Helios Towers PLC
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Helios Towers PLC
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Good morning, everybody, and thank you for making the time to join us to listen to our Q3 results call. I'm on Slide 1 of the deck. Joining me as usual is Tom Greenwood, our Chief Operating Officer; and also Manjit Dhillon, who's our interim Chief Finance Officer; and of course, I'm Kash Pandya, the CEO.If I move to Slide 2, the agenda of the call is myself and Tom will give highlights of the business. Manjit will take us through some detailed financials. And at the end of the call, there will be plenty of time for Q&A through our conference coordinator.So moving straight on to Slide 4, highlights of our third quarter 2020. We continue to have strong momentum and delivered strong revenue growth of 6% in the quarter, delivering $103.6 million of revenue. And corresponding, we saw EBITDA expand higher than our revenue, as you'd expect for our business model and grew by some 9% adjusted EBITDA growth, delivering a $57.4 million quarter 3 growth.But most importantly and we're very pleased that we've now entered the 55% margin range and into our medium-term target of 55% to 60% EBITDA margin. So that's the first for us for our business.Driving cash flow, portfolio free -- portfolio free cash flow was at $133 million, some 7% increase year-over-year, of course, reflected due to the higher EBITDA and a little bit of higher maintenance CapEx.Looking at some of our other metrics. First of all, site count, we delivered a 5% increase in our site count, tower sites and locations, slightly higher than 7,200 locations across our countries. And tenancy growth grew by some 6 percentage points to a little over 15,000 overall tenancies for the group, delivering a tenancy ratio of 2.09.You would have seen also that we secured additional debt capacity by tapping our bonds for another $225 million with a yield to maturity of 5.6, which gives us a significantly more efficient financing structure compared to where we were before. And again, I remind you of the August announcement of our signing of a deal to enter Senegal with the acquisition of 100 -- sorry, 1,220 towers. We expect to complete that transaction in Q1 of 2021. And part of that transaction was also 400 built-to-suits over the coming years ahead of us.Moving on to Slide 5. Just focusing on 3 key metrics. I've already mentioned the tenancy ratio of 2.09 and delivering around 15,000 now tenancies overall for our group. We've added year-to-date to Q3 856 tenancies.Our last quarter annualized EBITDA is coming in at $230 million, and the center KPI there shows a good trend in terms of growth year-over-year of our last quarter annualized EBITDA and again, emphasizing the margin expansion to 55% now into our -- into our range that we've been articulating for some time now. But most importantly, it continues the trend of quarter-on-quarter EBITDA expansion.This is now our 23rd quarter of consecutive EBITDA growth. And in terms of last quarter portfolio free cash flow growth, we've delivered $177 million, increasing of around 5% on full year '19, and we would expect this to continue the momentum we're seeing on this metric as well.I'm going to hand over to Tom now to talk a little bit more in detail about some of the other dynamics of our business.
Thanks very much, Kash. Hi, everyone. It's Tom Greenwood, Chief Operating Officer. So looking at Slide 6 now. This is the COVID slide, which we've been presenting through the year, looking at the impacts on our business over the key parameters, workforce and operations, revenue/liquidity, customer roll-out, supply chain and situation management.At a high level, the business very much continues operationally as normal with field operations continuing to be classed as essential services in our markets and delivering our normal power uptime as usual. As you can see from the middle column and the right-hand column, there's minimal impact and not too much change since Q2.The 2 changes highlighted here are the liquidity has increased through our bond tap. We now sit with $466 million of cash on balance sheet plus $290 million of undrawn loans. And then on the tenancies, we have seen some slight slowdown in roll-out from 1 or 2 of our customers in Q2 and Q3. And we're guiding for tenancies to be at around 1,000 net additions year-over-year by the end of FY '20.So within the previous guidance, albeit at the bottom of it, and I think we can say that we're getting a lot of tenancy orders in right now. And our sense is that without COVID, we would have ended the year at around 1,200 to 1,300 tenancies, but it seems like we're getting those now and we'll be having some of those come through in early next year.Supply chain and situation management, as you can see, unchanged and no impact there. Moving on to Page 7, the recent developments. I mentioned the bond tap. So that was a successful issuance in September, further reducing our cost of debt and cost of capital. This was issued at 5.6% equivalents of $106.25 trading price.And of course, this 5.6% being lower than the 7% that we achieved in our large refinancing back in June. So good progression there on our cost of capital. The operational excellence, as I mentioned on the previous page, very much continues. And through this year, we've been having record levels of power uptime performance, maintaining in Q3 the 99.99% levels across all of our markets, which demonstrates excellent performance by our teams in the field.Senegal is progressing well. As a reminder, we signed that deal in August and communicated at the time we expect to close in Q1. We're very much on track with that, executing our 100-day plan in the market, which seems on the ground setting up the office, the teams, the systems and going through the regulatory process. So very much expect to close that deal in Q1.And just on the subject of M&A, we are very busy still on a large pipeline of M&A. 10,000-plus towers that we're currently actively engaged in processes one way or another and some of those are in advanced stages. So we're extremely focused on getting a few more deals signed hopefully soon and making those announcements.And this is very much in line with our 5-year strategy. As you'll remember, when we did the IPO, we communicated a 5-year strategy of moving from 5 markets to 8 markets and 7,000 towers to 12,000 towers. With Senegal, we've moved to 6 markets and approaching 9,000 towers. And the pipeline we have, we could see that progress much further on an accelerated basis, which would be great. So hopefully, more to announce on that in the not-too-distant future.Moving on now to Page 8, our sustainable business strategy, which is core to everything we do and we've been communicating that with you through the year. And since doing IPO, we've been developing our strategy and core focus. We've developed our strategic KPIs and targets and these are centered around 3 major pillars: business excellence and efficiency, network access and sustainable development and empowered people and partnerships.And for those of you who've seen our sustainability section on our website, you may have seen a 16-page deck, which is green shorted on the right-hand side here, which I'd encourage people to have a look at, if you haven't. Date to your diary, the 19th of November, in a few weeks, we will be doing a sustainable business strategy presentation to investors. So I'd encourage everyone to sign up for that.If you're on the PDF of this presentation on our website, you can just click on that red box at the bottom of the page to register. And we'd love to see you all there and talk to you more about all of this. And then finally, in Q1 '21, in a few months' time when we release our FY '20 annual report, we'll also be releasing a sustainable business report alongside that, which we'll build on and provide a lot more detail on all of these factors in that. So look out for that alongside our annual report in Q1 next year.With that, I'll hand over to Manjit to take you through the financials.
Thanks, Tom. Moving on to the financial results and starting on Slide 10. Here we summarize the main KPIs, which I'll be talking to over the next few slides. So moving swiftly on to Slide 11. And we see continued upward growth in our tenancy. Over the last 12 months, we've added 856 tenancies across our portfolio and 176 additional tenancies quarter-on-quarter, which was predominantly driven by over 100 new sites in Tanzania, 43 and 33 new tenancies in DRC and in South Africa, respectively.As mentioned earlier, whilst there were some short-term COVID-19 delays to customer roll-out, our tenancy pipeline remains robust. And our tenancy guidance remains within what we've previously communicated during the course of the year, and we expect incremental tenancies for 2020 to be approximately 1,000 within our previous guidance of 1,000 to 1,500.On to Slide 12, looking at our revenues and EBITDA. We've seen solid growth in Q3 with revenue growth of 6% year-on-year and 1% quarter-on-quarter. Our Q3 2020 EBITDA grew by 9% year-on-year and 4% quarter-on-quarter to $57 million. This now represents our 23rd consecutive quarter of EBITDA growth, a trend spanning all the way back to Q1 2015.We're also very happy to announce our adjusted EBITDA margin has stepped up 1 percentage point to 55% and within our medium-term target range of 55% to 60%, which we also targeted for this year as well by the end of this year.If we move on to Slide 13, you'll see the usual breakdowns provided, which are very consistent from previous quarterly updates. Our customer base, FX mix and operating company splits are largely unchanged with 87% of our revenue year-to-date coming from Africa's big 5 mobile network operators, being Airtel, MTN, Orange, Tigo and Vodacom.60% of our revenue was in hard currency, being either U.S. dollar or euro pegged, which translates to approximately 65% of our EBITDA being in hard currency. This provides a strong natural FX hedge for the business and which is further complemented by our annual inflation escalators, which we have in our contracts with our customers.As mentioned previously, this hard currency mix will actually increase further following the closure of Senegal, where we expect the revenue percentage to actually increase to 63% from 60% today.Moving on to Slide 14, which provides an update on our CapEx. Year-to-date, our expenditure has been $62 million, reflecting $49 million of discretionary CapEx and $13 million of nondiscretionary CapEx. For full year 2020, we have revised guidance downwards to $80 million to $110 million from the previous guidance of $110 million to $140 million. This reduction of $30 million is due to a reduction in growth CapEx and reflects our expectation of 1,000 incremental tenancies for 2020 at the lower end of our previously guided range.We continue to expect nondiscretionary CapEx to be circa $20 million to $25 million in 2020. Finally, moving on to Slide 15. Here, we show a summary of our financial debt. Following the successful refinancing in June, we went back to the debt markets in September, where we raised $225 million through a bond tap issuance as mentioned earlier.This tap was priced at 106.25, yield to maturity of 5.6%. This further reducing our cost of debt, which was at 9.125% at the start of the year prior to our refinancings. We have a strong balance sheet with our cash balance as of Q3 2020 being $466 million. And when we combine that with our $200 million term loan facility, which is currently undrawn, we have significant funds to execute on our expansionary growth strategy and capitalize on the opportunities which Tom mentioned earlier.Finally, our net leverage is at 2.9 and currently below our target range of 3.5 to 4. When we pro forma in for the Senegal acquisition, we expect to be at roughly 3.5, again at the low end of our target range and importantly, allowing for further debt utilization when required.And with that, I'll pass back over to Kash to go through the final slides.
Thanks, Manjit. So, on Slide 16, and this is the last slide before we go to Q&A. So to summarize Q3 2020, look, we've maintained our track record of consistent EBITDA growth and profitable EBITDA margin of 55% and 23 consecutive quarters of EBITDA growth. We've secured record low cost of debt and further strengthened our balance sheet in terms of capacity to do expansion by tapping our bond for a further $225 million.As Manjit stated, our full year tenancy expectations around 1,000 tenancies to be added during the course of 2020 and within our guidance range. And the medium-term guidance is unchanged with strong demand for pipeline of organic growth as well as M&A expansion into new geographies. So on that point, I'm going to hand over to Adam to help us manage through the questions. Thanks, Adam.
[Operator Instructions] Our first question today comes from Giles Thorne of Jefferies.
The line went a little bit fuzzy there. Hopefully, you can hear me. My first question is -- my first question is on Airtel, Tanzania. Airtel famously was the only one who didn't sell the towers in Tanzania, but they're now very, very actively talking about selling those 1,500 towers. I think that would take you, if you were to buy them, to 100% ownership of towers in the country. So my question is, is that an asset base you're interested in? Is it an asset base you could even buy? Any commentary there?And second was on AirtelTigo in Ghana. There's news flow out over the past couple of days of nationalization of that asset. There doesn't seem to be much precedent for nationalization in your countries of operation. So I was just curious on your high-level commentary there. Is that an opportunity? Or is that a risk? And especially considering you were the big beneficiary of the merger of Airtel and Tigo in Ghana. So any commentary there?And then finally, sticking with the theme of M&A, you very successfully lowered your cost of debt over the past 12 months. With that lower cost of capital, are you inclined to be more aggressive when bidding for assets, bid at higher price because you've got a lower input cost? Or are you inclined to have larger spreads on the assets that you buy, if that makes sense? So how has your lower cost of capital changed your M&A approach? That's the question.
Giles, thanks for the question. Let me take the first 2 Airtel-related points, and then I'll ask Tom to comment on the M&A and the lower cost of capital impact in our M&A approach. So Tanzania Airtel, look, we're very well established in Tanzania, and we see continued organic growth. At this stage, our view of the Airtel towers in Tanzania is something that we'd sooner focus on other markets and expand into new geographies rather than spend our resources in further market share growth through acquisitions in Tanzania. And it's a good asset. I'm sure someone else will come in, and we think that's a good, good sign and advocates Tanzania as a solid market for a second towerco to operate in.Regarding Ghana, Airtel Ghana, AirtelTigo Ghana and the recent news, I think, came out yesterday from Airtel, we're watchful of the situation there. It's not an unknown secret that Airtel and Millicom are looking to -- or Airtel -- Bharti Airtel are looking to get out of Ghana and Millicom out of Africa. I think if the government do take that asset base on, then we feel very positive about the fact that the government will invest and ultimately sell the business on to a third party. And there are other players outside of the Africa's big 5 MNOs being obviously Airtel, Tigo, Vodacom, MTN and Orange, who are looking to expand. And Free being one of those assets or businesses, MNOs from Senegal that we've just acquired the towers from. So we're watchful of the situation in Ghana, but we're also positive that the government is looking at this business there. Tom, on the M&A front?
Yes. Giles, yes, look, I mean, our cost of capital is something that we monitor, particularly when it's moving in the right way as quickly as ours is or has over the past few months. So that is a good thing for us. It makes us more competitive if we need to be. I think the M&A that we're looking at, we always take it really on a case-by-case basis. So we won't come out and say, we're suddenly reducing our returns thresholds for all deals. But I think to the extent we want to or need to on particular deals, it does give us simply a bit more flexibility, which is a good thing for expanding our business. So we'll continue to monitor that. But the deals that we look at and are looking at, we always look for substantial surplus over and above our WACC whenever we underwrite anything. So that will continue.
Just as a follow-up on that. This will be a big debating point, but it feels to me that the market is being pretty efficient when it's pricing your debt, but it's not being that efficient when it's pricing your equity. I don't know what your view on that is. I'm sure you would agree with me and more. But does that mispricing of your equity here, does that slow your hand or slow your appetite when it comes to do M&A? Do you fear raising equity here?
Yes. I mean -- I mean, I think -- yes, I think you're right. I mean our sense is that the -- yes, I mean, I guess we're obviously going to say this, that the market is pricing equity too low. I think that we take a longer-term view when we're thinking about acquisitions and comparing acquisitions to our current trading levels. I think there may be 1 or 2 technical elements to why the equity trading levels are where they are with the perceived overhang of some pre-IPO shareholders, whether that's true or not, I don't know, but perhaps that's having some kind of impacts on the price. But we'll continue to do what is in our control and run a solid, efficient business and keep on doing the right thing, which is looking for new growth opportunities of good assets in exciting markets, which we think will add value to our business. So we'll focus on that. And our view is the market will also figure itself out over time.
Our next question comes from Florian Henritzi of Bank of America.
I got 3. So firstly, you already have talked about the Senegal deal in the presentation. Just wondering if you could give us a bit more color on how things have been going since you hit the ground. I mean is it going as planned? Have there been any sort of negative or positive surprises? I mean, for example, if everything going smoothly with the obtaining sort of the required permits and licenses? And just, I mean, overall, how the integration is going? How we are on track? That would be the first question.
Yes, absolutely. I'll take this. It's Tom here. Yes, look, Senegal is going well, I would say. And having -- this being our 6 market setup, we've got a great team on the ground. Some of them have been in the business for up to 10 years. So have experience setting up other markets, which is great. And we're executing on a 100-day plan. We've found an office. We're getting some staff on board. We're having some staff transferred from the mobile operator, which is typical in these deals. And we're having good interaction with the regulators. So the process is very much on track. We expect a Q1 closing. If anything, it's possibly a little bit ahead, but wouldn't change the expectation of closing time. I think Q1 is a reasonable time to assume still.
All right. Okay. And then secondly, I wanted to -- I was wondering how you generally see the South African market in terms of the M&A opportunities? I think you've previously mentioned that sort of built-to-suit would be focus here. But I mean South Africa is kind of a huge market in terms of towers. I was wondering if you just could give us some color around your discussions with the operators there. So I think Telkom at some point they were reported to look at a potential sale. And really anything you could say around M&A in South Africa would be appreciated.
Yes, absolutely. So a big part of our strategy for entering South Africa was clearly to have optionality should some of the large portfolios come up to sales over time. South Africa is a market with 29,000 towers. And I think over 25,000 of them are still owned by mobile operators. So clearly a big potential there should 1 or more of them decide to sell. And in the meantime, we did build-to-suit roll-out, but a big part of it, as I said, is having optionality there being on the ground should 1 or more of these come through. I don't think we can -- we can't speak in specifics on this call about exactly who we're talking to, what might be going on. But I think suddenly rumors circulating the market as you've alluded to. And we very much hope that our thesis that over time, South African mobile operators will sell their towers, hopefully we're starting on that track at the moment. So let's see what happens. But yes, it would be a big focus for us if that were to happen.
Okay, sure. Okay. And then just my last question is just on your margin. So at around, I think, 55% in Q3 looks quite decent, and I think it's already in the range of your mentioned target. Just trying to understand if the Q3 was sort of helped by any kind of temporary costs related to the lower commercial momentum on the back of COVID or if that development is really structural, we can expect a level of profitability to continue near term or, let me say, on an underlying basis, if I assume sort of your Senegal deal will initially be -- will be dilutive.
Manjit, why don't you take that?
Yes. Thanks, Florian. Yes, I think that where we are now is very much a structural piece. We see this as being part of our work that we've been doing over the past year to try and improve our margins. And that's really been driven by combination of increasing tenancies, but also operating efficiencies. I think as you rightly say, though, and as we look to the short to medium term, as we start to integrate new markets, specifically Senegal, given the low tenancy ratio they come with on day 1, it will certainly be somewhat margin dilutive. But as those assets start to lease up over time, we'll start to see the margin rebound and get back towards our medium-term target of 55% to 60%. But looking at our established markets, certainly, you'll start to see more and more improvement in our EBITDA margin over the medium term.
[Operator Instructions] Our next question comes from Simon Coles of Barclays.
I guess just on the tenancy guidance. Could you give us maybe a little bit more indication of is that specific in any markets that were causing a slight slowdown in roll-out? And then how do we think about that in the future? Is it just a pushback or is it a postponement, so those could be additional tenancies next year? And then I'm just wondering, you say Senegal is all on track. Are you already having conversations with the other operators in the market about adding tenancies to the portfolio you're buying because we know that's got a low tenancy ratio? So there's a big opportunity to grow there. So any more color around those things would be great.
Yes. Simon, it's Tom here. Yes, so in terms of the tenancy, I'd say rather than it being on a country-by-country basis, it's more on an operator-by-operator basis. And there are really 2 scenarios which have meant that some of the roll-out is happening a little later in the year than would originally have been assumed. One is 1 or 2 supply chain delays here and there with the mobile operators.And the second 1 is the group corporate keeping the purse strings tight in terms of CapEx spending in Q2 and Q3, which now appears to have opened up in the recent weeks. And so therefore, we're getting orders in now for sites which have been in the pipeline since around the start of this year and has -- there's a lead time on those particularly built-to-suits, which will mean that they don't hit the December 31 cutoff date for this year's reporting, but will go into the next year effectively.So yes, effectively, there's a little bit of a slowdown in Q2 and Q3 because of the 2 main reasons I just stated, which now appears to be coming through now. So I guess the good news is the pipeline hasn't changed or gone away. It's just some are coming through a little later. On the -- on your next part of the question regarding the guidance for next year or the tenancies for next year, we'll be giving in a normal way full guidance when we report our full year numbers in Q1 next year.But I would say, I wouldn't expect to sort of us to significantly increase our guidance for next year. I would imagine it will be in a similar vein as this year, something like 1,000 to 1,500, for example, rather than saying 1,200 to 1,700. So I think it will be just a slight shift to the right that we've put forward in Q1 for the guidance next year. And then the final strand of the question on Senegal. Yes, absolutely, I mean, very standard practice for us.As soon as we have a deal in a new market, even actually before quite often we actually signed it, we will be engaging with the other mobile operators in the market, and Senegal is no different to that. So yes, absolutely a big part of our 100-day plan as the sales work stream, which is very much focused on doing that, talking to the other potential customers in the market or existing customers because they're already on some of the sites that we're buying.
Our next question comes from Jonathan Kennedy-Good of JPMorgan.
Quick one on Tanzania. It looks like some of the regulatory interventions made against the mobile operators there is causing quite a bit of pressure on the revenue outlook and subscriber numbers. Just kind of wanted to get a sense of how that's impacted your pipeline there and whether there's already been a recovery or whether that's still pretty soft? And then also coming back to your lower debt costs, just wanted to try and unpack how you think about your debt headroom and how many towers that kind of could potentially result in -- allow you to purchase as you look at the deals before you. So just on those 2 questions, please.
Yes. Jonathan, great to hear from you again. So and nice to see your report on us this morning. Yes, so those Tanzania regulatory sort of dynamics in -- with the MNOs there, this is something we've seen before actually in -- back in, for example, in DRC back in 2017, '18 time frame. The rules are the rules as far as we're concerned. And there was an issue that not all SIM card registered. They've enacted that sort of regulation and the MNOs are adhering quickly to it.And from past experience, reference to DRC, we see this as a temporary dynamic and it corrected very quickly in DRC literally within 6 to 9 months, and the SIM registrations were back the following year at the same level. So we think that this will correct itself very quickly. In terms of roll-out in Tanzania, I think Manjit mentioned that we've added over 100 tenancies in Q3 in Tanzania, for example. Obviously, COVID had a slowdown impact like the rest of the world. But we don't see any other dynamic shift in Tanzania, and we're actively in conversation with all our customers in Tanzania about further roll-out over the next few months and progressing longer term.And then regarding your point on the debt capacity and what can that buy us, well, look, again, if you look at our past performance on transactions and what we paid, we believe that the facilities we have at hand today can deliver between 2,000 and 3,000 towers without having to do anything else further. And then beyond that, we can always utilize the further EBITDA expansion through the acquisitions we make and the growth that the existing business delivers. And ultimately, if and when needed, we could also go to the equity markets if we needed to. But we believe we've got ample capacity to add another 2,000 to 3,000 towers on top of Senegal.
Great. And maybe I could follow it up with a question on your cost of debt declining so much. Would you be comfortable in breaching the 4.5x net debt-to-EBITDA level? Or is that you've not changed your mind on that?
Yes. I mean -- go ahead. Go ahead.
Sorry, yes, I was just going to say, we still have a good target of 3.5 to 4.5. We keep -- we think that is a suitable target for this business. However, having said that, if there is a suitable opportunity that we see where we may go above 4.5, but for a very short-term period and then subsequently rebound to be back within that target, we certainly look at doing that. But I think we've stayed relatively within our target range for the last few years now, and we're relatively disciplined around that, but it would have to be something of scale or something that would subsequently rebound quickly for us to go above it.
Our next question comes from Alexander Vengranovich from Renaissance Capital.
A couple of things from my side. First one is a follow-up on the question regarding the outlook for the next year. Just wanted to make sure we're talking about the like-for-like comparison. So previously, you were talking about 1,000 to 1,500 additional tenants for the year as a kind of a matter of guidance. But after the acquisition of Senegal, do you -- are you now talking about the same base of the sites and tenants? Or do you already include the sites and the business acquired in Senegal in your outlook for the upcoming year? That's my first question.And the second, probably like a related question here, regarding the shift of the site roll-out this year, does that automatically mean that next year, you're going to have different seasonalities between the quarters with regards to the roll-out [indiscernible] of the MNOs? And the last question is more of a technical one on the working capital volatility, like usually you were providing this metric in your presentation. Can you just probably briefly update us with regards to what's happening with the working capital in the third quarter? That's it from my side.
Yes. Alex, Tom here. I'll take the first one on tenancies and then Manjit can take the working capital one. The Senegal, it is separate to the outlook. So when we say 1,000 tenancies or 1,500 tenancies that is excluding Senegal. So that's sort of 5 established markets that we currently have. So we will add Senegal on to that at the time of closing. In terms of seasonality, yes, I mean, I think we'll see probably more roll-out in Q1 next year than we usually do, just by virtue of the fact that we're getting a lot of orders now that will probably come on stream in Q1 or early Q2. So we may see a slight change in seasonality. I mean it's probably not material enough to change your model, I would say. But yes, certainly based on the timing of receiving [indiscernible] orders around now, that could be the case for next year. And then Manjit, do you want to take the working capital one?
Yes. On working capital, we've had another good quarter on working capital. The way to actually think about it is the movement from Q2 to Q3 in terms of cash balance has increased by roughly around $250 million. Now the majority of that is driven by the bond tap of about $225 million. So really, $15 million to $20 million has actually come through underlying business growth and also good working capital management. So I think there's nothing really to mention on that. We've continued to have a strong level of receivables coming through the business. So yes, another good quarter on that basis.
Okay. Good. And maybe just a quick follow-up on the cost side. I've noticed that there was some around $0.7 million increase of the corporate SG&A over the quarter. So just wanted to understand whether this new level of $5.9 million of corporate SG&A on a quarterly basis is a new sustainable level? Or should we expect some sort of further volatility there?
Yes, I'll take that one. Yes, we're seeing a little bit of an increase in the holdco costs. That is partially driven by the fact that we've increased a little bit of expenditure for some of the M&A efforts that we're going through. But we'll give more of a long-term guidance on holdco at the full year.
Our next question comes from Omar Maher of EFG Hermes.
I just have 1 follow-up question on Senegal actually. I was just wondering if you could share with us perhaps what is your base case for tenancy ratio over the medium term in Senegal. I'm just asking the question because I mean in the event or in the scenario that the larger players in Senegal doesn't take part in perhaps selling towers or colocation of any sort in Senegal, what sort of tenancy ratio are we looking at? And what is the [indiscernible] the base case scenario that you're considering there?
Yes, Omar. So yes, Senegal comes with very close to 1.0 tenancy ratio, so there's not much colocation. There's a few kind of colos on there from both Orange and Expresso today, but not many at all, which is quite typical when we go into a new market, to be honest, as the first towerco because typically, mobile operators, they do a bit of sharing with each other, but usually not too much. As we communicated at the time of the announcement at our half year, we would guide to a 0.1 tenancy ratio increase per year over the next few years. So that would be our base case.And that assumes colos from both Sonatel, Orange and Expresso. I think on your point around Sonatel or Orange maybe not selling their towers, that may well be the case. But what we find in all markets is whilst operators may or may not want to sell their towers, they're very happy to collocate on other towers, particularly that of an independent tower company like us because it's very attractive from a financial and operational point of view. They just pay us relatively low monthly lease rate to us rather than spending well over $100,000 on building a site and then running it themselves. So the colocation product very much work with or without the mobile operator selling their own towers.
That makes sense. And then lastly, if I may, on Ethiopia, if you have any updates on the progress of the privatization momentum there?
Yes. Omar, it's Kash. It's good to hear your voice again. On Ethiopia, I think you would have seen some media's sort of attention to the market. One, we view that the virus has had an impact in slowing the process down there. We still view MNO licenses to be issued in those countries. We're actively in conversations with the major African MNOs who are looking to enter Ethiopia, albeit our view is now that it's probably going to be back end of 2021, driven by the global pandemic. And we're still very excited about the opportunity in Ethiopia, again, albeit that we would be only entering on the basis of getting an operator license, a tower operator license, which is in the conversations, but again, delayed for the reasons I've just articulated.
Our next question comes from Dilawer Farazi of Royal London AM.
Congrats on your results. Just most of my questions have been answered. Just one last thing on the M&A. I guess you talked that you're in advanced stages of negotiations on a number of things. Are you able to clarify if that's something that's likely to be a 2020 announcement or more likely to be sort of next year? And just a follow-up on Ethiopia in terms of the tower operating license. How long will that typically take to get?
Yes. Dilawer, tom here. Thanks for the question. Yes. Look, suddenly, it's possible that 1 or more deals could be signed this year, i.e., in the next couple of months and announced. So watch out for that. We very much hope that will be the case, that partly depends on how quickly other parties move those that were not totally in control, as you can imagine. But based on where we sit today, that is certainly possible.And then on Ethiopia, I mean, it's quite a unique situation because Ethiopia is one of the last countries in the world, which does not have a free and open telecoms market today. They have 1 state-owned operator and they're running a process to issue licenses. The mobile operators first and then potentially to towercos. So don't know how long it will take. Originally, they plan to issue licenses in March earlier this year, which has now been delayed.Kash mentioned some of the press reports recently, which have been around how our company is not getting licenses there because they want everyone to colocate on Ethiotel’s infrastructure in the country today, which may delay towercos getting licenses further. Albeit, we don't believe that, that solution is the best for the market because we think and others think that around 10,000 towers need to be built in the country over the next 5 years. And for that kind of scale, you need international travel companies there with capital and expertise to do it. So we remain engaged and hopeful. But for now, there's many other things more imminent and higher priority for us.
Our next question comes from Bertram Dreyer of DEG.
Congratulations for the successful tapping of the capital market and also the good development on the margins. And I have a question with regard to the working capital again. I mean we see in all economies tightening liquidity and the receivable situation of companies is of high attention. What are your views and experiences with regards to the telecom sector more in general? Do you see tightening of liquidity, different payment behaviors of clients? And how is that in your value chain? Could you comment on that?
Sure. Manjit, do you want to take that?
Yes, sure. So I think from our perspective with our MNO customers, as kind of mentioned previously, we've seen no material movement in terms of our net receivables days. So if you recall, at H1, we are roughly around mid-40s in terms of number of days, and that's something -- that has actually tightened ever so slightly in Q3, which means that we are getting payments quicker and quicker from customers. I think one thing that we're seeing at the moment as well is it in our markets with mobile network operators more generally, you're seeing increasing traffic numbers. And in our markets, increasing traffic numbers has a direct correlation to cash flow for the mobile network operators. And so are you seeing some of them have relatively good months in terms of cash collections and that's translating into payments. But really, for us, it's business as usual. We're seeing no material movements in terms of customers not paying up. Everything is very much on a BAU basis.
[Operator Instructions] We have a follow-up question from Omar Maher of EFG Hermes.
Just a quick follow-up. Are you planning to provide some separate guidance for the year '21? Or is it -- it remains rather within the medium-term guidance that you've already provided?
Yes, we'll, of course, talk about that in our full year results in Q1. But our guidance today is -- our medium-term range of between 1,000 and 1,500 tenancies addition next year.
I was referring to financial guidance. So on revenue growth, margins and so on.
Sure. Manjit, do you want to take that?
Yes, I'll answer that one. What we'll do at the end of the year when we do our full year announcement, we'll give similar guidance levels to what we gave previously. So we'll talk through revenue per tenant, number of new incremental tenancies, split-out between colocations and sites, OpEx and SG&A. So we'll give you the building blocks which you can then utilize.
Thank you. I will now hand you back to Kash Pandya.
Thanks, Pat. Well, thank you very much, everybody, for the questions and coming on the call. We look forward to talking to you on our full year results call in Q1 -- back end of Q1. Thank you. Bye-bye.