Helios Towers PLC
LSE:HTWS
Earnings Call Analysis
Q3-2023 Analysis
Helios Towers PLC
The company has been focusing primarily on organic growth, which has successfully driven up the tenancy ratio and the overall returns. They have seen an impressive expansion in EBITDA by 30% this year, and the Return on Invested Capital (ROIC) has been increasing, demonstrating a concerted pivot away from acquisition-led growth to organic expansion to boost return metrics.
There has been significant growth in future contracted revenue which saw a 37% increase over the last year, helped by the renewal of existing tenancies, addition of new organic tenancies, and an acquisition in Oman. This gives the company an estimated average of 7.8 years of future revenue secured, providing a strong foundation for ongoing growth and enhanced returns.
Management expects the momentum of strong organic growth to continue into FY '24, with a focus on organic expansions to further increase the tenancy ratio. There are no near-term plans for significant M&A, with the company targeting double-digit EBITDA growth and a reduction in leverage to below 4x by the end of FY '24. Additionally, the ROIC is expected to continue on an upward trajectory.
A new record for organic tenancy additions was set, with growth in all key operational and financial metrics. These results have put the company on track for an outstanding year of organic growth, prompting an increase in full-year guidance.
The net leverage has been reduced ahead of schedule, currently at 4.5x pro forma, within the targeted range. This was achieved by drawing on a term loan to manage high-yield bonds and other debt components. Looking forward, they plan to cut net leverage further to below 4x. They maintain a healthy pool of undrawn debt facilities and cash on the balance sheet amounting to roughly $550 million, providing ample financial flexibility.
The company has escalation clauses built into contracts that adjust quarterly and annually in response to local power price changes, which has enabled them to increase revenue while protecting EBITDA despite higher power prices. Their business model effectively withstands macroeconomic volatility, with tenancy growth and operational efficiencies driving growth. Notably, a significant portion of revenue comes from long-term contracts with blue-chip mobile network operators, providing a stable future earnings stream.
Due to stronger-than-expected performance, the full-year guidance has been elevated, with organic tenancy growth expected to be between 2,200 to 2,400, marking an increase from the previous estimates. Adjusted EBITDA is projected in the range of $365 million to $370 million, which is approximately 30% higher than the previous year. Portfolio free cash is anticipated to be between $260 million to $265 million, showing a healthy cash conversion rate of around 70% for the year. The capital expenditure forecast has been increased to $150 million to $180 million due to the higher expected organic tenancy growth.
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Good morning, everyone, and welcome to today's conference call titled Helios Towers Third Quarter 2023 Results. My name is Ellen, and I'll be the call operator today. [Operator Instructions] I would now like to turn the call over to Tom Greenwood, CEO, to begin. Tom, please go ahead whenever you're ready.
Thanks very much, Ellen. Hi, everyone, and welcome to the Helios Towers Q3 '23 performance and Outlook Call. Very good to talk to everyone as always, and I hope you and your families are well. Thanks very much for your time today. So today, we'll be talking you through our performance year-to-date, our FY '23 outlook and guidance upgrade and providing some early guidance on our FY '24 view. So first off on Page 2, we have the usual lineup to you, me Tom, Manjit Dhillon, and Chris Baker-Sams. We've got the business and financial update slides, and then we'll open to Q&A at the end. So now looking at Page 5. Very pleased to report that we've delivered very strongly year-to-date. And therefore, we're upgrading guidance across all our key metrics for FY '23. Our tenancy additions are already above 2,100, which was previously the top end of our guidance. So consequently, we're increasing that. And the large line of colocations delivered so far have driven our tenancy ratio up from 1.8% to 1.9% year-to-date. And importantly, we've seen our future contracted revenue increased 13% quarter-on-quarter and 37% year-over-year to its high ever level of $5.5 billion, underpinning our future cash flows and returns growth. Financial performance in Q3 was especially strong year-over-year with revenues up 28%, EBITDA up 35% of which 22% was organic. And our margin up 3 percentage points driven by the tenancy ratio increase, I mentioned earlier. Also, our last 12 months portfolio free cash flow is up 30%, driven by the EBITDA growth, and tight control around ground leases, maintenance CapEx in fact. Our balance sheet continues to strengthen, firstly, with deleveraging with a 0.3x reduction this quarter and 0.6x year-to-date and now at 4.5x, which we previously guided as our full year figure, meaning we've accelerated deleveraging 1 quarter ahead of the previous guidance on this further reduction expected this quarter, Q4.
We've effectively tendered $325 million of our December '25 bonds in September, therefore, extending a good portion of our debt for another 5 years. In terms of upgrades to guidance, we're increasing our FY '23 forecast across all key metrics with tenancy additions guidance moving up 15% and that 2,200 to 2,400. EBITDA moving up 2%, $365 million to $370 million, and portfolio free cash flow guidance increasing 9%. All of this thanks to our customers' trust and our ability to operate effectively and deliver high-quality service, our partner network and our people and teams across the group performing at the highest standard through our business excellence strategy. So now moving to Page 6. And here, we see that in FY '23, we're delivering a stellar year for growth overall, and most importantly, for organic growth. Now that our FY '21 to '22 acquisitive expansion trade is done, and we're focusing fully on organic growth to drive returns, our tenancy ratio has expanded 0.1x. You can see in the middle chart, our EBITDA jumping up 30% this year. And most importantly, looking at our ROIC, as previously guided, following our 2-year expansion program, we very much see our organic operational delivery bear fruit as a royalty banning back up to 12%, following the temporary dilutive effect of new acquisitions with low tenancy ratios. As an example of this, our Oman acquisition, which was closed in December '22, and was acquired at a tenancy ratio of 1.2x and now is already at 1.31x, less than a year into operations. So this, along with all our other markets are helping to drive our returns up on a group-wide basis.
Next on Page 7, we thought it would be useful to show the evolution over the past year of our future contracted revenue [indiscernible] our tenancy contracts excluding any future escalations or auto renewals. This future pipeline has grown 37% in the last year, driven by 3 key factors: one, the 10-year renewal of almost 2,500 existing tenancies in the last quarter; two, the 2,700 record new organic tenancy added in the past year; and three, the Oman acquisitions associated leaseback agreement. The $5.5 billion future contracted revenue reflects around 7.8 years average remaining life, which is a very strong base of which the business will deliver further growth and increased returns. Now on to Page 8. We wanted to provide some early guidance on how we see FY '24 shaping up and we'll provide more details on this in March at our full year release. But in short, we expect a continuation of the strong organic momentum and returns growth that we're delivering in FY '23. In terms of capital allocation, we'll continue to focus on high returning organic growth and deleveraging, with tenancy ratio expected to increase 0.05x to 0.1x through next year. Any significant M&A continues not to be our focus for the foreseeable future. Our tenancy growth and cost efficiency focus will deliver double-digit EBITDA growth next year. CapEx will be tightly controlled, and we expect leverage to be below 4x by the end of FY '24 as well as continued upward trajectory on our ROIC. So looking forward to updating you each quarter next year as we deliver this. So that's it for me for now. I'll hand over to Manjit and then speak to you at the end for wrap up and Q&A.
Thanks, Tom. Hello, everyone. It's great to be speaking with you today. I'll be going through the financial results and starting on Slide #10. Continuing on from what Tom mentioned earlier, we have again delivered record organic tenancy additions and strong performance across all key operational and financial metrics. And additionally, we continue to proactively manage our balance sheet. We are on track to deliver one of our best ever years of organic growth. And accordingly, we've increased our full year guidance, which I will speak about later in the deck.
On this slide, as usual, you'll see we've summarized the main KPIs, which I'll go through in more detail now over the next few slides.
So moving on to Slide #11, our site and tenancy growth. From a site perspective, we saw 29% increase year-on-year, reflecting organic growth of 633 sites and 2,519 acquired sites in Oman. Year-on-year, we've added 5,711 tenancies, which is a 27% increase from a year ago. This growth was through a combination of record organic tenancy growth and our acquisition in Oman. We've delivered 2,694 year-on-year organic tenancy adds and 3,017 tenancies through the acquisition in Oman. In terms of tenancy ratio, our tenancy ratio dropped slightly on a group basis, and this was driven by the lower tenancy ratio of these sites in Oman, which had a day 1 tenancy ratio of 1.2s. However, we've already increased our tenancy ratio in Oman by 0.1x, which is actually ahead of plan. And we're very pleased with the performance and this shows how well Oman has integrated into our business.
On a group level, organic tenancy ratio also expanded by 0.1x on strong organic lease-ups. And again, that will support margin expansion and returns.
So moving on to Slide #12. We've seen a 28% revenue growth and 35% EBITDA growth year-on-year. And importantly, from an organic perspective, that's 18% plus on revenues and 22% plus on EBITDA. We've seen strong revenue and EBITDA growth in all three of our reporting segments. Our Q3 EBITDA margin has increased by 2 percentage points to 52%. And that's driven by lease-up and on a constant fuel price basis, Q3 adjusted EBITDA margin would have been even higher at 53%. So moving on to Slide 13. And here, similar to prior results, I'll dig into the drivers of revenue and EBITDA growth in a bit more detail. The first four bars of each bridge, organic tenancy growth, power escalations, CPI escalations, and FX, all combined to make up organic growth, and acquisitions being the contribution from the Oman market. The organic tenancy growth of 2,694 tenants year-on-year has driven an 11% growth in revenues and 18% growth in EBITDA. But focusing on the escalation movements. And again, similar to previous presentations, the contractual escalators are all performing as expected. As a reminder, we have escalated in almost every customer contract in all markets for power, roughly 50% of our contracts escalate quarterly and 50% annually. And these escalation is relation to the local pricing of the power, so for fuel and electricity. So if the local prices go up, then the escalations go up and if the prices go down, then the escalations go down. With CPI, we have annual CPI escalators and they typically kick in between December and February.
Our power price escalators increased revenue by $7 million, and that falls through each about $2 million on EBITDA, driving roughly around 3 percentage point EBITDA contribution, as you can see on the right-hand side. The positive EBITDA contribution is partly attributable to the rollouts of about 1,100 power solutions year-to-date as part of our Project 100 commitment alongside other historical power investments. This again demonstrates that our business model has effectively offset any increase in OpEx due to higher power prices to protect our EBITDA on a dollar basis, while we continue to save fuel costs through our investments in power initiatives. Moving on to CPI and FX. Local CPI is currently below 10% with the majority of our CPI escalators haven't already kicked in earlier in the year, and that contributed 5% to revenue year-on-year. The CPI escalators have effectively offset the FX movements on revenues. And on the EBITDA side, the escalators have covered the FX movements very well, which you can actually see in the dotted box on the right-hand side. The reason we continue to show this analysis is because it is really a useful demonstration of the business mechanics. And again, standing back and to reiterate the message, looking at this from an EBITDA level, there was little to no impact to FX and power price movements with vol-protected for macro volatility. And here, you can see the key drivers of our growth really being driven by tenancy growth, both organically and inorganically and operational improvements, all of which are within our control and how we want to operate the business. Moving on then to Slide 14. Again, you'll see the usual breakdowns, which is very consistent from previous updates. That 98% of our revenues come from blue-chip mobile network operators comprising Airtel Africa, Vodacom, Orange alongside other large M&As, such as Omantel and Axian as highlighted that our largest customers are spread across a few different markets, again, showing how diversified our business is. As Tom mentioned earlier, we have strong long-term contracts with our customers. And at the end of Q3, we have long-term contracted revenues of $5.5 billion, the highest ever on record for us with an average remaining life of just shy of 8 years, up 37% from $4 billion a year ago. This means, again, excluding any new rental rollout, we already have that revenue contracted and in the bag, and that provides a strong underlying future earnings stream for the business.
We also have 64% of our revenues in hard currency, be either U.S. dollars or euro backed, and that falls through to 71% then looking at it from an adjusted EBITDA perspective. This provides a fantastic natural FX hedge for the business, and that's all complemented by the escalators that I spoke about in the previous slide. Finally, just to mention on this slide, with the new market expansion successfully completed over the last few years. We're seeing a more diversified split of revenues, with the Middle East and North Africa segment, now representing about 8% of our revenues year-to-date.
As a market leader in 7 of our 9 markets, we are very uniquely positioned to capture all the robust structural growth across all of our markets. Moving on to Slide 15 and a look on CapEx. On the left-hand side of the table, you'll see the Q3 year-to-date we incurred total CapEx of $149 million, which is mainly made up of growth CapEx, reflecting our strong organic tenancy builds and roll out during the course of the year. Our discretionary CapEx continues to be tightly controlled and focused on high returning investments, for example, colocations and OpEx efficiency projects. So, so far, the $149 million we spent on CapEx roughly trends in line with what we'd expect for the full year CapEx guidance. And then actually, in terms of guidance, the CapEx range we're now guiding to for 2023 is being upsized to $150 million to $180 million of on discretionary CapEx, up from $140 million to $170 million, and that really accounts for the fact that we're increasing our organic tenancy guide by about 300. Nondiscretionary CapEx, by the way, remains unchanged at $40 million. Moving on now to Slide 16 and just to walk through our debt liability management exercise we carried out in September. As a summary, we raised up to $720 million of facilities, including a $600 million term loan and up to $120 million RCF facility. We've drawn $400 million of the term loan to tender $325 million of our high-yield bonds and really repay $65 million that we had drawn on our old group term loan and a small portion to cover fees. This has had a neutral impact on our growth and net leverage. And as you can see on the chart on the right-hand side, with the new term loan due in 2028, we've effectively pushed out our weighted average maturity of debt by 1 year to circa 4 years. The cost of debt has only marginally increased from 6.7% to 7.1%, which is a fantastic result, I think, in a rising rate environment. And I think this really reflects the increased scale and diversification of our company over the last few years, doubling our platform from 5 to 9 markets expanding our footprint from Africa to the Middle East, whilst also growing our hard currency earnings and continually demonstrating our resilience and robust business model. Following the transaction, we'll continue to have around $400 million of undrawn debt facilities, and we'll continue to monitor our options around opportunistically managing our debt profile. For sum up, we are really delighted that this transaction as this further strengthens our balance sheet.
On to Slide #17. Our net leverage at Q3 2023 has decreased by 0.6x to 4.5x pro forma, and that's now within our target range, 1 quarter ahead of what we previously guided. We've always had a clear path to delever the business at about 0.5x per annum on an organic EBITDA growth basis, and we're committed to continue to deliver that. And as Tom mentioned, looking forward to next year, we'll target to reduce our net leverage again by another 0.5 in turn to below 4x. As previously mentioned, we've got a good amount of undrawn debt facilities at $400 million. And that, together with the $151 million of cash on balance sheet, means we have roughly around $550 million of available funds to the group. Importantly, our debt remains largely fixed with 80% of it being on a fixed rate basis, and this is all long tenured and again, with the average remaining life quite long at 4 years. Moving on then to Slide 18. And as Tom mentioned earlier on the call, again, we made great progress on our 2023 goals. And as a consequence, we've increased our full year guidance again. Given our robust tenancy growth and our strong commercial pipeline at the end of the year and also what's growing next year as well. We've increased our organic tenancy guidance range. We're now targeting growth between 2,200 to 2,400 tenancies compared to 1,900 to 2,100 previously, implying a year-on-year growth rate of around 9% to 10%.
For adjusted EBITDA, the increased range is now $365 million to $370 million with a midpoint at an increase of about 30% year-on-year, reflecting, again, all the strong tenancy growth and operational improvements that we've been putting through during the course of the year. And accordingly, portfolio free cash has also increased and now expected to be in a range of $260 million to $265 million, and that represents a rough cash conversion of about 70% this year.
Due to the higher expectations on growth and tenancy growth, we've updated our CapEx range, which I spoke about earlier. But as you can see, we're on track to deliver one of our best ever year to organic growth in 2023. And again, this just simply demonstrates the proven and robustness of our business model through macro volatility, our focus on business excellence as well as the really compelling structural growth of all of our markets. And with that, I'll pass back to Tom to wrap up.
Thanks very much, Manjit. So on Page 19 now. And look, clearly, we're in a time of significant momentum in the business. And we're really pleased with the performance at the moment and the outlook. So look, FY '23 is said to be one of our best years ever for organic growth and total growth for that matter as well. And of course, we've upped and increased full year guidance across all the major metrics. Our new markets, very pleasingly continue to demonstrate lease-up. We've given the example here of Oman. And supporting the EBITDA and ROIC growth. Net leverage has accelerated its reduction and is now fully within its target range 1 quarter earlier than previous guidance, and we've increased average debt maturity with marginal increase in cost of debt with the tender of the bonds we mentioned earlier. And as I mentioned before, continued momentum expected into next year. We're really focused on organic growth with lease-up of 0.05x to 0.1x next year, double-digit EBITDA growth and net leverage below 4x. So with that, I'll hand back to Ellen, and we'll open for Q&A.
[Operator Instructions] Our first question today comes from Emmet Kelly from Morgan Stanley.
Yes. Good morning, everybody, and thank you for taking my questions. I've just got two questions, please. My first question is on the increase in contracted revenues. So Tom, you highlighted that they're up by $0.6 billion quarter-on-quarter due to a client extending their contract by 10 years. Can you just talk a little bit more about that contract extension, Tom, is it really due to the contract was reaching an end or approaching an end? And can you talk a little bit about the terms which the contract was extended as well. Is there any change to the headline tariffs?
And then my second question is on power costs. Obviously, power prices across the globe have been very, very volatile over the last 2 years. Spot power prices are clearly down quite a lot over the last 6 months. On Slide 13, you show that power is at 5% boost, I think, or a $7 million boost to revenues year-on-year in Q3. How should we be thinking about power over the coming quarters and as we go into 2024 pace.
Thanks very much, Emmet. So maybe I'll take the first one, and Manjit can take the power cost one. Yes. So look, I mean in regards to tenancy contract extension, I guess it's sort of business as usual for a tower company with its customers to do this. I mean all of the contracts have automatic renewals, but it's quite normal in the industry for a couple of years or so before the end of the term, remember these contracts are 10 to 15 years long usually for the two parties to engage, and discuss whether an auto renewal is relevant in which case, it just rolls forward identical terms or whether in the past 10 years or so, there are certain things that we've changed on both sides that lead to being a benefit to have a renewal. So it's sort of business as usual for 1 point. With this one, the terms were largely unchanged, to be honest. A few sort of tweaks around the edges really as well as future rollout commitments that we secured in this as well. And that's really it. So no change to sort of quality of revenue or anything like that. And then Manjit, do you want to take the power cost one?
Yes, sure. Yes. So look, on power and similar to what we've presented over previous quarters, I think from a cost perspective, what we typically see is that escalators work in a way in which means that from an EBITDA side, the costs are effectively mitigated. So you don't make a margin on the cost and the escalator to make up of the group. And that's what we want. We want to make sure that we're just effectively hedged, but not making any margins on that. And so what we're seeing this quarter is actually that the investments that we're making as part of the Project 100 actually minimize the volume of power that we utilize. And so that's where you start to make some of the upside. And so whilst we see prices going to either go up or stabilize in the markets, that will still be something which will effectively be hedged through a lot of our contractual makeup. But now as we're kind of putting more money into this Project 100, we should start to see year-on-year, a few more savings come through on that basis. So in future releases, we would hope to show kind of similar or kind of maybe more tempered EBITDA improvements from our cost initiatives. And as they start to come through and start to operate better, you'll see more and more savings come up year-on-year.
Our next question today comes from John Karidis from Numis.
First of all, is it [indiscernible] give us some color about what's happening in the DRC. It seems to be sort of on fire in the last 3 quarters, [indiscernible] passed? And just sort of color about the competition increasing? Is there a bigger focus in population [indiscernible] usage? What are your customers telling you there? And related to this, Ghana went sort of backwards in the third quarter. Is that just a blip? Or is there a sort of trend that we should be aware of? Then secondly, with regard to Emmet's question about fuel costs. I hear what you said, Manjit specifically -- what I'm trying to figure out is sort of if you like [indiscernible] how this driver will affect year-on-year change in your lease rates for the fourth quarter this year and how you think this might affect it for 2024. And then thirdly, I think your adjusted guidance for -- sorry, your guidance, your upgraded guidance for adjusted EBITDA and portfolio of free cash flow sort of suggests that tax will be significantly less at sort of 4% or 5% of revenue this year. I'd love to understand if -- well, if that's right, why? And what does it mean about the sort of tax rates in inverted commerce for 2024 and 2025, please?
Yes, John, Tom here. Why don't I take the DRC one, and then I'll hand over to Manjit. So yes, look, DRC is one of our larger markets. It's a market with a lot of favorable dynamics for operating in the telecom sector. First of all, it's a country of 100 million or more people. It's a huge country with some very large cities such as Kinshasa, which has a population of 15 million people. It's also a country with vast areas of gaps and any coverage. So I think it's something like out 40 million out of the 100 million people in the country actually don't live in an area with mobile phone coverage today. And so you've got dynamic in DRC whereby in Kinshasa and other large cities 4G is very much being rolled out and densification is happening. There's actually 5G trials going on right now in Kinshasa amongst the big mobile operators. So that will be starting soon. And then at the same time, you've got big, big new coverage requirements in new areas where thousands or hundreds of thousands of people live, which obviously leads to more of the build-to-suit products being required. And as the largest and the most experienced tower company operates within the country, we've been operating there since 2011. And I believe, offer a very high quality of service. In a challenging market, the infrastructure is weak in DRC, which makes the stage of the operations more difficult regarding infrastructure of towers. And so I think we have a compelling offering to all the mobile operators there. And certainly, we're doing business with all and helping all to grow their networks. And you're seeing that in the numbers come through. So it's really the focus on operational excellence and being able to navigate the challenges, and lack of infrastructure there. And our team there are doing a fantastic job. Manjit, do you want to take the other one?
Yes. Sorry, Tom, I wonder if you can say anything just to hit that on the head a little bit, nothing untoward there with the negative adds in the third quarter.
Sorry, John, the line just broke up. Sorry?
Forgive me, I think the trends in quarter adds for towers and tenancies in Ghana specifically seem to have gone sort of backwards. Is there anything untoward going on there?
Right. Sorry, in Ghana, yes, so we've had some legacy managed sites in Ghana from an acquisition we did many, many years ago, which we pass back to the mobile operator. So they were, I think even low or almost 0 margin sites. So it's basically a one-off share this quarter with sort of minimal impact. I think overall in Ghana we've seen strong rollout from the big mobile operators with something like 10% year-over-year growth in tenancies in the country. So yes. So what you're seeing is a kind of one-off small blip this quarter, but the underlying is actually growing well with the big operators here.
Just to add that as well, not only is that 10% growth in terms of tenancies from a tenancy ratio perspective, year-on-year, it's been one of our fastest growing at about 0.2x across the group. So we're adding a lot of co-los in that market. I think also just as another case in point to Ghana is one of our kind of OpEx innovation hubs at the moment, and we're utilizing that as an op-co to look at how we do clean power technologies and really look at power as a general service in that market. So I think we'll see some other kind of improvements going on in that market in due course as well. But from a year-on-year basis, probably a fantastic year for Ghana. Then just picking up a couple of your other points. So just on fuel -- just to kind of -- as we look forward to the following year, we'll give more detailed guidance in terms of where we expect it to be for 2024 in March following our full year results. But in short, what we expect we're seeing at the moment to at least in terms of power costs is that they are stabilizing in most of the markets. So we do expect potentially that some of the lease rate movements that happen on a quarterly basis, will start to kind of potentially taper, but we continue to monitor how power cost move, they can move in period-on-period. So on that basis, we may see that kind of more stabilizing. And then from an OpEx savings perspective, we'll give guidance for the full year, but we hope to see some more coming through from pilots and Project 100. Generally, we spend around $10 million per annum on Project 100, and we look to get a return -- that is at least our cost of capital, if not a bit more. So you'll start to see some of that coming through during the course of next year as well.
With regards to the question on guidance, particularly around portfolio free cash flow, just on the EBITDA growth, that is very much a function of the increased tenancies. So you -- that's one of the key pieces there for portfolio free cash flow that's driven by the EBITDA growth and a little bit less tax. That's partially driven by the fact that in some of the markets, there's been a slight amendment in some of the tax laws, so that you get a little bit more of a shield from your shareholder loans. So that certainly had a bit of a benefit during the course of this year. Again, though, I wouldn't change the modeling in terms of what we've guided as a general kind of stretch forward number in terms of increasing to around 4% to 5% of revenues over the medium term. So I'd hold that steady until we give updated guidance next year.
Thank you both very much, and congratulations to the whole team.
Our next question today comes from Rohit Modi from Citi.
Congratulations on [indiscernible]. Most of them has been answered. Just a couple. Firstly, just a follow-up on Ghana. You mentioned regarding some of the towers to one of the operators. Just trying to understand, was there a sale of tower you generate some cash flow? Or how that worked? And do you have similar kind of contract with the telcos where you might return the tower at some point of time? Or do you have that kind of deal? Secondly, in terms of your midterm guidance, you have annual tenancy additions of 1,600 to 2,100. Now there's an increase in tenancy guidance this year. Just trying to understand, should we take this as a floor? Is there a change in your midterm guidance or it remains the same what you guided last year? And that's it from my side.
Great. I'll take this one. So yes, on the Ghana point, look, it's only a small handful of towers and these are effectively managed towers rather than owned towers. We do have a basically across the business, a small number of managed sites. So we didn't pay [indiscernible] from the original deal that we did back in 2010, and we effectively just given those back. So we no longer manage those. So that we didn't generate any capital. It wasn't for sale. It was just about 15 tower sites. So that is what it was. So I'd say relatively de minimis in the grand scheme of things. And sorry, just on your second question, so you just might remind me that one again?
Yes. Sorry. In terms of your tenancy ratios...
Sorry. Apologies, yes. Again, we'll give updated guidance in March. I'd again just keep the guidance as it currently stands in terms of [indiscernible] currently got models. I wouldn't increase that and utilize what we're doing this year is a run rate keep that as it stands, we'll give some updated guidance in March. And again, so we hope to upside during the course of next year should things go on.
Sorry, just one more to ask about your view around M&A. And I know you spoke about this earlier, previous quarters now that you're back to your leverage range and you expecting it to go further down, does your focus change from pivoting towards organic growth to M&A again? Or are you still -- in 2024, you're still focusing on organic growth, and you don't see anything on the M&A front.
Hello, Rohit. Tom here. Yes, we very much focused on organic growth and deleveraging. So we're not focused on M&A right now or for the foreseeable future.
Our next question today comes from David Wright from Bank of America.
And a question -- to be honest, Tom, it's almost just a direct response to your previous answer, which is you're focused on organic growth and deleveraging. And I say this with the greatest of respect. But why so closed right now to further M&A? You guys have clearly got a very good grasp of acquisitions. You're clearly very efficient at bringing -- onboarding grids and building. And you've proven that these -- your acquisitions can generate returns and can add to organic growth. Now you've obviously just brought in a leverage number that is ahead of expectations. And there is no reason, especially with the contracted revenues, not to expect that momentum to remain very, very strong through the next year.
So I'm just wondering why so closed to future M&A, further M&A, I should say, given that it has gone so well and your deleverage is clearly ahead of plan. And maybe if you could just throw into your answer, at which point do you even start to think about your own shares as an attractive target?
Yes. Thanks, David. A very good question or challenge. Yes, look, I think where we sit today, with the global markets as they are and rates where they are and telco valuations where they are. The telco M&A generally comes in fits [indiscernible] certainly from the last 13 years across Africa and Middle East, which is really -- since the first M&A deal happened. And at the moment, there's really not too much M&A out there. Obviously, we keep our ears to the street and any deals that are happening or might be happening, obviously, it can come across our desk. But I think that sellers at the moment, unless they absolutely have to would probably wait a bit, I think. And that's reflecting the relatively low volume of deals happening at the moment. And I think for us, as a business, we've gone through 2 years of huge M&A, doubled the business, closed our last deal last December in Oman, moved into this year in the kind of new look Helios Towers with the 9 markets and Middle East as well as Africa. And this year, it was always a year for us to bed down, get the business excellence processes up and running the new markets, start to lease up the new assets which we acquired at a low -- very low tenancy ratio, start to drive the returns up again. All of that is obviously happening. And as you said, leverage is coming down faster than previously guided. So all that's great. But my sense of it is that we see that type of story continuing both from an external market perspective in terms of potential supply of high-quality M&A. We probably see that continuing into next year. And from our own perspective, we're very focused on increasing cash flow generation coming to the inflection point on cash consumptive and moving to cash -- bottom line cash generation and the consequential deleveraging that comes with that. I think that our stated guided range for leverage is 3.5 to 4.5. We've just got to the top end of that, that will come down further, obviously, over the next few quarters. I think but from a buyback point of view, I think that would need to be assessed at the time. I think we want to see ourselves get to below 4x on the leverage, which is where we have guided to be by the end of next year. And then to the extent we have surplus cash on the balance sheet at that point, then we'll have decisions to make, whether we utilize that for accelerating even more organic growth, which if this momentum continues, certainly, could be a potential use for it. I think if rates are still in the same place, arguably, we might choose to accelerate deleveraging even more through paying some debt. But we'll have to weigh that up at the time versus some kind of shareholder disbursement obviously as well. So I think all those options on the table in the order I just mentioned is sort of our capital allocation priority order at the moment, quite a lot of that is rate driven. And so we'll need to see how the capital markets and rates moved over the coming quarters and that could be a dynamic list as things change externally for us. So I hope that answers your question.
It does, yes. I appreciate your thinking around that.
Our next question today comes from Stella Cridge from Barclays.
Many thanks all for the call and all the comments so far, including the last ones on the where debt ranks in the priorities. And maybe just one follow-up. I wanted to ask -- so you obviously took a portion of the bond that's due. Would it be your kind of ideal base case that remainder and would be refinanced in the dollar bond market and you are kind of waiting for market opportunity. Just wondering where your thinking sit on that?
Yes, I can take that one. We do like the bond instrument. So we will be kind of keeping ourselves ready to potentially go back to the market should the opportunity arise. But I think at the moment, we do feel very comfortable about the balance sheet and our debt profile. The debt maturity of our high-yield bond isn't yet due for another 2 years in December '25. We've now got the bonds in a place where it's certainly a lot lower than what it was previously. [indiscernible] chunked it down by [indiscernible]. And we also have 3 term loans of about $200 million undrawn, which we could potentially utilize to refinance should we ever need it. So I think we sit here there in a position where the balance sheet is strong and we'll just wait and see and try and tap the market opportunistically whenever that moment occurs. But I think for now, we're in a good position.
We have another question today from John Karidis from Numis.
I just wanted to talk about, just one issue, please, and that's sort of competition [indiscernible]. So it would be useful to just get a picture of what proportion of your estate actually [indiscernible] competition from other telcos. And also touch on your [indiscernible] lease rates, it used to be that you'd say that the lease rates were significantly below the total cost of ownership for a [indiscernible] operator. Is there any update on that? Any numbers or anything like that, please?
John, yes, thanks for the questions. Yes, so I mean, in terms of competition, there's other cloud companies operating in most of our markets. There's perhaps a couple where there aren't any yet. So we fully expect that to be other tower operators where we operate. But in 7 of our 9 markets, we're by far the largest and #1 in the market. And we think that scale within the market matters, it means you've got more tower, more tower stock to sell co-locations on. So that's our strategy to be large in the markets we operate in. And from a competition perspective to be better in an operational sense than competition, and deliver customer service excellence. And there's a number of different types of services, which reflect that. The two most important services that we and other tower companies offer, which we spend all our time focusing on and hopefully excelling in. Our power uptime, where I do believe we are best in class for that. And rollout speed both of new build-to-suit sites and also obviously, of co-locations. For which we also deliver very, very strongly on.
So that's how we think about it. And we do expect competition, but we focus our business excellence to deliver better for our customers. And yes, just on the lease rate level, yes, there's not really much change there, to be honest. I know we haven't had that in the slides for perhaps a few quarters. I think we're still around 30% lower than the total cost of ownership. And that's the way we like it. We like to operate in a way which is efficient, which aimed to maximize the number of tenants sharing a tower and therefore, making our profitability through multiple tenants so volume basically, rather than having lacking great lease rates to create our profitability because they can come under more pressure. So that's our strategy. And they [indiscernible] very much is similar to what you've seen in the past at the moment.
[Operator Instructions] Our last question today comes from [indiscernible]
Hi, sir. My questions have been asked.
In that case we'll hand back to Tom for any closing remarks.
Great. Thanks, Ellen. Well, look, thank you, everyone, for dialing in today. Very good to speak with you, as always. And thank you to everyone asking the questions. We really appreciate it. So we look forward to engaging with you over the coming weeks and months and look forward to providing our full year update, which will be in March in a few months' time. So see you then and take care. Thank you.
This concludes today's conference call, everybody. Thank you all very much for joining. You may now disconnect your lines. Have a great rest of your day.