guys, congrats on the Just one question. 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 wood free? So how does that work? Yes, absolutely. So there's so first of all, our view is that the PEC will continue, and that is obviously backed up by the French Treasury. But there are provisions in the contract which do protect us to some extent if there was a de pegging, but we don't view that as a likely scenario at all, actually. Okay. And just one other question. Just so Aranj is obviously quite a strong number one in Senegal. Do you have existing relationships already with them? And do you expect them to be a large part of your growth in Senegal? Or is it mainly from the, I guess, the third operator going forward? Yes. I mean 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. But we very much expect them to co locate with us. Particularly as four gs and soon to come five gs arise, we think that our network portfolio positioning, particularly in the big cities like Dakar, is going to be really helpful for that because it's a dense city. It's fairly difficult to build big towers in the downtown area. And so our position of having a lot of these sites on the top of buildings, which can have trilocation on, we think, will be very, very attractive for the other both two mobile operators with the onset of data networks. So yes. And Orange is already a customer of ours in DRC, so we do have good relationships with them. Great. Thank you. Thanks a lot. Our final question comes from Dilawar Farazi of Lumis State. Congratulations on the acquisition again. Just a couple of quick questions about the funding of the transaction. So obviously, you've got over $200,000,000 of cash on balance sheet. 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? And in terms of the net leverage as a result, sort of 3.55% based on LQA, is that about right? And is your leverage target still in line with the 3.5 to 4.5 times that you've guided in the past? Dilavra. 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, so still slightly below our target range. And our target range remains unchanged. It will still be between 3.5 to 4.5. Brilliant. Thanks a lot, guys, and congrats. That concludes the question and answer session for today. I would now like to hand back over to Kash Pangya 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 October, actually, October 1, for our Q3 trading update. Thank you. Bye bye.