American Tower Corporation (NYSE:AMT) Citi’s 2023 Communications, Media & Entertainment Conference January 4, 2023 11:30 AM ET
Company Participants
Tom Bartlett – President and Chief Executive Officer
Conference Call Participants
Mike Rollins – Citi
Mike Rollins
Okay. Well, good morning, and welcome to Citi’s 2023 Communications, Media & Entertainment Conference. For those of you, I have not had an opportunity to meet, I’m Mike Rollins and I cover communication services and infrastructure for Citi.
Unidentified Company Representative
Everyone knows you.
Mike Rollins
Never know. Before we get started, I’d like to mention that we have disclosures available at the registration desk and on the city velocity page from which we’re streaming the audio. It’s a real pleasure to welcome back to Tom Bartlett, President and CEO of American Tower. Thank you so much for being with us today.
Tom Bartlett
It’s great to be here, Mike. As always, great way to start off the year.
Mike Rollins
It is. And looking forward to, you know, hearing what’s new with American Tower. Before we get started though, I do want to just share a couple of thoughts. We’re going to look to incorporate all of our audience’s questions into today’s discussion. So, for those of us around the table that have microphones, if you light it up with a button, we’ll try to get you included into this discussion live.
If you’re streaming the connection, there should be a question box the page for you to ask questions. And continuing on this tradition of using live surveys, they’re completely anonymous. By the way, we are not tracking who you are. We’re just aggregating responses. It could be accessed through these QR codes that are here on the table, also, on the streaming portion of the site, and you can use your connected devices, whether it’s here or online, to enter in your responses.
So, with all of that out of the way, Tom, it’s a real pleasure to have an opportunity to just delve in and maybe start with an update on the strategic and operating priorities for American Tower this year and how they might be a little bit different than where we were at this time last year.
Tom Bartlett
Fair question, Mike. I think that, you know, just kind of stepping back a moment. We’re really looking to build on the successes in the strategy that we have been able to execute over the last several years. You know, if you just kind of take a step back, you look over the last 2 to 3 years, and we built, you know, just under 20,000 sites globally. We’ve acquired probably in the 35,000 to 40,000 sites globally. And we’ve built out a significant presence in Europe, which is really a new beachfront, really for us to be able to further develop.
Even over the last couple of years, we’ve entered into or amended, close to 75 master lease agreements with our customers around the world. We’ve clearly built-out a new class of infrastructure in the United States and the data center business with CoreSite. We’ve built on our management team that we have in place over the last couple of years, built on our strong culture, so it’s really building on, you know, the successes that we have been able to initiate over the last several years. And I think we’re in a really good spot, you know, given the beginning of 2023, in terms of being able to do that.
The broadest category that we’re looking to do is continue to scale the core. And those are common words within the American Tower family. And we’re doing that through organic growth, want to take advantage of everything that’s going on in the 4G and 5G world, you know, our customers are, in our markets going to be probably spending north of $60 billion on their networks, now they’ve spent over $150 billion on spectrum. So, they want to put, you know, that spectrum to use. And so, we really want to position ourselves and be able to take advantage that on the organic side.
Inorganically, we want to continue with our build program, you know, through kind of life to date on our build program, we probably are generating upwards of $700 million to $800 million of revenue, generates a significant Day 1 yield for us. In 2022, we’re coming off building, you know, [6,000 to 6,500] [ph] sites. And so, you know, I’ve got my sights on building, you know, [40,000 to 50,000] [ph] sites over the next several years. And, and we do that – we don’t do that on spec.
Now, you know, we do that underneath a formal master lease agreement program with our carriers, and as more and more spectrum gets deployed, and as higher and higher bands of spectrum gets deployed, we’re going to see that need for further densification and colocation in our marketplace. So, that’s the number one is being able to take advantage of the organic world, being able to build out our sites around the world.
And then lastly, within kind of scale, the core is to make ourselves more efficient. You know, we’re a really good international business, we’re not yet a global business. And while we have capability and assets in 27 markets around the world, you know, I think that the opportunity for us is to be able to provide that global value proposition, particularly as the edge for more fully gets developed. And so, I think we would be able to take advantage of that value proposition, particularly with the cloud players.
Nobody around the world has the kind of coverage, the kind of scope that we have, and the kinds of markets that we’re in with the types of customers that we have. And so, I think that that’s a real opportunity for us, and one that we really need to get after, and take advantage of. And we’ll continue to, you know, further operationalize our business, make ourselves more efficient, drive more margin performance, and those types of things. So, that’s everything I kind of talk about when I say scale the core.
The second major initiative for us is what we call platform extensions. And we really have two platforms now, within our business that clearly the tower platform, which is the principal platform within our business, and we really want to extend the capabilities that we’re providing at the site level. We’re just talking a few minutes ago, you know, the fundamental competitive advantage, we have in our business is our exclusive pieces of real estate, you know, we’ve got a longitude and latitude on every one of those pieces of real estate.
And they’re strategically positioned within all of the markets that we’re in to be able to support our customer base. In essence, we have a [moat] [ph], really around it. And so for us, it’s to drive as much activity as we can in that site and to produce as much activity from within that site. And so, you think of things like power and fuel, which in many of our markets is a critical element to the service we provide, particularly in markets in Africa, India, even to certain extent down in Latin America. And I think it’s going to become even more important here within in the United States.
And we’ve invested probably $300 million to $400 million over the last several years in terms of really developing our power and fuel capability. So, it’s not just those things that are really behind the meter, which are the things that we’re doing within the site that aren’t metered that we provide for our customers and pass-through to our customers. But it’s also things that are looking in front of the [meter] [ph], and what other opportunities might be there for us.
It’s not only that the right thing to do for our customers, it’s the right thing to do for us, but it’s clearly the right thing to do for the environment itself. And the edge also fits within, and I know we’ll, I’m sure talk a bit more about the edge and how that fits into our overall plans. But that also gets encompassed within the platform extension as kind of the strategic initiative that we have.
I tend the third one is really becoming more strategic with our customers. As I mentioned, we’ve entered into, you know, 75 kind of new or improved master lease agreements around the world and we want to become closer and closer to them in terms of being able to help them. They’ve spent an awful lot on Spectrum as I mentioned. They’re committed to an awful lot of capital in our markets. And I think that’s a real opportunity for us to be able to provide higher levels of service for them.
As part and parcel to that are kind of the holistic arrangements that we’ve entered into in the United States with the big carriers. You know, those are ways for us to become more strategically aligned with them so that we’re not, you know, bickering about, okay, what’s going to be the cost to go on this particular site. And that’s really played out really well for us.
So, we kind of led the market in terms of deploying those kinds of pricing schemes. And we’ve really been able to, I think, take it to the next level and I think our customers have really appreciated that, particularly when time to market is so important for them. Getting on air is so important for them. And to the extent you can take out that, kind of the bickering on pricing as a typical landlord does.
You know, it really does help the overall relationship, if you will. And the other elements I think of what we’re trying to really focus on is continue to develop our team. We’re getting into some new lines of business. We want to make sure that we’ve got the capabilities and the skill sets within the business to be able to extend the, kind of leadership position that we have. And foundational to that is our culture. And really building on that kind of that leading ESG platform that we have, making our business really purposeful.
And I’ve found that over the years that I’ve been in business is that to the extent that our employee body can really find purpose in what they’re doing, the ownership and the accountability and the drive to provide higher levels of customer service, and it just comes together so much better. And not that compensation and all the other elements and opportunities for growth aren’t important because they are, but finding purpose in what they’re doing on individual basis is incredibly important.
So, those are kind of the broad categories. There’s nothing significantly new in there, as I said, in terms of kind of building on the successes that we’ve had over the last 2 years to 3 years, but it’s more of an emphasis and acceleration. And we’re continually looking at driving a strong dividend growth, which is what we’ve done over the past several years. We’re looking to define ways to continue to de-lever within our business. We’re kind of hit the 5.5x. We’re looking to get down to the 5x level.
I think that’s probably more appropriate place for us. We’re continually looking at – and these are all tactical. We’re continually looking at other forms of capital. We’ve over the last two years with some of the transactions that we’ve done that brought in third party capital just worked really well for us, particularly in Europe, as well as now in the United States. So, we continue to try to uncover other forms of capital that we can continue to look at and deploy.
And we’ll also look at even some of the markets that we’re in that are of less scale, if you’re within the markets. Whether those markets make sense or whether there is capital there that we might look to monetize and deploy in other areas. And that’s not different. We’ve done that for our – over the last dozen years, we’ve gotten out of some business certain asset classes here in the United States, as well as internationally, but we’ll continue to look at different areas of our business and then are there more optimal ways of being able to utilize that capital?
Mike Rollins
Great. This gives us a lot to drill into. Okay. And, but first, we’ll tease out the first survey question and get people involved. And the first question that we’re going to throw up to our audience, and you can use the QR codes to log in here at the table is, what is the biggest risk to future consensus AFFO per share growth for American Tower? And the choices are not concerned.
Customer consolidation or rationalization, including T-Mobile churn, rising rates, currencies, slower domestic growth, and slower international growth. And we’ll see what the audience comes back with. But before we get to that, you know, maybe starting in the domestic business, you talked about the MLA progression that you’ve been making and you had an announcement this past year as well in regards to those holistic deals.
Where does American Tower sit today in terms of that visibility? You’ve given that long-term trajectory of average organic growth. I believe it’s 5%, including T-Mobile churn, 6% without T-Mobile churn. Where are you on that visibility path? And what are the things that are not in these agreements that could add some potential upside or downside to, you know, the aspirations of American Tower?
Tom Bartlett
Well, yeah, first of all, I mean, our business and I think what I like and I think what investors have always liked is, kind of the predictability of our revenue streams. We’re into long-term leasing arrangements with our customers, with escalators, some fixed internationally as you all know based upon the, kind of CPI. So that gives a good baseline of revenue. On top of that, there’s a layer of the pricing mechanisms that you were just referring to with all of the major carriers.
Here in the United States, we have these long-term holistic comprehensive type of pricing schemes, which are the ones that I was talking about before in terms of our ability to work even more closely with our customers. You know, they have a pricing scheme, which they can budget more appropriately, and they can then come back and amend the sites that are part of that agreement, which gives them some predictability in terms of their own budgeting and gives us them predictability in terms of what that revenue growth will look like, right? Because they are committed just to paying us at those levels.
And in the United States, it’s probably 70% to 80% of our revenue growth is tied to one of those revenue schemes. So that gives us good comfort in terms of what that growth is and I think that’s why we can come out and say with certainty that we’re at the 5% without [indiscernible] and we’re with the 6% with it. And we have that visibility going forward because those pricing schemes that we put in place are multi-year. And with the arrangement that then we just negotiated with Verizon, that kind of, you know, put the bow around, okay, all of the carriers now in the United States that major carriers are under that, kind of pricing scheme.
So, then we have the other 20%. Now, keep in mind that we do probably have 1,500 customers in the United States. Now the big carriers probably represents, you know, 80% of that, but there are a number of customers that make up that 20%. And we have good visibility in terms of where they are in their own life cycles, what kinds of renewals we would expect. We have that on a side-by-side customer-by-customer basis. And so, as I said, we have I think really good visibility and comfort into that underlying U.S. growth rate.
Now, what could change that? Well, in the big carriers, you know, the way those schemes, I don’t get into the particulars on each one of them, but they’re largely based on space on the tower. And they’re largely in place for amendment type of activity. So, to the extent that 5G continues to take off and evolve, and there’s more of a need for further densification. There could be an opportunity for more colocation going on within the business. And that generally is not an element of that because we’re really talking about coming back to an existing site given a certain space that the customer has available to them and filling out that space.
You know, what we found out early on when we put the first holistic in place back with a carrier was that, [candidly] [ph], the underestimated the amount of space that was going to be required. And so that we actually were able to enjoy growth over and above, kind of that holistic arrangement. Not certain whether that’s going to happen now. My guess is that further along in the 5G cycle, it has a higher potential for that as more densification is then required and so you might see that.
In terms of the other 20%, again, it comes back to 5G demand, what their own used cases would look like and what their own underlying requirements might be? But I think the 80% that we have that kind of real good visibility into, I think gives us comfort that that kind of a 5% is really a baseline of revenue growth going forward. On top of that, if you start to think about some of the other players that might come into the marketplace, you start to take a look at some of the cable players, whether they might be looking. For them, it’s math-based, you know, at a certain customer level that they might be enjoying at an MVNO level.
Where does it make sense for them to [when you start to] [ph] build out some of their own networks, if you will. As I say, we’re really comfortable with that U.S. growth rate. And particularly over the last couple of years, coming-off of a 1%, kind of growth rate with the Sprint churn, it’s nice to get back into these kinds of levels. And candidly, I would expect the colo/amendment activity to really start to increase even further than we enjoyed in 2022. And that’s not – just not a phenomenon in the United States, it’s a phenomenon that I would expect to see globally. So, we feel good about that U. S. growth.
Mike Rollins
So, I was going to ask you about that because, you know, we’re getting through this mid-band spectrum build cycle where the focus by the national carriers in the U.S., particularly, was just as you’re describing, using more space on the tower and putting up more antennas and radios and things of that nature. You know, in your pipeline and in the search rings that you get, are you starting to see more densification requests and interest to, kind of on top of the amendment type of activity you’ve enjoyed, start to see more colo?
Tom Bartlett
A bit. You know, a bit. I think we’re still a little bit early for that. And, you know, kind of going back to the 3G life cycle and the 4G life cycle, really didn’t start to see that, kind of colocation requirement until, kind of the middle. And they were using, at the time, kind of, more lower band spectrum, right? And so, I would expect as more of the C-band spectrum starts to get deployed, we should start to see that a little bit more quickly.
So, as I said, haven’t necessarily seen it yet, Mike, but I would expect to see that going forward. One of the interesting phenomenon is with the, kind of the 5G cycle is even the carrier success that they’re having with fixed wireless. And, you know, that could also be another element of growth that 3 or 4 years ago when I was starting to think about the, kind of the 5G opportunity that I didn’t consider that perhaps there is an opportunity at – on that fixed wireless side that the customers are enjoying, that will largely fall on the site.
I mean, there can be smaller sites that that you might find to be able to support that kind of activity going forward, but right now, the carriers are really supporting that fixed wireless component element value proposition with additional infrastructure on our sites.
Mike Rollins
And maybe I’ll turn to the survey. And again, if you want to ask a question by the way, just turn the light on your microphone. And let’s see what investors are thinking about in terms of the risk to the future AFFO per share. So, 2%, sorry, 12% not concerned, 12% customer consolidation or rationalization, 41% rising rates, 18% slower domestic growth, an 18% slower international growth. So, you know, you’ve laid out this, the multi-year AFFO target is, I believe the average over the next number of years is 10% plus, is the goal that that you’ve laid out. As you think…
Tom Bartlett
That’s what we’ve enjoyed over the last dozen years or so.
Mike Rollins
And so, how do you think about some of these issues that kind of came back, the rising rates, risk of carrier consolidation, slower international growth? Like, what are the things that investors should be mindful of in 2023 as they think about the opportunity for American Tower to continue to grow that AFFO per share?
Tom Bartlett
Well, I mean, those risks are real. You know, and we deal with them. That’s what we do. I mean, we deal with them each and every day. On the carrier consolidation, we’ve had carrier consolidation back, you know, over the last 20 years. The most significant one being the Sprint and T-Mobile carrier consolidation, but we’ve had it in Latin America. We’ll continue to have it in Latin America. We’ve had it in Africa, particularly in South Africa.
So that’s, the way to be able to deal with that is to enter into long-term relationships, to be able to enter into markets where there’s a good rule of law. Where you’re able to monetize those relationships. And if that carrier leaves the market that you’re able to – be able to have some type of this settlement, to be able to take advantage of that as that carrier does get in consolidated, that that customer that is being consolidated into. Again, has the wherewithal and the ability to satisfy the obligation that that underlying customer may have.
So, we’ve been dealing with carrier consolidation from Day 1 Mike. And sure it does bring in relative levels of risk within the business. We do a significant market scan to be able to look at that. Before we even get into a market. Diversification, I think, has been very helpful. There are certain markets that we might be suffering a little bit from a carrier consolidation, but with diversification and other markets been able to step up. In those cycles, happen [year-in and year-out] [ph].
So, I think from a carrier consolidation perspective, we’ve been able to manage that risk exposure. From a number of perspectives pretty well. I think in terms of the growth that you also had in survey, if I remember the survey questions, we’ve talked about the U.S. growth. We haven’t really talked about the international top line growth, but we’re bullish on that growth. And again, it comes back to building out the 4G and the 5G technology and using multiple spectrum bands to be able to do that.
That always works well for a tower company when companies are using multiple bands of spectrum. Because it’s still very difficult to integrate multiple bands. And generally when you’re doing that, you’re bringing it down to the lowest common denominator. So, it’s going to require further densification going forward. And if you – I think you guys also produce these – the growth rates for broadband data going forward and slowing down. And the used cases for 5G have really yet to be developed?
You know, that we haven’t been able to even see the benefits of 5G. We’ve seen speed, some latency benefits, but the used cases haven’t even really been developed, and so I think that’s going to drive that incremental demand. And so, we see growth over prior years in terms of new colocation and amendment activity.
So, I’m not concerned at all about the growth rate. I think it’s there. And I think we’re well-positioned to be able to realize it. Who [won nuance] [ph], particularly over the last several months going in this year, our interest rates. And that’s a fact. I mean, you could take a look at our balance sheet. You can see what their – that side of the balance sheet looks like and we have a sizable amount of floating rate debt out there in terms of our overall fixed floating types of relationships.
We’ve got a fair amount of fixed that needs to be refinanced over the next 12 months, [3 billion worth] [ph]. So, that absolutely is going to provide some headwinds, if you will, in terms of our overall AFFO per share growth. Obviously not at the revenue or the EBITDA line. I think we’re going to see strong growth there and the business model being intact, I think we’re going to be able to see that support. And so, that’s, you know, I’m not sure what the percentage was relative to picking that one, but that’s probably the single largest headwind that we have in front of us.
Mike Rollins
Let me turn up our second survey question, and this will be a preview where we’re going in a few minutes. When will AMT begin to recognize material synergies and financial benefits from its data centers?
Tom Bartlett
It already has. We generated $700 million to $800 million of revenue last past year, so I’d say we already have. I think if you’re thinking about the opportunity to edge, I still think that’s a few years away. You know, when we think about the data center business or why, first of all, I think it’s just a great infrastructure class. I mean, I had a fair amount of experience being on the board of a very large data center company. And so, I had that visibility in terms of what kind of margin performance, what kind of growth could be for a certain type of data center company, which both Equinix and CoreSite are.
You know, we’re really looking to leverage the, kind of that interconnection capability to really drive more value at that tower site that I talked about before that we have that exclusive right to be able to utilize. In the meantime, we’re able to enjoy the, kind of that interconnection cloud on [rich marketplace] [ph]. And in CoreSite, you know, those we talked about this on the third call, you know, they set record levels of growth of sales in 2022, and I expect to grow on that in 2023. And so, you know, their model is selling to the cloud, selling to the enterprise, as well as sending to the MNOs. And they’re doing a terrific job in terms of being able to accomplish that.
They have a core set of assets that are really premier in the marketplace and they’re very tactical in terms of looking at where are those next opportunities for growth? And so, what we’ve been able to enjoy over the last 12 months is while those, kind of edge applications are in the formation stage. You know, the relationships that we’ve been able to build out with cloud players over the last 12 months has been significant.
We have an edge advisory board that are made up of industry experts. We have a lab that we’ve set up to be able to trial new types of applications and work with different entities to be able to explore what the opportunities would look like out at the edge. I mean, [indiscernible] in a couple of weeks, we have, you know, the significant number of meetings with cloud players. And so, those conversations, if there’s a synergy, you know, those conversations would not have existed without having CoreSite as a base. And so, as CoreSite continues to move its capabilities from the core NFL cities out, we’re continually looking at what are those [1,000] [ph] sites that we have where we can bring in a megawatt of power.
And so, I would expect to see those types of those synergies, if you will, develop over the next several years. But I couldn’t be more excited about the opportunity of bringing these two asset classes together to really build something very unique and something that I think will have a significant amount of say, in terms of how that network architecture gets developed.
Mike Rollins
Right. And that’s – and for the survey, that’s exactly what we were asking in terms of when that edge might come through and be a synergy? And we ask, is it going to be 2023, 2024. 2025 or unlikely to happen in the next 3 to 5 years. And it was very mixed in terms of results 17% 2023, 17% 2024, and then a third 2025, and a third unlikely to happen in the next 3 to 5 years. So, it sounds like your time frame is still over the next few years for these edge synergies to really emerge?
Tom Bartlett
It is. Believe so.
Mike Rollins
Moving over to the macro side. So, can you take us through the regions and help us understand how inflation can impact your escalators and your revenue growth in 2023? How it impacts the cost of your real estate. And I think what investors are trying to figure out is, does American Tower benefit from inflation? Does some of this inflation you might be able to get some of your markets drop to the bottom line or should investors think about this really as kind of a net neutral activity or zero calorie, you know, cash flow benefit relative to the revenue?
Tom Bartlett
Yes. I think it probably – the headline is probably zero calorie, but if you look at the markets themselves, when you look at the U.S. market, you know, we have – 95% of our contracts have a 3% kind of escalator, right? And so, and we also have a 3% escalator on our largest cost, which is our land. So, they’re pretty well insulated from zero calorie perspective as you kind of looked at.
Internationally, it’s a bit different because we are triple net, and we do have a significant amount of pass-through. And so, broadly speaking, our inflation or our escalators are a function of inflation in the marketplace. And we underwrote those contracts based upon that, but what – and so we’ll enjoy that on the top line. But what’s interesting on the bottom line or at the EBITDA level, again, our land costs are significant piece, as well as our fuel costs. And so while you’ll increase those costs as a result of inflation, we pass-through those costs to the [tune of about] [ph] 70% or 80%. And so by our ability to pass those costs through, even though they’ve gotten more expensive, we don’t necessarily feel the brunt of it.
Now, the reason I say zero calorie is that, I don’t like inflation. You know, I don’t think inflation is good for anything. And so, from a consumer level, from a customer level, inflation is not a good thing. You know, we need to be able to get that in track. But from an operational perspective, I think we are very well protected in terms of the impacts of that, kind of an event and we have been, Mike.
We take a look at some of the growth rates that we’ve had and over the last several years where we’ve had more inflationary driven economies, whether it’s Brazil, whether it’s certain markets in Africa, you know we’ve seen our ability to capture that type of impact. And keep in mind that largely the rationale for those CPI-based escalators was really to look at the impact of FX. And trying to look at the correlation between, you know, FX exposure and rising currency was how can we mitigate that? And the escalator helps us to mitigate that in a pretty significant way.
Mike Rollins
In our next few minutes, just give a preview of where we’re going, I’m going to just get our last survey question out there and we’ll come back to this topic, which is capital allocation. And before we hit that, maybe just jumping into a couple of the market specific details. So, the survey question that we’re going to ask our audience is, what is the best priority for capital allocation after internal development and the [build to suits] [ph] that you have over the next 12 months to 24 months?
And we’re going to offer the responses of repurchasing shares, accretive acquisitions measured by AFFO per share or acquisitions measured by tower gross profit, capital recycling, and net debt leverage reductions. And we’ll see what our audience comes back with. But before we get there, maybe in some of the markets, can you talk to us just a little bit about India? Like where you are in terms of collections and how that market evolves from a financial contribution perspective in 2023?
Tom Bartlett
Well, I mean, we’re right where we said we were going to be. In the second half of the year, our customer Vodafone said that they are only going to be able to pay a $0.60 on the dollar for what was contractually committed. And that’s what they’ve done. And they’ve said that at the beginning of 2023 they’re going to start coming back at the 100%. We’ll see. Don’t know that for certain yet.
I do know that they paid us $0.60 on the dollar. And, and they’re in the process of trying to figure out exactly how the government is going to, kind of influence the growth of their business and is, as you well know, the government had agreed to pay, take a piece of, kind of the interest on some of the tax levies that they’ve been imposed on them, and convert them to equity. And that is yet to happen.
And so, I think the lynchpin for Vodafone Idea is for that to happen. And so, I think that they’re all working on making that a reality. I can’t say for certain that that’s going to happen or not or what the timing might be, but that’s going to be a critical element, I think in terms of their ongoing success. So, we’ll, you know, continue to monitor closely as we’ve been doing, and see where that – how that lands in the first quarter in the next month or so.
In the meantime, you know, they continue to do as much as they possibly can with the capital that they have. Airtel and [indiscernible] are formidable competitors who are well-capitalized, they’re investing in 5G, collectively. The carriers spent about $20 billion on 5G spectrum, just last year. So, they’re all trying to monetize that in a significant way.
India is a very unique market, you know, we’ve been there for over a decade. They’re just about ready to, I think, take over China in terms of total population. Significant commitment from the government in terms of becoming more digital. The government, I think, has done a fair amount over the last 12 to 18 months in terms of positioning them in the marketplace from a regulatory perspective so that the customers there can be successful. They’ve, you know, continue to reiterate, it’s a three player market. And so, I think that’s one of the [impetuses] [ph] for them to be able to want to support Vodafone, as you know, is they being one of those players.
So, time will tell. This kind of comes into the play of, you know, we’re very diversified portfolio. This was a market that, you know, for the first seven, eight years of our ownership was, kind of high-single-digit, double-digit growth, and has had a number of headwinds over the last several years in terms of consolidation, in terms of tax levies, and have tried to manage their way through this as best they possibly – best we can.
We have a terrific management team in place, and we spend a significant amount of time with them in terms of trying to figure this through. And so, more to come on kind of their payment schemes for 2020 theory, but we haven’t heard different from them paying at [$0.100 on the dollar] [ph].
Mike Rollins
And before we get to capital allocation, which is probably our last topic, any international markets that you think investors may under appreciate the growth potential in 2023? Are there things that you’re seeing in certain international markets where, you know maybe you’re incrementally excited?
Tom Bartlett
Well, I’ll change that to the global market. [Indiscernible] I don’t think people appreciate the investors understand the U.S. market. You know, and so maybe that’s an underappreciated market. I think Europe is probably an underappreciated market. I get it, we’re new into and really into the marketplace. And, you know, with the long-term relationships that we have with companies like Telefonica, and even Vodafone, in Orange, now, with 101, you know, we’re really excited about the opportunity for growth. It’s built on the fundamental escalators that we see in the marketplace.
I think there’s certain markets in Africa that we will probably be able to enjoy, kind of outsized growth. I think Latin America is going to be the one where we do have some incremental churn. So, it comes back to the carrier consolidation risk churn that we need to, to manage through in Latin America, where we’ve enjoyed some high-single-digit growth rates, it’s probably in the lower-single-digit, kind of growth rate category in 2023, but we’ll get through that to be able to, you know, hopefully get back to enjoying some of those higher rates of growth going forward.
Mike Rollins
And then the subject to capital allocation. So, I’ll share with you the results. And then we’ll get into you maybe how American Tower is going to approach capital allocation this year and next year. So, 16% repurchase shares was the best priority, 5% accretive acquisitions by AFFO, zero acquisitions that are accretive on Tower gross profit, 16% on capital recycling, and 63% on net debt leverage reductions. How is American Tower approaching capital allocation potentially differently in 2023 and 2024, and how are you thinking about the current environment?
Tom Bartlett
Well, I think versus 2021 and 2022, in more so 2021, I think on the M&A front, you know we’ve been pretty vocal about saying there’s a significant dislocation between public and private valuations out there. And so, that’s probably not an area of high priority. We’ll always be around the hoop to the extent that there’s some opportunities there that should, kind of fall into our lap, to the extent that they make sense for us, we’ll take advantage of it. But I think you had zero down on the survey there.
My sense is, it’s going to be probably pretty low. There could be a couple of portfolios, smaller portfolios. We’re always rumored to be part of the huge portfolio and that’s just because of our size. And so, that shouldn’t spook investors. You know, as I said, we’re always around the hoop, but because of the dislocation, I wouldn’t expect that to be a significant place where we’ll be allocating capital.
I think the other areas that you have on in the survey there, I think are fair. I think de-levering, you know, is [indiscernible] the rising interest rates where they are. We’re at around 5.5x. Our sweet spot is in the 4x to 5x. And so, you know, we’ll be looking to de-lever to the extent that we will. And we’ve also have commitments to the rating agencies. As a result of the deals that we’ve done over the last few years, our leverage got up a bit like it had done back in the 14x, 15x timeframe when we acquired the GTP portfolios, you may recall and the Verizon portfolio.
So, we’re clearly committed to being able to de-lever and to get that element of our balance sheet down and lower those costs. And buying back equity. We have a – we talked about that on the third party – the third quarter call. And I think our equity is, I guess, any CEO could sit, but I think our equity is undervalued. You know, I look at the long-term value of our business. And so that to me is a pretty attractive place to be able to invest, but it also needs to be in concert with being able to de-lever, right?
And so, there’s no 100% here or 100% there. It’s a bit of a mix, I think. But underlying that is the ability to invest in those discretionary parts of our business, like you identified, that was kind of a given, I think, in the survey question, to be able to generate a good solid growth for us going forward and really be able to position ourselves to be able to drive that [40,000 or 50,000] [ph] build-to-suit capability over the next several years.
Mike Rollins
And just one quick follow-up. So, on the earnings call, I think you were describing that there was like a window timeframe where you were anticipating getting back to that 5x or less net debt leverage target, can you remind us like what the period or year is that you want to get to that point so we could think about the flexibility over that horizon?
Tom Bartlett
I think we’ve said, what, 18 months to 24 months? Couple of years. Yeah. Couple of years. Hopefully, we can accelerate that, Mike. But that’s what we’re committed to.
Mike Rollins
Right. Well, Tom, thank you for joining us today.
Tom Bartlett
Great to be here. Thanks for and thank you everyone for being here. Appreciate it.
Mike Rollins
Thank you.
Tom Bartlett
Great.
Question-and-Answer Session
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