Helios Towers plc (HTWS) Earnings Call Transcript & Summary

Hello, everyone, and welcome to Helios Towers H1 2022 results. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions] I will now hand over to your host, Tom Greenwood, CEO of Helios Towers to begin. Tom, please go ahead.

Thank you very much, Nadia, and welcome, everyone, today. It's great to be speaking to you, and thank you very much for your time. I'm on Page 2 in the presentation. As usual, alongside me, we have Manjit Dhillon, our CFO; and Chris Baker-Sams, Head of Strategic Finance and Investor Relations. So the presentation takes a normal format. I'll take you through some of the key highlights. Manjit will take you through some of the financial details, and then we'll open up for Q&A at the end. So look, overall, very pleased to be presenting you our H1 performance highlights here. I think it's been a really strong start to the year for us demonstrating both the continued growth and sort of rollout from mobile operators across our markets combining that with demonstrating the company's resilience and protection mechanisms embedded within our contracts with some of the uncertain macro environment out there, plus some really good progress on our sustainability strategy. So look, I'm on Page 5 now, which just shows the key highlights. As mentioned, number one, very strong tenancy growth, both organic and inorganic. So far this year, we delivered 24% year-on-year site growth which -- of which 9% is organic and 20% year-over-year tenancy growth. In terms of last 12 months, organic addition. So year-over-year organic additions were at 1,767 , which for a 12-month period in our business is fairly strong. In terms of our financial performance, obviously, that is showing similar traits to the tenancy performance, revenue up 25% year-over-year, 12% organic, EBITDA 19%, 9% organic. Our margin of 51% as I very much expected, given some of the dilution with the new acquisitions coming on board. And so Q2 was our first full quarter of Malawi, which we closed right at the end of March. The margins very much were expected and very strong portfolio. Free cash flow growth of 36% as well, which we're very pleased with. In terms of our progress on the M&A. As everyone knows, I think, we have Oman and Gabon that we're still working on. Oman is nearing completion with the license hopefully coming soon imminently now and Gabon, we continue to progress. Of course, we're fully funded -- more than fully funded for closing these announced deals. And finally, our tenancy additions as we guided to the start of the year at 1,200 to 1,700. We maintain that guidance for now but I think I'm confident of it and have a good pipeline such that we may be looking at more directionally from mid to high points here. Moving on now to Slide 6. Here, again, we see the last few years' progression. Obviously, tenancy is growing 9% year-over-year and up quite significantly from 2020. Our EBITDA, again, growing 15% year-over-year when you look at the Q2 annualized of $278 million and to show good progress from our FY '21 figure of $214 million (sic) [ $241 million ]. And of course, portfolio free cash flow, driving that upwards by 20% when compared to the full year of FY '21. So all in all, we're progressing sort of in line or slightly ahead of expectations, and we're pleased with the progress so far this year. If I now move on to Slide 7. But clearly, we're at a time of the world where there's a lot of uncertainty out there and some of the headline figures that everyone is reading about particularly, say, in the U.K. or U.S. from an inflation point of view is looking quite staggering as compared to the last few years or even the last few decades. But what we wanted to still on this page is really draw out, a, some of these features of our markets, which may be a little bit different to some of the headlines that people are reading in, say, U.K. or U.S., but also demonstrate how our business is very robust and protected against certain macro pricing movement out there. So look, first of all, on the left-hand side, what we're seeing at the moment and as sort of demonstrated, I guess, from our H1 tenancy rollout, we're seeing good rollout from our customers. As I mentioned before, we also have a good pipeline in hand for the second half of the year and even going into next year. And subscriber growth across our market really is very strong at 4.4%, which as demonstrated here by some of our key customers as well, they're clearly investing. And we're supporting all of our customers and their continued rollout to gain even more subscribers going forward. So there's quite a good kind of industry backdrop, if you like, within most of our key markets. You then couple that with the general macro GDP. And actually, across our markets, on average, GDP forecast is 5%. So you compare that with global forecast of 3.2%. And actually, a number of our markets are growing very strongly and some indeed are actually net beneficiaries of the increase of sort of mineral and commodity and foodstuff prices that we're seeing. So they're actually getting quite a lot of inflows. We do have some markets though where such as Ghana and Malawi where we have been seeing a bit more FX volatility and sort of CPI increases. But of course, our business is largely insulated against those through, a, our CPI and general sort of power price escalators that we have and be our hard currency mix. So again, our business and our contract is largely hedged against those. And of course, finally, there's the rising interest rate environment. Well, we have long-term debt at fixed rate. So we're not looking at any refis or anything like that around them. And of course, we're already fully funded for our acquisition. So again, we're in quite a strong position there from both business operating perspective. And a capital balance sheet perspective, again, underpinned by $5.3 billion of contracted revenues from our customers. So business in a fairly strong position, I would say. Moving on now to Slide 8, look at quick reminder on the recent acquisition. Journey we've been on the first 3, Senegal, Madagascar, Malawi, obviously not closed. Malawi off to a really good start, having closed just at the end of March and really getting off to a good start in Q2 both operationally with power uptime improving. We're building sites now having received our first large build-to-suit order as well as colo order, and you'll see that coming through later this year and into next year. As I mentioned earlier, Oman is very much nearing closing. We have extended the long stop date with Oman until September 30 albeit what we have would guide to is the simplicity in all your models and forecasts, just put Oman starting from January 1, just given the slightly unknown timing that we've been experiencing that I think that would be prudent to do so. So that would very much be what we recommend there. And of course, Gabon is moving. I would sign Gabon earlier in the year, we were moving quite well. I think with the discussions there with the regulator, obviously, alongside Airtel, that kind of slowed a little bit the last couple of months. We still very much are working on it, but it has slowed down from earlier in the year, but we continue to push on with that as well. Moving on to Page 9, and Senegal was the first acquisition in our recent acquisition journey. And we recently had our anniversary there. So we thought it is good just to highlight some of the key features of our first year operation now. And I would say it's really been a good success, Senegal, and continues to be. So here on the top right, you see Karim, who's our Senegal Managing Director; and Phil, who is our Regional CEO, who covers Senegal and supports Karim, and the team there. And the team have really done a great job over the past year or so. First of all, operationally, we've improved power downtime per tower by 96% since started. When we took over the network, the downturn per tower per week was 5 minutes, 57 seconds. We've reduced that in a year to 14 seconds. And you can see a very nice comment there by the CEO of our main customer. Tenancy growth has been good at 7%, and that continues. We will be seeing further build-to-suit rollout and colo rollout through H2 this year in Senegal. So that's moving well. And then obviously, EBITDA growth has been strong at 12%. What I would say, though, is remember, Senegal uses the Central African Franc, which is Euro [indiscernible] so what this EBITDA growth represents the 21 million that you see in Q2, that's euro EBITDA. Now Euro depreciated 9% against the dollar since we closed. So actually, on a constant currency basis, you see that 21 million, actually about 23-plus million, which would equate to about a 20% growth. And obviously, the dollar has been very strong recently but potentially maybe that rebounded and the dollar weakened slightly as we move into next year and the Euro becomes a little bit strong again. So actually, that would be 20% growth on a constant currency basis with the dollar-euro. So really, really great progress there by the team. And we're hoping to replicate this kind of thing in all of the markets that we close. And indeed, next year, what we'll present to you one of these calls will be a roundup of all of our recent acquisitions in the same vein as this. Moving on now to Slide 10. I mentioned earlier, we're making really good progress on our sustainable business strategy. And I'm very pleased to say that we received our first rating from MSCI, which actually was AAA which I believe is their top rating. So we were very pleased about that. So huge well done there to Sima, our Head of Sustainability, along with Manjit. And to be honest, a huge amount of the team from across the group who did contribute to this. Also, we had been included in the FTSE4Good Index, you can see there on the bottom left, again, demonstrating our strong focus on sustainability practices and processes across the group. As you will remember, we launched our sustainable business strategy at our Capital Markets Day in May, and that is generally progressing well through to 2026. On the right-hand side here, what we've done, we've actually just shown you a few of the kind of internal KPIs that we are looking at. And these cover everything from sort of network performance to rural connectivity to female empowerment to investment in people, staff training, et cetera, as well as the carbon emission reductions, which we've set up to reduce on a per-tenant basis by 46% by 2030. So these are the kind of KPIs that we follow internally and we thought it'd be useful to show them here. So look, without further ado, I'll hand over to Manjit to take us through the next section. Over to you, Manjit.

Thanks, Tom. Hello, everyone. It's great to speak with you all today. I'll be going through the financial results and starting on Slide 12. Continuing on from what Tom mentioned earlier, we've had a strong first half of the year, and that really reflects continued organic tenancy growth, complemented by integration of our acquisitions in Madagascar, Senegal and Malawi. On the slide, you'll see that we've summarized the main KPIs, which I'll be talking through in more detail over the next few slides. But in general, we're seeing good growth across a number of these key metrics. So jumping into the detail. Moving on to Slide 13, our site in tenancy growth. Again, we've seen strong organic and inorganic tenancy growth in Q2. From a site perspective, we saw a 24% increase year-on-year, reflecting organic growth of 9% which is plus 878 sites and complemented by 1,213 acquired sites across Madagascar and Malawi. From a tenancy perspective, we've added 3,459 tenancies, which is a 20% increase from Q2 '21. Organically, we added 1,767 tenancies, again, a 9% increase year-on-year. And inorganically, we added 1,692 tenancies, again, coming from Madagascar and Malawi. Our tenancy ratio has dropped slightly on a group basis, and this is due to the lower tenancy ratio of the acquired sites that we brought on board, which had a combined tenancy ratio of 1.4x. So diluting the overall tenancy -- the overall group tenancy ratio slightly. Excluding these acquisitions, our tenancy ratio has remained flat year-on-year, and that really reflects the strong site growth across our markets, which provides an enlarged base for driving lease-up and, therefore, returns going forward. On to Slide 14. We've seen continued growth in revenue and EBITDA with 27% revenue growth and 19% EBITDA growth year-on-year, up organically 14% and 9%, respectively. The revenue growth is principally driven by tenancy additions in addition to a 3% increase in lease rate per tenant. The lease rate per tenant movement reflects a 4% increase across our established markets and partially offset by our new markets coming in with lower lease rates on average. Adjusted EBITDA grew by 19% year-on-year and 9% organically, again, really driven by organic tenancy growth of 9% and again, contributions from our new markets. EBITDA margin declined 3 percentage points year-on-year to 50% for the second quarter with 1 percentage point being due to increased corporate SG&A investments as part of our ongoing expansion to 10 markets, which have already included as part of our overall guidance for the year. The remainder of the margin impact is driven by the timing of higher fuel costs, particularly in DRC. There can be a lag between the local fuel price increasing when we escalate customer lease rates for those increases. And so that's what we've seen a little bit in the quarter, a bit of a higher OpEx base from fuel increases in Q2. But of course, that will normalize as our customer escalations kick in, in Q3 and there afterwards. Moving on to Slide 15. Let me highlight how the macro environment has evolved across our markets and demonstrate how our earnings and revenue is well protected from these movements. So starting on the top left of the table with fuel. We can see that on average, local fuel prices are up 31% year-on-year in 2022. We have power price escalators embedded in all of our customer contracts and accordingly we've seen a 4% increase in our revenues. Some of the more recent local price increases, again, specifically with DRC, occurred shortly after the last contract escalation date. So there's been a bit of a lag in catch-up. However, we'll see further quarterly escalations kick in, in Q3 and Q4. From a fuel perspective, though, the escalators have worked such that the revenue increase has broadly offset the increase in OpEx, so largely EBITDA neutral from a dollar perspective. Local CPI is up 6% year-on-year in our markets, which is actually lower than what we've seen in the U.S. and U.K., for example, and that's principally driven due to markets at Tanzania where we're seeing inflation around the 4% level year-on-year. Our revenues are up 3% from our CPI escalators, which occur annually, and that's in line with what we would expect, given that just over half of our customer lease rates are tied to CPI. Further currency movements on -- further currency movements on a revenue blended basis, we've seen a depreciation against the dollar of approximately 3%. And as Tom mentioned, that's principally related to both movements in the euro and also the Ghanaian Cedi. With circa 50% of our revenues either being in Euro [indiscernible] or in local currency denominated, that impact on our revenue and our revenue base is just under 2%. So here, we see the CPI escalators offsetting the FX impact really quite effectively with minus 2% FX impact being offset by 3% CPI increases. So whilst there has been macro movements, the contracts have escalated as expected, which when combined with 9% revenue growth from organic tenancies and 14% from inorganic growth leads to 27% year-on-year revenue growth. Moving on to Slide 16. Here, you'll see the usual breakdowns provided, which are very consistent from previous updates and again, further demonstrate our robust business structure underpinned by long-term contracts with a diverse quality customer base with strong hard currency earnings. 98% of our revenue come from large blue-chip MNOs, comprising mainly Airtel Africa, MTN, Orange, Free, [indiscernible] Axian, Voda and Free Senegal. Our single largest customer exposure is 27%, and that's spread across 5 different markets. We have strong long-term contracts with our customers. And as at the end of H1, we had long-term contracted revenues of $4.2 billion with an average remaining life of 7.2 years. This increases to $5.3 billion pro forma for Oman and Gabon. And what this effectively means is that excluding any new wins and rollouts, we already have that revenue contracted and that provides a strong underlying earning stream to the business. We also have 63% of our revenues in hard currency, being either U.S. dollars or euro [indiscernible]. As a reminder, this will increase to 68% pro forma for the announced acquisitions, which is used to close, which from an EBITDA perspective, translates to 73% in hard currency. So fantastic natural FX hedge for the business. And again, this is further complemented by escalators, which we have in all of our customer contracts, which we demonstrated on the previous slide. Finally, on the slide, with the new market expansion, we're seeing a more diversified split of revenue per market and pro forma for acquisitions, no single market accounts for more than 32% of revenues. Moving on to Slide 17 and I look at our cash flow. As mentioned earlier, we've seen solid free cash flow of $100 million -- portfolio free cash flow of $100 million. This is up 36% year-on-year, and that's principally driven by adjusted EBITDA growth in addition to the timing of nondiscretionary CapEx. Portfolio free cash flow conversion was 74%. By year-end, with further nondiscretionary CapEx outflows expected in H2 in line with our CapEx guidance, we would expect it to be a touch lower towards 65% to 70% conversion level by the year-end. With regards to working capital, we've seen a $53 million working capital outflow, and that just reflects the timing of customer payments, which is lumpy and can struggle period end. And that's typical for our business. And finally, some working capital is also related to CapEx prepayments as we go into the second half of the year. Importantly, receivable days remains in the range of 45 to 55 days, which was seen as consistent over the past few years. On to Slide 18 and a look at CapEx. For H1, we incurred total CapEx of $132 million. This includes $43 million of acquisition CapEx, principally related to our entry into Malawi and $89 million of organic CapEx. Our guidance for the full year remains unchanged, and that reflects $650 million related to the acquisitions across Oman and Malawi in addition to some deferred consideration for Senegal and Madagascar. Our organic CapEx guidance remains unchanged at $160 million to $200 million, and we've incurred $89 million against that from H1. Nondiscretionary CapEx remains again unchanged at roughly $30 million for 2022. So far, we spent $9 million in the first half. So the majority should come through in H2. Moving on to Slide 19, which shows a summary of our financial debt. Our net leverage at H1 was 3.9x and continues to be comfortably within the target range of 3.5x to 4.5x. We do expect this to tick up towards the higher end of the range as we close the other markets during the course of the year, as we previously discussed. But in general, leverage very much under continued tight control. As it stands today, we currently have $730 million of available funds, which is sufficient for our announced acquisitions and our organic growth, which for our established markets is self-financing. One thing to mention as well, which Tom spoke about earlier, is that we partnered with Rakiza in Oman, a great local infrastructure investor with significant local experience and expertise. They're investing 30% pro rata in the local business, which not only derisks the investment for us but assists with our leverage. So a great overall development, and we look forward to working with and partnering with Rakiza over the coming years. Another good development to mention last month, we were actually at Fitch for our first rating and received a rating of B+ with a stable outlook. This rating which is our highest across the rating agencies reflects our recent diversification into new markets, our leading market positions and long-term earnings and cash flow visibility. And we are now rated by all 3 rating agencies. Finally, a quick comment on balance sheet. We sit on a very strong balance sheet with long-tenure debt, as Tom mentioned, with the nearest maturity for drawn group that not until the end of 2025. Our drawn debt has a weighted average remaining life for 4 years. We have very limited floating exposure for 96% of drawn debt being fixed, again, giving us good protection against the rising interest rate environment. Overall, we're in a great position to say that if we do choose to do any financings or refinancings, we'll be doing this for strategic reasons and where possible, continuing our trend of reducing the cost of debt. And finally, on to Slide 20. Again, as Tom mentioned, our guidance remains unchanged, and the group continues to target organic tenancy additions of 1,200 to 1,700 in 2022. We have exceeded our seasonality guidance for H1 with 675 organic tenancies delivered year-to-date. From a financial perspective, we're tracking in line or ahead of guidance with lease rate per tenant at 3% and EBITDA margins of 51%. So all in all, we're progressing well against our targets and remain very focused on continued delivery for the years ahead. And with that, I'll pass back to Tom to wrap up.

Thank you very much, Manjit. So just on '21, a quick wrap up here. So number one, we've had a really strong start to 2022 with H1 operational and financial performance. Very much robust and moving in the right direction. I think we're demonstrating the resilience of our business and the robustness of our contracts in the midst of some moving macro elements here. And of course, we're seeing good progression with our tenancy rollouts and investment from our customers. And last but not least, our guidance as being reiterated. So with that, I will hand back to Nadia, and we'll take some questions.

[Operator Instructions] And our first question today comes from John Karidis of Numis.

If I may, I'd like to ask 3 questions. One at a time. So firstly, aside from Airtel and Vodacom, you gave us some quotes at the beginning. Have you had any meaningful signals from customers of any plans for them to delay tenancy orders to Helios because, for example, of macro uncertainty. So apart from -- so setting aside what Airtel and Vodacom said, please?

John, Tom here. Thanks for the question. The short answer is no. I can't actually think of any customer who said that to us. And we're for sure in conversations with basically most of our other major customers about new rollout at the moment. Indeed, we have some orders in hand which you'll see coming through in the second half and others that we're trying to win at the moment. So no, we haven't seen any sort of specific hold back from them as of now.

The next one, has -- have you experienced any meaningful change, positive or negative, in your supply chain versus previous periods?

Thanks, again, John. Look, the supply chain continues to be different to what it was 2, 2.5 years ago pre-COVID and what that means is that typically, shipping times are longer and shipping is more expensive. Albeit it's sort of relatively small dollars in terms of what we invest in CapEx. You don't really see that sort of in our numbers as such, but it is more expensive for our container ownership. So no, we haven't seen any real changes up or down in the past few months, John, since the last update. But we're continuing to really plan ahead 6 to 9 months at the moment, where as you know, before, it was more like 3 months or maybe 6 months maximum. So things have extended by about 3 months. So we've already put up a lot of our orders for 2023, for example, already, and we did that in June and July, whereas 3 years ago, we would have probably been doing that in September and October. So that's the main change.

And then lastly, the closing of your tower acquisition in Oman could be as much as a sort of a year late. If that is possible for you, have you at least been able to build some sort of shadow order book with the lights of Vodafone, for example?

Yes, the short answer is yes. And we always try and do that in any market to sort of get off to a good start on closing. So we'll have a sales process going on pretty much from when we first get on the ground and start opening an office and recruiting a team there. So yes, Oman is no difference in that sense and we are seeing traction from Vodafone there in Oman even prior to closing.

And our next question comes from Jerry Dellis of Jefferies.

Yes. 2 questions, please. When we think about your full year guidance on tenancy adds, the 1,200 to 1,700, I suppose that implies quite a wide range of outcomes for the second half, 60% of full year tenancy adds guided to come from new sites. I think you probably have quite good visibility then on that sort of element of the guidance. So how should we think about the reasons why the full year guidance range on tenancy adds remains so wide? Where is the sort of uncertainty in where you might land within that wide range in the second half? And then secondly, related to the sort of Oman situation, we obviously read about other parcels of mobile network operator towers that might be available or becoming available within your footprint. At what stage do you think that there's sort of an opportunity cost tied up in Oman, which doesn't enable you to move for alternative acquisitions that might be sort of easier to complete and for how -- at what stage do you decide to maybe strike out in another direction?

Yes. Thanks, Jerry. So yes, look, on the tenancy guidance, yes, look, we're aware that the 1,200 to 1,700 is fairly wide. I think we're feeling fairly confident about it. As I said earlier, I think some directionally mid- to upper half of that range is, I think, sort of where we're tending to, which is obviously good. I mean, at this point of the year, there's basically a couple of things which can drive that sort of up or down, one is the timing of rollouts. So particularly when you're doing a lot of build-to-suits, your reliance on a huge amount of external parties to actually get the build-to-suits up and running and therefore, recognize principally your reliance on a bunch of external agencies who need to provide permits, such as environmental agency, local municipality for a building permit and more often than not the Civil Aviation Authority. So those 3 agencies all operate at different paces, sometimes they are quick, sometimes they are slow and it can just provide variability often as well, they're processing sites in patches if we're doing a whole bunch of sites at one time, for example, the Civil Aviation Authority, in a given market, maybe processing 50 or 100 sites at the same time. [indiscernible] great. If they don't, then that probably means we're going into next year. So it can be a bit binary from that perspective, which is why at this point of the year, we're still a little bit cautious about things like that. And the other factor, obviously, is the sales process itself. So there's a number of opportunities, which we're in fairly advanced stages on. We're feeling quite good about them but they haven't signed on their dotted line yet. So again, that brings a bit of variability into it as well. But all in all, we're feeling quite good about the progress, certainly so far this year in H1 and the pipeline that we've got for H2, we're feeling reasonably good about. The second question on Oman, basically, when would we walk away? We're not in that head space, to be honest, at least not at the moment whilst things have moved slowly there, they are moving. We're just sort of coming out of the summer break where a lot of things slow down or sort of shut down for a month or 2. But we are -- we do understand that our license is kind of imminently to be signed. So we're waiting eagerly for that. And then once that has come through, then we'll be in the kind of the closing straight proper as it were, which is effectively just getting all the legal things ticked off and money drawn from our partner, Rakiza, prior to closing. So we are confident of closing Oman. We're not looking at sort of dropping it at all in any way. And I'm confident that we will close that reasonably soon. I think there are opportunities out there in terms of other tower deals. They come up obviously generally quite regularly. Again, we always assess them, but we're very happy with what we've signed and announced, and we're just super focused on closing them and moving forward.

That's very clear. Could I just ask a follow-up on a different question, please?

Sure.

You mentioned again planning ahead with inventory levels 6 to 9 months. Are you confident that current inventory levels are sort of enough? Could that be a scenario in which you might decide you have to sort of raise stock levels a bit further in order to sort of be very comfortable that you can sort of deliver on build-to-suit objectives?

Yes, we are comfortable with current inventory levels, I would say. We're actually quite well stopped in some of our key markets where we well either believe or know that we've got rollout coming soon. So I think we're quite happy at the moment. As always, there can be peaks and troughs on this from time to time. So we're looking at a few potentially very large rollouts, which are more on next year's business, to be honest, rather than this year. So that may mean that we need to increase inventory levels a bit for a short-term period, in which case we would do that. But yes, nothing kind of as on the ordinary to be honest, Jerry. We're just keeping things roughly at this level with the sort of natural peaks and troughs that occur as it utilized and new inventory brought in.

Our next question comes from Alex Roncier of Bank of America.

I will have actually 3. Most of them actually following up on some of the earlier questions. The first one is just on KPIs and [indiscernible] in H1. Just wondering if it just -- and you highlighted to some point, but is it faster build? Is it just faster permits from regulatory agency? Or is it just higher demand from MNOs? And largely, obviously, you've talked a little bit about no change in guidance, confidence in mid- to high range. But I do believe that MNO budget are kind of set in Q3, Q4 every year. So do you think implicitly, I mean the kind of front load in their BTS program this year? And secondly, just on Oman, and I think for you, this is kind of more of a blueprint and test for Middle East, are you already discussing with new partners there? And will the partnership actually with Rakiza help in Oman or is it just mostly locally focused? And then lastly, it's maybe a bit more holistic, but obviously, given the volatility we're seeing on energy markets, looking backwards or even forward, anything you think you should have done or could have done better and differently in terms of matching energy costs and your contract rates and escalators?

Yes. Thank you very much, Alex. Great questions. So let me take them in order. So yes, look, in terms of the KPIs, so I guess the question is sort of why the higher tenancy rollout this H1? Is it quicker? Or is it just more orders? Yes. Look, I think it's largely more orders in hand at the start of the year. So quite a lot of the tenancies that rolled out in H1 were obviously negotiated or ordered towards the end of last year or very early this year. And I think that's just a factor of MNO demand and their needs to both expand our networks and also upgrade that or increase their density. General volumes through networks have obviously increased in the past couple of years, particularly on the data side. And so that really drives the need for more tenancies or more antenna, which means a tenancy for us. So yes, I think it's just simply more volume rather than any specific speed to rollout point. And I think it's probably worth making the point that often, particularly Q1 and to some extent, H1 for us can actually usually be quite quiet because MNOs typically get their budget done in Q1 or Q2 and then that leaves some orders being placed and then more rollout in the second half of the year for us. This year has been slightly different on the upside for us for that, which has been good. And I think it's just down to share volume of demand, basically. Yes. In Oman, there are other tower portfolios in that market. There are other tower portfolios, obviously, around the Middle East, which may well be on not for sale at some point. We'll always look at key portfolios that come up for sale in both our countries and also the regions in which we operate. So there could be potential there for expanding network, either in Oman or across the region at some point. We do know though that these deals tend to take quite a long time as we're -- as we always experience. So in terms of our strategy and what we're focused on right now, as we articulated previously at the Capital Markets Day that the focus for this year 2022 and going into next year is very much focusing on closing the deals we've signed and announced integrating them into our business, getting our business excellence processes going across all these markets and driving the organic growth with a view of potentially more acquisitions in the slightly more medium-term horizon. Of course, what that means is that work needs to start now from a business development point of view because the gestation period on these deals typically is 1 to 2 years. So it's good that there are opportunities out there. Of course, we'll always look at them. Sometimes we'll like them, sometimes we won't and we'll walk away. Very happy to do that. And we'll look to kind of assess each opportunity one by one. And just your last point there on Rakiza. Yes, for sure, Rakiza, our partnership we have there with Rakiza, I think, is a great partnership. We're very pleased with Rakiza as our partner in Oman. And look forward to a very long and fruitful relationship with them in the country. Just on final point, energy volatility, anything we could or should have done better. I mean I think what we've done well, I think, is customer contracts, I think, very well hedged both from an energy point of view, but also from a currency point of view, but I guess here, we're speaking specifically about energy. So we have energy pass-through basically in all of our major contracts across the group, which does mean that we're pretty well insulated whether prices are going up or down. Obviously, at the moment, we're going up. Now it's not 100% perfect. There is obviously a short time lag there with some of our contracts being quarterly and some being annually. So it's not an absolute perfect hedge, but it's fairly good, I would say. I think what we're really focusing on now and have been focused on across the years, but very much, probably even more so now is reducing reliance on fuel in general. And we've articulated that through our carbon reduction strategy. And today, we have some form of renewable technology, either hybrid batteries or solar at about 30% of our sites, if you exclude the very recent acquisition. And as we articulated last November in our carbon investor presentation, we're aiming to take that up to about 75% of our entire portfolio over the coming years. And that will really help to even reduce further our exposure to diesel pricing as well as obviously reducing carbon, which is the key aim of it. So yes, I think that's our real big focus going forward.

And the next question comes from Omar Maher of EFG Hermes.

Just 2 questions from my side. One is on Congo B. So I guess, if I look at the last 9 months, the pace of expansion in site additions has been faster than what we've seen in many years in that market. And at the same time, we're not seeing any meaningful pickup in number of tenants essentially. So if I look at the tenancy ratio, it's been largely sort of like sliding a little bit down. And I wanted to understand that what is -- if you could provide some highlights and explain what's happening in that market, like you're obviously probably seeing some future demand coming, and that's why I'm guessing you're expanding the number of sites. But at the same time, what is delaying this pickup in the tenancy in that market? And then my second question is on Ghana, actually, with the recent news that we saw on potential acquisition of Vodafone Ghana, how does that change things for you?

Yes. Thank you very much, Omar. Thanks for the question. So taking the first one, Congo B, yes, look, we've seen some good site growth there, and this has been through build-to-suit orders, which, to be honest, we haven't seen much of in the previous 5 or 6 years. It's been great to be getting those build-to-suit orders in. The thing about build-to-suit is typically there will be 1 tenant site from day 1. And then over time, we aim to put colocation tenants on them. We usually expect to build-to-suit when we underwrite it to get a second tenant on between 3 to 5 years. That's roughly the sort of normal or the sweet spot. Obviously, we try and push harder on that from a sales perspective and try and get them on within 6 months or 1 year or even from day 1, in some cases, but the norm is 3 to 5 years when we underwrite the build-to-suit. So that's why initially you see when the site growth is happening, you see that grow, but the tenancy ratio will get diluted a little bit because unless you're adding colocation as well at the same time, inherently, the sort of fraction that calculates tenancy ratio will drive a slightly lower ratio initially but a larger asset base. And then over time, as you put more colos on, that tenancy ratio should grow. So we're very much on plan in Congo B, as I said, 3 to 5 years is the norm. And you should see that tenancy ratio grow in these new build-to-suits over that time scale going forward. In Ghana and Vodafone, yes, we've seen the announcement. Obviously, we continue to work with Vodafone as we do with all of our customers in Ghana. And from a contract perspective, there's no change essentially when the new owner comes in, in any of our contracts. So we just continue with that contract going forward. We're monitoring that situation and we'll be working with the new owners, as and when or if and when that deal closes. And for now, it's very much business as usual.

And then next one is on Ghana, if I may just a quick follow-up on that. We've seen the average lease rate sliding -- has been going down for a while in Ghana. So is it an issue of competition? Or is there something else that is like pressuring the lease rates that we're not aware of?

Yes. In Ghana, specifically, Ghana is one of our markets with probably the most exposure to the local currency, which is the Ghanaian Cedi, and that has obviously dropped off against the dollar recently. So when you -- we report in dollars. So when you're looking at the average revenue per tenancy for Ghana, you're seeing it in our report in dollars and obviously, because the Cedi depreciated, you're seeing a lower figure. But there hasn't been any change to the underlying sort of lease rates there. And we will be seeing power price escalators kick in, in Ghana through the rest of this year, and we'll be seeing CPI escalators kick in there in Q1. And obviously, CPI is running quite high. So you'll see a bit of an uptick there in Q1 when they kick in, in a few months' time.

Our next question comes from Jonathan Kennedy-Good of JPMorgan.

Just a couple of quick ones from me on the level of CPI inflation that you're observing in the country is obviously a little bit lower than what I thought it would be versus developed markets? How -- is that rolling over? And do you think the inflation levels have peaked? Or given currency devaluation in some of these markets, do you think that could rise still? Any thoughts there would be helpful. And then in terms of the tenancy seasonality, obviously, you mentioned pretty strong in the first half. Are there any obvious kind of drivers of that in the key markets. I'm talking more from an organic perspective, DRC, Tanzania and whether there are certain operators that are driving this? And then finally, just on cash flow repatriation to your Holdco. Is there any -- are there any issues in certain jurisdictions? I think Ghana may be somewhat dislocated at the moment. So it would be interesting to know if you're experiencing any issues there? And that's it for me.

Yes. Thanks, Jonathan, for the questions. Let me take them in order. Look, the level of CPI inflation, yes, as you've seen, sort of blended average across our markets is about 6%. Clearly, that's lower than headlines you're seeing elsewhere, U.K., U.S., et cetera, in the world. We do have quite a wide range without those. So Tanzania is 4%, I think DRC is 6%. Obviously, DRC is dollarized, and there are the 2 largest markets, so have the biggest sort of impact on this -- on the average. And then at the other end of the spectrum, you've got Ghana and Malawi, which sort of well into the 20s in terms of inflation. Now those markets typically run double-digit inflation anyway. So they've gone up from low to mid-double digits to sort of 20s. Of course, those 2 markets are pretty small for us, particularly Malawi, which is very small from an overall group percentage perspective. So there's not much impact on us from that. The question is, has it peaked? I guess that's the million-dollar question for a macroeconomic expert, way above my pay grade. But look, I would suspect that there's probably still a bit more to come. Sometimes you see a bit of a ripple effect. When inflation happens in sort of U.S. and Europe, and then it maybe ripples out elsewhere. So let's keep monitoring that. We're not sort of overly concerned about that. We do have the CPI escalators in our contracts. So to the extent that we do see a little bit more come through same time as in DRC, which obviously has fairly low inflation at the moment, then we'll absorb that through our escalators. But let's see, I think both of those markets, to some extent, have a fairly strong position here with the commodity and food prices around the world going up because they export a lot of it. So I think they may be on a slightly different trap to countries like the U.K. which is obviously in a slightly different place. So let's see. Tenancy seasonality. Next question, any obvious drivers of that? Look, I think we're actually seeing -- there's no sort of single 1 customer that's driving that, to be honest. I think we're seeing good competitive tension between the mobile operators in our key markets, particularly Tanzania and DRC are both markets that extremely low mobile penetration today. They've both got 4 major mobile operators with no one of them over, I think, 35% or 40% being the max and the sort of #1 market share in both markets. There is very evenly spread market share, which is a very healthy environment for mobile operators and clearly, a good environment for tower companies to operate in and we are the beneficiaries of that healthy competition between the mobile operators. So yes, no obvious sort of one single customer driving that. I'd say we're seeing reasonably good demand across the board or across most of the board. And then, the final one on cash flow repatriation. Manjit, do you want to take that one?

Yes, absolutely. So we still hold around 80% to 90% of all of our cash up at group level. So we're still having -- we've always had the ability to upstream cash. The only potential things, which do happen from time to time, it's just the availability of dollars in the market, but we've experienced this throughout our time in operations. So when there is good availability at a good rate, you kind of do a bit of over conversion. And when it's not, you kind of hold for a period of time. But in general, there's nothing to really mention in terms of our ability to upstream. We're still doing it on a monthly basis. And you mentioned Ghana, I mean, look at that market, we do actually receive -- about 20%, 25% of our revenues are linked to U.S. dollars and received in U.S. dollars. So we can always move that around the business as well. But in general, still the vast majority held up the group, which is consistent with how we've operated since inception.

[Operator Instructions] And our next question comes from Simon Coles of Barclays.

Sorry, first one's back on tenant fees. If we take a step back last year, it was probably a little bit lighter than we would have hoped. So -- and then you obviously spent a bit of extra CapEx to drive tenancies this year. If we were to say, remove those tenancies, will we say that you're actually just running in the middle of the range because you're saying that you're sort of hoping that you're going to end towards the mid to the upper end? And then if we think to next year, I think you said you've got some big rollout contracts being discussed. Does that make you confident that you're sort of potentially upper end of your medium-term guidance, at least in 2023? Understand if you can't comment too much on that, but just wondering how that's going? Then secondly, thank you for the slide. I think it's 15. That's super helpful. Is there any big difference between markets? And I'm mainly thinking about DRC on whether the escalators are quarterly or annually? Is it still 50-50 in DRC just because the revenue per tenant there looks a little bit mixed, whereas, say, Tanzania has been growing quite nicely. But I realize there are lots of moving parts in there. And then sorry, if I can just ask one last final one. On M&A, are you seeing multiples from private sellers come down at all given what we're seeing with interest rates globally?

Simon, thank you very much for those questions. Let me take them in order. So tenancies last year being light. I think H1 last year was a little bit light, but H2 was extremely busy. And I think last year, we ended up with one of our highest ever years for organic tenancy by the end of the year, albeit absolutely H1 was like -- I think we did about 170 tenancies in H1 last year. But ended well above 1,000 or around 1,100, I think. Look, I think the progress so far this year has clearly been good. I think that we are in a position of having a reasonably good amount of either orders in hand or conversations ongoing for new rollout, which could come into this year or could go into sort of next year's business depending on when the conversations finalize and when the rollout starts. So I feel quite good about the number of conversations that we're having with multiple different mobile operators. So it's not like we're just reliant on 1 mobile operator, for example. We're obviously very, very diversified on that front. So I think this year could be another strong year for tenancies. As I mentioned before in terms of our guidance, 1,200 to 1,700. We could very well directionally be going towards middle or upper of that range. which would, of course, mean that, that would be our, I think, our highest rollout ever in a year, certainly higher than last year or the year before. So that's sort of good directionally, I guess. In terms of the CapEx, the CapEx really follows the currencies, particularly when it comes to build-to-suit because build-to-suits require CapEx. So that essentially kind of goes hand in hand with the tenancies. Slide 15, I think your question was about DRC escalations. And yes, most of them in DRC are quarterly. And on M&A, what are we seeing on the multiples? I mean, look, I guess sellers may well have a preconceived idea of what they want or what they expect from a valuation point of view. That may well be based on multiples of power values that were paid a year or 2 or 3 years ago. Who knows? And we may have a different view for that, and that's fine. And I guess it depends on how many other players there are out there who have the same or different views. And at the end of the day, some deals may trade or may not trade. Sellers may think, oh, we'll just wait a bit, inflation is running at 10% on the U.S. dollar. So maybe it's not the best time to do the tower sale at the moment or maybe they'll be the opposite and say, well, we'll look through that and buyers will look through that on the assumption that it comes down at some point and still be confident of getting a good deal. So we take each one on a case-by-case basis. As I said, this year, and to some extent, next year is all about the integration and the consolidation of the deals that we've announced and really starting to get the facts out of them within the Helios Towers group. And we'll look at any new M&A opportunities that come through and we made a line with the seller on expectations or we may not. And if we don't, then that's fine. We'll happily walk away, and if we do, great. But of course, these deals do have fairly long gestation period. So again, that aligns quite well with our focus right now on integration and consolidating what we've got.

And our final question comes from Stella Cridge of Barclays.

Many thanks for all the update so far. And I wondered if you could give us an update on the planned funding for the remaining acquisitions. So for example, what you would consider the main sources to be? And what kind of minimum cash balance you'd like to keep, obviously, given that we've had about volatility in global markets? And that would be great thing.

Yes. Sure. I'll pick this one up. So really, for the remaining acquisition, which is Oman in the short term, that's $575 million. We've clearly got cash on balance sheet, which would be utilized against that. Now we have Rakiza as a 30% investor. They will be investment pro rata for that. We are also investigating potentially a smaller local line in Oman. What we're finding at the moment is actually there is some really quite attractive pricing, particularly in Oman for local debt. So we may do a small portion of that. And if we do that, that would actually -- if all goes well, actually continue to reduce our overall cost of debt on a group basis. So I think a combination of the 3, cash on balance sheet, Rakiza coming in, potentially a small line up at the group level. We have undrawn debt facility settled about $270 million at the group level and maybe also a little bit of local debt in Oman as well. All of those will be the main source of funding for Oman and for Gabon, it's a smaller acquisition. So again, that will be funded either to cash on balance sheet to the group facility.

We currently have no further questions. So I'll hand the call back over to Tom for any closing remarks.

Thank you very much, Nadia, and thank you, everyone, for dialing in today. Thanks, everyone, for the questions as usual. If there's anything you want to follow up on, you know where we are, please feel free to contact me, Manjit, Chris any time. Very happy to talk to you again, and I look forward to seeing you all soon. Have a great day. Take care.