All right. Everybody can go ahead and please take their seats. We're gonna go ahead and get started with our next session of the day. For those of you who don't know me, I'm Matt Niknam, North American Communications, Infrastructure Analyst here at Deutsche Bank. I'm very pleased to welcome back American Tower CFO Rod Smith. Rod, welcome back.
Yeah, thank you, Matt. It's great to be here.
Great to have you. There's always a lot to talk about with American Tower. But maybe just to start, you recently reported fourth quarter results. You gave an initial outlook for twenty-five. Maybe if you can share some of the key highlights from the outlook and the top priorities for AMT this year.
Yeah, that sounds great, so thank you, everyone, for joining. We did hold our earnings call a couple weeks ago, and we announced the outlook for this year. I'm sure you've all seen it. That outlook was largely in line with kind of the way we pre-positioned it, so we were certainly happy with that. You know, the highlights are we had the AFFO per share growth off of the adjusted prior year, excluding India, in the mid-fours or so. We also provided an algorithm that kinda highlights what the overall growth components are. The interesting thing there is it shows the core business performing in the upper single-digit range for AFFO per share growth. That is before you account for FX and interest rate headwinds.
In that area there of high single digits, I think we were at 8.5%. It's been pretty consistent the last couple years where the core business really drives that upper single-digit growth rate. And then FX has been fairly volatile. That's provided a headwind. And the example we showed for 2025, it accounts for about 2.7% headwind. And then we've got another 100 basis points, or so from FX refinancing headwind. So those are the two pieces that take us down from upper single-digit AFFO per share growth down to, kind of that mid-single-digit AFFO per share growth on an adjusted basis for India. And you know, what I would say about that is that we're happy with the position of our global portfolio and its ability to grow before you account for the FX headwind.
And in line with that, we are also looking to improve the quality of our earnings and have less exposure to FX so we can have more consistency, more predictability around that upper single-digit growth rate. That's kinda where we're headed. And you see us moving in that direction by taking strategic steps that we've talked about over the last couple of years, things like selling our India business, which had been fairly volatile. FX was one piece of that, but just the overall growth and customer non-pay issues and things like that. It was a drag on growth. We ended up selling that and paying down debt. By doing that, we were able to do two things. One, remove the volatility of India and also reduce our overall debt burden and reduce the amount of uncertainty around our interest rate charges.
We've also sold a couple of the smaller businesses like the Mexico fiber business. We exited Poland, and we just announced that we've entered into agreement to sell our fiber business down in South Africa. So that's all meant to improve the quality of our earnings, and at the same time kinda reduce some exposure to FX volatility so that we can be in a more predictable range around that upper single-digit growth, that core growth that we showed in that example. So we're pleased with the way we're executing on the priorities that we highlighted earlier, not only this year but in prior years, things like driving organic growth through the core business, strengthening the balance sheet, reducing exposure to floating rate, that we've got that down out of the low single digits. And that certainly helps us in terms of the balance sheet strength.
We were upgraded on a credit rating, viewpoint to BB B flat, which was really good. We've rotated our capital where we're investing more capital into developed markets, less capital into emerging markets, and overall, we've been investing, you know, less capital year over year. In twenty twenty-five, we're actually increasing our overall capital investments. With that said, that increase is really going in the direction of developed markets, and we're continuing to reduce capital investments across Africa and across Latin America.
Got it. One of the other interesting points I thought that came up on the call was you noted you recently appointed Bud Noel as your new COO, and you talked a little bit about incremental opportunities for business efficiency and margin expansion. What's been achieved so far, and what's incremental as we look forward?
Yeah, it's. I mean, we're very proud of the fact that we have been focusing on operational efficiency. That is one of the priorities we highlighted a couple years ago and have been diligently focusing on it. You've seen us reduce our SG&A in aggregate, for the last three years in a row. So we've been consistently stepping down that SG&A spending. And we expect to do that again in 2025. So our outlook has about $13 million of a reduction of SG&A in our 2025 plan. We did signal that with the addition of the position of Chief Operating Officer, and that role is being filled by Bud Noel, who was previously the EVP and oversaw our U.S. business. He's now overseeing our operational functions globally. So the leasing processing business, the field force, the network operation centers, those types of operational centers.
And the focus is gonna be on improving quality, improving efficiency, getting more of the operational activity done in a similar way, done with similar philosophies, and over time reducing the overall cost of the operations group globally. Now, we're not putting out targets, at least not yet. As Bud and his team kinda get into the details there, we are very confident they will find ways to improve service quality internally and for our customers across the globe and drive costs down. And once we have a firm review on that, we will reassess whether or not we put out targets.
Got it. Good. So you talked about maybe shifting the asset mix more towards developed markets in recent years. I think this year about 75% of unlevered AFFO is gonna come from developed markets. Are you content with the current mix, or do you see that 75-25 mix evolving even more over time?
I mean, I would say, you know, we're happy with our current positioning and getting to that 25%. We were at not too long ago more closer to a 50% number in that direction, right? So we've bent the curve quite a bit from some of the things that I just talked about, that we've done. With that said, we are continuing to prioritize investing in developed markets, and continuing to deprioritize investments in emerging markets. What that means by definition, if we continue on that path, which we will, we will continue to see that percentage of our unlevered AFFO from emerging markets get smaller. And so our strategic priorities would suggest that that's gonna get smaller, and that's where we expect it to go. So we've made a lot of progress. We're happy that we've gotten that number down to 25%.
That means there is less volatility in our earnings than there would have been if that number was still 35% or 45%. But given the priorities that we laid out and our focus on leaning into developed markets and let's say from a new capital investment standpoint away from emerging markets, then we will expect to see that number get smaller. With all that said, the local market local currency growth rates that we're seeing in some of the markets is pretty compelling and pretty interesting. Unfortunately, much of that is wiped out by the volatility around FX. That's been the challenge. So we do think that those markets could improve over time. We think that the investments that we have today, we could see extended return on invested capital if we see less volatility around FX.
We are leaning into those organizations to drive down costs and increase the gross growth and have improved contracts with customers so that we can monetize more activity. All that is happening so we think the outlook for those businesses is good, but the uncertainty around the macroeconomics and the FX is such that we don't wanna continue to invest at the levels that we have in the past, incrementally invest.
Got it. So if we think about the current asset mix, it sounds as though you've got some moving parts with FX this year, some debt refinance headwinds that have been lingering.
Yep.
Is it fair to assume then that on sort of a multi-year horizon basis, high single-digit growth is reasonable to assume with where the asset mix is today and with where leverage sits?
Yeah, I think it is. And again, I would bring you back to the example we had in the earnings presentation, which is when you look at the business as it sits today, you get up in that 8.5% growth. You know, very little of that is coming from the emerging market expansion, let's say. But then you're losing it; the FX kinda takes that away. So as we continue to lean into CoreSite, our U.S. business in Europe, and as that becomes a bigger piece, those businesses contribute to an upper single-digit growth rate, right? And if we have less volatility and exposure to FX, we should be in much better shape. And I'm not gonna predict where interest rates are gonna go in the future.
But I can say over time as we move out, the average rate on things that we're refinancing will come in at a higher level, right? And then the refinancing rate, to the extent that that's at a lower level in a year from now than it is today, that headwind will dissipate and be materially kinda in check. If those kinda things happen where FX volatility calms down a bit and we naturally kinda get through some of the refinancing headwinds as we refinance lower rate bonds with higher rate bonds, as that stuff dissipates, there's no reason to think we can't comfortably and consistently kinda get into that upper single-digit growth rate based on the portfolio that we have today.
There's a lot to unpack around cap allocation. Why don't we pivot there before we get into some of the regions?
Yeah.
So you've been busy. You've delevered this business down to around 5.1 turns at year-end. 97% of the debt now is fixed rate. You've got what looks like incremental cash EBITDA growth and cash flow generation. What's the approach to capital allocation and uses of excess cash, especially now that you're sort of getting back within that five-turn envelope?
Yeah, it's a great question. So we have done a lot to strengthen the balance sheet. We are at about 5.1 times leverage. Our stated range is three to five times, so we're pretty much right where we want to be in terms of getting to that five times leverage. We significantly reduced our exposure to floating rate debt. That was materially helped by the sale of the India business. 100% of the proceeds, virtually all the proceeds from that transaction went to pay down floating rate debt, which was helpful in that pursuit. We got upgraded from a credit rating perspective with a BBB flat. Our balance sheet is strong and it's well positioned.
Going forward, based on the growth rates that we see, you know, similar to kinda what we see in 2025, we'll begin to build free cash flow that we will have available to us. And, you know, the consistent capital allocation options are on the table. We've resumed dividend growth in 2025, so we're happy to be able to do that for our investors, back to that mid-single-digit growth rate on the dividend. Do expect that that will continue, of course, subject to our board approval, which happens every quarter. We've increased our capital investments from about $1.5 billion back up to about $1.7 billion. I think we were at $2 billion a couple years ago.
So there is potential room to continue to expand and increase our internal capital programs with that free cash flow, to the extent that we have opportunities, which I think we will, across the developed markets, including CoreSite, to put capital to work in a way that drives shareholder value. We can do that even in a bigger way than we have up until now. So that's certainly an option. Share buybacks is certainly something that we will be looking at over time. We have the flexibility to do that once we get down below five times, which will happen early in 2025 . So that is an option that is certainly available to us M& A potentially.
I mean, we will certainly be disciplined, but we do think that there will be some assets that will come up for sale in the developed markets where we will be prioritizing and looking at. We will be very disciplined, so we, you know, may or may not get seriously involved in any transaction there. But if we see an opportunity to deploy capital with the right risk profile and the ability to drive shareholder value over the long term, we'll be in a position where we can assess that credibly and make decisions there. So all those options are on the table. And if at the moment we don't see anything compelling, we can delever and we can continue to go down below five times and kinda build that debt capacity. You know, being in the upper fours is probably the comfort zone there.
So if you see us go well below that, it just means we're being patient and delevering is not a bad way to kinda store that free cash flow until a good compelling opportunity comes available. So patience will be key in the way that we allocate capital.
The dividend growth. So yes, you returned to growth. I think you, you bumped up the dividend by about 5% recently. Is this gonna be pegged to AFFO per share growth on a go-forward basis? Is there like an optimal payout ratio you see yourself getting to over time?
It's the easiest way to think about it is the likelihood of the dividend growing in line on average with the way our AFFO per share grows over time, is probably the right way to think about it. You know, the likelihood there is high. So we definitely will not be pegging dividend growth to AFFO growth on an annual basis. So you won't see the dividend growth kinda moving up and down, consistent with the way AFFO may move from time to time. We will be able to kinda monitor and manage that in a way that over time, if you see a certain average growth rate in AFFO over a three- or four-year period, chances are you'll see a similar type of level of growth in the dividend, on average.
We think that looks now, you know, mid-single-digit growth rate seems to make sense over time.
Got it. One theme that I've actually picked up today. We'll hear more from one of your peers later this afternoon, but U.S. towers seem like things are getting better. Seems like we're maybe well off the lows that we've heard about, you know, maybe in last year, years past. What are you seeing across the demand backdrop across the U.S. business? And maybe if you can give us some more color on what's baked into the outlook for 4.3% or better organic tenant billings growth this year?
Yeah, maybe I'll start with the amount of volume and applications that we're seeing through our services business. That's a pretty good indicator of what's happening out in the marketplace. And we see a strong level of applications coming in for 2025 for our services business. We, you know, we've got a pretty high level of services revenue baked in our outlook, which I'm sure you've all seen. That comes with an underpinning of expected volumes that is pretty much in line with what we saw in 2024. So pretty significant amount of applications and volume. On the services side, we do have a kind of a, in our expectation, a peak with the applications, kinda mid-year, third quarter with a little drifting down in the Q4.
Part of that is because the visibility that we have into the services pipeline, we have much more visibility earlier in the year and less visibility later. I think you could put it in the category of us being conservative because it's a little further away and there's less visibility. But we're seeing, through where we have higher visibility, the first two to three quarters, some pretty strong services activity coming in. And we'll see what happens at the end of the year. It could very well be that that activity stays strong and we see even a bump up in terms of the number of applications out in the fourth quarter.
On the other side of this, the spectrum here, when you think about our leasing revenue and the 4.3% organic tenant billings growth, that is underpinned by about $170 million of new leasing revenue that is coming in in 2025. That's what's driving that 4.3%. That we're seeing, you know, fairly consistent but accelerating contributions throughout the year. So in, I think, in 2024, that number averages right around $45 million a quarter. We're seeing that number probably a little bit lower than $40 million for Q1. And ramping up into the mid-forties by the time you get out to Q3 and Q4. With a higher number each quarter as you go out. So the highest number we see is out in Q4.
So on the leasing side, we're seeing that acceleration and kind of a ramp up right out through the end of Q4.
Got it. And as we think about maybe the construct there without getting into carrier specifics. Is the strength broad-based and are you seeing more sort of infill colos activity relative to maybe a more amendment-heavy activity that you may have seen earlier in the decade?
Yeah, it is definitely broad-based. So all the carriers are active. They all contribute into that new business number, just like they have for the last several years. It's kind of a strong broad-based demand that we see for the new leasing activity. I can't say that we've seen a noticeable shift yet in terms of the colocation and amendment activity. I mean, in the last couple years, just as an example, one of the carriers is primarily or completely colocation driven. That's gonna continue. One has a more of a balanced mix between colocation and amendment activity as they kinda work in their network plans. And that's likely to continue. And then a couple of them are very heavily weighted towards amendment revenue, more like the, you know, 70%-80% amendment revenue. That's likely to continue through 2025.
With that said, we are seeing and having discussions around increasing appetite for colocation, increasing need for colocations. You know, that may be measured in 2025 by, you know, hundreds of additional colocations. Maybe it gets up to a thousand or more. Not a material shift, but nevertheless, it's a shift. And it may be the beginning of the carriers turning to a more heavily weighted towards colocation or at least more heavily weighted than it has been in the past several years.
How should investors, as we think about the U.S. business, maybe on a more longer-term timeframe, are you still comfortable with that sort of five-ish% or mid-singles% growth range in what's now maybe a more mature U.S. wireless market?
Yeah. So the organic tenant billings growth, we put out an on average 5% organic tenant billings growth that really carried us from 2021 all the way up to 2027. So pretty good chunk of time. We certainly hit that for the first two years, 2021 and 2022. And we're pretty much on that when you average it out for the rest of the period. So we are still committed to the on average. That doesn't mean every single year will be 5%. You can have some below and some above. But on average, we still see us being pretty tight to that 5%. This year, we're gonna be in and around at or better than 4.3%. We still have three quarters of Sprint churn that we're working through in 2025.
So in order for the math to work, for us to be comfortable with an on-average 5% number, throughout that time period, then that suggests we expect a higher than 5 number for 2026 and 2027, which we do. The Sprint churn will dissipate. It's completely gone by the end of October. By October in 2025, we'll return to more normalized growth. We expect that in 2026 and 2027 to be north of 5%.
Got it. One last one on the U.S. Tower business before I pivot to CoreSite. Satellite coverage has been really topical. A lot of your customers are now maybe signing agreements with satellite partners. How do you frame the potential risk from satellite-based coverage to the business, and does it affect your business prospects in more rural markets, if at all?
It's not a risk. It doesn't affect us in any material way. We have investments in AST SpaceMobile, which is a satellite company. Some of our big customers are also customers of AST SpaceMobile, so we understand that business very well. The technology and the service is a very nice complement to terrestrial networks. It provides coverage in areas where the terrestrial networks just don't reach, so from that perspective, it is a value add to the terrestrial network. That's why the carriers like it. It's a very cost-effective way to extend their reach into more rural areas. But they're rural areas where towers don't exist, and the satellites, by definition, will never offer the capacity or the latency to really compete with the terrestrial networks in the core suburban areas where the population density is. That's not where it's meant to compete.
We don't see it competing there. We view it as just complementary. It's a nice added extension kind of the terrestrial networks.
Great. Let's pivot to CoreSite. That's been. It's an area where you got into the business about three years ago. I think performance, safe to say, has well exceeded initial expectations. So can you talk a little bit about the expectations for 2025? You had another record leasing year, it sounds like, in 2024. So what are the expectations for 2025? And maybe just update us on how the asset fits into the broader American Tower portfolio.
Yeah. So we bought CoreSite several years ago. We underwrote that transaction at about 6%-8% economic growth, and we viewed it as a high-quality, differentiated asset. We viewed it as an asset that had limited downside. We thought it would perform very well because of the high-quality nature of it, and then the added consideration was that it could unlock synergies between cloud on-ramp data center and, you know, data centers and tower properties where you could deploy edge compute facilities and tie those assets together and unlock revenue synergies for the combination, really, for the tower company and the data center company together. So far, that thesis is playing out really well for us, across all fronts. We. The asset has proven to be a high-quality, differentiated asset.
It's an interconnection-rich, network-dense set of properties where there's multiple cloud on-ramps at every one of the campuses. That is a very interesting set of assets, and the growth rates have been very good this year. We're moving into double-digit growth rates. We've had three years in a row of record-setting new business. That's given us leverage and pricing power so that we've been able to drive expansion in rates, expansion in average revenue per cap equivalent. You know, we're driving that up. Turn rates have been in check and kind of at the lower end of the range. Our mark-to-market cash renewals have been at the higher end of our range and even outside that range, up in the mid-singles edges from a historical, you know, 3%, so everything is going really, really well. We see that strong growth now continuing for several years.
And that double-digit growth is outpacing the original expectations we had when we underwrote it. You know, AI demand is developing. We are seeing customers that want more power, more space. We do believe that that's because of some of the AI components of their own businesses. But we still think we're at the very early stages of that. And we think that AI demand is gonna drive demand for our services and our facilities well into the future. And we are seeing the edge becoming more clear that it is something that is gonna be needed in the networks, the wireless networks, the telecom networks. The carriers talk about the need for edge computing, the benefits of edge computing, reducing the latency for 5G applications across the networks, reducing the backhaul costs as these applications become more bandwidth intense.
And then the real question is, will they deploy? How will they be deployed? Will there be neutrally hosted edge compute facilities that someone like American Tower can own and operate and have multiple carriers and multiple cloud companies all represented in that ecosystem? We believe that's where the edge could go. But we're still at the very beginning of really designing exactly what that looks like and figuring out the ecosystem and who from a telecom perspective is gonna be interested in joining a neutrally hosted network. But we do see the need for these facilities across the board. I think all the carriers talk about the need for them. It's just a matter of how will they be deployed? Who will they be deployed? What will the economic arrangements be? Will they be neutrally hosted or proprietary?
Got it.
In the outlook for 2025, you talked about data center CapEx that's up roughly 20% relative to a year ago. So I think it's a little over $600 million you're investing this year. Can you maybe give us some color on what's driving this and whether you ultimately envision expanding CoreSite into newer domestic or international markets?
Yeah. We've had a pretty consistent step up in capital spending in CoreSite. When we bought CoreSite, their average capital spending was around $200 million-$250 million a year. We're now up to $600 million. The trajectory there has been pretty consistent step ups. And the use of that capital is really centered all around ensuring that in the campuses we have across the country, that we have the capacity to meet the obligations of capacity that we've sold.
So the fact that we've had three years in a row of record-setting new business, those are signed new leases. Once we sign those leases, we have to then deliver. It takes about eighteen months to two years to actually deliver the capacity in those leasing arrangements. So and as we deliver the capacity, then we wanna replace that capacity so that we always have a couple years of available capacity to sell and to release. So as you see leasing go up, you also see CapEx going up 'cause we're replacing that capacity. The other interesting thing is in the construction projects that we have going on, which is basically us rebuilding the capacity that we sold.
We're amongst the highest levels we've ever been in terms of that new capacity that we're constructing being pre-leased, with that being well over 50%. So as we build out new capacity, more than half of that is already under contract and leased. So as fast as we can build it, it's being leased. That's what gives us the confidence around hitting the double-digit growth rates and keeping that going for a couple years 'cause we have had the record-setting new businesses. We're deploying capital to backfill that capacity. As we deploy the capital to backfill the capacity, we continue to lease it up at a very fast rate. So we'll continue to invest in that business as long as the environment, the backdrop stays as healthy as it is and the results are as strong as they are.
With that said, expanding outside of our campuses into new regions or internationally, I mean, we're really focused on the U.S., certainly at this point. We're really focused on expanding the campuses that we have. We've entered a few new, you know, markets. We did build and buy a facility down in Miami. That's a new market for us. So you may see us do incremental expansions like that in the U.S. marketplace, but not wholesale changes to kind of what CoreSite is, what it looks like, but if it makes sense to add a campus where we can get a cloud on-ramp and expand the reach of CoreSite in an incremental way that adds value across the platform, we can certainly do that. And we've done that on occasion.
to hit on there's one other piece of the developed market portfolio, Europe, which is the market you've scaled up in, I'd say, over the last several years with the Telefónica acquisition, Telxius acquisition. Can you give us an update on what you're seeing in the European market? And I guess more importantly, would you look to add more scale there inorganically, or are you primarily focused on newer builds in that market?
Yeah. So we've been in the European market for quite a while, you know, 12 or 15 years. And recently we bought the Telxius's portfolio, which is a set of assets that we bought from Telefónica, really centered in Germany and Spain. They have some assets now through Latin America that we acquired as well. But the bulk of that acquisition was really in Germany and Spain. That market is performing very well for us. So you know, the underpinnings there is we've got assets in really strong economies. We've got the vast majority of our revenues with counterparties that are very high quality, you know, economically strong counterparties. Like in our other markets, we have escalators that are tied to inflation rates. So particularly in Germany and Spain, our revenues increase in accordance with local inflation.
That helps offset any volatility in the FX rates that we see. And as importantly, the way we've contracted with Telefónica and others is that there is limited churn in that market as a result. So the churn that we're seeing in that market is around 1% or less, which is, you know, well below where it's been anywhere else in the world. And we expect that to continue based on the structure of that market and the way that our contracts are set up. And we are seeing increased contribution from activity-based growth from new business across the region. Still represents, you know, a low single-digit number, like a 3%, you know, percent number, but it's been moving up and it continues to move up. So the market is a really healthy, strong market for us.
We'll be organic tenant billings growth this year in and around 6%. It's been higher than that the last couple years, so Europe is a great market where we have a big footprint there and it grows faster than the U.S., and it's a high-quality market, so all that is good. We're building assets across our footprint, primarily with Telefónica and with Orange and across the markets. We'll continue to build assets in that market, and you know, when the time is right as things come up, we certainly will be inquisitive and looking there. There could be other markets that we wanna get into or that we get into depending on what the opportunities are, that potentially could be acquisition opportunities where we strengthen our position and scale in any given market.
Certainly when you look at France, we could benefit from a little bit more scale there. So we would be interested in that. With all that said, we like our footprint today. It performs very well. And with any consideration around M&A, we will be very disciplined. And we don't feel pressured at all to buy anything in Europe. So it's not the right portfolio, not the right terms and conditions, not the right counterparty. We don't need to do anything to have a really strong functional business in Europe. But we do like the performance of our assets. If we can keep that quality and make it a little bigger, we would try to do that. But again, we feel no pressure to do it at the risk of reducing the quality.
I wanna hit on LATAM and Africa as well. We think about LATAM maybe just to start. So the outlook for this year calls for another year of, call it, 2% organic tenant billings growth. M&A churn's still somewhat elevated in the mid-single digits. Can you help us think about how long this elevated M&A churn could last and ultimately what normalized growth could and should look like for the region?
Yeah. Sure. It's so the region of LATAM for the telecoms is going through consolidation in a number of markets. That's happened in Brazil. It's happening in a few other places, and we're watching that. That is driving an elevated level of churn, as you said. It's been like that for a couple years. We think that would likely continue for another two or three years anyway. You know, we do think that you'll see continued consolidation churn for a couple more years. We do have uncapped inflation-based escalators across the regions. The escalators that we're seeing are still in around 5%. We see 5% escalators, another 5% in churn, which gets you down to about zero, and then we're seeing 2% activity-based growth.
That activity-based growth is lower than it has been historically, lower than we'd like to see. So as these regions and the countries are moving through the consolidation churn, the only impact there is not just the churn. It actually slows down the new business activity as well while the carriers are busy, consolidating churn and consolidating churning. So we think that will continue for a couple more years where our Latin America business may be in a low single-digit kind of net new, organic tenant billings growth rate. Beyond that, we think it could come back to more normalized activity, you know, lower churn, higher levels of new business activity, which should be able to drive that region back up in the upper single-digit OTBG. That's kind of where we think.
And the components of that is if you get churned down to a couple of percentage points, right. You have 4%-5% inflation-based escalators. You know, you're looking at a 3% kind of net there. And then the new activity being 3% or 4% gets you in the upper single digit. That certainly should be possible.
And then maybe just to round this out with Africa, that's actually, I think, Africa plus Asia Pacific.
Yeah.
Japan's the strong region, 12% this year. Seems like maybe we're past consolidation churn.
Yep.
In that region, just wondering, as you think about some of the volatility around currency that's taken place over the last year plus, maybe the repivoting towards more developed markets with a broader portfolio, has that affected at all the way you think about your investments in Africa and Asia Pacific?
Yeah. So, we have a segment, Africa and Asia Pacific. Asia Pacific is very small. So it really is Africa when you look at that segment there. You know, Africa is a place where we consistently see strong activity-based growth across the region in local currency. Like, the activity levels, the demand for sites is. It's really been quite compelling. We have uncapped escalators tied to local inflation. So as inflation goes up, we see pretty high escalators across the region. And the carriers end up, you know, paying those higher rates kinda going forward. We did have higher levels of churn in the last few years, 5%-8% churn over the last couple of years. A lot of that was consolidation churn in various markets. And we are seeing that dissipate. It's getting behind us.
We've got churn down in the lower single digits now in the 3%-4% range and probably ticking lower than that as we go forward. So the basic backdrop of Africa looks really compelling from a wireless sector, a tower industry sector, you know, getting strong upper single- even double-digit organic tenant billings growth. All that is really, really good. The challenge that disrupts our ability to really be confident in consistently creating value is the FX and the FX volatility. We've seen pretty significant headwinds when it comes to foreign exchange across Ghana, across Nigeria, and a few of the other markets. That has real impacts on the overall returns and our ability to drive value for our shareholders. So with that said, we're being very cautious, and, you know, we have investments in Africa.
We do think there will be years where that Africa should be very accretive to our overall growth rates. The years when FX is muted, it'll be very accretive and very supportive of our overall growth rates. And then FX will continue to be volatile and unpredictable. I certainly can't predict where it'll go. All I can do is show you what's happened over the last 10 years. And if you look at that and say going out, you'll have continued volatility there for sure. Some years it'll add a lot of value and some years it may be challenging. Our focus is making sure that the challenging years, that we don't have such a exposure to Africa that it throws our entire earnings cycle kinda at risk and has too much of a negative impact.
And at the same time, when FX is muted and there's that local currency strong growth comes through, you know, those will certainly be good times and it'll have good impact. So our focus with Africa is we like the portfolio we have. We've invested in it. I think we're really good operators across the region. The carriers certainly appreciate what we offer for them. And they're leasing up the assets in a strong way. So our focus is driving as much organic growth through that portfolio as we can, improving contract terms where we can to strengthen our position to reduce our exposure to FX.
We'll do that whenever we can, if we can, driving organic growth and watching our cost structure and really making sure that we're operating that business as efficiently as we can. That includes reducing capital investments so that we can increase margins, leverage organic growth, and drive the overall margins up in that region. That's what we wanna focus on, and that means by definition we're not looking to invest incremental capital into new builds. We like what we have today, and we will see how it performs over the next several years. We will, you know, very specifically be watching the economies, the political backdrop across these regions, the FX, and, you know, as things sit today, that volatility is something we don't wanna increase exposure to.
We wanna keep it the size that it is, maybe even smaller as a % of the overall business so that, in the aggregate, we expand the quality of our earnings. And the way to do that is expand the exposure. We have to develop the markets to the world's highest quality economies, and by definition that means we're reducing exposure to the lower, you know, quality economies and the lower quality counterparties, and that would be Africa and Latin America.
It's a great place to end it. I think we're just about out of time.
Excellent. Thank you.
Yeah. Thank you, Matt. Appreciate it.
Thanks, everyone.