Good afternoon, everyone. Thanks for joining us for the last panel of the day at the Wells Fargo TMT Summit. Eric Luebchow covers communications infrastructure at Wells Fargo, and really pleased to be joined by Colby Synesael, the EVP of communications at IHS. Thanks for joining us.
Thanks for having me.
So Colby, maybe you could talk a little bit about your role at IHS and give, like, the people in the room here and on the webcast, a brief overview of the company for those who are not as familiar.
Sure. My name's Colby Synesael, EVP of Communications at IHS. I joined in March 2022 after being a former equity research analyst, like my friend here. I am responsible for our group communications, IR, ESG reporting, group commercial, and group M&A. So my areas are fairly broad. In terms of IHS, IHS IPOed in October 2021. We are an emerging markets-focused tower company. We operate in 11 different countries across the globe. Seven of those are in Africa, three of those are in LATAM, Brazil being our largest market. We're actually the fourth largest provider, tower operator in Brazil, and we're also in Kuwait.
Just to give a sense of the company, we are this year guiding to about $2.1 billion in revenue and about $1.1 billion in EBITDA. The company is growing organically this year. I think we're guiding to about 33% or 34%. A lot of that is tied to our contract structures. We have FX resets, so as the currencies in the countries to which we operate depreciate, which this year there's been significant devaluation, we see that benefiting in the form of FX resets, which we include in our organic revenue growth. So hopefully that gives you a little bit of sense of the company. We're about 2,900 employees, headquartered in London, with back offices in Dubai as well as in New York.
Perfect. And maybe we'll start off kind of at a higher level, you know, in terms of underlying tenant demand in a lot of your key geographies, such as Nigeria. And, you know, perhaps how that differs from some of the more mature tower markets that, many of us are familiar with, like the U.S. So what you really see in terms of colocation versus amendment demand, and then also additional build-to-suit opportunities into your markets. We don't see too many of those anymore in the U.S. market, so that might be a good way to start.
Okay, great. So I think the first thing I would encourage people to think about is that we really did set this company up from a structural perspective to look and feel a lot like the developed market tower operators that everybody's familiar with, the American Towers, the Crown Castles, the SBAs. So we are going to the, you know, top two or three largest MNOs in any of the countries to which we operate in, which are typically not necessarily always investment grade, but high quality credit customers. We're signing 10-year contracts with them. They have annualized escalators built into those. We charge for things like amendments, so very much what you would expect to see in terms of the structure.
The big difference, though, is that we are much more growthy, and that's really a function of two things. One is just the underlying demographics in the markets to which we operate. So first up, we have very high population growth in a lot of the countries to which we operate. Nigeria, which is our largest market, the country is growing a population, I think, just over 2% on 200+ million people. That's pretty significant in terms of what we see in terms of new phone adopters every year entering the market. The second thing is that we also have very young populations. In some of our countries, the average population is, you know, 20, 21 years of age.
And you can appreciate then that, you know, those are the types of people who are using their phones more often than those that are older. The other thing I'd point out is that in our markets, they've been relatively underinvested when you think about tower infrastructure for the amount of users to which we have. When you think about things like SIMs per tower, as an example, we have roughly twice as many SIMs per tower in Nigeria as we do in the United States. So just purely based on the growth which we're already seeing, or the demand to which we're already seeing, you need more towers than we do today.
In terms of, you know, where that growth comes from in our model, it is a combination of the things that you would think about, again, when thinking about those traditional tower operators, the Americans, the Crowns, the SBAs. It's things like colo, so adding new tenants. It's things like amendments, and it's also new sites that are effectively build-to-suits. When you take those three components of our growth, they're growing about 5%. It's probably about 5% of our growth rate. You compare that to a more mature American, Crown, SBA, you know, those are typically maybe 1% type growth that you're seeing in today's market. And then the other component to that is those structural components of our contracts, those FX resets, and our CPI escalators.
For the CPI, for example, in some of our countries, we're almost in all of our countries right now seeing double-digit CPI growth, and in some cases, north of 20%. That also contributes to our growth. And then lastly, on the build-to-suits, this year, for example, we guided to 1,250 build-to-suits on a base of 39,000 towers. So we're adding roughly 3% to our base, which is, I think, pretty significant. And, of those, we're seeing most of that coming in Brazil, where we guided to about 750 in Brazil, which I think is the fastest build-to-suits that you're seeing out there in the market in Brazil right now. And quite frankly, we could do more.
It's really a function of CapEx and capital allocation, but if we wanted to do more build-to-suits, there's plenty of build-to-suits in our markets that could, you know, make that number much bigger if we wanted it to be.
All right. That's a helpful overview. So if we think about the activity levels that you do see on your sites today, maybe you could talk about, you know, is a lot of it still related to 4G and coverage? Obviously, in the U.S., we've seen a lot of 5G and mid-band spectrum deployments. It seems like, you know, most of your markets are years behind in terms of 5G adoption. Are you starting to see some signs of the carriers deploy selectively 5G, whether that's new amendments, new sites, for some of the 5G spectrum they've acquired in the last handful of years?
Yeah. So in our three largest markets, Nigeria, Brazil, and South Africa, they've all done spectrum auctions in the last year or so for 5G, so that's absolutely a big part of their focus in those countries. And I would say that in Brazil, that's probably our most technologically advanced country to which we operate in. And just to give a sense of that, I mean, 5G there is still relatively small. It's expected to be about 38% of the penetration in 2027, but today it's just 3%. In our other countries, it's really a quite frankly 2G, 3G large market for the most part, but you've seen, you know, some growth of 4G over the last year or two.
Just to give some numbers, in Nigeria, we're now at about 20% penetration on 4G, and our other countries, that is, 40%. So still pretty small when you think about where we are in the United States, which is effectively at 100%. The good news, though, is that we're probably gonna see a leapfrog. You're not gonna get to those 100% penetration rates for 4G.
Mm-hmm.
You are gonna start to see a leapfrog into 5G. In the third quarter, we noted that we saw 14% growth on our amendments, and that was all tied to... Well, I should say, overwhelmingly tied to 5G.
So 5G is coming, but it's still very in its infancy.
Yep. All right. That's helpful. So I think one of the other unique parts about your model, especially with your largest tenant in Nigeria, is that you effectively own the cost of diesel. It's not a direct pass-through like we see in some of the other, you know, tower markets internationally. So I know that can obviously present some risks in terms of the cost of diesel, but also some longer-term opportunities. So maybe you could talk about, you know, your transition to more renewable sources as part of Project Green. Give us an update on where we are at this point, where we're going in terms of the transition from diesel to more renewable sources, and what impact that will have on the bottom line.
Sure. So I'm gonna give a little bit of context that I think is helpful. So first off, IHS as a company was started in 2001, so we're well over 20 years of age as an organization. We started off in Nigeria. In Nigeria, unlike in the United States, where effectively every tower is connected to the grid, I mean, you build the tower, you plug it in, and it just kinda runs, and if you don't go see it for six months, no one's gonna necessarily know the difference.
Yeah.
In our countries, and particularly in Nigeria, the grid availability is limited, if available at all. And just to give a sense of that, in 2022, I believe roughly 5% of all of our towers, our 16,000+ towers in Nigeria, were actually connected to the grid.
Mm-hmm.
Which means then that 95% were not. Those towers then have to be self-powered. What's interesting about IHS's history is those first 10 years of our existence, we actually didn't own towers. We were building and managing towers on behalf of MNOs in the market. That's what the core business was. The reason I bring that up is that that's where our expertise is. It's the actual operational and management of those towers, which is such an important skill set in the markets we operate in, but in the United States, it doesn't really matter.
Mm-hmm.
From that perspective, when we started buying towers in 2011 and 2012, we got our first investment from the IFC. To do that, we had that kind of inherent skill set in terms of what does it take to actually manage and operate towers? And that is one of our key areas of expertise and one of our, you know, barriers of entry, if you will, when you think about tower companies operating in emerging markets, particularly at scale. And from that perspective, you know, we have to go and purchase that diesel, we have to deliver that diesel to the actual sites, and then we actually have to secure that diesel. I'm sure as you can appreciate, in some of the countries to which we operate, that's also sometimes a challenge.
That whole entire operational skill set is very important to us, but at the same time, to your point, it does consume a lot of diesel. Diesel, as a percentage of our revenues, is roughly 15% on any given quarter. So it is a significant portion of where we're having to spend our money. But to alleviate that or to reduce that, we have announced something called Project Green. So in 2022, we announced Project Green, and effectively what it is, is we're going to go and upgrade roughly 14,000 of our towers, overwhelmingly in Nigeria, and we're gonna add more batteries. They all have batteries, but we're gonna add more batteries. In some cases, we're gonna add solar, and if they have solar, we're gonna upgrade that solar.
And then we're also gonna connect roughly 5,000 of towers to the grid. Now, I mentioned to you earlier that the grid is not available, but the reality is the grid has improved over the last several years. And it doesn't mean you're gonna connect it in, you get 24/7, but even if you get 12 hours, that's huge, because then that means for 12 hours of the day, we're not running a diesel generator. That is gonna result in extreme meaningful cost savings.
Yeah.
So Project Green, we've committed to spend $214 million over three years in 2022, 2023, and 2024, for that, to upgrade those 14,000 towers. And by the way, this isn't our first time doing this. It's just the next iteration. It's our first iteration as a public company, and there'll be more Project Greens in the future. And ultimately, that's expected to result in $77 million of what we call ALFCF, or effectively a free cash flow, or AFFO-like metric, for those who know that, type savings. 75% of that is gonna be in the form of OpEx, and 25% of that is gonna be in the form of maintenance CapEx, in terms of where those savings come from. The project has a 30% IRR on it. It's a fantastic project.
So far it's going well, and we'll be giving some updates on how it went in 2023 on our year-end call in just a few months.
All right. We'll look forward to that. So one other, you know, obvious news event that I'm sure you've been asked about just a few times. There's been some headlines around, you know, one of your largest tenants moving 2,500 sites to a large competitor in Nigeria in 2024 and 2025. So maybe you could give us some background, you know, what, in your view, caused this potential churn event? Is this simply a vendor diversification? What you're doing to mitigate its potential impact, and then, you know, any residual risks within your portfolio to additional churn from other customers, or the degree of lock-in you have, and your confidence level going forward, that this is just a one-off event.
Sure. So again, I'm gonna give some context, because I'm gonna guess that most of you in this audience aren't necessarily familiar with what's going on. So the first thing, I'm gonna say is that MTN is the customer we're talking about. MTN is the largest mobile network operator across the continent of Africa. They're based or headquartered in South Africa, but they're, you know, they have a significant presence across the continent. They also own 26% of IHS. Back in, I believe it was 2014, when we purchased one of their portfolios, they actually took equity ownership in IHS in exchange for that, and that culminated in ultimately what was a 26% ownership stake when we went public in 2021. At the same time, they're also our largest customer.
They represent about 60% of our total revenue. So we have both a investor or ownership perspective or relationship with them, and we also have a commercial relationship. When that initial agreement was done in 2014, there were certain things that were done to make sure that we remain an independent company, in part because some of our other customers were concerned about having MTN familiar with some of the information that they might be sharing with IHS. One of those things was that, MTN did not have any board representation. The second one is that they were limited in terms of having 20% voting stake, even though they own, in this case, now 26% of the stocks. Only 20% of their 26% actually votes.
The reason I bring all this up is that in June of this year, two of our largest investors, MTN and Wendel, which is our second largest investor, both petitioned to IHS that they wanted to put certain... They wanted to request that we put certain proposals at our AGM. Ultimately, our board rejected that request, which was within their right. But the unfortunate part was both MTN and Wendel were not happy with how that played out. The reason I bring that up is that fast-forward to September of this year, and what happened was MTN announced that they were not gonna be renewing one of their contracts with us in Nigeria for 2,500 towers.
Roughly 2,000 of those expire at the end of 2024, on December 31, and the other 500 expire throughout 2025. It's our view that those two things are related. When you think about the contractual terms that we are offering in terms of pricing, we think that our pricing was competitive.
Mm-hmm.
And when you think about the challenges that are in front now of MTN to actually go move literally 2,500 sites or pieces of equipment off of our towers and put them onto new towers. And then, by the way, they have announced that they're working with American Tower Corporation to do that. And American Tower Corporation, or ATC, is gonna have to go and build what we believe is a significant number of those 2,500 towers to replicate our network. That, too, also comes with its own challenges. So when you think about all those things together, you know, our view is that we do think that what's happening with the removal of those 2,500 towers is somehow related to their dissatisfaction with us as it relates to governance.
Now, that said, in terms of your question, in terms of what are we doing to mitigate the potential impact, it's less about what are we doing, it's more a function of just the complexities of what they're trying to accomplish. You know, you do this as a living in terms of powering the tower industry. I'm not aware, and I would ask if you are, of anyone else who's ever gone and moved 2,500 sites or that level or magnitude-
Mm-hmm.
-from one tower operator to the next. We do think it will be challenging. We do ultimately think that at the end of the day, a good portion of those 2,500 sites will remain with us at the end of the contract expiration, but we're now gonna have to go and wait and see over the next year or two to see exactly what will happen. And then the last part to your question, are there any risks of additional churn within our broader portfolio? In Nigeria, we actually have four contracts with them. One to which we're talking about, 2,500 sites. It's actually a contract or a master agreement that covers 4,100 sites. The remaining 1,600 expire in 2026 and beyond.
There's also another contract that expires, December 31, 2024 for just under 1,000 sites. Then there's a large contract that we have with them that expires in 2029, and then another contract we have with them that expires in 2035. In total, we have about 14,500 sites, with MTN in Nigeria. For the same reasons I argued for why we don't think it's gonna be practical to move, the 2,500 sites is the same reason why I don't think any other sites should be at risk either. The other thing I'd point out is that we are the largest tower operator in, Nigeria, with about those 16,000+. The next largest competitor is, AMT, with, around 8,000.
So again, arguments we would make for why we don't think there's more at risk of any meaningful scale. The other five countries to which we operate with them is Rwanda, Zambia, Côte d'Ivoire and Cameroon. We just renewed our contract with them in Cameroon for ten years earlier this year. We are continuing to work with them on a contract for CIV, which actually has already expired in 2024, 2023, excuse me, but we feel that that will renew. And then we have two other contracts with them in Zambia and Rwanda that expire next year, which we also believe will renew. And I just point out that we are the only real independent power company of scale in all four of those countries. So again, less opportunities or alternatives.
And then lastly, in South Africa, we actually just did a deal with them last year. We have ten years on that till 2032. So when you put it all together, we do think that the churn risk is limited. And even then, in terms of what ultimately transpires, we've come out there and said on our third quarter earnings call, and I'm repeating today, that we think it'll be ultimately less than what's been conveyed thus far to the market.
Yeah, no, that's, that's helpful. I think it's an important point you brought up that in the majority of your markets, there aren't that many multinational scaled tower operators. Even Nigeria might be the one exception where they're—you know, you do compete against American Tower, but you're usually either number one or number two in virtually all of your markets, correct?
Yeah. So if you look at our disclosures, we actually do provide third-party data from Analysys Mason, which tells you, you know, what the market share is of each of the tower operators in the countries to which we operate in. And to your point, I think in—I'd have to... I don't remember, but I think it's like six out of the seven-
Yeah
... So maybe it's seven out of the seven, we're number one in Africa in terms of being tower operators. It's really only in Brazil where we have some competition.
Yeah. Yeah.
So yeah, that's that.
So touching on Nigeria, given its prominence in your business. Obviously, a country in transition. We've had, you know, a relatively new administration. We've had a pretty material depreciation of the current local currency recently. But there are obviously some hopes on the horizon that, you know, the government's gonna, you know, ignite some new reforms, bring more foreign investment into the country. So maybe you can kind of talk about how the outlook for the Nigerian macro influences how you look at things like capital allocation and your business in Nigeria into 2024, and some of your optimism longer term, even with some near-term potential headwinds around some of the reforms taking place.
Sure. So again, I'm gonna give some context because I'm guessing not everybody's an expert on Nigerian macro. But, so first off, I'd start by saying this: so in May of this year, a new president was elected in Nigeria, and almost to the day when he was elected, he started putting in some pretty material reforms. So the first one that was put in place was they removed the subsidy for petrol. Petrol is what they use to fuel their automobiles in Nigeria, and they were significantly subsidizing that for their citizens. In 2022, they spent roughly about $10 billion on that subsidy. So by removing that subsidy, that's effectively money that the government gets to keep and could be used elsewhere.
So that, by the way, was perceived by most economists as a positive step in the right direction. The second thing that they did, though, is there were multiple FX rates in Nigeria, and to simplify, they effectively collapsed that into one rate. That too, was viewed as a positive thing by those who pay attention to the Nigerian economy. However, there are still steps that need to be taken, and more specifically, there is an FX backlog, people who effectively wanna take U.S. dollars out of Nigeria, and it's somewhere thought to be around $7 billion-$8 billion in terms of what that value is.
The Nigerian government needs to go and then effectively put that money into the system to clear that backlog and then to provide more dollars for people to effectively take dollars out when they want to. Some of the issues, though, that have transpired, though, as they're kind of going through this transition, is that it has had a significant impact on devaluing the currency. That happened starting in June of this year, and it has continued. Now, again, we have FX resets in our contracts, which should protect us to some of that, but not all. And then also, it has also made it more challenging to get dollars out of the country.
You know, I'm, as you appreciate, not a Nigerian economist, but from everything that I read, there's generally a view out there that it's gonna take a few more quarters for this to work its way through. But we are optimistic that in 2024, we'll start to see some of those improvements start to actually manifest in more areas of the economy in ways that should be hopefully beneficial to our business.
Yeah. Well, you've helped give me a crash course in Nigerian economics for the last year, so I appreciate that. You're much more of an expert than I am. So you know, one of the other, I think, issues with your stock has just been liquidity, right? Like, it's improved a lot since the IPO, but you still are largely owned by pre-IPO shareholders. And I think, you know, you guys are working hard to think of ways to improve the stock's liquidity in the public market so that more shareholders, you know, can get in and out of the stock and hopefully improve the float over time. So maybe you could talk about some of the ways in which you guys are, you know, actively evaluating ways to improve stock liquidity.
I know it's kind of naturally starting to happen, but ways you might be able to accelerate that process.
Sure. So as I mentioned, we went public in October of 2021, and at the time, we put forward new primary shares that equated to about 5%. I think it was 18 million-335 million shares outstanding, which effectively meant that 95% was still owned by our pre-IPO shareholders, which sold 0 stock at the time of the IPO. And these are roughly about a dozen different investors. We have, as I mentioned, IFC, GIC, KIC, the Korean sovereign wealth fund as well, Goldman Sachs, Wendel, MTN, there's probably another two or three that I'm... the names are escaping me right now.
Over the last two years, we've had different lockups, I believe five in total, that each equated to around 20% of their ownership. The last three effectively became unlocked and available to be sold on October 16 of this year. So effectively, at this point now, all the stock can be sold to the extent that they want to. The good news is, as we've unlocked this, starting with the first lockup in May 2022, we've gone from maybe 125,000 shares being traded on a daily basis to today, about 400,000 shares. So we have seen a significant improvement, but there's still obviously a lot more to go.
I think part of what's slowing down that improvement right now is there is some concerns on the Nigerian macroeconomy, which is giving some pause, and then there's obviously the MTN situation. Those two things combined, I believe, have had a negative impact on our stock. When you look at where our stock is trading at, I believe it's significantly below where most of our pre-IPO holders would want to sell, which is why you're not necessarily seeing the level of selling that you might otherwise have expected at this point. That could obviously change. We don't know that.
You know, the hope is that as we're able to see improvements in the fundamental business, but at the same time, hopefully see some improvements with the macros in terms of the markets to which we operate in, and hopefully, the stock starts to work, I would think or expect to start to see, hopefully, that liquidity start to improve as well.
Yeah. Yeah. Yeah, definitely something that, that we're looking for as well. So I wanted to touch on, you know, the M&A environment. Now, obviously, historically, IHS was kind of created as a roll-up of a lot of different, you know, tower assets, in addition to some of the build-to-suits you've done. Tower M&A has been relatively quiet, really, across the globe this past year. You know, pretty wide bid-ask spreads in terms of where, people think towers should be valued in a higher rate environment. So maybe you could talk about, you know, what you see across the M&A landscape today, any emerging opportunities in 2024 that might be of interest across your footprint, any new geographies that might be interesting, without giving us exact answers, just generally speaking.
Sure. So, first, that goes back to your question just a moment ago about capital allocation, which I, I didn't answer. But when you think about capital allocation, there's obviously CapEx, there's M&A, we could pay a dividend, we can do, stock buybacks, and we do have a buyback program in place right now. We could also buy back our debt. There's a variety of different ways in which we could utilize our capital. I would say that this year and last year, we spent over $600 million in CapEx. As I mentioned to you, there's more growth opportunities in our markets than we could actually take on. But given what we did see as the opportunity, we did step up our CapEx the last two years.
On our third quarter earnings call, we did mention that we'll be taking our CapEx down. We'll be at the low end of our guidance for this year, and we've communicated to the market you should see another significant step down in 2024. And that's really a function of still growing at a good growth rate, but also trying to find more balance with also cash generation at the same time. So we are becoming more focused on cash generation while still giving that level of what we think will be exciting growth for investors. When it comes to, excuse me, when it comes to M&A, though, we've said, though, that there's a pretty high bar right now for M&A, and it's for the reasons that you just described.
You know, the reality is that the bid is still very high, or excuse me, the ask is still very high in terms of what people are trying to sell their towers at, relative to what we'd be willing to transact in. And that's obviously a function of our own cost of capital having gone up, and also just taking a very disciplined approach to what we want to do. To that point, one of the other things that we mentioned on our third quarter earnings call is that we are going through a review of our markets and ensuring that we're focusing on our core markets.
We weren't more specific than that, but you should take from that that we're very much making sure that we have the right portfolio of towers in the right markets, in addition to, you know, taking some of those steps around the CapEx plan, as we go into 2024.
That's somewhat implying you could look to recycle capital or, you know, look at non-core asset sales as a potential lever down the road?
I think that that's fair.
Okay. Understood. So just to touch on your margin outlook as well. So I think, you know, before you were public, you know, you had operated at close to a 60% margin in that general ballpark. And I know you've had some impacts the last couple of years, higher diesel prices, which have had some impact. I'm sure there's some public company costs as well that you've had to absorb. So maybe you could talk about the pathway from getting to where you are today, back up to, you know, a target, I think, longer term, you have about 60% margin level.
So to your point, there we own the cost of diesel with our largest customer, whose name I already mentioned, in a variety of markets. So whether the price of oil is $120 a barrel or $50 a barrel, we own that cost. So we could either be benefiting or hurting as a result of that. You'd appreciate, particularly in 2022, with where the cost of oil and diesel went, that was a headwind for our business.
Mm-hmm.
And that did put pressure on our margins. At the same time, we did become a public company, which also has had a hit on our margins. And at the same time, we've done acquisitions, some of which are at a lower margin than what the overall company was at. So for a variety of reasons, our margins are lower than they were a few years ago. This year, if you look at the midpoint of our guidance, we're guiding to about 54% EBITDA margin. I've already conveyed to you that we're taking a more prudent focus on cost, and it's not just on the CapEx side, but also on the OpEx side.
So I think generally speaking, it's, I think, a fair assumption to think that we're focusing on an improvement, just given we're also focusing on taking costs out of the business. I'd also point out then that long term, what we've conveyed to the market and continue to convey to the market, is we think we can get back to that 60% EBITDA margin, but we've not given a timeline on when we expect to get there.
You touched on this earlier a little bit, the build-to-suit program. Obviously, the hurdle rate for any investment today is higher in this current interest rate environment. So maybe you could talk about some of the areas you pulled back a little bit, I think, such as some of the rural areas in Nigeria. And as you look at build-to-suits today, can you get the correct, you know, risk-adjusted development yield or NOI yield, however you want to characterize it, today in a lot of these markets, or has it become increasingly challenging?
So, in Nigeria and in a few of our other Sub-Saharan Africa countries, we have a unique model, which is our rural builds. And what makes it unique is that it's actually a revenue share model, where often the MNO will share the revenues that that tower generates, as opposed to us collecting just a rent from the underlying tenant. And these are single tenant-type solutions, and they're powered on solar. These are towers that we put into rural areas, villages, to give connectivity. And by the way, there's also a very significant focus on sustainability at IHS and giving back. In fact, last year, we gave back around, I think, just over $7 million in terms of various partnerships and programs to which we work with.
One of the things that we're very focused on is providing connectivity to people who don't have connectivity. I hope everybody can appreciate that if you don't have any connectivity in these areas, and all of a sudden you put a tower in that area, you know, and you put a phone in someone's hand, you know, the impact that that has on an individual is profound. So with that said, we are very focused on these rural programs. So we have been going and building out towers. I think at this point, we've built just over 500 rural sites across Nigeria that are on that model that I described.
That said, we have pulled back on that, this year, as we've redirected more of our investment towards Project Green, which I mentioned to you before, which also has very positive sustainability-type components to it as well, and quite frankly, has a very attractive, as I mentioned, 30% type IRR. I think long term, you'll expect, you should expect us to continue to do more of those rural builds. But for the time being, we have paused, or not paused, but slowed that down, and we've also redirected a lot of our build-to-suits to Brazil, which is also a very exciting market, and one we want to continue to grow in.
In terms of your balance sheet and how you're kinda thinking about leverage in the next, you know, couple of years, you're operating kind of toward the lower end of your 3x-4x leverage target. You've, you know, taken some steps to fortify the balance sheet, do more locally denominated debt to help hedge some of the FX. But, you know, do you expect to continue to operate it a little more conservatively in the near term, given there's still uncertainty on where cost of capital goes and what the financing markets look like in the near term?
Yeah, I think that that's fair. I, I think that, when you think of our covenants, they're either at 4x or 4.5x, depending on, on the instrument, versus our current leverage, which is 3.2x. We have noted that our leverage is gonna go up in the first half of 2024 based on the devaluation-
Mm-hmm.
-that we've seen, as our metric is tied to an LTM-based metric. So as you start to see more of those quarters with the devaluation having impacted it, you'll see our leverage tick up to probably the midpoint of our 3x-4x range. But then we expect to delever naturally as we go forward. That is, I think, on the lower end of leverage compared to a lot of the other tower operators, including some that focus on emerging markets as well. So we don't think we have a bad leverage, but I think it is prudent to be prudent. It makes sense to be prudent.
I'd also point out that if you look at our announcements every quarter, every quarter, we're going and, and doing things to strengthen our balance sheet in terms of pushing out maturities, reducing rates where we can. We've also been very focused the last few quarters on moving more of our debt to local currency, to align with where our revenues and profits come from, opposed to being more hard or USD-oriented. Which is something I think you can expect to see more of, as we go forward as well.
Okay, perfect. I think, I think we're just about out of time. So Colby, appreciate you providing us with those insights today, and we look forward to, you know, watching your progress go forward.
Great. Thank you.