All right, if everyone can please go a head and take their seats, we're gonna go ahead and get started with our next session. For those of you who don't know me, I'm Matt Niknam , Comm Infrastructure Analyst here at Deutsche Bank. We are very pleased to welcome back American Tower CFO, Rod Smith . Rod Smith, welcome back.
Yeah, thank you, Matt Niknam. Good morning, everyone. Thanks for being here.
Great to have you. Obviously, lots to talk about. Maybe just to start, you recently reported Q4 results. You gave an outlook for 2024. Maybe we can touch on some of the key highlights from the outlook and the top priorities for American Tower this year.
Yeah, that, I mean, that sounds good. I will, maybe start here with the, with the top priorities. And as we look through, you know, into 2024, we're really focused on driving organic growth on our existing asset base. That is, is critical to us. And as you've seen in the last couple of years, we're very focused on cost management, controlling our operating costs, both direct operating costs as well as SG&A around the world, and that leads to expanded margins. So kind of those fundamentals are critical to us in terms of driving organic growth on existing towers, managing our expenses, and expanding margins. And that's working, and you've seen that a couple of years, and we're continuing, to focus on that.
And then also, having that be the catalyst to drive AFFO growth and have that expanding from where it was in 2023. So we're, you know, up in the mid-single-digit AFFO per share growth going into 2024 is kind of the outlook. And then when you hit on capital allocation, where, you know, being very disciplined on capital allocation and really prioritizing deleveraging, strengthening our balance sheet along the way. One of the highlights there that I would raise is that our capital that we're investing across the globe is coming down a little bit from where it was in 2023. And we're putting that capital back into the balance sheet, into delevering, getting back down to 5x and strengthening that balance sheet.
At the same time, we're increasing investments in some of our developed markets, like in the U.S., through CoreSite, in our U.S. tower business and in Europe. So there is a little shift in capital allocation around the globe, prioritizing developed markets in this environment, but really focused on driving balance sheet strength. And the reason for those priorities is that they make good sense. They're fundamental and they're important. But we do believe that that will lead us to future growth, that having a strong balance sheet, a well-executed and run business model globally, will drive our equity share price to the highest level possible.
The combination of a high equity and a strong balance sheet is what will make us competitive and successful when and if M&A comes up in the next few years, which we think there will be some interesting catalyst to growth at that point. But in the near- term, it's all about the fundamentals. It's all about balance sheet strength. It's all about making sure we're taking this time to really focus on the internal operations of the business. Got it.
You entered the year with a new CEO, familiar face-
Yeah.
Steve Vondran. I'm just curious, is there any, maybe noticeable difference or evolution of strategy with Steve Vondran recently taking over as CEO?
Yeah, I would say that, there's two things I would say. One is Steve Vondran did lay out his strategic priorities, pretty much in line with what I just said, and I don't see that as a shift. I don't think Steve Vondran sees that as a shift from where we had been. Now, with that said, the strategies evolve and there are nuances year- over- year. There certainly are. But the idea of driving organic growth, being really disciplined with capital allocation, balance sheet strength, those are all things that Tom Bartlett and Jim Taiclet before him prioritized as well. In different times, when interest rates were lower, there were more M&A. In this rising interest rate and interest rate uncertainty and kind of the dislocation between private and public equity prices, you know, M&A hasn't been as active.
So I wouldn't say that the things that we're doing today that might be different than we were doing a few years ago, it's not a strategy shift. It really is just a good management team reacting to the current environment. But, you know, I'd also just kind of highlight again that the priorities of the company and Steve Vondran's priorities as a new CEO is driving organic growth on the assets we have, making sure we operate this business as well as we can, which means controlling costs and driving margins up. And capital allocation is so important in this business and making sure that we're getting the right returns, and we're investing our capital in the right place to increase the probability of driving long-term value for shareholders.
He's hyper-focused on that, and of course, balance sheet strength is a big part of that.
So maybe it's a good segue, because, AMT obviously has been very active, tilting its asset mix towards more developed markets in recent years. You have acquisitions in the U.S., CoreSite, Telxius portfolio in Europe, and you've actually sold some assets in more emerging markets. And I think India is probably the big one that stands out. Can you talk about the broader decision to pivot the portfolio mix in recent years? And then, you know, are you content with the current mix, or is there more room to recalibrate the asset mix?
Yeah, it's a great question, and again, I would, I would highlight that, that what you've seen is not a major strategy shift. What it is, it's just a continuation of American Tower's goal to be a very, high-quality, you know, set of assets globally that drive shareholder value. Now, candidly, there was a time when we were doing more acquisitions in emerging markets. That's because that's where the assets were available, with the right, you know, terms for us. And then, in the last couple of years, we saw a few real interesting portfolios, in the Telxius transaction in Europe and in CoreSite. And we also picked up the, the InSite, assets in the U.S.
You put those three together, it was $25 billion invested in the U.S. and Europe, the highest quality markets there are on the planet, and, and we were happy to do that. It doesn't mean that we're shifting, you know, completely away from emerging markets. It's that we have a, a desire to be a high quality set of assets, and we had the opportunity to bring in some really good assets. But, and when I say assets, I wanna make sure this is really clear. It's not about just the steel, and concrete, it's about the contracts. It's about who the, the counterparty is, and we were really pleased with the contract terms and conditions that we were able to negotiate with Telefónica, on a big set of assets in really key markets.
We had been looking for that deal for many years in Europe, and we just couldn't find it. It wasn't available. When it came available, we executed on it, and we're seeing very good results year-over-year from that now in Europe. And Europe has now become not only a much bigger part of our business, it's a highly developed, high quality cash flow generator for us, but it has phenomenal growth in a very well-developed market. You know, so that's been critical, but that's a function of the terms and conditions, and we got those terms and conditions based on our patience and discipline, and waiting and watching the market.
So with the current asset mix that you have, how should investors think about what long-term AFFO per share growth could look like for AMT?
Yeah, it's a great question. There was a time when we were, you know, highlighting double-digit AFFO per share growth. There was a time when we were delivering double-digit AFFO per share growth. In this current environment, the way we look out at AFFO per share, we think the growth algorithm is really well intact for us. It may not reach double- digits in the next couple of years. It certainly isn't this year, and it didn't last year with the rotation and interest rates and a few collections challenges we have in India, some FX headwinds. Those things have been burdensome for us for a few years.
But, you know, we see upper single- digit growth in AFFO per share coming from this business, even with a higher percentage of the business being from high quality, you know, markets, and with CoreSite and Telxius kind of added in, into the mix there. We continue to see 5% organic growth in the U.S. on the tower side, out through 2027. You know, we're well on track for that and have been for the last several years. We see Europe kind of coming in with growth rates above that, and again, in a very stable market. So that's accretive to the overall growth rates. And then we have CoreSite in the mix, which is upper single- digit growth in terms of economic growth, revenue, a-d it kind of comes right down into the bottom line.
We do see a pathway for that to continue to accelerate up. That's based on the investments that you've seen us make in the last several years. One thing about the data center business is the revenue and earnings growth that you get off of investments can be a couple of years delayed, unlike in the towers, where it's a little bit quicker. So you've seen our capital investments in CoreSite go up in the last couple of years. That's a really good indicator that we're gonna see higher levels of growth in the next couple of years from CoreSite.
So you look at all that, and then you say the international, the emerging market part of our business, we still expect it to grow a few hundred basis points, 200 basis points-300 basis points higher than the U.S., and that assumes that FX kind of gets in check in certain places, which I'm sure it will here and there. You put all that together, and you've got that upper single-digit revenue growth at 6%+. You drop down into gross margin, EBITDA, you can get that up into the 7%, you know, 7% range. If we, you know, if we can manage the cash taxes, and depending on the interest rate environment, if that stays steadier or certainly declines into a tailwind, you know, then you can drive even higher levels of AFFO and AFFO per share growth.
So the algorithm is there, and I think we have a really nice portfolio. But the key to our portfolio is that we've got multiple avenues to invest in, depending on what we see on the ground. We've got the ability to invest in U.S. tower. We have the ability to invest in Europe and build towers for our carriers within the context of our current businesses, to leverage, you know, that in a way that's exciting. We have CoreSite, which is a great business in the U.S., that we can continue to grow and see really good results. And then when the time is right, investing in emerging markets, we have a portfolio there as well.
So we've got a lot of different levers to pull, and you may see us shift capital allocation around to different places at different times as we try to deploy that capital into the best environment available.
It's an excellent segue to the next question, because I wanted to dig into capital allocation. You've actually been very actively seeking to get leverage back, sort of sub-5x turns. I think you ended the year at 5.2x, so almost there. You've also, I think, done a lot to reduce your exposure to floating rate debt.
Yep.
Can you frame your approach to cap allocation and potential uses of cash once you get sub five turns?
Yeah, absolutely. We are, you know, honing in on that 5x leverage, and, you know, our stated range is 3x-5x. That really is a self-imposed, you know, ban there for us, but it is important. We look to get down to that 5x this year, and we do sort of see that as an important milestone, just to get back within our stated range. And then that gives us more financial flexibility, right? We don't see a compelling need to go well below 5x if, if that's not the best thing for our shareholders, over time. So then once you get back down into the 5x range, our approach to capital allocation is very consistent with, with how it's been and what it's been for, for many years.
You know, first off, we, you know, we're, we're a real estate investment trust. We provide a dividend. That's important to our investors. It's important to us, so we fund that, we fund that first. The dividend is a function of, of, of pre-tax, you know, REIT income. So as that grows, the dividend will grow along with it. So funding the dividend is, is priority number one. Then we have really compelling ways to invest across the globe, again, in different geographies, under different asset classes, with the data centers and the towers, but different types of markets and with different carriers, depending on the time.
So we typically can invest, you know, $1.5 billion-$2 billion in CapEx every year, and that capital comes at very high day one NOI yields and overall returns, because we have infrastructure and businesses around the globe that we can put capital into, which is in a very efficient use of capital and gives us some of the highest returns possible. So we certainly have that avenue. But with that said, with the changes in cost of capital globally and interest rates and, you know, changes certainly on the market, we would always be looking at acquisitions, share buybacks, and potentially even delevering a bit more. But they would all kind of compete, all of those potential uses would compete with one another at any day of the week.
If buying back our shares was the right way to go, we could do that, you know, when we're down below 5x. If we find compelling M&A opportunities in the right geography, that gives us what we're looking for in terms of quality of earnings and stability of earnings and some of those things at the right price, with the right terms, we could be back in to an M&A cycle again. We don't see that. We didn't see it in 2023. I don't really see that in 2024 going forward. It doesn't mean we don't look at things that you, that you all may hear could be out there, 'cause we do, but we're very disciplined. And in the near- term, our focus is on delevering the balance sheet.
So we, you know, we will always be balancing our internal build programs with M&A, with delevering, with buying back shares, and those sorts of items. They're all on the table.
Got it o kay. A couple of things I just want to follow up on there. So first, on M&A, it sounds as though, you know, maybe there's still a wider gap between buyer and seller expectations. That's certainly been what we heard at, on day one of the conference.
Yeah.
I'm just curious to get your take in terms of what you're seeing in that landscape.
Yeah, I think that, I think that's right. You know, if you look back in the last many years, 5+, there's a lot of appetite to invest in infrastructure assets, in tower assets, data centers, including fiber. With more buyers and a limited number of deals available, it drives the prices up, and it can even kind of drive the terms and conditions more into the hands of the sellers. And we saw that, we understand how these businesses work and how to create value. So we, you know, we're very disciplined there. With the change in rates that we saw over the last couple years, I think the expectation was, which I shared, which was, you know, maybe M&A would slow down.
There might be a cooling off of prices, a little bit more rational approach to the amount of leverage and the pricing that people might be willing to pay, a little bit more discipline around terms and conditions. And I think we began to see some of that coming into the market, which was good. I think directionally, that's important and remains important. But we're not quite, you know, there in terms of where I would have expected the market to be. It doesn't mean we won't get there in the next couple of years, and that's what we'll be watching for. So, you know, the key here for us in the M&A cycle is, we've got a really big portfolio. We've got a really experienced management team that knows how to look for deals.
I do think the carriers have in the past and will continue to, and maybe even more in the future, prioritize who owns their assets and of these long-term owners, professional operators, that they can partner with for the long- term. That has been important to certain carriers. I think it'll be more important to more carriers as we go forward, and that certainly plays right into our our strength. So we could be active in the M&A in a couple of years, let's say, you know, in the next few years, when you get out beyond 2024.
But we'll continue to be disciplined, and I hope to see more price, you know, kind of price sensitivity on the side of the buyers and more, you know, awareness of terms and conditions and how that impacts value creation over the long- term.
Any specific markets with maybe healthier underlying dynamics? Obviously, we know you, you're sort of out of India, but Europe, Africa, LATAM, are there any regions where maybe you see additional room for further scale?
Yeah, it's a great question. So we, you know, we are exiting India. We have announced a deal to sell 100% of that business. I would also highlight, we, you know, we announced the sale of our fiber business down in Mexico. We also exited Poland. So, you know, that to me falls under the umbrella of just the management team being able to actively manage the portfolio, being willing to look at the portfolio throughout the year and year after year, and do more of what's working well and stop doing what's not working. So I think that's a good sign longer term. When I think about, you know, growth going forward, I think that Europe has a lot of potential.
Not only does it have a lot of potential, in terms of assets that could come to market, it has, counterparties there that are very strong. You know, they're high quality economies, which is very interesting to us. It produces the highest quality cash flows, that we see outside of, the United States. So that's a place that we'll continue to keep our eye on, certainly. We have opportunities to continue to invest in CoreSite, incrementally, not radical, different, you know, approach than what we're currently doing. But you've seen us increase the capital investments in that business from $200 million a year to more than $400 million a year. That's based on the strong demand, the strong pricing, the strong returns, and EBITDA and AFFO growth that we're seeing there. So it's really working, very well.
You know, putting money, more money into just the U.S. business is not a bad thing, and I think there could be opportunities there. Exactly what that, you know, means, not quite sure at the moment, but to the extent that there are small, medium-sized tuck-ins there, we certainly would be open to that. Building towers into a 5G cycle, when densification becomes important, we're certainly open to doing that. When you look internationally, we have a great international portfolio throughout the emerging markets. Not all of our markets are places we wanna put more money in today because of some of the inherent risks that can ebb and flow. Risks around the economic, you know, situation within a country, the FX and currency volatility that we may see, and even some levels of churn that end up happening.
So we can be very selective. I think Brazil is a really good place, where they've kind of turned a corner, and I think that could be a place where adding additional, towers into our existing business there could be really, you know, interesting. And there could certainly be other places to do that as well. In a place like Kenya is, you know, going very, well for us, and even, in a place like Uganda. So we'll, we'll be selective. We talk about our business as regional businesses, but we manage them as country-level businesses. And just because we, you know, we may, you know, look to sell in India, doesn't mean that we may not continue to build a few towers in a place like the Philippines, which we're doing.
The dividend, I wanna hit on, too. I know we've asked a lot about cap allocation, but I think it's important just for the benefit of those on the webcast and here in the room. You've got relatively flattish growth in dividend per share this year. How should investors think about the rate of forward growth? And is this pegged to AFFO per share growth, or is there an optimal sort of payout ratio you see AMT getting to over time?
Yeah, it's interesting. It's a great question. We've had a dividend since 2012, so a long-standing dividend. We've had, you know, pretty compelling growth in that dividend throughout that whole time period. The last few years, you've seen that growth begin to step down. That really is a function of our business just getting much bigger and the rate of REIT taxable income, you know, declining in terms of the rate of growth. So the key point there would be that our dividend is really subject to the REIT rules, and we dividend out, you have to dividend about 90% of your REIT taxable income. We choose to, and we target dividending out 100% of REIT taxable income.
We just think that's more efficient for the shareholders and, when you put it up against, cash taxes and, and other things. So that really is the driving factor. If pre-tax REIT income is growing, our dividend will grow. If pre-tax REIT income is not growing, then our dividend, you know, may not grow. We expect pre-tax REIT income to grow. And the easiest way to kind of think about that, 'cause when you get into a company's tax books and records, they can get fairly complicated. We look out over time and say, REIT taxable income is likely to grow in line with AFFO and AFFO per share growth.
Now, it doesn't mean that every year, that the growth rates of those two metrics will be the same, but if you look over a number of years, are they likely to be very similar? They are t hat's our view. So that means when you look over a number of years, the average REIT, or the average dividend growth rate is probably gonna be somewhere in the ZIP code of the AFFO growth rates. There are small things management can do to kind of manage the trajectory, make it smoother, more predictable for, for investors, and we will, do that. But if our AFFO is growing, on average over a number of years, then that means our pre-tax REIT income is growing in a similar way, and our dividend should be growing in that.
With all that said, our dividend is subject to board approval. We look at that every quarter and every year. You know, so we, we haven't done that beyond, beyond Q1 of this year. So every quarter, it's, you know, we go to the board and present that, and they approve it.
Great. Let's jump into U.S., towers, and maybe we can start with just broader demand backdrop. See if you can talk about what you're seeing across the three nationals in the U.S. as well as Dish, and what's baked into the outlook for $180 million-$190 million in new leasing this year.
Yeah, so we see a compelling amount of activity across the board with all the carriers, the three, you know, legacy carriers, as well as, as well as with Dish, and they all contribute to our new business expectations of that $180 million-$190 million of new revenue. And, and we see, you know, we see activity from all of them. And that new business level, you know, puts us right in that longer-term target that we have of that roughly 5% on average. So for 2024, we're projecting 4.7%, organic tenant billings growth in the U.S.
Last year, we had 5.3%, so you average those out, we're right on the 5%, which is where we expect that kind of a trajectory to continue going out to 2027. And that includes the impacts from Sprint churn. Without the impacts of Sprint churn, we would be up to 6%. So as we get out, you know, beyond 2025, that Sprint churn goes away, we could be up, you know, in the higher ends of that sort of range because the Sprint churn will be working behind us. So we see a compelling level of activity. If you look at just what the carriers themselves say, that they will invest in the networks in 2024, that number is still north of $30 billion. It's up in the $32 billion-$35 billion range.
That is a very healthy amount of spending, not just, you know, on its own, but in the context of history. You know, it's a little bit lower than the spending that was in the year before, where they got up to $40 billion or so. That was really a function of all the carriers deploying 5G kind of all at once and getting spectrum, new spectrum deployed, that they all got all at once. So there was kind of an initial higher than expected, upward kind of trajectory to that CapEx. And now it's quite frankly, it's right in the range where we would have originally expected it, in between $30 billion-$35 billion.
And we expect going forward, that it probably is gonna be in that range, you know, for several years as they continue to invest in 4G, as well as continue to roll out and build out 5G. So that paints a very compelling backdrop over many years in terms of good carrier investments in 5G, which will keep us in that roughly 5% average organic tenant billings growth. So the U.S. looks really good for us, and all the carriers are participating in that activity.
It's interesting. Your services outlook implies, I think you've guided to $17 million improvements in services contribution this year versus last. A little bit different from what we've seen maybe from some of your peers, public peers. Can you talk a little bit about what's baked into that outlook? Because I think it raised maybe some eyebrows, some question marks, just considering, I think, overall, you know, softer activity that we've heard on, calls from some peers.
Yeah.
Maybe we could just walk through what's driving that expectation for an uplift this year, and when you anticipate this to drive maybe an uptick in incremental leasing activity?
Yeah, it's a good question. I would remind everyone that our leasing revenue, much of that is underpinned with what we refer to as holistic MLAs or holistic contracts. That means many of our carriers, not all of them, but many of them, are under contract over multiple years for a certain level of activity. Whether they use it or not, they pay for that. I think that helps bring some stability to the leasing line, but it also brings some stability to the activity line. The activity line is what is more closely correlated to our services revenue. So you know, where we came up with the services guide is based on our expectation of activity. It's based on what the carriers have told us they wanna get done this year.
It's under the context of what they wanna do in the context of the MLA rights that they are paying for in the year. So there's a certain amount of activity they want to do, you know, to make sure they get full advantage of those holistic agreements. Much of the services activity is projections from our teams on the ground in the field, and we are expecting a ramp-up later in the year. There was a slowdown last year. Carriers have new budgets approved. They're coming back in and doing some work. We're seeing an uptick in activity level, you know, volumes and applications being submitted to us.
We expect that to continue out through the year, and we expect Q3 and Q4 from a services and activity level to be higher than in Q1 and Q2, as people ramp- up their activity on our sites, right? I can't speak to other people's sites and the way their revenue contracts work, but we, you know, we are seeing and expecting an uptick in activity from the U.S. carriers. And in the, you know, the other thing that I will hit here is that in terms of these holistic agreements, we've announced in the past that we, you know, have a holistic agreement with Dish. And what we have in our leasing revenue guidance is the minimum contracted revenue with them.
So not based on what they actually deploy or what they do, which I think they are, actually are in, you know, in a mode now where they're, where they're active on our sites. But our leasing revenue is contracted, you know, as a, as a, fixed fee, kind of incremental increases, and the minimum is the only thing that's in our 5%, you know, growth rate. So it's really delinked from any short-term changes in activity level from them. They've got a contract where they kind of pay for rights as we go. And, and today, the Dish revenues sit at around a 1% of our total global revenues and maybe about 2% of our, of our U.S. revenues.
Got it. Let's hit on data center. So I think we're now just over two years since you acquired CoreSite. I think it's safe to say performance has exceeded expectations. Can you talk maybe more broadly around how the asset fits into the American Tower portfolio?
Yeah, absolutely. So, you know, we are very pleased with the CoreSite acquisition. It is a high quality, you know, very differentiated set of assets that we, that we bought there. And simply put, the thing that makes CoreSite special is the ecosystem that happens within the campuses. When you think about this business, it really is just spread across 8 or now 9, you know, different geographies in their campus space. So we've got, you know, 28, 29 kind of buildings across 8 or 9 campus locations. And all these different buildings are tethered together in the campus environment. What makes that environment really compelling...
In what drives, let's say, above average, you know, economic results, is that everyone is interconnected together, and they're all, you know, they all have access to multiple cloud on-ramps in these facilities. So these, these centers are built around multiple cloud on-ramps, then we attract multiple network providers into each of these facilities. And then with those two pieces, it, it's able to attract the highest quality, corporates to use these facilities, and then those high quality corporates begin to interconnect with each other, and into the networks and into the cloud on-ramps. And that makes the environment much stickier. It gives us, the ability to price in a certain way. That's why we've been seeing our churn rates a little bit lower, you know, on the, on the spectrum.
We've seen our interconnection growth rates higher in terms of being up in the upper single digits, you know, area. And much of that interconnection growth is existing customers doing more interconnections, which means our facilities are becoming more important to them over time, and that reduces the churn rate over the long- term. It reduces the pressure on mark-to-market cash adjustments when leases come up for renewal. So all the metrics look really good. We're seeing upper- single- digit growth rates there, and I do think there's room, even on the upside from there, based on the capital that we've deployed and record levels of new business that we've signed, in the last couple of years, which I think everyone recalls us talking about. You know, we had two years back-to-back of kind of record-setting, new business.
We're now deploying that capital and building out that capacity, getting those sales orders online and activated. M uch of them have not yet made their way into our financial results. So that will start bleeding in over the next couple of years, and I think you'll see a nice impact to our overall growth. So that is really good. The other thing that is just as important as us running this business really well and getting the most out of the investment we made, is what does it mean to our tower portfolio? And how can we take the data center portfolio and the tower portfolio and bring them together to create even additional value that might be available for someone like American Tower, that's not available to a standalone tower company or a standalone data center company.
That's where we do see, you know, the cloud companies wanting more and more cloud on-ramps further distributed throughout the U.S. You know, whether you call it edge compute or, or whatever your term of art may be, you know, we have direct discussions with cloud carriers, and they say, "We want more cloud on-ramps. We want them further distributed. We want our customers, our enterprise customers, to be able to access the cloud closer to their premises." So that's, that's important, point number one. We also know that, the telecoms want compute power and cloud on-ramps closer to their end users, so that they can get the most out of 5G and 6G technology and have higher speeds, lower latency, and reduced transport costs, quite frankly.
You know, so you have this push and the pull from the cloud players and the network guys, not just wireless networks, but landline networks as well. And that's what brings in the concept of bringing these cloud on-ramps with compute power and putting them together. And many people refer to that as edge computing. We believe in that. We think it's coming. And with AI, you know, that probably plays right into it as well, having AI access points more distributed throughout the U.S. and being able to touch into these networks and these big enterprises. We think there's a compelling opportunity for us to potentially site these cloud on-ramps on our tower sites.
Then they would be very well located for our very large carrier customers that have tens of millions, hundreds of millions, really, collectively, of subscribers. So it really feels like it could be a compelling business model to bring cloud on-ramps and site them at tower sites and offer them up not only to wireless carriers, but also to enterprise customers within those geographical areas and landline network companies as well. So when you think about us, you know, and the potential for edge computing on a tower site, think well beyond just wireless carriers benefiting from that. It's really gonna be potentially landline network companies as well as enterprise and cloud companies all, you know, running and operating their businesses in a location that may be very close or connected to a tower site.
In the time we have, let's maybe hit on some of the international markets as well. Maybe let's start with Europe. So you've given an outlook, 5%-6% growth this year. I think it implies a little bit of a step up in new leasing relative to some moderating CPI-linked escalators. Can you talk a little bit about what's driving that uptick in activity in Europe?
Yeah, we are seeing a modest up increase in activity-based revenue, you know, in Europe, getting up to, you know, up to 3% or so in terms of gross activity. Last year, that was more around 2%, so we are seeing a step up there. And we're just seeing more activity. We're seeing the carriers deploy 5G networks, so you know, that we expect that this is a good sign kind of going forward. We also have Drillisch Online that is beginning to contribute into those growth rates, but certainly in Germany. And there is more room for upside there in terms of them building out their network. So I would kind of look at Europe and say, there's a couple of things.
It's the gross growth is important, and that's moving up, and we like that trajectory. It is activity-based, not just from the existing carriers deploying 5G, but also Drillisch Online embarking on building a network in Germany. We are seeing a slight tick down in revenue that is coming from inflation-based escalators. But, you know, the good news there is it's a high quality set of countries that we're in, and our revenues escalate based on inflation, so we're kind of fully protected from that inflationary environment there, which is really good, at least in Germany and Spain. France, we have 2% escalators, but it's a much smaller business for us.
And then the final piece is, because of the way the contracts with Telxius are structured, we have clear visibility to a pretty low churn number in that region for many years to come. You know, so where in other regions, we, we see higher levels of churn, we see consolidation churn and those sorts of things, that's not gonna affect us in Europe at this point going forward, 'cause there's so much of that revenue is Telefónica, and we've got long-term partnership with Telefónica that, that doesn't allow for any kind of material churn. So, you know, you keep that churn rate in the 1% range there with, kind of a growing, you know, new business number with some escalators tied right to inflation. It's a good backdrop for solid mid-single or better kind of growth rates over multiple years.
That'd be a good segue to LATAM, where I think you've got it to 2% organic billings growth, stable new leasing, softer CPI-linked escalators, and churn that's maybe a little bit more elevated, tied to consolidation. The question there is mainly around how long, based on the visibility you have, how long the elevated level of churn lasts and what normalized growth should look like once we get past that?
Yeah, it's a, it's a good question. You know, we have had higher levels of churn in that market than, than we would like to see. And, and the, the churn issue that we're dealing with today, you know, most notably is the Oi churn down in Brazil. That, quite frankly, is probably gonna last a couple more years. So 2 years-3 more years of, let's say, low- single- digit, or on the lower- end of single- digit growth, may not be out of the realm of possibility. And a lot of that is gonna be the headwinds of that Oi churn that we need to work through, in Brazil. We worked through some churn in terms of Nextel down in, Brazil, we've worked through some Telefónica churn, and now we'll get through the Oi churn.
Once that happens, you know, and churn kinda moderates back down into that, you know, 1%-2% range, then we think growth can kind of accelerate from the low- single- digits, you know, maybe back up in the mid- single- digits. But, you know, candidly, it's probably a few years away, for that region to get through that Oi churn and get through some other kind of carrier difficulties that we're seeing that might be holding even the gross growth down a little bit at the moment. But I would point to Latin America, and particularly Mexico and Brazil, and over the long term, we've been in those markets for decades.
They've been great markets for us, and they're going through a little consolidation churn, some headwinds, but, you know, we feel really good about the long-term nature there. And Brazil is in a really good spot, bringing three carriers to the forefront. So they've gotten through some necessary consolidation churn, and now they're building out 5G networks. So I think we could get back to some really good times in Brazil.
And last but not least, Africa, your fastest growing region this year. I think you've got it to 11%-12% growth. Just general expectations there, and are we past the bulk of consolidation churn in that region?
Yeah, it's a great question. We're seeing very compelling top line growth rates in local currency, so seven, you know, up at north of 10%- 11% now. It's been kind of double- digits for a little bit. That really highlights the amount of activity that you see happening across Africa. It's really compelling there. We have had some consolidation churn in different markets. Churn is lower in 2024 than it was in 2023, and I do think we have an opportunity to get past the consolidation churn that's happening now, maybe a little sooner than what you see in, you know, in Latin America. So I would look for a steady kind of decline in churn over the next few years.
We're working through some, you know, churn with Cell C down in South Africa and a few other things there, Tigo over in Ghana and a few things like that. So we'll get through that, but the gross level of activity across the region looks really good. Throughout the market, we have protection either in CPI-linked escalators in local currency, or we have portions of our revenue pegged to the U.S. $. Either way, both of those help us, you know, protect ourselves and our investors from the currency fluctuations. But with that said, the other headwind in Africa has been currency fluctuations. It's been significant the last couple of years.
We do look forward to a time when there isn't as much headwind, but there's still the activity-based growth, and Africa could be a compelling, you know, growth contributor for us in years to come.
Great. I think we're just out of time. Rod Smith, thank you very much.
You're welcome. Thank you, Matt Niknam. Thanks, everyone.