Helios Towers plc

Hi everyone and welcome to the Helios 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 FY23 outlook and guidance upgrade and providing some early guidance on our FY24 view. So first up on page two, we have the usual lineup for you and me, Tom, Manjit Dhillon and Chris Baker-Sams. We've got the business and financial updates slide and then we'll open for Q&A at the end. So now looking at page five, 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 FY23. Our tenancy additions are already above 2100 which was previously the top end of our guidance so consequently we're increasing that and the large number of co-locations delivered so far has driven our tenancy ratio up from 1.8 to 1.9 year to date and importantly we've seen our future contracted revenue increase 13% Water on Quarter and 37% year-over-year to its highest 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 three 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 caps and tax. Our balance sheet continues to strengthen. Firstly, we've seen leveraging 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 one quarter ahead of the previous guidance on this further reduction expected this quarter Q4 and we've effectively tendered 325 million of our December 25 bonds in September therefore extending a good portion of our debt for another five years In terms of upgrades to guidance, we're increasing our FY23 forecasts across all key metrics. The tenancy additions guidance moving up 15%, and that 22 to 2400. EBITDA moving up 2%, 365 to 370 million dollars. And portfolio free cash flow guidance increasing 9%. All of this thanks to our customers' trust in 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 six and here we see that in FY23 we're delivering a stellar year for growth overall and most importantly for organic growth. Now that our FY21 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 on the middle chart our EBITDA jumping up 30% this year and most importantly looking at our ROIC as previously guided following our two-year expansion program we very much see our organic operational delivery bear fruit with the ROIC rebounding back up to 12% following the temporary diluted effect of new acquisitions with low tenancy ratios. As an example of this, our Oman acquisition, which was closed in December 22, 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 seven, we thought it'd be useful to show the evolution over the past year of our future contracted revenue. Our tenancy contracts today, excluding any future escalations or auto renewals. This future pipeline has grown 37% in the past year, driven by three key factors, one, The 10-year renewal of almost 2,500 existing tenancies in the last quarter Two, the 2,700 record new organic tenancies 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 onto page 8. We wanted to provide some early guidance on how we see FY24 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 FY23. In terms of capital allocation, we'll continue to focus on high returning organic growth and deleveraging The tenancy ratio expected to increase 0.05 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 FY24. as well as continued upwards trajectory on our ROIC. So looking forward to updating you each quarter next year as we deliver this. So that's it from 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 number 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 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 number 11, site and tenancy growth. From a site perspective, we saw a 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 ads 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 the sites in Oman which had a day one tenancy ratio of 1.2. However, we've already increased that 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 lease on strong organic lease ups and again that will support margin expansion and returns. So moving on to slide number 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 three 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 in EBITDA growth in a bit more detail. The first four bars of each bridge, organic tenancy growth, power escalations, CPI escalations, and FX, all combine 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 escalate in relation to the local pricing for power, so for fuel and electricity. So if the local prices go up, then the escalators go up, and if the prices go down, then the escalators go down. For CPI we have annual CPI escalators and they typically kick in between December and February. Our power price escalators increase revenue by 7 million and that falls through to about 2 million on EBITDA driving a 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 rollout 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 investment in power initiatives. Moving on to CPI and FX, local CPI is currently below 10% with the majority of our CPI escalators having 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 you 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 is little to no impact to FX and power price movements. We're well protected from 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&Os such as Omantel and Axion. It's worth highlighting that our largest customers are spread across a few differing 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 had long-term contracted revenues of $5.5 billion, the highest ever on record for us, with an average meaning life of just shy of eight years, up 37% from $4 billion a year ago. This means, again excluding any new wins or rollouts, we already have that revenue contracted and in the bag, and that provides a strong underlying future earning stream for the business. We also have 64% of our revenues in hard currency being either US dollars or Euro pegs and that falls through to 71% when 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 I spoke about in the previous slide. Finally, just to mention 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 segments now representing about 8% of our revenues year-to-date. As a market leader in seven of our nine 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 that Q3 year-to-date, we incurred total capex of 149 million, which is mainly made up of growth capex reflecting our strong organic tendency builds and rollout during the course of the year. Our discretionary capex continues to be tightly controlled and focused on high returning investments, for example, co-locations and opex efficiency projects. So, so far, the 149 million we've 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 to 180 million on discretionary capex up from 140 to 170 million and that really accounts for the fact that we're increasing our organic tenancy guide by about 300. Non-discretionary 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 fully repay 65 million that we've drawn on our old group term loan and a small portion to cover fees. This has had a neutral impact on our gross 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 debts by one year to circa four 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. I think this really reflects the increased scale and diversification of our company over the last few years, doubling our platform from five to nine 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. But to sum up, we are really delighted with this transaction as this further strengthens our balance sheet. On to slide number 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, one quarter ahead of what we previously guided. We've always had a clear path to deliver the business at about 0.5x per annum on an organic EBITDA grade 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 half a 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 four years. Moving on then to slide 18 and as Tom mentioned earlier on the call again we've made great progress on our 2023 goals and as a consequence we've increased our four-year guidance again. Given our robust tenancy growth and our strong commercial pipeline to 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 increase range is now 365 to 370 million, with the 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 to 265 million and that represents rough cash conversion 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 years of organic growth in 2023 and again this just simply demonstrates the proven 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, FY23 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 EBITDA and ROIC growth. Net leverage has accelerated its reduction and is now within its target range one 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 and we're really focused on organic growth with lease up of 0.05 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. Thank you.

Thank you. We'll now enter our Q&A session. Our first question today comes from Emmet Kelly from Morgan Stanley. Emmet, your line is now open, please go ahead.

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 dollars quarter on quarter due to a client extending their contract by 10 years. Please talk a little bit more about that contract extension, Tom. Is it really due to that contract was reaching an end or approaching an end? And can you talk a little bit about the terms maybe on 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 two years. Spot power prices are clearly down quite a lot over the last six months. On slide 13, you show that power is a 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, please? Thank you.

Thanks very much Emmet. So maybe I'll take the first one and Manjit can take the power costs one. Yeah, 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 in. but it's quite normal in the industry for you know a couple of years or so before the end of the term remember these contracts are 10 to 15 years long usually for the you know two parties to engage and you know discuss whether you know an auto renewal is is relevant in which case it just rolls forward on you know identical terms or whether In the past 10 years or so, there's certain things that have changed for both sides that lead to it being a benefit to have a renewal. It's business as usual for one point. With this one, the terms were largely unchanged, to be honest. A few tweaks around the edges, really, as well as future rollout commitments that we secured. Manjit Singh Dhillon, Lara Coady, Fritz Dzeklo, Colard Nkole Tshiyoyo

I think from a cost perspective what we typically see is that the escalators work in a way in which means that from an EBITDA side the costs are effectively mitigated so we don't make a margin on the cost and the escalator makeup 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 project 100 actually minimize the volume of power that you utilize and so that's where you start to make some of the upside and so Whilst we see prices kind of either go up or stabilise in the markets, that will still be something which will effectively be hedged through all 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 tampered 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.

Thank you very much both.

Thank you Emma. Our next question today comes from John Creelish from Newness. John, your line is now open. Please go ahead.

Thank you. Good morning. Thanks for taking the questions. So first of all, is it possible to give us some colour about what's happening in the DRC? It seems to be sort of on fire in the last three quarters relative and just sort of color about is the competition increasing? Is there a bigger focus in population usage? What are your customers telling you there? 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, how this driver will affect year-on-year change in your lease rate. 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 free cash flow sort of suggests that TAC, will be significantly less than four or five percent of revenue this year. I'd love to understand if that's right, why, and what does it mean about the sort of tax rates and inverted commas for 2024 and 2025, please? Yeah. Hi, John.

Tom here. Why don't I take the DRC one and then I'll hand over to Manjit. 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 and it's also a country with vast areas of gaps in coverage so I think it's something like 40 out of 100 million people in the country actually don't live in an area with mobile phone coverage today and so you've got You've got Dynamics and 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 you know big big new coverage requirements in new areas where you know thousands or hundreds of thousands of people live which you know obviously leads to more of the the built-to-suit products being required and you know as the the The largest and the most experienced power company operating in the country. We've been operating there since 2011. We, I believe, offer a very high quality of service. In a challenging market, the infrastructure is weak in BRC, which makes day-to-day 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 the infrastructure and our team there are doing a fantastic job. Manjit, do you want to take the other ones? Yeah, sure.

Sorry, Tom, I wonder if you can say anything just to hit that on the head a little bit. Nothing on toward there with the negative ads in the third quarter.

Sorry, John, the line just broke up. Sorry.

Forgive me. I think the trends in water ads 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, yeah, so we've had some legacy managed sites in Ghana from an acquisition we did many, many years ago, which we passed back to the mobile operator. So they were, I think, either low or almost zero margin sites. So it's basically a one-off year this quarter with sort of minimal impact. I think overall though 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 yeah, so what you're seeing now is a kind of one-off small blip this quarter but the underlying is actually growing well with the big operators there.

and just to add to that as well not only is it 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 you're adding a lot of colos in that market. I think also just as a as another case in point for Ghana it is one of our kind of opex innovation hubs at the moment and we're utilizing that as an opco to look at how we do clean power technologies and really look at power as a as a general service in that market so I think we'll see some some other kind of improvements going on in that market in due course as well but from a year-on-year basis probably in a fantastic year for Ghana. Then just picking up a couple of your other points so just on fuel just to kind of get as we look forward to the following year we'll give more detailed guidance in terms of where we expect to be for 2024 in March following our full year results but in short what we expect we're seeing at the moment 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 costs move they can move period on period so on that basis we'll be making that kind of more stabilizing and then from a OPEX savings perspective we'll give guidance at the full year but we hope to see some more coming through from 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 the question on guidance particularly around portfolio free cash flow so just on the EBITDA growth that is very much a function of the increased tenancies so 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 modelling in terms of what we've guided as a general kind of stretch forward number in terms of increasing to around four to five percent of revenues over the medium term. So I'd hold that

Thank you both very much and congratulations to the whole team. Thank you John.

Our next question today comes from Rohit Modi from Citi. Rohit your line is now open please go ahead.

Thank you for taking my question. Yeah, we can hear you very good. Oh, great. Thank you. Thank you for taking my question and congratulations. Most of them have been answered. Just a couple. Firstly, just to follow up on Gahana, you mentioned returning some of the towers to one of the operators. Just trying to understand, was there a sale of tower and you generated some cash flow or how that worked? And do you have similar kind of contract with other telcos where you might return the towers at some point of time. Do you have that kind of deal? Secondly, in terms of your midterm guidance, you have annual tenancy additions of 1600 to 2100. 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? Thank you very much.

basically across the business a small number of managed sites so we didn't own them they're from the original deal that we did back in 2010 and we've effectively just given those back so we no longer manage those so that that we didn't generate any capital it wasn't a sale it was just a you know about 15 tower sites so that 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 sorry can you just remind me that that one again

Sorry, in terms of your... Oh, guidance, 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 what we've currently got modeled. I wouldn't increase it and utilize what we're doing this year as a run rate, but keep that as it stands. We'll give some updated guidance in March. And again, who knows, but we hope to upsize during the course of next year should things go well.

Thank you. Sorry, just one more I forgot 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're expecting it to go further down, does your focus change from pirating 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 trend?

Hi, Mo here, Tom here. Yeah, very much focused on organic growth and deleveraging. So we're not focused on M&A right now for the foreseeable future.

Thanks, John.

Thanks.

Thank you. Our next question today comes from David Bright from Bank of America. David, your line is now open. Please proceed with your question.

Thank you very much. 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 um grids and building um and you know you've proven that these uh your acquisitions can um you know generate returns and and can add to organic growth now you've obviously just um brought in a leverage number that is ahead of expectations um 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 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, you know, at which point, you know, do you even start to think about your own shares as an attractive target? Thank you.

Yeah, no, thanks, Joe. No, very good question or challenge. Yeah, look, I think, you know, where we sit today, you know, with the global markets as they are and rates where they are and Talco valuations where they are, you know, the Talco M&A generally comes in fits and bursts. Suddenly it has, you know, for the last 13 years across Africa, Middle East, which is really since the first M&A deal happened. and you know at the moment there's really not too much M&A out there you know obviously we keep our ears to the street and any deals that are happening or might be happening obviously come across our desk but I think that you know 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. I think for us as a business, we've gone through two 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 mine markets and Middle East as well as Africa. This year is always a year for us to bed down, get the business excellence processes up and running, the new market, start to lease up the new assets which we'd acquired at very low tenancy ratios, 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 you know my sense of it is that you know we see that type of story continuing both from an external market perspective in terms of you know potential supply of high quality M&A. You know I think we probably see that continuing into next year and from our own perspective we're very focused on Thank you very much. 3.5 to 4.5. We just got to the top end of that. That will come down further, obviously, over the next few quarters. I think that 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 leveraged which is you know where we are guided to be by the end of next year you know and then to the extent we have surplus cash on the balance sheet you know at that point then you know we'll have decisions to make whether we utilize that for accelerating even more organic growth which you know if this momentum continues certainly could be a potential use for it I think, you know, if rates are still in the same place, arguably we might choose to accelerate deleveraging even more through repaying some debt. But we'll have to weigh that up at the time, you know, versus some kind of shareholder disbursement, you know, obviously, as well. So I think all those options on the table, the order I've just mentioned is, you know, sort of our Thank you very much.

Thank you. Our next question today comes from Stella Cridge from Berkeley. Stella, your line is now open. Please go ahead.

Hi there. Many thanks all for the call and all the comments so far, including the last ones on where debt ranks in the priorities. There was maybe just one follow-up I wanted to ask. So you obviously took out a portion of the bond that's due. Would it be your kind of ideal base case that The remainder would be refinanced in the dollar bond market and you are kind of waiting for a market opportunity. Just wondering where you're thinking to sit on that.

Yeah, I can tell you 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 two years, so December 25. We've now got the bond in a place where it's certainly a lot lower than what it was previously, having chunked it down by almost a third. And we also have group term loans of about 200 million undrawn, which we could potentially utilise to refinance should we ever need it. So I think we sit here today in a position where the balance sheet is strong and we'll just wait and see and try and tap the market opportunistically and over that name in two cars. But I think for now, we're in a good position. That's great. Many thanks for that.

Thank you. Thank you. We have another question today from John Kouridis from Numus. John, the line is open. Please go ahead.

Thank you for allowing this. I just wanted to talk about just one issue, please, and that's sort of competition from our coast. So it would be useful to just get a picture of what proportion of your estate actually uses competition from other towercos. And also touch on your leasing rates. It used to be that you'd say that the lease rates were significantly below the total cost of ownership for a mobile operator. Is there any update on that? Any numbers, anything like that, please?

Hey, John. Yeah, thanks for the questions. Yes, I mean, in terms of competition, there's other tower companies operating in most of our markets. There's perhaps a couple where there aren't any yet. So we fully expect there to be other tower operators where we operate. But in seven of our nine markets, we're by far the largest and number one in the market. And we think that scale within a market matters. It means you've got more tower stock to sell co-locations on. and so you know that that's our strategy to be large in 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 you know there's a number of different types of services which which which reflect that the two most important Our services that we and other tower companies offer which we spend all our time focusing on and hopefully excelling in are power up time 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 best for our customers and yeah and just on the lease rate level yeah 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 total cost of ownership and that's the way we like it. We like to operate in a way which is efficient, which aims to maximize the number of tenants sharing a tower and therefore making our profitability through multiple tenants, so volume basically. rather than having whacking great lease rates to create our profitability because they can come under more pressure. So that's our strategy and that very much is similar to what you've seen in the past at the moment.

Fab, thanks Tom.

Thanks John.

Hey, our last question today comes from Ksenia Edwards from Loomis Sales. Your line is now open, please go ahead with your question. Hi, sorry, my questions haven't been answered, thank you. Okay, no problem. In that case, we'll hand back to Tom for any closing remarks.

Great, thanks, Ellen. Well, look, thank you everyone for dialling 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