IHS Holding Limited (IHS) Q3 2022 Earnings Report, Transcript and Summary

Good day and welcome to the IHS Holding Limited Results Call for the Three-Month period ended September 30th, 2022. Please note that today's conference is being webcast and recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Colby Synesael. Please go ahead, sir.

Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Synesael, the SVP of Communications here at IHS. With me today are Sam Darwish, the Chairman and CEO of IHS; and Steve Howden, CFO. This morning we published our financial statements for the three-month and nine-month period ended September 30th, 2022 on the Investor Relations section of our website and issued a related earnings release and presentation. These are the consolidated results of IHS Holding Limited, which is listed on the New York Stock Exchange under the ticker symbol IHS, which comprises the entirety of the Group's operations. Before we discussed the 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 our earnings release and 6-K filed as well today. In particular, the information to be discussed may contain forward-looking statements, which by their nature, involve known and unknown risks, uncertainties, and other important factors, some of which are beyond our control, that are difficult to predict and other factors which may cause actual results, performance, or achievements or industry results to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking statements, including those discussed in the risk factors section or our Form 20-F/A filed with the Securities and Exchange Commission and our other filings with the SEC. We'll also refer to non-IFRS measures that we view as important in assessing the performance of our business. Reconciliation of non-IFRS metrics to the nearest IFRS metric 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 and welcome, everyone, to our third quarter 2022 earnings results call. We had a strong quarter, driven by continued secular demand plus incremental recurring revenue and a one-time $18 million catch-up payment. Based 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 rates previously assumed in guidance, we are raising our 2022 guidance for revenue by $20 million, adjusted EBITDA by $10 million, and RLFCF by $10 million and reiterating our guidance for CapEx. Having just raised 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 to narrow our former 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 RLFCF, provide an overview of our carbon reduction road map, of which Project Green is our next significant step, and lastly, provide a strategic update on other key topics. On slide four, we again show our revenue, adjusted EBITDA and RLFCF results over the past five years that generated organic revenue growth of 15.2%, adjusted EBITDA growth of 15.1%, and RLFCF growth of 14.1% compounded annually during this time. Given 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 solutions, including fiber, all with a focus on driving attractive profitability and ultimately, ROIC for our shareholders over time. The charts on slide 5 are similar to those on slide 4, except they focus on the past five quarters as opposed to five years. You can see we delivered strong double-digit growth for reported and organic revenue, adjusted EBITDA and RLFCF 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 6, you can see that IHS owns nearly 40,000 towers, across 11 countries covering 770 million people, making us the third largest independent multinational tower company by tower count in the world. This geographical scale help both further diversify our revenue stream, having initially been founded as a Nigerian Tower Company, but also positions us in some of the largest emerging markets in the world by GDP, including Nigeria, Brazil and South Africa. Turning to slide 7, on October 24, we announced our Carbon Reduction Roadmap, or CRR. Our CRR provides a comprehensive strategy for decreasing our emissions, by reducing our dependence on diesel through connecting more sites of the grid as well as increasing our use of batteries and powered solutions. This, in turn, is expected to reduce the Scope 1 and Scope 2 kilowatt hour emission intensity of our tower portfolio by circa 50% by 2030 as well as, of course, the volatility in our cost structure.\ Under Project Green, the next significant step of our CRR, we expect to spend approximately $214 million in CapEx towards these efforts between 2022 and 2024, including the $110 million in 2022 and to deliver annual RLFCF savings of approximately $77 million by 2025. This, in turn, is expected to generate an implied return on investment of 30%. Project Green, will allow us to achieve almost half of our 2030 emissions reduction targets within a few years, as we reduce the kilowatt our emission intensity of our tower portfolio, through the use of more renewable energy generation. Turning to slide 8, starting 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 in fixed bonds and the earnings of those mature in 2026. To further improve our liquidity balance sheet in September, we extended the termination date of our currently undrawn $270 million revolving credit facility by two years to March 2025. In addition, in October, we entered into a new $600 million three-year Bullet-Term loan to refinance existing U.S. dollar loans. The new Bullet-Term loan will reduce our interest expense in 2023 and 2024, push out maturities and provide incremental capacity. Furthering this point, as of September 30, our leverage remained at 3.1 or the lower-end of our three to four targets. Moving on to Stock Liquidity. Following the Board's decision to waive the registered offering requirement for Block A on May 17, we've seen our 90-day average daily trading volume increased to 337,000 shares as of November 11 from 122,000 as of May 17, almost a threefold increase. In addition, the Block B shares were unblocked on October 14, but can only be traded through a registered offering until April 14, 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 upstreaming. We did not upstream from Nigeria in the third quarter of 2022 with excess naira currency being used in part to help finance Project Green. However, we continue to upstream from other upstream from other countries per normal course of business. While the macro environment in Nigeria is currently challenging, we have a long track of upstreaming 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 dollars. 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, put our goal to further diversify our revenue stream. Regardless of the specific asset though, 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 3% to 4% target range. Lastly, you see on Slide 9, we again lay out our sustainability strategy and provide examples of some of the initiatives we completed in third quarter of 2022. While not shown here, I'd also like to highlight that in conjunction with announcing our carbon reduction road map last month, we took the opportunity to revise 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 application for the 2022, 2023 academic year being processed in the third quarter. Last year, for the 2021, 2022 academic year, we awarded scholarship to 14 students, eight females and six males to study at both local and international universities. Courses studied ranged from business administration to medicine and no discipline is excluded from the initiatives scope. For the next academic year, we are seeing an increase in application numbers and are excited to enabling more children of our frontline workers to pursue their academic aspirations. And with that, I will turn the call over to our CFO, Steve.

Thanks, Sam, and hello to 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, while also noting the non-recurring items that we had anticipated in guidance for the fourth quarter, but landed in the third quarter. You will see on this slide that our main KPIs have 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 onetime items that impact comparability will highlight these differences over the next few slides so you can understand the true performance of the business this quarter. As you'll also see, our 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 I-Systems and to the GTS' SP5 and South Africa acquisitions that completed earlier in the year. Finally, versus the same time last year, our consolidated net leverage ratio increased to 3.1 times, which is the same level as Q2 2022. Turning to our revenue on a consolidated basis. Slide 11 shows the components of our 30.2% reported consolidated revenue growth. Organic revenue growth of 23.1% in the third quarter was driven primarily by CPI escalations, power indexation, which we've now shown as its own bar, Lease Amendments, FX reset, New Colocation, Fiber, which we've also shown as its own bar and New Sites. The level of escalations you see reflects our contract protections in the current inflationary environment and together with the FX resets, offset negative FX impact by 80 basis points. In terms of other, this 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 SP5 acquisition in Q1 2022 and the I-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 Nigerian macro remains challenging in part driven by the cascading effects of the Russia Ukraine situation with the country's sovereign debt rating having been downgraded in October. The US dollars continue to be difficult to source, although remain available with FX reserves having marginally decreased to $38.3 billion from $38.9 billion last quarter. And while the price of oil moderated slightly quarter-on-quarter, it remained elevated versus a year ago and due to the continued increase in premium, we are seeing applied to the importation of refined products like diesel to Nigeria. We believe the ICE Gasoil price, which averaged $1,012 per metric ton over 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. It expanded by 3.5% in Q2 2022, bringing the full year 2022 projected growth rate of 3.2%, while inflation increased 20.8% this past September versus 16.6% in September 2021. Looking ahead, we're monitoring the upcoming presidential election in Nigeria in February next year, and we remain in close contact with our key customers, two of which have again recently published healthy top line results in their businesses. We also continue to work closely with various regulators, our vendors and our local banking partners to continue to best position IHS. All said, we believe the business remains well positioned for continued long-term success and to endure the near-term challenges. And to this point, our Nigerian business once again delivered strong results in the third quarter, tracking well on our key metrics. Top line growth was driven primarily by CPI escalations, power indexation, lease amendments, FX resets, new sites and new colocation in addition to the onetime items previously mentioned Our tower count grew by 1.7% versus Q3 last year, inclusive of some planned decommission. Our total tower count increased by 2.4% versus the prior period, and our colocation rate was up at 1.53 times, the same as in Q2 this year. Lease amendments continued to be a strong driver of growth with fees increasing by 14% year-on-year as our customer’s added additional equipment to our sites, particularly 4G upgrades. However, please note that the movement in lease amendments includes the reduction of 1,444 during the quarter that are billed variably based on power consumption rather than through a recurring use fee. The improved operational performance is reflected in our Nigeria financial results. Third quarter 2022 revenue of $355 million increased almost 23% 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 was in the Nigerian segment. The revenue growth reflects increased activity from key customers, partly offset by a decrease in revenue from a smaller key customer, stemming from a decrease in revenue recognition from last quarter due to a delay in payments, although this was essentially flat 2Q to 3Q. 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 cost of $35.7 million, an increase of administrative expenses of $4.8 million. Now I'll summarize the results of the other segments, and firstly, our Sub-Saharan African segment, which now reflects the inclusion of our South African business. In that segment, 1,000 tenants increased substantially versus Q3 last year. Q3, 2022 revenue of $115 million increased by almost 29%, of which organic revenue grew 3.1%, primarily from escalations, new sites and new colocation. 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 volume of 28%, driven primarily by the increased revenue from South Africa, offset by increase in power generation costs, maintenance, security costs and administrative expenses. The adjusted EBITDA margin decreased slightly to 55.5%. In our LatAm segment, towers tenants revenue and adjusted EBITDA all increased substantially in this quarter due to meaningful inorganic growth, primarily from the GTS SP5 acquisition as well as the I-Systems fiber business. In Brazil, our second largest market was 6,915 towers, macro conditions were somewhat improved as FX rates marginally strengthened, interest rates held steady and inflation decreased, and we note the seemingly orderly conclusion of the recent presidential election. In our LatAm segment, overall, towers increased by almost 50% and tenants by over 65% due to the acquisitions. Q3 2022 revenue nearly tripled with organic revenue increasing 36% driven by escalations, new sites and new colocations while inorganic revenue increased by 147%. There was also a negligible impact of FX of 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%, and each of these cases, mainly as a result of closing additional tranches of the Kuwait acquisition as well as new site build. The Q3 2022 adjusted EBITDA margin decreased slightly to 42.2%. On to slide 13, I'll discuss our KPIs. As of September 30, our tower count was 39,397, up by nearly 9,000 or over 29% from 3Q last year. This was driven largely by our South African and GTS SP5 acquisitions as well as ongoing new sites in Nigeria, LatAm and SSA. As you can see in the chart on the top right collectively, we built 385 towers during the quarter, including additional rural sites under development in Nigeria that we previously mentioned were going live in the second half of 2022. Total tenants grew almost 26% year-on-year to 57,893, with the colocation rate at 1.47 times, down slightly or 0.94 times versus last year, but flat with Q2 2022. Two things we continue to point out related to our colocation rate; first, lease amendments, which are a significant factor in our Nigerian segment are not included; and second, when you're a significant acquirer and build roof towers as we are, then you're typically adding to the denominator period-on-period, even as we continue to lease up our portfolio. We continue to see no reason why we can't get to two time greater on our overall portfolio over the long-term, and our more mature portfolios and towers are at or above that rate. Lease amendments increased by 14% year-on-year as our customers added equipment to their sites, particularly 4G upgrades in Nigeria. Although as I mentioned, the movements in lease amendments include a reduction of 1,444 during the quarter that we set up variably based on power consumption rather than through a recurring use fee. On slide 14, you can see our 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%, each demonstrating the continued strong top-line growth trends of the businesses led by Nigeria and Lat Am in particular. Moreover, excluding the quarter $18 million of additional non-recurring revenue, our reported revenue growth was still 26% and organic growth 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 see from double-digit revenue growth on an annual basis. Regarding our adjusted EBITDA and adjusted EBITDA margins in the third quarter, adjusted EBITDA of $275 million increased 25% versus the prior year, including the onetime items and still increased 17% if you exclude the onetime 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 onetime benefits this quarter primarily reflect the increase in revenue we discussed, partially offset with year-on-year increase in 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 in our Nigerian 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 costs in the quarter were partially offset by a $22 million increase from power indexation year-over-year. Finally, as discussed in our recent Project Green announcement three weeks ago, we're also increasingly prioritizing alternative sources of power to reduce our dependency on diesel. Moving on to Slide 15 and our recurring levered free cash flow, which we report in a manner consistent with our US peers. We generated RLFCF 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, an $18 million decrease in bond interest costs in the quarter this year post our November 2021 bond refinancing and those items offset by higher interest expense from the bridge loan and the new South Africa acquisition-related financings. It also includes a nearly $24 million increase in maintenance CapEx and a nearly $11 million increase in lease and rent payments, all emanating from having a larger portfolio of assets post our acquisitions. Excluding the non-recurring items, our RLFCF would have been flat. Our RLFCF cash conversion rate was 33.3%, down slightly year-on-year. And on to 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 I-Systems and SP5 acquisitions and increased CapEx in SSA in connection with our South Africa acquisition. On Slide 16, we look at capital structure related items. So as of September 30 of this year, we have approximately $3.8 billion of external debt and IFRS 16 lease liabilities, similar to the end of June. Of that $3.8 billion of debt, $1.94 billion represents our bond financings and $298 million are Nigerians senior credit facilities, all are shown here as well as the $280 million bridge loan and other local credit facilities included in our other indebtedness. Our undrawn group revolving credit facility remained at $270 million. And importantly, on November 3, we announced that we entered into a $600 million three-year bullet-term loan at the IHS Holding Limited level at an interest rate of 3.75% plus three-month terms SOFR tranche [ph]. We used 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 USD tranche of our Nigerian 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 same time, as Sam 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 have completed these transactions, which further derisk the balance sheet and increase our financial flexibility and to have achieved the rates we did, particularly in light of the tough financing conditions across the globe. We believe the successful outcome is a testament to the strength of our cash flows and contracts and our history in the credit markets as well as our relationship with our global banking partners. Cash and cash equivalents decreased slightly to $530 million at the end of the quarter. In terms of where that cash is held approximately 16% of the total cash was held in Naira at our Nigeria business, whereas Sam 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 3.1 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. You'll see that, as of September 30, 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 8.2%. Moving to slide 17. You can see we are raising our FY 2022 revenue guidance by $20 million and raising our guidance for adjusted EBITDA and RLFCF by $10 million each, while maintaining our CapEx guidance, which we just raised by $100 million 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 versus FX rate previously assumed in guidance. I'd point out. We could see incremental upside to revenue in the fourth quarter 2022 versus our new guidance from additional power pass-through, although this wouldn't have an impact on adjusted EBITDA or RLFCF. Regarding new sites, we reduced our target to approximately 1,350 from approximately 1,750. This has a minimal impact on our financials and issue to timing delays resulting in part from the current macro environment. Overall, we believe the business is proving resilient given the macro headwinds we're facing. Taking all this into account, we now believe that revenue for FY 2022 will now range between $1.95 billion and $1.925 billion, which represents a 21% increase at the midpoint of the range on a reported basis versus FY 2021 and approximately 17% organically. We expect adjusted EBITDA will range between $1.015 billion and $1.035 billion and RLFCF will range between $320 million and $340 million. We're maintaining our CapEx guidance of $645 million to $685 million. But as noted, we raised CapEx guidance on October 24 to include $110 million in CapEx for Project Green as we also took the opportunity to narrow our previous range based on actual spend year-to-date. And 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 US dollar or euro, where the amount the customer pays us in local currency adjusts based on the exchange rate with the associated hard currency. These structures help protect against FX devaluation, the impact of which is reflected in our FX reset component in our organic revenue breakout. For more information on our FX resets, please see page 20 in the appendix. Also, please be aware that there is not a hard currency component to our contract structures in South Africa, which impacts the percentages shown on slide 18 versus last quarter. This now brings us to the end of our formal presentation. We thank you for your time today. And operator, please now open the lines for questions.

Thank you. [Operator Instructions] Our first question is with Jonathan Atkin from RBC Capital. 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 length and extent of that elevated CapEx and what's going on there? And then I've got a couple of follow-ups. Thanks.

Hey, Jon, it's Steve. So in terms of refurbishment CapEx here, we've got some refurbishment going through this year and next year. 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 closed or just before we close the transaction. So that's all on track. We're still in line with that. And we'll get to next year when we get to the full year earnings call next year.

And then Nigeria, the reduction of the 1,444 Lease Amendments, can you – I guess, I was a little surprised to see that. I didn't realize the power was variable, and I would have thought that would be non-cancelable. So any color on that?

Yeah. No financial impact on that, just to be clear. So that was just a reallocation between what we define as a lease amendment, which has to be recurring long term use fees and those ones were not they were power. So we've taken that out of the tenant count?

And then lastly, 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?

Look, more of the same, to be honest, in terms of the overall environment in Nigeria. As we mentioned in the comments just now, dollars are hard to source in Nigeria, they remain available. We're continuing to look to source, but it continues to be a 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, a chunk of which is local currency. 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, your line is open.

Great. Thanks for taking my questions. Two, if I may. You did lower your Build-to-Suit guidance, I think, by $300 million to $1,350, and you mentioned timing and general market conditions. I was just wondering, if you get more specific, is that the higher hurdle rate – I'm sorry, the higher cost of debt and 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, the names come up on the Orido [ph]acquisition. And you mentioned robust landscape, but you did mention the higher hurdle rates. And I'm just wondering, if that's limiting your M&A opportunities? Thanks.

Hey, Greg. On the BTS side of things, that's really market driven. And I would just point out the majority of that reduction is actually coming through rural sites in Nigeria, which have very little financial impact to us, that's just less of a priority for ourselves and for customers at the moment. So, nothing too significant in that and as we look forward to next year, I think we'll see an overall cooling of BTS 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 return's still makes sense, certainly. So, we'll look to keep doing that in selected markets.

Hi Greg, this is Sam. Regarding the M&A, look, as specific as to -- Oridu [ph], we cannot comment on processes or client transactions, but we have seen valuations kind of like softened recently. And again, 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.

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 the point about how you might see a little bit of cooling of 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 on one of the slides, you talked about you will continue to evaluate options and 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 enhance stock liquidity or is there a broader point you are trying to make? Thank you.

Yes, Brett. So, on the BTS, I mean, I was referencing earlier in the year, we had a target of around 2,300 BTS for this year, and that's obviously cooled through the course of the year. So, I think where we are now in terms of the 1,350, that's the sort of level that we may get to next year. But let's see. We're still working with our customers on next year's pipeline. And I would just say in terms of the overall sector demand, don't forget BTS is one component colocations, lease amendments. We're still seeing a lot of 4G rollout activity. We're starting to see 5G. We've got 5G starting to come in Nigeria now. We even have 5G in South Africa as well and we're starting to see possibilities of 5G in places like Kuwait as well and don't forget we have Brazil that's still working through it. It's a breakup, which will then really allow the carriers to then start putting their best foot forward on a 5G perspective as well. So, plenty of different levers for growth into 2023. Stock liquidity. Brett, just to repeat your question. So, are we alluding to anything in specific, was that the question?

Yes, because you talked about the options and enhance the value of the company, but it seemed to be in that tile dedicated to stock liquidity. So, I didn't know if that was options related to stock liquidity or for something else you were trying to say?

Yes. Not, not particularly. I mean we're 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 float. We have seen some incremental benefit on that. But obviously, we still have a way to go. So, that remains a big focus for us. As everybody knows, we did unblock the first amount of pre-IPO shareholder shares in May. The next block is now available. We have not unlocked it. So, we're 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 that liquidity position.

That's helpful. Can I just ask a quick follow-up? The general commentary around the strong secular demand environment, 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 what's the discussion been like with your carrier customers? Are they finding that there is any 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, Brett, we've just seen some of our bigger customers report MTN Nigeria is 22% up on revenue, more so on, EBITDA, rest on Nigeria's 16% up on revenue. MTN in SA is also up a number of percentage points, despite being a more mature market. So we're actually seeing the big customers still continue to deliver in their businesses, which obviously then flows through into the overall demand for infrastructure services into our business as well.

All right. Thank you.

Our next question is from Michael Rollins with Citi. Michael, your line is open.

Thanks everybody and good morning. A couple of questions, the first one, just following on some of the comments in terms of leasing activity that you were discussing, as you look at the revenue contributions from New Colocation 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 crosscurrents in some of the commentary, so just kind of curious how to think about that also going forward? And then, sorry, finally, one other thing. The 1.1% revenue contribution to fiber, it looks like that's a contribution to the 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? Thanks.

Hi. Mike. So in terms of the shape of the building blocks, I mean, I think year-to-date, we're seeing what we expected to in terms of the split between Colocation Build-to-suit and Lease Amendments, possibly slightly less from Build-to-suits. As we said, we've downsized the amount that we're going to Build this year, although as we keep saying a big majority of that was rural sites, which don't really contribute that much. So similar pattern to what we're expecting, Lease Amendments leading the way. We always thought that, that would be the biggest component of those three building blocks. And clearly, we're getting more come through from CPI and 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 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 fiber, keeping in mind that the vast, vast majority of our iSystems Brazilian fiber business is still sitting in the inorganic block on that slide 11. We consummated that acquisition in November last year. So you'll start to see that unwind from inorganic into organic starting Q4 and then into Q1. So that $5 million or 1.1% fiber growth is organic from Nigeria. And still -- it's still a small part of our business, but growing nicely. We haven't split out yet the precise reported and organic split of the fiber businesses just by themselves, but we wanted to at least start breaking out in terms of the overall growth building blocks that you see on the page.

Thank you.

Our next question is from Eric Luebchow from Wells Fargo. Eric, your line is open.

Great. Thanks for taking the questions. Curious, if you could just touch on the leasing outlook in Nigeria. You mentioned kind of some of the difficult macro environment indicators there, but it looks like another spectrum auction is coming later this year? And maybe you could talk about any change whatsoever you've seen in the pace of activity from MTN or the other carriers? And then second, just touching back on capital allocation. Again, I know stock liquidity is a key focus, but how do you think about potentially a share repurchase, which I realize wouldn't help 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 rightly say, there's more spectrum coming. At the moment, we have MTN as the key carrier that has 5G spectrum, whereas Airtel does not. So I'm taking the view that Airtel will be going after 5G spectrum in the next allocation, but let's see how that unfolds. And if that would be the case, then that gives another emphasis on extra rollout such that we could potentially then have two customers rolling out on us with 5G equipment. So that's also come in the future. Again, I'll repeat something that we've said for a couple of quarters now. 5G is certainly coming in Nigeria, and we're starting to get 5G lease amendments, particularly on our site today, but it's a very small component, very small. And we would see 2023 is really a transitional year, where people are starting to roll out 5G 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 that more spectrum is coming and that the two real big key carriers, MTN and Airtel, should hopefully be well positioned by the end of the year. So I think that's really the continuing story around Nigeria, not seeing huge difference really in terms of desire for new build sites or collocations and lease Amendments will continue to be a big driver of growth as we go into next year that we continue to see. On the share repurchase question, I mean, that's certainly one thing that we continue to consider as a company and board along with lots of other options as well. I think you hit the nail on the head in terms of whether or not a 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 still at a position where we feel like we are a young company. We're continuing to execute on the business, trying to pace the numbers quarter-on-quarter such that everybody understands the underlying fundamentals and strength of the business and resilience of the business in this macro environment. And 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. [Operator Instructions]. Our next question is from David Shellhammer with PGIM. David, your line is open.

Thank you for taking my questions. On the MTM call, they mentioned that they were in the process of renegotiating lease agreements with you guys, both focused on energy cost adjustments and currency mix. I was just wondering if these negotiations prove successful for them, what impact would this have on your top line and timing of the possible lease renegotiations A – Sam Darwish: Yes. I think the MTN comment was around Telcos generally, as opposed to us specifically. So I wouldn't necessarily assume that anything is going to change from that point of view around power and things like that. But look, we're always engaged with our customers if there are pain points they want to fix. There's always things that we would like to fix as well. So given the growth environment of our countries, these end up being a win-win. But I wouldn't put too much relevance on that 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 Results Call. Should you have any questions, please contact the Investor Relations team via the e-mail address, investorrelations@ihstowers.com.. The management team, thank you for your participation today and wish you a good day.