Helios Towers plc (HTWS) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for joining our Q1 results update for 2020. First of all, I hope everybody is well, safe and healthy during this difficult time. Joining me on the call today, I'm on Slide 2 of our deck, is Tom Greenwood, our CFO; and Manjit Dhillon, who's the Head of our Investor Relations and Corporate Finance. Today, we're going to cover -- on Slide 3, we're going to cover highlights that I'm going to take you all through and then hand over to Tom to take us through the financial results. And as Jordan has said, there's plenty of time at the end for Q&A, so we'll go through those right at the end. Moving on to Slide 5. Well, look, Q1 is business as usual as far as we're concerned. Our quarter is on track to what we expected, and we are maintaining our full year 2020 outlook. We've had a strong revenue growth of 9% in the quarter against Q1 of 2019, coming in at $102 million. And correspondingly, our EBITDA has grown by 11%, coming in at $54 million. Our margin improved quarter-over-quarter by 1 percentage point to 53%. And we delivered another quarter of growth that now equates to 21 consecutive quarters of growth for our business and demonstrates the robustness of the business model, but also the robustness of the markets we operate in. The business has delivered, in the quarter, portfolio-free cash flow of $46 million, some 14% increase year-over-year. Regarding our operational dynamics in terms of currency growth and site growth, 4% year-over-year site growth shy end of 7,000 towers in total and 8% year-over-year tenancy growth coming in at a little under 14,700 tenancies. This gives us a tenancy ratio of 2.1x and maintains our trajectory in the sort of medium to long-term horizon, 3 to 5-year horizon of achieving 2.3x to 2.5x tenancy ratio for our business. In terms of our resilience towards particularly the pandemic. We've got a couple of slides coming on during this deck. But look, as I said, it's business as usual. We're maintaining our performance and serving our customers as we've done in the past years, and we'll talk a little bit more detail on how we're doing that. M&A, our strategy continues to focus on expansion in our markets but also into new markets. We're pursuing multi-deals currently, and it's in line with our strategy and we'll touch on that in a slide later on as well. Moving on to Slide 6. Well, just reinforcing 21 consecutive quarters of EBITDA growth. This slide demonstrates the robustness that we've been operating under, and we believe we'll continue to operate under this, our margin slightly decreased. This is just purely driven by some additional costs coming through as we're now a PLC, it was something we expected. But it does represent a 39% CAGR growth in our EBITDA margin and EBITDA since Q1 of 2015, more than doubling our margin over that time. Moving on to Slide 7. Look, I've got a couple of slides on how we're operating under the COVID environment. And our business is robust, and we had minimal impact. First of all, looking at our staff and colleagues, we executed working from home offices very early prior to lockdowns in the markets and we took the right steps. And this has meant that we've not seen any misses in our operational capability. And the nature of our field operations is an isolated model. Typical field engineer is operator on his own. He has his car, his 4-wheel drive truck. He has spares that he carries and equipment he carries and he goes out to site on his own. So it's a very isolated model. What's important is that all the governments in our markets have classified telecoms communication as an essential service. And so we've got the ability to move around the markets we operate in very easily. And we are one of the special service categories that allow us to move freely. In terms of our revenue and existing liquidity, we still have close to $3 billion worth of contracted revenue at around 7 years of contract life remaining. And in our industry, we sign typically 10- to 15-year contracts. So still a long way to go on our contract life. We serve Africa's large MNOs, the Big-Five, as we call them. Over 80% of our revenues are with these guys, and they're robust and have healthy balance sheets and are continuing to operate and actually the demands have gone up, which I'll touch on shortly. And overall, in terms of cash and debt capacity, we have $230 million of financial resource to continue to pursue our M&A strategy and continue to drive the performance of our business. Customer rollouts under the current environment. Well, look, we've seen Q1 is in line with the tenancy growth that we've seen in the last 3 years. And that actually you could argue it's fractionally better than what we've delivered in 2018 and 2019. The only sort of potential challenge is supply chain for our customers, but we believe they're managing this well in terms of availability of equipment to put on new towers active equipment. From our side, our supply chain, we've been proactive in mobilizing the supply chain to make sure that we've bought early and ahead. And during the course of 2020, we see no issues in making sure we can maintain our towers but, more importantly, facilitate building new towers for our customers when and as they need them. And to the extent of fuel consumables, et cetera, we've been proactively purchasing fuel in our markets. And then we have up to 3 months of fuel across our markets on an ongoing basis to ensure that we don't have any blips in servicing our business. And in terms of the organization and our staff and the communication, look, one of the benefits of investing in digitized solutions that we have done over the last few years, is that, it's coming into its own play now. We've been able to have our staff work from home because we've got cloud-based solutions that we can monitor and communicate video conferencing. Day-to-day monitoring of our assets hasn't changed. And we have been able to enact our business continuity plans that were already in place prior to this challenge, and they've worked well for us. Slide 8. Really just going on further. If you look at our power uptime performance, it's just business as usual. We've been operating at close to 100%, well above the SLAs, we have service level agreements with our customers. And it's pleasing to see actually that during April, we've seen a slight improvement in our performance in power, delivery and uptime of our sites to our customers. Rollouts for our customers, as you'll see in the comments from Voda and Orange on this slide. There is increased investment from some of our customers. It's driven by more volume of traffic that we're seeing from our customers. Some of the full year trading updates from Vodacom, Orange, Airtel this week, for example, have all talked about increase in data volume and voice traffic. And this is all putting positive strain on the infrastructure, which means more equipment for us, which means in time, more revenue and growth for us. And regarding the operational safety, we've enacted the normal PPE. You'd expect a business like ours to put in the field to ensure we carry on protecting our staff. Moving on to Slide 9. Touching on our progress on ESG. Look, we've talked about our values, they have been ingrained in our business since 2015. We are one of the only few companies, if not only company in Africa, that's got 4 international ISO standards when it comes to behaving with integrity, focus on quality and protecting the environment and our people. We've invested in capital to introduce green solutions into our portfolio. And part of our ESG focus is that we carried out a benchmarking exercise during the first few months of this year and is to compare ourselves to what the FTSE 250 companies are doing. It was pleasing to know and the outcome of that benchmarking was that we are actually in the midpoint of what FTSE 250 companies are doing. We're not satisfied with that. We set ourselves an objective to be in the top quartile over the next 3 to 5 years as part of our strategy, and we will be communicating our strategy on ESG in the next few weeks, and we've invested in resource into the business who can support us, knowledgeable resource to bring an understanding of ESG and sustainability and integrate that to our business strategy. So watch this space as we communicate that road map in the next few weeks. On Slide 10, moving on to really our focus on M&A and growth through acquisitions. This slide you've seen just reiterating that the 65,000 (sic) [ 165,000 ] towers in Africa that are still owned by MNOs. And the gray countries that you see on the continent are countries with no independent towercos operating in them today. So we're still very active. And in some ways, I feel that the business development tracker has improved. We've got more opportunities on there than we had a few months ago. And we continue to pursue multiple transactions and are hopeful and positive about bringing them to fruition over the next few months. Obviously, the COVID-19 issue has had a slight slowdown in our ability to travel and the ability to communicate with counterparties just because of the upheaval that the world is going through, but no change to our outlook on the opportunities to expand, et cetera. And our target and our objective still remains is to enter additional 1, 2, 3 countries over the next 5 years and add a significant amount of towers through M&A into our portfolio. On that, I'm going to hand over to Tom, who's going to take us through the financials. Tom?

Thank you very much, Kash. And hello, everyone. I hope everyone is well. So starting on Slide 12. This really just summarizes some of the main KPIs, which I'll talk through on the next few pages. So if we move on to Page 13, to look at our revenue and EBITDA, we have had solid and steady growth continuing, with revenue growth of 9% year-on-year and 2% quarter-on-quarter. And likewise EBITDA growth of 11% and 1% respectively through those periods. Our margin year-on-year has stepped up slightly, 1 percentage point. Slightly down quarter-on-quarter from Q4 from 54% to 53%. In fact, that's a 0.5% movement that's predominantly because of some additional PLC-related costs coming through to our business. But still very much reiterating guidance for the full year '20, which was to be between the 55% to 60% range that we've set ourselves for the medium term and just coming into the bottom of that range. If we move on to Page 14, again, a page that is very consistent with previous quarterly update. Our customer base, FX mix and OpCo split is largely unchanged from 2019, with 86% of our Q1 revenue coming from Africa's Big-Five mobile operators. 59% of our revenue being hard currency, which translates to about 65% at EBITDA level. Moving on now to Slide 15. And we see the continued upward growth on our tenant fees. Year-over-year, last 12 months, we've added 1,077 tenancies across our portfolio, which is in the range of our 1,000 to 1,500 guidance [indiscernible] and that, of course, is our guidance for FY '20, which we're reiterating today. In Q1, we added 86 tenancies. Traditionally, Q1 is our quietest quarter for tenancy increase and that's because the big mobile operators typically just finishing or just starting their budget cycles at this point. And if you compare the Q1 for the last few years, it's very much in line and perhaps slightly ahead. In 2019, we had 51 and in 2018, 76. We do usually see uptick in tenancy growth through the year, which is our expectation again now based on a pretty robust pipeline that we have ahead of us. Moving on to Slide 16 and a look at our gross profit per tower and our OpEx. Gross profit per tower has stepped up 10% year-on-year, demonstrating the continued operational leverage of our platform, essentially adding new tenancies to our platform, which delivers significant bottom line flow through. The OpEx is up slightly in the quarter, as we've seen a slight increase in sites and a slight increase in power cost. That was still 33% of revenue being maintained there. If we look at Slide 17 now, our CapEx. Again, our CapEx -- we're reiterating our CapEx guidance for the year, which is $110 million on an organic basis with the $30 million earmarked for some smaller market acquisitions, which are near term. One of which actually is very imminent and could potentially be in the next few days. Our CapEx as of Q1 was $11 million, so relatively low compared to the full year guidance, but that's simply timing of quarter-on-quarter. So again, no change to the CapEx guidance for the full year. And in fact, we've accelerated the purchasing of CapEx items at the end of Q1 and early Q2, so that our CapEx is ready in market, ready for deployment, based on the pipeline that we've seen to date from our customers. Moving on now to Slide 18. Again, our debt position, not much has changed here since our last update for FY '19. Our leverage continues to be below our target range. Our leverage is at 3.0x on a net leverage basis at the moment. Our target range continues to be 3.5x to 4.5x, so we do have funds available for the expansion path that we've described. We'd expect to deploy some of that in the coming months. If we look now on Slide 19, I get a look at our cash flow. Cash conversion portfolio free cash flow continues to be very strong and demonstrate growth reaching 85% in Q1. And that's almost a 30% increase since 2017, so a significant increase in cash conversion. Our net working capital, which is the other call-out on this page is minus 35% -- $35 million for the quarter, but this principally represents investment in CapEx and OpEx for our business as described in terms of the business resilience earlier. This is a forward purchasing and investment for growth that we've done to ensure our business is resilient through this year and also ready for growth as it comes through the pipeline. Our net customer receivables has gone up a bit in the month, $9 million. As you can see on the chart there. This was solely some of the large Big-Five MNOs paying us after the March 31 date, which, of course, for some of them was their year-end. And in fact, that has turned around through April. So if we were to show this chart today, it would be a $17 million reduction on this position. So all the cash coming in effectively. And with that, I will pass back to Kash for the summary on Page 23.

Thanks, Tom. This is the last slide, before Q&A. So look, to summarize, Q1 is in line with our expectations. The business is operating robustly during the COVID crisis and business as usual as far as we're concerned. Organic and inorganic pipeline continues to be robust for us. And we are on track to deliver between 1,000 and 1,500 tenancies this year, which is the guidance we've given, and we're maintaining 2020 guidance. So on that note, I'm going to hand back to our conference coordinator Jordan, who can help with the questions. Jordan, over to you.

[Operator Instructions] Our first question comes from Giles Thorne of Jefferies.

My first question is, coming back to the matter of how the coronavirus has impacted wireless traffic? Yes. So to your point, Kash, yes, there's -- some of your customers have evidently benefited from a massive pickup in traffic. But I wanted to explore how that could or couldn't come through in accelerated network investments this year or early into next year? And in particular, I was surprised to see that Airtel Africa, as an example, actually kept their March 2021 CapEx guidance unchanged, i.e., there's no ostensible pickup in network investment by Airtel Africa. So it would be useful to hear exactly what your customers are telling you at this point in time. when you speak to them about any changes to immediate investment plans. Hopefully, that all makes sense. Related to that -- let me get the 3 out, and then I'll hand back to Kash.

Yes.

And related to that, Airtel Tanzania was awarded some more 1800 megahertz in February. Do you think that is something that they're about to imminently deploy? And actually, could this be a catalyst for them to maybe finally sell their towers in that market? And then the final question was on Millicom again under the same kind of umbrella theme. Millicom Tanzania or Tanzania as Millicom's last African market, my reading of the body language from Millicom remains that they are pretty ambivalent to the region. Is this going to be a structural impediment to growth for your Tanzanian business? Are they just going to sit on their hands and not invest in that particular operation? Thanks, Kash.

Thanks, Charles. Thank you for those questions. So first of all, what we're hearing from the customers, certainly, we -- our pipeline for tenancies, colocations, et cetera, seems robust over the last few months and we have had inquiries about additional equipment, et cetera. I cannot go into specifics, and at this stage we are not saying anything about being above our guidance. We still -- our range of adding tenancies between 1,000 and 1,500 is fairly large and will absorb whatever additional capacity increases they need within that range as far as we are concerned. So we are actively working with our customers. The good thing from our side is we are ready to do what they need across all our markets. We have got the capacity in terms of equipment to build towers but also to add more tenancies on existing towers. But customers’ plans change. It is the beginning of the new budget cycle for some of our customers from the 1st April, and we will hear more during the next three months on their rollout plans for their next 12 months, which is slightly out of sync to our budget year, effectively. On Airtel Tanzania, yes, no -- they've -- look, first of all they own their own portfolio as you quite rightly pointed out. They have got more Spectrum. It is an entity with the government there in Tanzania. And as they upgrade their network, we should see some improvement in our equipment on our towers where they already have tenancies on. And we are watchful. On the towers that they are selling, we know that portfolio very well. We have looked at it before. Currently our view is that while the towers equate to some 1,300 towers owned by Airtel, for us there are about 700 towers that are unique, because we are in close proximity to those towers. So we will see what happens with that asset sale. It has been in the public domain, so -- and I will not comment anymore on that point. Regarding Millicom, it's not a secret that they've been looking at marketing those -- that business. It's their last hold effectively in Africa as a wholly-owned entity. And I think this crisis may have slowed down that sale process potentially for a few months. But they were preparing to sell their assets. And yes, they may not invest as much as they should, if it was a long-term commitment. But certainly, we are still getting inquiries from Tigo in Tanzania, that's their brand name on tenancies and expansion, et cetera, because they need to maintain their market share. What's good from our perspective is that we don't believe it will be a merger because the market share would be unfair, whoever buys from within, i.e., Airtel or Vodacom or Viettel in that market. So we believe that there will be a new player that will come in, whether it's MTN, Orange or someone else to take that MNO. And that will encourage more investment when that happens. So we've learned from acquisitions or takeovers as well as mergers in other markets over the last few years that there's growth when that happens in the markets.

And just as a follow-up, the coronavirus because obviously, you've spoken to stimulating network investment. It will be interesting to see if it's stimulating any kind of addition to the top of the M&A funnel, if that makes sense. So our MNOs in the region being prompted by the virus to change industrial policy and outsource and pare their needs back? And what's kind of happening at the top of the M&A funnel in response to the virus?

Yes. Look, we do think that -- and this is not just for the virus, but we think that there will be pressure on CapEx, et cetera, which will ultimately continue to feed the pipeline for tower sales in our view. So for example, MTN, I think, this morning or yesterday announced that they've got a constraint. And that all leads to releasing value from the balance sheet, in our view, which will happen over the coming years. There is 165,000 towers still owned by MNOs in the continent, as they outsource that aspect of their business. And it's proven that independent power companies do the job better than MNOs in running passive infrastructure. We've certainly experienced that when we've taken on tower portfolios. And I think there will be more and more of this that will occur in the continent.

Our next question comes from Cesar Tiron of Bank of America.

The first one, can you please discuss about your confidence that tenancies would gradually increase throughout the year? That's the first thing. Second question would be on the scope for the refinancing of your bond? And the third one, if you can give probably a little bit more insights on M&A plans for this year?

Yes. Well, let me take the first part, and then I'll let Tom talk about the bond, and we'll come back to also M&A. So look, as we've said, we're pretty robust in continuing to grow our tenancies. Our pipeline in terms of inquiries for tenancies on existing towers, build-to-suits, et cetera, is healthy, and positive at this time of the year. And so our guidance is, we'll be within that range of 1,000 to 1,500 tenancies added this year. And look, if you look back, we've -- if you just look at the last 12 months, we've added 0.07x tenancy growth to our portfolio, and we don't see any change to that. And our guidance has always been that we will add between 0.05x to 0.10x tenancies per year. That takes us to our target of around 2.3x to 2.5x in the 5-year horizon, and we're on track for that. And if you look at our history, we've been within that range and confident of delivering on that. Tom, refi?

Yes. No, absolutely. So we're monitoring the market for a refi. We're ready to do it should a window occur. I think people are seeing the bond, the EM bond market has moved quite a lot in the past couple of months. Our bond is currently trading at around par. We believe that based on our business strength that we should refi at better than that level, so we are monitoring. We're in no super rush to do so, but we're doing what we can control, which is be ready, this time, should a window occur. So I guess, watch this space and we'll be monitoring the market for any opportunity. And then on the M&A, I'm going to pass it to one of...

Yes, yes. On the M&A, as I said, again, we've got a number of different opportunities from small to medium-size and large opportunities we're tracking. And actually, there has been a slight uptick on the opportunities. We've had a few more things we are engaged with than we had in January, for example. So we're still confident of the acquisition pipeline. But in the short term, as you'd expect with the virus pandemic that there's been a slight slowdown. And if I said anything different, you would not believe me, so there has been. It's quite simple because people are not able to travel. People are working from home, some of the government bodies that we engaged with in some of the markets, obviously, are not as available, et cetera. So it's a slowdown, but nothing's changed in the opportunity tracker that we're working hard on. It's not detracted our team that we have internally. We've got a dedicated business development team under the leadership of Alex Leigh, and that continues to be the focus of that team.

Our next question comes from Simon Coles of Barclays.

Simon from Barclays. with COVID-19 and obviously the increasing importance of connectivity, are you seeing any increased pressure or discussion from governments and regulators to sort of force operators to increase their coverage? And then linked to that, I guess there is going to be areas where operators will see it as uneconomical for them to do that but the government will still want coverage. Is that an opportunity for you guys? And are you maybe even potentially in discussions to build towers in some of these areas already? I think we have seen a similar situation happen in other markets in Africa, so I am just wondering if you are seeing anything there. Thank you.

Thanks Simon. Appreciate your question. Well, yes, absolutely regarding the current situation with the virus, as I mentioned telecoms is an essential service in our markets because there is no other fixed line infrastructure that people could rely on. And actually the regulators are focused today on quality of service and availability of service and expansion. But let me just -- on the expansion, for example, rural company -- rural locations, a lot of our governments and regulators have funds that encourage the facilitation of antennas and services from our customers into these small communities, and we are part of that solution. So for example in Tanzania, we build rural sites, we have a rural solution that is a lower cost solution designed for 1 tenant services, maybe 2. But less equipment et cetera. And in our view, and what we hear on the ground, is that this pandemic is going to accelerate the rollout over time because these communities need connectivity during these difficult times to access medical services through the internet for example, et cetera. So perversely, this is going to increase the focus on coverage, which means more activity for independent tower companies as well as our customers.

Our next question comes from John Karidis of Numis.

Just for good order first, can I just check that it's still the case that about 65% of EBITDA during the quarter was in hard currency? And then secondly, last year, revenue growth accelerated during the course of 2019. Should we expect the same to happen this year?

Tom, I will let you take this one.

Yes. Yes. Yes, short answer, yes, 65% hard currency. There has been no major change there, and 59% at revenue level as well. So, yes, very consistent with previous years. And on the revenue one, yes, usually Q1 is the quieter quarter when it comes to adding tenancies. The mobile operators are either just getting their budgets signed off or just starting their budget season, and so that is typically what we see, very similar to previous years with ramp-up expected in the following quarters. And that is certainly what the pipeline tells us today.

Okay. Tom. If I may, given that consensus is forecasting 10% revenue growth in the year, and you delivered 9% in the first quarter, do you think that the risk to consensus estimates, therefore, is quite clearly on the upside?

I wouldn't want to go and start talking about upside. I think clearly Q1 is very close to the full year consensus and we know that Q1 is generally a slower quarter. So I think we feel fairly good about the full year, but I would not want to start talking about upside.

Our next question comes from Simrin Sandhu of SCB.

Thank you very much for the presentation. A couple of questions from me, please, regarding liquidity. So I noticed the CapEx guidance is unchanged from your prior call, but I am just curious as to how you are thinking about prioritizing cash conservation and maybe keeping a liquidity buffer on the books versus executing on your growth plans in light of the fairly uncertain broader macro environment we are in? Maybe if you could also comment on how much of the $110 million in CapEx is committed? And then secondly on the cash, could you please tell us how much of the cash balance is contained in USD versus local currency? And also whether there have been any recent issues in extracting cash from your subsidiaries? Thanks.

Yes. No, absolutely. Thanks for the question. So look, first of all, on the CapEx, we are reiterating our guidance on the CapEx and that is based on seeing the pipeline ahead of us, a large amount of our CapEx is linked to customer rollouts, of course, and some of it we earmarked for the smaller market acquisitions, which are near term, some of which are actually pretty imminent. So while not all of that is effectively committed today as such, it is very much within our sight in terms of pipeline. And so as we mentioned earlier, we have been forward purchasing CapEx at the end of Q1 and into Q2 for the remainder of the year to ensure that we have all the equipment required in country in the event that there could be supply chain delays later in the year, which, by the way, we have not seen really at all yet in any material way whatsoever, but we are doing that from a prudence point of view. And from a funding point of view, our organic business plan is self-funding. So the earnings of the business through the rest of the year effectively pays for all that CapEx. In terms of our cash balance and available debt to draw, at the end of Q1, we had $146 million of cash in the bank and over $100 million worth of debt lines available to draw. So we are liquid, we do have a good amount of available funding should that be required for expansion plans. From a leverage point of view, as I mentioned we are at 3.0x leverage, which is below our stated target levels at 3.5x to 4.5x, and this is effectively because we have a high cash balance on the balance sheet today, which -- some of which will be deployed on these short -- near-term acquisitions that we have in the pipeline. In terms of cash flow, we do always to keep a healthy balances of cash across the group. Nearly, all of our cash is in US dollars at group treasury level. So of the $146 million at Q1 end, something in the region of 80% to 90% would be in US dollars with effectively small float in each opt-co, and that's how we operate. We do monthly upstreaming of cash in dollars through our shareholder loan structure across the group. So each month our opt-cos send up US dollars from the market to our group treasury in Mauritius, and that continues, and that is partly leading to us being able to keep small floats regular in our opt-cos, which is our ongoing strategy around cash management and de-risking the business. Does that cover your questions?

Great. That's very helpful.

Our next question comes from James Congdon of Quest.

My first question about the bond refi, Tom, you've already covered off. My Second question is around cash flow statements. I see that there's a $37 million outflow due to change of control taxes from around the IPO time. I just wondered if there's any more of these kind of similar transactions to come out or kind of adjustments to make going forward?

Yes, absolutely. So that's very much in line with the structure that we set out at IPO, and that was funded through an escrow account from the pre-IPO shareholders, which had been drawn at year-end. So if you look on our December 31 balance sheet, there's $220-or-so million of cash, but $37 million of that was restricted cash. And that was the cash that had just been drawn from the escrow pre-year end and then settlement of that to the tax authority was post year-end. So it's slightly confusing, the fact that it has straddled a period end versus why we had the restricted cash on balance sheet at year-end. And then, that's come out on our bank accounts this quarter, which is why you see it coming out of the cash flow statement this quarter. So if that has happened within a quarter and not at a period end. And, obviously, you wouldn't have seen any of that, so that wouldn't -- that I guess would have been less confusing, but that's what's happened there. And we have as per the IPO disclosure, there are certain change of control taxes due in our markets, and the pre-IPO shareholders are funding that through an escrow account. So to the extent there is more of that to pay, then that would be drawn from the escrow account, but it's currently sitting there in escrow and come through the company and then out to the tax authorities. So if that happens again straddling a period end then you would see that, you would see some restricted cash on balance sheet at the period end and then that would come out the following quarter. But we cannot exactly predict the timing of that. So that is all that is, effectively.

Our next question comes from Alexander Vengranovich of Renaissance Capital.

The first one, I'm trying to get some local color the need on the Coronavirus [Technical Difficulty] and did you see any potential risks to your business [Technical Difficulty]. The second question...

Sorry, Tom, are you able to hear the question clearly, because I couldn't get all of that.

Can you hear me now, maybe it's better to control.

Yes. That's much better, Alex. Yes.

Yes. Much better.

Sorry, my mic was like probably on low volume.

Would you repeat?

Yes, I'm going to repeat. So my first question is on Tanzania, and actual spread of the coronavirus infection there. So I'm just trying to get some local color from your side because it looks like there is a lot of the misleading information about the virus in the country. As far as I understand, there is no additional lockdown, but it looks like the infection goes really viral there, like more and more people being infected unofficially. So just trying to understand where you see any significant risks there if this spread goes faster than it was initially expected by the government.

Yes. Yes. Let me take that before we go into the second question. Look, Tanzania has been one of the countries who basically has not had a lockdown and people have been encouraged to operate as normal there. However, our customers and ourselves enacted a lockdown for our staff, so working from home, working remotely, et cetera, et cetera. And we have taken all the standard precautions we've taken across the continent where we operate to protect our staff, community, et cetera. And it is business as usual for us in Tanzania. In terms of the -- I can only quote official figures. My job is not to speculate. The official figures say there is a low infection rate and low death rate, the fatality rate there in Tanzania. But it has not affected our ability to deliver service and carry on running and growing our business in Tanzania. Yes, that is all I can really say about that, regarding Tanzania. Just to give you a flavor though of our staff. Across the whole of our business, we have only had two individuals who have been infected by the virus, who did go to hospital for a couple of weeks. That was in DRC. Both members of our staff are out of hospital and recovering well back at home. So again low impact on our business so far.

Good. And the second question to Tom on working capital. So in the first quarter, there was like around $35 million net change, like a negative change in the working capital, mainly driven by, again, like the increase on the Big-Five MNO payments timings. So just trying to understand what sort of volatility should we expect for net receivable debts this year? Should we expect the number of the receivable debts to grow further? Or you think that the current level of the first quarter is more or less sustainable?

Yes. Thanks, Alex. If you look at our working capital on page 19. So the majority of the $35 million is actually us investing in early CapEx and OpEx. So $16 million on CapEx and $11 million on OpEx, and that is for the reasons I described earlier. In terms of the net customer receivables, yes it increased $9 million. That was solely due to some of the big customers paying us later, some of whom had their year end at the 31st of March. If we were to show these numbers for the end of April, though, then it would be $17 million lower. So the payments that were dragged out around the year end very much were caught up and more so through April. So I think from a modeling perspective I would just leave things flat through the year. That is probably the best option at this point. But, yes, effectively, the money is coming in the door, just after the March 31 reporting date.

Next question comes from Jonathan Kennedy-Good of Standard Bank.

Apologies, this might have been covered. I joined the call a little late. The 1,000 to 1,500 tower tenancy growth for the year, is it possible to give us a little bit of color into where you see the majority of that growth coming from by region? It looks to me like there is a bit of a head start for DRC so far this year. I was just wondering whether that could continue for the rest of the year and then where you see kind of highest ROIC and most attractive kind of return profile within the various operating regions? And then just finally on Ghana, MTN seems to be showing very, very strong growth there still. Just wondering how the whole ATC-Eaton deal played out, how that has affected the market and what you see the pipeline looking like there, given what looks to be very strong MNO growth and now the deal completed.

Yes. Tom, do you want to take the first part? And then, I'll talk about Ghana?

Yes. Jonathan, thanks for the question. Yes so the tenancies, we are very much expecting them across the group. I think as we look at the pipeline today there is no sort of one country that stands out as particularly ahead of the rest or particularly below the rest. So we would anticipate the broad country split to be maintained through this year on an organic basis. So I think that is what to assume there. From a ROIC point of view, again the numbers that we have shown previously in terms of build to suit yields and things like that are maintained, and to remind you of that, single tenant 9%, two tenant 19% and three 32%, which is what we have shown in previous and pre-IPO materials. So no major change there. There's not huge differences either between the markets on that, so again we wouldn't guide model any particular big variance there in terms of yield or ROIC. So I guess very much expecting the business as a whole to keep growing roughly with all markets on track with each other, effectively. Then on the Ghana point, Kash, do you want to take that one?

Yes. Yes, look, so MTN is the lead, dominant player in Ghana and over the past 2, 3 years we have been building towers. MTN have had a strategy to continue increasing coverage and I think now they are probably up to 95 plus percent coverage of the geography. Vodafone and AirtelTigo obviously are the challengers there, but still a solid market share for those 2 operators. And we can't go into detail, but we certainly have a good pipeline from all our customers in Ghana regarding upgrades and expansion. So clearly AirtelTigo are focused on their strength -- stronger position as a merged entity and a bigger market share to carry on investing and growing their market share there, and we are obviously one of two towercos in that market, us and American Towers, and we are active working with AirtelTigo, Voda and MTN, all our customers in Ghana.

Great. And no material change in kind of what ATC is doing in Ghana, given the Eaton deal?

No. I mean, there's still obviously integrating that asset and doing what they need to do, but no change at all. No. In some ways, what we've -- in our view, is that the erratic behavior of the Eaton has disappeared. There's more structure as far as we are concerned. And our agility, we believe will put us in a good place now in that market.

Our next question comes from Charles Cartledge of Sloane Robinson. Our next question comes from Alex Ayoub of Waha Capital.

Thank you very much, thanks for the call and for the great results. I have a few questions, actually. One is on the oil impact. I thought that lower oil prices would have an impact on your EBITDA. I think when we went to the roadshow, I think, like a 10% decrease would have a 2.5% decrease in EBITDA. Can you just tell us whether that's been the case or not? And why?

Yes, the oil impact. So the movement of prices locally in our markets is really the key factor here for our own P&L. The prices in the markets are not one-to-one elastic with global oil prices. So when global oil prices move as much as they have done, that is by no means reflected in the pricing in local markets. So we have seen some reduction of some fuel prices in the past few weeks as the global oil supply chain has been arriving at ports in our countries. And I would say, there has been, depending on the region, anywhere between 0% to 10% or 15% reduction in the price currently. And that is just starting to feed in. I do not think we anticipate any major change to our business either from an OpEx saving perspective or an overall P&L perspective as we move through the year. So we would not guide to make any changes based on these movements that we have seen or are seeing over the last few weeks. We would just recommend leaving that out of modeling.

Okay. Got it. But just to understand how that works. I mean, ultimately if this fuel price decreases by 10%, your revenues are going to be impacted on a quarterly basis. You would review your revenue on a quarterly basis with your clients? Or is it on a monthly basis? How does this impact the price with your clients? Is it monthly, quarterly price resets?

It is either quarterly or annually. Most of our power price escalators are quarterly. So there is a little time lag before that feeds in. So we get a little bit of OpEx benefit for a few weeks and then some of that feeds through to our customers at the next escalation date, which -- for the contracts, which are quarterly escalating now would be from the start of July. But again the impact is minimal.

Perfect. And just so -- I have just 2 more questions. On the FX, you are like -- you say 65% is in hard currency. Does that mean that you receive it in dollars in these countries? Or you receive it in local currency and you have to convert it? I am just wondering how much are you exposed to convertibility risk on that 65%.

Absolutely. Of those 65%, 40% of the 65% roughly comes from DRC and DRC is dollarized economy. so everything there is in dollars. We get paid physical dollars in DRC. And then the balance of the remaining 25% comes from a spread across all of our other markets. In those markets, the contracts allow these type of settlements in dollars or in local currency at spot rates. And so in those markets, where we do receive local currency, we sometimes do dollar swaps with the banks there if we need dollars. But yes, 40% out of the 60% (sic) [ 65% ] comes from DRC, which is all dollars.

Perfect. And just the next question is on the tax. So like how much tax should we expect going forward? I know it was a one-off, the $38 million, which was supposed to be paid at the end of the year related to your change of control with the IPO. But is there like still a significant amount pending? Or is not much? And then aside from that, how much tax roughly should we factor in for 2020 and going forward?

Absolutely. So from a corporate -- corporation tax perspective, ignoring the change of control tax for a minute, that is all funded from an escrow account from the pre-IPO shareholders. So from a normal corporate income tax perspective, the blended rate across our markets is around 30%; however, as you know we are in a tax loss position in most of our markets at the moment meaning that we just pay a de minimis amount of tax in those markets. That will change over the next few years, and as we guided at the IPO and reiterate today, we would see a gradual step up of tax to normalized levels at 30% of profit before tax over the next 4-year or so period. I think at IPO we guided that over the next 5 years we would gradually step up to a normalized level of 30% of profit before tax. So that is what to put in the model. From a change of control tax point of view, I cannot really comment on exact timing of future amounts, but it is funded by the pre-IPO shareholders in an escrow account. So it's not a -- whilst it comes through our bank accounts and, obviously, you see it on the cash flow statement as and when it goes out the door, it is not a cost to the company as such. It is effectively money in from the escrow and then money out immediately. It just so happens that when we did it around the year end, it straddled the year end period and so you saw the inflow in one period and the outflow in the next period. But that is just a timing thing.

Very clear. So last question on the M&A. Just trying to understand about the liquidity. You have around $150 million of cash on balance sheet, what is the minimum amount you would be comfortable with keeping on balance sheet? Like would you be comfortable with like $30 million, $50 million of cash on balance sheet and using the remainder for acquisitions? Or do you think you need more or much less?

Yes, I think around $50 million or so is reasonable. Obviously, we have got a fair amount of surplus at the moment but I think, yes, something around that level.

Got it. And so still on the M&A, we're wondering like could it maybe make sense to do the refi first and then the M&A because M&A you're likely to have a higher leverage, maybe the cost of debt would be higher or it will be cheaper. I guess it really depends and you do not want to -- I was just wondering whether you had some thoughts around that, timing of M&A before refi or vice versa.

Yes, I think to some extent we have got to be flexible on both of those options entirely, because of the window of the bond market we don't control, but also the M&A is reliant on third parties as well, so we don't exactly control timing of that. So I think we've got to be as flexible as we can on it. The refi is principally to refinance existing debt so I would say the acquisitions that we have in our very near term, which are the ones we have called out in our CapEx guidance, they are not reliant on the refinances to happen before they do. So I think, we will just have to play that one by year and be ready for both M&A or the bond market, depending on when the window opens.

Our next question comes from [ Mauritz Lang ] of DEG. Our next question comes from Peter Bartlett of GML Capital. Peter, please go ahead.

Yes, can you hear me okay? I am interested to know, following on from the previous question about the refi. I mean, your bond recovered to par. They did fall down quite sharply, I think, they got into around ninety-ish. Surely the right time to be refinancing is right now, I mean, given the global uncertainties particularly in terms of what's happening in emerging markets. Surely, if you are talking about the opportunity to refinance it is now.

Yes, I mean, I think, we are monitoring it. We are closely watching what the market does, both our bonds but also the wider market against these other EM bonds trading down more sharply than ours, but that also has recovered somewhat. So I think we are monitoring it weekly and we will go at the right time for us. We are not in a super rush to do it, but we do want to take the window when it comes. So I think we will monitor for now and see how it goes.

But to give you assurance, we are ready to do it off of our Q1 numbers when the right window occurs for us.

Can I just understand one thing. I mean, what does that mean? If the bond is trading at par, surely that is the rate...

Well...

Well it means that we believe that our true cost of debt should be lower than that, that's what it means. And the business is a resilient business, which is being demonstrated at this time and we will be watching developments to see where the market is moving to. But I think we believe that it would be premature to just do a refi now at par, given we are not in a rush to do it. So I think that is where I would be at the moment.

[Operator Instructions] We have a question from [ Mauritz Lang ] of DEG.

Can you hear me now? I had some issues.

Yes.

Yes.

My question relates to the regulatory -- low regulatory developed environment of your host countries. And I was wondering, with the heat maps rising in those countries and the budgetary deficits widening, do you expect any risks that both your clients and yourselves will be facing any claims from state authorities to cover up state deficits?

Well, first of all we have been operating in these environments for a long time and we are used to being very rigorous around our tax management and so on. So -- and the regulators are very professional in the markets we operate in regarding telecoms. We pay fees, our customers pay license fees, et cetera, et cetera. So from our perspective the business will continue as normal. We are used to rigorous tax audits and we have never had a problem in our 10 years of existing in these markets. So we are confident that it will be normal behavior. Tom, I don't know if you want to add something more to that?

No, I think that covers it.

We have no further questions on the line, so I'll hand back.

That's great. Thanks, Jordan. Well, look, thank you very much, everybody, for your time and great questions, and we look forward to giving you a half year trading update sometime in August. Thank you. Bye-bye.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.