Helios Towers (LSE: HTWS), the London-based tower company, through the first half of 2024 added towers and tenants that drove growth in revenues, Adjusted EBITDA and portfolio free cash flow (PFCF). The company operates in nine developing markets in East and West Africa (Tanzania, Senegal, Malawi), Central and Southern Africa (DRC, Congo Brazzaville, Ghana, South Africa, Madagascar) and Middle East and North Africa (Oman) that together have a population of 149 million people.
At the end of 2Q24, Helios Towers owned and operated across those nine markets 14,185 sites, up two percent on a year-over-year basis. Those sites supported 28,574 tenancies which grew 10 percent in the same period for a tenancy ratio of 2.01. The company has set a goal of reaching 2.2 tenants per tower and becoming free cash flow positive by 2026. Helios Towers says its business is underpinned by long-term contracted revenues of $5.5 billion, 99.6 percent of which is from large multinational MNOs, with an average remaining initial life of 7.4 years. Continue Reading
There are on average, three or more MNOs in the countries where Helios Towers operates. The company’s largest MNO customers in the region include Airtel Africa, Vodacom/Vodafone (NASDAQ: VOD), Axian, and Orange (NYSE: ORAN).
With the exception of South Africa, Ghana and Oman, mobile penetration in the remaining markets is less than 50 percent. Moreover, the MNOs across the nine markets still hold close to 20,000 towers.
Helios Towers sees potential upside for new tenant colocations on existing, build-to-suit, or acquired towers. The company points out, however, that it will only consider capital efficient investments that yield accretive returns either through colocations, operational efficiencies and highly selective BTS sites.
Helios Towers faces headwinds as these countries are dealing with stressed macroeconomic conditions and devalued foreign exchange rates. The company is able to offset some of those negative impacts by passing through energy costs to its MNO tenants and by indexing its annual lease escalators to local inflation rates, which averaged over four percent in the quarter.
Revenue for the quarter was $195 million, up 9 percent YoY, and Adjusted EBITDA grew 17 percent YoY to reach $104 million. Through 1H24, PFCF came in at $142 million, up 14 percent YoY, mainly driven by tenancy additions that led to Adjusted EBITDA growth. Capital expenditure for the quarter was $80 million including $57 million of discretionary capex.
Helios Towers updated its full-year 2024 guidance. At the midpoint, it now expects 2,000 organic tenancy additions for total tenancy growth of 7-8 percent YoY, Adjusted EBITDA of $415 million, up over 12 percent YoY, and PFCF of $285 million versus $268 million. The company is budgeting capex of $173 million, down from $203 million in 2023, as it focuses on capital efficient organic growth and improved return on invested capital.
By John Celentano, Inside Towers Business Editor
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