Helios Towers ups guidance as tenancies increase

Specifically, the towers operator now expects to add more than 2,400 new tenancies to its towers in Africa and the Middle East during the full year, having previously targeted something in the range of 1,900 to 2,100.

And on the financial side it is now looking at hitting the high end of its guidance range; that's earnings of around US$420 million and free cash flow of $290 million.

“Our Q3 results reflect continued execution of our 2.2x by 2026 strategy, with strong tenancy growth supported by our leading positions in structurally high-growth markets," said Helios Towers chief executive Tom Greenwood, referring to the strategic shift the company made earlier this year when it switched its focus from volume of towers to its tenancy ratio.

As the name suggests, it is shooting for a ratio of 2.2x – that's 2.2 tenancies per tower – by 2026, having previously been working towards a goal of 22,000 towers by the same date.

While the strategy change could be viewed as Helios shifting the goalposts once it realised it was unlikely to reach that figure, it arguably also signals the end of an expansion phase and a move towards belt-tightening and increased returns, much like the company's larger peers in more developed markets.

"We view this shift in strategy as positive given that we expect increased focus on existing portfolio utilization and organic growth to result in improving EBITDA margins," noted analysts from S&P Global in May. "The company is targeting EBITDA margins between 55%-60% by 2026 and expects FOCF to turn positive this year," they said.

Helios' adjusted EBITDA margin came in at 53% for the first nine months of this year, up from 50% in the same period last year, on the back of 16% growth in EBITDA to $312 million.

Its tenancy ratio reached 2.04x, up from 1.9x a year earlier, while the number of tenancies increased by 2,096 between January and end-September to 29,021. Helios has added 150 new sites in 2024 so far, taking its total to 14,247.

To put that in context, Vodafone's Vantage Towers made much of its aim to secure a 1.5x tenancy ratio across an 84,000-site footprint, while Cellnex, which has also backed away from M&A and focused instead on debt-reduction, has 138,000 towers and is aiming for a tenancy ratio of 1.64x by 2027.

"Looking forward to FY 2025, we expect further progress in our tenancy ratio expansion strategy," said Greenwood. "Combined with our resilient business model and focus on efficiencies through AI and digitalisation, we expect this to drive low double-digit adjusted EBITDA growth, continued ROIC expansion and further deleveraging, supporting sustainable value creation for all our stakeholders."

Helios Towers expects net leverage to come in at below 4x this year, and aims to reduce it yet further to 3.5x in 2025. Also next year it expects to see low double-digit EBITDA growth and one percentage point growth in return on invested capital (ROIC). And it is aiming for an interim tenancy ratio target of 2.1x.

Its message around cutting debt and prioritising organic growth has become a familiar one in the towers space, irrespective of whether the operator in question has a developed market focus or works primarily in faster-growing spaces. Helios Towers has set itself some attainable targets and there's no reason why it shouldn't be able to hit them.