Q1 2023 IHS Holding Ltd Earnings Call
Participants
Colby Alexander Synesael; EVP of Communications; IHS Holding Limited
Sam Darwish; Chairman & Group CEO; IHS Holding Limited
Steve Howden; EVP & Group CFO; IHS Holding Limited
Bora Lee-Marks; Assistant VP; RBC Capital Markets, Research Division
Brett Joseph Feldman; Equity Analyst; Goldman Sachs Group, Inc., Research Division
Gregory Bradford Williams; Director; TD Cowen, Research Division
Michael Ian Rollins; MD & U.S. Telecoms Analyst; Citigroup Inc., Research Division
Philip A. Cusick; MD and Senior Analyst; JPMorgan Chase & Co, Research Division
Stella Cridge; Head of EEMEA Corporate Credit Research; Barclays Bank PLC, Research Division
Presentation
Operator
Good day, and welcome to the IHS Holding Limited Earnings Results Call for the 3-month period ending March 31, 2023. 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.
Colby Alexander Synesael
Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Synesael, EVP of Communications here at IHS. With me today are Sam Darwish, our Chairman and CEO; and Steve Howden, our CFO. This morning, we published our unaudited financial statements for the 3-month period ended March 31, 2023, on the Investor Relations section of our website and issued a related earnings release and presentation. These are the consolidated results of IHS Holding Ltd, 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 discuss the results, I would like to draw your attention to the disclaimer at the beginning of the presentation on Slide 2, which should be read in full, along with the cautionary statement regarding forward-looking statements set up 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 of our Form 20-F filed with the Securities and Exchange Commission and 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 metrics can be found in our earnings presentation, which is available on the Investor Relations section of our website. And with that, I'd like to turn the call over to Sam Darwish, our Chairman and CEO.
Sam Darwish
Thanks, Colby, and welcome, everyone, to our first quarter 2023 earnings results call. We had another strong quarter with growth primarily driven by a sequential step-up from new lease amendments, escalators and ForEx resets while growth from power moderated, all as expected. Results also included a $48 million onetime benefit to revenue and adjusted EBITDA from our smallest key customer in Nigeria, inclusive of $5 million additional withholding tax gross up and a $43 million onetime benefit to RLFCF. Lastly, Q1 results included a $9 million ForEx tailwind versus rates previously assumed in guidance, all positive.
We are reiterating our 2023 guidance for all our key metrics, including revenue, adjusted EBITDA, RLFCF and CapEx that we issued in March. We recognize the modest upside from the $5 million withholding tax benefit in Q1 and that our updated ForEx rates now assumed in guidance implied $14 million upside versus rates previously assumed in guidance.
However, given ForEx rates in emerging markets can be volatile and that a notable risk of Naira devaluation this year exists, we think it's important we remain prudent in our approach and not increase our guidance. Overall, we remain on track to achieve our goals for 2023.
Skipping to Slide 7. I want to discuss some of our key highlights for the quarter. Starting with Nigeria, President-elect Bola Ahmed Tinubu is expected to be sworn in as Nigeria's next President on May 29. We wish Mr. Tinubu much success and continue to be cautiously optimistic about the economic issues he has said he intends to address. More specific to IHS, we completed the upstreaming that began last quarter and resulted in an incremental $15 million upstream in Q1. We're also pleased to announce today that subsequent to quarter end, we have upstreamed an additional $50 million. Lastly, on Nigeria, during Q1, we elected to rationalize 727 towers occupied by our smallest key customer, where we were not recognizing revenue, but we're incurring costs. This was as expected and will help drive cost savings, a positive development.
In South Africa, our acquisition of nearly 6,000 towers from MTN a year ago, immediately made us the largest independent tower operator in the country. As we stated last quarter and given various dynamics in the market, including an unprecedented level of load shedding that has occurred in the country post deal close. We continue to evaluate our power services opportunities, and we'll update you as appropriate and if necessary.
Moving on the Block B shares, which equates to just over 60 million shares became available to trade without the registered offering requirement on April 14 and another 120 million-plus shares will become available in October 2023, including Block C and D. After taking initial steps in 2022 to help improve stock liquidity, including waiving the registered offering requirement last May, we believe the releases of Block B, C and D this year may further help our trading volumes, and we continue to evaluate options that we believe will enhance the value of the company.
At the same time, we continue to focus on delivering against our publicly stated fundamental objectives and building a track record with investors. Lastly, as previously disclosed, during Q1, we entered into a Naira denominated term loan and RLFCF as we look to increase the percent of our debt health in local currency or more specifically the Naira in anticipation of a potential Naira devaluation.
Overall, we continue to take a disciplined approach to capital deployment, recognizing the importance of maintaining a strong balance sheet. This includes net leverage of 3.1x at the low end of our 3x to 4x target and no meaningful maturities due until Q4 '25. While we continue to optimize our balance sheet, we are generally happy with where we are.
Quickly, you see on Slide 8 that we expect to publish our 2022 sustainability report later this quarter, which will be our fifth year of doing so. The 2022 sustainability report will be our first year reporting under the GRI framework demonstrating our continued evolution and sustainability reporting at IHS. And with that, I will turn the call over to Steve.
Steve Howden
Thanks, Sam. Hello, everyone. Having reported our Q4 and full year 2022 results less than 2 months ago and discussed the relevance of Q1 then, I'll be particularly concise today. Turning to Slide 9. As Sam mentioned, we're pleased with our Q1 performance. You will see that our main KPIs have all increased by double-digit percentages in Q1 2023 versus Q1 2022. And we once again delivered double-digit growth in revenue, adjusted EBITDA and RLFCF for the quarter, even after excluding the onetime cash payment received in Q1 '23 from our smallest key customer in Nigeria.
As Sam mentioned, we had already flagged this payment on the Q4 call and ultimately, it resulted in $48 million of revenue and adjusted EBITDA and $43 million of RLFCF in Q1. Specifically, in Q1, we delivered 35% growth in revenue, 37% growth in adjusted EBITDA and 72% growth in RLFCF in each case on a reported basis, driven by both organic and inorganic activity across our markets.
Our adjusted EBITDA margin improved to 55.7% and an 80 basis point gain on Q1 '22. I'll talk about these rates as adjusted for the onetime revenue on later slides to give the true performance comparison. As you also see, CapEx grew by 30% in the quarter, largely due to investment in network refurbishment in South Africa, increased CapEx relating to I-Systems fiber deployment in LatAm and in Nigeria ongoing investment in Project Green, offset in part by decreases in other and private CapEx there. Finally, our consolidated net leverage ratio was 3.1x at the end of Q1, an increase versus last year following our 2 acquisitions, but a slight decrease from Q4 '22.
Turning to our revenue on a consolidated basis. Slide 10 shows the components about of 35.1% reported consolidated revenue growth for the first quarter. Organic revenue growth of 38% was driven primarily by the $48 million onetime revenue in other and by CPI escalations, power-related revenue and lease amendments with FX resets, new colocation, new sites and fiber deployment adding to growth as usual.
The level of escalations in FX resets you see reflects our contract protections while the level of power-related revenue continues to reflect the high energy price environment, albeit it was down from last quarter. I would also again note that we now include the power pass-through revenue we received in South Africa within the Power segment and in Q1, accounted for $1.4 million.
On the right, you can see the organic growth rates of each of our segments for the quarter with Nigeria delivering 47% organic growth, including that onetime payment. Inorganic growth for Q1 was 8.3%, reflecting the South African acquisition, the SP5 acquisition in Brazil and the fifth stage of the Kuwait acquisition. Inorganic growth will continue to drop in Q2 as we are passing the anniversaries of the SP5 and South African transactions. Finally, FX delivered a negative 11.3% impact in the quarter. So in totality, even when excluding the onetime revenue in the quarter, we delivered strong growth of 24% on a reported basis and 27% on an organic basis.
On Slide 11, you can see our consolidated revenue, adjusted EBITDA and adjusted EBITDA margins for Q1 '23. As I discussed on the prior slide, in the first quarter, IHS generated a 35% increase in reported revenue.
Organic revenue growth was even higher at 38%, again demonstrating the continued strong top line growth trends of the businesses led by Nigeria and LatAm in particular. In Q1 '23, adjusted EBITDA of $335 million, increased 37% versus Q1 '22 and adjusted EBITDA margin was 55.7%, up 80 basis points from the prior year.
The year-over-year changes in adjusted EBITDA and margin for the first quarter primarily reflect the increase in revenue we've already discussed, including that onetime revenue, partially offset with the year-on-year cost increases in cost of sales, mainly due to higher diesel costs, increased maintenance and repair costs on a larger business as well as increased administrative expenses resulting from employee costs related to the acquisitions.
Without the $48 million onetime benefit, adjusted EBITDA still grew 17%. Power generation cost of sales increased by $28 million, driven by a $23 million diesel cost increase, primarily due to a 38% increase in diesel price, partially offset by a 7.5% decrease in consumption each in Nigeria. As previously highlighted, we have locked in pricing for a significant portion of our diesel needs through September of 2023. And through Project Green, we continue to prioritize alternative sources of power to reduce our dependency on diesel.
On Slide 12, we'll first review our recurring levered free cash flow. We generated RLFCF of $150 million in Q1 '23, a 72% increase versus Q1 last year due to a combination of factors, including the increased revenue and adjusted EBITDA discussed already, in particular, the onetime payment in Nigeria, which had a net $43 million positive impact on RLFCF.
These factors were offset in part by increases in net interest paid lease payments made mostly due to South African acquisition and withholding tax. Our RLFCF cash conversion rate was 44.6%. Excluding the nonrecurring revenue in the quarter, our RLFCF still grew 23%, despite the higher energy and higher interest rate environment in this quarter versus the prior period. Turning to CapEx. In Q1 '23, CapEx of $153 million, increased 30% year-on-year. The increase was again primarily due to increased CapEx in South Africa in connection with the refurbishment of the portfolio acquired during 2022, also increased CapEx in LatAm primarily for I-Systems and increases in Nigeria in connection with Project Green, on which we spent $34 million in the quarter.
And turning to the segment review on Slide 13. I'll first walk through our Nigeria business. Nigerian macro remains challenging, as we discussed in late March. U.S. dollars continue to be difficult to source, although remain available with FX reserves in the country having decreased to $35.5 billion at the end of March from $37.1 billion at the end of 2022. And while the price of oil has since decreased quarter-on-quarter, the ICE gas oil price remains elevated versus a year ago, reflecting the start of the Russia-Ukraine conflict in Q1 of 2022, and it is the most relevant indicator of the diesel pricing we pay.
Looking at ICE gas oil, it was $819 per tonne in Q1 2023, down from $948 per tonne in Q4 of last year, but still above $786 per tonne in Q1 2022. Moving to real GDP growth. It expanded by 3.5% in Q4 of 2022 with a projected full year 2022 growth of 3.2%, while inflation increased 22% this March versus 15.9% in March '22.
Importantly, on May 29, President-elect Bola Ahmed Tinubu is expected to be inaugurated. As we said previously, we're cautiously optimistic given the statements made by Mr. Tinubu regarding addressing the economic issues facing the country, and we remain in close contact with our key customers, 2 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 enjoy the nearer term macroeconomic challenges. To this point, our Nigerian business once again delivered strong results in the first quarter, tracking well on our key metrics. Q1 '23 revenue of $425 million, increased 33% year-on-year on a reported basis and 47% on an organic basis, in each case, also reflecting the onetime revenue discussed.
Top line growth was driven by the usual group of power-related revenue escalations, FX resets, lease amendments, new colocations, fiber and new site deployment. The negative FX impact was $45.2 million or 14%.
Our tower count decreased by 2.9% and total tenant count decreased by 0.2%, each versus Q1 '22, largely reflecting the planned decommissioning previously discussed, which does not impact our revenue. Our colocation rate consequently improved to 1.57x, up from 1.52x in Q1 '22. Lease amendments continue to be a strong driver of growth with these increasing by 13% quarter-on-quarter as our customers added additional equipment to our sites, particularly 4G upgrades.
Q1 '23 segment adjusted EBITDA in Nigeria was $272 million, a 34% increase from a year ago, and segment adjusted EBITDA margin was up 70 basis points to 64%. Let me now briefly summarize the results of our other segments. As our Sub-Saharan African segment now reflects the inclusion of our South African business, towers and tenants increased substantially versus Q1 of '22. Revenue increased by 43%, of which organic revenue grew 16%, inorganic revenue grew 33%, driven by the South African acquisition. And FX was a 6.2% headwind.
Segment adjusted EBITDA increased by 39%, driven primarily by the increased revenue, partially offset by increases in power generation costs, maintenance and security costs and administrative expenses. Segment adjusted EBITDA margin decreased to 53.5% from 54.9% in Q1 of last year. We continue to monitor the macro environment in South Africa, particularly the ongoing power load shedding by the national utility. And as previously discussed, we continue to evaluate our managed services opportunity there.
In our LatAm segment, towers and tenants grew more modestly by 3.4% and 9%, respectively, reflecting the closure of the GTS SP5 acquisition in Q1 last year. However, revenue and segment adjusted EBITDA each increased by over 40% in Q1 '23, largely due to the timing of the closure of the deal last year as well as the I-Systems fiber business. In Brazil, our second lines market was 7,023 towers. Macro conditions were largely stable as GDP growth decelerated, FX rates marginally strengthened, interest rates held steady and inflation decreased. In our LatAm segment, overall, Q1 '23 organic revenue increased 18%, driven by an increase from I-Systems, CPI escalators, new sites and new colocation with inorganic revenue increasing by 27% from the acquisition.
Segment adjusted EBITDA grew by 41% in the quarter with a segment adjusted EBITDA margin of 68.3%, reflecting the increased revenue, but offset by increase in administrative expenses, including increased staff costs and bad debt allowance. In MENA, towers and tenants each grew by 8% in Q1 '23, and revenue grew by 13% including 11% organic revenue growth.
Segment adjusted EBITDA grew by 1% in the quarter with a segment adjusted EBITDA margin of 37.6%, reflecting the increased revenue, but offset by increase in cost of sales and administrative expense.
On to Slide 14, I'll briefly highlight our KPIs. As of March 31, our tower count was 39,104, up 17.5% from the same period last year driven largely by the acquisitions mentioned and ongoing new sites in LatAm, Nigeria and SSA, albeit down by net 548 towers since the end of 2022.
As you can see in the chart on the top right, collectively, we built in 200 towers during the first quarter of 2023. But as Sam mentioned, we also rationalized 727 towers occupied by our smallest key customer in Nigeria, where we were not generating revenue. Towers and tenants grew 17% with a co-location rate at 1.49x, flat versus last year, but up slightly from Q4 '22. We continue to point out that lease amendments are a significant factor for us, particularly in our Nigerian segment given the ongoing 4G upgrades by our customers there and the initial, albeit small 5G activity we are seeing.
While lease amendments increased by almost 16% year-on-year, they are not included in our colocation calculation. We continue to see no reason why we can't get to 2x or greater on our overall portfolio over the long term and our more mature portfolio of towers are at or above that rate.
On Slide 15, we look at our capital structure and related items. At March 31, 2023, we had approximately $4.06 billion of external debt and IFRS 16 lease liabilities. Of the $4.06 billion of debt, $1.94 billion represent our bond financings and other indebtedness includes $370 million that we drew down in 2022 from the $600 million 3-year bullet term loan at the IHS Holding Limited level. Additionally, as discussed on our Q4 earnings call, in January of 2023, we entered into an up to NGN 165 billion 5-year term loan and up to NGN 55 billion 3-year RCF.
In connection with this, we repaid NGN 114 billion of our 2 Nigerian local currency facilities and as you see in the table, removing significant 2023 amortization. The Nigerian RCF is undrawn. As we previously stated, we're very pleased to have completed the recent Nigeria refinancings, which further derisked the balance sheet and increased our financial flexibility, particularly in light of the tough financing conditions that remain across the globe.
Cash and cash equivalents were basically flat at $516 million at March 31. In terms of where that cash is held, approximately 10% of the total cash was held in Naira at our Nigeria business, as we've been using excess cash to support Project Green and upstreaming. The majority of the remaining cash was held in U.S. dollars at the group level. Moreover, as we previously highlighted, in January, we upstreamed $15 million from Nigeria as part of the structured transaction that began at the end of last year, and through which we have upstreamed $75 million across December '22 and January '23. And as Sam noted, we have upstreamed an additional $50 -- $50 million in Q2 '23. Consequently, from all these moving elements, at the end of Q1 '23, our consolidated net debt was approximately $3.5 billion and our consolidated net leverage ratio was 3.1x, down slightly from December and at the low end of our net leverage target range of 3x to 4x, further demonstrating our strong balance sheet.
On to Slide 16, we're reiterating 2023 guidance that includes revenue in the range of $2.19 billion to $2.22 billion, adjusted EBITDA in the range of $1.2 billion to $1.22 billion, RLFCF in the range of $430 million to $450 million and total CapEx in the range of $610 million to $650 million. As Sam mentioned, while we recognize the modest upside in Q1, including the updated FX rates, given FX rates in emerging markets can be volatile and that we still expect some notable devaluation in Nigeria this year, we think it's important we remain prudent in our operation and not increase our guidance.
Guidance also continues to include approximately $25 million of power pass-through revenue in South Africa, of which we recognized $1.4 million in Q1 '23. I do want to again caution that timing of such moves is difficult to predict and could be delayed relative to what we've assumed, although this would have no impact on adjusted EBITDA or RLFCF.
Guidance also continues to not include any revenue from Egypt, although we continue to evaluate opportunities in the market that we believe could align with our financial and strategic objectives. I also want to point out again that we have locked in pricing for a significant portion of our diesel needs in Nigeria through September 2023, which, in turn, provide greater visibility to our costs. For the year, we continue to expect to build approximately 1,200 towers, which is slightly more than the amount we built in 2022. This includes a (inaudible) drop in Nigeria as we pull back on new site builds as we shift more of our focus to Project Green, but also includes the tripling of tower builds in Brazil that will be back-end loaded in 2023.
On Slide 17, on the top, you can see revenue by reporting currency for Q1 '23, whereas on the bottom, we provided a breakdown of revenue based on contract split. The right side shows the average annual FX rates assumptions that we used in 2023 guidance and has been updated slightly since last quarter. This equates to $14 million upside for the year versus rates assumed last quarter. This now brings to the end of our formal presentation. We thank you for your time today. And operator, please now open the line for questions.
Question and Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Phil Cusick with JPMorgan.
Philip A. Cusick
A couple of things. Let's just dig a little deeper into Nigeria. There's a new government. You've mentioned a couple of times a devaluation expected. It sounds like you pared down your cash pretty aggressively getting ready for this. But just give us a little bit more on your thinking?
Steve Howden
Phil, it's Steve. So not too much has changed since we last spoke in March. Mr. Tinubu had been elected in February, which is obviously still the case. We've got the inauguration coming on the 29th of May. And the policies that Mr. Tinubu continues to sort of champion are the ones that we've mentioned before around potentially tackling the FX rate and the fact that it continues to be undervalued. Hence, our comments around continuing to believe that there could be a devaluation of the currency during the course of 2023.
The fuel subsidy as well, that continues to be a hot topic in Nigeria, if and when that may get ramped down, phased out and over time, completely eradicated. So there isn't too much more, I think, we can say from our perspective. We're waiting to see the new government come in, in the next week or so and then see if some of those pledges that were made through the campaign start to come to fruition.
Philip A. Cusick
Have the carriers changed their build pace or anything like that or everything is just running at pace?
Steve Howden
Not significantly. No. We're continuing to see the likes of MTN in Nigeria, likes of the assets in Nigeria continue to push forward with their rollout. They're pretty focused on 5G at the moment. And by that, I mean, focused on figuring out exactly how best to get that to the population, which won't , as we've said before, won't initially be thousands and thousands, thousands of sites being rolled out, but it will certainly start to add incrementally to the infrastructure needs of the country. Indeed, we've seen that in Q1 a little bit and in Q4, a little bit last year as well. So no significant changes. I would say the carriers are continuing to behave as we would expect them to, in this part of the technology cycle, which is the early onset of the next year technology.
Philip A. Cusick
Okay. And then, Sam, if I can, maybe talk about the global tower M&A landscape. What does it look like in terms of potential carrier sales or other partnerships. And your leverage is running at this point at the low end of your target range. Does that make you think any differently about either how you would structure things or what kind of deals you would want to do?
Sam Darwish
In terms of our position, maybe I'll start there. I think we are -- we have intentionally been on the prudent side over the past 12 months, I would say, 12 to 15 months. We have kind of like seen this coming with the rising interest rates, and we realized pressure will be on our sector for sure. So it's kind of like shied away as much as we can. I mean we are -- we still look at various M&A opportunity. We still did South Africa, which we thought was very strategic to us. But for us, it's largely about how strategic is it going to be and how expensive or how cheap can we get a deal done. That's the important part at the moment.
Now having said that, I think there has been a dislocation between public valuations and private valuations. The private expectation -- the private sector expectations kind of like it did not trend down as fast as the public valuations did. So that this location kind of like was still there. But to be honest, Phil, we're beginning to see it softening somehow as some of the sellers who need to sell kind of like are beginning to put their assets out there.
There are a few processes in LatAm. There are a few processes out there in the Middle East at the moment. They're taking their time. But at some point, I think transactions will have to start happening and they're not going to be at the high multiples that we've seen 18 months ago or 24 months ago. So I hope that answers your question.
Philip A. Cusick
In the meantime, with your leverage at the low end, would you sit, think about buying stock, how do you think about the need for liquidity versus taking advantage on the share price?
Sam Darwish
Look, I think this year, it's kind of like slightly different because we're in a very good position. Last year, we wanted to make sure we kind of like -- our balance sheet is tight. It's ready for come what may, and I think Steve and the team have done a wonderful job in kind of like pushing maturities further, bringing more debt into the local currency. Even our overall cost of debt remains kind of like somehow subdued. So yes, at the moment, we are sitting at low leverage, which enables us to probably try and do more. But I guess, I don't think the word is out of its funnel. I think the interest rate yet to be seen. How are we going to control inflation? Where does Europe stand? (inaudible) geopolitical tensions with China. So I think we are still in a phase that requires prudence. Now if it did present itself that is cheap enough, it has to be good commercial. It has to be strategic. We can do it. It's as simple as that.
Operator
Your next question comes from the line of Greg Williams with TD Cowen.
Gregory Bradford Williams
Just one, just help us with your guidance. I know you reiterated it, and you are just admittedly one quarter in or even just 2 months from the last (inaudible). Even if I look at your underlying performance at these $43 million of onetime benefits, you are trending to beat. Just wondering if there's conservatism here. And how much of that is factoring and maybe the uncertainty of devaluation.
And then second, just to ask again on devaluation, can you help me with the mechanics of it? I suppose there's a devaluation tomorrow, how quickly are your FX and CPI resets? Is it monthly, quarterly to catch up with that, if you will?
Steve Howden
Greg, so I mean, what you said -- what you outlined in terms of the guidance is exactly how we've tried to portray it and exactly how we're thinking about it, which is, yes, we've had some positive performance in Q1, helped by some positivity around FX, et cetera. So we have tailwinds there.
But as you said, we're only at Q1. We are taking again a cautious position around potential future currency devaluation, particularly in Nigeria, we've just spoken about. So our view right now is to layer a little bit of caution into the guide and not change it, but we're certainly pleased where we are within those ranges at the upper end, et cetera. So yes, that's exactly the thinking and the fact pattern around maintaining guidance as is for now.
And then on your second question around as and when if devaluation happens, and we're specifically referring to Nigeria here, of course. And I'll just guide people to the Slide 19 in our presentation, the earnings presentation, which is up in the website, gives you a pie chart of the frequency of our reset. So from an FX resetting perspective, the vast majority, in fact, 94% of those contracts are resetting on a quarterly basis. So if a devaluation what's happened tomorrow in your example, they would start to reset from the 1st of July being the next calendar quarter commencing. Now they're not all spot.
Some are taking the average of FX rates, et cetera. So you see that reset come through the next quarter and the following quarter. So that takes care of the FX side of things. And then from a CPI perspective, majority of CPI escalations are passed annually, in fact, pretty much all of them. And those are often in January being the beginning of the calendar year or on the anniversary of when any particular MLA was signed. So they are scattered a bit across the year, but those CPI resets are annual, whereas the FX resets, Slide 19, most of them are quarterly.
Operator
Your next question comes from the line of Brett Feldman with Goldman Sachs.
Brett Joseph Feldman
I guess I'll probably stick initially with the potential devaluation. You sort of alluded to, but obviously, it would be helpful to your Nigerian-based debt balances. It sounds like you've pulled down a lot of cash. So I don't think that, that would be particularly harmful. Is there anything else that we need to think about from a mechanic standpoint? Would there be any gains or charges that you would take in a quarter where there may be a significant devaluation. And then remind us around the history, the conversation you have with your tenants because a significant devaluation can make it more challenging for them to pay their bills, particularly bills that are tied to hard currencies. Anything we need to be contemplating there? And I have a follow-up question on Project Green.
Steve Howden
Yes, sure. I'll start taking that one. So in terms of anything else to be thinking through on potential devaluation, we do see unrealized FX losses in case of devaluation, which is effectively our third-party dollar debt, although in the case of Nigeria that's now 0. So we won't see that. But shareholder loans, which is how we've historically pushed money into the country. So these are internal shareholder loans to be clear. Those are denominated in dollars. And so you can see unrealized FX losses there, but that will pass through the bottom of the income statement.
It won't affect any KPIs, but you will see that come through if there is a devaluation coming through. In terms of customer discussions, I think there's a lot of things to keep in mind around the customer discussions. I mean, firstly, our key customers in Nigeria continues to be very healthy. The MTN and Airtel continue to grow their businesses really significantly, MTN about 19%, Airtel about similar 20% revenue growth in the last quarter results they posted, and they're sitting at 52%, 53% margin as well.
So those businesses continue to be very profitable themselves such that they can withstand these types of devaluations that pass through. I would also just point out that in some of those cases, we have been taking the diesel cost, the energy cost for those customers. So when we talk to customers about FX, we're also talking to them about energy prices. So it's a totality of conversations. Some they win, some we win, et cetera. So we're not expecting any particular issue with those key customers in the market. And that's been the case historically as well in terms of when devaluations have occurred.
Brett Joseph Feldman
Got it. And then just on Project Green, obviously, it's still early days, but you seem like you're making good progress against that initiative. Any early anecdotal color you can give to us in terms of the extent to which it's yielding the benefits you had anticipated? Or is it just too soon?
Steve Howden
Yes, it's a little too soon. So we'll look to get to that later in the year. But I would say it's very much on track. We are in that phase where certainly Q3, Q4, Q1 and a little bit coming in Q2 is really the time frame to get CapEx out the door to get all those solutions, grid connectivity, batteries, solar panels, et cetera, get all that on to site, spent on site and starting to be connected and working. So we're a little bit early, but certainly, we're on track. We're pleased with what we're seeing internally and we'll update everyone in due course.
Operator
(Operator Instructions) Your next question comes from the line of Michael Rollins with Citi.
Michael Ian Rollins
A couple of follow-ups. So just looking at Slide 10. If you add together the CPI and the FX resets, the FX headwind to the right is a little larger than the combination of those 2 items, the escalations in the resets. How should investors be thinking about this relationship on a go-forward basis? Is it net positive, net neutral, net negative? And is that the right way to think about that there's a relationship between all 3 of these components of the revenue bridge.
And then just secondly, just taking a step back on some of the capital allocation strategies and some of the points that you outlined earlier, are there any new ideas or updates on how the Board and the management team would like to translate the operating performance into creating shareholder value?
Steve Howden
Sure. I'll take the first one. I'm happy to start with second one and Sam can jump in as well. So on the first one, yes, you're absolutely right in the way of thinking about it, that's how I like to talk to people about the building blocks in this growth bridge, CPI escalations plus FX resets versus the FX impact at the end of the bar. There is, of course, timing nuances. These are very binary quarterly snapshots of our growth. And so in the case of this particular quarter, when you look at FX reset starting at 3.4%, yes, we had CPI escalated at 7.3%, but against FX negative of 11.3%.
I give you one example, which is the majority of what's happening there this quarter. In Nigeria, average billing was around NGN 444 to the dollar because some of it is based on spot and some of it is based on average of the preceding quarter, when the average rate we consolidated the books out was NGN 461.
So you'll see that true-up, that balance come through in Q2. So that's why I say sometimes there's a little bit of timing within these growth blocks, but how are you thinking about it, Mike, is absolutely the right way to think about it. And it should be net positive overall. That's what we've seen historically. It's not hugely net positive, but it's certainly a positive when you combine CPI and FX resets versus underlying currency performance.
On the capital allocation point, clearly, it's the Board's mandate continue to assessing these, along with management. So we keep looking at all the different options between investing in the business, inorganic activity, things like buybacks or other forms of capital allocation. So that continues to be a hot topic of agenda for us, and we'll continue to look at that through the course of, I suspect, this year. Sam, do you want to jump in?
Sam Darwish
Yes. Michael, Look, Mike, it's very important to note that in terms of share price performance or where things stand, there is definitely, again, a disconnect. But let's not forget, we listed barely 18 months ago -- we listed at the beginning of a downturn in the global economic cycle. Now of course, this would reverse at some point in time. The most important part for us is, again, to kind of like be there in the public eye quarter after quarter, showing what we can do, what our markets can do, how can they grow, how can we tackle problems and at the same time, keep growing, keep expanding our margin quarter after quarter.
The strategy that we have maintained or created to basically help us get ourselves there is to diversify. We need to bring down or control our energy costs among our other things. We need to keep growing organically in double-digit, et cetera, et cetera. So the most important thing is to keep doing these things quarter after quarter.
And of course, the second part of the strategy is communications. That's why we kind of like have Colby now on board to basically be able to kind of get ourselves out there in front of investors on a quarterly basis -- on a monthly basis, sometimes even on a weekly basis, just keep kind of like reiterating the message time after time. I mean this is the growth force way. This is the best way. This is the right way that will get us there over time to increase the size of our float.
Remember, Michael, the float remains an inhibitor. The size of the float remains an inhibitor to kind of like realizing proper valuation potential. Now having said all of this, the company and its Board, curiosity, we evaluate strategic option. I mean what else can be done? Can we do this? Can we do that? Can we run a secondary offering? Can we do this? Can we do that? Is buyback the right thing to do? I mean, we constantly evaluate things, and at the appropriate time if we feel that some of those strategic options are worth stabling, then we will put it forward.
Michael Ian Rollins
Do you have any interest to attract minority capital into certain investments that you have as a way to maybe increase capital to recycle at 4 acquisitions while also trying to manage the valuation at which the capital comes in?
Sam Darwish
Look, all options are on the table, but no options are on the table at the same time. And we continue to evaluate the leasing, but it is -- it will happen as and when it is appropriate. At the time -- we look at these things, but at the time, we have no definitive plan to move with any of those options.
Operator
Your next question comes from the line of Bora Lee with RBC.
Bora Lee-Marks
It's Bora Lee on for Jon Atkin. So 2 questions from my side. Can you remind us how you're viewing the opportunities for rural build-out and fiber deployment in Nigeria and how meaningful that could be over time?
And then secondly, touching on Latin America, what are you seeing in terms of carrier activity there? I'm just curious if they're still going through that digestion period post Oi and when you think that might inflect?
Steve Howden
Bora, so in terms of Nigeria, so rural activity is still around. We are not engaged in huge volumes of rural activity, but we're certainly continuing to do what we can and what is needed. So I would say smaller part of the overall picture in Nigeria in 2023. And that will just really depend on carrier activity as well as our own desires. As we've mentioned a few times, we're outsized diverting, if you like, capital into Project Green, which we think is a huge beneficial project for the country as well as for IHS.
So that's really driving that. Fiber opportunity continues for sure in Nigeria. We're continuing to roll out what we call the kind of last master, the fiber piece where we connect our own towers, which is effectively extending our infrastructure services to the entity, the customers that are already on the towers. So that does continue.
But just to give you an idea, I mean, fiber across the entire group represents something like 3.5% of our revenue. So that is Nigeria and I-Systems, our Brazilian business combined. So it still remains a reasonably small part of our business. I would say stemming back from numbers strategically, we do feel like there is opportunity for the right part of fiber within IHS over the short, medium and long term.
We do think fiber connectivity is the key to successful backhaul, particularly on 5G, but even on 4G. So that is certainly part of our thinking over the longer term. And then in LatAm, carrier activity, I would say starting to free up. So you're absolutely right. In terms of the carriers being distracted with Oi over the last 18, 24 months and the carve-up of that, I would say starting to free up a little bit. I think you're going to see our activity ramping up through the course of 2023, particularly on the new build side. We've started off with a reasonably modest number of towers built in the quarter 1, but I can tell you it's already accelerated in Q2. And so we expect to see that continue to ramp through the course of the year.
Operator
Your final question comes from the line of Stella Cridge with Barclays.
Stella Cridge
If I could just follow-up and ask what was the rate at which you [up feed] the FX in Q2 from Nigeria and that be really helpful. And I also wanted to ask on South Africa. So I know on the last call, you had commented that the mobile approaches have to take some decisions about how they want to address the energy crisis and I just wondered, since that last call, do you have any -- more of a sense of what IHS' role might look like in terms of providing those solutions? I know you said earlier, you know there is a lots of questions about valuation, et cetera, but in terms of that sort of rollout, it would be great to hear if there's any updates there.
Sam Darwish
I'll take the second. Steven can take the first one. Let me start with the second one. Look, I think no one disagrees with the fact that IHS is one of the most experienced Tower Cos who can run power solutions in the whole world at the moment. I mean, our experience in Nigeria for the past 24 or 25 years, basically, we've done that in a country with at the moment, 225 million people where 95% or more of the sites don't even have a grid connection. So the experience is there.
Now at the moment, we are listed in the New York Stock Exchange. We have an equity story to tell, and we are a Tower Co. Our expertise, however, in South Africa is critical because we want to use it to help our clients. We want to use it to help our clients, mainly our partners kind of like overcome this or deal that is [sadly] happening in the country, and it's going to be used in whatever form, whether we actually do the service, whether we consult, whether we become technical partners, whether we provide services, it is basically at the decision of our partners.
Steve Howden
And then just on the second one, pretty short, sharp answer. We haven't disclosed the rate of [$50 million]. Historically, we disclose our rates at the end of each year. So we haven't done it so far.
Stella Cridge
Okay. Okay. And in terms of Q1 or Q2, was there some funds upstreamed from other countries, ex-Nigeria as well?
Sam Darwish
Yes, they were. We haven't actually disclosed the details, but yes, there were upstreams from other countries as well.
Operator
That brings us to the end of the IHS Holding Limited First Quarter 2023 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. You may now disconnect.
