Q3 2022 IHS Holding Ltd Earnings Call
Good day and welcome to the IHS holding limited earnings result call for the three month period ended September 30th 2022.
Please note that today's conference is being webcast and recorded.
If you'd like to ask a question. Please press star and then one on your telephone keypad at anytime.
At this time I'd like to turn the conference over to Koby signs, though please go ahead Sir.
Thank you operator, thanks also to everyone for joining the call today I'm Kobe sinus I'll be at the keep communications here at IHS.
With me today are Dan Darwish, the chairman and CEO by J.
<unk> CFO .
This morning, we published our financial statements for the three month and nine month periods ended September 32022 on the Investor Relations section of our website at Michigan related earnings release and presentation.
These are the consolidated result of I, just holding limited which is listed on the York stock exchange under the ticker symbol IHS, which comprises the entirety of the group's operations.
Before we discuss our results I'd like to draw your attention to the disclaimer set out at the beginning of the presentation on slide two which should be read in full along with the cautionary statement regarding forward looking statements set out in the earnings release, and 6K filed as well today.
In particular, the information to be just got may contain forward looking statements, which by their nature involve known and unknown risks uncertainties and other important factors that nobody's are beyond our control that are difficult to predict and other factors, which may cause actual results performance or achievements or industry is off to be materially different.
<unk> future results performance or achievements or industry results expressed or implied by such forward looking statements, including those discussed in the risk section the.
The risk factors section of our 20 of our form 20-F E.
Out of the Securities and Exchange Commission and our other filings with the SEC.
Well also refer to non IRS measures that we view as important in assessing the performance of our business a reconciliation of non <unk> metrics to the nearest <unk> metrics can be found in our earnings presentation, which is available on the Investor Relations section of our website.
With that I'd like to turn the call over to Sam Darwish, our chairman and CEO. Thanks, Colby I welcome everyone to our third quarter 2022 earnings results call.
Had a strong quarter driven by continued secular demand plus incremental recurring revenue and a one time $18 million catch up payments.
It's largely on the strong secular demand as well as additional upside from power revenue and lower withholding taxes, and despite an 11 million forex headwind versus rate previously assumed in guidance. We are raising our 2022 guidance for revenue by $20 million adjusted EBITDA by $10 million and audited P F.
$10 million and reiterating our guidance for Capex, having yesterday, our capex guidance on October 24th when we announced project Green at that time, we raised capex guidance by $100 million, including 110 million for project Green, which I will discuss later as we also took the opportunity.
Two nuttall our format range based on actual spend year to date.
Steve will take you through the results in greater detail, but before doing so I'm going to discuss our growth strategy, including a focus on revenue adjusted EBITDA and audit of the F provide an overview of our carbon reduction roadmap of which project Green is our next significant step and lastly provide a strategic update.
On the other key topics.
On slide four.
We have gas for our revenue adjusted EBITDA and audited results over the past five years that generated organic revenue growth of 15, 2% adjusted EBITDA growth of 15, 1% and Rls ski F growth of 14.1% compounded annually. During this time given out.
Our short existence as a public company I think it's important to again highlight our long and established track record of generating attractive risk adjusted growth across multiple market cycles.
We believe this attractive growth is a function of the key elements of our strategy, namely the strong demand trends in our markets. The inherent benefits of the co location model thoughtful and prudent finance M&A and a broadening focus on other communication infrastructure solution, including fiber.
All with a focus on driving attractive profitability and ultimately ROIC for our shareholders over time.
The charts on slide five are similar to those on slides four except they focus on the past five quarters as opposed to five years you can see we delivered strong double digit growth on a reported and organic revenue adjusted EBITDA and all the left here year on year. This past quarter, Steve will discuss our results in greater detail.
But I'm very proud of our performance as it symbolizes the resilience of our business and contract structures and a turbulent macro environment across the globe on slide six you can see that IHS owns nearly 40000 towers.
Across 11 countries, covering 770 million people, making us the third largest independent multinational tower company by tower count in the World.
This geographic the scale has both further diversify our revenue stream, having initially been founded as a 19 in our company, but also position.
The largest.
Rewards by TDP, including Nigeria, Brazil, and South Africa, turning to slide seven on October 24th we announced our carbon reduction roadmap or see our our our CR I'll provide a comprehensive strategy for decreasing our emissions by reducing our dependence on diesel.
Through connecting more sites for the grid as well as increasing our use of batteries and solar solution. This in turn is expected to reduce the scope one and scope two kilowatt hour emissions intensity of our tower portfolio by circa 50% by 20 to 30 as well as of course, the volatility in our core.
Our cost structure.
And their project Green the next significant step of our C. O R. We'd expect to spend approximately $214 million in capex towards these affords between 2020, two and 'twenty 'twenty four including the 110 million in 2022 and to deliver annual Rls T. F savings of approximately 70 says.
$7 million by 2025.
This in turn is expected to generate an implied return on investment of 30%.
Well your green will allow us to achieve almost half of our 2030 emissions reduction targets within a few years as we didn't use the kilowatt hour emissions intensity of our portfolio through the use of more renewable energy generation turning to slide eight.
With our balance sheet. We appreciate in today's macro environment, it's important to be prudent and that having a strong balance sheet is critical.
With this in mind I would like to remind you that we now have over $1 billion of liquidity, including over $500 million of Undrawn debt capacity, plus $530 million of cash with 66% of our debt and fixed bonds and the earliest of those mature in 2020.
Six to further improve our liquidity balance sheet in September we extended the termination date of our currently undrawn $250 million revolving credit facility by two years to March 2025, and.
In addition in October we entered into a new 600 million three year bullet term loan to refinance existing U S. Dollar along the new bullet term loan will reduce our interest expense in 2020, three and 'twenty 'twenty four pushout maturity and provide incremental capacity further even at this point.
September 30, our leverage remained at 3.1 or the lower end of our three to four target moving onto stock liquidity. Following the board's decision to waive the registered offering of requirement for block H on May 17, we'll seen our 90 day average daily trading volume increase.
The 337000 shares as of November 11 from 122, thousands as of May 17, almost a threefold increase in addition, the block V shares with unblock on October 14th, but can only be traded through a registered offering until April .
14th 2023, after which the block B shares may be sold without further restriction.
We continue to evaluate options that we believe will enhance the value of the company, but remain mindful and sensitive to the current market environment.
Shifting to up streaming we did not upstream from Nigeria in the third quarter of 2022 with excess night are currently being used in part to help finance project Green. However, we continue to upskilling them from other upstream from other countries for normal course of business.
The macro environment in Nigeria is currently challenging we have a long track of up streaming in Nigeria, including $147 million earlier. This year as of September 30, we had $98 million in cash in Nigeria of which 86 million was held in naira and the remainder in dollar.
<unk>.
Lastly on M&A, we are happy with our geographical footprint. However, we continue to evaluate new opportunities both in our current and new markets as there remains a robust number of M&A processes in the market with our goal to further diversify our revenue stream regardless of the specific.
Do any transaction, we would do aims to be accretive to our long term value and return thresholds only increase as cost of capital increases. In addition, we expect to remain within our three to four target range.
Lastly, you'll see on slide nine we again lay out our sustainability strategy and provide examples of some of the initiatives. We completed in third quarter of 2022 why not shown here I'd also like to highlight that in conjunction with announcing our carbon reduction roadmap last month, we took the opportunity to read.
Our corporate values and incorporate a new fifth sustainability value that focuses on health and safety security and the environment to ensure that these topics are further embedded throughout the business. The frontline workers initiative is also developing swiftly with applications for the 'twenty two 'twenty three.
Academic year being processed in the third quarter last year for the 'twenty one 'twenty two academic year, we awarded scholarships to 14th students a teammate in six main to study at both local and international universities courses studied reagents.
<unk> from business administration to medicine, and not discipline is excluded from the initiatives scope for the next academic year, we have seen an increase in application numbers and are excited to enabling more children of our frontline workers to pursue that academic aspiration.
And with that I will turn the call over to our CFO Steve.
Thanks, Simon and Hello, everyone turning to slide 10, as Sam mentioned, we're very pleased with how the business performed in the third quarter 2022 against a challenging macro backdrop.
I know, you're saying the nonrecurring items that we had anticipated in guidance for the fourth quarter, but landed in the third quarter.
He will stay on this slide that our main kpis of all increased by double digit percentages versus Q3 2021.
Specifically, we delivered 30% growth in consolidated revenue, 25% growth in adjusted EBITDA and 24% growth in recurring Levered free cash flow in each case, driven by both organic and inorganic activity across our markets as well as the nonrecurring items.
Our adjusted EBITDA margin was 52, 7%.
As in past quarters, with one time items that impact comparability will highlight these differences over the next few slides that you can understand the true performance of the business this quarter.
And you'll also see a level of investment in Capex to grow the business increased by over 100% in the third quarter. This was largely due to investment in project Green along with increased capex relating to ice systems and to the GTS S. P. Five in South Africa acquisitions that completed earlier in the year.
Finally at the same time last year, our consolidated net leverage ratio increased to three one times, which is the same level as Q2 2022.
Turning to our revenue on a consolidated basis slide 11 shows the components of that 32% reported consolidated revenue growth.
Organic revenue growth of 23, 1% in the third quarter was driven primarily by CECO Escalations power indexation, which we've now shown a design bar lease amendments FX reset new co location fiber, which we've also shown as a sidebar and new sites.
Level of Escalations, you see reflects the contract protections in the current inflationary environment and together with the ethics resets offset negative FX impacts by eight basis points.
In terms of the other primarily consists of the $18 million of nonrecurring revenue from a key customer having reached agreement on certain contractual terms.
On the right you can see the organic growth rates of each of our segments, which I'll talk about on the next slide.
Inorganic growth was 13, 1% in the quarter again, primarily reflecting the South African acquisition in Q2 2022, the GTS S. P. Five acquisition in Q1, 2022, and the <unk> systems acquisition in the last quarter of 2021.
Turning to the segment review on Slide 12, first I'll take you through the Nigeria business and then highlight the other segments the.
In Nigeria macro remains challenging in part driven by the cascading effects of the Russia, Ukraine situation that the country sovereign debt rating downgrades in October .
U S dollars continued to be difficult to source or they remain available with FX reserves, having margin decreased to $38 3 billion.
From $38 $9 billion last quarter.
Meanwhile, the price of oil moderated slightly quarter on quarter, it remains elevated versus a year ago and due to the continued increase in premium we are seeing applied to the importation of refined products like these into Nigeria.
We believe the ice gas oil price, which averaged $1012 per metric ton in the third quarter and was up 68% year on year is the most relevant indicator of the diesel price we pay.
Moving to real GDP growth at expanded by 3.5% in Q2 2022, bringing the full year 2020 projected great great three 2%, while inflation increased 28%. This past September versus 16, 6% in September 2021.
Looking ahead with monitoring the upcoming presidential election in Nigeria in February next year, and we remain in close contact with our key customers two of which to the gang recently published healthy topline results in their businesses.
We also continue to work closely with various regulators, even does not local banks and partners to continue to best position IHS. All said, we believe the business remains well positioned for continued long term success and to ensure the near term challenges.
And to this point and Nigeria business. Once again delivered strong results in third quarter tracking well on our key metrics topline.
Topline growth was driven primarily by CPI Escalations power indexation lease amendments ethics reset new sites and new co location. In addition to the onetime items previously mentioned.
Our tower count grew by one 7% versus Q3 last year inclusive of some planned decommissioning.
Total tower count increased by two 4% versus the prior period and that co location rate was up at 1.53 times the same as in Q2 this year.
Lease amendments continue to be a strong driver of growth with days, increasing by 14% year on year is that customers added additional equipment to our sites, particularly for G. Upgrades. However, please note that the movement in lease amendments include the reduction of 1444 during the quarter, then I'll build variably based on power.
<unk> rather than through a recurring usefully.
The improved operational performance as reflected in Nigeria financial results.
Third quarter 2022 revenue of $365 million increase of 923% year on year on a reported basis and almost 29% on an organic basis, albeit including the $18 million, one time revenue in the quarter, which within the Nigeria and segments.
The revenue growth reflects increased activity from key customers, partly offset by a decrease in revenue from our small and key customer stemming from a decrease in revenue recognition from last quarter due to a delay in payments. Although this was essentially flat to Q2 <unk>.
Q3, 2022, adjusted EBITDA in Nigeria was $210 million, a 17% increase from a year ago and adjusted EBITDA margin was 59, 1% in each case, reflecting in part an increase in power generation costs of $35 7 million and increased administrative expenses of $4 8 million.
Yeah.
Now I'll summarize the results of the other segments and first they are sub Saharan African segment, which now reflects the inclusion of our South African business.
Isn't that segment thousand tenants increased substantially versus Q3 last year.
Q3, 2022 revenue of $115 million increased by almost 29%, which organic revenue grew three 1% primarily from Escalations, new sites and new co location.
Inorganic revenue contributed $29 $7 million driven by a full quarter contribution from the South African acquisition, while the negative FX impact was $7 million.
Adjusted EBITDA increased by only 28% driven primarily by the increased revenue from South Africa offset by increases in power generation costs maintenance security costs and administrative expenses. The adjusted EBITDA margin decreased slightly to 55, 5%.
In our Latam segment towers, Tennant's revenue and adjusted EBITDA, all increased substantially in this quarter due to meaningful inorganic growth primarily from the GTS S. P. Five acquisition as well as the ice systems fly the business.
In Brazil, our second largest market with 6915 towers macro conditions were somewhat improved with <unk>.
Sex race margin strengthened interest rates held steady and inflation decreased and we now seemingly or late inclusion of the recent presidential election.
In our Latam segment overall towers increased by almost 50% and tenants by the 65% due to the acquisitions.
Q3, 2022 revenue nearly tripled with organic revenue, increasing 36% driven by Escalations, new sites and new co locations, while inorganic revenue increased by 147%.
There was also a negligible impact of FX ethanol, 0.4%.
Adjusted EBITDA, almost tripled and the adjusted EBITDA margin was 71, 2%.
In Mena towers grew by nearly 22% and tenants by 23% in the quarter revenue grew by 24%, including 16% organic revenue growth and adjusted EBITDA grew by nearly 18% in each of these cases, mainly as a result of closing additional Trump chairs of the Kuwait acquisition.
As well as new site built.
The Q3 2022, adjusted EBITDA margin decreased slightly to 42.2% onto slide 13, I'll discuss our Kpis as of September 30, our tower count was 39397.
Nearly 9000 or 29% from three key last year. This was driven largely by our South African and GTS S. P. Five acquisitions as well as ongoing new sites in Nigeria Latam in SSA.
As you can see in the charts on the top right collectively we built 385 towers during the quarter, including additional rural sites under development in Nigeria that we previously mentioned we are going live in the second half of 2022.
Titled Tenants grew by 26% year on year to 57893 with the Colocation rates at 147 times down slightly or no point note four times.
Last year, but flat with Q2 2022.
Two things we continue to point out relates to our Colocation right first lease amendments, which are significant factors in our Nigerian segment are not included and second when your significant acquirer and builder of towers. As we are then you were typically adding to the denominator period on period, even as we continue to lease up our portfolio, we continue to see.
The reason why we can't get to two times greater than our overall portfolio over the long term in a more mature portfolios of towers of at or above that rate.
Lease amendments increased by 14% year on year as our customers added equipment to their sites, particularly for G upgrades in Nigeria.
Although as I mentioned the movements and lease amendments include the reduction of 1444 during the quarter that we set up the variably based on power consumption rather than through recurring use phase.
On slide 14, consolidated revenue adjusted EBITDA and adjusted EBITDA margins.
In this third quarter, we generated $521 million in reported revenue a 30% increase versus Q3 last year, while organic revenue growth was 23% H demonstrating the continued strong topline growth trends of the businesses led by Nigeria in Latam in particular.
Moreover, excluding the quota to $18 million of additional nonrecurring revenue our reported revenue growth was still 26% inorganic break was still 19%.
Organic revenue was $52 $4 million equating to 13, 1% growth during the quarter.
Overall, we continue to grow well in line with our stated objectives of seeking double digit revenue growth on an annual basis regarding our adjusted EBITDA and adjusted EBITDA margins in the third quarter adjusted EBITDAR of $275 million increased 25% versus the prior year, including the one time items and still increased 17%.
If you excluded the one time items.
Adjusted EBITDA margin was 52, 7% down from third quarter 2021, but up from the second quarter of this year.
The year over year changes in adjusted EBITDA, including the one time benefits. This quarter, primarily reflects the increase in revenue, we discussed partially offset with year on year, increasing cost of sales, mainly due to higher diesel costs increased depreciation and amortization as well as increased SG&A associated with being a public company.
Power generation cost of sales increased by $39 million, primarily not in Nigeria and segment and as I'll discuss later with respect to our guidance we locked in a significant portion of our diesel prices in Nigeria in September for the remainder of the year something that we highlighted we were looking at on our last call.
These increased power generation cost in the quarter were partially offset by a $22 million increase from power indexation year over year.
Finally as discussed in our recent project Great announcement three weeks ago. We're also increasingly prioritizing alternative sources of power to reduce that dependency on diesel.
Moving onto slide 15, and our recurring Levered free cash flow, which we report in a manner consistent with our U S peers, we generated <unk> of $91 million in the third quarter, a 24% increase versus Q3 2021 due to a combination of factors, including the $18 million nonrecurring revenue in the quarter and 19.
Decrease in bond interest costs in the quarter. This year post November 'twenty, one bond refinancing and those items offset by higher interest expense from the bridge loan and the new status correct position related financings.
It also includes a nearly $24 million increase in maintenance Capex and nearly 11 million increase in lease and rent payments all emanating from having a larger portfolio of assets placed on acquisitions.
Excluding the nonrecurring items, our rls shift would have been flat.
Our rls yet cash conversion rate was 33, 3% down slightly year on year.
And also Capex in Q3, 2022, capex of $174 million increased over 100% year on year, primarily from increases in Nigeria in connection with project Green on which we spent $42 million in aggregate through September this year, including $27 million in the third quarter as well as increased capex in Latam.
Following the ice systems at S. P five acquisitions and increased Capex in SSA in connection with that South Africa acquisition.
On slide 16, we look at capital structure related items say September 30 of this year, we have approximately $3 $8 billion of external debt and <unk> 16 lease liabilities similar to the end of June .
Of that $3 $8 billion of debt 194 billion represented a bond financings and $298 million Nigerians senior credit facilities, all as shown here as well as the $280 million bridge loan and other credit facilities included in our other indebtedness, our undrawn revolving credit facility.
Remained at $270 million and importantly on November 3rd we announced that we entered into a $600 million three year bullet timeline.
Just holding limited level as an interest rate of 375% plus three months terms sucker in cats.
We use an initial drawdown of $370 million to repay the $280 million bridge loan, which was due to mature in February 2023, as well as repaying the $76 million of USD tranche about Nigeria and facility that is currently amortizing and was due to mature in September 2024.
The remaining proceeds are undrawn and can be used for general corporate purposes.
And at the St. Thomas Some noted we announced that we extended the 270 million group revolving credit facility for another two years to March 2025.
As you can imagine we're very pleased to complete these transactions, which further derisked the balance sheet and increased our financial flexibility and to have achieved the rates, we did particularly in light of the tough climate and conditions across the globe.
We believe the successful outcome is a testament to the strength of our cash flows and contracts in our history in the credit markets as well as that relationship so that global banking partners cash and cash equivalents decreased slightly to $513 billion at the end of the quarter in terms of where that cash is held approximately 16% of the total cash was held in IRA.
After that Nigeria business, whereas some noted excess cash will be used to support project green.
Most of the remaining cash was held in dollars at the group level.
Moving on at the end of the third quarter of this year. Our consolidated net leverage was approximately $3 $2 billion with a consolidated net leverage ratio of three one times.
In both cases similar to the end of June . This is at the low end of our net leverage target range of three to four times and further demonstrates our strong balance sheet.
As of September 30th 78% of our debt was linked to hard currencies and with a fixed floating ratio of 66% to 34% and a weighted average cost of debt up eight 2% moving to slide 17, you can see we are raising our FY 'twenty two revenue guidance by $20 million and raising our guidance for <unk>.
Adjusted EBITDA in our FCS by $10 million, each while maintaining our capex guidance, which we just raised by $100 billion on October 24, when we announced project Green.
The step up in guidance is largely based on the strong secular demand as well as additional upside from power revenue and low withholding taxes, and despite an $11 million FX headwind, that's the FX rates previously assumed in guidance.
I'd point out we could see incremental upside to revenue in the fourth quarter 2022 last is on your guidance from additional power pass through although I just wouldn't have an impact on adjusted EBITDA or our left yet.
Regarding new sites, we reduced our target to approximately 1350 from approximately 1750.
This has a minimal impact on our financials and is due to timing delays, resulting in part from the current macro environment.
We believe the business is proving resilient given the macro headwinds we're facing.
Taking all this into account we now believe that revenues for FY 'twenty two will now range between 190 $5 billion and $1 $90 billion to $5 billion, which represents a 21% increase at the midpoint of the range on a reported basis versus FY 'twenty, one and approximately <unk> <unk>.
17% organically.
We expect adjusted EBITDA will range between 1.015 billion and $1.035 billion an hour left yes will range between 320 and $340 million, we are maintaining our capex guidance of $645 billion to $685 billion, but as noted.
We raised Capex guidance on October 24 to include a $110 million in Capex. The project Green as we also took the opportunity to narrow our previous range based on actual spend year to date.
On slide 18, we discuss how FX impacts our business on the top you can see revenue by reporting currency, whereas on the bottom we provide the breakout of revenue based on contract split.
For those who may be less familiar recall that while we are paid in local currency in each of the countries in which we operate in certain situations portions of the contracts are linked to hard currencies, such as U S dollar or euro where the amount the customer paid in local currency adjustments based on the exchange rate with the associated hot currency.
These structures help protect gains FX devaluation, the impact of which is reflected in our ethics reset component in organic revenue breakout.
For more information on that FX resets. Please see page 20 in the appendix.
Please be aware that there is not a hard currency component to our contract structures and South Africa, which impacts the percentages shown on slide 18 versus last quarter.
This now brings us to the end of the formal presentation. We thank you for your time today and operator. Please now open the line for questions.
Thank you as a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
We will now pause briefly while we register your questions in the Q&A roster.
First one is this dam.
What are your thoughts.
Our first question is with Jonathan Atkin from RBC capital John .
Jonathan Your line is open.
Yeah, So I wondered.
If you could maybe talk a little bit about the refurbishment capex for South Africa that you referenced the lengths and extent of that elevated capex and what's going on there and then I got a couple of follow ups. Thanks.
Hey, John that state I'm, sorry in terms of a refurbishment capex yeah. We've got some refurbishment going through this year next year and.
If you remember originally our guide was around $40 million to $45 million of Capex. When we brought South Africa into the guide when we close or just before we close the transaction and so that's all on track we listed in line with that and we'll get into next year, we're not when we get to the full year earnings call.
Next year.
And then Nigeria the reduction of the 2014 44 lease amendments.
Could you I guess I was a little surprised to see that I didn't realize the power was variable and I would've thought that would be noncancelable, so any any color on that.
Yeah, no financial impact on not just to be clear. So that was just a reallocation between between what we define as a as a lease amendment, which has to be recurring long term.
He sees a nice ones would not play with palisade, we've taken a lot of time out of the 10 accounts.
And then lastly, any any commentary on the naira, there seems to be a divergence again between the various rates and how is that impacting your financial or operational decisions.
But more of the same to be honest in terms of the overall environment in Nigeria.
As we mentioned in the in the comments just now Dulles are hard to source in Nigeria. They remain available we're continuing to look to source.
But it continues to be a challenge.
Challenge as it has been through the course of 2022.
One of the things, we're obviously doing right now is utilizing capital on project Green.
Chunk of which is local currency and so we are deploying the cash flow generation from Nigeria into that project at the moment.
Thanks very much.
Our next question is with Greg Williams from Cowen Greg.
Greg Your line is open.
Great. Thanks for taking my questions. Two if I may you did lower your built to suit guidance I think.
313, 15, you mentioned timing and general market conditions I was just wondering if you've got more specific is that the higher hurdle rates.
I'm, sorry, the higher cost of debt.
Cost of capital or is it labor and supply or are you looking more towards M&A and my second question is just that on the M&A landscape on your names come up on the <unk> acquisition, and you mentioned robust landscape, but you did mentioned the higher hurdle rates and I'm, just wondering if thats limiting your M&A opportunities.
Thanks.
Hey, Greg on.
On the BCS side of things that's really.
Market, driven and I would just point out the majority of that reduction is actually coming through our rural sites in Nigeria.
Which have very little <unk>.
Actual impact to us that's just less of a priority for ourselves.
And for customers at the moment.
So nothing nothing too significant a in that and as we look forward to next year.
I think I think we will see an overall pooling of BCS requirements versus what we originally started out with this year.
But certainly that will still be a component of our growth next year, we still want to deploy capital into Bts the returns still makes sense.
Secondly, we will look to keep doing that in selected markets.
Hi, Greg This is Sam.
Regarding the M&A look as specific as to what do you do we cannot comment on processes or our clients' transactions, but we have we have seen valuations kind of like softened recently and again, we could we continue to pursue opportunities, but we are very highly selective at the moment.
We'll see how the future evolves.
Got it thank you.
Thank you.
Okay.
Our next question is from Brett Feldman with Goldman Sachs.
Brett Your line is open.
Thanks, just a couple of follow ups.
You just made that point about how you might see a little bit of cooling as the bts opportunity rolling into next year, but you've also talked about the strong secular demand you're seeing for your towers. So I'm. Just wondering if you can kind of give us a little more context around why there might be less build to suit opportunities. If the demand backdrop remains strong and then.
And one of the slides you talked about you will continue to evaluate options that enhance the value of the company that wasn't a tile dedicated to your discussion of stock liquidity and so I'm wondering was that looking at options that are unique to things that enhanced stock liquidity or is there a broader point you were trying to make thank you.
Yes, Brett so on the on the BCS was referencing earlier in the year, we had a target of around 2003 hundred bps for this year and that's obviously crude through the course of the S. I am I think where we are now in terms of the 13 50.
Yeah, that's the sort of levels that we may get to next year, but let's see we are we're still working with our customers on next years pipeline and I would just say incentive the IPO sector demand I mean don't forget Bts is one component.
<unk> lease amendments were still seeing a lot of four G rollout activity was starting to see five G.
We've got five G starting to come in Nigeria now.
We even have five G in South Africa as well.
And we're starting to see possibilities of five gene places like Kuwait as well and don't forget we have Brazil, that's still.
Working through it it's OE breakup, which will then really allow the carriers then stopped putting the best foot forward on a 50 perspective as well so.
Plenty of different levers for growth into 2023.
Okay.
Stock liquidity, Brett just repeat your question say Ah, we alluding to anything specific.
Specific was that the question.
Could you talk about the options and enhance the value of the company, but it seemed to be in that tile dedicated the stock liquidity. So I didn't know if that was options related stock liquidity or for something else you were trying to say.
Yeah, no no not particularly I mean, we just re highlighting that it's clearly a focus of the company to try to improve the liquidity in the stock I E. The free flight and we've seen some incremental benefit or not but obviously, we still await the guy that remains a big focus for us and as everybody knows we did on block are the first amount.
Pre IPO shares.
We're off to a shareholder's shares in May.
<unk> block is now available we have not unlocked. It. So we are just making that point clear.
But still a key focus of the company and the Board's work is to continue assessing options to help with our liquidity position.
Yeah.
Helpful can I just ask a quick follow up.
The general commentary around the strong secular demand environment is it your customers the vast majority of their customers use prepaid services and so therefore your customers' revenues are directly responsive to how much usage is on their networks and of course, we've been in a really volatile economic climate and just whats the discussion been like with your carrier.
Customers are they finding that there is any reduction or a reduction in the usage of their networks by their customers because of any economic stresses or is this just a secular tailwind where usage is growing through cycles as we've sort of historically seen.
I mean, the opposite so far but we've just seen some of our bigger customers report MTN, Nigeria is 22% up on revenue.
More so than EBITDA, SL, Nigeria, 16% up on revenue empty NSA is also up in a number of percentage points, despite being a more mature market site.
We're actually seeing the big customers still continue to deliver into their businesses.
Which obviously that flows through into the overall demand for infrastructure services into our business as well.
Thank you.
Our next.
<unk> is from Michael Rollins with Citi.
Michael Your line is open.
Okay.
Thanks, and good morning.
Couple of questions. The first one.
Following up on some of the comments in terms of leasing activity that you were discussing as you look at the revenue contributions from new co location and lease amendments in dollars year to date, how is that progressing versus the internal expectations that you set going into the year and just.
How should we think about the opportunity for that over time.
Because you mentioned a few different cross currents some of the commentary. So just kind of curious how to think about that also going forward and then sorry final one other thing.
The 1.1% revenue contribution to fiber it looks like that's the contribution to that.
A year ago revenue, if you had to unpack what fiber is growing at organically in your business what would that number look like in the third quarter.
Hi, Mike So in terms of the shape of the building blocks I think.
At year to date, we're seeing what we expected to in terms of the split between Colocation and build to suit and lease amendments, possibly slightly less from build to suits. As we said we are down downsize the amount that we're going to build this year, although as we keep saying the big majority of that was rural sites, which doesn't really contribute that much. So.
Similar a similar pattern to what we're expecting lease amendments leading the way we've always thought that that would be the biggest component of those.
Those three building blocks.
Clearly, we're getting more come through from CPI in diesel pass through given the nature of the macro through the course of this year.
But again, that's just showing that our contract structures are working effectively.
Effectively and as we always try to articulate so I would say those are probably the two larger ones, but that's really driven by macro.
And then on your question on fiber so just to be clear the fiber split out there is the organic growth in fibre keeping in mind that the vast vast majority of our ice systems Brazilian supply the business is still sitting in the inorganic block on that slide 11.
Consummated that acquisition in November last year, so you'll start to see that unwind from inorganic into organic starting Q4 and into Q1.
The five men and a 1.1% fiber growth is organic from Nigeria.
Still I still a small part of our business.
But growing nicely, we haven't without yet the precise reported an organic split off the side of business is just by themselves, but we wanted to at least start breaking it out in terms of the overall.
Growth growth building blocks that you see on the page.
Thank you.
Our next question is from Eric <unk> from Wells Fargo.
Eric Your line is open.
Oh, great. Thanks for taking the question.
I'm curious if you could just touch on the leasing outlook in Nigeria, you mentioned kind of some of the different difficult macro environment indicators there but.
It looks like another spectrum auction is coming later this year and maybe you could talk about any any change whatsoever, you've seen in the pace of activity from MTN are the other carriers and then second just touching back on capital allocation again, I know stock liquidity as a key focus but how would you think about potentially a share repurchase which I realized wouldn't.
Liquidity in the near term, but could help improve the stock price and potentially improve liquidity longer term. Thank you.
So I think in terms of the Nigeria leasing environment. So similar to what we're seeing now and what we've seen through 2022 to be honest.
You rightfully say theres more spectrum coming at the moment, we have MTN is the key carrier that has five <unk> spectrum, whereas <unk> does not.
So.
I'm, taking the view that ASUR will be getting after five <unk> spectrum in the next allocation, but let's see how that unfolds.
That would be the case, then that gives another emphasis on an extra rollout such that we could potentially then up to customers.
Atlas with five G <unk>.
<unk> equipment sites.
<unk> vessel to come in the future again, I'll repeat something that we've said for a couple of quarters now five G is certainly coming in Nigeria, we're starting to get five G.
Lease amendments, particularly on our site today, but it's a very small component is very small.
Say 2023 is really a transitional year, where people are starting to rollout by J, a little bit more on a commercial basis, but really I think you'll start to see the main impact as we get into 2024, but certainly all positive good news in that.
More spectrum is coming.
The two real big key carrier MTN that should hopefully be well positioned by the end of the year.
So I think Thats really the continued story around Nigeria, not seeing huge difference really in terms of desire for David sides, Soak allocations and lease amendments will continue to be a big driver.
Of growth as we go into next year.
We continue to see.
On the share repurchase question.
Certainly one thing that we continue to consider his company and board along with lots of other options as well.
You hit the nail on the head in terms of whether or not.
Share repurchase would help with the overall liquidity, which obviously it would not there's obviously other factors to consider around that decision as well.
But we're.
We're still at a position where we feel like we are a young company with continuing to execute on the business trying to place the numbers quarter on quarter, such that everybody understands the underlying fundamentals and the strength of the business the resilience of the business in this macro environment.
Things like share repurchases amongst other things, we will certainly continue to assess and consider.
But not one for right now.
Great. Thank you.
At this time there are no further questions. So as a reminder, it is star one on your telephone keypad.
Our next question is from David Shellhammer with T. G I F.
Covid Your line is open.
Hi, Thank you for taking my question.
On the MCM call. They mentioned that they were in the process of renegotiating lease agreements with you guys. Both focus on energy cost adjustments and currency mix.
Was just wondering if these negotiations prove successful for them what impact would this have on your your topline and timing.
Hospital lease renegotiations.
Thank you.
Yeah I think.
I think they understand comment it was around telcos generally.
I used to a specific clip.
So I wouldn't necessarily assume that anything is going to change.
From that point of view around power and things like that.
But the way, we always engage that customers if they.
Their pain points that they want to fix there's always things that we would like to fix as well. So I think given the growth environment a lot of countries that they usually ends up being a win win but.
<unk>.
Yeah, I wouldn't put too much too much relative relevant some about it at this point in time.
Thank you.
That concludes our Q&A.
And that brings us to the end of the IHS Holdings Limited third quarter 2022 earnings result call.
Should you have any questions. Please contact the Investor relations team via the email address investor relations at <unk> I.
IHS towers Dot com.
The management team. Thank you for your participation today and wish you a good day.