Helios Towers has reported robust Q3 2024 financial results, driven primarily by increased tenancies and a strong operational performance.
The company’s EBITDA surged 16% year-over-year (YoY), with organic growth as the main contributor, marking a $50 million EBITDA increase largely attributable to the first full year of operations in Malawi and Oman following recent acquisitions.
Tenancy growth is the main focus
Helios Towers added 2,096 new tenancies over the past year, mainly fueled by expansions in Oman and Tanzania. This has led to a 0.14x YoY increase in the tenancy ratio, bringing it up to 2.04x as of Q3.
This is in line with the company’s full-year guidance of 2,400 total tenancies for FY 2024, with a target to push the tenancy ratio even higher, reaching an estimated 2.2x by 2026. Furthermore, Helios Towers has grown its portfolio size by 2%, adding 223 new sites YoY. The company remains highly selective with new sites, prioritizing high-return opportunities while maximizing the commercial value of its capital.
Financial metrics reflect optimistically on operating markets
Helios Towers recorded a 6% rise in revenue, predominantly driven by tenancy additions, and a significant 11% EBITDA growth. Revenue from high-margin markets in the Middle East and North Africa (MENA) accounted for 31%, with Oman leading growth.
The African market contributed 19% of revenue, despite FX challenges in Tanzania and Malawi, which saw respective currency devaluations of 10% and 37%. These macro conditions were largely offset by escalators, including power costs, CPI, and foreign exchange adjustments.
The company’s net leverage ratio improved, dropping 0.3x YoY to 4.2x, reflecting its focus on maintaining financial stability. Helios Towers plans to further reduce net leverage to 4.0x by the end of FY 2024, with a long-term target of 3.5x by FY 2025, which could pave the way for potential shareholder returns once leverage nears 3.0x.
Organic growth and operational efficiency
Following an acquisition-driven expansion strategy in 2021–2022, Helios Towers has shifted toward strengthening free cash flow, moving from negative to breakeven in Q3, with a pathway to free cash flow growth.
The company's focus on organic growth over mergers and acquisitions is reflected in capital expenditures, with $59 million allocated to tenancy-driven growth. Helios Towers’ current stance is to prioritize organic growth opportunities, considering M&A only if exceptionally valuable opportunities arise.
In terms of operations, the company has benefited from a diverse mix of revenue streams. While Oman’s high-margin tenancies generate lower revenue per tenant, they contribute significantly to overall margin. In contrast, markets like the Democratic Republic of Congo (DRC) provide higher revenue per tenant, helping bridge the gap between tenancy growth and EBITDA growth.
Future outlook and strategic priorities
Looking ahead, Helios Towers remains committed to increasing its tenancy ratio and further reducing leverage. With the 2024 pipeline nearly complete, the company’s focus has already shifted to its 2025 targets, which include a tenancy ratio of 2.1x and low double-digit EBITDA growth. The company aims to enhance return on invested capital (ROIC) and optimize lease-up, especially as new colocations increase.
As Helios Towers approaches a more favorable leverage position, there may be room to reevaluate capital allocation priorities, including potential investor distributions. However, with macroeconomic volatility and infrastructure challenges across Africa, the company sees organic growth as the most stable path to long-term value creation.
In a region where network sharing remains rare, Helios Towers stands poised to continue leading in infrastructure provision, capitalizing on high-margin markets, operational efficiencies, and a strong pipeline, which it expects to carry forward into 2025 and beyond.
